TaxTMI Updates e-Newsletter
Sep 17,2022

Cancellation of registration - show cause notice - principles of natural justice - revocation of cancellation - representation by liquidator

Show cause notice - principles of natural justice - cancellation of registration - revocation of cancellation - Validity of the show cause notice and cancellation order and whether the explanation furnished by the petitioner-consortium was addressed - HELD THAT: - The Court recorded that the SCN dated 08.07.2021 did not set out any reasons for proposing cancellation, and that the cancellation order dated 06.08.2021 similarly failed to state reasons for cancelling registration. The Court noted that the petitioner-consortium had asserted, in subsequent proceedings, that the unit had shifted premises and had furnished supporting documents, but that the order rejecting revocation dated 08.12.2021 did not deal with that explanation. These deficiencies were highlighted as compromising the adherence to the principles of natural justice and rendering the departmental proceedings procedurally suspect. The Court did not finally adjudicate the merits of the cancellation on the basis of the material, but recorded these defects to be considered in further proceedings.

The Court observed procedural infirmities in the SCN and cancellation order and treated the matter as requiring further consideration by the revenue rather than pronouncing a final decision on the merits.

Representation by liquidator - revocation of cancellation - Authority of the liquidator to represent the petitioner-consortium and interim procedural directions for further prosecution of the writ petition - HELD THAT: - The Court noted that the lead member of the consortium had been ordered to be liquidated and that the liquidator, Mr. Anil Mehta, attended and said he had delegated certain powers to an employee who executed a vakalatnama. The revenue contested any such delegation. To resolve representation and to enable proper contest, the Court directed that the liquidator should execute a vakalatnama in favour of the petitioner's counsel and granted a short adjournment to enable this step. The Court also directed the revenue to take instructions whether it wished to revisit its position in light of the recorded procedural deficiencies and listed the matter for further hearing.

The Court directed the liquidator to execute a vakalatnama for the petitioner's counsel, granted an adjournment, and directed the revenue to take instructions and consider revisiting its position; the matter was listed for further hearing.

Final Conclusion: The High Court recorded serious procedural deficiencies in the SCN and cancellation order, directed steps to regularise representation by the liquidator, asked the revenue to take instructions on revisiting its view, and listed the matter for further hearing on 15.09.2022.

Exemption under Notification No.12/2017-Central Tax (Rate) - Heading 9994 - Services by way of public conveniences - taxability - Validity and applicability of State G.O.Ms.No.588/2017 exempting like services - Illegality of demand of C.G.S.T. and A.P.G.S.T. on exempted services - Writ of Mandamus under Article 226

Exemption under Notification No.12/2017-Central Tax (Rate) - Heading 9994 - Validity and applicability of State G.O.Ms.No.588/2017 exempting like services - Illegality of demand of C.G.S.T. and A.P.G.S.T. on exempted services - Demand of C.G.S.T. and A.P.G.S.T. on the monthly license fee paid for the work contract of maintenance of toilets held illegal - HELD THAT: - The Court examined Notification No.12/2017-Central Tax (Rate), dated 28.06.2017, which places services by way of public conveniences such as provision of bathrooms, washrooms, lavatories, urinals or toilets under Heading 9994 at a nil rate, and the corresponding G.O.Ms.No.588, dated 12.12.2017, issued by the State of Andhra Pradesh exempting like services. Both instruments remain operative and there is no notification on record modifying or overriding those exemptions. The petitioner, who performs cleaning/maintenance of toilets and has been charged C.G.S.T. and A.P.G.S.T. at 9% each by the respondents notwithstanding the notifications, furnished no countervailing material from the respondents, and the court found the impugned demand inconsistent with the exemptions. For these reasons the writ petition was allowed and the demand declared illegal and improper. [Paras 9, 10, 11]

Writ petition allowed; respondents' demand for C.G.S.T. and A.P.G.S.T. on the monthly license fee for toilet maintenance declared illegal and improper; no order as to costs.

Final Conclusion: The writ petition under Article 226 is allowed: the demand of C.G.S.T. and A.P.G.S.T. at 9% each on the monthly license fee for maintenance of toilets is declared illegal in view of the Central and State notifications exempting such services; miscellaneous petitions, if any, stand closed.

Classification of goods - HSN 8415 - air conditioning machines - HSN 8607 - parts of railway rolling-stock - Note 2 to Section XVII - exclusion of machines of headings 84.01 to 84.79 - Note 3 to Section XVII - criterion of sole or principal use - principal use test

Classification of goods - HSN 8415 - air conditioning machines - HSN 8607 - parts of railway rolling-stock - Note 2 to Section XVII - exclusion of machines of headings 84.01 to 84.79 - Note 3 to Section XVII - criterion of sole or principal use - Whether the roof-mounted air-conditioning units manufactured for use in railway passenger coaches are classifiable under HSN 8415 or under HSN 8607 - HELD THAT: - The Authority analysed the nomenclature and Explanatory Notes to HSN Chapters 84 and 86 and the Section and Chapter Notes to determine classification. Heading 8415 covers air-conditioning machines used to maintain temperature and humidity irrespective of the field of industry in which they are used. Heading 8607 covers parts of railway or tramway locomotives or rolling-stock only if three cumulative conditions in the Explanatory Notes to Section XVII are satisfied: (a) the parts must not be excluded by Note 2 to Section XVII; (b) they must be suitable for use solely or principally with the articles of Chapters 86 to 88; and (c) they must not be more specifically included elsewhere in the Nomenclature. Note 2 to Section XVII expressly excludes "Machines and mechanical appliances, and parts thereof, of headings 84.01 to 84.79," specifically mentioning air-conditioning machines (heading 84.15), from being treated as parts for classification under Section XVII. Because the roof-mounted units fall squarely within heading 8415 and are excluded from classification as parts under Section XVII by Note 2 read with the Explanatory Notes, the mandatory conditions for classification under heading 8607 are not fulfilled. The Authority therefore rejected the contention that principal or sole use for railway coaches displaces the express exclusion in Note 2 and held the goods to be classifiable by reference to their function as air-conditioning machines under HSN 8415. [Paras 7]

Roof-mounted air-conditioning units supplied for railway coaches are classifiable under HSN 8415 and not under HSN 8607.

Final Conclusion: The Advance Ruling Authority held that the roof-mounted air-conditioning units manufactured by the applicant are classifiable under HSN 8415 (air-conditioning machines) and not as parts of railway rolling-stock under HSN 8607; classification is governed by the Explanatory Notes and Note 2 to Section XVII which exclude air-conditioning machines from Chapter 86.

Passage of benefit of input tax credit under Section 171 of the CGST Act, 2017 - commensurate reduction in price - methodology for computation of profiteering by comparing ratio of ITC/CENVAT to turnover (pre GST v. post GST) - ineligibility of CENVAT credit on one time lease premium for vacant land - jurisdiction of DGAP under Rule 129(6) read with Section 2(91) for investigation under Section 171 - interest at 18% on profiteered amount - non applicability retroactively of penalty under Section 171(3A) - direction to DGAP to investigate other projects of the Respondent

Passage of benefit of input tax credit under Section 171 of the CGST Act, 2017 - commensurate reduction in price - Whether additional benefit of input tax credit accrued to the Respondent for the period 01.07.2017 to 30.09.2019 and whether that benefit was passed on to recipients by way of commensurate reduction in price. - HELD THAT: - On examination of the Respondent's Service Tax and GST returns and other records, the Authority accepted DGAP's computation that the ratio of input tax credit to turnover rose from 0.07% (pre GST) to 2.51% (post GST), giving an incremental benefit of 2.44% of turnover. Applying the Authority's approved methodology - recalibrating base price by deducting the incremental ITC percentage from post GST turnover and computing the corresponding GST - the DGAP quantified the aggregate amount not passed on as Rs. 1,56,77,149 (inclusive of GST). The Authority found that the Respondent had not demonstrably passed this benefit to the eligible recipients and that the DGAP's calculations (based on the Respondent's own filed returns and reconciliations) were reliable for the stated period. The Authority therefore held that Section 171(1) had been contravened and directed restitution to identifiable recipients along with prescribed interest.

Additional ITC benefit of 2.44% accrued during 01.07.2017 to 30.09.2019; Respondent did not pass the benefit and is directed to return Rs. 1,56,77,149 to the identifiable recipients with interest at 18%.

Methodology for computation of profiteering by comparing ratio of ITC/CENVAT to turnover (pre GST v. post GST) - Whether the DGAP's methodology of computing profiteering by comparing the ratio of input tax credit/CENVAT to turnover (pre GST v. post GST) and applying the incremental percentage to post GST turnover is correct and can be relied upon. - HELD THAT: - The Authority observed that the ratios and data used by DGAP were derived from documents and returns furnished by the Respondent (Service Tax ST 3, GSTR 3B etc.) and were verified by DGAP. The Authority affirmed that this methodology is the accepted and approved approach of the Authority in cases where benefit of ITC accrues on account of transition to GST and where the relevant figures are available and verifiable. The computation in the present case was accordingly held to be correct and usable for determining the profiteered amount for the specified period.

DGAP's comparative ITC/turnover ratio methodology is correct and the DGAP's computation is accepted.

Ineligibility of CENVAT credit on one time lease premium for vacant land - Whether the CENVAT/credit claimed by the Respondent in respect of one time lease premium paid to CIDCO for the allotment of plot is admissible for computation of benefit. - HELD THAT: - The Authority agreed with DGAP that leasing/renting of vacant land was in the negative list under the Finance Act, 1994 (as then applicable) and thus no service tax was leviable on such lease of vacant land; consequently the amount paid as lease premium could not be treated as eligible CENVAT/ITC. The Respondent produced no evidence showing that the departmental authorities had allowed such credit. Accordingly, the alleged CENVAT credit on lease premium was excluded from the computations of available ITC.

CENVAT claimed on one time lease premium for vacant land is not admissible and was correctly excluded from the profiteering computation.

Jurisdiction of DGAP under Rule 129(6) read with Section 2(91) for investigation under Section 171 - Whether the DGAP and this Authority had jurisdiction to investigate and determine profiteering under Section 171 and related Rules. - HELD THAT: - The Authority noted that the DGAP conducted the investigation under Rule 129(6) and submitted the report under the statutory scheme. The Authority held that DGAP functions as a proper officer under the statutory definitions read with the Act and Rules for the purpose of conducting investigations under Section 171 and submitting findings to the Authority. The DGAP's role in investigation and the Authority's adjudicatory role under Section 171 were upheld.

DGAP and the Authority have jurisdiction to investigate and determine profiteering under Section 171 and the Rules; the proceedings are within the statutory scheme.

Interest at 18% on profiteered amount - Whether interest is payable on the profiteered amount and at what rate. - HELD THAT: - Relying on the statutory framework and DGAP's computation, the Authority directed that the identified profiteered amounts be returned to the eligible recipients along with interest at the prescribed rate of 18% per annum from the dates on which the amounts were collected until the date of repayment or adjustment. The Authority ordered restitution to be effected within three months and recovery procedure in case of non compliance.

Profiteered amounts must be repaid/adjusted with interest at 18% per annum from the dates of collection until repayment.

Non applicability retroactively of penalty under Section 171(3A) - Whether penalty under Section 171(3A) can be imposed for contraventions occurring during the investigation period (01.07.2017 to 30.09.2019). - HELD THAT: - The Authority observed that Section 171(3A) was inserted with effect from 01.01.2020 and therefore was not in force during the period to which this investigation relates. Consequently, although the Authority found contravention of Section 171(1), it held that the specific penalty provision could not be applied retrospectively to the period of contravention.

Penalty under Section 171(3A) cannot be imposed retrospectively for the period 01.07.2017 to 30.09.2019.

Direction to DGAP to investigate other projects of the Respondent - Whether further investigation into other projects executed by the Respondent should be directed. - HELD THAT: - Having found contravention in relation to the subject project and noting the possibility of similar non compliances in other projects, the Authority invoked its powers under the Rules to direct the DGAP to investigate profiteering, if any, in respect of other projects executed by the Respondent. This is a procedural/directed action to be undertaken by DGAP for fresh enquiries and is not a final adjudication on those projects.

DGAP is directed to investigate profiteering, if any, in other projects of the Respondent; further inquiries to be conducted afresh.

Final Conclusion: The Authority accepted DGAP's findings that an incremental ITC benefit of 2.44% accrued to the Respondent for the period 01.07.2017 to 30.09.2019, held that the Respondent failed to pass that benefit to identifiable buyers, quantified the profiteered amount at Rs. 1,56,77,149 and directed restitution with 18% interest within three months; ineligible CENVAT on the lease premium was excluded from computation; DGAP and the Authority's jurisdiction to adjudicate under Section 171 was affirmed; retrospective imposition of penalty under Section 171(3A) was disallowed; and DGAP was directed to investigate other projects of the Respondent.

Reopening of assessment - prima facie material for reassessment - change of opinion - reassessment based on Financial Intelligence Unit information - non-speaking assessment order - principles of natural justice - consideration of assessee's reply

Reopening of assessment - prima facie material for reassessment - change of opinion - reassessment based on Financial Intelligence Unit information - Validity of the notice under Section 148 and order under Section 148A(d) reopening assessment for AY 2017-18 - HELD THAT: - The Court examined whether the reassessment could be interdicted at the writ stage. It applied the settled principle that the court must be satisfied only whether there was prima facie material on which the Department could reopen the assessment, leaving the sufficiency and correctness of that material to the assessing authority. The impugned proceedings were initiated on the basis of suspicious transactions flagged by the FIU showing unusually large cash deposits during the demonetisation period. The assessment made pursuant to search (Section 153A read with Section 143(3)) appeared to be confined to documents seized during the search and did not clearly record examination of the cash deposit aspect; where an earlier assessment is non speaking or cryptic, it is difficult to treat reassessment as a mere change of opinion. In the facts of the case, given the allegation of substantial cash deposits during the relevant period, the Court concluded that a prima facie case of escapement of income was made out and therefore no interlocutory relief against reopening was warranted. [Paras 6, 7, 9]

Writ petition attacking the reopening was dismissed as the court found prima facie material justified reopening and refused to quash the notice/order at this stage.

