TaxTMI Updates e-Newsletter
Sep 24,2024

Jurisdiction to issue show cause notice under Section 74 of the CGST Act - Authorisation of State GST officers as proper officers under Section 6 of the CGST Act - Prohibition on initiation of multiple proceedings on the same subject matter under Section 6(2)(b) of the CGST Act - Scope of Section 74 proceedings for evasion of tax and wrongful availment of input tax credit

Jurisdiction to issue show cause notice under Section 74 of the CGST Act - Authorisation of State GST officers as proper officers under Section 6 of the CGST Act - Prohibition on initiation of multiple proceedings on the same subject matter under Section 6(2)(b) of the CGST Act - Validity of show cause notice issued by the State GST Officer at Chandigarh under Section 74 of the CGST Act in respect of supplies/utilisation across multiple States. - HELD THAT: - The Court found that the show cause notice arose from an internal audit under Section 65 for the periods 2017-18 to 2019-20 and that officers appointed under Sections 4 and 5 and officers authorised under Section 6 have coextensive powers for administration of the Act. Section 6(2)(b) prevents initiation of proceedings by another proper officer on the same subject matter once proceedings have been initiated. Applying these provisions and prior authority, the Court held that the State GST Officer at Chandigarh was competent to issue a notice under Section 74 even though the audit revealed supplies or redemptions occurring in other States; such issuance did not constitute a jurisdictional error. The Court explicitly declined to decide on the merits of the factual contentions in the notice and confined its conclusion to the question of competence of the issuing authority. [Paras 8, 9, 11]

The challenge to the jurisdiction of the Chandigarh officer to issue the Section 74 notice is rejected; there is no jurisdictional error.

Scope of Section 74 proceedings for evasion of tax and wrongful availment of input tax credit - Whether the court would adjudicate the merits or contents of the show cause notice at writ stage. - HELD THAT: - The Court did not adjudicate the substantive objections raised by the petitioner to the contents of the notice. The petitioner had not filed a reply to the Section 74 notice and instead directly approached the Court on jurisdictional grounds. The Court left the factual and legal objections to be raised in the statutory reply and required the authority to consider the petitioner's reply and pass a speaking order; any grievance against that order can be pursued before the appropriate forum under the Act. [Paras 12]

Merits of the show cause notice left open for consideration by the authority upon the petitioner's reply; not decided by the Court.

Final Conclusion: Writ petition dismissed summarily on the ground that the issuing officer at Chandigarh had competence to issue the Section 74 notice in respect of the audit periods 2017-18 to 2019-20; the petitioner is permitted to raise all substantive objections in its statutory reply and to seek remedy thereafter under the Act.

Remand for fresh consideration - Opportunity of personal hearing - Technical glitch in GST portal affecting reconciliation between GSTR-01 and GSTR-09 - Confirmation of demand based on GSTR reconciliation - Assessment under Section 73 of the Central Goods and Services Tax Act, 2017

Technical glitch in GST portal affecting reconciliation between GSTR-01 and GSTR-09 - Confirmation of demand based on GSTR reconciliation - Demand raised on account of alleged mismatch between GSTR-01 and GSTR-09 for Financial year 2018-19 was remanded for fresh consideration. - HELD THAT: - The adjudicating authority had confirmed a substantial demand arising from a reconciliation mismatch between GSTR-01 and GSTR-09. The petitioner contended that the mismatch arose from a technical defect in the GST portal whereby an advance adjustment reported in Table 11B of GSTR-01 was added to output tax liability instead of being reduced. The Court observed that the same factual-technical controversy had been examined and accepted by the adjudicating authority in respect of the subsequent tax period (2019-20). In view of the narrow compass of the controversy and the authoritative examination made for the later period, the Court found it appropriate to remit the matter for fresh consideration rather than compel the petitioner to pursue the statutory appellate remedy without first allowing reconsideration on merits by the adjudicating authority. [Paras 7, 8, 9]

The demand based on reconciliation mismatch is remanded to the adjudicating authority for fresh consideration.

Remand for fresh consideration - Opportunity of personal hearing - Assessment under Section 73 of the Central Goods and Services Tax Act, 2017 - Impugned order under Section 73 (Financial year 2018-19) was set aside and the matter was directed to be decided afresh after affording personal hearing. - HELD THAT: - The Court set aside the impugned order passed under Section 73 for the financial year 2018-19 and remitted the matter to the adjudicating authority. The remand was coupled with a direction to afford the petitioner an opportunity of personal hearing prior to passing a fresh order. The Court emphasised that, given the adjudicating authority's subsequent acceptance of the technical-glitch contention for the next period, reconsideration in the present period on merits was appropriate and procedurally fair. [Paras 10, 11]

Impugned order set aside and matter remitted for fresh adjudication after personal hearing.

Final Conclusion: The impugned order for Financial year 2018-19 is set aside and the matter remitted to the adjudicating authority to decide afresh after affording the petitioner a personal hearing; pending applications are disposed of and a listed hearing cancelled.

Refund of electronic cash ledger balance - implementation of appellate authority order - binding effect of appellate order unless stayed or appealed - processing of refund with applicable interest - succession certificate as basis for legal heir's bank account

Implementation of appellate authority order - binding effect of appellate order unless stayed or appealed - refund of electronic cash ledger balance - processing of refund with applicable interest - succession certificate as basis for legal heir's bank account - Respondents directed to implement the appellate order dated 21.01.2024 and process the refund of the excess electronic cash ledger balance into the bank account indicated by the legal heir, along with applicable interest. - HELD THAT: - The appellate authority had set aside the adjudicating authority's rejection and expressly directed refund of the excess balance in the electronic cash ledger into the bank account for which the legal heir (Smt. Neera Batra) had become entitled in terms of the succession certificate. An appellate order of this character must be implemented by the revenue unless it is stayed or set aside by a superior forum. In the present case the respondents had not preferred any appeal or obtained any stay against the Order in Appeal dated 21.01.2024 and therefore could not lawfully withhold compliance. The Court accordingly directed immediate processing of the refund claim in terms of the appellate order and payment of interest as per law. [Paras 5, 10, 11]

The respondents are directed to forthwith process the refund in accordance with the Order in Appeal dated 21.01.2024 and to pay applicable interest.

Final Conclusion: Petition allowed; respondents required to implement the appellate order dated 21.01.2024 by processing the refund of the electronic cash ledger balance into the bank account of the legal heir (as per succession certificate) and to pay interest in accordance with law.

Cancellation of GST registration with retrospective effect - Natural justice - opportunity to be heard - Non-existent premises as basis for cancellation - Reliance on physical verification for cancellation - Remand for fresh adjudication and personal hearing

Cancellation of GST registration with retrospective effect - Natural justice - opportunity to be heard - Non-existent premises as basis for cancellation - Impugned order cancelling the petitioner's GST registration with retrospective effect set aside for want of adequate opportunity and insufficient material to conclude non existence. - HELD THAT: - The impugned Show Cause Notice merely recorded the ground as "Non-existent" and did not propose retrospective cancellation. A separate letter on the GST portal, allegedly stating that physical verification found the firm non existent and directing cancellation from the date of registration, gave no date of verification nor particulars to demonstrate that the petitioner never existed at the declared principal place of business. The cancellation order contains no independent reasoning and simply refers to the SCN. The petitioner was not afforded an opportunity to respond to any proposal to cancel registration with retrospective effect. In these circumstances the cancellation with retrospective effect cannot be sustained and must be set aside to enable the petitioner to be heard and to allow proper consideration of material establishing existence of the business until its closure. [Paras 7, 8, 9, 10, 11]

Order cancelling GST registration with retrospective effect set aside; petitioner found not to have been afforded sufficient opportunity to meet retrospective cancellation.

Remand for fresh adjudication and personal hearing - Reliance on physical verification for cancellation - Matter remitted to the proper officer to consider the SCN insofar as it is assumed to propose retrospective cancellation, after giving the petitioner an opportunity to respond and a personal hearing. - HELD THAT: - The court directed that the petitioner be permitted to file a response to the SCN, on the assumption that it proposed retrospective cancellation, and to produce documents demonstrating existence at the declared principal place of business until closure in November 2022. The petitioner is to file the response within three weeks. The proper officer must consider the response, afford personal hearing, and pass an appropriate reasoned order, preferably within two months after the personal hearing. The court thus remitted the matter for fresh consideration rather than deciding the merits of retrospective cancellation on the record before it. [Paras 11]

Remitted to the proper officer for fresh consideration after the petitioner files a response within three weeks and is afforded personal hearing; appropriate order to be passed expeditiously, preferably within two months after hearing.

Final Conclusion: The order cancelling the petitioner's GST registration with retrospective effect is set aside; the petitioner may file a response within three weeks and the proper officer shall decide the SCN afresh after personal hearing, preferably within two months thereafter.

