TaxTMI Updates e-Newsletter
Sep 23,2020

Provisional deposit of profiteered amount - stay on interest and penalty - challenge to order of National Anti-Profiteering Authority - notice and opportunity to file counter-affidavits - interim equitable relief in writ petition

Provisional deposit of profiteered amount - interim equitable relief in writ petition - Interim direction to deposit the principal profiteered amount in instalments pending adjudication of the writ petition. - HELD THAT: - The Court, while entertaining the writ petition challenging the final order of the National Anti-Profiteering Authority, directed the petitioner to deposit the principal amount found to have been profiteered (as identified in the impugned order) by way of six equated monthly instalments beginning 30th September, 2020. The direction was given as an interim measure in the exercise of the Court's equitable jurisdiction to balance the parties' interests pending adjudication on merits. The deposit requirement was made subject to exceptions reserved in the final hearing and without deciding the substantive challenges raised by the petitioner.

Petitioner directed to deposit the principal profiteered amount in six equated monthly instalments commencing 30th September, 2020.

Stay on interest and penalty - Interim stay of payment of interest and initiation/continuation of penalty proceedings directed in respect of the profiteering finding. - HELD THAT: - The Court expressly stayed the payment of any interest directed to be paid and stayed any penalty proceedings arising out of the impugned order until further orders. This stay was granted as an interim protective measure while the challenge to the authority's order is pending before the Court, thereby separating liability for the principal amount from consequential monetary liabilities pending final adjudication.

Payment of interest and penalty proceedings stayed until further orders.

Challenge to order of National Anti-Profiteering Authority - notice and opportunity to file counter-affidavits - Proceedings on the substantive challenge to the NAPA order, and ancillary constitutional and rule vires contentions, were not finally decided and were kept for adjudication after notice and pleadings. - HELD THAT: - The writ petition's substantive contentions, including challenges to the validity and applicability of the provisions relied upon (and the petitioner's plea that certain provisions are inapplicable to the post transition period), were not adjudicated on merits at this stage. The Court issued notice to the respondents, directed filing of counter affidavits within four weeks and permitted rejoinders, and directed short written submissions to be filed prior to the next hearing. Thus, the constitutional and vires questions and the challenge to the NAPA order remain pending for final determination.

Notice issued; counter affidavits and rejoinders directed; substantive issues reserved for further hearing.

Final Conclusion: Interim order granted: petitioner to deposit the principal profiteered amount in six monthly instalments commencing 30th September, 2020; payment of interest and penalty proceedings stayed; notice issued and pleadings directed, with substantive challenges to the NAPA order left for final adjudication.

Provisional attachment of property - opportunity of hearing / de novo hearing - remand for fresh consideration - administrative decision to initiate recovery proceedings - protection of revenue interests during interregnum

Administrative decision to initiate recovery proceedings - opportunity of hearing / de novo hearing - Whether the authority could proceed by issuing Form GST DRC-01 simultaneously while the writ applicant's response to Form GST DRC-01A remained pending, and the appropriate course of action. - HELD THAT: - The Court did not decide the substantive legality of issuing Form GST DRC-01 in the factual circumstances. Instead, having noted the writ applicant's representation that a reply to the Form GST DRC-01A notice was yet to be filed, the Court directed the Assistant Commissioner (Enforcement) to consider that representation and take an appropriate decision in accordance with law. The direction requires the authority to examine the representation and determine whether further proceedings, including any issuance or continuation of Form GST DRC-01, are justified after giving due consideration to the pending reply and applicable law. The authority was ordered to complete this decision-making process within 15 days of receipt of the order. [Paras 3, 4]

Representation dated 26th August 2020 to be considered and decided by the Assistant Commissioner (Enforcement) in accordance with law within 15 days; no substantive adjudication on the validity of simultaneous issuance of GST DRC-01 was made.

Provisional attachment of property - protection of revenue interests during interregnum - remand for fresh consideration - Continuation of provisional attachment and effect of earlier remand to the authority. - HELD THAT: - The Court recalled its earlier order in Special Civil Application No. 9527 of 2020, wherein it had quashed the earlier Form GST DRC-01A and remitted the matter for a de novo hearing, but expressly declined to disturb the provisional attachment to protect the revenue and prevent creation of third-party rights during the interregnum. In the present petition the Court maintained that course and did not call for vacation of the attachment; instead it directed the authority to proceed in accordance with law on the remanded matters. The present disposal is confined to directing consideration of the applicant's representation and does not modify the earlier decision to keep the provisional attachment in force. [Paras 2, 4, 5, 7]

Earlier order maintaining provisional attachment remains undisturbed; matter remitted to authority for fresh consideration with attachment continuing as before.

Final Conclusion: Writ petition disposed by directing the Assistant Commissioner (Enforcement), Surat, to consider the writ applicant's representation dated 26th August 2020 and pass an appropriate decision in accordance with law within 15 days; the provisional attachment ordered earlier remains undisturbed.

Principles of natural justice - opportunity of personal hearing - setting aside assessment orders - remand for de novo assessment

Principles of natural justice - opportunity of personal hearing - setting aside assessment orders - remand for de novo assessment - Whether the impugned assessment orders were passed in violation of the principles of natural justice by proceeding to finalise assessment on the same date that the assessee sought further personal hearing and time to produce evidence, and whether those orders must be set aside and remanded for fresh decision after affording opportunity to be heard. - HELD THAT: - The Assessing Authority issued a notice of personal hearing and the assessee appeared on the date specified and filed a written objection which is recorded in the assessment order. In the concluding paragraph of that objection the assessee sought another personal hearing and additional time to produce supporting evidence, but the Assessing Authority ignored this request and proceeded to pass adverse assessment orders on the same date. The Court found this course inconsistent with the principles of natural justice and with the judicial precedent relied upon by the assessee. The revenue raised no substantive objection to the proposal that the assessments be reopened so as to afford the assessee an opportunity to present evidence. In the circumstances the Court held that the impugned orders could not stand and required the Assessing Authority to redo the assessments after giving the assessee a fair opportunity to produce documents and be heard. [Paras 3, 4, 6]

Impugned assessment orders set aside; matters remitted to the Assessing Authority for de novo assessment after affording the assessee opportunity to furnish documents and be personally heard, with directions for compliance and expeditious disposal.

Final Conclusion: Writ petitions allowed; assessment orders dated 10.03.2020 set aside and remitted for fresh adjudication after affording the assessee opportunity to file documents and be heard; directions issued for compliance and expeditious disposal; no costs.

Confiscation proceedings under Section 130 - interim conditional release - deposit towards tax and penalty - bank guarantee as security - adjudication to proceed on merits

Confiscation proceedings under Section 130 - adjudication to proceed on merits - Whether the Court should interfere with ongoing adjudication under Section 130 of the Act. - HELD THAT: - The Court declined to interfere with the adjudication of the confiscation proceedings which are pending under Section 130. Although earlier proceedings had resulted in quashing of a final confiscation order for failure to afford hearing, the present adjudication is to proceed in accordance with law and on its merits. The Court expressly refrained from expressing any opinion on the substantive merits of the confiscation case and directed that the adjudication be completed independently by the authority. [Paras 5, 11]

Adjudication under Section 130 shall proceed without judicial interference and the Court has not expressed any view on merits.

Interim conditional release - deposit towards tax and penalty - bank guarantee as security - Whether interim relief in the form of release of goods and vehicle should be granted pending adjudication, and on what conditions. - HELD THAT: - Balancing the protection of the goods from damage and the State's revenue interest, the Court granted conditional interim relief. The writ applicant was directed to deposit a specified amount towards tax and penalty and to furnish a bank guarantee from a nationalised bank equivalent to 50% of the assessed value of the goods. Upon compliance with these conditions, the authority was directed to release the goods and vehicle forthwith. The bank guarantee and deposit are to abide by the final outcome of the adjudication. [Paras 9, 10]

Release of goods and vehicle ordered on deposit of tax and penalty and furnishing of the directed bank guarantee; security/deposit subject to final adjudication.

Final Conclusion: Writ petition disposed of by refusing to stay or set aside the ongoing confiscation adjudication under Section 130; interim relief granted conditionally by directing deposit towards tax and penalty and furnishing of a bank guarantee, on receipt of which the goods and vehicle shall be released, with adjudication to proceed on merits.

Availability of alternative statutory remedy - maintainability of writ petition against assessment order - ex parte best judgment assessment under Section 144 - taxation of unexplained cash deposits under Section 69A - requirement of notice under Section 143(2)

Availability of alternative statutory remedy - maintainability of writ petition against assessment order - Whether the writ petition challenging the assessment order is maintainable notwithstanding the availability of a statutory appeal. - HELD THAT: - The High Court upheld the Single Judge's disposition that the appellant, having an effective statutory remedy by way of regular appeal against the assessment order, could not proceed by way of writ without first availing that remedy. The court noted that the Single Judge did not express any view on the merits of the assessment but granted liberty to file the statutory appeal and directed the appellate authority to consider it on merits without reference to limitation. The appellants' reliance on precedents concerning notices under Section 143(2) or block/other special assessments was held inapplicable to the facts on record, where notices under Section 142(1) and a show cause notice were issued and the Assessing Officer completed assessment after obtaining directions under the relevant provisions. On this basis the court found no ground to interfere with the impugned order and dismissed the writ appeal. [Paras 7, 9, 10]

Writ petition was not maintainable in the face of an alternative statutory remedy; the appellant is to pursue the regular appeal; writ appeal dismissed.

Ex parte best judgment assessment under Section 144 - taxation of unexplained cash deposits under Section 69A - requirement of notice under Section 143(2) - Whether the Assessing Officer's treatment of the demonetization-period cash deposits as unexplained income and completion of assessment under Section 144 was vitiated for lack of notice under Section 143(2). - HELD THAT: - The court recorded that the Assessing Officer, after issuing notice under Section 142(1) and a show cause notice, considered the appellant's explanations and, on appraisal and directions from the Joint Commissioner, proceeded to complete the assessment. The Assessing Officer treated the cash deposits as unexplained and brought them to tax under Section 69A and completed assessment under Section 144; penalty proceedings were also initiated. The High Court did not decide the merits of those contentions or set aside the assessment on the ground of absence of a Section 143(2) notice; instead, it held that these matters are to be ventilated before the appellate authority since an effective statutory remedy exists. The court therefore declined to adjudicate the substantive correctness of the assessment procedure or findings. [Paras 3, 8, 9]

No adjudication on the correctness of classification of deposits as unexplained or on procedural infirmity for absence of Section 143(2) notice; matters to be contested in the statutory appeal.

Final Conclusion: The writ appeal is dismissed for lack of merit because an effective statutory remedy by way of appeal is available; the High Court did not express any view on the merits of the assessment and directed the appellant to pursue the statutory appeal.

Power under Section 263 of the Income Tax Act - Erroneous and prejudicial to the interests of revenue - Eligibility for exemption under Section 54F - Scope and limits of revisional inquiry under Section 263 - Plausible view of the Assessing Officer

Power under Section 263 of the Income Tax Act - Erroneous and prejudicial to the interests of revenue - Eligibility for exemption under Section 54F - Plausible view of the Assessing Officer - Scope and limits of revisional inquiry under Section 263 - Validity of the revisional order under Section 263 quashing the assessment for alleged erroneous allowance of deduction under Section 54F. - HELD THAT: - The Court affirmed the Appellate Tribunal's conclusion that the pre-conditions for exercise of revisional jurisdiction under Section 263 - an assessment order being both erroneous and prejudicial to the interests of the Revenue - were not satisfied. The Assessing Officer had carried out enquiry, had before him relevant documents and reached a view accepting the assessee's claim under Section 54F. The Tribunal recorded that established judicial precedents construed the expression "a residential house" to include different residential units on different floors of the same building and that a plausible view in favour of the assessee existed. The Court endorsed the Tribunal's reasoning that mere existence of an alternative view, or even a lesser degree of verification perceived by the revisional authority, does not render the assessment order "erroneous" in the sense contemplated by Section 263. Revisional power can be invoked only in cases of substantive error or clear inadequacy of inquiry producing prejudice to revenue; it is not a forum to substitute the Commissioner's judgment for a legally tenable view taken by the AO. Applying these principles to the facts, the Tribunal rightly held the AO's acceptance of the claim to be a plausible view and quashed the revisional order.

The revisional order passed under Section 263 was quashed and the appeal by the Revenue dismissed.

Final Conclusion: The High Court declines to interfere with the Tribunal's judgment setting aside the revision under Section 263, holding that the Assessing Officer's allowance of deduction under Section 54F was a legally plausible view and that the conditions for invoking revisional jurisdiction (an order being both erroneous and prejudicial to revenue) were not satisfied; the Revenue's appeal is dismissed.

Genuineness of creditors under section 68 of the Income-tax Act, 1961 - burden to prove genuineness of transactions - remand for fresh consideration of evidence by assessing officer

Genuineness of creditors under section 68 of the Income-tax Act, 1961 - remand for fresh consideration of evidence by assessing officer - Whether the assessing officer had discharged the obligation to consider the material placed by the appellant to satisfy the genuineness of creditors and whether the matter required reconsideration. - HELD THAT: - The Court found that the appellant had produced four bills and ledger material in support of the disputed creditor balances but the assessing officer's order does not refer to or record consideration of those specific bills. On questioning, the revenue counsel could not confirm that those bills had been before the assessing officer. Given that the assessing officer, if he had considered the bills, may have reached a different conclusion, the Court concluded that the appropriate course was not to decide the genuineness on merits but to remit the matter. The assessing officer is directed to consider afresh the four bills produced by the appellant together with the material already placed before him and thereafter pass a fresh assessment order in accordance with law.

Appeal allowed; the ITAT order is set aside and the matter is remanded to the assessing officer for fresh consideration of the specified bills and related material and for passing a fresh assessment order.

Final Conclusion: The High Court allowed the appeal, set aside the Income-tax Appellate Tribunal's order, and remitted the matter to the assessing officer to reconsider the four bills and other material and to pass a fresh assessment order in accordance with law for the financial year 2005 - 06 (AY 2006-07).

Charitable purpose - proviso to the definition of charitable purpose excluding activities in the nature of trade, commerce or business - incidental business carried on in furtherance of charitable objects - classification of receipts as income from house property vis-a -vis business income - remand for fresh consideration on utilization of receipts for charitable objects

Proviso to the definition of charitable purpose excluding activities in the nature of trade, commerce or business - incidental business carried on in furtherance of charitable objects - charitable purpose - Whether the proviso to the definition of "charitable purpose" would be attracted where the receipts from letting out of Kalyana Mandapam, Gnanavapi and Community Hall are utilised entirely for the charitable objects of the trust. - HELD THAT: - The Court found that the Assessing Officer, the CIT(Appeals) and the Tribunal did not examine or record whether the entire revenue derived from letting out the halls and Gnanavapi was in fact applied for the trust's charitable objects such as education and medical relief. The material before the authorities did not reflect any consideration of utilisation of the earned income for the primary objects of the trust. Given this lacuna, the Tribunal's upholding of invocation of the proviso to the definition of "charitable purpose" was set aside. The matter is remitted to the Assessing Officer to determine, on merits and on fresh evidence/verification, whether the receipts were wholly applied to charitable purposes and consequently whether the proviso to the definition is attracted in fact. [Paras 19, 20, 23]

Remitted to the Assessing Officer for de novo consideration whether the proviso to the definition of charitable purpose applies, having regard to actual utilisation of receipts for the trust's charitable objects.

Classification of receipts as income from house property vis-a -vis business income - incidental business carried on in furtherance of charitable objects - Whether the income from letting out the Community Hall, Kalyana Mandapam and Gnanavapi is to be treated as income from house property or as business income and, if treated as business income, whether it remains exempt by being incidental to the trust's objects. - HELD THAT: - The Court observed that the Assessing Officer had not made findings on the central factual question whether receipts were applied for the trust's primary objects and that neither the CIT(A) nor the Tribunal addressed the utilisation issue. Because classification between "income from house property" and "business income" depends on facts including use and application of receipts and whether the activity is ancillary or a regular business, the matter was set aside and remitted. The Assessing Officer is directed to consider afresh the correct head of income (house property or business), and whether, even if classifiable as business, the activity is incidental to and applied for the charitable objects so as to attract exemption under the Act. [Paras 22, 23]

Remitted to the Assessing Officer to decide de novo whether the receipts constitute income from house property or business income and whether any business is incidental and applied to charitable objects so as to be exempt.