Principles of natural justice - consideration of assessee's reply - non-speaking assessment order - Whether failure to consider the assessee's replies under Section 148A(b) vitiated the reopening - HELD THAT: - The Court noted the importance and flexibility of natural justice, and that the assessing officer should decide on material on record including the assessee's reply. Although the assessee submitted that its detailed reply was not considered and that a request for extension was unresponded, the Court was of the view that even if the reply were taken into account the prima facie case for issuing notice existed. The Court therefore did not find unfairness sufficient to quash the proceedings but directed that the Assessing Officer decide the matter on merits without being influenced by the observations in the present order, leaving all rights and contentions open. [Paras 8, 9, 10]

Failure to consider the reply did not, on these facts, render the reopening void; the AO must nevertheless decide the matter afresh on merits after considering available material and the assessee's contentions.

Final Conclusion: Writ petition challenging the reopening and notice for AY 2017-18 dismissed; the court held there was prima facie material (including FIU information and unexplained large cash deposits during demonetisation) to justify reassessment and directed the Assessing Officer to decide the matter on merits after considering the assessee's submissions, leaving all rights and contentions open.

Accrued liability versus contingent liability - mercantile system of accounting - deferment of payment does not convert an accrued liability into a contingent liability - condition subsequent will not convert an accrued liability into a contingent liability - requirement of certainty of incurring the liability and reasonable estimate for quantification - deduction for business expenditure allowable under section 37(1)

Accrued liability versus contingent liability - mercantile system of accounting - deferment of payment does not convert an accrued liability into a contingent liability - condition subsequent will not convert an accrued liability into a contingent liability - requirement of certainty of incurring the liability and reasonable estimate for quantification - deduction for business expenditure allowable under section 37(1) - The disallowance of the bonus amount claimed as expenditure on the ground that the liability was contingent was not justified and the Tribunal rightly allowed the deduction. - HELD THAT: - The Court upheld the Tribunal's conclusion that the liability to pay bonus to the contractor accrued year-to-year under the Comprehensive Service Agreement and, on the facts, had crystallised in the relevant accounting year. Applying the principles in Bharat Earth Movers, for an assessee following the mercantile system a liability which has definitely arisen in the accounting year is deductible although quantification or discharge may occur later; what must be certain is the incurring of the liability and it must be capable of estimation with reasonable certainty. The contractual provisions permitting the assessee either to pay in cash or to adjust the bonus against future amounts due from the contractor, or the contractor's future power to waive the claim, do not convert a presently accrued liability into a contingent one. Likewise, the possibility that the liability may be reduced or extinguished in future is a condition subsequent which does not render the liability contingent. On these grounds the addition made by the Assessing Officer was unsustainable and the Tribunal's reversal of the AO's order was affirmed. [Paras 17, 19, 20, 24, 25]

The assessment addition disallowing the claimed bonus was set aside and the Tribunal's allowance of the expenditure was upheld; the appeal is dismissed.

Final Conclusion: The High Court dismissed the revenue's appeal, holding that the bonus payable under the CSA constituted an accrued business liability in the relevant year and was properly allowable under the mercantile system and the principles governing accrued liabilities; consequently no interference with the Tribunal's order was warranted.

Validity of assessment passed against a non existent amalgamating company - Effect of amalgamation on service of notice and continuation of assessment proceedings - Limitation for passing assessment after amalgamation under the time bar prescribed by Section 153 of the Income tax Act - Principle of certainty in tax litigation

Validity of assessment passed against a non existent amalgamating company - Effect of amalgamation on service of notice and continuation of assessment proceedings - Assessment order passed in the name of the amalgamating company after amalgamation (when the amalgamating company had ceased to exist) is invalid. - HELD THAT: - The Court recorded that the amalgamation was brought to the Assessing Officer's notice by communication dated 16.01.2009 (acknowledged 23.01.2009) yet the draft assessment order was passed on 16.12.2009 and the final assessment on 23.09.2010 in the name of the amalgamating company. Having regard to authorities emphasising certainty in tax litigation, the Court held that proceedings or orders recorded against a company which no longer exists are not sustainable. The reasoning accords with precedents relied upon by the assessee and subsequent affirmation of related decisions by higher courts, leading the Court to answer the substantial question of law relating to validity in favour of the assessee. [Paras 7, 8, 9]

The assessment framed in the name of the non existent amalgamating company is invalid; the substantial question is answered for the assessee.

Limitation for passing assessment after amalgamation under the time bar prescribed by Section 153 of the Income tax Act - Principle of certainty in tax litigation - It was not permissible to remit the matter for framing assessment in the name of the amalgamated company where the proceedings had been conducted after amalgamation and the statutory time limit for completing assessment had expired. - HELD THAT: - The Court considered the fact that amalgamation had been communicated to the Assessing Officer well before the draft order was passed and that the Assessing Officer nonetheless proceeded in the name of the now non existent entity. Relying on the value of certainty in tax litigation and consistent judicial authorities, the Court held that remitting the matter to pass a fresh order in the name of the amalgamated company despite expiry of the statutory time limit under Section 153 would be inconsistent with those principles. For these reasons the substantial question concerning the remand/limitation was answered in favour of the assessee. [Paras 7, 8, 9]

Remission to frame assessment in the name of the amalgamated company despite expiry of the statutory period is not justified; answered for the assessee.

Final Conclusion: Appeal allowed; the substantial questions of law are answered in favour of the assessee and against the Revenue, holding the assessment proceedings and any fresh framing of assessment in the name of the non existent amalgamating company unjustified.

Deemed income under Section 11(3) - Accumulation of income under Sections 11(1) and 11(2) - Scope of adjustment under Section 143(1) - Debatable legal issue not susceptible to summary adjustment under Section 143(1) - Binding effect of High Court decisions and CBDT instruction on prima facie disallowance under Section 143(1)

Scope of adjustment under Section 143(1) - Debatable legal issue not susceptible to summary adjustment under Section 143(1) - Deemed income under Section 11(3) - Accumulation of income under Sections 11(1) and 11(2) - Adjustment in the intimation under Section 143(1) to deny accumulation of deemed income under Section 11(3) was not permissible where the question was debatable. - HELD THAT: - The Tribunal examined the limited scope of Section 143(1) which permits adjustments only for arithmetic errors and incorrect claims apparent from the return. The assessee's claim to treat the deemed income under Section 11(3) as eligible for accumulation under Sections 11(1)/11(2) raised a debatable question of law because it was supported by a High Court decision. Instruction No.1814/1989 of the CBDT and authorities relied upon in the record establish that where a claim is founded on a High Court or Tribunal decision, even contrary views elsewhere render the issue debatable and not amenable to summary disallowance under Section 143(1). The Tribunal therefore found that the denial of the claim in the intimation amounted to an impermissible summary adjustment and set aside the finding of the CIT(A), directing the Assessing Officer to allow the claim for the purposes of the intimation process. [Paras 9, 11, 12, 13, 16]

Finding of denial in the intimation under Section 143(1) set aside; assessee's claim to accumulate the deemed income cannot be rejected by summary adjustment in the intimation.

Deemed income under Section 11(3) - Accumulation of income under Sections 11(1) and 11(2) - Whether the assessee is ultimately entitled to accumulate the deemed income under Section 11(3) in the manner provided under Sections 11(1)/11(2) was left undecided. - HELD THAT: - Having allowed the assessee on the question of procedural impermissibility of adjustment at the Section 143(1) stage, the Tribunal did not adjudicate the substantive controversy on whether the deemed income under Section 11(3) can be accumulated under Sections 11(1)/11(2). The matter was left open for consideration by the Assessing Officer in appropriate proceedings. [Paras 17]

Substantive question on entitlement to accumulate the deemed income left open for fresh consideration; no finding given.

Final Conclusion: The intimation under Section 143(1) denying accumulation of the deemed income under Section 11(3) was set aside as an impermissible summary adjustment; the assessee's grounds are allowed and the substantive question of entitlement to accumulate the deemed income is left open for fresh consideration.

Unexplained cash credit - Onus under Section 68 - Identity, creditworthiness and genuineness of creditors - Proof by bank statements and primary documents - No adverse inference from doubts without concrete material - Prospective operation of proviso to Section 68

Unexplained cash credit - Onus under Section 68 - Identity, creditworthiness and genuineness of creditors - Proof by bank statements and primary documents - No adverse inference from doubts without concrete material - Prospective operation of proviso to Section 68 - Whether the addition of Rs. 72,96,000/- as unexplained cash credit under Section 68 for AY 2008-09 was justified - HELD THAT: - The Tribunal examined whether the assessee discharged the statutory onus under Section 68 to establish identity, creditworthiness and genuineness of the credited amounts. The assessee produced bank statements, audited financial statements and returns for the company from whose accounts cash was withdrawn, along with records showing withdrawals from her own concern and re-deposits. While the pattern of withdrawals and re-deposits appeared unusual, mere doubts or surmise by the AO/CIT(A) were held insufficient to draw an adverse inference in the absence of concrete material contradicting the primary documents. The Tribunal treated the produced bank statements and related primary documents as competent evidence to establish source and genuineness. The Tribunal also noted that the proviso to Section 68 (requiring proof of source of source) introduced with effect from 01.04.2013 is prospective and not applicable to AY 2008-09. Applying these principles, the Tribunal concluded that the assessee had satisfactorily discharged the onus under Section 68 and that no addition could be sustained on the basis of unsubstantiated doubts. [Paras 11, 12, 13, 14]

The addition under Section 68 is deleted and the assessee's appeal is allowed.

Final Conclusion: The Tribunal held that for Assessment Year 2008-09 the assessee discharged the onus under Section 68 by producing bank statements and related primary documents; doubts without concrete material cannot sustain an addition, and the proviso to Section 68 is prospective, accordingly the addition of Rs.72,96,000/- is deleted and the appeal is allowed.

Deduction under section 80P(2)(d) of the Income-tax Act - Deduction under section 80P(2)(a)(i) for interest derived from credit provided to members - Scope of review under section 263 - whether assessment order is erroneous and prejudicial to the interests of revenue - Sufficiency of inquiries by assessing officer at original assessment

Sufficiency of inquiries by assessing officer at original assessment - Scope of review under section 263 - whether assessment order is erroneous and prejudicial to the interests of revenue - Whether the Assessing Officer made sufficient enquiries before passing the original assessment and whether the Principal CIT was justified in invoking section 263 to set aside the assessment. - HELD THAT: - The Tribunal examined the record of proceedings and the notices issued by the AO which specifically inquired into the claim of deduction under Chapter VI-A and the claim under section 80P, including requests for constitution, members' list, loan and investment details, computation of income and tax audit report and explanations for the low ratio of income to investments/loans. The assessee had responded to those queries with detailed explanations. Consequently, the Tribunal held that the AO had made adequate enquiries at the time of the original assessment. Because the AO entertained a tenable view on the facts - particularly after receiving and considering the assessee's replies - the Principal CIT's exercise of jurisdiction under section 263, which requires that the assessment order be both erroneous and prejudicial to the interests of the revenue, was not justified. The Tribunal therefore found no infirmity in the AO's order that warranted setting it aside under section 263. [Paras 6, 7, 9]

The assessment was based on sufficient enquiries by the AO; the order under section 263 setting aside the assessment was not justified and is set aside.

Deduction under section 80P(2)(d) of the Income-tax Act - Deduction under section 80P(2)(a)(i) for interest derived from credit provided to members - Whether the assessee was entitled to claim deduction under section 80P in respect of (a) interest received from members and (b) dividend/interest from investments in a co-operative bank. - HELD THAT: - The Tribunal accepted the assessee's factual explanation that interest income had been earned from loans to its members and not from banks, which fits within the scope of deduction under section 80P(2)(a)(i) for interest derived from credit provided to members. With respect to dividend income (and by extension interest from deposits) arising from shares or deposits with a co-operative bank, the Tribunal relied on authoritative decisions of High Courts and Tribunals (as recorded in the order) holding that income from investments/deposits with co-operative banks is eligible for deduction under section 80P(2)(d). Applying these precedents and the plain language of section 80P(2)(d), the Tribunal concluded that the assessee's claim in respect of dividend on shares held in Rajkot District Cooperative Bank was allowable. The Principal CIT's contrary view - that interest on loans to members could not qualify under section 80P(2)(d) or that the dividend claim was disallowable - was therefore rejected on merits. [Paras 5, 8, 9]

The assessee's claim under section 80P in respect of interest from members and dividend from investments in a co-operative bank is legally sustainable; the Principal CIT's contrary conclusion is rejected.

Final Conclusion: The Tribunal allowed the appeal for A.Y. 2017-18, holding that the AO had made sufficient enquiries and that the assessee's claims under section 80P (including dividend/interest from a co-operative bank) were allowable; accordingly the order passed under section 263 was set aside.