Cancellation of GST registration - Retrospective cancellation - Show Cause Notice - Opportunity to be heard / Natural justice - Suspension of registration - Modification of administrative order - Limitation - bar to appeal

Cancellation of GST registration - Retrospective cancellation - Show Cause Notice - Opportunity to be heard / Natural justice - Suspension of registration - Modification of administrative order - Validity of cancelling the petitioner's GST registration with retrospective effect from 11.09.2017 and whether the cancellation should be made operative from 24.05.2022 - HELD THAT: - The SCN issued on 24.05.2022 did not propose cancellation with retrospective effect from 11.09.2017 nor did it contain the reasons ultimately recorded in the impugned order. The impugned order cancelling registration retrospectively relied upon non-attendance at personal hearing and non-updation of bank details, matters which were not the basis of the SCN; consequently the petitioner was not afforded an opportunity to meet the reasons on which retrospective cancellation was imposed. The registration had been suspended from the date of the SCN. The respondents, when given time to take instructions, stated they had no objection to making the cancellation operative from the date of suspension (24.05.2022). In light of the mismatch between the grounds in the SCN and those in the cancellation order, the Court modified the impugned order so that the cancellation operates prospectively from 24.05.2022 instead of retrospectively from 11.09.2017, while preserving the respondents' statutory rights to initiate appropriate proceedings or recover dues in accordance with law. [Paras 11, 13, 14, 15, 16]

The impugned order is modified so that the petitioner's GST registration stands cancelled with effect from 24.05.2022 and not with retrospective effect from 11.09.2017.

Final Conclusion: Petition disposed of by modifying the cancellation order: the petitioner's GST registration is cancelled with effect from 24.05.2022 (date of suspension) instead of retrospectively from 11.09.2017; respondents remain free to pursue any lawful proceedings or recovery in accordance with law.

Cancellation of registration infringing principles of natural justice - show cause notice must disclose reasons - opportunity to be heard - restoration of GST registration - permission to file pending returns

Cancellation of registration infringing principles of natural justice - show cause notice must disclose reasons - opportunity to be heard - The impugned cancellation of the petitioner's GST registration was invalid for want of compliance with principles of natural justice because the Show Cause Notice and the cancellation order did not disclose reasons and the petitioner had no opportunity to respond. - HELD THAT: - The Court found that the only ground stated in the SCN was recorded as "Others" and that the detailed reasons, though prepared, were not communicated to the petitioner due to a technical glitch. Neither the SCN nor the cancellation order reflected the substantive reasons for cancellation, and the petitioner had no opportunity to meet or answer those allegations. In these circumstances the impugned order cancelling the GST registration fell foul of the requirement to afford an opportunity to be heard and to communicate reasons for adverse action. The absence of communicated reasons vitiated the cancellation. [Paras 9, 10]

Impugned cancellation set aside for failure to comply with natural justice; registration restoration ordered.

Restoration of GST registration - permission to file pending returns - Relief to be granted as consequence of setting aside the cancellation and directions regarding future proceedings and compliance. - HELD THAT: - As a consequence of invalidating the cancellation, the Court directed immediate restoration of the petitioner's GST registration and permitted the petitioner to file his pending returns within thirty days. The Court clarified that the petitioner is not precluded from filing an application for cancellation of registration on account of transfer of business, and that the revenue is not precluded from initiating fresh proceedings for statutory non-compliance or recovery of dues in accordance with law. These directions preserve the parties' rights to pursue proper statutory processes going forward. [Paras 11, 12, 13]

Registration restored forthwith; petitioner permitted to file pending returns within thirty days; parties free to initiate or seek lawful relief thereafter.

Final Conclusion: The cancellation order was set aside for breach of natural justice; the petitioner's GST registration is restored and he may file outstanding returns within thirty days, while both parties remain free to initiate or pursue appropriate statutory proceedings thereafter.

Service of show cause notice via GST portal - accessibility of electronic notices - reasonable notice - natural justice - opportunity to be heard - remand for fresh consideration

Service of show cause notice via GST portal - accessibility of electronic notices - reasonable notice - The show cause notice placed under the 'Additional Notices and Orders' tab on the GST portal was not readily accessible to the petitioner and therefore did not constitute adequate notice. - HELD THAT: - The Court accepted the petitioner's uncontradicted case that the SCN was not received and that access to the GST portal was limited because the petitioner's registration was cancelled. The Court noted that at the material time the SCN was placed under the tab 'Additional Notices and Orders' which was not positioned so as to invite the taxpayer's attention. The Court relied on its earlier decisions dealing with the accessibility of electronically hosted notices and observed that the portal has since been redesigned, but that the placement of the tab at the relevant time meant the notice was not reasonably brought to the petitioner's attention. On these findings the Court concluded that the statutory requirement of effective notice was not met and the adjudicating authority's order confirming demand could not stand insofar as it proceeded without affording the petitioner an opportunity to respond. [Paras 6]

The SCN as placed on the GST portal was not reasonably accessible and did not amount to effective notice.

Natural justice - opportunity to be heard - remand for fresh consideration - The adjudication passed without the petitioner's response was set aside and the matter was remanded for fresh consideration after affording the petitioner an opportunity to reply. - HELD THAT: - In consequence of the inadequacy of notice, the Court allowed the petition, set aside the impugned order and directed that the petitioner be permitted to file a reply to the SCN with all relevant documents within two weeks. The adjudicating authority was directed to consider the reply, afford the petitioner an opportunity of hearing, and pass an appropriate order afresh. The Court recorded that the issue is covered by its earlier decisions and that the portal has been subsequently amended, but ordered remand so that merits may be considered following compliance with principles of natural justice. [Paras 7, 8]

Impugned order set aside; matter remanded for fresh adjudication after permitting the petitioner to file a reply within two weeks and be heard.

Final Conclusion: Petition allowed; impugned order set aside and remanded to the adjudicating authority to decide afresh after the petitioner files a reply to the SCN within two weeks and is afforded an opportunity of hearing.

Cancellation of GST registration - Show Cause Notice - Physical verification - Suspension of GST registration - Evidence required to establish non existence of business premises - Reliance on undocumented oral statements - Right to be heard - Restoration of registration pending adjudication

Physical verification - Evidence required to establish non existence of business premises - Reliance on undocumented oral statements - Whether the Field Visit Report sufficed to conclude that the petitioner's principal place of business was non existent at the time of physical verification - HELD THAT: - The Court concluded that the respondents' finding of non existence was ex facie erroneous because the Field Report itself recorded that the premises existed, contained stock, displayed a signboard bearing the trader's name and GSTIN, and included a photograph of a person described as an employee. The only indicia relied upon by the respondents to reach the contrary conclusion were purported oral statements of unnamed nearby shop owners, which the Field Report failed to identify or document. The Court held that a taxpayer's registration cannot be cancelled solely on the basis of unspecified oral enquiries for which there is no record or corroborative documentary evidence. Accordingly, the Field Report could not, by itself, establish non existence of the petitioner's principal place of business. [Paras 12, 13, 14, 15, 16]

The Field Visit Report does not establish non existence of the principal place of business and cannot be relied upon as the sole basis for cancellation.

Suspension of GST registration - Restoration of registration pending adjudication - Right to be heard - Whether the suspension of the petitioner's GST registration on the basis of the Field Report should be sustained and what interim relief is appropriate - HELD THAT: - Given that the Court found the respondents' conclusion premised on the Field Report to be ex facie erroneous and unsupported by documentary evidence, it held there was no ground to sustain the suspension of the petitioner's GST registration. As a protective measure pending fresh consideration, the Court directed immediate restoration of the petitioner's GST registration. The Court also upheld the petitioner's entitlement to file a reply with supporting documents to the impugned Show Cause Notice and to have the proper officer take an informed decision thereafter. [Paras 17, 18]

The suspension was not sustained; the respondents were directed to restore the GST registration forthwith and allow the petitioner to be heard.

Show Cause Notice - Right to be heard - Whether the earlier Show Cause Notice dated 07.08.2023 and the consequential cancellation order complied with requirements of particularity and reasoning - HELD THAT: - The Court noted that the Show Cause Notice dated 07.08.2023 was vague and bereft of particulars, rendering it incapable of eliciting a meaningful response. The subsequent order of cancellation dated 25.08.2023 did not state any reasons for cancellation and merely referred to that vague notice. The petitioner's revocation application was allowed on 30.10.2023. The Court's observations record that a Show Cause Notice must be sufficiently particularised to enable the respondent to reply effectively and that orders of cancellation must disclose reasons. [Paras 7, 8, 9]

The earlier Show Cause Notice was vague and the cancellation order lacked reasons; the revocation granted by the proper officer was noted.

Show Cause Notice - Right to be heard - Restoration of registration pending adjudication - Direction to the respondents for fresh consideration of the impugned Show Cause Notice after allowing the petitioner an opportunity to reply - HELD THAT: - The Court directed the petitioner to file a response to the impugned Show Cause Notice within two weeks, along with all documents relied upon to show continuous existence of the principal place of business since registration. The proper officer was directed not to rely on the Field Report as establishing non existence and to take an informed decision on the basis of the petitioner's reply within two weeks thereafter. This constituted remand for fresh consideration limited to the admissible evidence and compliance with the petitioner's right to be heard. [Paras 17, 18]

Petitioner to file reply within two weeks; proper officer to consider afresh and decide within two weeks thereafter, excluding reliance on the impugned Field Report.

Final Conclusion: The Court found the respondents' finding of non existence to be ex facie erroneous and unsustainable on the basis of the Field Report; it directed immediate restoration of the petitioner's GST registration, granted the petitioner two weeks to file a reply with supporting documents, and directed the proper officer to decide the Show Cause Notice afresh within two weeks without relying on the impugned Field Report.