Final Conclusion: The Tribunal's order is set aside. The appeals are allowed to the extent that the matters are remitted to the Assessing Officer for fresh consideration on whether the entire receipts from letting out the halls and Gnanavapi were applied for the trust's charitable objects and, on that factual foundation, whether the proviso to the definition of charitable purpose is attracted and whether the receipts are to be treated as house property income or business income; the substantial questions of law are left open for determination by the Assessing Officer.

Deduction of tax at source under Section 194A - Assessee-in-default under Section 201 - First proviso to Section 201(1) - accountant's certificate and burden of proof - Direct payment by payee under Section 191 - Effect of amendment by the Finance Act, 2012 on proviso to Section 201 - Liability of partnership firm and its partners - joint and several liability

Deduction of tax at source under Section 194A - Assessee-in-default under Section 201 - First proviso to Section 201(1) - accountant's certificate and burden of proof - Effect of amendment by the Finance Act, 2012 on proviso to Section 201 - Whether failure to deduct tax on interest under section 194A renders the payer an assessee-in-default under section 201 and the effect of the first proviso to section 201(1) on the burden of proof. - HELD THAT: - Section 194A obliges a person (other than specified exempt entities) who pays interest to deduct tax at the time of credit or payment. Section 201(1) deems a person who does not deduct or pay such tax to be an assessee-in-default. The first proviso to section 201(1), as introduced by the Finance Act, 2012, provides that the person who failed to deduct shall not be deemed an assessee-in-default if the payee has filed return, included the sum in income and paid tax thereon, and the person furnishes the prescribed accountant's certificate. The appellants did not produce the required certificate or otherwise satisfy the proviso. Consequently the statutory scheme operates to deem the deductor an assessee-in-default where the conditions of the proviso are not met, and the burden to avail the proviso lies on the deductor to produce the prescribed proof. [Paras 7]

The failure to deduct tax under section 194A renders the payer liable as an assessee-in-default under section 201; the proviso applies only if the deductor furnishes the prescribed accountant's certificate and other conditions, which the appellants did not do.

Direct payment by payee under Section 191 - Assessee-in-default under Section 201 - Whether the Assessing Officer must first verify that the payee has paid tax directly under section 191 before declaring the deductor an assessee-in-default under section 201. - HELD THAT: - Section 191 provides that where tax has not been deducted under the Chapter, income-tax is payable by the assessee direct, and its Explanation declares that if the deductor does not deduct and the assessee also fails to pay directly, the deductor shall be deemed an assessee-in-default. The provision creates a statutory fiction; there is no statutory requirement that the Assessing Officer must first confirm direct payment by the payee before the deductor is deemed an assessee-in-default. The deeming under section 201 operates by statute irrespective of any prior adjudication that the payee has not paid. [Paras 8]

No pre-condition exists requiring the Assessing Officer to verify payment by the payee under section 191 before treating the deductor as an assessee-in-default under section 201.

Effect of amendment by the Finance Act, 2012 on proviso to Section 201 - Whether earlier decisions (specifically Jagran Prakashan Ltd.) can be relied upon where the proviso to section 201 was not in force for the years decided in those cases. - HELD THAT: - The judgment in Jagran Prakashan Ltd. related to assessment years prior to the insertion of the first proviso to section 201 by the Finance Act, 2012. The proviso altered the statutory position by expressly providing conditions under which a deductor would not be deemed an assessee-in-default. Because the statutory provision has since changed, the earlier decision is not a proper precedent for cases governed by the post-2012 proviso; the present appeals are governed by the amended provision and the burden it places on the deductor to produce the prescribed certificate and satisfy the proviso. [Paras 9]

Jagran Prakashan Ltd. is distinguishable and not applicable where the proviso to section 201(1) (introduced in 2012) governs the relevant assessments.

Liability of partnership firm and its partners - joint and several liability - Whether fixing demand on the managing partner (or certain partners) instead of separately on the firm or other partners renders the assessment or demand vague or perverse. - HELD THAT: - A partnership firm is not a separate legal person in strict law; in tax law it is a unit of assessment but the liability of the firm is the liability of its partners. Liability can therefore be fixed on partners and a demand on the managing partner represents a demand on a person managing affairs for and on behalf of all partners. Such a demand does not amount to abandonment of claims against other partners because partners' liabilities are joint and several. The Tribunal's and authorities' approach in fixing liability and issuing demand against the managing partner is consistent with settled law and not perverse. [Paras 10]

Fixing liability on the firm and its partners, and issuing demand against the managing partner, is lawful and not vitiated by vagueness or perversity.

Final Conclusion: Appeals dismissed. The courts below were correct in treating the deductors as assessee-in-default under section 201 for the assessment years 2013-14 to 2016-17 where the proviso conditions were not satisfied; no requirement existed to first establish direct payment by payees under section 191; earlier precedents predating the 2012 proviso are distinguishable; and fixation of liability on a firm and its partners (and demand on the managing partner) is valid.

Treatment of Government Securities as bonds or debentures for the purpose of the proviso to section 48 - disallowance of long term capital loss on sale of Government Securities - binding effect of a coordinate bench's earlier decision - indexation benefit on long term capital assets notwithstanding fixed return

Treatment of Government Securities as bonds or debentures for the purpose of the proviso to section 48 - disallowance of long term capital loss on sale of Government Securities - binding effect of a coordinate bench's earlier decision - indexation benefit on long term capital assets notwithstanding fixed return - Whether Government Securities should be treated as bonds or debentures for application of the proviso to section 48 leading to disallowance of long-term capital loss on their sale and whether indexation is precluded because the securities yield a fixed return - HELD THAT: - The Tribunal examined the contention that Government Securities are subspecies of bonds and therefore fall within the proviso to section 48 (now fourth proviso) which would preclude allowance of the long-term capital loss claimed. The Bench found the present appeal to be squarely covered by earlier orders of the coordinate (Kolkata 'B') Bench in the assessee's own cases for A.Y. 2010-11 and A.Y. 2014-15, which adjudicated the same question in favour of the assessee. The Bench declined to act as an appellate forum over a coordinate Bench and observed that the Revenue had not placed before it any distinguishing facts or legal points warranting departure from the coordinate Bench's view. The Tribunal also rejected the Revenue's broad proposition that a fixed return on a capital asset necessarily precludes indexation benefit, noting by analogy that fixed rental yields on land or buildings do not preclude indexation when the asset is a long-term capital asset. On these bases the Tribunal allowed the grounds challenging the treating of Government Securities as bonds for the proviso and the consequent disallowance of long-term capital loss.

Allowed the appeal; reversed the disallowance and granted relief to the assessee, following the coordinate bench's earlier decisions and holding that fixed return does not automatically deny indexation on a long-term capital asset.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y. 2015-16, setting aside the treating of Government Securities as bonds/debentures for the proviso to section 48 and restoring the long-term capital loss, while following the coordinate Bench's earlier decisions and rejecting the contention that a fixed return on the securities precludes indexation.

Principles of natural justice - opportunity to cross-examine witnesses - use of third-party statements for making additions - reopening of assessment - re-adjudication after cross-examination of witnesses

Principles of natural justice - opportunity to cross-examine witnesses - use of third-party statements for making additions - re-adjudication after cross-examination of witnesses - Whether the additions made on account of alleged on-money payments could be sustained where statements of third parties were used without affording the assessee adequate opportunity to cross-examine, and what remedial course should be followed. - HELD THAT: - The Tribunal held that the principles of natural justice are sacrosanct when evidence is to be considered against an assessee and that, although the Evidence Act does not govern income-tax proceedings, the right to cross-examination is a rule of essential justice. The assessment relied upon statements of the sellers and agents to draw adverse inference and make additions, but the material and the record show that the assessee and his authorised representative were not afforded a meaningful opportunity to cross-examine those persons despite requests; the assessee had sought adjournments on medical grounds and asked for copies of the statements which were not furnished in a manner enabling effective cross-examination. The Tribunal observed that the revenue had not produced independent documentary evidence to corroborate the alleged on-money payments and that there was no clarity on whether the sellers had disclosed corresponding income in their returns. In view of these defects and the violation of natural justice, the matter could not be finally adjudicated on merits. Accordingly, the Tribunal restored the issues to the file of the Assessing Officer for fresh adjudication after complying with natural justice: the AO must furnish all statements and other evidence proposed to be used, permit cross-examination of persons whose statements are relied upon, allow the authorised representative to cross-examine without insisting on the physical presence of the assessee, and grant adequate time to rebut the evidence. [Paras 8, 11, 12, 13]

Issues restored to the file of the Assessing Officer for re-adjudication after affording the assessee and his authorised representative full opportunity to receive the statements and evidence relied upon and to cross-examine the witnesses; directions issued to comply with principles of natural justice.

Final Conclusion: The revenue appeal and the assessee's cross-objection were partly allowed for statistical purposes; the matters are remitted to the Assessing Officer for fresh adjudication in conformity with the Tribunal's directions regarding disclosure and opportunity to cross-examine.

Transfer pricing comparability - arm's length price - exclusion of comparables for fluctuating margins and diminishing revenue - disallowance for delayed deposit of employees' contribution to provident fund and ESIC - rectification application for carry forward losses and unabsorbed depreciation

Transfer pricing comparability - exclusion of comparables for fluctuating margins and diminishing revenue - arm's length price - Whether Excel Infoways Ltd. could be retained as a comparable for determining the arm's length price of international transactions of the assessee for AY 2013-14. - HELD THAT: - The Tribunal examined earlier coordinate-bench decisions and the factual material on record showing volatile and diminishing revenue and markedly fluctuating operating margins of Excel Infoways Ltd. The Tribunal noted prior Tribunal orders excluding the same company as a comparable where similar facts existed (diminishing revenue, super-normal or highly fluctuating margins, and functional/segmental differences). On that basis and following those coordinate-bench precedents, the Tribunal held that Excel Infoways Ltd. is not functionally and financially comparable and directed the AO/TPO to exclude it from the final comparable set and recompute the mean margin and the ALP after affording opportunity to the assessee. [Paras 23, 24]

Excel Infoways Ltd. excluded from the final set of comparables; AO/TPO to recompute ALP of the international transactions after exclusion.

Disallowance for delayed deposit of employees' contribution to provident fund and ESIC - business expenditure - timing of deposit - Whether the employer's deduction should be disallowed on account of employees' contribution to PF and ESIC not being deposited earlier than the due date, for AY 2013-14. - HELD THAT: - The Tribunal considered the competing High Court decisions and noted binding authority of the jurisdictional High Court in favour of the assessee. Applying the principle of following the jurisdictional High Court and the guidance in relevant Supreme Court precedent cited by the Bench, the Tribunal accepted the assessee's contention and allowed the grounds raised challenging the disallowance, holding in favour of the assessee. [Paras 25, 26]

Disallowance of employees' contribution to PF and ESIC set aside; grounds in favour of the assessee allowed.

Rectification application for carry forward losses and unabsorbed depreciation - set-off of brought forward losses and unabsorbed depreciation - Disposition of the assessee's claim for set-off of brought forward business losses and unabsorbed depreciation which the AO had not allowed and the pending rectification application filed under law. - HELD THAT: - The Tribunal observed that the assessee had filed a rectification application and that a coordinate-bench earlier directed the AO to decide such application in accordance with law. In light of that precedent and the pendency of the AO's disposal of the rectification application, the Tribunal remitted the matter to the file of the AO for decision on the application in accordance with law, directing the AO to consider the assessee's submissions. [Paras 27]

Issue remitted to the AO for disposal of the rectification application and determination of availability of brought forward losses and unabsorbed depreciation for set-off.

Final Conclusion: Appeal partly allowed: Excel Infoways Ltd. is to be excluded from the comparable set and ALP recomputed; disallowance of employees' PF/ESIC contributions set aside in favour of the assessee; claim for set-off of brought forward losses and unabsorbed depreciation remitted to the AO for decision on the rectification application.

Onus on Assessing Officer to bring material to make an addition - use of material and evidence recorded by Settlement Commission under section 245HA(3) - assessment to be disposed as if no application under section 245C was made where proceedings abate (section 245HA(2)) - declaration before Settlement Commission not ipso facto proof of income in absence of corroborative material - requirement for chargeability of capital gains under section 45: proof of transfer, nature of asset, consideration and year of acquisition/transfer - principle that source and application of income cannot both be taxed

Declaration before Settlement Commission not ipso facto proof of income in absence of corroborative material - use of material and evidence recorded by Settlement Commission under section 245HA(3) - assessment to be disposed as if no application under section 245C was made where proceedings abate (section 245HA(2)) - onus on Assessing Officer to bring material to make an addition - Deletion of addition of Rs. 7,50,000 made by A.O. on account of alleged scrap trading was upheld. - HELD THAT: - The Tribunal accepted the CIT(A)'s finding that the only basis for the addition was the assessee's declaration before the Settlement Commission and that neither the A.O. nor the Settlement Commission had before them any material (such as quantity sold, parties, procurement or transport evidence) to demonstrate that the assessee earned income from scrap trading. While section 245HA(3) permits the A.O. to use material produced before the Settlement Commission and section 245HA(2) directs disposal as if no application had been made where proceedings abate, the primary onus to demonstrate the existence of income lies on the A.O. In absence of any independent or corroborative material, the declaration alone could not sustain the addition. The Revenue did not place any positive material to controvert the appellate finding; accordingly the deletion was maintained. [Paras 5]

Addition of Rs.7,50,000 on account of scrap trading deleted and the CIT(A)'s order upheld.

Requirement for chargeability of capital gains under section 45: proof of transfer, nature of asset, consideration and year of acquisition/transfer - declaration before Settlement Commission not ipso facto proof of income in absence of corroborative material - onus on Assessing Officer to bring material to make an addition - Deletion of addition of Rs.68,30,220 made by A.O. on account of alleged long-term capital gain was upheld. - HELD THAT: - The Tribunal agreed with the CIT(A) that the A.O. had not produced any material in the regular assessment to show that the assessee had transferred any capital asset during the year, nor identified the asset, year of acquisition, year of transfer, purchaser or consideration. As the chargeability under section 45 requires proof of transfer of a capital asset and its consideration, an addition founded solely on the assessee's declaration before the Settlement Commission (in abated proceedings) could not be sustained. The A.O. failed to discharge the onus of establishing the requisite facts for computing capital gains, and the Revenue did not produce positive material to challenge the appellate finding. [Paras 9]

Addition of Rs.68,30,220 as long-term capital gain deleted and the CIT(A)'s order upheld.

Principle that source and application of income cannot both be taxed - declaration before Settlement Commission not ipso facto proof of income in absence of corroborative material - onus on Assessing Officer to bring material to make an addition - Deletion of addition of Rs.88,69,780 made by A.O. on account of undisclosed expenditure under section 69 was upheld. - HELD THAT: - The Tribunal endorsed the CIT(A)'s finding that the 'on money' from sale of the Arpit Nagar plot was treated by the A.O. as income of the assessee's father (Shri Mangi Lal Kandoi) on the basis of affidavits, and that the assessee's claimed investment (deduction under section 54F) arose from that same on money. Applying the settled principle that source and application cannot both be taxed, and observing that the source (sale proceeds/on money) had been taxed in the father's hands, the application (investment) should likewise be attributable to him. The A.O.'s approach of taxing the source in one person's hands while treating the application in another's was impermissible; no positive material was placed to disturb the appellate finding. [Paras 13]

Addition of Rs.88,69,780 on account of undisclosed expenditure deleted and the CIT(A)'s order upheld.

Final Conclusion: All three additions made by the Assessing Officer were deleted by the CIT(A) and those deletions are upheld by the Tribunal; the revenue's appeal is dismissed.