Failure to get accounts audited - penalty under section 271B - tax audit requirement under section 44AB - reasonable cause under section 273B - discretionary nature of penalty - absence of revenue leakage as ground for waiver of penalty

Failure to get accounts audited - penalty under section 271B - reasonable cause under section 273B - absence of revenue leakage as ground for waiver of penalty - Whether the penalty under section 271B for failure to get accounts audited is sustainable in view of the assessee's bona fide belief about commission income, acceptance of declared income in assessment, and absence of revenue leakage. - HELD THAT: - The Tribunal noted that the assessee's turnover exceeded the threshold in section 44AB and therefore the statutory obligation to get accounts audited arose; nevertheless, imposition of penalty under section 271B is discretionary and not automatic, and an assessee may escape penalty if reasonable cause is shown under section 273B (paras 9, 9.1). The assessee's plea that only commission income should determine the audit liability was unsupported by documentary evidence and the onus lay on the assessee to prove that contention (para 9.2). However, the assessment under section 143(3) admitted the income declared by the assessee and the Assessing Officer accepted the return after verification of books and documents; no infirmity or leakage of revenue was found (paras 7.1, 9.3, 9.4). In these circumstances the Tribunal held that the object and benefits of a tax audit had effectively been met through the assessment process, and, applying the discretionary power under section 271B read with section 273B, concluded that imposing penalty was not justified in the interest of justice and fair play (paras 9, 9.4). [Paras 9]

Penalty under section 271B deleted as not sustainable in the facts; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the CIT(A)'s confirmation of penalty and directed deletion of the penalty under section 271B in view of acceptance of the declared income, absence of revenue leakage and the discretionary power/readiness to apply section 273B.

Levy of fee u/s 234E - substantive nature of section 234E - prospective effect of amendment to section 200A w.e.f. 01-06-2015 - invalidity of demands under section 200A for periods prior to 01-06-2015

Levy of fee u/s 234E - prospective effect of amendment to section 200A w.e.f. 01-06-2015 - invalidity of demands under section 200A for periods prior to 01-06-2015 - Deletion of late fee levied under section 234E for TDS statements pertaining to F.Y. 2012-13 (A.Y. 2013-14) on the ground that such levy could not validly be made prior to 01-06-2015. - HELD THAT: - The Tribunal held that section 234E is substantive in nature but the mechanism for computation and demand of the fee by issuance of intimation under section 200A was introduced only by amendment effective from 01-06-2015. In consequence, demands/intimations issued under section 200A for computation/payment of fee under section 234E in respect of periods prior to 01-06-2015 lack statutory authority. The Tribunal applied the ratio of the Karnataka High Court in Fatheraj Singhvi and consistent decisions of coordinate Benches of the Tribunal, which construed the amendment to section 200A as having prospective effect and held that late fee under section 234E can be levied only w.e.f. 01-06-2015. Applying that precedent to the present appeals (which relate to F.Y. 2012-13), the Tribunal concluded that the late fee levied prior to 01-06-2015 is not permissible in law and directed deletion of the fee by the assessing authority. [Paras 4, 5]

The late fee levied under section 234E for F.Y. 2012-13 is quashed and the assessing officer is directed to delete the fee.

Final Conclusion: All appeals are allowed: the late fee levied under section 234E for TDS statements pertaining to F.Y. 2012-13 (A.Y. 2013-14) - being levied prior to 01-06-2015 - is set aside and the assessing officer is directed to delete the levy.

Remission or cessation of trading liability - section 41(1) of the Income Tax Act - unilateral write off in books of account - treatment of advances as income - verification by Assessing Officer / remand for de novo adjudication - taxability in the year of occurrence of the event

Remission or cessation of trading liability - section 41(1) of the Income Tax Act - unilateral write off in books of account - Deletion of addition under section 41(1) in respect of sundry creditors shown in books of account. - HELD THAT: - The Tribunal found that the Assessing Officer treated the sundry creditors as both non existent and as having ceased, and added the amounts to income under section 41(1) without any material showing that the assessee obtained a benefit by way of remission or cessation of the liabilities. The liabilities continued to appear in the books from previous years and there was no unilateral write off by the assessee or any evidence that the liabilities had irrevocably ceased or could not be revived. In the absence of documentary evidence establishing that the assessee received a benefit in respect of those trading liabilities during the year, mere surmise and assumption cannot attract section 41(1). On these findings the addition was held not sustainable and directed to be deleted. [Paras 7, 8]

Addition on account of sundry creditors under section 41(1) deleted; assessee's grounds allowed.

Treatment of advances as income - verification by Assessing Officer / remand for de novo adjudication - taxability in the year of occurrence of the event - Whether advances/loans shown in the books should be treated as income in the year under consideration or subjected to verification. - HELD THAT: - The Tribunal noted that the advances/loans appeared in earlier years' financials and that the assessee asserted some advances were refundable (creditors treating them as receivables) and others related to shows/events that had not occurred. The CIT(A) accepted the assessee's plea that loans/advances are not automatically taxable as income in the absence of evidence of assimilation into income. Given unsettled factual aspects, the Tribunal directed that the matter be remitted to the Assessing Officer for fresh verification: to ascertain whether creditors treat the amounts as refundable/receivable and, if so, to grant relief; and to examine whether the events/shows have since taken place, noting that such advances can only be taxed in the year in which the respective shows/events occurred. [Paras 14]

Revenue's appeal allowed for statistical purpose and the issue remitted to the Assessing Officer for de novo adjudication and verification as directed.

Final Conclusion: The assessee's appeal is allowed by deleting the addition under section 41(1) relating to sundry creditors; the Revenue's appeal is allowed for statistical purposes and the issue of advances is remanded to the Assessing Officer for verification and fresh adjudication, with directions that advances be taxed only in the year the respective events occur if so established.

Validity of revision under section 263 of the Income tax Act - Time limit for giving effect to an order under section 263 as governed by section 153(3) (proviso substituting "twelve months") - Effect of failure of the Assessing Officer to pass a fresh assessment order within the prescribed period - rendering the revision infructuous - Reopening under section 147 of the Income tax Act - "reason to believe" and subsequent acceptance of return in reassessment

Validity of revision under section 263 of the Income tax Act - Time limit for giving effect to an order under section 263 as governed by section 153(3) (proviso substituting "twelve months") - Effect of failure of the Assessing Officer to pass a fresh assessment order within the prescribed period - rendering the revision infructuous - Whether the appeal against the order passed under section 263 is maintainable where the Assessing Officer has not passed any fresh order pursuant to the section 263 direction within the statutory time limit and the reassessment (if any) has subsequently resulted in acceptance of the return. - HELD THAT: - The Tribunal noted that the PCIT passed the section 263 order on 05/03/2020 directing the AO to make detailed verification and pass a fresh speaking order (paras 8). The statutory period for the AO to give effect to a section 263 order is governed by section 153(3); because the section 263 order was passed after 1/4/2019 the proviso substituting "twelve months" applies, making the outer limit 31/03/2021 (paras 9-10). Further extensions notified by CBDT in view of the COVID 19 situation extended the AO's time up to 30/09/2021, but no order was passed by the AO within these extended limits (para 10). The AO later initiated proceedings under section 147 on the same information, but the reassessment order dated 30/03/2022 accepted the return and made no addition (para 12). Given that no operative order was passed by the AO pursuant to the section 263 direction within the statutory period (as extended), the challenge to the validity of the section 263 order became academic; accordingly the appeal was dismissed as infructuous while leaving open the liberty to recall if an AO's order is later found to have been passed pursuant to the section 263 directions (para 13). [Paras 8, 9, 10, 12, 13]

Appeal dismissed as infructuous because the Assessing Officer did not pass any fresh assessment order pursuant to the section 263 direction within the statutory period (as extended); liberty granted to recall if an operative order is later found to have been passed.

Final Conclusion: The appeal against the PCIT's order under section 263 is dismissed as infructuous because no order was passed by the Assessing Officer pursuant to the section 263 directions within the statutory period (as extended); parties may seek recall if an operative order is subsequently shown to have been passed.

Appropriation of profits - provision for additional interest treated as dividend/appropriation - deduction under section 80P of the Income tax Act - admission of additional evidence on appeal - revised return and offer of income

Dismissal as not pressed - Dismissal of grounds 1 and 2 as not pressed and dismissal of general ground 7. - HELD THAT: - The Tribunal recorded that the assessee's counsel did not press grounds 1 and 2 at the hearing and the Revenue raised no objection; accordingly those grounds were dismissed as not pressed. The general ground pleaded as ground 7 was also dismissed. The order disposes of these grounds by recording non press and treating the general ground as not establishing a separate contention for adjudication. [Paras 3]

Grounds 1 and 2 dismissed as not pressed; ground 7 dismissed.

Provision for additional interest treated as dividend/appropriation - appropriation of profits - Validity of additions disallowing provisions for additional interest on Compulsory Thrift Deposits (CTDs) and Reinvested CTDs (RID CTD). - HELD THAT: - The Tribunal considered the assessment officer's findings that the provisions made by the society for additional interest on CTDs and on reinvested CTDs were in substance appropriation of profits (dividend like distribution) rather than deductible business expenditure, noting the manner of crediting to members and minutes of the AGM indicating distribution out of profits. The AO completed assessment u/s 143(3) disallowing the provisions and the CIT(A) upheld those disallowances. The Tribunal examined the AO's treatment, the fact that for subsequent assessment years the assessee filed revised returns offering similar amounts as income and taking deduction under section 80P, and found no infirmity in the CIT(A)'s confirmation of the additions for A.Y.2012 13. [Paras 7, 8, 9, 14, 17]

Additions disallowing provisions of Rs.99,95,270 (additional interest on CTDs) and Rs.58,96,831 (additional interest on RID CTDs) upheld.

Reserve fund and other funds debited to profit and loss account - Disallowance of amounts debited to Profit & Loss account as reserve fund, education fund and common good fund. - HELD THAT: - The AO queried and disallowed amounts appropriated to reserve fund, education fund and common good fund on the basis that these debits amounted to appropriation of profits. The CIT(A) sustained the AO's action and the Tribunal found no infirmity in that conclusion on the material before it, thereby upholding the disallowance of such fund appropriations as not allowable deductions in computing taxable income for the year under appeal. [Paras 8, 9, 10, 17]

Disallowance of reserve fund, education fund and common good fund debited to P&L account confirmed.

Deduction under section 80P of the Income tax Act - revised return and offer of income - admission of additional evidence on appeal - Claim for deduction under section 80P raised before the CIT(A) but not before the Assessing Officer; whether the claim should be examined. - HELD THAT: - The CIT(A) rejected the assessee's claim to deduction under section 80P on the ground that it was a new claim not taken before the AO and that additional evidence was not filed during original proceedings. The Tribunal observed that the assessee had, in other assessment years, filed revised returns offering the additional interest as income and obtained deduction under section 80P, and that a ground was taken before the CIT(A). Considering the totality of facts and in the interest of justice, the Tribunal found merit in the assessee's contention and directed that the claim for deduction under section 80P be restored to the file of the Assessing Officer for consideration on facts and law after giving the assessee an opportunity of being heard. The Tribunal therefore did not decide the claim on merits but remitted it for fresh adjudication. [Paras 18, 19]

Ground raising deduction under section 80P is restored to the Assessing Officer for fresh consideration; matter remanded.

Final Conclusion: The appeal is partly allowed for statistical purposes: the Tribunal upheld the Assessing Officer's and CIT(A)'s disallowances of the provisions for additional interest on CTDs and RIDs and the appropriations to reserve/education/common funds for A.Y.2012 13, but restored the assessee's claim for deduction under section 80P to the file of the Assessing Officer for fresh adjudication after hearing the assessee.

Best judgment assessment - Estimation of income on rejection of books - Consideration of past history of the assessee - Honest guess work / fair and reasonable estimate - Application of net profit rate for computation of income

Best judgment assessment - Consideration of past history of the assessee - Honest guess work / fair and reasonable estimate - Application of net profit rate for computation of income - Quantification of estimated net profit for Assessment Year 2013-14 where books of account were rejected and assessment was completed under best judgment provisions. - HELD THAT: - The Tribunal held that while Section 144 best judgment assessments are resorted to when the assessee fails to cooperate, the Assessing Officer must act within legal bounds and make an honest, fair estimate grounded in evidence and past material. The past history of the assessee is a relevant and necessary guide in framing such estimation; arbitrariness or disregard of previous trends renders the estimate unsustainable. In the present case the AO applied 12% without regard to earlier years, and NFAC reduced it to 5% without adequately considering past trends. Having examined the assessee's historic net profit percentages and the precedents where appellate authorities reduced arbitrary estimations, the Tribunal concluded that neither the AO's 12% nor NFAC's 5% were supported by cogent reasons. Balancing the need to prevent revenue leakage with the assessee's non-production of books, the Tribunal applied the principle of fair and reasonable estimation and directed computation of income by applying a net profit rate of 2.5% on gross receipts for the year under consideration. [Paras 5, 6]

Net profit rate for Assessment Year 2013-14 directed to be 2.5% of gross receipts; appeal partly allowed.

Final Conclusion: The appeal is partly allowed: the order under challenge is modified by directing computation of income for Assessment Year 2013-14 by applying a net profit rate of 2.5% on gross receipts.

Section 40A(3) - requirement of payment by crossed cheque or bank draft - business expediency - genuine and bona fide transactions - assessment of cash payments to petty suppliers in remote locations

Section 40A(3) - business expediency - genuine and bona fide transactions - requirement of payment by crossed cheque or bank draft - Whether disallowance under Section 40A(3) is justified in respect of cash payments made to suppliers for contract work - HELD THAT: - The Tribunal examined the nature and circumstances of the payments and the assessee's business. The assessee carried out contract work for government agencies at remote desert locations and made cash payments to petty suppliers who were illiterate and lacked PAN; these factual contentions were not shown to be false. The assessee's audited accounts and comparative gross profit and net profit ratios for the year under consideration did not suggest that the expenditures were bogus or intended to inflate costs; on the contrary, profit margins had improved. The Tribunal applied the principle that Section 40A(3) is not absolute and must be read with regard to business expediency and other relevant factors; genuine and bona fide transactions may be exempted from disallowance if the assessee satisfies the assessing officer about the impracticality or genuine difficulty in making payment by cheque or draft. In light of the totality of facts - remote location, nature of suppliers, absence of any finding of sham transactions, and improvement in profit ratios - the disallowance made by the Assessing Officer and upheld by the CIT(A) was held not to be justified and was directed to be deleted. [Paras 8, 9]

Addition under Section 40A(3) deleted and the assessee's ground allowed

Final Conclusion: The Tribunal allowed the appeal and directed deletion of the disallowance made under Section 40A(3) in Assessment Year 2015-16, holding that payments were genuine and that business expediency and surrounding circumstances warranted relief.