Cancellation of GST registration - revocation of cancellation - change of principal place of business - physical verification by anti-evasion officials - opportunity of hearing - remand for fresh consideration

Change of principal place of business - cancellation of GST registration - revocation of cancellation - physical verification by anti-evasion officials - opportunity of hearing - remand for fresh consideration - Whether the appellate authority should reconsider the revocation application in light of documents tendered to prove existence and change of the principal place of business and whether the cancellation should be revisited. - HELD THAT: - The appellate authority had rejected the revocation application on the ground that the appellant did not furnish documents substantiating that business was carried on at the declared principal place of business and that the appellant had not re-filed the amendment application after an initial rejection. The petitioner contested the reliability of a recorded statement and asserted that he shifted premises on 01.06.2023 and had filed for amendment; he also produced documents and photographs supporting his current address. The Court found that the central controversy-whether the petitioner was in existence at the registered principal place of business prior to shifting-required examination of documents demonstrating existence at that earlier address and consideration of the materials already supplied for the current address. Given that the appellate authority decided the matter without fresh adjudication of those documents and without providing the considered opportunity to be heard on the evidentiary record, the matter is liable to be reconsidered. The petition is therefore remitted to the appellate authority to admit and consider all documents filed by the petitioner within two weeks, to afford the petitioner an opportunity of hearing, and to pass a fresh order after such consideration. [Paras 15, 16, 17]

Matter remanded to the appellate authority to consider afresh the petitioner's documentary proof of existence at the declared principal place of business and of the change of address, after giving the petitioner an opportunity of hearing; documents to be filed within two weeks.

Final Conclusion: Petition allowed to the extent of remanding the matter to the appellate authority for fresh consideration of the petitioner's documents regarding existence and change of principal place of business, with liberty to file documents within two weeks and after affording an opportunity of hearing; other rights reserved.

Relevancy of information leading to discovery (Section 27, Indian Evidence Act) - territorial jurisdiction for investigation and trial (Section 77 Cr.P.C.) - bail jurisprudence in economic offences - gravity, public interest and risk of tampering - principle that bail is the rule and jail the exception (subject to exceptions)

Relevancy of information leading to discovery (Section 27, Indian Evidence Act) - Admissibility of statements/information of accused and co-accused under Section 27 of the Indian Evidence Act for purposes of the investigation and bail consideration. - HELD THAT: - The Court held that Section 27 admits only that portion of information which 'distinctly relates' to the fact thereby discovered and is therefore admissible notwithstanding the general bar on police confessions under Sections 25-26. Applying Section 27 to the case materials, the Court found that the investigation proceeded from information given by arrested persons which led the police to premises, recover laptops, SIMs, mobile phones, lists of firms and other incriminating material; those discoveries are admissible to the extent they directly resulted from the information received. Consequently, the contention that confessional statements are entirely inadmissible for bail consideration was rejected and the Court accepted that the material collected (including statements leading to discovery) is relevant for assessing whether a prima facie case exists against the applicants. [Paras 122, 123, 124, 125, 126]

Portions of statements that directly led to discovery are admissible under Section 27 and may be considered in assessing the bail applications.

Territorial jurisdiction for investigation and trial (Section 77 Cr.P.C.) - Whether registration of FIR and investigation by Police Station Noida Sector-20, Gautam Buddh Nagar was without territorial jurisdiction. - HELD THAT: - The Court rejected the applicants' challenge to territorial jurisdiction. It noted the distinction between investigation (police function) and inquiry/trial (court function) and observed that the place of registration and the connections of fake GST firms across States do not render the Noida registration invalid. Given the interlinked supply-chain and the investigation materials showing nexus with persons and acts connected to Gautam Buddh Nagar, the submission that the FIR/ investigation was without jurisdiction was held to be untenable. [Paras 119, 120, 121, 144]

The challenge to territorial jurisdiction of Police Station Noida Sector-20, Gautam Buddh Nagar is repelled; registration and investigation there were not without jurisdiction.

Bail jurisprudence in economic offences - gravity, public interest and risk of tampering - principle that bail is the rule and jail the exception (subject to exceptions) - Whether applicants are entitled to bail in view of the nature of the offences, the material collected and principles governing bail in economic offences. - HELD THAT: - The Court applied settled bail principles and the developed law on economic offences: while bail is generally the rule, economic offences involving organised fraud and large-scale misappropriation affecting public interest attract cautious exercise of discretion. The Court examined the material on record (including extensive recoveries, lists of fake firms, IMEI/CDR links, confessional statements and DGGI/DGGI-unit reports) and observed a substantial money-trail and organised modus operandi involving many accused. The Court also considered delays and interlocutory proceedings and noted attempts by accused to stall charge framing. Weighing factors such as gravity of charge, nature of evidence, likelihood of tampering and public interest, the Court concluded that the applicants have not made out a case for bail. [Paras 130, 131, 132, 133, 136]

Considering the gravity and organised nature of the economic offences and the material on record, the applicants are not entitled to bail.

Use of co-accused statements and discovery material in bail proceedings - Whether the Court may consider statements of co-accused and discovery-linked material while adjudicating bail applications. - HELD THAT: - The Court reiterated that at bail stage the judicial inquiry is limited to whether there are reasonable grounds to believe the accused committed the offence; it is not a trial on merits. Consequently, the Court may examine the case diary and other materials, including statements of co-accused and materials leading to discovery, to assess prima facie involvement. Relying on precedents, the Court accepted prosecution submissions that such material is relevant in serious economic offence matters and therefore was properly considered while hearing these bail applications. [Paras 97, 108, 109]

Statements of co-accused and discovery-linked material are examinable at the bail stage and were rightly considered in these applications.

Final Conclusion: After considering the nature of accusations, the material on record (including discovery-linked recoveries, statements and investigative reports) and the principles applicable to economic offences, the High Court found a prima facie case against the applicants and declined to grant bail; the bail applications are rejected.

Cancellation of GST registration for non-compliance - Reasonableness of restriction on Article 19(1)(g) by cancellation of registration - Fundamental right to carry on trade and livelihood under Article 19(1)(g) and Article 21 - Power of authority to cancel registration as a coercive revenue-realisation measure - Effect of pandemic-related extension of limitation on filing appeals - Revocation/restoration of cancelled registration and availment of amnesty schemes - Scope of judicial interference under Article 226 where statutory remedies exist and limitation not complied with

Cancellation of GST registration for non-compliance - Reasonableness of restriction on Article 19(1)(g) by cancellation of registration - Power of authority to cancel registration as a coercive revenue-realisation measure - Fundamental right to carry on trade and livelihood under Article 19(1)(g) and Article 21 - Validity of the cancellation of the petitioners' GST registrations and the constitutional challenge to the provision authorising cancellation. - HELD THAT: - The Court rejected the constitutional challenge to the provision permitting cancellation of registration, holding that cancellation for non-compliance is a permissible and reasonable restriction on the right to carry on business under Article 19(1)(g) when judged in the context of the State's interest in revenue realisation. The Court relied on the principle that registration is a statutory benefit which may be conditional and withdrawn for non-compliance, and that cancellation operates as one of the coercive measures available to secure public revenue. The decision in M.A. Rahman was applied to show that cancellation may be justified even if it results in extinction of business where necessary for collection of revenue, and the petitioners failed to demonstrate any substantive ground to render the provision unreasonable or ultra vires. The Court further noted that the Bombay High Court decision invoked by petitioners is only persuasive and fact-specific and declined to follow it on the present facts. The petitioners' contention that cancellation irretrievably destroys goodwill and thus dis-entitles them from relief was not accepted. [Paras 11, 12, 14, 15, 17]

The constitutional challenge to the provision empowering cancellation of registration is dismissed and the cancellations are held to be within legislative competence and not violative of Articles 19(1)(g) or 21.

Effect of pandemic-related extension of limitation on filing appeals - Revocation/restoration of cancelled registration and availment of amnesty schemes - Scope of judicial interference under Article 226 where statutory remedies exist and limitation not complied with - Whether the petitioners could avail pandemic-related extension of limitation, the statutory remedy of revocation/restoration, or relief under the amnesty/circulars, and whether delay justified judicial interference under Article 226. - HELD THAT: - The Court found that the petitioners did not avail the reliefs available within the statutory or extended windows. The pandemic-related saving of limitation and the Supreme Court's directions extended limitation only up to specified dates; the appeals were filed well after even the extended period had expired. The petitioners also failed to apply for revocation within the statutory period and did not utilise the amnesty window notified by the Government. Given non-availment of these statutory remedies and absence of satisfactory explanation for delay, the Court declined to exercise discretionary writ jurisdiction under Article 226 to condone delay or restore registration. The Court emphasised that absence of reliance on or failure to invoke Section 30 (revocation) and available administrative reliefs precluded equitable interference. [Paras 6, 7, 8, 16]

The pandemic-related extension of limitation and the amnesty/restoration mechanisms do not assist the petitioners; their delayed appeals and failure to pursue statutory remedies disentitle them from relief, and the Court refuses to exercise writ jurisdiction to condone the delay.

Final Conclusion: The writ petitions are dismissed; the cancellations of registration are upheld and no interference is permitted in view of the absence of timely availing of statutory remedies or justification for delay.