Deduction under Section 54F for construction of a residential house - construction of a house for residential purpose as condition for exemption - proof of construction (boundary wall, rooms, electricity connection) sufficing for Section 54F - applicability of the deeming fiction in Section 50C to computation of capital gains for claiming deduction under Section 54F - meaning of 'full value of consideration' for purposes of Section 54F

Deduction under Section 54F for construction of a residential house - construction of a house for residential purpose as condition for exemption - proof of construction (boundary wall, rooms, electricity connection) sufficing for Section 54F - Claim for deduction under Section 54F was allowed as the assessee fulfilled the statutory condition of constructing a house for residential purposes within the stipulated time. - HELD THAT: - The Tribunal recorded that the assessee purchased a plot and undertook construction comprising two rooms, boundary wall, iron gate and obtained electricity connection. Those facts were admitted by the Assessing Officer and were within the scope of evidence earlier examined. The statutory requirement under Section 54F is that a residential house be constructed or purchased within the prescribed period; whether the plot is agricultural or commercial or whether the assessee actually resides there is immaterial for entitlement. The AO failed to follow specific directions of the earlier ITAT order to verify payments and evidence and instead reiterated irrelevant findings; the authorities below also disregarded the ratio in the cited decision holding that construction on non-residential land does not defeat Section 54F where construction for residential purpose is established. On that basis the denial of the exemption was held to be without merit and the assessee's claim was allowed. [Paras 7, 8, 9]

Deduction under Section 54F granted as conditions for construction for residential purpose were satisfied.

Applicability of the deeming fiction in Section 50C to computation of capital gains for claiming deduction under Section 54F - meaning of 'full value of consideration' for purposes of Section 54F - Section 50C's deeming provision (adoption of stamp duty value as 'full value of consideration' for capital gains computation under Section 48) does not govern the meaning of 'full value of consideration' in Section 54F; the consideration stated in the sale deed must be considered for computing net consideration for Section 54F purposes. - HELD THAT: - The Tribunal held that Section 50C is a deeming fiction enacted to curb under-reporting of consideration and operates in relation to computation of capital gains under Section 48. Judicial precedent and reasoning accepted by the Tribunal establish that the deeming effect of Section 50C is confined to Section 48 and does not alter the meaning of 'full value of consideration' in other provisions such as the Explanation to Section 54F(1). Consequently, for ascertaining the net consideration relevant to the 54F deduction the actual consideration recorded in the sale deed must be considered. Since the cost of the new asset was not less than the net consideration even if the stamp authority value were taken, the assessee remained entitled to the exemption. [Paras 12]

Section 50C not applicable for computing consideration relevant to Section 54F; assessee entitled to exemption.

Final Conclusion: The assessee's appeal is allowed: the claim of deduction under Section 54F is sustained and the deeming effect of Section 50C was held not to govern computation for Section 54F, accordingly the assessment is set aside to the extent of denying the exemption and the exemption is granted.

Jurisdiction under section 263 - erroneous and prejudicial to the interest of revenue - order passed without making enquiries or verification which should have been made (Explanation 2 to section 263) - Assessing Officer's exercise of quasi judicial discretion where two views are possible - verification of surrendered income and its head wise classification - taxation of income referred to in sections 68 to 69D read with section 115BBE

Jurisdiction under section 263 - erroneous and prejudicial to the interest of revenue - order passed without making enquiries or verification which should have been made (Explanation 2 to section 263) - Assessing Officer's exercise of quasi judicial discretion where two views are possible - Whether the Principal Commissioner was justified in invoking revisionary jurisdiction under section 263 by holding that the assessment order dated 29.12.2017 was erroneous and prejudicial to the interests of revenue for lack of proper enquiries and verification. - HELD THAT: - The Tribunal found on the record that the assessee had undergone both survey proceedings under section 133A and a complete scrutiny assessment under section 143(3), during which books of account, cash book, bills, vouchers and other documentary evidence were produced and examined. The AO issued notices under section 143(2) and section 142(1), sought detailed information by questionnaire, examined impounded documents and made specific additions where justified. The Principal Commissioner's show cause reproduced multiple queries already considered in assessment and primarily faulted the AO for not reopening or making further enquiries; however, the Tribunal held that mere difference of opinion or the availability of an alternative view does not render the AO's order erroneous and prejudicial. Applying the conjunctive requirement that an order must be both erroneous and prejudicial before section 263 can be exercised, and having found that the AO had in fact made enquiries and applied his mind to the material on record, the Tribunal concluded that the Pr. CIT's intervention amounted to re opening issues already examined by the AO without demonstrating that the AO's conclusions were unsustainable in law. The Tribunal therefore held the exercise of revisionary power in the facts of this case to be inappropriate and set aside the section 263 order. [Paras 33, 34, 35, 44, 45]

Pr. CIT's order under section 263 setting aside the assessment was not justified; the assessment order stands restored.

Verification of surrendered income and its head wise classification - taxation of income referred to in sections 68 to 69D read with section 115BBE - Whether the surrendered amount of Rs. 3.00 crore was correctly brought to tax in the assessment (including classification of Rs. 2.20 crore as coaching fee revenue) and whether the AO erred in not taxing the surrendered income head wise under provisions relating to unexplained income. - HELD THAT: - The Tribunal examined the assessment record and documentary material showing the breakdown of the Rs. 3.00 crore offered during survey into coaching fee advance (Rs. 2.20 crore), coaching fee (JEE) and reconciliation items, and noted that these amounts were reflected in audited financial statements and in the AO's query letter and assessment order. The accounting policy on revenue recognition showed that amounts treated as revenue were recorded under "Receipts from Students" and advances would have been shown as current liabilities; thus the nomenclature "Coaching Fee Advance" did not establish non inclusion in revenue. The assessee had also filed detailed reconciliations, ledgers, vouchers and confirmations for advertisement, rent, creditors and construction expenditures, and the AO had considered these in scrutiny, making additions only where supported (e.g., an addition under section 40A(3) in respect of a cash electricity payment). Given the material on record and the AO's enquiries and findings, the Tribunal held that the surrendered amount was properly examined and included in income and that there was no failure to tax the surrendered income in the manner alleged by the Pr. CIT. [Paras 29, 34, 35, 40, 41]

The surrendered amount was duly examined and accounted for in the assessment; there was no failure to tax the surrendered income as alleged by the Pr. CIT.

Taxation of income referred to in sections 68 to 69D read with section 115BBE - Whether the AO should have applied the higher tax rate regime newly introduced with effect from 1-4-2017 while taxing the surrendered income for A.Y. 2015-16. - HELD THAT: - The Tribunal noted that the amended charging provision increasing the tax on income referred to in sections 68 to 69D (by the Taxation Laws (Second Amendment) Act, 2016) became effective from 1-4-2017 and thus applies from A.Y. 2017-18 onwards. For A.Y. 2015-16 the assessee's undisclosed/surrendered income was taxable under the provisions then in force and was taxed at the applicable rate (including surcharge and cess) and not under the post 2017 higher rate. The Tribunal relied on precedent holding that amendments with later effective dates cannot be applied retrospectively to prior assessment years. [Paras 42]

The AO rightly taxed the assessable income under the provisions applicable for A.Y. 2015-16; the higher rate introduced effective 1-4-2017 was not applicable to the year in dispute.

Final Conclusion: The Tribunal allowed the assessee's appeal, set aside the order of the Principal Commissioner under section 263, and restored the assessment order dated 29.12.2017 for A.Y. 2015-16, concluding that the AO had made requisite enquiries, verified the records and correctly dealt with the surrendered income under the law applicable to that assessment year.

Fair market value - Comparable sale instances - Valuation by DVO - Use of Sub-Registrar/DLC rates versus market comparables - Effect of local planning/ecological restrictions on valuation - Cost of boundary wall as cost of acquisition - Computation of capital gains

Fair market value - Comparable sale instances - Valuation by DVO - Use of Sub-Registrar/DLC rates versus market comparables - Effect of local planning/ecological restrictions on valuation - Cost of boundary wall as cost of acquisition - Computation of capital gains - Sustainability of the addition based on DVO valuation and appropriate basis for determining fair market value for computation of capital gains - HELD THAT: - The Tribunal found the DVO's valuation to be excessive and not reflective of the relevant factors for the subject land. The DVO failed to take into account that the land lies in an ecological area (a notified Dark Zone) where construction and certain uses are restricted, that adjoining comparable sale instances were not considered, and that minimum road and permitted use limitations affect marketability. The surrounding sale instances produced before the authorities indicated an average rate substantially lower than the rate adopted by the DVO. Having regard to the character and restrictions applicable to the property and the available comparable sales, the Tribunal held that true market value should be determined with reference to such comparables rather than by mechanically applying Sub-Registrar/DLC rates or the DVO's higher rate. The Tribunal also accepted that the cost of the boundary wall as determined by the DVO is to be included in the cost of acquisition. Applying the fair market value derived from comparables, the Tribunal directed the Assessing Officer to recompute capital gains accordingly and taxed the assessee on revised net capital gain as worked out by the Tribunal.

Addition based on DVO's valuation set aside; fair market value to be determined with reference to comparable sales and ecological/use restrictions, cost of boundary wall allowed as part of cost of acquisition; AO directed to recompute capital gains.

Final Conclusion: Appeal allowed in part: the addition founded on the DVO's valuation is disallowed; fair market value is to be fixed by reference to comparable sale instances and relevant ecological/use restrictions, boundary wall cost is allowable for cost of acquisition, and the Assessing Officer is directed to compute capital gains accordingly.

Disallowance under section 43B of the Income Tax Act - overriding effect of section 23 of the MSMED Act on deductibility of penal/interest payments - weighted deduction under section 35(2AB) of the Income-tax Act - gross expenditure v. net of related receipts - disallowance under section 14A of the Income-tax Act and computation under rule 8D of the Income-tax Rules - presumption that investments are made out of own funds for purposes of rule 8D(2)(ii) - treatment of administrative expenses under rule 8D(2)(iii) - consideration of investments yielding exempt income - deduction for bad debts under section 36(1)(vii) - sufficiency of reducing sundry debtors by provision as write off

Disallowance under section 43B of the Income Tax Act - Validity of disallowance of provision for interest payable to Central Excise/Sales Tax/Customs invoking section 43B - HELD THAT: - The Tribunal upheld the disallowance made by the AO and confirmed by the CIT(A), observing that identical claims in the assessee's earlier years were decided against the assessee by coordinate benches of the Tribunal. Following those precedents, the Tribunal found no error in the orders below and dismissed the assessee's ground on this issue. [Paras 6]

Disallowance sustained and assessee's ground dismissed.

Overriding effect of section 23 of the MSMED Act on deductibility of penal/interest payments - Disallowance of interest payable to micro, small and medium enterprises under section 23 of the MSMED Act - HELD THAT: - The Tribunal followed the coordinate bench decision which construed section 23 as prohibiting deduction of interest payable to MSMEs for computation of income under the Income tax Act. It noted that section 24 gives overriding effect to sections 15-23, and that interest under section 16 is penal in nature; accordingly such interest is not allowable under the Income tax Act or under section 37. Applying that reasoning, the Tribunal upheld the disallowance. [Paras 8]

Disallowance under section 23 MSMED Act upheld.

Weighted deduction under section 35(2AB) of the Income-tax Act - gross expenditure v. net of related receipts - Whether weighted deduction under section 35(2AB) is to be computed on gross R&D expenditure or on net expenditure after deducting related receipts - HELD THAT: - Following the coordinate bench decision and binding High Court precedents relied upon therein, the Tribunal held that receipts of an in house R&D centre which are in the nature of revenue/income (fees and service charges) form part of the assessee's total income and cannot be reduced from gross R&D expenditure for purposes of section 35(2AB). However, because the nature of certain receipts (income/reimbursement/grant) required factual verification, the Tribunal set aside the matter to the assessing officer for limited verification of those facts and directed that deduction be allowed on the gross amount where applicable. [Paras 10]

Order set aside and matter remitted to AO for limited verification; deduction under section 35(2AB) to be allowed on gross expenditure in principle.

Disallowance under section 14A of the Income-tax Act and computation under rule 8D of the Income-tax Rules - presumption that investments are made out of own funds for purposes of rule 8D(2)(ii) - Applicability of rule 8D(2)(ii) for disallowance where own funds exceed investment value - HELD THAT: - On the material before it (balance sheet figures showing own funds greater than investment values at the opening and closing of the year), the Tribunal applied the presumption that investments were made out of own funds and, following the Supreme Court authority relied upon by the assessee, held that no disallowance under rule 8D(2)(ii) was called for. The Tribunal therefore deleted the interest disallowance computed under rule 8D(2)(ii). [Paras 14]

Interest disallowance under rule 8D(2)(ii) deleted.

Treatment of administrative expenses under rule 8D(2)(iii) - consideration of investments yielding exempt income - Computation of disallowance under rule 8D(2)(iii) with regard to administrative expenses and whether investments not yielding exempt income should be excluded - HELD THAT: - The assessee relied on a special bench principle that investments which did not yield exempt income should be excluded when computing average value of investments for rule 8D(2)(iii). Given that factual aspects bearing on which investments yielded exempt income required examination, the Tribunal restored this specific issue to the file of the assessing officer for determination in accordance with the cited principle. The Tribunal directed that if the AO's computation results in a disallowance lower than the amount voluntarily made by the assessee in the return, the assessee's amount should be restored. [Paras 15]

Issue remitted to AO for factual determination and computation under rule 8D(2)(iii) applying the indicated principle.

Deduction for bad debts under section 36(1)(vii) - sufficiency of reducing sundry debtors by provision as write off - Allowability of deduction for provision for bad and doubtful debts where provision is shown by reducing sundry debtors in the balance sheet - HELD THAT: - The Tribunal followed the Karnataka High Court's decision (which in turn followed the Supreme Court in Vijaya Bank) that where an assessee debits profit and loss and correspondingly reduces sundry debtors in the balance sheet such treatment constitutes a write off for purposes of section 36(1)(vii). Observing that the assessee had reduced the provision from sundry debtors, the Tribunal held that the statutory condition was complied with and directed deletion of the disallowance. [Paras 18]

Disallowance of provision for doubtful debts deleted.

Final Conclusion: For assessment year 2010 11: the revenue's appeal on the interest provision under section 43B was dismissed; disallowance under section 23 MSMED Act was upheld; the weighted deduction under section 35(2AB) was allowed in principle and remitted to the AO for limited verification of receipts; disallowance under rule 8D(2)(ii) was deleted while the rule 8D(2)(iii) computation was remitted to the AO; and the disallowance of provision for bad and doubtful debts under section 36(1)(vii) was deleted. The assessee's appeal is treated as partly allowed.

Reopening of assessment under section 147 - reasons to believe - reason to suspect versus reason to believe - client code modification (CCM) and alleged tax-evasion - tangible and relevant material as precondition for reopening

Reopening of assessment under section 147 - reasons to believe - client code modification (CCM) and alleged tax-evasion - tangible and relevant material as precondition for reopening - reason to suspect versus reason to believe - Validity of reassessment initiated under section 147 of the Act on the basis of information regarding client code modification (CCM). - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer and the Investigation Wing's report relied upon to conclude that CCM had been used to shift profits and losses. While the record showed that client code modifications occurred, there was no material establishing a live link or direct nexus between those modifications and a deliberate scheme by the assessee to evade tax. The reasons reproduced largely the investigation report and patterns observed, but did not furnish tangible and relevant material from which a reasonable person could form a belief that income chargeable to tax had escaped in the assessee's case. Relying on precedent that reopening under section 147 requires material stronger than suspicion, the Tribunal held that the AO had acted on a mere apprehension and on reproduction of the investigation report without independent application of mind. Consequently the reassessment proceedings were quashed for want of valid reasons to believe. [Paras 5]

Reassessment proceedings under section 147/148 quashed for A.Y. 2010-11 for lack of tangible and relevant material to form a reason to believe; ground allowed.

Final Conclusion: The appeal is allowed: reassessment for A.Y. 2010-11 initiated under section 147/148 is quashed for want of valid reasons to believe, and other grounds were not adjudicated.

Interest on temporarily parked/idle funds - inextricably linked capital receipt - interest on fixed deposits to be set off against pre-operative interest - distinction between 'surplus funds' and 'temporarily idle funds' - netting off interest income against interest expenditure - application of Tuticorin and Bokaro ratio

Interest on temporarily parked/idle funds - inextricably linked capital receipt - netting off interest income against interest expenditure - distinction between 'surplus funds' and 'temporarily idle funds' - Whether interest earned on fixed deposits created out of borrowed funds temporarily pending deployment for setting up the SEZ is taxable as "income from other sources" or is a capital receipt to be set off against pre operative interest expenditure. - HELD THAT: - On the facts the Tribunal found that the funds invested in fixed deposits were not surplus but were temporarily idle amounts raised for the specific purpose of setting up the SEZ and were withdrawn and applied to business as and when required. The Tribunal distinguished earlier years' contrary orders on the basis that, in those years, capital work in progress was less than available funds (indicating surplus funds), whereas for the year under consideration the CWIP absorbed the funds and deposits were made only for brief interregnum periods. Applying the principle in Bokaro Steel and the exposition in the Delhi High Court decisions (as followed by the Mumbai bench in Kamat Hotels), interest earned on funds that are inextricably linked with the setting up of the project is a capital receipt and may be capitalised or set off against pre operative interest; by contrast, where funds are genuinely surplus the Tuticorin ratio applies and interest is taxable as income from other sources. On these facts the Tribunal held the Bokaro/Delhi High Court line of reasoning applicable and directed the AO to allow netting off of interest earned on fixed deposits against interest expenditure capitalised for the project. The Tribunal accordingly allowed the additional (alternate) ground and did not adjudicate the original grounds further as relief was granted on the alternate ground.