Penalty under section 272A(1)(d) - non-compliance of notice under section 142(1) - compliance before assessment - bonafide delay due to transition to e-assessment

Penalty under section 272A(1)(d) - non-compliance of notice under section 142(1) - compliance before assessment - bonafide delay due to transition to e-assessment - Validity of penalty imposed under section 272A(1)(d) for alleged non-compliance with notice under section 142(1). - HELD THAT: - The Assessing Officer initiated penalty proceedings under section 272A(1)(d) on the ground that the assessee failed to comply with the notice under section 142(1) dated 18.11.2019. The record shows that the assessee furnished earlier online replies (29.07.2019) and thereafter replied to the queries raised by the notice dated 18.11.2019 (reply recorded in the order and consisting of responses dated 20.12.2019). The Assessing Officer himself recorded receipt of the replies and the documents and thereafter framed the assessment under section 143(3) on 28.12.2019 after considering those replies. Given that the compliance, though belated, was made before framing of the assessment and was considered in the assessment, the Tribunal held that the case did not amount to non-compliance warranting penalty. The Tribunal additionally noted the transition to electronic/e-assessment mode as furnishing a bonafide explanation for delay in compliance, which supported the conclusion that delay was not deliberate. On these findings the Tribunal deleted the penalty. [Paras 6, 7, 8]

Penalty imposed under section 272A(1)(d) deleted as the assessee made compliance to the section 142(1) notice before the assessment was framed and delay was held to be bonafide in the circumstances of transition to e-assessment.

Final Conclusion: The appeal is allowed and the penalty levied under section 272A(1)(d) is deleted because the assessee's belated compliance with the section 142(1) notice was made before framing of assessment and the delay was held to be bona fide in the circumstances.

Ex parte assessment under section 144 of the Income tax Act - duty of the assessee to lead evidence and burden of proof to substantiate returned income - rejection of books of account and disallowance of expenses for non production of bills/vouchers - enhancement of gross profit rate where declared GP is unverifiable - service of notices and obligation to intimate change of address / file revised Form No.36

Ex parte assessment under section 144 of the Income tax Act - service of notices and obligation to intimate change of address / file revised Form No.36 - Whether the appeal could be proceeded with and the orders of the lower authorities sustained where the assessee failed to appear, did not cure registry defects and notices were returned undelivered. - HELD THAT: - The Tribunal recorded that the assessee did not appear before the Assessing Officer or the Commissioner (Appeals) and failed to appear before the Tribunal despite multiple listings and notices dispatched by RPAD being returned. The Registry had pointed out defects in the appeal (shortfall in fee, missing challan, missing grounds) which were not cured for over three years. The Tribunal observed that it is the assessee's duty to pursue the appeal, to lead evidence in support of his claims and to intimate any change of address (including filing revised Form No.36). In these circumstances the authorities were left with no option but to pass ex parte assessment under section 144 based on material available on record, and the Tribunal found no reason to keep the matter pending or to reopen the record in absence of any cooperation from the assessee. [Paras 4, 9, 10]

Tribunal dismissed the appeal for lack of prosecution and confirmed that ex parte orders could be sustained in absence of the assessee's participation and failure to cure registry defects.

Duty of the assessee to lead evidence and burden of proof to substantiate returned income - rejection of books of account and disallowance of expenses for non production of bills/vouchers - enhancement of gross profit rate where declared GP is unverifiable - Whether the additions made by the Assessing Officer (enhancement of gross profit rate, disallowance of expenses and other additions) were sustainable in absence of books, vouchers and any contrary material produced by the assessee. - HELD THAT: - On the material on record the Assessing Officer found the assessee's declared gross profit (3.47%) on large turnover to be not verifiable because the assessee failed to produce books and supporting documents despite opportunities. The AO held a higher GP rate (5%) to be appropriate and disallowed claimed expenses for want of bills/vouchers. The Commissioner (Appeals) confirmed these findings, noting non production of evidence and that notices were returned. The Tribunal accepted the approach that where the assessee fails to discharge the burden of proof by producing books and vouchers, the AO/CIT(A) may make additions based on available material and reasonable estimates; in absence of any rebuttal or documentary evidence placed before the Tribunal, there was no basis to interfere with the additions. [Paras 5, 6, 9]

Tribunal confirmed the additions and disallowances made by the lower authorities on merits for lack of any contrary material or evidence from the assessee.

Final Conclusion: Appeal dismissed; the Tribunal upheld the ex parte assessment and the related additions where the assessee neither prosecuted the appeal nor produced any evidence to controvert the findings of the Assessing Officer and the Commissioner (Appeals) for A.Y. 2008-09.

Classification of goods under Customs Tariff Item - Goods "principally" used in an Automatic Data Processing System - Goods "capable of directly connecting to and designed for use with" an Automatic Data Processing Machine - Eligibility for exemption notification for goods of a specified tariff-item - Extended period of limitation - invocation where importer acted in bona fide reliance on existing decisions - Penalty under section 114A of the Customs Act - Penalty under section 114AA of the Customs Act

Classification of goods under Customs Tariff Item - Goods "principally" used in an Automatic Data Processing System - Goods "capable of directly connecting to and designed for use with" an Automatic Data Processing Machine - Eligibility for exemption notification for goods of a specified tariff-item - Colour data projectors imported by the appellant are classifiable as data projectors falling under the tariff items for goods used with ADPS (CTI 8528 61 00 prior to 01.01.2017 and CTI 8528 62 00 w.e.f. 01.01.2017) and thereby eligible for exemption under the notification. - HELD THAT: - The Tribunal accepted the appellants' contention that the determinative test for the pre-2017 tariff entry is whether the goods are "principally" used with an Automatic Data Processing System (ADPS), i.e. whether their specifications and features indicate they are generally or primarily meant for use with ADPS, notwithstanding capability of other uses (para 22). Prior Tribunal decisions (including Sony India, Aveco Viscomm, Vardhaman Technology) were held to support classification of colour data projectors under the ADPS-specific heading where the projectors are used in conjunction with ADPS; additional connectivity ports do not alter the basic nature of the goods or disqualify them from the ADPS heading (paras 23-25, 27). For post-01.01.2017 entries, the change in tariff language to "capable of directly connecting to and designed for use with" an automatic data processing machine did not defeat classification where the principal function remains use with ADPS (para 21, 27). Applying these principles to the facts, the Tribunal found that the projectors imported by the appellant meet the description of goods covered by the exemption notification for both the pre- and post-2017 periods and are therefore entitled to the exemption (paras 28, 22, 27). [Paras 21, 22, 23, 27, 28]

Projectors held classifiable under CTI 8528 61 00 (pre-01.01.2017) and CTI 8528 62 00 (w.e.f. 01.01.2017) and eligible for exemption under the exemption notification.

Extended period of limitation - invocation where importer acted in bona fide reliance on existing decisions - Extended period of limitation could not be invoked because the appellant had bona fide belief, founded on existing Tribunal decisions, that the goods were correctly classified and exempt. - HELD THAT: - The Tribunal accepted the appellant's submission that decisions of the Tribunal on the classification issue could have reasonably led to a bona fide belief that the imports were correctly declared. In such circumstances, invoking the extended period of limitation was inappropriate (para 29). Reliance was placed on the principle that a declaration made in conformity with prevailing judicial decisions is bona fide and not a mis-declaration, and therefore cannot justify extended limitation (para 29). [Paras 29]

Extended period of limitation not invokable; demand could not be sustained on that ground.

Penalty under section 114A of the Customs Act - Penalty under section 114AA of the Customs Act - Penalty under section 114A could not be imposed where there was no mis-declaration; penalty under section 114AA was not imposed and Department's appeals against non-imposition of 114AA were dismissed. - HELD THAT: - Because the Tribunal concluded that the appellants had correctly availed the exemption and that there was no mis-declaration (given bona fide reliance on existing Tribunal decisions), the imposition of penalty under section 114A was not sustainable (para 30). The Tribunal also observed that section 114AA penalties were not imposed by the adjudicating authority and, in consequence, the Department's appeals contesting non-imposition of section 114AA were without merit and were dismissed (paras 10, 31). [Paras 10, 30, 31]

Penalties under section 114A not sustainable; absence of penalty under section 114AA upheld and Department's appeals dismissed.

Final Conclusion: The Tribunal allowed the appeals filed by the importers, holding the projectors to be classifiable as goods for use with ADPS and eligible for exemption for the period 07.11.2013 to 09.10.2018; extended limitation and penalty grounds raised by the Department failed, and the Department's cross-appeals were dismissed.

Pre-deposit requirement under Section 129E of the Customs Act, 1962 - condonation of delay where pre-deposit is made after prescribed time - treatment of pre-deposit made before the Tribunal as pre-deposit before Commissioner (Appeals) - remand to adjudicating authority for fresh decision on merits - bar on refund of pre-deposit until disposal of remand proceedings

Pre-deposit requirement under Section 129E of the Customs Act, 1962 - condonation of delay where pre-deposit is made after prescribed time - treatment of pre-deposit made before the Tribunal as pre-deposit before Commissioner (Appeals) - Whether the appeal could be admitted and the late pre-deposit treated as cure for non-compliance with the pre-deposit condition before Commissioner (Appeals). - HELD THAT: - The Tribunal recorded that the appeal initially stood rejected by the Commissioner (Appeals) for non-payment of the mandatory 7.5% pre-deposit required by Section 129E. The appellant thereafter made the pre-deposit and applied for condonation of delay. The Bench restored the appeal, treated the date of payment as the date of filing for purposes of delay, and observed that the procedural irregularity had been remediated. The Tribunal further held that the pre-deposit made before the Tribunal can be regarded as the pre-deposit required to entertain the appeal before the Commissioner (Appeals), and therefore the appeal was admitted for hearing instead of remaining rejected for want of pre-deposit. [Paras 2]

Late pre-deposit was condoned; the pre-deposit made before the Tribunal is treated as satisfying the pre-deposit requirement before the Commissioner (Appeals), and the appeal was admitted.

Remand to adjudicating authority for fresh decision on merits - Whether the matter should be remanded to the Commissioner (Appeals) for fresh decision on merits in accordance with the earlier remand order of the Tribunal. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) had not adjudicated the remanded matter on merits and that the impugned Order-in-Original resulted from proceedings following an earlier remand by the Tribunal. In the interests of justice, the Tribunal concluded that the appropriate course was to remit the matter back to the Commissioner (Appeals) for a decision on merits in accordance with the Tribunal's earlier remand direction, while directing that the Commissioner (Appeals) decide the issue within three months after allowing the appellant an opportunity of hearing. [Paras 3, 4]

Matter remanded to the Commissioner (Appeals) for fresh decision on merits, to be completed within three months after hearing the appellant.

Bar on refund of pre-deposit until disposal of remand proceedings - Whether the appellant is entitled to a refund of the pre-deposit during the pendency of remand proceedings. - HELD THAT: - While permitting remand, the Tribunal expressly clarified that the appellant is barred from claiming a refund of the amount pre-deposited for filing the appeal before the Tribunal until the Commissioner (Appeals) disposes of the remand proceedings. This restriction was imposed to preserve the status of the pre-deposit while the remand proceedings are adjudicated on merits. [Paras 3, 4]

Appellant cannot claim refund of the pre-deposit until the remand proceedings before the Commissioner (Appeals) are finally disposed of.

Final Conclusion: The Tribunal allowed the appeal for limited relief: it treated the late pre-deposit as curing the procedural defect and admitted the appeal, remanded the matter to the Commissioner (Appeals) for fresh adjudication on merits within three months after hearing the appellant, and directed that the pre-deposit shall not be refunded until disposal of the remand proceedings.

Formation of opinion under Rule 3 of the SEBI Adjudication Rules - disclosure of documents relied upon for initiation of adjudication - principles of natural justice and duty of adequate disclosure - two-tier adjudication procedure under Rule 4 of the SEBI Adjudication Rules - reliance only on documents supplied at the adjudication stage

Formation of opinion under Rule 3 of the SEBI Adjudication Rules - disclosure of documents relied upon for initiation of adjudication - duty of adequate disclosure - Whether the Board is required to furnish the opinion formed under Rule 3 or disclose documents relied upon in forming that opinion to the noticee prior to adjudication. - HELD THAT: - At the stage of Rule 3 the Board decides only whether there are prima facie grounds to appoint an Adjudicating Officer; that opinion is not a formal inquiry involving the person contemplated and participation by the person is not necessary. The Court reiterated that documents relied upon to set the adjudication in motion need not be disclosed at the opinion-formation stage unless they are to be relied upon in the subsequent inquiry. While principles of natural justice and the duty of adequate disclosure require disclosure of material relied upon at the adjudication stage, they do not mandate wholesale disclosure of all internal materials or documents used only for forming the Board's preliminary opinion. If the noticee is ultimately prejudiced by reliance on undisclosed materials in the final order, appropriate remedies remain available. [Paras 45, 46, 50]

No obligation to furnish the complete Rule 3 opinion or all documents used to form that opinion; disclosure is required only insofar as materials are to be relied upon in the adjudication.