Requirement of certified copy for filing appeal - amendment to Rules 108 and 109 of the GST Rules (effect from 26th December 2022) - appeal filing date where order is uploaded on common portal - quash and remand for de novo disposal with opportunity of hearing

Requirement of certified copy for filing appeal - amendment to Rules 108 and 109 of the GST Rules (effect from 26th December 2022) - appeal filing date where order is uploaded on common portal - Whether submission of a certified copy of the order appealed against is mandatory where the order has been uploaded on the common portal after the amendment to Rules 108 and 109 effective 26th December 2022. - HELD THAT: - The Court construed the amended Rule 108 (with effect from 26th December 2022) with reference to the GST Council minutes and concluded that where the decision or order appealed against is uploaded on the common portal and is viewable by the Appellate Authority, the requirement for the appellant to submit a certified (or self certified) copy is rendered insignificant. The amended provision issues a final acknowledgement and treats the date of provisional acknowledgement as the date of filing when the order is on the portal; the obligation to furnish a self certified copy arises only where the order is not uploaded. Applying this clarificatory amendment and the reasoning in the cited precedent of this Court, rejection of an appeal on the sole ground of non submission of a certified copy (where the order is uploaded) was held to be impermissible. [Paras 6, 7, 8]

Submission of a certified copy is not mandatory where the impugned order is uploaded on the common portal; the appellate authority could not validly reject the appeal on that technical ground after the amendment.

Quash and remand for de novo disposal with opportunity of hearing - Remedy to be granted in consequence of rejection of the appeal on the aforesaid ground. - HELD THAT: - The Court, following its interpretation of the amended Rule and earlier decision in Otsuka Pharmaceutical India Pvt. Ltd., quashed the impugned order rejecting the appeal dated 28th February 2023 and remanded the matter to the Appellate Authority for fresh de novo adjudication. The Court expressly declined to enter into the merits and directed that the appeal be heard after giving the petitioner an opportunity of hearing, with the exercise to be completed within 12 weeks from receipt of this order. [Paras 9, 10]

The impugned rejection is quashed and set aside; the matter is remanded to the Appellate Authority for de novo disposal after hearing the petitioner within 12 weeks.

Final Conclusion: The order rejecting the first appeal for non submission of a certified copy is quashed; where the appealed order is uploaded on the common portal the appellant need not furnish a certified copy, and the matter is remitted to the Appellate Authority for fresh de novo consideration after giving the petitioner an opportunity of hearing to be completed within 12 weeks.

Attachment of financial assets/demat accounts - Notice and opportunity to be heard before attachment - Quashing of attachment orders for lack of notice - Direction to depository participants/NSDL to defreeze accounts - State undertaking to comply with court direction

Attachment of financial assets/demat accounts - Notice and opportunity to be heard before attachment - Quashing of attachment orders for lack of notice - Attachment orders freezing the petitioner's five demat accounts were quashed for failure to give notice and opportunity to be heard. - HELD THAT: - Petitioner challenged orders freezing five demat accounts on the ground that no notice was issued and no opportunity was afforded to present his case. The State, through its counsel, conceded that the petitioner ought to have been given notice before the impugned attachment orders were communicated to the depository participants and/or NSDL. In view of this concession and the absence of prior notice or opportunity, the Court set aside the attachment orders. The depository participants named in the orders were informed that the attachment orders have been quashed. The State's representation that depositories and NSDL would be notified to defreeze the accounts by the stipulated time was accepted by the Court as an undertaking. [Paras 3, 4, 5, 6]

Attachment orders quashed; depository participants to be informed and accounts defrozen pursuant to the State's accepted undertaking.

Final Conclusion: Writ petition allowed; impugned attachment orders quashed and set aside, depository participants to be informed and accounts to be defrozen pursuant to the State's undertaking; petition disposed, no order as to costs.

Review under Section 114 and Order XLVII Rule 1 CPC - mistake or error apparent on the face of the record - appealable order - liberty to approach appellate forum - relaxation of limitation by appellate forum - no prejudice by High Court observations

Review under Section 114 and Order XLVII Rule 1 CPC - mistake or error apparent on the face of the record - appealable order - Maintainability of the review petition and whether the impugned order is amenable to review - HELD THAT: - The Court applied the settled grounds for review (discovery of new evidence, mistake or error apparent on the face of the record, or any other sufficient reason) and found no ground justifying review. The impugned order was passed in the presence of learned counsel for the parties and no objection was raised at that time; the order is appealable and an alternative remedy by appeal existed. In these circumstances there was no mistake or error apparent on the face of the record to warrant recalling or reviewing the writ order. Consequently the review petition was held to lack merit and liable to be dismissed. [Paras 6, 7, 8]

Review petition dismissed for want of merit; no error apparent on the face of the record and the impugned, appealable order is not liable to be reviewed.

Liberty to approach appellate forum - relaxation of limitation by appellate forum - no prejudice by High Court observations - Permission to approach the appellate forum and directions regarding consideration of limitation and effect of High Court observations - HELD THAT: - Although the review petition was dismissed, the Court granted the petitioner liberty to pursue the appellate remedy. The appellate forum was directed to decide the appeal on merits without being influenced by observations made in the impugned High Court order or in the review proceedings, and it was permitted to take into account the period during which the petitioner prosecuted litigation before the High Court as a ground for relaxing limitation in accordance with law. [Paras 9]

Petitioner permitted to approach the appellate forum; appellate authority to consider the appeal on merits, may relax limitation if appropriate, and shall not be influenced by High Court observations in the impugned order or the review petition.

Final Conclusion: The review petition is dismissed for lack of merit; the petitioner has liberty to approach the appellate forum, which shall decide the appeal on merits, may consider relaxation of limitation based on the period prosecuted before the High Court, and shall not be influenced by observations in the impugned order or the review petition.

Repugnancy of subordinate legislation to parent statute - interpretation of Section 54(3)(ii) of the CGST Act, 2017 regarding refund of accumulated ITC - refund of accumulated input tax credit due to inverted tax structure - application of administrative circular in adjudication of refund claims - remand for fresh decision in accordance with law

Repugnancy of subordinate legislation to parent statute - interpretation of Section 54(3)(ii) of the CGST Act, 2017 regarding refund of accumulated ITC - application of administrative circular in adjudication of refund claims - Validity and applicability of Circular No.135/15/2020-GST vis-a -vis refund claims under Section 54(3)(ii) of the CGST Act, 2017. - HELD THAT: - The Division Bench in Baker Hughes Asia Pacific Limited held that Circular No.135/15/2020-GST, being subordinate legislation, is repugnant and in conflict with Section 54(3)(ii) of the CGST Act and therefore cannot be applied to oust legitimate claims for accumulated ITC refunds, particularly where the claim dates to a period prior to issuance of the Circular. The Court recorded that the Appellate Authority in the present case relied solely upon that Circular to allow the departmental appeal. Having regard to the earlier decision that the Circular is incompatible with the parent statute, the impugned reliance upon the Circular was impermissible. [Paras 6]

Circular No.135/15/2020-GST is repugnant to Section 54(3)(ii) and cannot be applied to defeat legitimate claims for accumulated ITC refund.

Refund of accumulated input tax credit due to inverted tax structure - remand for fresh decision in accordance with law - Whether the appellate order allowing the departmental appeal solely on the basis of the Circular should be sustained. - HELD THAT: - The appellate order was based solely on the Circular which has been judicially declared repugnant to the statute; accordingly, the impugned order cannot be sustained. The Court set aside the Appellate Authority's order and remitted the matter to the Appellate Authority for fresh adjudication in accordance with law, thereby directing reconsideration without applying the invalid Circular but without deciding the substantive entitlement to refund on the merits. [Paras 7, 8]

Impugned appellate order set aside; appeal remitted to the Appellate Authority for fresh decision in accordance with law.

Final Conclusion: Writ petition allowed; the appellate order founded solely on Circular No.135/15/2020-GST is set aside and the matter is remitted to the Appellate Authority to decide the departmental appeal afresh in accordance with law, without applying the declared-invalid Circular.

Reopening of assessment - Jurisdictional notice - Notice under Section 148 issued in the name of a deceased person is null and void - Condition precedent for reopening - Tax deducted at source under Section 192 - No income escapement where salary income subjected to TDS

Notice under Section 148 issued in the name of a deceased person is null and void - Jurisdictional notice - Condition precedent for reopening - Validity of proceedings under Section 147/148 where notices were issued in the name of a deceased assessee - HELD THAT: - The Court held that issuance of a notice under Section 148 is the foundation for reopening an assessment and is a jurisdictional requirement. A notice issued in the name of a dead person does not satisfy the condition precedent for acquiring jurisdiction to reopen the assessment. Prior decisions were followed to the effect that a notice under Section 148 issued against a deceased assessee is invalid unless the legal representative submits to the jurisdiction without objection. In the present case the legal heir had informed the Department of the assessee's death and the Department proceeded to issue notices in the name of the deceased, rendering the proceedings void. Consequently, initiation of action under Section 147 could not be sustained where the statutory notice requirement was not complied with as to the correct person. [Paras 6, 8, 11]

Proceedings under Section 147/148 initiated by notices issued in the name of the deceased assessee are invalid and set aside.

Tax deducted at source under Section 192 - No income escapement where salary income subjected to TDS - Whether reassessment can be sustained in respect of salaried income already subjected to TDS - HELD THAT: - The Court noted that the salary income for AY 2020-21 was shown in Form 16 and tax had been deducted at source by the employer. Under the statutory scheme the employer is responsible for payment of tax on salaries and where tax is deductible at source the assessee is not required to pay that tax to the extent it has been deducted. Given the presence of TDS on the salary income, there was no income chargeable to tax that had escaped assessment warranting reassessment against the assessee or his legal representatives. Reliance on earlier administrative guidance and judicial treatment of similar facts supported the conclusion that reassessment and demand could not be initiated in respect of the salary already subjected to TDS. [Paras 4, 14, 15, 16]

Reassessment in respect of the salaried income already subjected to TDS cannot be sustained; consequential demand is not justified.