Interest on fixed deposits made from borrowed funds temporarily parked pending deployment for the SEZ is to be treated as a capital receipt inextricably linked to project construction and may be netted off against capitalised interest; the AO is directed to allow such netting.

Final Conclusion: The appeals are partly allowed: the Tribunal directed the Assessing Officer to permit netting off of interest earned on fixed deposits (created from borrowed funds temporarily awaiting deployment for the SEZ) against the capitalised interest expenditure, holding such interest to be a capital receipt in the circumstances.

Stay of auction - interim payment schedule by undertaking - finalisation of outstanding dues by terminal manager - payment conditioned on determination of final dues

Stay of auction - interim payment schedule by undertaking - Whether the scheduled auction of the petitioner's consignment should be stayed and on what terms pending disposal of the petition. - HELD THAT: - The Court granted an interim stay of the auction of the subject consignment that had been scheduled for 31st August, 2020. The stay was continued subject to the petitioner filing an undertaking and complying with an interim payment schedule. The petitioner, through an affidavit by its director, undertook to make staged payments amounting to 25% of the amount determined by respondent No.2 within the week specified and a further 25% in the following week, with the balance to be paid within two weeks of communication of final dues after respondent No.2 extends any applicable benefit. The Court directed immediate compliance with the specified installments and recorded that payments shall be made in accordance with paragraphs 4(a) and 4(b) of the affidavit filed on 14th September, 2020.

Interim stay of the auction continued until further orders, conditional upon the petitioner making payments as per the undertaking and interim schedule filed in Court.

Finalisation of outstanding dues by terminal manager - payment conditioned on determination of final dues - How the outstanding dues in respect of the nine containers are to be determined and the related administrative step to be taken. - HELD THAT: - The Court directed that an authorised representative of the petitioner meet the Terminal Manager, ICD Tughlakabad, on 22nd September, 2020 to finalise the amount due and payable for the nine containers, thereby mandating an administrative verification and computation of dues at the terminal level. The undertaking filed by the petitioner contemplates payment of the balance, if any, within two weeks of communication of final dues determined by respondent No.2 after allowing any applicable waiver or benefit. The Court thereby left computation and communication of final dues to respondent No.2, subject to the petitioner's right to receive the benefit reflected in the undertaking.

Directed meeting on 22nd September, 2020 to finalise dues and required payment of any balance within two weeks of respondent No.2 communicating the final determined amount.

Final Conclusion: The High Court continued the interim stay of the auction on specified conditions: the petitioner must comply with the interim installment payments set out in its affidavit and meet the Terminal Manager on the directed date to finalise outstanding dues, with the balance payable within the timeframe stated after communication of final dues; matter listed on 28th September, 2020.

Provisional assessment - assessable value - bank guarantee - phytosanitary certificate - release of imported goods - compliance with conditions precedent - judicial supervision of administrative compliance

Provisional assessment - assessable value - bank guarantee - phytosanitary certificate - release of imported goods - compliance with conditions precedent - Direction for release of imported goods upon compliance with conditions specified in the Orders-in-Appeal. - HELD THAT: - The Court noted that earlier proceedings resulted in provisional assessment and that Orders-in-Appeal dated 04.09.2020 modified the Orders-in-Original by requiring (i) the bond of assessable value to be furnished as stated in the Order-in-Original, (ii) reduction of the bank guarantee for differential duty from 100% to 25%, and (iii) modification of the phytosanitary certificate requirement to permit certificate from the country of re-export. The petitioners alleged non-compliance by the respondents with those Orders-in-Appeal; the respondents contended the petitioners had not complied with the conditions. Without adjudicating the substantive controversy on merits, the Court directed that if the petitioners furnish the specified bond, the reduced bank guarantee and the modified phytosanitary certificate to the concerned authorities, the respondent authorities shall release the goods within one week of receipt of those documents. The Court expressly required the petitioners to cooperate with the respondent authorities during investigation, and disposed of the writ petitions on that limited compliance-based direction. [Paras 3, 5, 6, 7]

If the petitioners comply with the bond, the reduced bank guarantee and the phytosanitary certificate as modified by the Orders-in-Appeal, the respondent authorities shall release the goods within one week of receipt; the petitioners must cooperate with authorities.

Final Conclusion: Writ petitions disposed of by directing release of the imported goods on compliance with the three conditions set out in the Orders-in-Appeal; no adjudication on the merits of the underlying dispute.

Seizure of goods - provisional release on furnishing bank guarantee - retention of goods by investigating agency pending adjudication - protection of revenue interest - balance of convenience and equities pending investigation - availability of alternative statutory remedy under the Customs Act

Provisional release on furnishing bank guarantee - balance of convenience and equities pending investigation - protection of revenue interest - retention of goods by investigating agency pending adjudication - Provisionally release of seized goods on specified security while protecting the revenue and balancing equities pending further adjudication. - HELD THAT: - The Court declined to adjudicate at this stage the larger controversies concerning the legality of seizure and classification of the goods, but directed interim measures to balance the parties' competing interests. Having considered submissions that the seizure has practically halted the petitioners' business and the respondents' contention that the revenue must be protected, the Court exercised its discretionary writ jurisdiction to order conditional provisional release. The petitioners were directed to furnish a running bank guarantee from a nationalized bank for Rs. 2.00 Crores; simultaneously, the Directorate of Revenue Intelligence was directed to retain raw materials up to a value of Rs. 10 Crores. Upon furnishing of the bank guarantee as directed, the respondents were ordered to provisionally release the remaining goods at the earliest. The directions are interim and limited to preserving the commercial viability of the companies while securing the revenue interest pending further hearing. [Paras 17, 18, 19]

Directed furnishing of a running bank guarantee of Rs. 2.00 Crores by the writ applicants; DRI to retain raw materials up to value of Rs. 10 Crores; upon furnishing the guarantee respondents to provisionally release the rest of the goods; matter posted for further hearing.

Seizure of goods - availability of alternative statutory remedy under the Customs Act - Legality and validity of the seizure and the preliminary objection on availability of alternative remedy are to be examined at the next hearing. - HELD THAT: - The Court did not resolve, on the present hearing, the petitioners' challenge to the legality and validity of the seizure, including contentions about classification and whether the order of seizure is appealable under the Customs Act. The learned counsel for respondents raised a preliminary objection that an alternative statutory remedy in the form of an appeal exists; the Court recorded that these larger issues will be examined on the next date. Thus, the substantive questions relating to the merits of seizure, classification and maintainability/alternative remedy remain for further consideration and have not been finally adjudicated at this stage. [Paras 17]

Deferred adjudication on legality/validity of seizure and on the question of alternative statutory remedy; directed these issues to be considered at the next hearing.

Final Conclusion: Interim order: writ applicants to furnish a running bank guarantee of Rs. 2.00 Crores; DRI to retain raw materials up to value of Rs. 10 Crores; upon compliance respondents to provisionally release the remaining seized goods; substantive challenges to seizure and the question of availability of alternative statutory remedy are reserved for further hearing on the posted date.

Power of arrest under Section 104 of the Customs Act, 1962 - investigative procedure under Sections 154 to 157 and 173(2) of the Code of Criminal Procedure, 1973 - status of Customs/DRI officers vis-a -vis police officers and registration of FIR - summons and statement-recording under Section 108 of the Customs Act, 1962 - admissibility of statements recorded by Customs/DRI officers and Section 25 of the Evidence Act, 1872 - concept of 'proper officer' under Section 2(34) and assignment of functions under the Customs Act, 1962 - precedential scope of Om Prakash v. Union of India in relation to arrests and bailability under the Customs Act

Power of arrest under Section 104 of the Customs Act, 1962 - investigative procedure under Sections 154 to 157 and 173(2) of the Code of Criminal Procedure, 1973 - Whether arrest under Section 104 of the Customs Act requires compliance with Sections 154 to 157 of the Code of Criminal Procedure - HELD THAT: - The Court held that a Customs officer empowered under Section 104 may arrest a person if he has reason to believe an offence under the specified provisions has been committed and is not obliged to follow the procedure in Sections 154 to 157 CrPC before effecting such arrest. Section 104 prescribes that the arrested person be informed of the grounds and be taken to a Magistrate without unnecessary delay; the Code provisions relating to registration of FIR and preliminary police procedure do not apply at that stage because the Customs Act provides its own scheme for inquiry and arrest. The Court relied on authorities distinguishing Customs/Excise inquiry from police investigation and emphasized that the Customs Act's procedure governs investigations under it where there is no contrary provision in the Act requiring registration or preliminary police formalities. [Paras 92]

Customs officers effecting arrest under Section 104 are not required to comply with Sections 154 to 157 CrPC prior to arrest; they must inform grounds and take the person to a Magistrate without unnecessary delay.

Status of Customs/DRI officers vis-a -vis police officers and registration of FIR - Whether Customs/DRI officers are 'police officers' who must register FIRs under the Code of Criminal Procedure - HELD THAT: - The Court reaffirmed settled precedent that Customs/DRI officers are revenue officers and not police officers for the purposes of the Evidence Act and CrPC reporting obligations. They do not exercise the police function of lodging a police report under Section 173 CrPC and are not required to register FIRs in the manner of police investigation; instead, prosecuting agencies under special Acts file complaints (for Customs, under Section 137). The distinction rests on the legislative design: customs powers are primarily for revenue protection, seizure and adjudication, and where the special statute prescribes its own procedure that governs over Chapter XII of the CrPC to the extent inconsistent. [Paras 55, 92]

Customs/DRI officers are not police officers and are not obliged to register FIRs under the CrPC in respect of offences under Sections 133 to 135 of the Customs Act.

Summons and statement-recording under Section 108 of the Customs Act, 1962 - admissibility of statements recorded by Customs/DRI officers and Section 25 of the Evidence Act, 1872 - Validity of summons under Section 108 and admissibility of statements recorded thereunder vis-a -vis Article 20(3)/Section 25 Evidence Act - HELD THAT: - The Court held that Section 108 empowers a Gazetted Customs officer to summon persons, record statements and require production of documents as part of a departmental inquiry; such inquiry does not amount to a formal accusation under Article 20(3) and statements recorded are not covered by Section 25 Evidence Act as those apply to statements to police officers. The power under Section 108 does not contemplate magisterial intervention and is intended to elicit truth in departmental proceedings; the statement recorded in that context is distinct from a police statement under Section 161 CrPC. The Court noted that the precise contention concerning parity with NDPS/Section 67 is pending before a larger Bench of the Supreme Court, but on existing precedent statements under Section 108 are not inadmissible merely because recorded during departmental inquiry. [Paras 40, 51, 55, 77, 92]

Summons under Section 108 are valid for departmental inquiry and statements recorded to Customs/DRI officers are not automatically inadmissible under Section 25 Evidence Act or Article 20(3).

Concept of 'proper officer' under Section 2(34) and assignment of functions under the Customs Act, 1962 - Whether DRI officers qualify as 'proper officer' for purposes of exercising functions under the Customs Act - HELD THAT: - The Court examined statutory amendments, notifications and legislative intent showing that officers of the Directorate of Revenue Intelligence have been appointed as officers of Customs and, by notifications and a subsequent saving clause, assigned functions of 'proper officer' for purposes of Sections 17 and 28. Having regard to those assignments and the statutory amendments enacted after Sayed Ali, coupled with Board notifications, the Court concluded that DRI officers are proper officers empowered to exercise the specified functions under the Act. The Court distinguished earlier case-law to the extent superseded by subsequent legislative action and notifications. [Paras 82, 90, 92]

A DRI officer is a 'proper officer' for the purposes of the Customs Act and may be assigned and exercise functions accordingly.

Precedential scope of Om Prakash v. Union of India in relation to arrests and bailability under the Customs Act - Whether the Supreme Court's decision in Om Prakash governs the present controversy - HELD THAT: - The Court analysed Om Prakash and concluded that its core holding concerned classification of offences as non-cognizable and the consequence for bailability under the statutory scheme extant at that time. Subsequent amendments to Section 104 altered the cognizability/bailability framework and the present case raises distinct questions of procedure and jurisdiction. On that basis the Court held Om Prakash has no bearing in the present matter. [Paras 68, 69, 71, 92]

Om Prakash does not have bearing on the issues before this Court in the present case.

Summons and statement-recording under Section 108 of the Customs Act, 1962 - Whether the writ-applicant has established prima facie undue harassment by DRI officials in issuing repeated summons under Section 108 - HELD THAT: - The Court found the allegations of physical and mental harassment to be unsubstantiated on the record, noting that the writ-applicant had previously attended and had statements recorded. While cautioning that unnecessary repeated summoning should be avoided, the Court recorded there was no credible material to interfere with investigatory action and observed that if no further inquiry is necessary the department should cease unnecessary calls for interrogation. [Paras 91, 92]

Allegations of harassment were not substantiated; court warns against unnecessary summons but did not find grounds to grant the reliefs sought.

Final Conclusion: The writ petition is dismissed. The Court held that Customs/DRI officers may arrest under Section 104 on reasonable belief without first complying with CrPC Sections 154-157; they are not police officers required to register FIRs, DRI officers qualify as 'proper officers' when assigned functions, statements under Section 108 are not per se inadmissible under Section 25 Evidence Act, Om Prakash is not apposite to the present facts, and the petitioner's allegations of harassment were unsubstantiated though unnecessary repeated summoning should be avoided.

Maintainability of winding up proceedings post transfer rules - winding up on recommendation under Section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 - binding effect of BIFR recommendation - winding up-change in net worth, viability and revival potential - delay and laches in continuation of winding up proceedings - publication for claims and absence of creditors' claims - relevance of official liquidator's report and audited balance sheet

Maintainability of winding up proceedings post transfer rules - winding up on recommendation under Section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 - Proceedings for winding up initiated on the recommendation of the BIFR continued to be maintainable before the High Court after notification of the Companies (Transfer of Pending Proceedings) Rules, 2016. - HELD THAT: - The Court noted that the Companies (Transfer of Pending Proceedings) Rules, 2016 (Rule 5(2)) preserve proceedings where the BIFR had forwarded its opinion for winding up and no appeal was pending; accordingly these proceedings, initiated under Section 20(1) of the Act, 1985, remained properly before this Court despite change of the company's registered office. The Court therefore proceeded to adjudicate the matter on merits.

Proceedings are maintainable before this Court under the Transfer Rules and continued to be dealt with by the High Court.

Binding effect of BIFR recommendation - winding up-change in net worth, viability and revival potential - The recommendation of the BIFR is not ipso facto binding on the Company Court and, at a belated stage, need not be accepted if material change in circumstances shows the company is not liable to be wound up. - HELD THAT: - Relying upon the principle that a BIFR recommendation does not conclusively bind the Court, the judgment records that in the 17 years since the BIFR reference there was a demonstrable change in the company's financial position. The Court accepted that the net worth and assets, as per the company's audited balance sheet and the Official Liquidator's report, exceeded liabilities and that substantial arbitration awards in favour of the company and an affidavit of the initiating creditor (Bank of India) indicating satisfaction of dues materially altered the position. Given these changed circumstances and the non-conclusive nature of the BIFR opinion, the Court held it was not obliged to accept the recommendation for winding up at this stage.

BIFR recommendation is not binding and, in the present belated circumstances, cannot be accepted as a basis for winding up.