Two-tier adjudication procedure under Rule 4 of the SEBI Adjudication Rules - principles of natural justice and opportunity of personal hearing - reliance only on documents supplied at the adjudication stage - Whether there was procedural irregularity in the adjudication (including fixing the matter for final hearing and inspection/supply of documents) and whether the High Court erred in declining relief. - HELD THAT: - Rule 4 contemplates that after a show cause notice and receipt of cause shown, the Adjudicating Officer must consider the reply and, if of the opinion that inquiry should be held, issue notice fixing a date for appearance and thereafter provide a personal hearing and opportunity to produce documents. In the present case the Board formed an opinion and appointed an Adjudicating Officer, the Show Cause Notice was issued, preliminary replies and inspections occurred, and the Adjudicating Officer, after considering replies, fixed dates for appearance. The Adjudicating Officer had undertaken not to rely on documents not supplied; SEBI provided inspection and a compact disc of voluminous records while withholding certain internal/confidential materials. The Court found no procedural irregularity up to the stage of fixing the hearing and held that the High Court correctly refused relief; the existing interim order precluded SEBI from relying on undisclosed documents during inquiry and the noticee retains remedy if prejudiced by reliance on undisclosed material. [Paras 47, 48, 51, 52, 53]

No procedural infirmity found; High Court rightly dismissed the writ petition and SEBI may proceed with inquiry provided it does not rely on documents not supplied to the noticee, with remedies open if prejudice is shown.

Final Conclusion: The Special Leave Petition is dismissed. The Board need not disclose its Rule 3 opinion or materials used solely to form that opinion unless those materials are to be relied upon in the adjudication; the adjudication may proceed so long as SEBI does not rely on documents not supplied to the noticee, and remedies remain available if prejudice from undisclosed reliance is demonstrated.

Filing of interlocutory applications under Section 76 of the Insolvency and Bankruptcy Code and Section 340 of the Criminal Procedure Code in pending Section 9 proceedings - abuse of process and dilatory tactics - discretion of the Adjudicating Authority to refuse reliefs and to initiate prosecution - weight to be accorded to factual findings and observations of the Adjudicating Authority

Filing of interlocutory applications under Section 76 of the Insolvency and Bankruptcy Code and Section 340 of the Criminal Procedure Code in pending Section 9 proceedings - abuse of process and dilatory tactics - Validity of the Adjudicating Authority's rejection of I.A. No. 4201 of 2022 and I.A. No. 4202 of 2022 filed in the pending Section 9 proceedings - HELD THAT: - The Appellate Tribunal examined the record and the sequence of hearings before the Adjudicating Authority and agreed with the Adjudicating Authority's finding that the applications filed on 30.08.2022 under Section 76 of the I&B Code and Section 340 of the CrPC were instituted to delay the Section 9 adjudication. Although the Corporate Debtor's earlier Section 76 application was not listed and lay in defect, the Adjudicating Authority's order records a statement by the Corporate Debtor's counsel that the Section 76 application would be withdrawn. The Tribunal held that the Adjudicating Authority, being in charge of the proceedings, was entitled to treat the later-filed applications as dilatory and to refuse them. Deference was given to the Adjudicating Authority's factual observations and exercise of discretion, and no ground was found to take a different view.

The rejection of the interlocutory applications by the Adjudicating Authority was upheld and the Appeal dismissed.

Discretion of the Adjudicating Authority to refuse reliefs and to initiate prosecution - weight to be accorded to factual findings and observations of the Adjudicating Authority - Whether the Adjudicating Authority's recorded observation regarding withdrawal and the power to initiate prosecution could justify dismissal of the applications - HELD THAT: - The Tribunal noted that the Adjudicating Authority has broad powers, including to direct prosecution and to manage interlocutory steps in the pending adjudication. The Adjudicating Authority had heard the parties multiple times, directed filing of written submissions and recorded the Corporate Debtor's counsel's statement about withdrawal of the earlier Section 76 application. In light of these circumstances and the Adjudicating Authority's assessment that the subsequent applications were aimed at delaying the proceedings, the Tribunal found no reason to interfere with the exercise of discretion or to reappraise the factual finding.

The Adjudicating Authority's exercise of discretion and its factual observation were affirmed; no interference warranted.

Final Conclusion: The Appellate Tribunal dismissed the appeal and upheld the Adjudicating Authority's rejection of the applications filed under Section 76 of the I&B Code and Section 340 CrPC as dilatory, giving deference to the Adjudicating Authority's factual findings and discretionary exercise.

Ad-interim stay - forfeiture of caution money deposit - time-bound liquidation under IBC - finality of NCLT order - liquidator's discretion in auction process - extension of time for payment under e-auction terms - abuse of process

Ad-interim stay - finality of NCLT order - Validity of the ad-interim stay orders dated 28.02.2022 and 22.03.2022 restraining the third e-auction of the Ratnagiri property. - HELD THAT: - The Tribunal found that the Adjudicating Authority's impugned orders granting and extending ad interim stay on the third e auction were unsustainable on the facts. The NCLT order dated 16.03.2021 (in IA No.468/2021) had achieved finality and expressly denied any further indulgence regarding timeline for payment to the successful bidder of the second e auction. That order and the terms and conditions of the second e auction bound the respondent, who had been given the stipulated time and further extension but failed to pay the balance. The respondent's subsequent interlocutory applications and publicity to dissuade bidders obstructed the liquidation process. On appreciation of the complete record, the Tribunal concluded that the Adjudicating Authority, when granting the stay, either did not have before it or did not appreciate the effect of the earlier final order. Consequently, the impugned stay orders were set aside to permit prompt sale and completion of the liquidation process in a time bound manner. [Paras 21, 22, 23, 28]

Impugned orders dated 28.02.2022 and 22.03.2022 granting and extending ad interim stay were set aside and the liquidator directed to proceed with the sale of the Ratnagiri property.

Forfeiture of caution money deposit - extension of time for payment under e-auction terms - liquidator's discretion in auction process - Lawfulness of the liquidator's cancellation of the sale and forfeiture of the CMD where the successful bidder failed to deposit the balance within the time permitted by the e auction terms and by the NCLT order. - HELD THAT: - The Tribunal accepted the liquidator's actions as consistent with the Liquidation Process Regulations and the e auction terms. The record showed that the respondent was the successful bidder in the first and second rounds, was given the time permitted under the bid terms (a total of 90 days after the first round and 30 days in the second round including an extension), but failed to pay the balance by the stipulated dates. The NCLT order of 16.03.2021 explicitly prohibited further indulgence and permitted participation in the fresh auction on specified terms; that order was not challenged and hence attained finality. Given these facts, the liquidator was entitled to cancel the sale and forfeit the CMD in accordance with the applicable terms and regulations, and the respondent was precluded from re litigating those issues. [Paras 19, 20, 21, 22, 27]

The liquidator's cancellation of the offer and forfeiture of the CMD were upheld as lawful and the respondent was precluded from reopening those concluded matters.

Time-bound liquidation under IBC - abuse of process - Whether the respondent's conduct amounted to abuse of process warranting penal consequence and costs. - HELD THAT: - The Tribunal observed that repeated litigations, publicity to deter bidders and failure to honour payment commitments unduly delayed the liquidation of the corporate debtor's asset, contrary to the time sensitive objectives of the Insolvency and Bankruptcy Code. The conduct was held to have obstructed the sale process and diminished prospects for realization for creditors. Having regard to the protracted timeline from the first e auction in December 2020 to March 2022 and the adverse impact on the liquidation estate, the Tribunal concluded that the respondent had abused the process of law. [Paras 24, 29, 30]

A penalty and costs were imposed: the respondent was directed to deposit the fine into the Prime Minister's Relief Fund and to pay litigation costs to the liquidator, amounts to be added to the liquidation estate.

Final Conclusion: The appeals were allowed: the ad interim stay orders of 28.02.2022 and 22.03.2022 were set aside; the liquidator was directed to proceed with sale of the Ratnagiri property; the liquidator's cancellation of sale and forfeiture of CMD was upheld; and the respondent was found to have abused the process and ordered to pay a fine and litigation costs to be added to the liquidation estate.

Operational debt - default under the Insolvency and Bankruptcy Code, 2016 - settlement agreement and its effect on operational debt - scope of Adjudicating Authority under Section 9 of the IBC - referral to arbitration under Section 8 of the Arbitration and Conciliation Act

Operational debt - settlement agreement and its effect on operational debt - default under the Insolvency and Bankruptcy Code, 2016 - Whether unpaid amounts under the Settlement Agreement dated 20.11.2018 qualify as an operational debt for the purpose of initiating CIRP under Section 9 of the IBC. - HELD THAT: - The Tribunal examined the Settlement Agreement clauses which recorded the outstanding principal and set out staged obligations including reduction to a specified amount by 30 November 2018 and a further obligation to reduce the outstanding amount to zero by 30 April 2019 subject to concluding a further supply contract. The Adjudicating Authority construed these provisions and held that the instalment obligations under the Settlement Agreement do not fall within the definition of operational debt as conceived in Section 5(21) of the IBC. The Tribunal noted that the Adjudicating Authority considered the terms of the Settlement Agreement and concluded that the claimed amounts under the Settlement Agreement did not amount to operational debt for triggering Section 9. Having reviewed the Settlement Agreement and the parties' contentions, the Appellate Tribunal found no error in that conclusion and affirmed the Adjudicating Authority's approach and outcome. [Paras 17]

The claim under the Settlement Agreement does not constitute an operational debt for initiation of CIRP under Section 9; the Adjudicating Authority's dismissal on that ground is affirmed.

Scope of Adjudicating Authority under Section 9 of the IBC - referral to arbitration under Section 8 of the Arbitration and Conciliation Act - Whether the Adjudicating Authority exercising jurisdiction under Section 9 could/should have referred the dispute to arbitration under Section 8 of the Arbitration and Conciliation Act. - HELD THAT: - The Adjudicating Authority declined the Corporate Debtor's prayer to refer the matter to arbitration, observing that while exercising powers under Sections 7, 9 and 10 of the IBC its role is limited and referral to arbitration is beyond the scope of Section 9. The Appellate Tribunal recorded that the Adjudicating Authority took note that the Corporate Debtor had remedies before the proper civil forum (Commercial Civil Suit No. 2/2020) and that refusal to refer the dispute to arbitration was consistent with the limited inquiry under Section 9. The Tribunal found no infirmity in the Adjudicating Authority's conclusion and upheld its approach. [Paras 17]

The Adjudicating Authority acted within its limited scope under Section 9 in refusing to refer the matter to arbitration; that finding is affirmed.

Final Conclusion: The impugned order dismissing the Section 9 application was examined and sustained: unpaid obligations as per the Settlement Agreement do not constitute operational debt for triggering CIRP under Section 9, and the Adjudicating Authority properly declined to refer the dispute to arbitration. The appeal is dismissed and the impugned order affirmed.

Liability for CIRP costs - ratification of fees and expenses by the Committee of Creditors - proviso to Regulation 12(3) of CIRP Regulations, 2016 - inclusion of a creditor in the CoC not affecting validity of prior decisions - participation of reconstituted CoC and estoppel from denying prior ratifications

Liability for CIRP costs - ratification of fees and expenses by the Committee of Creditors - proviso to Regulation 12(3) of CIRP Regulations, 2016 - participation of reconstituted CoC and estoppel from denying prior ratifications - Whether the appellant bank, as the sole financial creditor in the reconstituted CoC, is liable to pay the CIRP costs and the resolution professional's fees ratified by the earlier CoC. - HELD THAT: - The Tribunal held that the earlier Committee of Creditors had approved the resolution professional's fees and CIRP costs prior to the appellant's inclusion in the reconstituted CoC. The proviso to Regulation 12(3) of the CIRP Regulations, 2016, provides that inclusion of a creditor upon admission of its claim shall not affect the validity of any decision taken by the committee prior to such inclusion. The appellant had participated in subsequent CoC meetings, became the sole member, and passed the liquidation resolution; it did not object to the previously ratified fees. The appellant's contentions that fraudulent/missing security or alleged deficient performance by the RP absolve it of liability were rejected as having no nexus to the obligation to bear CIRP expenses. The Adjudicating Authority's apportionment, which allocated the earlier-approved CIRP costs to the appellant for the period up to the liquidation resolution, was found to be lawful and in conformity with the cited regulation. Accordingly, there was no error in holding the appellant liable to pay the RP's fees as ratified earlier. [Paras 4, 5, 6]

The appellant bank is liable to bear the CIRP costs and the resolution professional's fees ratified by the earlier CoC, and the Adjudicating Authority's order so directing is upheld.

Final Conclusion: Appeal dismissed; the Impugned Order directing payment of the resolution professional's fees and CIRP costs as apportioned by the Adjudicating Authority is upheld.

Assets of the corporate debtor - no lien account - assets under Section 18(f) of the Insolvency and Bankruptcy Code, 2016 - moratorium under the Code - banker's lien - deposit made to show bona fides not creating bank's proprietary right

Assets of the corporate debtor - no lien account - assets under Section 18(f) of the Insolvency and Bankruptcy Code, 2016 - moratorium under the Code - banker's lien - deposit made to show bona fides not creating bank's proprietary right - Whether the sum of Rs.1 Crore lying in a 'no lien account' with the Bank vested in the Resolution Professional as an asset of the corporate debtor or belonged to the Bank - HELD THAT: - The amount was deposited on 15/12.07.2017 at the behest of the corporate debtor pursuant to an OTS proposal to demonstrate bona fides and was kept in a separate 'no lien account' with the Bank, with the express understanding that it would be adjusted only upon approval of the resolution/OTS and not applied to interest or principal until then. The OTS did not materialise and CIRP commenced on 26.11.2019. The Adjudicating Authority correctly held that, in those circumstances, the funds lying in the 'no lien account' constituted the corporate debtor's property and fell within the RP's obligation to take custody of all assets under Section 18(f) of the Code. Once the moratorium under the Code had commenced, the Bank could not appropriate the amount. The Banker's lien contention was rejected on the facts: the specific understanding and purpose of the deposit, its segregation in a 'no lien account', and the commencement of CIRP prevented the Bank from asserting a proprietary right over the sum. The decision also noted that deposits made to show bona fides do not automatically become the bank's asset, consistent with the principle that funds kept under a specified directive or in a registry-type arrangement are not available for the bank's appropriation absent the condition precedent (approval of OTS) being fulfilled. Having regard to these findings, there was no illegality in the Adjudicating Authority directing release of the amount to be treated as an asset of the corporate debtor and subject to the RP's control. [Paras 7, 8, 10]

The order of the Adjudicating Authority directing that the Rs.1 Crore in the 'no lien account' is the asset of the corporate debtor and subject to the RP's control is upheld; the Bank's claim to the amount is rejected.