Final Conclusion: The impugned notice under Section 148-A(b), order under Section 148-A(d) and notice under Section 148 (all dated as indicated) are set aside; the writ petition is allowed.

Validity of notice under Section 148 - Applicability of Section 151A and faceless scheme - Jurisdiction of Faceless Assessing Officer versus Jurisdictional Assessing Officer - Invalidity for breach of statutory procedure

Validity of notice under Section 148 - Applicability of Section 151A and faceless scheme - Jurisdiction of Faceless Assessing Officer versus Jurisdictional Assessing Officer - Invalidity for breach of statutory procedure - Notices issued under Section 148A(b), order under Section 148A(d) and consequent notice under Section 148 issued by the Jurisdictional Assessing Officer without following the faceless scheme under Section 151A are invalid. - HELD THAT: - The Court found that the impugned notices and order were issued by the Jurisdictional Assessing Officer and not by a Faceless Assessing Officer as required by the scheme framed pursuant to Section 151A and the Notification dated 29 March 2022. The faceless scheme mandates automated allocation and assigns jurisdiction to the officer so allocated, to the exclusion of concurrent jurisdiction by the JAO; consequently notices under Section 148A and Section 148 must be issued in compliance with Section 151A and the notified scheme. Reliance on the Division Bench decision in Hexaware Technologies Ltd. established that where the Scheme assigns jurisdiction to the FAO, the JAO cannot validly issue notices under Section 148, and that actions taken contrary to the statutory scheme are to be quashed without the assessee being required to prove additional prejudice. The Court also noted consonant decisions of this Court (including Kairos Properties and Nainraj Enterprises) and recorded the Revenue's concession that the present proceedings are covered by those precedents. Having regard to non-compliance with Section 151A and the notified scheme, the initiation of reassessment proceedings was held to be vitiated; the Court expressly did not decide other substantive issues raised in the petition as disposal was complete on the procedural ground. [Paras 3, 4, 5, 9, 10]

The notices and order issued in the manner challenged are quashed and set aside and the reassessment proceedings initiated in respect of Assessment Year 2016-17 are invalidated for non-compliance with Section 151A and the faceless scheme.

Final Conclusion: Writ petition allowed; the order under Section 148A(d) and the notices under Section 148A(b) and Section 148 dated 25 March 2022 and 7 April 2022 respectively are quashed for non-compliance with Section 151A and the faceless scheme, and the reassessment proceedings for Assessment Year 2016-17 stand vitiated; other issues reserved.

Reopening of assessment on formation of belief that income has escaped assessment - borrowed satisfaction - retracted admission/confession recorded during search - unexplained cash credit - share application money under section 68 - burden on assessee to prove identity, genuineness and creditworthiness of shareholders - Lovely Exports principle - revenue to proceed against alleged bogus shareholders and not add to recipient company's income

Unexplained cash credit - share application money under section 68 - burden on assessee to prove identity, genuineness and creditworthiness of shareholders - retracted admission/confession recorded during search - Lovely Exports principle - revenue to proceed against alleged bogus shareholders and not add to recipient company's income - Deletion of addition of share application money treated as undisclosed income of the assessee - HELD THAT: - The Tribunal found that the assessee produced evidence to establish identity, genuineness and creditworthiness of the seven subscribing companies (share application forms, board resolutions, PANs, bank statements, ITRs, confirmations and affidavits) and that receipts were through banking channels. The Assessing Officer and the CIT(A) relied on generalized information and statements recorded during search in the case of an unrelated entry-provider, including statements later retracted, without independently disproving the documentary evidence or recording specific dissatisfaction with the explanation under section 68 as applicable for the year. The proviso to section 68 inserted w.e.f. 01.04.2013 was held inapplicable to the year under consideration. Applying the principle in Lovely Exports, where shareholders are identified and prima facie documents are on record, the correct course is for Revenue, if it contends shareholders are bogus, to proceed against those shareholders rather than treat the amount as the recipient company's undisclosed income. On this basis the Tribunal concluded the addition was unsustainable and directed deletion. [Paras 10]

Addition of Rs. 60,00,000 as unexplained share application money deleted; grounds 2, 2.1, 2.2 and 2.3 allowed.

Reopening of assessment on formation of belief that income has escaped assessment - borrowed satisfaction - retracted admission/confession recorded during search - Validity of reopening (grounds 1 and 1.1) not adjudicated - HELD THAT: - Although the assessee challenged the reopening as based on borrowed satisfaction and on statements recorded during search (some of which were retracted), the Tribunal chose not to decide the legal challenge to the initiation of reassessment proceedings because it disposed of the controversy on merits. The court expressly stated that it did not deem it necessary to adjudicate the reopening issue as it had become academic in light of the decision on merits. [Paras 11]

Grounds relating to validity of reopening left undecided as academic.

Final Conclusion: Appeal allowed: the addition of the share application money was deleted; the challenge to reopening was not decided as the Tribunal disposed of the matter on merits.

Revisionary jurisdiction under section 263 - reassessment under section 147 - escape of income / escaped assessment - adequacy of inquiry by the Assessing Officer - order erroneous and prejudicial to the interests of revenue - verification of source of funds / bank credit scrutiny

Revisionary jurisdiction under section 263 - adequacy of inquiry by the Assessing Officer - order erroneous and prejudicial to the interests of revenue - verification of source of funds / bank credit scrutiny - reassessment under section 147 - Whether the Principal Commissioner of Income-tax was justified in invoking revisionary jurisdiction under section 263 to set aside the reassessment orders for AY 2011-12 and AY 2012-13 as erroneous and prejudicial to the interests of revenue. - HELD THAT: - The Tribunal found that the Assessing Officer had issued notices under sections 142(1) and 143(2), sought complete bank account details and explanations for credit entries exceeding Rs. 20,000, and received bank statements and a loan sanction letter which were considered in the reassessment proceedings. The reassessments under section 147 specifically related to alleged unexplained investments in immovable property and were addressed by detailed inquiries by the AO. In AY 2012-13 the addition made by the AO was subsequently deleted by the Commissioner (Appeals), reinforcing that the AO's inquiries and conclusions were supported by evidence. On these facts the PCIT's exercise of revisionary jurisdiction under section 263, premised on alleged failures of the AO to verify bank credit entries and other sources, amounted to substitution of the PCIT's view for a reasoned decision of the AO without demonstrable legal infirmity or prejudice to revenue. As there was no material showing that the AO's orders suffered from a legal error or factual omission causing loss to the revenue, the PCIT's orders were held unsustainable and were set aside, with the AO's orders restored.

Orders of the Principal Commissioner of Income-tax under section 263 for AY 2011-12 and AY 2012-13 set aside; assessment orders passed by the Assessing Officer restored.

Final Conclusion: Appeals allowed; the Tribunal held that the Assessing Officer had conducted adequate inquiries in the reassessments and that the PCIT's revision under section 263 was unjustified, accordingly setting aside the revisionary orders and restoring the AO's assessment orders for AY 2011-12 and AY 2012-13.

Exemption under section 11 - violation of section 13(1)(c) and 13(1)(d) - honorarium to relative of the founder - application of income to charitable objects - parking of funds with sister trust - registration under section 12AA

Honorarium to relative of the founder - violation of section 13(1)(c) and 13(1)(d) - exemption under section 11 - registration under section 12AA - Allowability of the honorarium of Rs. 1,11,900 paid to Ms. Meenakshi Sundararajan - HELD THAT: - The Tribunal examined whether the payment to the wife of the founder attracted the prohibition in section 13(1)(c) and thereby disqualified the trust from exemption under section 11 for AY 2012-13. The trust was formed on 01.02.1961 (pre-Act) and clauses in its Memorandum of Association (clauses 36-41) provided for honorarium to Ms. Meenakshi Sundararajan for services rendered. The Tribunal followed its earlier decision in ITA No.2092 & 2093/Chny/2016 dated 22/06/2018 (in favour of the assessee on the identical issue), which the Revenue did not successfully challenge. Having regard to the prior binding tribunal decision and the registered mandate predating the Act, the Tribunal found no infirmity in the CIT(A)'s conclusion to allow the honorarium and delete the addition. [Paras 22, 23]

Addition relating to the honorarium is deleted and the payment is allowable; the Revenue's ground is dismissed.

Parking of funds with sister trust - application of income to charitable objects - violation of section 13(1)(c) and 13(1)(d) - exemption under section 11 - Whether the excess funds (Rs. 70,25,780) paid to Ganapathy Educational Trust constitute a prohibited investment/parking of funds or an application of income for charitable purposes - HELD THAT: - The Tribunal considered the factual matrix including that the recipient, Ganapathy Educational Trust (GET), is a charitable trust with identical objects, the nature and timing of payments and repayments, and documents produced pursuant to the Madras High Court directions. The assessee produced invoices and payment particulars showing payments to the contractor M/s L&T and the audited entries reflecting the loan and its subsequent recovery in the relevant year. The Tribunal, following judicial precedents cited by the assessee which treat inter-trust loans to institutions with similar objects as application of income (and not necessarily as prohibited investment), and having found the facts and documentary material sufficient to show the amounts related to construction activity for colleges run by the trusts, held that the transaction did not attract section 13(1)(c). On these findings the CIT(A)'s deletion of the addition was upheld. [Paras 24, 25, 26]

Addition of Rs. 70,25,780 as funds parked with sister trust is deleted; the transaction is treated as application towards charitable objects and does not violate section 13(1)(c).