Delay and laches in continuation of winding up proceedings - publication for claims and absence of creditors' claims - relevance of official liquidator's report and audited balance sheet - Winding up proceedings were liable to be dropped because of prolonged delay, absence of creditor claims despite publication, improved financial position of the company and pending favourable arbitral awards and creditor affidavit. - HELD THAT: - The Court considered the 17-year pendency, the publication of notices inviting claims (with no claims received), the Official Liquidator's affidavit and the company's audited financials showing assets and net worth exceeding liabilities. It also took into account three arbitration awards in the company's favour and an affidavit from the Bank of India stating that its dues had been satisfied. Weighing these factors, the Court concluded that the circumstances no longer warranted winding up under the ground recorded by the BIFR (insufficient net worth and inability to meet obligations within a reasonable time) and that it could not be said the company could not revive itself.

Proceedings for winding up are dropped.

Final Conclusion: The High Court held the transferred winding up proceedings to be maintainable, ruled that a BIFR recommendation is not binding on the Court at a belated stage, and, in view of long delay, absence of creditor claims, improved financial position supported by audited accounts and favourable arbitration awards and creditor affidavit, ordered that the winding up proceedings against the company be dropped.

Scheme of Amalgamation under Sections 230 to 232 of the Companies Act, 2013 - Appointed Date and Effective Date in a sanctioned scheme - Judicial sanction binds shareholders, secured and unsecured creditors and employees - Acceptance of undertakings in response to Regional Director's observations - Dissolution of transferor company without winding up - Compliance with regulatory requirements and filing obligations post-sanction

Scheme of Amalgamation under Sections 230 to 232 of the Companies Act, 2013 - Appointed Date and Effective Date in a sanctioned scheme - Sanction of the Scheme of Amalgamation and its operative effect from the Appointed Date - HELD THAT: - The Tribunal examined the Scheme of Amalgamation between the Transferor and the Transferee companies, including the corporate purpose and rationale for the merger. The Board approvals and the Appointed Date of 1st April, 2018 are on record. No objector opposed the Scheme and the Official Liquidator reported that the affairs of the Transferor Company were conducted properly. Having considered the materials on record, the Tribunal found the Scheme to be fair and reasonable, not violative of any law and not contrary to public policy, and accordingly sanctioned the Scheme. The Scheme as placed at the petition is declared binding on the companies concerned and on their shareholders, secured creditors, unsecured creditors/trade creditors and employees, and shall operate with the Appointed Date fixed as 1st April, 2018. [Paras 1, 4, 11]

The Scheme is sanctioned and shall take effect from the Appointed Date 1st April, 2018; it is binding on the companies and all concerned.

Acceptance of undertakings in response to Regional Director's observations - Compliance with regulatory requirements and filing obligations post-sanction - Sufficiency of undertakings given by the Petitioner Companies in response to the Regional Director's and ROC observations - HELD THAT: - The Regional Director raised specified observations relating to compliance with accounting standards for amalgamation, definitions and effect of Appointed Date and Effective Date, set-off of fees on authorised capital upon dissolution, and regulatory matters including RBI NOC and protection of creditors' interests. The Petitioners furnished explanations and gave undertakings to comply with applicable accounting standards, the specified definitions of Appointed Date and Effective Date, Section 232(3)(i) concerning fees on authorised capital, and to serve notices on RBI and intimate the outcome. The Tribunal accepted those undertakings and found that the observations had been adequately responded to and that statutory requirements and protections would be complied with. [Paras 8, 9]

The Tribunal accepted the undertakings and clarifications furnished in response to the Regional Director's and ROC observations; the Petitioners must comply with those undertakings and statutory/regulatory requirements.

Dissolution of transferor company without winding up - Judicial sanction binds shareholders, secured and unsecured creditors and employees - Compliance with regulatory requirements and filing obligations post-sanction - Consequential orders upon sanction, including dissolution of the Transferor Company and mandated filings and steps - HELD THAT: - Upon sanctioning the Scheme, the Tribunal directed that the Transferor Company be dissolved without being wound up. The Tribunal ordered procedural and consequential compliances: filing of certified copy of the order and scheme with the Registrar of Companies in E-Form INC-28 within the stipulated period, lodging authenticated copies for stamp duty adjudication, publication in newspapers as previously done, and taking all consequential statutory steps under the Act. The Tribunal also recorded that all concerned may act on authenticated copies of the Order and that any interested person may approach the Tribunal for further directions if necessary. [Paras 12]

The Transferor Company is dissolved without winding up and the Petitioner Companies are directed to carry out specified filings, publications and consequential statutory steps; authenticated copies of the Order shall be acted upon.

Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation as placed before it, effective from the Appointed Date 1st April, 2018; accepted the undertakings given in response to the Regional Director's and ROC observations; ordered dissolution of the Transferor Company without winding up; and directed the parties to comply with the statutory and procedural steps specified in the Order.

Scheme of Amalgamation - sanction of scheme by company court limited to fairness, justness and reasonableness - transfer and vesting of assets and liabilities on amalgamation - continuance of pending proceedings by or against transferee - employee transfer on amalgamation without break and on not less favourable terms - compliance with statutory requirements under Sections 230-232 of the Companies Act, 2013 - set-off of tax losses and preservation of Income Tax Department's recovery rights

Scheme of Amalgamation - sanction of scheme by company court limited to fairness, justness and reasonableness - Approval and sanction of the proposed Scheme of Amalgamation between the Transferor and Transferee companies. - HELD THAT: - The Tribunal examined the joint petition, the affidavits evidencing service and publication, the reports of the Regional Director and the Official Liquidator, statutory auditor certificates on accounting treatment, and the absence of objections. The Regional Director's report raised no specific objection and the Official Liquidator reported no complaints or indicia of prejudice to members or public interest. The Tribunal applied the settled principle that its jurisdiction is confined to ascertaining whether the scheme is fair, just and reasonable and not to exercise appellate scrutiny over commercial merits. In light of the approvals by members and creditors and the material on record, no impediment to sanctioning the Scheme was found and sanction was granted.

The Scheme of Amalgamation is sanctioned as fair, just and reasonable and may be approved under the Companies Act framework.

Transfer and vesting of assets and liabilities on amalgamation - continuance of pending proceedings by or against transferee - employee transfer on amalgamation without break and on not less favourable terms - Legal consequences on and after the effective date of the Scheme as to dissolution of the Transferor Company, vesting of assets and liabilities, continuance of proceedings and transfer of employees. - HELD THAT: - The Tribunal ordered that upon the Scheme becoming effective the Transferor Company would stand dissolved without winding-up; all property, rights and powers of the Transferor would be transferred and vested in the Transferee and all liabilities and duties would be transferred to the Transferee. Proceedings pending by or against the Transferor were directed to be continued by or against the Transferee. Employees in service immediately prior to the effective date were to become employees of the Transferee without any break and on terms not less favourable than those subsisting prior to amalgamation. The petitioners were directed to deliver a certified copy of the order to the Registrar of Companies for registration and related filing steps were prescribed.

On the Scheme taking effect, assets and liabilities vest in the Transferee, pending proceedings continue against the Transferee, employees transfer without break, and the Transferor is dissolved.

Set-off of tax losses and preservation of Income Tax Department's recovery rights - compliance with statutory requirements under Sections 230-232 of the Companies Act, 2013 - Treatment of Income Tax Department's observations and the effect of sanction on tax liabilities and recoveries. - HELD THAT: - The Income Tax Department's report raised concerns about set-off of losses and preservation of its recovery rights. The Transferee gave an undertaking to treat the Transferor's losses in accordance with applicable tax law and procedures. The Tribunal recorded the undertaking and clarified that there shall be no limitation on the Income Tax Department's power of recovery, including imposition of penalties, and that sanctioning the Scheme shall not affect tax treatment or operate as a defence in tax proceedings. The Tribunal also observed that petitioners remain bound to comply with statutory requirements and that any deficiency or violation under any enactment would not be shielded by the sanction and may be pursued according to law.

The Transferee's undertaking on tax treatment is recorded; the Income Tax Department's rights of recovery and liability determination remain unimpaired and sanction does not affect tax treatment or remedies available to revenue.

Final Conclusion: The Tribunal, after considering filings, statutory reports and the absence of objections, sanctioned the Scheme of Amalgamation between Corteco India Private Limited and Freudenberg-NOK Private Limited as fair, just and reasonable; directed vesting of assets and liabilities, continuance of proceedings, transfer of employees and dissolution of the Transferor on the effective date; recorded undertakings on tax treatment while preserving the Income Tax Department's recovery rights; and required compliance with statutory filing and other legal requirements.

Scheme of Amalgamation - sanction - meeting approval of shareholders and creditors - compliance with accounting standards and statutory filings - Regional Director and Official Liquidator reports - vesting of assets and liabilities by operation of law upon sanction - continuance of pending proceedings by transferee - protection of employees on amalgamation - protection of tax recovery rights despite sanction - appointed date and consequential registrar formalities

Scheme of Amalgamation - sanction - meeting approval of shareholders and creditors - compliance with accounting standards and statutory filings - Regional Director and Official Liquidator reports - Sanction of the Scheme of Amalgamation between the Transferor Company and the Transferee Company - HELD THAT: - The Tribunal recorded that the requisite meetings of the Transferee Company's equity shareholders, secured and unsecured creditors were held and the reports of the Chairman of meetings show the requisite majorities in favour (para 3). Notices to statutory/regulatory authorities were issued and proof of publication and service was placed on record (para 5). The Regional Director filed a report stating no objection after examining protections for employees and noting regular statutory compliance (para 6). The Official Liquidator's report contained no adverse finding regarding conduct of affairs and the Chartered Accountant's verification raised no adverse observations (paras 7-8). The petitioners filed the auditor's certificate regarding compliance with applicable Accounting Standards (para 12) and stated no investigations or proceedings for oppression or mismanagement were pending (para 13). In view of these factual and procedural compliances and absence of objections, the Tribunal found it appropriate to sanction the Scheme (para 14). [Paras 7, 8, 12, 13, 14]

The Scheme of Amalgamation is sanctioned.

Protection of tax recovery rights despite sanction - non-exemption from payment of taxes and stamp duty - Whether sanction of the Scheme operates as a bar to statutory recovery or exempts the parties from taxes, duties or other statutory obligations - HELD THAT: - The Tribunal noted judicial observations referred to in an earlier NCLT order and the Vodafone line of authority as to the revenue's entitlement to pursue recovery despite sanction (para 11). The Tribunal expressly clarified that sanction does not preclude action being taken, in accordance with law, against concerned persons if any deficiency or violation of enactments is found (para 15), and that the order should not be construed as granting exemption from payment of stamp duty, taxes or other charges (para 16). [Paras 11, 15, 16]

Sanction is subject to the rights of statutory authorities to recover dues and does not grant exemption from taxes, stamp duty or other statutory liabilities.

Vesting of assets and liabilities by operation of law upon sanction - continuance of pending proceedings by transferee - protection of employees on amalgamation - appointed date and consequential registrar formalities - Regional Director and Official Liquidator reports - Operative consequences of the sanctioned Scheme including vesting, continuance of proceedings, employee transfer, appointed date, registrar formalities and direction for payment to Official Liquidator's auditor - HELD THAT: - The Tribunal directed that upon sanction all properties, rights and interests of the Transferor shall, by operation of Section 232(3), transfer and vest in the Transferee, and all liabilities, powers and obligations shall similarly transfer to the Transferee (operative orders (i) and (ii)). It directed that proceedings pending by or against the Transferor shall continue by or against the Transferee (operative (iii)). Employees in service immediately prior to the scheme taking effect shall become employees of the Transferee without break (operative (iv)). The Appointed Date was fixed as 1st July 2019 and the Tribunal directed filing of certified copy of the order with the Registrar of Companies within thirty days, on which the Transferor shall be dissolved and files consolidated (operative (vi) and (vii)). The Official Liquidator's auditor remuneration was to be paid by the Transferor Company as directed by the Tribunal (para 9). [Paras 9, 16]

The Tribunal's operative directions (i)-(viii) take effect, including vesting of assets and liabilities, continuance of proceedings by the Transferee, transfer of employees, fixation of the Appointed Date, Registrar formalities and payment to the Official Liquidator's auditor.

Final Conclusion: Having found that statutory processes, requisite meetings, regulatory notifications and requisite certificates were in order and no substantive objections remained on record, the Tribunal sanctioned the Scheme of Amalgamation subject to the expressed preservation of statutory recovery rights and the operative directions set out in the order.

Scheme of Amalgamation under Sections 230-232 and Section 234 of the Companies Act, 2013 - Dispensation of physical meetings and conduct of meetings by postal ballot and e-voting due to Covid-19 - Convening of meetings of equity shareholders and creditors for sanction of scheme - Appointment and remuneration of chairperson, alternate chairperson and scrutinizer for postal ballot/e-voting - Obligation to serve notices, publish advertisement and supply scheme documents to regulators and stakeholders - Compliance with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016

Scheme of Amalgamation under Sections 230-232 and Section 234 of the Companies Act, 2013 - Convening of meetings of equity shareholders and creditors for sanction of scheme - Application under Sections 230-232 and 234 filed by the transferee company for convening meetings in relation to the proposed Scheme of Amalgamation is allowed to the extent of directing convenance of requisite meetings. - HELD THAT: - The Tribunal considered the petition filed by the Applicant/Transferee Company for sanctioning the Scheme of Amalgamation merging RightMatch Holdings Limited into R Systems International Limited and, on the material placed (including board resolutions, valuation report and fairness opinion), directed that meetings of the equity shareholders, secured creditor and unsecured creditors of the Applicant Company be convened for consideration of the Scheme. The Tribunal recorded that the Scheme and supporting documents have been filed and that the board approvals and relevant certifications have been placed on record, and therefore it is appropriate to call and convene the meetings necessary for voting on the Scheme. [Paras 8, 9, 11, 12, 14]

Meetings of the equity shareholders, one secured creditor and 47 unsecured creditors are directed to be convened for considering the Scheme.

Dispensation of physical meetings and conduct of meetings by postal ballot and e-voting due to Covid-19 - Voting schedule and modalities - Physical meetings dispensed with and voting to be conducted by postal ballot and/or e-voting with specified timeline. - HELD THAT: - In view of the Covid-19 situation, the Tribunal dispensed with holding physical meetings of equity shareholders and creditors and directed that voting shall be conducted through postal ballot and/or e-voting. The Applicant Company represented the numbers of stakeholders (14,305 equity shareholders, 1 secured creditor and 47 unsecured creditors as on February 28, 2020) and voting was directed to be completed on or before 7th July, 2020. The Tribunal thereby authorized alternative voting modalities in place of physical meetings to facilitate the scheme process during the pandemic. [Paras 14]

Physical meetings dispensed with; voting to be conducted by postal ballot and/or e-voting to conclude on or before 07th July, 2020.

Appointment and remuneration of chairperson, alternate chairperson and scrutinizer for postal ballot/e-voting - Chairperson, alternate chairperson and scrutinizer for the postal ballot/e-voting are appointed and their fees fixed. - HELD THAT: - The Tribunal appointed Mr. S.P. Chawla as Chairperson and Mr. Gursat Singh Vachher as Alternate Chairperson for the postal ballot and/or e-voting and Mr. Abhishek Mittal as Scrutinizer. The Tribunal fixed the fees for the Chairperson, Alternate Chairperson and the Scrutinizer and directed that the Chairperson shall file reports within two weeks from the closing of the e-voting and/or postal ballot. These appointments and fees are necessary to supervise and validate the voting process in lieu of physical meetings. [Paras 15, 16]

Appointments of chairperson, alternate chairperson and scrutinizer are confirmed and their fees and reporting timelines are directed.

Obligation to serve notices, publish advertisement and supply scheme documents to regulators and stakeholders - Compliance with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Directions issued for service of notices, publication of advertisement, supply of scheme documents to regulators and stakeholders, and compliance with statutory rules. - HELD THAT: - The Tribunal directed the Applicant Company to send individual notices of the meeting to shareholders and creditors by prescribed modes 30 days before conclusion of voting, to publish advertisements in specified newspapers indicating the start and end dates of voting, and to furnish copies of the Scheme and explanatory statement free of cost at the registered office and on requisition. The Applicant Company was also directed to send notice and documents to the Central Government, Income Tax Authorities, Registrar of Companies, Official Liquidator and any sectoral regulator having significant bearing on the company. An authorized representative of the Applicant Company must file an affidavit of service, publication and compliance at least one week before the close of voting. All directions are to be strictly complied with in accordance with applicable law and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. [Paras 18, 19, 20, 21, 22]

Applicant Company to effect service, publication, supply of documents to regulators and file affidavits of compliance in accordance with the Companies Act and the Rules.