Final Conclusion: Appeal dismissed; the Adjudicating Authority's order directing release of the amount held in the 'no lien account' as an asset of the corporate debtor and for the RP to deal with it is affirmed.

Voluntary liquidation of a corporate person - declaration of solvency - compliance with statutory and regulatory requirements for voluntary liquidation - public announcement and invitation of claims - realisation and distribution of assets in voluntary liquidation - dissolution by Adjudicating Authority under Section 59(8) of the Insolvency and Bankruptcy Code, 2016 - notification to Registrar of Companies and Insolvency and Bankruptcy Board of India

Voluntary liquidation of a corporate person - declaration of solvency - compliance with statutory and regulatory requirements for voluntary liquidation - Whether the company complied with the statutory conditions and procedural requirements for initiation of voluntary liquidation under Section 59 of the Code. - HELD THAT: - The Tribunal examined the materials on record including the directors' affidavits of declaration of solvency, audited financial statements, the special resolution passed in the Extra Ordinary General Meeting confirming voluntary liquidation and appointment of an insolvency professional, and filings made with the Registrar and the IBBI. The court found that the Board had formed the requisite opinion after inquiry into the affairs of the company and that the procedural formalities for initiating voluntary liquidation were followed in accordance with Section 59 and the applicable Regulations. There was no material to show that the company was being liquidated to defraud any person or that the statutory preconditions were not satisfied. [Paras 5, 6]

The company complied with the statutory conditions and procedural requirements for voluntary liquidation under Section 59 of the Code.

Public announcement and invitation of claims - realisation and distribution of assets in voluntary liquidation - final report and closure formalities - Whether the liquidator completed the liquidation process by inviting claims, realising assets, satisfying stakeholders and submitting the final report. - HELD THAT: - The Tribunal noted the liquidator's compliance with Regulation 14 by publishing the public announcement, the absence of claims by the claims cut-off date, the opening and subsequent closure of the liquidation bank account, distribution of proceeds to members in terms of Regulation 35 and Section 53, communication with the Income Tax Department, and submission of the preliminary and final reports and Form GNL-2 to the Registrar and the IBBI. The RoC's report indicated no pending inquiry or legal action against the company. On this basis the Tribunal concluded that the liquidator had performed the duties necessary to wind up the affairs of the corporate person. [Paras 9, 11, 12, 13]

The liquidator has completed the liquidation process, realised and distributed assets, and submitted the requisite reports and filings.

Dissolution by Adjudicating Authority under Section 59(8) of the Insolvency and Bankruptcy Code, 2016 - notification to Registrar of Companies and Insolvency and Bankruptcy Board of India - Whether the Adjudicating Authority should pass an order dissolving the corporate person and direct communication of the order to the Registrar of Companies and the IBBI. - HELD THAT: - Having found that the statutory conditions for voluntary liquidation were satisfied and that the liquidator had wound up the company's affairs and made the necessary distributions and filings, the Tribunal exercised its power under Section 59(8) to order dissolution. The Tribunal further directed that a copy of the dissolution order be communicated to the Registrar of Companies and to the Insolvency and Bankruptcy Board of India within the stipulated period, as required for record and completion of statutory formalities. [Paras 14, 15, 16]

The Adjudicating Authority ordered dissolution of the corporate person and directed communication of the order to the RoC and the IBBI.

Final Conclusion: The petition filed by the liquidator was allowed: the Tribunal held that the company satisfied the statutory requirements for voluntary liquidation, the liquidator had completed the winding up and compliance formalities, and accordingly ordered dissolution of the corporate person with directions to communicate the order to the Registrar of Companies and the IBBI.

Pre-existing dispute under Section 8 - Demand notice under Section 8 - Default under the Insolvency and Bankruptcy Code - Plausible contention test at admission - Operational creditor's remedy under Section 9

Pre-existing dispute under Section 8 - Plausible contention test at admission - Operational creditor's remedy under Section 9 - Whether a pre-existing dispute existed between the parties such as to preclude admission of the Company Petition filed under Section 9 of the Code. - HELD THAT: - The Tribunal applied the principles laid down in Innoventive Industries and Mobilox Innovations, observing that at the admission stage the Adjudicating Authority must determine whether a plausible contention requiring further investigation exists and whether the dispute is pre-existing, i.e., predates the demand notice. The Corporate Debtor pointed to repeated communications and emails alleging deficiency of work, slow progress and use of defective materials, with specific emails on various dates before the demand notice dated 13 July, 2019. The Tribunal found these contentions supported by record (emails and correspondence) and held that the defence was not spurious, frivolous or a moonshine plea. Given that the dispute demonstrably existed prior to service of the demand notice, the statutory bar under Section 8(2) applied and the petition under Section 9 could not be admitted. [Paras 8, 9, 11, 12, 13]

The Company Petition under Section 9 is dismissed for existence of a pre-existing dispute which precludes initiation of CIRP.

Final Conclusion: The Tribunal dismissed C.P. (IB) No. 1289/KB/2019 on the ground that a pre existing dispute, established by communications and emails antecedent to the demand notice, barred admission of the Section 9 petition; the corporate debtor remains free to pursue other remedies.

Committee of Creditors approval threshold under Section 30(4) - Compliance with Section 30(2) and Section 31 of the Insolvency and Bankruptcy Code - Treatment of dissenting financial creditors and operational creditors in a resolution plan - Promoter's eligibility under Section 29A vis-a -vis Section 240A for an MSME corporate debtor - Role of the Resolution Professional and Form-H certification

Committee of Creditors approval threshold under Section 30(4) - Validity of approval of the resolution plan by the Committee of Creditors with 73.03% voting share and the extent of adjudicating authority's review of commercial feasibility. - HELD THAT: - The Committee of Creditors approved the resolution plan by 73.03% votes. Section 30(4) requires approval by not less than 66% of the voting share. Having met and exceeded that statutory threshold, the approval could not be impugned on the ground of inadequate voting share. The adjudicating authority, therefore, had no reason to reassess the commercial feasibility and viability of the plan which was considered and approved by the CoC.

The CoC approval by 73.03% is valid and suffices under Section 30(4); the Adjudicating Authority will not reassess the commercial viability considered by the CoC.

Compliance with Section 30(2) and Section 31 of the Insolvency and Bankruptcy Code - Treatment of dissenting financial creditors and operational creditors in a resolution plan - Whether the resolution plan complies with the statutory requirements of Section 30(2) and Section 31, including priority treatment of CIRP costs, operational creditors and dissenting financial creditors. - HELD THAT: - The plan provided for CIRP costs and payments to operational creditors and dissenting financial creditors in the manner envisaged by Section 30(2)(a) and Section 30(2)(b). The dissenting secured financial creditors were to be paid 100% of their admitted claims and operational creditors were provided for. The plan also provided for a Management Committee and mechanisms to keep the corporate debtor as a going concern, addressing Section 30(2)(c) and 30(2)(d). The Resolution Professional filed Form-H certifying that the plan does not contravene any law. Having found these statutory requirements satisfied and no contravention of Regulation 38 (IBBI Regulations) apparent, the plan meets the criteria for approval under Section 31.

The resolution plan complies with Section 30(2) and Section 31 (and relevant regulations); it is approved on that basis.

Promoter's eligibility under Section 29A vis-a -vis Section 240A for an MSME corporate debtor - Whether a promoter of the corporate debtor who is a related party is ineligible under Section 29A, or whether Section 240A permits such promoter to submit a resolution plan for an MSME. - HELD THAT: - The corporate debtor is an MSME and the resolution applicant is a promoter of the corporate debtor submitting a plan in individual capacity. Applying the reasoning in the NCLAT decision relied upon by the parties, and having regard to the intent of Section 240A, the tribunal held that Section 240A enables a promoter of an MSME corporate debtor to submit a resolution plan and not be automatically disqualified under Section 29A where the plan treats stakeholders equitably and satisfies creditors. The resolution applicant here proposed full payment to dissenting financial creditors and appropriate provisions for other creditors, and therefore could not be held ineligible under Section 29A in view of Section 240A.

The promoter-resolution applicant is not disqualified under Section 29A by virtue of Section 240A applicable to an MSME; the application of Section 240A permits his eligibility in the present facts.

Final Conclusion: The adjudicating authority allowed IA 690 of 2020 and approved the resolution plan submitted by the promoter-resolution applicant: the CoC's approval by 73.03% satisfied the statutory threshold; the plan complied with Sections 30(2) and 31 and relevant regulations (including equitable treatment of dissenting financial creditors and provision for operational creditors and CIRP costs); and the promoter was not rendered ineligible by Section 29A in view of Section 240A applicable to an MSME. The resolution plan is approved and shall become effective from the date of the order.

Prohibition against duplicate assessments for the same tax period - quashing of inadvertently passed order - pre-existing appeal operates as bar to fresh adjudication in respect of same assessment period - assessment founded on third-party data - extraordinary jurisdiction under Article 226/227

Prohibition against duplicate assessments for the same tax period - quashing of inadvertently passed order - pre-existing appeal operates as bar to fresh adjudication in respect of same assessment period - Order-in-Original dated 24th May, 2022 in respect of Financial Year 2014-15 is liable to be quashed as a second/duplicate assessment passed inadvertantly while an earlier assessment for the same period was sub judice. - HELD THAT: - The petitioner challenged the Order-in-Original dated 24.05.2022 raising an identical demand for Financial Year 2014-15 which duplicated an earlier Order-in-Original dated 20.01.2021 that was the subject matter of a pending appeal before the Commissioner (Appeals). On resumed hearing the departmental counsel conceded that the later order was passed inadvertently. In view of that concession and the principle that a fresh adjudication cannot stand where an identical assessment for the same tax period is already in existence and sub judice, the Court quashed the 24.05.2022 order. The Court therefore exercised its extraordinary jurisdiction under Article 226/227 to set aside the inadvertently passed second order while leaving the earlier proceedings and the appeal untouched. [Paras 7, 8]

Order-in-Original No. AC/CTC-II DIVN/ST/54/2022 dated 24th May, 2022 (pertaining to Financial Year 2014-15) is quashed.

Final Conclusion: Writ petition allowed; the second Order-in-Original dated 24.05.2022 for Financial Year 2014-15 is quashed as having been passed inadvertently, without disturbing the earlier order and the pending appeal; certified copy to be issued urgently.

Definition of advertising agency under section 65(3) of the Finance Act - service tax liability under advertising agency services - mere printing of ready-made advertisement not being 'making' or 'preparation' of advertisement - printing activity amounting to manufacture and not a taxable service - exclusion of transfer of goods by sale from scope of service tax (section 65B(44)(a)(i))

Definition of advertising agency under section 65(3) of the Finance Act - mere printing of ready-made advertisement not being 'making' or 'preparation' of advertisement - Whether printing and supply of advertisement material by the respondent, using designs provided by clients, attracts service tax as 'advertising agency' service - HELD THAT: - The Tribunal accepted the finding that the respondent only printed 'ready to print' advertising content supplied by customers, had no role in conceptualisation, designing or preparation of the advertisement and had no authority to alter the content. Applying the definition of 'advertising agency' and having regard to CBEC Trade Notice (16.08.1999), the Board's Master Circular (23.08.2007) and consistent precedents, the activity of mere printing and sale of printed material cannot be read as falling within 'any service connected with the making, preparation, display or exhibition of advertisement' where there is no element of making or preparation. Read literally, the definition would produce absurd over-inclusion; hence it must be understood restrictively. On the facts, the respondent's activity did not involve providing services of making or preparation of advertisement and therefore did not attract service tax as an advertising agency for the periods in dispute. [Paras 13, 16, 17, 21, 26]

Printing of ready-made advertisement content supplied by clients does not qualify as 'advertising agency' service and is not liable to service tax on that ground.

Printing activity amounting to manufacture and not a taxable service - Whether the activity of printing advertisement content on PVC/flex resulting in printed goods amounts to manufacture and thus is not leviable to service tax (pre-01.07.2012) - HELD THAT: - The Tribunal upheld the Commissioner's conclusion that the process of printing the advertisement content on PVC material resulting in printed flex or boards is properly characterisable as production/manufacture and hence not a taxable service. The adjudicating authority's finding on this aspect was not challenged by the appellant and was accepted as a determinative reason for negating service tax liability for the pre-01.07.2012 period. [Paras 27]

The printing activity was held to amount to manufacture and is not subject to service tax for the period prior to 01.07.2012.

Exclusion of transfer of goods by sale from scope of service tax (section 65B(44)(a)(i)) - Whether, for the period after 01.07.2012, the respondent's activity is excluded from service tax as a mere transfer of title in goods by sale - HELD THAT: - For the post-01.07.2012 period the Tribunal agreed with the Commissioner that the transaction between the respondent and its customers was essentially a sale of printed goods on which VAT/Sales Tax was discharged. Under the negative-list regime, transfer of title in goods by way of sale is excluded from service tax as per the provision relied upon. The show cause notice did not adequately specify a basis for levying service tax for the period after 01.07.2012, and no substantive grounds were raised in appeal to challenge the Commissioner's finding. [Paras 28, 29]

The post-01.07.2012 activity was excluded from service tax as a transfer of goods by sale and thus not taxable as a service.