Final Conclusion: The Revenue's appeal is dismissed; the CIT(A)'s allowance of the honorarium and the deletion of the addition relating to funds paid to the sister trust are upheld, thereby maintaining the trust's entitlement to exemption under section 11 for AY 2012-13.

Distinction between tax and fee - Value Added Tax collected and remitted on behalf of State is not a 'fee or charge' within the meaning of section 40(a)(iib) - allowability of VAT as business expenditure under section 37 read with section 43B - exercise of revisionary jurisdiction under section 263 - order erroneous and prejudicial to the interests of Revenue

Value Added Tax collected and remitted on behalf of State is not a 'fee or charge' within the meaning of section 40(a)(iib) - distinction between tax and fee - allowability of VAT as business expenditure under section 37 read with section 43B - Whether the VAT payments made and debited by the assessee for AY 2018-19 attract disallowance under section 40(a)(iib) and are therefore not allowable as business expenditure. - HELD THAT: - The Tribunal examined the nature of the levy and applied the established distinction between taxes and fees: taxes are compulsory exactions for public purposes enforceable by law without quid pro quo, whereas fees are charges for special services rendered. The VAT at issue is levied by the State under its constitutional competence to tax sale and purchase of intoxicating liquor and is collected from customers at statutory rates and remitted to the Government; it is not borne exclusively by the assessee nor retained as surplus by the assessee. Relying on prior decisions (including the Tribunal's own orders in the assessee's case for earlier years and the Kerala High Court decision) and constitutional-law analysis of the State List entries, the Tribunal held that the levy is a tax and not a fee or charge contemplated by section 40(a)(iib). Consequently, the VAT payment does not fall within the scope of disallowance under section 40(a)(iib) and is allowable as an expenditure under section 37 read with section 43B. [Paras 6]

VAT payments are not disallowable under section 40(a)(iib) and are allowable under section 37 read with section 43B.

Exercise of revisionary jurisdiction under section 263 - order erroneous and prejudicial to the interests of Revenue - Whether the Principal Commissioner of Income Tax was justified in invoking jurisdiction under section 263 to revise and set aside the assessment for AY 2018-19 on the ground that VAT should have been disallowed under section 40(a)(iib). - HELD THAT: - Having concluded that the VAT payments do not attract section 40(a)(iib), the Tribunal found that the PCIT's view to the contrary rendered the revision order erroneous. The Tribunal noted that identical legal questions had been determined in favour of the assessee in its own earlier decisions for AY 2014-15 and AY 2015-16 and that the Revenue had not placed any contrary order on record. In these circumstances the exercise of revisional jurisdiction to set aside the assessment as erroneous and prejudicial was not justified. [Paras 6, 7]

The revision order passed under section 263 is erroneous and prejudicial to the interests of Revenue and is quashed.

Final Conclusion: The appeal is allowed: the disallowance of VAT under section 40(a)(iib) is unsustainable for AY 2018-19 and the PCIT's revision order under section 263 is quashed; the VAT payments are allowable under section 37 read with section 43B.

Registration/approval under section 10(23C)(vi) - genuineness of activities and power to call for audited accounts at approval stage - requirement of furnishing annual accounts under Rule 2C - rejection of application for non-furnishing of supporting documents and explanations

Registration/approval under section 10(23C)(vi) - genuineness of activities and power to call for audited accounts at approval stage - Validity of rejection of the assessee's application for registration under section 10(23C)(vi). - HELD THAT: - The Tribunal held that the Commissioner for Exemption was within jurisdiction to call for documents and make inquiries necessary to satisfy herself about the genuineness of the institution's activities at the stage of approval. The Tribunal applied the Supreme Court's reasoning in New Noble Education Society that audited annual accounts are one of the legitimate heads of information which may be called for consideration at the approval stage and that the authority is not constrained from examining accounts and related documents to discern the pattern of income and expenditure. The assessee failed to furnish satisfactory explanations or supporting documents in response to the show-cause and physical verification, and the absence of such material justified rejection. The Tribunal found no infirmity in the CIT(E)'s reliance on the power to call for audited accounts and other information to test genuineness and therefore upheld the rejection of the application. [Paras 12, 13, 16]

The rejection of the application for registration under section 10(23C)(vi) was valid and is upheld.

Requirement of furnishing annual accounts under Rule 2C - rejection of application for non-furnishing of supporting documents and explanations - Whether the assessee's non-furnishing of audited accounts and failure to explain specific ledger entries and donations warranted adverse inference. - HELD THAT: - The Tribunal examined the assessee's contention that audit was not required for FY 2020-21 by virtue of the relevant university statute and that Rule 2C required only self certified accounts. The Tribunal observed that the assessee did not establish its contention with supporting evidence and noted that audit for FY 2021-22 was carried out before the asserted notification date, making the explanation for non-audit of FY 2020-21 untenable. On merits, the vouchers and explanations for vehicle expenses, examination expenses and endowment donations were not substantiated before the CIT(E) or the Tribunal. Given the absence of corroborative documents or convincing explanation, the authority's adverse findings regarding the genuineness and correctness of the accounts were justified. [Paras 3, 4, 14]

The failure to furnish audited accounts and to satisfactorily explain or support specific expenditures and donations justified the adverse findings and contributed to lawful rejection of the application.

Genuineness of activities and power to call for audited accounts at approval stage - application of New Noble Education Society - Applicability of the Supreme Court decision in New Noble Education Society to the facts and whether reliance on it by the CIT(E) was justified. - HELD THAT: - The Tribunal held that New Noble Education Society authorizes the Commissioner to require audited accounts and related material at the approval stage to satisfy herself as to genuineness and manner of functioning. The assessee's argument that disproportionate weight should not be given to income and expenditure was considered, but the Tribunal concluded that New Noble permits examination of accounts to ascertain whether activities are genuinely educational. Given the assessee's failure to produce required material, the Tribunal found that the CIT(E)'s reliance on New Noble was appropriate and correctly applied to the present facts. [Paras 5, 13, 16]

The authority's invocation of New Noble Education Society was correctly applied and did not militate against the rejection of the application.

Final Conclusion: The appeal is dismissed; the Tribunal upholds the Commissioner (Exemption)'s rejection of the application for registration under section 10(23C)(vi) on the ground that the assessee failed to furnish audited accounts and satisfactory supporting documents/explanations necessary to establish the genuineness of its activities.

Reopening of assessment - reassessment under Section 147 initiated by notice under Section 148 - non-issuance of statutory notice under Section 143(2) - jurisdictional defect vitiating reassessment - precedent establishing nullity of reassessment without Section 143(2) notice

Non-issuance of statutory notice under Section 143(2) - jurisdictional defect vitiating reassessment - precedent establishing nullity of reassessment without Section 143(2) notice - Reassessment order passed under Section 143(3) read with Section 147 for A.Y. 2011-12 is bad in law for non-issuance of the statutory notice under Section 143(2). - HELD THAT: - The Tribunal examined the assessment order and found no mention of service of a notice under Section 143(2). The Revenue was given an opportunity to produce evidence of issuance of such notice but failed to do so. Reliance was placed on the Supreme Court principle that framing of assessment under Section 143(3) requires compliance with the statutory requirement of issuing notice under Section 143(2), and non-issuance is a jurisdictional defect that renders the reassessment void. Because the assessing officer did not demonstrate that the statutory notice under Section 143(2) was issued, and the Revenue did not controvert that absence when directed to do so, the reassessment order could not be sustained. The Tribunal observed that if it is subsequently proved that the notice was in fact issued, an application for recall may be made in time, but on the material before it the defect stood established. [Paras 12, 13, 14, 15]

Reassessment order for A.Y. 2011-12 set aside as invalid for want of notice under Section 143(2); additional ground allowed and appeal allowed on this ground; other grounds left unadjudicated.

Final Conclusion: The appeal is allowed insofar as the reassessment for A.Y. 2011-12 is set aside because the statutory notice under Section 143(2) was not shown to have been issued; other grounds were not decided.

Sanction for reassessment under Section 151 - specified authority for issuance of notice - TOLA as temporal extension of limitation, not a conferral of sanctionary power - date of issuance: despatch/entry outside originator's control

Sanction for reassessment under Section 151 - specified authority for issuance of notice - Validity of notices under Section 148 for AY 2015-16 where prior approval was accorded by the Joint Commissioner of Income Tax (JCIT) instead of the authority specified by Section 151. - HELD THAT: - The Court held that Section 151 prescribes which authorities may grant prior approval for issuance of notices under Section 148 according to the lapse of time from the end of the relevant assessment year, and that approval granted by an authority not specified in Section 151 is not compliant with the statutory scheme. Applying that principle to the facts, all impugned notices for AY 2015-16 were approved by the JCIT, an authority recognised only under the pre-amendment residuary clause for cases within four years; once it is conceded that the notices related to a period after the applicable window (three/four years as the applicable regime), approval by JCIT could not validate the reassessment. The Court therefore found the sanction obtained from the JCIT insufficient and quashed the reassessment notices which rested on that sanction. [Paras 30, 40, 41, 42]

Impugned notices under Section 148 for AY 2015-16, which rest on sanction accorded by JCIT, are invalid and are quashed.