Final Conclusion: The Tribunal allowed the petition to the extent of directing convenance of the requisite meetings for sanction of the Scheme of Amalgamation, dispensed with physical meetings due to Covid-19 and prescribed postal ballot/e-voting (to conclude by 07th July, 2020), appointed and fixed fees for the chairperson/alternate and scrutinizer, and issued detailed directions for notice, publication, supply of scheme documents to regulators and filing affidavits-all subject to strict compliance with the Companies Act and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

Sanction of scheme of arrangement - Demerger of undertaking on a going concern basis - Reduction of share capital consequent to scheme - Compliance with accounting standards in corporate amalgamation/demerger - Appointed date for scheme - Filing of certified order and scheme for stamp adjudication and ROC compliance - Acceptance of Regional Director's observations

Sanction of scheme of arrangement - Demerger of undertaking on a going concern basis - Reduction of share capital consequent to scheme - Sanction of the Scheme of Arrangement between Amura Marketing Technologies Private Limited and K2V2 Technologies Private Limited comprising demerger of the Product Business as a going concern and reduction of share capital of K2V2 Technologies Private Limited. - HELD THAT: - The Tribunal examined the Scheme presented under Sections 230 to 232 read with Section 66 of the Companies Act, 2013, noted the Board resolutions approving the Scheme and that no objector appeared before the Bench. The material on record, including affidavits of compliance and undertakings by the petitioners, showed that statutory requirements had been complied with. The Tribunal found the Scheme to be fair and reasonable, not violative of any law or public policy, and appropriate for sanction as prayed in the petition. [Paras 3, 7, 16, 17, 22]

Company Scheme Petition C.P.(CAA)/4071/MB/2019 is allowed and the Scheme is sanctioned; the demerger and reduction of share capital are approved.

Acceptance of Regional Director's observations - Compliance with accounting standards in corporate amalgamation/demerger - Appointed date for scheme - Treatment of the Regional Director's report and the petitioners' replies concerning accounting entries under the applicable accounting standards and the appointed date. - HELD THAT: - The Regional Director's report raised the need for the petitioners to make necessary accounting entries in conformity with AS-14 (IND AS-103) and other applicable standards (such as AS-5/IND AS-8), and clarified definitions of "Appointed Date" and "Operative Date" with reference to the Scheme. The petitioners filed an affidavit addressing these observations, undertaking to make the necessary accounting entries and confirming the appointed date as 1st April, 2019 in accordance with Section 232(6). On consideration, the Regional Director filed a supplementary report accepting the petitioners' replies and undertakings, and the Tribunal recorded that those clarifications and undertakings are satisfactory. [Paras 10, 11, 12, 13, 15]

Regional Director's observations have been considered; the petitioners' clarifications and undertakings regarding compliance with accounting standards and the appointed date are accepted.

Resolution of unsecured creditors' objections - Whether outstanding claims by unsecured creditors who filed affidavits opposing the Scheme affected sanction. - HELD THAT: - Affidavits opposing the Scheme were filed by two unsecured creditors claiming dues. The petitioners produced proof of payment to those creditors before the Tribunal and it was noted that the creditors did not appear before the Bench and are no longer unsecured creditors. On the basis of the payments made and absence of opposition at the hearing, the Tribunal treated the objections as resolved. [Paras 8, 9, 16]

The objections filed by the unsecured creditors are rendered academic by payment and do not preclude sanction of the Scheme.

Filing of certified order and scheme for stamp adjudication and ROC compliance - Directions regarding post-sanction compliances including stamping and filing with the Registrar of Companies and effect on regulatory authorities. - HELD THAT: - The Tribunal directed the petitioners to lodge certified copies of the order and Scheme with the Superintendent of Stamps for adjudication of stamp duty within 60 days, and to file certified copies with the Registrar of Companies electronically (E-Form INC-28) and physically within 30 days of issuance of the order. The Tribunal further directed that all concerned regulatory authorities act on certified copies of the order and scheme and kept an open liberty for any person interested to apply for further directions. [Paras 18, 19, 20, 21]

Petitioners must comply with the directed stamping and ROC filing requirements; regulatory authorities to act on certified copies and interested persons have liberty to apply for further directions.

Final Conclusion: The Tribunal sanctioned the Scheme of Arrangement for demerger of the Product Business from Amura Marketing Technologies Private Limited into K2V2 Technologies Private Limited, fixed the appointed date as 1st April, 2019, accepted the Regional Director's observations as addressed by the petitioners, recorded that objections by certain unsecured creditors were resolved by payment, and directed statutory post-sanction filings and stamp adjudication.

Power of review - mistake apparent on the face of the record - inherent powers - maintainability of review under the Companies Act - limitation period for initiation of insolvency proceedings - acknowledgement for extending limitation

Power of review - mistake apparent on the face of the record - maintainability of review under the Companies Act - inherent powers - Maintainability of the review application under Section 420(2) of the Companies Act, 2013 and Rule 11 of the NCLAT Rules, 2016. - HELD THAT: - The Tribunal held that review jurisdiction is statutory and cannot be equated with appellate jurisdiction; Rule 11 of the NCLAT Rules is an inherent powers provision and does not itself confer substantive power to entertain a review where the governing statute (the I&B Code) contains no review mechanism. Section 420(2) of the Companies Act permits amendment of an order to rectify a mistake apparent from the record within two years, but that power is circumscribed: the error must be patent and not require re examination of the record or rehearing. Where the I&B Code does not provide for review and no manifest, self evident error is shown on the face of the record, the proper course is not to invoke Rule 11 or exercise an inherent jurisdiction to re hear the appeal. The Tribunal therefore declined to entertain the review application and indicated that the appropriate remedy, if any, was to approach the Supreme Court. [Paras 23, 25, 26, 28]

Review Application is not maintainable under the impugned provisions and inherent powers rule relied upon; the review is dismissed as devoid of merit.

Limitation period for initiation of insolvency proceedings - acknowledgement for extending limitation - mistake apparent on the face of the record - Whether there was a mistake apparent on the face of the record showing the Section 7 application was time barred because of the date of default being November 1, 2012, and whether subsequent documents or payments constituted an acknowledgement extending limitation. - HELD THAT: - The Review Applicant argued that Form 1 recorded the date of default as 1.11.2012 and that, on settled precedent, limitation would run from that date making the Section 7 filing time barred. The Tribunal noted these contentions but emphasised that a review under Section 420(2) cannot be used to re open contested questions of fact or law which require re examination of the record. An error must be self evident on the face of the record; reliance on subsequent agreements or alleged payments to treat them as acknowledgements for extending limitation would require factual appraisal and could not be corrected by way of review. Consequently, the Tribunal found no patent error on the face of its judgment that warranted rectification in review proceedings and declined to re adjudicate the limitation issue in this forum. [Paras 5, 6, 7, 8, 26]

No mistake apparent on the face of the record was shown to establish that the Section 7 application was time barred or that subsequent conduct constituted a legal acknowledgement extending limitation; these contentions cannot be remedied by review.

Final Conclusion: The Review Application No. 09 of 2020 is dismissed as not maintainable and devoid of merit; the Tribunal found no patent error on the face of its judgment that justified review and indicated the appellant's remedy is to approach the Supreme Court.

Pre-existing dispute - Operational debt - Demand Notice in Form 3 under Section 8 - Admission of application under Section 9 - Mobilox test for Section 9 - Corporate Insolvency Resolution Process (CIRP) - Remand for determination of IRP/RP fees and costs

Pre-existing dispute - Mobilox test for Section 9 - Demand Notice in Form 3 under Section 8 - Admission of application under Section 9 - Whether the admission of the Section 9 application and initiation of CIRP was vitiated by a pre-existing dispute between the parties and therefore required to be set aside. - HELD THAT: - The Tribunal applied the legal framework in Mobilox and examined whether there was documentary evidence showing (i) an operational debt, (ii) that the debt was due and payable, and (iii) existence of a dispute or pendency of proceedings prior to receipt of the demand notice. The appellant produced emails dated 9.9.2017 and 13.9.2017, predating the demand notice of 13.4.2018, wherein the corporate debtor specifically alleged non-receipt of material against three invoices and threatened reversal in its books. The Adjudicating Authority failed to take these communications into account when admitting the Section 9 petition. Since the emails raised a pre-existing dispute prior to the demand notice, the condition in Mobilox for admitting a Section 9 application was not satisfied and the admission of the petition and initiation of CIRP could not be sustained. [Paras 24, 25, 26]

Impugned order admitting the Section 9 application is set aside; the Section 9 application is dismissed and the corporate debtor is released from CIRP.

Remand for determination of IRP/RP fees and costs - Determination of fees and costs of the CIRP payable to the Interim/Resolution Professional and allocation of liability for such fees. - HELD THAT: - Although the Tribunal set aside the admission and terminated the CIRP, it left open the limited question of fees and costs of the IRP/RP arising from actions taken during the process. The Tribunal remitted this discrete matter to the Adjudicating Authority for quantification and decision, directing that such fees and costs shall be borne by the Operational Creditor.

Matter remitted to the Adjudicating Authority to decide fees and costs of CIRP payable to IRP/RP, to be borne by the Operational Creditor.

Final Conclusion: The appeal is allowed: the admission of the Section 9 petition and consequent CIRP is set aside for failure to consider a pre-existing dispute established by earlier communications; the corporate debtor is released from CIRP, actions taken during CIRP are declared void, and the limited issue of IRP/RP fees and costs is remitted to the Adjudicating Authority to be fixed and borne by the Operational Creditor.

Existence of an operational debt as a pre condition to initiation of CIRP - Default - Existence of a dispute or pre existing proceedings as a bar to Section 9 petition - Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Requirement to substantiate claim before invoking CIRP

Existence of an operational debt as a pre condition to initiation of CIRP - Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Default - Maintainability of the Company Petition under Section 9 for initiation of CIRP against the Corporate Debtor - HELD THAT: - The Tribunal applied settled law that an application under Section 9 can be entertained only if there is an operational debt which is due and payable and there is default. Reliance is placed on authority holding that IBC is not a substitute for recovery and that existence of an undisputed debt is a sine qua non for CIRP. The pleadings and correspondence show the Corporate Debtor accepted invoices but sought supporting documentation before releasing payments and raised objections about the value delivered. In these circumstances the petition was found to be filed on misconceived facts and law and could not be sustained in its then form. Having regard to the communication from the Corporate Debtor requesting substantiation and the Tribunal's duty to ensure the pre conditions for Section 9 are satisfied, the petition was disposed of directing compliance rather than admitting the CIRP. [Paras 9, 10, 11]

The petition is not admitted; it is disposed of as misconceived with directions for the Petitioner to furnish requisite documents and for the Corporate Debtor to consider them.

Requirement to substantiate claim before invoking CIRP - Existence of a dispute or pre existing proceedings as a bar to Section 9 petition - Direction for verification/consideration of the claim by the Corporate Debtor if substantiating documents are produced - HELD THAT: - Because the Corporate Debtor had, by email, acknowledged the invoices but conditioned payment on receipt of supporting documentation and had made comments about dissatisfaction with outcomes, the Tribunal directed a procedural course: the Petitioner must, within four weeks, furnish the documents specified in the Corporate Debtor's communication; if furnished, the Corporate Debtor must consider the claim and pass appropriate orders within four weeks thereafter. This direction effectively remands the factual/quantificatory question of liability and payment to the Corporate Debtor for fresh consideration upon production of substantiating material, rather than adjudicating the debt on merits in the Section 9 proceeding. [Paras 10, 11]

The Petitioner to furnish requisite documents within four weeks; if furnished, the Corporate Debtor to consider and decide the claim within four weeks thereafter.

Final Conclusion: The Company Petition under Section 9 was disposed of (not admitted); the Petitioner is directed to furnish the supporting documents specified by the Corporate Debtor within four weeks, and upon receipt the Corporate Debtor must consider and communicate its decision within a further four weeks. No order as to costs.

Maintainability of insolvency petition under the Insolvency and Bankruptcy Code, 2016 - operational creditor's claim for professional fees - summary proceedings under the Code - inherent powers of the Adjudicating Authority under Rule 11 of the NCLT Rules, 2016 - exercise of discretionary relief in the interest of justice

Maintainability of insolvency petition under the Insolvency and Bankruptcy Code, 2016 - operational creditor's claim for professional fees - summary proceedings under the Code - Whether the petition under the Code by an operational creditor for recovery of professional fees was maintainable - HELD THAT: - The Tribunal found that although the petitioner had rendered professional services in good faith and the corporate debtor had, on the respondent's case, made certain payments and denied further liability, the petition was not maintainable under the Code. The decision recognises the limited and summary nature of proceedings under the Code which allows the corporate debtor to resist such claims on legal grounds. The Tribunal nevertheless observed the equities of the situation - the petitioner being a senior citizen who rendered substantial services - but treated those equitable considerations as insufficient to convert an otherwise not-maintainable petition into a maintainable proceeding under the statutory scheme. The determinative legal finding is that the petition does not meet the requirements of maintainability under the Code despite merit in the petitioner's factual claim for professional remuneration. [Paras 8]

The petition was held not maintainable under the Code.

Inherent powers of the Adjudicating Authority under Rule 11 of the NCLT Rules, 2016 - exercise of discretionary relief in the interest of justice - Whether the Adjudicating Authority could exercise its inherent powers to grant discretionary relief despite non-maintainability - HELD THAT: - Having concluded that the petition was not maintainable, the Tribunal invoked Rule 11 of the NCLT Rules, 2016 to exercise inherent powers in the interest of justice. The Tribunal considered the petitioner's age, the long period over which services were rendered, and the perceived inequity of absolute refusal by the corporate debtor. On that basis, and without adjudicating the underlying monetary claim on merits, the Tribunal directed the corporate debtor to sympathetically consider payment of a reasonable amount for the services rendered and to communicate its decision within a specified time. This direction was an exercise of discretionary relief ancillary to dismissal, meant to address equitable considerations without altering the legal conclusion on maintainability. [Paras 9, 10]

The Tribunal disposed of the petition as not maintainable but, exercising inherent powers under Rule 11, directed the corporate debtor to consider and communicate payment of a reasonable amount to the petitioner within four weeks.

Final Conclusion: The Tribunal held the insolvency petition under the Code to be not maintainable but, invoking its inherent powers under Rule 11 of the NCLT Rules, 2016, disposed of the petition with a direction that the corporate debtor sympathetically consider and communicate payment of a reasonable amount to the petitioner within four weeks.

Maintainability of Company Petition under Section 9 of the IBC, 2016 - pre-existing dispute - operational debt - initiation of Corporate Insolvency Resolution Process (CIRP) - demand notice compliance - use of IBC as a recovery mechanism - pre-institution mediation under Section 12A of the Commercial Courts Act, 2015

Maintainability of Company Petition under Section 9 of the IBC, 2016 - pre-existing dispute - operational debt - initiation of Corporate Insolvency Resolution Process (CIRP) - pre-institution mediation under Section 12A of the Commercial Courts Act, 2015 - Company Petition under Section 9 dismissed on grounds of a pre-existing dispute and lack of a prima facie case for initiation of CIRP - HELD THAT: - The Tribunal examined the petition filed under Section 9 and the rival pleadings and documentary exchanges between the parties. Prior to the Operational Creditor's demand notice, the Corporate Debtor had issued legal notices asserting substantial claims for damages arising from alleged defective supplies and had adjusted certain amounts against invoices. The Corporate Debtor had also instituted pre-institution mediation under Section 12A of the Commercial Courts Act, 2015 (PIM No. 25/2019), with notices issued and proceedings pending. In the light of these facts and the settled law that IBC is not a substitute for a recovery forum and that an undisputed debt is a sine qua non for initiating CIRP, the Tribunal found that a pre-existing dispute existed and that the petition did not disclose a prima facie case for CIRP. Having regard to the communications, earlier notices, the pendency of mediation and the authorities cited, the petition was held to be not maintainable as an attempt to invoke IBC for recovery rather than for insolvency resolution. [Paras 11, 12, 13]

C.P.(IB) No. 27/BB/2020 dismissed for want of maintainability; parties free to pursue the pending mediation.

Final Conclusion: The Company Petition under Section 9 of the IBC, 2016 was dismissed as not maintainable because of a pre-existing dispute and absence of a prima facie case for initiating CIRP; the order leaves open the pending mediation between the parties.