Final Conclusion: The Tribunal dismissed the Department's appeal and upheld the Commissioner's order dated 18.07.2014 dropping the show cause proceedings: printing of ready-made advertisement content supplied by clients does not attract service tax as advertising agency services; the printing activity was treated as manufacture for the pre-01.07.2012 period; and for the post-01.07.2012 period the transactions were excluded from service tax as transfers of goods by sale.

Mailing list compilation and Mailing - Taxable Service - Memorandum of Understanding

Mailing list compilation and Mailing - Taxable Service - Whether the services rendered by the appellant in providing CAT scores to non-IIM institutions fall within the taxable category of "Mailing list compilation and Mailing" - HELD THAT: - The Tribunal found that the appellant only supplied section-wise and total scores and percentiles of individual candidates to non-IIM institutes on the basis of candidate lists and registration numbers furnished by those institutes under the Memorandum of Understanding. The appellant did not compile or provide lists of names, addresses or other information from any source nor did it send documents or materials "for or on behalf of" a client in the sense contemplated by the definition. The CBEC Circular was considered and distinguished: the Circular describes commercial mailing-list compilation and mailing agents who compile information from external sources or dispatch materials on behalf of clients, which is different from the appellant's activity of supplying examination results to contracting institutes. On these facts and legal distinctions, the Tribunal held that the activity is not covered by the taxable service category "Mailing list compilation and Mailing."

The activity of providing CAT scores to non-IIM institutes is not covered by the taxable service "Mailing list compilation and Mailing" and the demand is set aside.

Final Conclusion: The appeal is allowed: the service of supplying CAT scores to non-IIM institutions does not constitute "Mailing list compilation and Mailing" and therefore is not exigible to service tax under that head for the periods in question.

Refund of interest paid under protest - relevant date under Section 11B - time bar/limitation for refund claims - effect of continuation of litigation by filing appeal - payment under protest - proviso to Section 11B

Relevant date under Section 11B - time bar/limitation for refund claims - effect of continuation of litigation by filing appeal - refund of interest - Whether the refund claim of interest filed on 16.05.2017 was time barred. - HELD THAT: - Section 11B requires a refund application to be made within one year from the relevant date; Explanation (B)(ec) treats the relevant date as the date of the judgment, decree or order by the appellate authority or court which makes the duty refundable. Though the CESTAT had given its final order on 31.03.2012, the Department filed an appeal before the High Court and that appeal was dismissed on 21.04.2017. The Tribunal held that, once the Department exercised the option of continuation by appealing to the High Court, the entitlement to refund became finally crystallised only on the High Court's dismissal on 21.04.2017. The refund claim of interest was filed on 16.05.2017, which is within one year of 21.04.2017 and therefore cannot be rejected as time barred on the ground that 31.03.2012 was the relevant date.

Refund claim of interest filed on 16.05.2017 is not time barred because the relevant date is the High Court's order dated 21.04.2017, and the claim was filed within one year thereof.

Payment under protest - proviso to Section 11B - refund of interest - Whether the payment of interest made after issue of demand could be treated as payment under protest and exempted from the one year limitation. - HELD THAT: - The interest was paid by the appellant pursuant to a Memorandum cum notice of demand and therefore the payment was not voluntary but made under protest. The proviso to Section 11B excludes application of the one year limitation where duty or interest has been paid under protest. The Tribunal accordingly held that limitation could not be invoked by the authorities to reject the refund claim of interest on this ground as well.

Payment of interest being pursuant to departmental demand and thus under protest, the one year limitation under Section 11B does not bar the refund claim.

Refund of interest - consequential relief - Whether, having allowed the refund of duty in the appellant's own case, refund of interest should also be allowed. - HELD THAT: - The Tribunal had earlier allowed the refund of the duty (order dated 29.06.2021) on the ground that the relevant date was the High Court's dismissal of the Department's appeal. Since the refund of interest relates to the same duty and the claim for interest was filed earlier in time (16.05.2017), the same reasoning applies and the refund of interest must likewise be allowed with consequential relief as per law.

Refund of interest is to be allowed on the same lines as the earlier grant of refund of duty, with consequential relief as per law.

Final Conclusion: The appellant's appeal is allowed; the refund of interest paid under protest is held not to be time barred (the relevant date being the High Court's dismissal on 21.04.2017) and, alternatively, is covered by the proviso to Section 11B as payment under protest; refund of interest is therefore to be granted with consequential relief as per law.

Recovery of duties erroneously refunded - Doctrine of unjust enrichment - Finality of adjudication under section 11B - Inapplicability of section 11A once refund under section 11B attains finality - Reopening concluded orders on basis of subsequent judicial pronouncement - Credit to Consumer Welfare Fund

Finality of adjudication under section 11B - Inapplicability of section 11A once refund under section 11B attains finality - Whether the Department could issue a notice under section 11A to recover amounts refunded pursuant to an order passed under section 11B which had attained finality - HELD THAT: - The Tribunal's order under section 11B had attained finality as no appeal was filed by the Department. The court analysed the scheme of sections 11A and 11B and relevant authority holding that an adjudication under section 11B results in an entitlement to refund which, when final, does not constitute an 'erroneous refund' within the meaning of section 11A. Reliance was placed on High Court decisions holding that where a refund is made pursuant to a final adjudication, the Revenue cannot treat it as an erroneous refund or reopen it under section 11A; the proper remedy, if any, would have been to invoke statutory supervisory or appellate remedies available against the adjudicating order. Applying this reasoning, the Court concluded that powers under section 11A cannot be invoked to recover amounts refunded pursuant to a final order under section 11B. [Paras 36, 37, 42, 43]

Show cause under section 11A issued to recover refunds granted by a finally adjudicated order under section 11B was without jurisdiction and cannot be sustained.

Reopening concluded orders on basis of subsequent judicial pronouncement - Recovery of duties erroneously refunded - Whether the Department could reopen and recover refunds granted earlier on the basis of a subsequent Supreme Court decision (Addison) or otherwise revisit a concluded refund order - HELD THAT: - The court applied the principle that a subsequent judicial pronouncement cannot be used to re-open or reassess matters already finally adjudicated and accepted by the Revenue, particularly where the refund was granted after adjudication and no appellate remedy was pursued. The court observed the factual and legal distinction between the Supreme Court decision relied upon and the present case (manufacturer covered by a different clause of the proviso to section 11B). It held that the subsequent judgment (Addison) did not authorise reopening of the finally concluded refund orders in this case and that re-opening by invoking section 11A would be impermissible where the refund arose from an order under section 11B which had become final. [Paras 44, 45, 46]

The Department could not reopen the concluded refund orders on the basis of the subsequent Supreme Court judgment; the attempt to do so was impermissible.

Credit to Consumer Welfare Fund - Recovery of duties erroneously refunded - Validity of the impugned order directing recovery of the refunded amounts and crediting them to the Consumer Welfare Fund along with interest - HELD THAT: - Because the show cause invoking section 11A was held to be without jurisdiction (as the refunds were granted pursuant to final section 11B orders), the consequent directions in the impugned order-to recover the refunded amounts, to credit them to the Consumer Welfare Fund, and to levy interest-lacked legal foundation. The court therefore examined the impugned order in light of the foregoing legal conclusions and found the recovery and related directions unsustainable. [Paras 43, 47]

The impugned order directing recovery, credit to the Consumer Welfare Fund and levy of interest was set aside.

Final Conclusion: The appeal is allowed. The show cause notice issued under section 11A and the consequential order dated 16.11.2018 seeking recovery of amounts refunded pursuant to final orders under section 11B (for the periods in dispute) and directing credit to the Consumer Welfare Fund and levy of interest are without jurisdiction and are set aside.

Packing or repacking as manufacture under section 2(f)(iii) - parts, components and assemblies as entries in the Third Schedule - classification under Heading 8482 (Ball and Roller Bearings) - Section Notes to Sections XVI and XVII - exclusion of articles of Heading 8482 from "parts" and "parts and accessories" - commercial identity / market understanding in classification evidence

Classification under Heading 8482 (Ball and Roller Bearings) - Section Notes to Sections XVI and XVII - exclusion of articles of Heading 8482 from "parts" and "parts and accessories" - Whether the imported ball and roller bearings are classifiable as parts, components or assemblies of vehicles or machinery covered by Serial No.100 / 100A of the Third Schedule or are goods classifiable under Heading 8482. - HELD THAT: - The Tribunal examined the section notes to Section XVII and Section XVI and held that articles falling under Heading 8482 (ball and roller bearings) are expressly excluded from the expressions "parts" and "parts and accessories" in the Notes. Section Note 2(e) to Section XVII and Section Note 2 to Section XVI indicate that goods ordinarily classifiable under Heading 8482 must be classified under that heading and are not to be treated as "parts" of the vehicles or machines listed in Sections XVI/XVII. Reliance on earlier Tribunal decisions was noted as supportive. The consequence is that bearings ordinarily falling under Heading 8482 cannot, by classification, be treated as parts/components/assemblies of Chapter 87 vehicles or the specific Chapter 84 goods referred to in Serial Nos.100/100A merely because they may be used in some automotive applications. [Paras 4]

Ball and roller bearings imported by the appellant are to be classified under Heading 8482 and are not parts, components or assemblies covered by Serial Nos.100/100A of the Third Schedule.

Packing or repacking as manufacture under section 2(f)(iii) - parts, components and assemblies as entries in the Third Schedule - commercial identity / market understanding in classification evidence - Whether the appellant's activity of packing/repacking and affixing retail sale price renders the imported bearings liable to excise assessment under section 4A via Serial Nos.100/100A (i.e., whether such activity amounts to manufacture for goods covered by those serial numbers). - HELD THAT: - Clause (iii) of section 2(f) makes packing/repacking and declaration/alteration of retail sale price amount to "manufacture" only in relation to goods listed in the Third Schedule. The Tribunal first concluded that bearings are not goods covered by Serial Nos.100/100A because they fall under Heading 8482. It further considered the evidence relied upon by revenue (statements of dealers and buyers) and found that the mere assertion of industrial and automotive usage, including a solitary instance of Automotive use for two codes, did not establish that the bearings are parts/components of Chapter 87 vehicles or the Chapter 84 goods in the Third Schedule. The section notes therefore neutralise the relevance of alleged end-use for reclassification as parts; commercial identity evidence was insufficient to displace the tariff classification. As the bearings are not within the Third Schedule entries relied upon, the packing/repacking activity could not be pressed into service to classify the activity as manufacture under section 2(f)(iii) for assessment under section 4A. [Paras 4]

The repacking/labeling activity does not attract excise assessment under section 4A via Serial Nos.100/100A because the bearings are not goods covered by those Third Schedule entries; consequently, the packing/repacking does not amount to "manufacture" for that purpose.

Commercial identity / market understanding in classification evidence - Whether the revenue discharged the burden of proving that the imported bearings were parts/components of vehicles or specified machinery (i.e., suitability for classification under Serial Nos.100/100A) by adducing dealer/customer statements and other investigational material. - HELD THAT: - The Tribunal reviewed the statements and documents collected by the revenue and observed that most statements merely noted that bearings have both industrial and automotive usage; they did not demonstrate that the bearings were exclusively or principally used as parts of the vehicles or the specific machinery in the Third Schedule. A single or isolated instance of usage in two-wheelers was held insufficient to overturn the tariff classification dictated by the Section Notes. The Tribunal emphasised that the section notes governing classification prevail over asserted end-use where the goods are ordinarily classifiable under Heading 8482, and the revenue failed to produce conclusive evidence to the contrary. [Paras 2, 4]

Revenue did not discharge the burden of proving that the bearings imported by the appellant were parts/components covered by Serial Nos.100/100A; the evidence relied upon was inadequate to establish exclusive or principal automotive use.

Final Conclusion: The appeals are allowed and the impugned order dismissed. The Tribunal held that the imported ball and roller bearings are classifiable under Heading 8482 and not as parts/components/assemblies covered by Serial Nos.100/100A of the Third Schedule; consequently, packing/repacking and affixing MRP did not amount to "manufacture" under section 2(f)(iii) so as to attract assessment under section 4A, and the revenue's demand based on those entries could not be sustained.

Classification of land as agricultural in revenue records - capital asset within the meaning of Section 2(14) of the Act - definition of "urban land" under Explanation 1(b) to clause (ea) of the Wealth tax Act - requirement of building being "constructed" for exclusion from urban land - application of Section 53A of the Transfer of Property Act to unregistered joint development agreements - levy of interest under section 17B of the Wealth tax Act on delayed filing/reopening of assessment - retrospective amendment excluding land classified as agricultural in records from "urban land"

Classification of land as agricultural in revenue records - capital asset within the meaning of Section 2(14) of the Act - retrospective amendment excluding land classified as agricultural in records from "urban land" - Whether the Egattur land held by the assessee was agricultural land and not a capital asset liable to tax for the assessment years under consideration. - HELD THAT: - The Tribunal upheld the view of the CIT(A) and followed its own earlier detailed decision in the assessee's income tax appeals. Having regard to authorities of the jurisdictional High Court and subsequent amendment to Explanation 1(b) to clause (ea) of the Wealth tax Act (which excludes land classified as agricultural in Government records and used for agricultural purposes from being "urban land", with retrospective effect from 1 4 1993), the Tribunal concluded that the land in question was agricultural as per revenue records and therefore not a capital asset within Section 2(14). The Tribunal rejected the Revenue's reliance on coordinate Bench decisions to the contrary and the argument that surrounding development alone converted the land into non agricultural land. The gain on sale was held not exigible to tax for the assessment years considered.

Grounds of Revenue dismissed; Egattur land held to be agricultural and not a capital asset for the assessment years under consideration.