TOLA as temporal extension of limitation, not a conferral of sanctionary power - specified authority for issuance of notice - Whether the Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 (TOLA) altered the distribution of sanctionary powers under Section 151 or otherwise validated sanction by JCIT for notices issued in the extended period. - HELD THAT: - The Court analysed Section 3 of TOLA and concluded that TOLA operates as a remedial temporal extension of time limits for completion or compliance of actions (including issuance of notices, sanctions and approvals) where the original time limits fell within the specified pandemic period. TOLA extends statutory timelines but does not amend or reallocate substantive powers or the hierarchy of authorities established by the Income-tax Act. Consequently, the additional time furnished by TOLA cannot be read as changing which authority must grant prior approval under Section 151; TOLA therefore does not validate a sanction granted by an authority other than those specified by Section 151. [Paras 36, 37, 38, 39, 40]

TOLA extends time for action but does not alter or confer sanctionary authority under Section 151; it does not validate JCIT's sanction where Section 151 requires a different specified authority.

Final Conclusion: Writ petitions allowed; Section 148 notices dated 31 March 2021 for AY 2015-16, which rested on sanction from the JCIT contrary to the allocation of sanctionary authority in Section 151, are quashed; revenue free to initiate further action as permissible in law.

Time limit for reassessment under the amended regime of Section 149(1) as applicable from 1 April 2021 - First Proviso to Section 149(1) and its effect on reopening for years prior to 1 April 2021 - computation of the "relevant assessment year" under Section 153C read with Section 153A - reckoning of the ten-year block period for reopening assessments - reopening beyond the ten-year block rendered unsustainable - impact of receipt/handing over of books of account under Section 153C in determining the relevant block

Time limit for reassessment under the amended regime of Section 149(1) as applicable from 1 April 2021 - First Proviso to Section 149(1) and its effect on reopening for years prior to 1 April 2021 - Validity of notices under Section 148 issued on 30 March 2023 in light of the First Proviso to Section 149(1) for assessment years beginning on or before 1 April 2021. - HELD THAT: - The Court held that notices issued on 30 March 2023 fall under the amended reassessment regime effective from 1 April 2021 and therefore must satisfy the temporal restrictions in the First Proviso to Section 149(1). Any action for reassessment in relation to assessment years prior to 1 April 2021 is sustainable only if compliant with the timeframes specified under Section 149(1)(b), Section 153A or Section 153C as they stood immediately before the commencement of the Finance Act, 2021. Applying that statutory framework, the Court found that the impugned notices seeking to reopen AY 2012-13 and AY 2013-14 could not be sustained under the First Proviso. [Paras 2, 3, 4, 9]

Notices dated 30 March 2023 under Section 148 are invalid insofar as they seek reassessment of AY 2012-13 and AY 2013-14 under the First Proviso to Section 149(1).

Computation of the "relevant assessment year" under Section 153C read with Section 153A - reckoning of the ten-year block period for reopening assessments - impact of receipt/handing over of books of account under Section 153C in determining the relevant block - reopening beyond the ten-year block rendered unsustainable - Whether AY 2012-13 and AY 2013-14 fall within the ten-year block period reckoned from the date of the impugned Section 148 notice (30 March 2023) under Section 153C read with Section 153A. - HELD THAT: - Relying on earlier decisions of the Court concerning the legal fiction enacted by the First Proviso to Section 153C, the Court affirmed that for a non-searched person the starting point for computing the six- or ten-year block is the date on which books, documents or assets seized from the searched person are handed over to the jurisdictional AO, not the date of search. Applying that principle and counting the ten-year block backward from the assessment year relevant to the date of the impugned notice (AY 2023-24), the ten-year block covers AY 2014-15 up to AY 2023-24. AY 2012-13 and AY 2013-14 therefore fall outside the ten-year period and cannot be reopened under Section 153C read with Section 153A; consequently the reassessment notices for those years are ex facie unsustainable. [Paras 5, 6, 7, 8, 9]

AY 2012-13 and AY 2013-14 lie beyond the ten-year block period as reckoned under Section 153C read with Section 153A and the impugned notices in respect of those years are unsustainable.

Final Conclusion: Writ petitions allowed; notices dated 30 March 2023 issued under Section 148 insofar as they pertain to AY 2012-13 and AY 2013-14 are quashed.

Reopening of assessment - Jurisdiction to reopen assessment under Section 147/148 - Change of opinion - Reason to believe - Tangible material or new information as prerequisite for reassessment - Applicability of Explanation 1 to Section 147

Reopening of assessment - Change of opinion - Reason to believe - Tangible material or new information as prerequisite for reassessment - Validity of the notice issued under Section 148 to reopen assessment for AY. 2016-17 - HELD THAT: - The Court examined the reasons recorded by the Assessing Officer for issuing the Section 148 notice and found that the Assessing Officer relied upon the same material that had been placed on record and considered during the earlier scrutiny assessment framed under Section 143(3). The reopening was premised on the contention that deduction under Section 54F was not substantiated, but there was no showing of any new information or tangible material coming into the Assessing Officer's possession after completion of the original assessment. Relying on the principle that reassessment cannot be based on a mere change of opinion, and having regard to the authority reproduced in the judgment, the Court held that a 'reason to believe' for reopening must have a live link with fresh or tangible material and not merely an alternate view on materials already considered. The Court further noted the Assessing Officer's own reasons did not demonstrate discovery of new material or that the issue had not been examined previously; accordingly the reopening was held to be a change of opinion and impermissible. The Court therefore concluded that the Section 148 notice was not legally sustainable. [Paras 9, 10, 11]

The notice dated 30th March, 2021 issued under Section 148 for AY. 2016-17 is quashed as being a reopening based on mere change of opinion and lacking fresh/tangible material to constitute a 'reason to believe'.

Final Conclusion: Petition allowed; the Section 148 notice dated 30th March, 2021 reopening assessment for AY. 2016-17 is quashed and set aside.

Faceless assessment scheme under Section 151A - Jurisdiction of Faceless Assessing Officer versus Jurisdictional Assessing Officer - Validity of notice under Section 148 where the faceless scheme is not followed - Prior procedure under Section 148A (b) and Section 148A (d) - Quashing of action for contravention of statutory scheme without requirement to prove prejudice

Faceless assessment scheme under Section 151A - Jurisdiction of Faceless Assessing Officer versus Jurisdictional Assessing Officer - Validity of notice under Section 148 where the faceless scheme is not followed - Prior procedure under Section 148A (b) and Section 148A (d) - Quashing of action for contravention of statutory scheme without requirement to prove prejudice - The notices and order issued in the reassessment proceedings were invalid because they were issued by the Jurisdictional Assessing Officer without compliance with the faceless scheme mandated by Section 151A and the Notification dated 29 March 2022. - HELD THAT: - The court found on the record that the impugned notice dated 19 March 2023 under Section 148A(b), the order dated 06 April 2023 under Section 148A(d) and the consequent notice dated 06 April 2023 under Section 148 were all issued by the Jurisdictional Assessing Officer and not by a Faceless Assessing Officer as required by the scheme notified under Section 151A. Relying on the Division Bench decision in Hexaware Technologies Ltd., the court accepted the legal proposition that the Scheme mandates automated allocation and vests jurisdiction exclusively as allocated (faceless adjudication) so as to preclude concurrent jurisdiction of the JAO and the FAO for issuance of notices under Section 148. The court held that action taken contrary to the statutory scheme is invalid and causes prejudice to the assessee without the need for separate proof of prejudice. Applying these principles, non-compliance with Section 151A and the Notification vitiated the proceedings and rendered the impugned prior notice, order and reassessment notice invalid. [Paras 3, 5, 11, 13]

The impugned notice dated 19/03/2023 under Section 148A(b), the order dated 06/04/2023 under Section 148A(d), and the consequent notice dated 06/04/2023 under Section 148 are quashed as invalid for non-compliance with Section 151A and the faceless scheme.

Final Conclusion: Writ petition allowed; the reassessment proceedings initiated by notices/orders issued by the Jurisdictional Assessing Officer in breach of the faceless scheme under Section 151A are quashed and set aside; no costs.

Characterisation of income as profits and gains of business - Deduction under Section 80P(2)(a) - Interest on deposits of surplus profits - Statutory investment and disposal of net profits under Sections 63 and 64 of the Multi-State Co-operative Societies Act - Distinction from interest contemplated by Section 80P(2)(d) - Distinguishing the Supreme Court decision in Totgars' Cooperative Sale Society

Characterisation of income as profits and gains of business - Deduction under Section 80P(2)(a) - Interest on deposits of surplus profits - Statutory investment and disposal of net profits under Sections 63 and 64 of the Multi-State Co-operative Societies Act - Distinction from interest contemplated by Section 80P(2)(d) - Whether interest earned on deposits of surplus profits retained by the Co-operative Society qualifies for deduction under Section 80P(2)(a) as profits and gains of business attributable to providing credit facilities to members. - HELD THAT: - The Court held that the deduction under Section 80P(2) extends to the whole of the amount of profits and gains of business attributable to the specified activities of a Co-operative Society, and that sums which are legitimately dealt with under the regulatory scheme governing the society (Sections 63 and 64 of the Multi-State Co-operative Societies Act) retain their character as business profits. Where surplus profits of the lending activity are transferred or deposited in the modes statutorily permitted, any interest earned on such deposits is an incidental enhancement of the profits of the principal business and does not lose its nexus with that business merely because the society prudently deposits the surplus with permitted institutions. The Court distinguished the Totgars' Cooperative Sale Society decision on facts: there the surplus receipts remained due to members and the society's appropriation and investment of those receipts meant the interest ought to have accrued to members, thereby breaking nexus with the society's business; by contrast, in the present case the amounts invested had already attained the character of surplus profits in the hands of the society. Consequently, the interest in issue is not of the type contemplated by Section 80P(2)(d) (which deals with interest not attributable to the main business), and need not be treated as income from other sources. For these reasons the question was answered in favour of the assessee and against the Revenue. [Paras 7, 8, 9]

Interest earned on deposits of surplus profits, invested in accordance with Sections 63 and 64 of the Multi-State Co-operative Societies Act, retains the character of profits and gains of business and is eligible for deduction under Section 80P(2)(a).