Condonation of delay in CIRP - rejection of late EOIs under Regulation 36A (6) - eligibility criteria fixed by the Committee of Creditors (Minimum Tangible Net Worth) - time bound nature of CIRP for maximisation of asset value - principles of natural justice in CIRP proceedings

Condonation of delay in CIRP - time bound nature of CIRP for maximisation of asset value - Whether the Applicant should be permitted to be impleaded and the delay in submission of EOI and Resolution Plan condoned. - HELD THAT: - The Tribunal found that the CIRP commenced on the date of admission, namely 27.09.2019, and that the Applicant's plea of ignorance and assertion that CIRP commenced only in February 2020 was untenable. The Applicant's explanation that its Executive Chairman missed the public invitation due to travel was held to be a bald, unmeritorious averment inconsistent with the strict timelines under the Code. The Tribunal emphasised the time bound object of the Code to maximise asset value and observed that undue delay risks diminution of asset value; in these circumstances condonation of delay was not warranted. Applying these principles, the Tribunal concluded no prima facie case was made to interfere with the ongoing CIRP or to allow impleading of the Applicant. [Paras 7, 8, 10]

Application for condonation of delay and impleadment dismissed; no interference with the ongoing CIRP.

Rejection of late EOIs under Regulation 36A (6) - principles of natural justice in CIRP proceedings - Whether the Resolution Professional had discretion to accept the Applicant's belated EOI and whether rejection violated principles of natural justice. - HELD THAT: - The Tribunal examined the process followed by the Resolution Professional and noted publication of Form G, the originally fixed deadline and the CoC's extension of that deadline. The RP finalised the list of prospective resolution applicants after issuing notice under Regulation 36A (12) and circulated it to the CoC. The Tribunal accepted that Regulation 36A (6) requires rejection of EOIs received after the specified time and that, after finalisation under Regulation 36A (12), the RP had no power to accept further EOIs. While recognising that natural justice is relevant in CIRP, the Tribunal found no procedural infirmity or mechanical application warranting interference; the RP's rejection of the delayed EOI was in accordance with the Regulations and the process followed was not impeachable. [Paras 9, 10]

Rejection of the belated EOI by the RP upheld; no breach of natural justice requiring interference.

Eligibility criteria fixed by the Committee of Creditors (Minimum Tangible Net Worth) - time bound nature of CIRP for maximisation of asset value - Whether the Applicant was ineligible on merits because it failed to meet the TNW/NOF criterion fixed by the CoC, and whether that rendered consideration of its belated application purposeless. - HELD THAT: - The Tribunal noted the CoC resolution of 31.12.2019 fixing a minimum TNW/NOF threshold at the Group level and observed that the Applicant's certified TNW as on 31.03.2019 was materially below that threshold. The Tribunal recorded that the RP had considered the Applicant both on the ground of delay and on merits; since the Applicant did not meet the basic eligibility criterion fixed by the CoC, condonation of delay would serve no purpose and would conflict with the Code's objective of a time bound resolution process. Accordingly, the Applicant's failure to satisfy the TNW/NOF criterion independently justified refusal to permit participation. [Paras 3, 10]

Applicant was ineligible on merits for failing the CoC fixed TNW/NOF criterion; this warranted refusal to allow participation irrespective of delay.

Final Conclusion: IA No. 111 of 2020 is dismissed being devoid of merits; IA No. 129 of 2020 is disposed of as infructuous. The Resolution Professional may continue the CIRP in accordance with the Code and regulations.

Approval by ninety percent voting share under Section 12A for withdrawal of CIRP - power of the interim resolution professional to admit, revise or reject claims and thereby reconstitute the committee of creditors under Regulations 12 and 14 - constitution of committee with only operational creditors under Regulation 16 of IRCP Regulations, 2016 - procedure for withdrawal under Regulation 30A of IRCP Regulations, 2016 - principles of natural justice applicable to revision or exclusion of admitted claims by IRP/RP

Approval by ninety percent voting share under Section 12A for withdrawal of CIRP - procedure for withdrawal under Regulation 30A of IRCP Regulations, 2016 - Validity of the resolution passed in the 2nd COC (14.01.2020) approving withdrawal of the CIRP under Section 12A and whether the tribunal may allow the withdrawal. - HELD THAT: - Section 12A requires approval by ninety percent of the voting share of the committee of creditors for the Adjudicating Authority to permit withdrawal. Regulation 30A prescribes the mode and timelines for making and processing a withdrawal application by the committee and the RP. Having regard to the settled law upholding the 90% threshold and to the fact that Form FA and bank guarantee/fees were filed, the Tribunal found that the withdrawal application had been approved by the requisite committee vote as recorded and processed in accordance with the regulations and concluded that the Adjudicating Authority may permit withdrawal. The Tribunal noted earlier contrary directions were overruled by higher authority and that the NCLAT has adopted a liberal approach to compromises where the procedural requirements are met. (See reasoning on the need for 90% threshold and reference to Regulation 30A and subsequent compliance.) [Paras 10, 13, 19, 20]

MA No. 67/2020 (withdrawal application) is allowed and the CIRP stands withdrawn.

Power of the interim resolution professional to admit, revise or reject claims and thereby reconstitute the committee of creditors under Regulations 12 and 14 - principles of natural justice applicable to revision or exclusion of admitted claims by IRP/RP - Whether the IRP validly excluded or reclassified certain claimants (including joint developers/land owners) from the COC by treating them as related parties or reclassifying their claims. - HELD THAT: - Regulations 12 and 14 empower the IRP to call for substantiation, admit claims by best estimate where precise amounts are not available, revise admitted amounts on receipt of additional information and thereby alter the constitution of the COC. Those powers include reclassification of claims and, where credible material (including prior orders) warrants it, exclusion of related parties from participation or voting. However, any exclusion or adverse revision must follow reasonable grounds and afford affected claimants notice consistent with natural justice. Applying these provisions and considering earlier orders (including this Bench's treatment of joint development arrangements as indicative of related-party status), the Tribunal held that the IRP was entitled to exclude or reclassify the three landowners/joint promoters from the 2nd COC where the IRP had credible material and earlier orders supporting such classification. The Tribunal emphasised that the exercise of such powers should not be arbitrary and must be based on reasonable and credible information. [Paras 16, 17, 18]

The IRP's exclusion/reclassification of the specified claimants from the 2nd COC is upheld as validly exercised under the Regulations, subject to the requirement that such revisions be based on credible material and comply with natural justice.

Constitution of committee with only operational creditors under Regulation 16 of IRCP Regulations, 2016 - principles of standing to oppose withdrawal where claim not admitted - Whether a claimant whose claim had not been admitted (or was pending admission) could maintain opposition to the COC's resolution for withdrawal of the CIRP. - HELD THAT: - Regulation 16 provides for constitution and voting rights of a committee formed solely of operational creditors where no financial creditors exist or all financial creditors are related parties. Where a claimant's claim remains unadmitted or is pending substantiation, the claimant cannot insist on being treated as a member of the COC or thwart a withdrawal resolution passed by the constituted committee. The Tribunal noted that a claimant whose claim was not admitted (or was yet to be admitted after seeking further documents) remains at liberty to pursue its claim separately, but cannot by virtue of a pending/unadmitted claim prevent the COC from approving withdrawal under Section 12A, particularly where the COC has been validly constituted and the requisite voting threshold achieved. [Paras 12, 18, 19]

An unadmitted claimant cannot block the withdrawal; the home buyer's challenge to the MA 67/2020 is rejected.

Procedure for withdrawal under Regulation 30A of IRCP Regulations, 2016 - restoration of management and vacation of interim orders on withdrawal of CIRP - Consequential orders upon allowing withdrawal under Section 12A: effect on suspended board, possession and interim orders. - HELD THAT: - Once withdrawal of the CIRP is permitted under Section 12A and corresponding regulations (including filing of Form FA and provision for estimated costs), the CIRP stands withdrawn and interim consequences of CIRP-suspension of the board's powers and any interim orders-fall away. The Tribunal noted that the IRP's fees and estimated costs had been provided to his satisfaction and, accordingly, directed restoration of powers to the Board of Directors, handing back possession and control of books and assets, and vacated interim orders passed during the CIRP. [Paras 20, 22]

On allowing MA 67/2020 the CIRP is withdrawn, the board's powers are restored and interim orders during CIRP are vacated; IRP to hand over possession and records.

Final Conclusion: The Tribunal allowed the IRP's withdrawal application (MA No. 67/2020) under Section 12A read with Regulation 30A after finding the 2nd COC validly constituted and the requisite approvals obtained; upheld the IRP's exercise of powers to admit, reclassify or exclude claims under Regulations 12 and 14 (subject to natural justice), dismissed the opposing applications, and directed restoration of management and return of possession and records to the board, with interim orders during the CIRP vacated.

Duty of adjudicating authority to investigate serious allegations - verification of proof of debt - direction to Resolution Professional to produce records - service of notice - conflict of interest - whistle blower allegations

Duty of adjudicating authority to investigate serious allegations - whistle blower allegations - verification of proof of debt - Allegations of stage management, collusion and fabrication affecting the authenticity of claims in the CoC required judicial scrutiny and verification. - HELD THAT: - The Bench recorded grave allegations that the insolvency proceedings may be 'cooked up' and that documents of members in the CoC appeared fabricated; it also noted that the Corporate Debtor had not been operational since 2007 and that the papers did not sufficiently prove the alleged loan from the Financial Creditor, despite an admission of 'Loan' in the Corporate Debtor's affidavit and letters seeking repayment. In light of these serious contentions and the role of the application as a whistle blower, the Adjudicating Authority concluded that prima facie doubts exist regarding the authenticity and sufficiency of the claims and documents, necessitating documentary verification and production of primary records by the Resolution Professional for judicial scrutiny.

The Resolution Professional was directed to file copies of the claims received from Financial Creditors, proof of debt of each claimant, other proofs of debt of the Corporate Debtor, book debts, balance sheets for the relevant period and bank statements with the NCLT registry by 04.03.2020 for verification.

Service of notice - direction to Resolution Professional to produce records - Procedural directions for notice, filing of affidavits of service and registry communication were necessary to secure participation of parties and obtain the records ordered. - HELD THAT: - The Bench directed the petitioner in IA No. 42/CTB/2020 to serve notice on all four respondents within three working days and to file an affidavit of service. It recorded that the Resolution Professional had already taken notice and filed a counter in that IA. The Registry was ordered to communicate the direction to the Resolution Professional both by email and speed post to ensure compliance. The Adjudicating Authority also ordered that a copy of the order be sent to the IBBI for information and records and listed the matter for further hearing on 20.03.2020.

Petitioner to serve notice and file affidavit of service; Registry to communicate order to the Resolution Professional by email and speed post; order to be sent to IBBI; matter posted for further hearing on 20.03.2020.

Conflict of interest - representation and Vakalatnama - The identities and capacities of counsel appearing were recorded and the Bench addressed potential conflict of interest arising from counsel's appearance for multiple parties. - HELD THAT: - The Bench examined the representation on record, observed absence of a Vakalatnama on file authorising one counsel to appear for the Financial Creditor though order sheets recorded him as counsel, and recorded appearances and enrolment numbers of various advocates. While noting the question whether counsel appearing for the Applicant also appearing for the Resolution Professional gave rise to a potential conflict of interest, the Bench recorded that a Vakalatnama existed for appearance on behalf of the Resolution Professional and took note of counsel engaged to argue the matter. The issue was recorded and identities of counsel were placed on record for clarity.

Counsel appearances and enrolment details recorded; the Bench noted the potential conflict of interest and ensured that the Resolution Professional's Vakalatnama and counsel engagement were placed on record.

Final Conclusion: The Tribunal, having recorded serious allegations of collusion and possible fabrication of claims, ordered production of primary records by the Resolution Professional for verification, directed service of notices and registry communication to secure participation and compliance, recorded counsel identities and potential conflict concerns, and listed the matter for further hearing.

Constitution of Committee of Creditors - judicial discipline - effect of appellate direction on subordinate authority - withdrawal under Section 12A read with Regulation 30A - closure of interlocutory applications consequent to superior court direction

Constitution of Committee of Creditors - effect of appellate direction on subordinate authority - judicial discipline - Whether the IRP could be restrained from constituting the Committee of Creditors pending disposal of the IRP's application for withdrawal of the CIRP. - HELD THAT: - The Adjudicating Authority examined the orders of the Hon'ble NCLAT which, after hearing on merits and facts as on the final date, specifically directed the IRP to constitute the Committee of Creditors and vacated the interim stay on constitution of the CoC. Applying the principle of judicial discipline that subordinate authorities must follow unreservedly the orders of higher appellate fora, the Adjudicating Authority held that it would be contrary to judicial propriety and discipline to grant a direction restraining the IRP from constituting the CoC. Consequently, the prayer to restrain constitution of the CoC was rejected. [Paras 16, 17]

Prayer to restrain the IRP from constituting the CoC rejected; IRP to proceed in accordance with NCLAT directions.

Withdrawal under Section 12A read with Regulation 30A - closure of interlocutory applications consequent to superior court direction - Disposition of the IRP's application under Section 12A/Regulation 30A seeking withdrawal and closure of CIRP (IA No. 177/2020) in light of the NCLAT direction to constitute the CoC. - HELD THAT: - Given the Hon'ble NCLAT's direction to constitute the CoC and the Adjudicating Authority's refusal to restrain that constitution, the Adjudicating Authority observed that the IRP's application for withdrawal and closure (IA No. 177/2020) cannot be processed at this stage and accordingly stands closed in view of the appellate direction. The persons who sought settlement earlier remain at liberty to make a fresh application for settlement and withdrawal before the CoC after compliance with the provisions of the Code and regulations. [Paras 18]

IA No. 177/2020 closed; applicant/appellant permitted to seek settlement and withdrawal before the CoC in accordance with the Code and Regulations.

Closure of interlocutory applications consequent to superior court direction - Status of IA Nos. 178/2020 and 179/2020 which sought directions contrary to the relief in IA No. 176/2020 after IA No. 176/2020 was rejected. - HELD THAT: - The Adjudicating Authority noted that the prayers in IA Nos. 178 and 179 were contrary to the relief sought in IA No. 176 and, since IA No. 176 was rejected and the CoC constitution directed by NCLAT, further adjudication of IA Nos. 178 and 179 was unnecessary. Accordingly, these applications were closed as a consequential measure. [Paras 19]

IA Nos. 178/2020 and 179/2020 stand closed.

Final Conclusion: The Adjudicating Authority refused to restrain the IRP from constituting the Committee of Creditors in view of the Hon'ble NCLAT's direction and the principle of judicial discipline; IA No. 176/2020 rejected, IA No. 177/2020 closed with liberty to seek settlement before the CoC in accordance with the Code, and IA Nos. 178/2020 and 179/2020 closed consequentially.

Exclusion of period from CIRP - extension of CIRP in exceptional cases - outer limit of 330 days for completion of CIRP - interest of stakeholders - role of Committee of Creditors in approving resolution plan

Exclusion of period from CIRP - role of Committee of Creditors in approving resolution plan - Application under section 60(5) of the Insolvency and Bankruptcy Code, 2016 seeking exclusion of 7 days from the CIRP period ending on 06.02.2020 for approval of the Resolution Plan. - HELD THAT: - The Adjudicating Authority considered the stage of the corporate insolvency resolution process, the fact that the Committee of Creditors had resolved to seek a short exclusion to enable internal approvals and e-voting on the Resolution Plan, and the steps already taken by the Resolution Professional. The Authority relied on the guidance of the Supreme Court in Essar Steel that, while the statutory time-limit ordinarily applies, in exceptional cases a short extension beyond the 330-day outer limit may be permitted where only a short period is required to complete the CIRP, it would be in the interest of stakeholders to do so, and the delay is not attributable to the parties but to factors warranting indulgence. Applying that principle to the facts of this case, the Authority concluded that only a short time remained to complete the CIRP and that allowing the exclusion would better serve stakeholders than directing liquidation. [Paras 6, 7]

Exclusion of 7 days from the calculation of the CIRP period ending on 06.02.2020 is allowed; the applicant is granted the period from 07.02.2020 (seven days) for completion of the CIRP.

Final Conclusion: IA No. 126 of 2020 is allowed and a period of seven days from 07.02.2020 is excluded from the CIRP period to enable completion of the resolution process; the application is disposed of.