Definition of "urban land" under Explanation 1(b) to clause (ea) of the Wealth tax Act - requirement of building being "constructed" for exclusion from urban land - application of Section 53A of the Transfer of Property Act to unregistered joint development agreements - Whether the Velachery property was "urban land" liable to wealth tax or was excluded because the building had been constructed and the built up area sold. - HELD THAT: - Relying on the Supreme Court decision in Giridhar Yedalam v. CWT, the Tribunal accepted the CIT(A)'s finding that the relevant test for exclusion from "urban land" is whether a building has been "constructed"; land on which construction is complete and which is occupied by a building is excluded. In the present facts the assessee had obtained planning permission, constructed the building and sold built up area from AY 2010 11 onwards; therefore the property could not be treated as urban vacant land liable to wealth tax. The Tribunal noted that the Revenue's reliance on the issue of enforceability of the JDA under Section 53A (and related registration points) was not the determinative question before the CIT(A), and that Balbir Singh Maini did not alter the applicability of Giridhar Yedalam to the factual posture here.

Grounds of Revenue dismissed; Velachery property not assessable as urban land for the assessment years under consideration.

Levy of interest under section 17B of the Wealth tax Act on delayed filing/reopening of assessment - Whether interest under section 17B(3) should be recalculated as directed by the CIT(A) or whether interest is chargeable because the return was not filed and the assessment was made for the first time. - HELD THAT: - The Tribunal examined the statutory scheme of section 17B and the Bangalore Bench decision in Smt. M.R. Prabhavathy v. ACIT. Where an assessment is made for the first time under section 17, Explanation 3 to section 17B(1) treats such assessment as a regular assessment and the conditions in section 17B(1) apply. In the present case the assessee had not filed wealth tax returns under sections 14 or 15 and the assessment was a first time assessment; accordingly the circumstance falls within the scope of section 17B as explained by the Tribunal in the cited precedent. The Tribunal therefore held that the CIT(A)'s direction on recalculation under sub section (3) was incorrect and restored the Assessing Officer's levy of interest.

Order of the CIT(A) on interest reversed; interest under section 17B is held chargeable and the Assessing Officer's position restored.

Final Conclusion: The Revenue appeals were partly allowed. Additions treating the Egattur land as non agricultural and the Velachery property as urban land were set aside (assessee favourable), but the CIT(A)'s direction on recalculation of interest under section 17B was reversed and the Assessing Officer's levy of interest was restored.

Interim measures under Section 9 of the Arbitration Act - Prima facie case and balance of convenience for interim relief - Applicability of Order 38 Rule 5 CPC principles to Section 9 petitions - Power of court to secure disputed amount by deposit or bank guarantee - Effect of Corporate Insolvency Resolution Process (CIRP) on novation, assignment and set off

Interim measures under Section 9 of the Arbitration Act - Prima facie case and balance of convenience for interim relief - Power of court to secure disputed amount by deposit or bank guarantee - Applicability of Order 38 Rule 5 CPC principles to Section 9 petitions - Whether the High Court rightly exercised its power under Section 9 of the Arbitration Act in directing deposit of the disputed security deposits or furnishing of bank guarantees by Essar House Private and Essar Services. - HELD THAT: - The Court held that Section 9 confers wide powers to pass interim measures to secure the amount in dispute and other measures as may appear just and convenient, guided by but not strictly confined to the technical text of CPC provisions. The Court accepted that the basic principles underlying Order 38 Rule 5 CPC (e.g., need for a strong prima facie case and consideration of attempts to dispose of assets) are relevant, but the rigours of every procedural provision of the CPC cannot be allowed to defeat interim relief under Section 9. Proof of actual attempts to remove or dispose of assets is not imperative; a strong possibility of diminution of assets suffices. The Division Bench recorded that the appellants had disclosed limited assets and were heavily indebted, and that the security deposits were not being released but were sought to be diverted by inter group arrangements. On that basis the High Court found a strong prima facie case and that the balance of convenience favoured securing Arcellor's claim by directing deposit or bank guarantee. The Supreme Court found no infirmity in that reasoning and affirmed the orders directing deposit or bank guarantee to secure the claim in arbitration. [Paras 48, 49, 50, 51, 52]

The High Court correctly exercised its discretion under Section 9 to direct deposit of the disputed sums or furnishing of bank guarantees; the appeals against those orders are dismissed.

Effect of Corporate Insolvency Resolution Process (CIRP) on novation, assignment and set off - Power to prevent unilateral novation or assignment during CIRP - Whether the appellants could rely on alleged inter company arrangements, novation or set off to avoid returning the refundable security deposits after commencement of CIRP of Essar Steel. - HELD THAT: - The Court observed that novation, rescission or alteration of a contract requires agreement of both contracting parties and cannot be effected unilaterally. Further, obligations under a contract cannot be assigned without consent of the counterparty. Crucially, the Court noted that during CIRP Section 14 of the IBC bars actions to foreclose, recover or enforce security interests created by the corporate debtor, and the Resolution Professional's rights must be respected. Accordingly, even if inter se arrangements existed, Essar Services or Essar House Private could not have adjusted refundable security deposits against alleged dues to third parties during Essar Steel's CIRP without requisite consent or approval. The Division Bench rightly rejected the appellants' contention based on unilateral novation or set off. [Paras 31, 34, 35, 36]

The defence of unilateral novation/assignment or set off during Essar Steel's CIRP is untenable; such adjustments could not defeat Arcellor's claim and do not bar the grant of interim relief under Section 9.

Final Conclusion: The Division Bench of the Bombay High Court correctly applied the principles governing interim relief under Section 9 of the Arbitration Act, properly balanced the prima facie case and balance of convenience, and rightly rejected the appellants' contentions of unilateral novation/assignment or set off during CIRP; the appeals are dismissed.

Liability under Section 138 of the Negotiable Instruments Act - vicarious and joint liability in cheque dishonour cases - requirement of signatory status and account-holder nexus for prosecution - magistrate's duty to apply mind before taking cognizance - exercise of inherent jurisdiction under Section 482 CrPC to prevent abuse of process

Liability under Section 138 of the Negotiable Instruments Act - requirement of signatory status and account-holder nexus for prosecution - Whether the complaint under Section 138 of the Negotiable Instruments Act was maintainable against the petitioner who was neither the drawer/signatory of the cheque nor the holder/operational holder of the account from which the cheque was drawn. - HELD THAT: - The Court applied the settled principle that prosecution under Section 138 can be instituted only against the person who has drawn and signed the cheque on an account maintained by him and that mere joint liability as between private individuals does not render a non-signatory, non-account-holder liable under Section 138. The material on record established that the cheque was issued and signed by the petitioner's sister and the account was operational in the sister's name; the petitioner was neither signatory nor account-holder. Reliance was placed on authoritative precedents which hold that a person other than the drawer/signatory cannot be prosecuted under Section 138 and that Section 141 cannot be invoked to extend criminal liability to private individuals who are not directors, partners or members of an association falling within that provision. Applying these principles, the Court found that the liability for dishonour could not be fastened on the petitioner. [Paras 15, 17]

Complaint and summons quashed and complaint dismissed insofar as the petitioner is concerned.

Magistrate's duty to apply mind before taking cognizance - Whether the trial Magistrate had to apply judicial mind to the allegations and material before taking cognizance and issuing process. - HELD THAT: - The Court reiterated the settled law that cognizance requires the Magistrate to take notice of accusations and apply his mind to the allegations and the material filed with the complaint before concluding there is sufficient material to proceed; cognizance relates to the offence and not the offender. While a Magistrate is not required to determine defenses or evaluate evidence in detail at cognizance, the exercise must not be mechanical or cryptic. This principle was noted in the context of the impugned order and the Court observed the standard that must govern taking of cognizance. [Paras 14]

Magistrate must apply judicial mind to allegations and material before taking cognizance; mechanical or cryptic taking of cognizance is impermissible (principle applied to the facts).

Exercise of inherent jurisdiction under Section 482 CrPC to prevent abuse of process - Whether the High Court should exercise its inherent jurisdiction under Section 482 CrPC to quash the complaint/process insofar as it related to the petitioner to prevent abuse of process and secure ends of justice. - HELD THAT: - Recognising that the High Court's inherent power under Section 482 is to be exercised sparingly and with caution, the Court applied that jurisdiction to prevent abuse of the process of the court where the statutory preconditions for prosecution under Section 138 were absent as regards the petitioner. Given that the petitioner was neither drawer nor signatory nor account-holder and the prosecution could not be sustained against her under the legal tests laid down, the Court concluded that the complaint insofar as against the petitioner amounted to an abuse of process and warranted quashing in exercise of inherent powers to secure the ends of justice. [Paras 16, 17]

Inherent jurisdiction under Section 482 CrPC exercised to set aside the impugned order and quash the complaint against the petitioner.

Final Conclusion: The petition is allowed: the summoning order and criminal complaint are quashed and dismissed insofar as they pertain to the petitioner, the court having found she was neither drawer nor signatory nor account-holder and that continuation of proceedings against her would be an abuse of process; the petition is disposed of with pending applications.

Liability of ex-director in proceedings under Section 138 of the Negotiable Instruments Act - quashing of criminal proceedings under Section 482 Cr.P.C. - public documents as defence at the prima facie stage - abuse of process

Liability of ex-director in proceedings under Section 138 of the Negotiable Instruments Act - public documents as defence at the prima facie stage - quashing of criminal proceedings under Section 482 Cr.P.C. - Whether the criminal proceedings under Section 138 of the Negotiable Instruments Act against the petitioner, who had resigned as a director prior to issuance of the dishonoured cheques, are liable to be quashed by exercise of inherent jurisdiction under Section 482 Cr.P.C. - HELD THAT: - The court found on admitted facts that the petitioner had signed the commercial agreement on 17.08.2018 but had tendered and had an acceptance of resignation as Director effective 04.07.2019, as reflected in public filings (Form DIR-11 and DIR-12). The dishonoured cheques were issued in December 2019 and January 2020 by the other director. The court held that where uncontroverted public documents demonstrate that the accused ceased to be a director before the alleged offence, the High Court, in a proper case, may look into such materials at the prima facie stage and quash the prosecution to prevent a travesty of justice or abuse of process. Reliance on the Apex Court's exposition that an ex-director cannot be hauled into criminal proceedings under Section 138 when resignation acceptance and filing are beyond doubt was applied. The petitioner's alleged non-response to statutory notice did not override the unimpeachable public documents showing cessation of directorship. Consequently, the power under Section 482 was exercised to obliterate the proceedings against the petitioner while expressly leaving the cases against other accused untouched. [Paras 8, 9, 11, 12]

Proceedings under Section 138 of the Negotiable Instruments Act against the petitioner, who had ceased to be a director prior to issuance of the cheques as evidenced by public documents, are quashed by exercise of inherent jurisdiction under Section 482 Cr.P.C.

Final Conclusion: Criminal petitions allowed; criminal proceedings in the specified complaint/charge sheets stand quashed insofar as they relate to the petitioner (ex-director) on the ground that unimpeachable public documents demonstrate resignation prior to issuance of the dishonoured cheques, and the quashal does not affect proceedings against the remaining accused.

Legally enforceable debt or liability - Section 138 of the Negotiable Instruments Act - acknowledgment under Section 18 of the Limitation Act - promise under Section 25(3) of the Indian Contract Act - renewal/resuscitation of time barred remedy - quashing of complaint under inherent powers of the High Court (Section 482 Cr.P.C.)

Legally enforceable debt or liability - Section 138 of the Negotiable Instruments Act - acknowledgment under Section 18 of the Limitation Act - promise under Section 25(3) of the Indian Contract Act - Whether issuance of a cheque after the lapse of limitation for recovery of the original loan can constitute a written promise creating a legally enforceable debt so as to attract liability under Section 138 of the Negotiable Instruments Act, and whether the complaint should be quashed at the threshold. - HELD THAT: - The Court held that the determinative question is whether, on the date the cheque was issued, the liability to pay subsisted as a legally enforceable debt. The complaint avers an open ended loan carrying interest "till return of principal" and continuous payment of interest by the drawer; no fixed repayment period was pleaded. Section 18 of the Limitation Act requires an acknowledgement to be made during the subsistence of the prescribed period to restart limitation, whereas Section 25(3) of the Contract Act operates to validate a promise in writing to pay a debt even if the remedy is otherwise time barred. The Contract Act thus can resuscitate a time barred remedy and render the obligation capable of enforcement by suit; a cheque may embody such a written promise under Section 25(3). Precedents relied upon by the Court (including the Division Bench view in K.K. Ramakrishnan and this Court's earlier decision in Sultan Singh) support the proposition that issuance of a cheque in repayment of a time barred debt can amount to a written promise under Section 25(3), thereby creating a legally enforceable debt for the purposes of Section 138. Limitation questions are mixed questions of law and fact and ordinarily require evidence; therefore, the High Court should not, in exercise of its inherent jurisdiction, quash a complaint at the threshold on the ground of limitation where the facts pleaded (payment of interest and issuance of cheque) permit the claim that the cheque constituted an acknowledgment/promise or a renewal of remedy under Section 25(3). Applying these principles to the averments in the complaint, the Court concluded that the cheque dated 6.7.2018, issued against advances made on 14.12.2011, could be treated as issued in acknowledgement/promise to discharge the debt and, upon dishonour, would attract Section 138 proceedings; accordingly, quashing was not appropriate. [Paras 14, 15, 16, 19, 26]

The complaint and the summoning order were not quashed; the petition under Section 482 Cr.P.C. was dismissed.

Final Conclusion: The petition seeking quashing of the complaint and the summoning order was dismissed: issuance of the cheque was held capable of constituting a written promise that could render the liability legally enforceable for the purposes of Section 138, and the matter is fit to proceed to trial.

Summary order. Notice of motion issued returnable on 20.10.2022; interim order granted in terms similar to CRM-M-31440-2022; matter directed to be heard along with CRM-M-31440-2022.