Rent-a-cab scheme operator - taxable service in relation to renting of a cab - liability to pay service tax for renting/hiring of cabs - distinction between hiring and renting (not material for levy)

Rent-a-cab scheme operator - taxable service in relation to renting of a cab - hiring vs renting distinction - liability to pay service tax for renting/hiring of cabs - Appellant provided rent-a-cab service and was liable to pay service tax. - HELD THAT: - The Tribunal examined the statutory definition of a rent-a-cab scheme operator and the expression 'in relation to renting of a cab', observing that the amended definition covers any person engaged in the business of renting of cabs and thus widens the tax net beyond licensed operators. The Tribunal considered ordinary and legal meanings of 'rent', 'renting' and 'hire', noting that both renting and hiring involve enjoyment of de facto possession and that the legislature has not drawn a distinction between them for the purpose of levy. Reliance was placed on judicial authorities holding that the nature of the arrangement (including retention of certain control by the provider) does not exclude the activity from being a rent-a-cab service. Applying these principles to the contracts and facts - the appellant's provision of multiple vehicles to clients on a periodic/monthly basis and its own registration as a rent-a-cab service provider - the Tribunal held that the activity falls within the rent-a-cab taxable service and sustained the demand. [Paras 9, 10]

Appeal dismissed; order-in-original and order-in-appeal upholding demand for rent-a-cab service tax are upheld.

Final Conclusion: The Tribunal affirmed that the appellant's supply of vehicles on periodic hire constituted a rent-a-cab service within the taxable net, upheld the impugned orders and dismissed the appeal.

Intellectual Property Services - date of rendition of service as determinative of taxability - continuous supply of service - retrospective amendment of agreement and consequential liability - interest and penalty where tax not leviable

Intellectual Property Services - date of rendition of service as determinative of taxability - Whether service tax under the head Intellectual Property Services is leviable in respect of the licence/permission granted by the assessee under agreements dated 01.04.2004, for the period 10.09.2004 to 15.02.2005. - HELD THAT: - The Tribunal held that the determinative date for levy is the date when the service (grant of licence/permission to use trademark/technology) was rendered, and not the dates on which payments were received subsequently. Applying settled coordinate-bench precedents, it was found that the licence/permission in the present case was granted on 01.04.2004, which was prior to introduction of the taxable entry for Intellectual Property Services w.e.f. 10.09.2004. The mere continuation of use or subsequent receipt of payments after 10.09.2004 does not convert the earlier transfer into a service taxable from the later date, nor does it constitute a continuous supply that would attract tax as of the date of levy. Accordingly, service tax could not be demanded for the period 10.09.2004 to 15.02.2005 in respect of the subject agreement. [Paras 7]

Demand of service tax under the head Intellectual Property Services in respect of the agreement dated 01.04.2004 for the period 10.09.2004 to 15.02.2005 is not leviable and is set aside.

Retrospective amendment of agreement and consequential liability - interest and penalty where tax not leviable - Whether the assessee's subsequent modification of the agreement (dated 15.02.2005 with retrospective effect from 10.09.2004) and the imposition of interest and penalty affect the liability when tax is held not payable. - HELD THAT: - The Tribunal observed that the contention of the Revenue regarding retrospective amendment to reduce the taxable value is immaterial once the primary conclusion is that no service tax was leviable because the service was rendered before the introduction of the taxable entry. On the question of interest and penalty, since the impugned tax demand itself was quashed, the consequential interest and penalty confirmed by the adjudicating authority were also set aside. The Tribunal did not undertake independent quantification or remand for fresh computation, but allowed consequential relief as per law. [Paras 7, 8]

The retrospective amendment does not sustain a tax demand where the service is held not leviable; interest and penalty confirmed with the demand are set aside and consequential relief granted.

Final Conclusion: Appeal allowed; the demand of service tax, interest and penalty confirmed by the Commissioner for the period 10.09.2004 to 15.02.2005 is set aside on the ground that the licence/permission was granted on 01.04.2004 prior to the introduction of the taxable entry for Intellectual Property Services, and consequential relief is directed as per law.

Refund claim - delay in adjudication - show cause notice - non-application of mind - reconstruction of records - direction to decide within time - Article 226

Refund claim - delay in adjudication - direction to decide within time - Pending refund claim filed in 2004 had remained undecided for over a decade and required determination. - HELD THAT: - The Court noted that the writ applicant's refund application filed in 2004 remains undecided despite the passage of some 16 years and observed that departmental inaction is not acceptable. Rather than adjudicating the claim itself, the Court directed the departmental authority to decide the refund claim in accordance with law within two months of receipt of the order. The Court further recorded that if the department requires any documents, the writ applicant shall promptly furnish necessary and relevant documents, and the authority is to decide the claim on the available materials and law. [Paras 4, 10]

Respondents directed to decide the refund claim in accordance with law within two months; writ petition disposed accordingly.

Show cause notice - non-application of mind - reconstruction of records - Issuance of three show cause notices in the circumstances exhibited non-application of mind and procedural inadequacy, but the Court did not further adjudicate merits of those notices. - HELD THAT: - The Court observed that the impugned show cause notices were issued despite the original claim papers being unavailable with the division and that the notices reflected apparent non-application of mind and procedural infirmity. The Court questioned the propriety of issuing multiple show cause notices instead of taking an appropriate decision on the longstanding claim, noted that the petitioner had on past occasions reconstructed and furnished records to the department, and declined to go into further controversy about the merits of the show cause notices, leaving the authority to proceed in accordance with law while directing decision of the refund claim. [Paras 7, 8, 9]

Court recorded that the show cause notices exhibited non-application of mind; refrained from adjudicating their merits and required the department to decide the refund claim after allowing the petitioner to supply necessary documents.

Final Conclusion: Writ petition disposed by directing the respondents to decide the refund claim filed in Form R (2004) in accordance with law within two months of receipt of the order; the Court recorded that the impugned show cause notices displayed non-application of mind but did not adjudicate their merits.

Refund under Rule 5 of the Cenvat Credit Rules, 2004 - limitation under Section 11B of the Central Excise Act, 1944 - re-credit of Cenvat credit reversed for refund purposes - deemed export / supplies to 100% EOU and admissibility of cash refund - remand for determination and sanction of refund

Refund under Rule 5 of the Cenvat Credit Rules, 2004 - limitation under Section 11B of the Central Excise Act, 1944 - deemed export / supplies to 100% EOU and admissibility of cash refund - remand for determination and sanction of refund - Determination of admissibility and sanction of refund in respect of Appeal Nos. E/13076/2018 and E/13077/2018, including effect of supplies to/from 100% EOU and temporal cut-off for grant of refund. - HELD THAT: - The tribunal's earlier view that limitation under Section 11B applies to refund claims under Rule 5 of the Cenvat Credit Rules is binding and disposes the broader limitation controversy against the appellant. For Appeal Nos. E/13076/2018 (period Oct'12 to Dec'12) and E/13077/2018 (period April'13 to June'13), the refund claims were filed broadly within one year, and the precise limitation computation depends on the actual dates of export. With regard to supplies involving a 100% EOU, the tribunal followed precedent holding that refunds are not automatically barred merely because goods moved between DTA and EOU; where exports fall within the relevant temporal scope (post the dates relied upon), refund entitlement arises. Accordingly, the matter in both appeals is remanded to the original adjudicating authority to determine and sanction the exact amount of refund admissible from the dates identified by the Tribunal (4.10.2012 onwards for E/13076/2018 and 9.4.2013 onwards for E/13077/2018), after verifying export dates and admissibility in light of the amended Rule/definitions applicable to the periods in question. [Paras 4]

Appeal Nos. E/13076/2018 and E/13077/2018 are remanded for determination and sanction of the exact refund admissible in the terms indicated.

Re-credit of Cenvat credit reversed for refund purposes - refund under Rule 5 of the Cenvat Credit Rules, 2004 - limitation under Section 11B of the Central Excise Act, 1944 - Entitlement to re-credit Cenvat credit that was reversed at the time of filing refund claims which were subsequently rejected as time-barred. - HELD THAT: - For the six appeals found to be barred by limitation under Section 11B, the tribunal concluded that the reversal of Cenvat credit was effected solely for the purpose of claiming refund. Where such refund claims are ultimately not allowed by the revenue (on limitation grounds), the credit reversed for the refund process becomes admissible for re-credit. The tribunal therefore directed that the appellants be allowed re-credit of the Cenvat credit reversed in respect of those time barred claims. [Paras 4]

For the appeals barred by limitation, the amounts of Cenvat credit reversed for claiming refund shall be allowed to be re credited to the appellant.

Final Conclusion: Appeals are partly allowed: two appeals (E/13076/2018 and E/13077/2018) are remanded to the original adjudicating authority for determination and sanction of refund in the terms indicated; in respect of the remaining appeals held time barred, the Cenvat credit reversed for refund purposes is to be re credited to the appellant.

Reversal of proportionate Cenvat credit under Rule 6(3A) - Interpretation of "total Cenvat credit" under the Rule 6(3A) formula - Attribution of ineligible, eligible and common credit - Clarificatory amendment with retrospective effect

Interpretation of "total Cenvat credit" under the Rule 6(3A) formula - Attribution of ineligible, eligible and common credit - Whether the "total Cenvat credit" in the formula of sub rule (3A) of Rule 6 means the total credit in the books or only the credit of common inputs/input services after excluding credit attributable exclusively to non exempt (dutiable) goods. - HELD THAT: - The Tribunal followed the Coordinate Bench decision in the appellant's earlier case and held that read harmoniously Rule 6(1),(2) and (3A) contemplates that credit exclusively used for manufacture of non exempt/dutiable goods remains allowable and should not be included within the "total Cenvat credit" subject to reversal under the formula. The proper construction of sub rule (3A) requires attribution first of ineligible credit (A) and eligible credit (B), with common credit (C) being the balance; the formula for computing ineligible common credit (D) applies only to that common credit and not to credit exclusively used for dutiable goods. Accepting the Revenue's broader interpretation that the entire book credit must be subjected to reversal would result in disallowance of credit on inputs/input services genuinely used for dutiable goods, which is not permitted under the Rules. The Tribunal accordingly found no merit in the Commissioner(A)'s contrary view and allowed the appeal. [Paras 4, 5]

The Tribunal held that "total Cenvat credit" for the purpose of the Rule 6(3A) formula is confined to common credit and does not include credit exclusively used for manufacture of dutiable goods; the impugned order disallowing broader credit was set aside and the appeal allowed.

Clarificatory amendment with retrospective effect - Reversal of proportionate Cenvat credit under Rule 6(3A) - Whether the substitution of sub rule (3A) by Notification No. 13/2016 is clarificatory and applicable retrospectively. - HELD THAT: - Relying on the amended text of sub rule (3A), the Tribunal observed that the legislature consciously substituted the provision to remove the anomaly and to clarify that denial of Cenvat credit on inputs/input services used in dutiable goods was never intended. The substituted provision was characterised as clarificatory and therefore having retrospective effect. On this basis the Tribunal endorsed the earlier coordinate bench reasoning and directed that the substituted sub rule operate to validate the narrower interpretation of "total Cenvat credit." [Paras 10]

The Tribunal held that the substituted sub rule (3A) is clarificatory and has retrospective effect, reinforcing that credit used for dutiable goods is not to be disallowed under the formula.

Final Conclusion: The Tribunal, following the Coordinate Bench decision in the appellant's own case, set aside the Commissioner (Appeals) order, allowed the appeals of the assessee and disposed of the Revenue's cross objection, holding that the Rule 6(3A) formula applies only to common credit and that the substituted sub rule is clarificatory with retrospective effect.

Cenvat credit - manufacture - excisable goods - change in form or size not amounting to manufacture - embargo under Rule 6(3)(b) of the Cenvat Credit Rules, 2004 - separate accounts for dutiable and exempted products / alternatives under Rule 6 of the Cenvat Credit Rules

Manufacture - change in form or size not amounting to manufacture - excisable goods - Iron ore fines generated during crushing and screening are not excisable goods because the process does not amount to manufacture. - HELD THAT: - The Tribunal accepted the factual admission that iron ore lumps were crushed and screened to obtain feed-size material for the sponge-iron kiln and that fines were inevitably generated during segregation. Relying on the settled principle that a process which merely alters the form or size of the same material does not ordinarily amount to manufacture, the Tribunal held that sieving out fines in the described process is not a manufacturing activity that converts the input into a new excisable product. The iron ore fines, being part of the input and not produced by any manufacturing operation of the appellant, cannot be treated as excisable goods. The original adjudicating authority's finding to this effect was correct and the contrary view of the Commissioner (Appeals) was held perverse.

The iron ore fines are not excisable goods as the crushing and screening undertaken did not amount to manufacture; the appellate order holding otherwise is set aside.

Embargo under Rule 6(3)(b) of the Cenvat Credit Rules, 2004 - separate accounts for dutiable and exempted products / alternatives under Rule 6 of the Cenvat Credit Rules - cenvat credit - Rule 6(3)(b) embargo and Rule 6 based liabilities do not apply because the iron ore fines are not exempted excisable goods and there is no revenue notification exempting them. - HELD THAT: - The Tribunal found no material to establish that the iron ore fines were exempted goods by any notification of the Revenue. Since the fines were held not to be excisable, the embargo and accounting / reversal consequences under Rule 6 (including the options in Rule 6(3)) do not get attracted. Reliance on decisions dealing with identical facts supported the conclusion that clearance of such fines without payment of duty does not obligate the assessee to pay duty under Rule 6. Consequently, the demand confirmed by Commissioner (Appeals) under Rule 11A and allied provisions was not proper.

The confirmation of demand based on application of Rule 6/Rule 6(3)(b) and related provisions is unjustified and set aside.

Final Conclusion: The impugned order of Commissioner (Appeals) is set aside; the order-in-original is restored and the appeal is allowed.

Rectification under Section 84 - error apparent on the face of the record - reversal of Input Tax Credit - non-speaking order - principles of natural justice - opportunity of personal hearing - circular instructions of the Commissioner requiring hearing - redo assessment de novo

Rectification under Section 84 - error apparent on the face of the record - non-speaking order - Validity of the intimation rejecting the petitioner's Section 84 applications on the ground that the requests did not disclose any error apparent on the face of the record. - HELD THAT: - The Court found that the intimation rejecting the petitioner's Section 84 applications was non speaking and did not adequately address or explain the objections raised by the petitioner to the reversal of Input Tax Credit. Although Section 84 does not by its text universally mandate personal hearing (except where rectification is initiated suo motu), rejection on the basis that no error apparent exists requires a reasoned order. The Assessing Officer's brief intimation merely stated that the petitioner's working was not based on the prescribed formula and that reversal was without basis, without any discussion of the petitioner's contentions or the material filed. For these reasons the impugned intimations could not stand as valid orders of rectification under Section 84 and were set aside for fresh consideration. [Paras 5, 7]

The intimations rejecting the Section 84 applications were held to be non speaking and legally infirm and were set aside for de novo reconsideration.

Principles of natural justice - opportunity of personal hearing - circular instructions of the Commissioner requiring hearing - reversal of Input Tax Credit - Whether the petitioner was entitled to be heard in person before finalisation of the reassessment of reversal of Input Tax Credit and the extent to which departmental instructions require hearing. - HELD THAT: - The Court observed that fairness and the requirements of natural justice call for a dealer to be heard, particularly where the dealer has specifically sought personal hearing. The Court took note of Circular No. 7 of 2014 issued by the Commissioner, which directs assessing officers to afford reasonable opportunity and to afford personal hearing in assessment matters and to pass speaking orders addressing objections. Applying these principles, the Court directed that the petitioner be given an opportunity of hearing (virtual or physical) and that the Assessing Officer shall hear the petitioner and pass a reasoned order within a stipulated time frame. The remedy afforded was a fresh assessment to be framed after hearing, thereby ensuring compliance with natural justice and the departmental circular. [Paras 5, 6, 7]

The petitioner must be afforded personal hearing and the matter remanded for redetermination in accordance with the principles of natural justice and the Commissioner's circular; fresh orders to be passed after hearing.

Final Conclusion: Impugned intimations rejecting the petitioner's applications under Section 84, insofar as they were non speaking and issued without affording the petitioner the requested hearing, are set aside; the assessments for 2007-08, 2009-10 and 2010-11 are to be reopened and redetermined de novo after affording personal hearing, with final orders to be passed within the timeframe directed by the Court.