Final Conclusion: The appeals are dismissed insofar as they challenge the grant of deduction under Section 80P(2)(a) in respect of interest earned on deposits of surplus profits invested in compliance with the Multi-State Co-operative Societies Act; such interest forms part of the profits and gains of the society's lending business and is deductible.

Fair market value of leasehold rights - valuation by approved/registered valuer - capitalization of lease rent - reliance on tribunal's factual finding

Fair market value of leasehold rights - valuation by approved/registered valuer - Tribunal's determination of fair market value at Rs. 800 per sq. yd. as on 01.04.1981 in place of the valuation placed by the approved valuer - HELD THAT: - The Court examined the registered valuer's report filed by the assessee and found that the valuer expressly treated the property as leasehold, computed annual net lease rent, capitalized it at the rate applied and deducted the capitalized lease rent from the gross land value assessed at Rs. 1,200 per sq. yd., thereby arriving at Rs. 57,75,000 as on 01.04.1981. The Tribunal's contrary observation that the valuer had not made any deduction for leasehold rights was erroneous and inconsistent with the valuation report. Having regard to the valuation methodology recorded in the report and the absence of any effort by Revenue to controvert the approved valuer's computation, the Tribunal was not justified in substituting its own estimate of Rs. 800 per sq. yd. The Court therefore held that the fair market value as determined by the registered valuer must be accepted for computation of long term capital gains subject to indexation and other adjustments directed by the Tribunal to be given effect to by the Assessing Officer. [Paras 7, 8, 10]

Tribunal's valuation at Rs. 800 per sq. yd. set aside; valuation of Rs. 57,75,000 as on 01.04.1981 determined by the approved valuer accepted.

Reliance on tribunal's factual finding - capitalization of lease rent - Whether the Tribunal erred in rejecting the approved valuer's estimate and effectively sitting over the valuer's valuation despite Revenue making no effort to controvert it - HELD THAT: - The Court noted that the Tribunal treated valuation as a question of fact but its specific finding that the approved valuer had not considered leasehold rights was contrary to the valuer's own report which records deduction of the capitalized lease rent. In the absence of any contention or evidence by Revenue to rebut the approved valuer's computation, the Tribunal ought not to have rejected the valuer's valuation. The Court answered the admitted substantial questions of law against Revenue and in favour of the appellant, concluding that no substantial question arose for upholding the Tribunal's contrary factual conclusion. [Paras 7, 8, 9, 10]

Tribunal's rejection of the approved valuer's estimate was incorrect; the approved valuer's valuation stands accepted and the Tribunal should not have substituted its own estimate in the absence of contrary evidence from Revenue.

Final Conclusion: Both substantial questions of law admitted for adjudication are answered in the negative and in favour of the appellant; the Tribunal's valuation at Rs. 800 per sq. yd. is set aside and the approved valuer's valuation as on 01.04.1981 is accepted for computation of long term capital gains, with directions to the Assessing Officer to give effect accordingly.

Reopening of assessment under Section 148 - Reason to believe - Change of opinion doctrine - Deduction under Sections 54B and 54F - Limited scrutiny assessment and production of documents - Absence of new tangible information

Reopening of assessment under Section 148 - Reason to believe - Change of opinion doctrine - Deduction under Sections 54B and 54F - Limited scrutiny assessment and production of documents - Absence of new tangible information - Validity of reopening assessment for A.Y. 2015-16 by notice dated 31.3.2021 - HELD THAT: - The Court held that the Assessing Officer's reasons for reopening showed no new or tangible material coming into possession after completion of the original assessment; the very issues as to allowability of deduction under Sections 54B and 54F had been examined during limited scrutiny proceedings and the petitioner had furnished sale deed, conveyance deeds, bank statements and detailed explanations before framing assessment under Section 143(3). Reopening on the basis of material already on record and merely because the Revenue now takes a different view amounted to a change of opinion, which is impermissible. The Court emphasised that jurisdiction under Section 148 must be founded on reasons to believe having direct nexus with new information or tangible material indicating escapement of income, and cannot be exercised to re-open an issue already considered in the original inquiry merely because the Assessing Officer or successor contends the earlier inquiry was casual or erroneous. [Paras 12, 13]

Impugned notice under Section 148 is quashed as a change of opinion; reopening is invalid.

Final Conclusion: The petition is allowed; the notice dated 31.3.2021 reopening assessment for A.Y. 2015-16 is quashed.

Judicial review of High Court order - Dismissal of Special Leave Petition - Vacation of interim relief - Surrender in criminal proceedings

Judicial review of High Court order - Dismissal of Special Leave Petition - The Special Leave Petition challenging the High Court's order is dismissed and the Supreme Court will not interfere with the High Court's decision. - HELD THAT: - After hearing the learned Senior Counsel for the petitioner and perusing the materials on record, the Court found no ground to interfere with the impugned High Court order. The petition was considered on merits in the limited scope appropriate to an SLP, and the Court concluded that the High Court's order requires no interference. [Paras 1, 2]

Special Leave Petition dismissed; Supreme Court declines to interfere with the High Court order.

Vacation of interim relief - Surrender in criminal proceedings - The interim order granting exemption from surrender to the petitioner is vacated and the petitioner is directed to surrender within one week. - HELD THAT: - Consequent upon dismissal of the SLP, the Court vacated its earlier interim order that had granted the petitioner exemption from surrender. In view of the vacatur, the Court directed the petitioner to surrender before the concerned Court within one week from the date of the order. [Paras 3, 4]

Interim exemption from surrender vacated; petitioner to surrender within one week before the concerned Court.

Final Conclusion: The Supreme Court dismissed the Special Leave Petition, declined to interfere with the High Court's order, vacated the interim exemption from surrender, and directed the petitioner to surrender within one week.

Restoration of appeal after compliance with pre-deposit - pre-deposit condition under section 35F - functus officio of appellate tribunal - condonation of delay due to company being declared sick under SICA - exemption from pre-deposit and effect on dismissal for non-compliance - appeal to be decided on merits

Restoration of appeal after compliance with pre-deposit - pre-deposit condition under section 35F - appeal to be decided on merits - Validity of CESTAT's restoration of the original appeal after the respondent made the pre-deposit. - HELD THAT: - The Tribunal restored the appeal for hearing on merits after the respondent deposited the pre-deposit amount required by the interim order. The High Court found that the restoration did not warrant interference because the respondent had complied with the condition of pre-deposit and there had been no adjudication on merits by the CESTAT earlier; consequently the appeal could properly be revived for adjudication on merits. The Court noted that the Revenue had accepted the deposit and that, in the circumstances, it could not challenge restoration merely because earlier procedural dismissals had occurred. [Paras 11, 12, 13, 14]

CESTAT's order restoring the appeal after compliance with the pre-deposit is upheld and the appeal is to be decided on merits.

Functus officio of appellate tribunal - Whether the Tribunal was functus officio after the dismissal of the appeal for non-compliance. - HELD THAT: - The Court held that the Tribunal becomes functus officio only after it decides an appeal on its merits. Dismissal for non-compliance with pre-deposit requirements meant the appeal was not entertained on merits and was to be treated as dormant or stillborn; it did not vest the Tribunal with finality on the substantive controversy. Therefore the Tribunal retained jurisdiction to entertain restoration and thereafter to decide the appeal on merits once conditions were complied with. [Paras 11]

Tribunal was not functus officio merely because the appeal was dismissed for non-compliance; it retained jurisdiction to restore and decide the appeal on merits.

Condonation of delay due to company being declared sick under SICA - Whether delay in filing the application for restoration was excusable in view of the company's earlier status as a sick company under SICA/BIFR. - HELD THAT: - The Court accepted that the respondent-company had been declared a sick company under SICA by BIFR and, while under BIFR control, could not operate its accounts and effect the pre-deposit. That factual circumstance justified condonation of the long delay in seeking restoration once the company was functional and made the pre-deposit. The High Court found the earlier dismissal without regard to this aspect did not preclude restoration. [Paras 8, 12]

Delay in seeking restoration was condoned as the company had been declared sick under SICA and could not earlier comply with the pre-deposit requirement.

Exemption from pre-deposit and effect on dismissal for non-compliance - pre-deposit condition under section 35F - Whether appeals of individual directors could validly have been dismissed for non-deposit where pre-deposit was exempted for one director and already deposited by another. - HELD THAT: - The Court noted that the Managing Director had been exempted from pre-deposit and another director had already deposited the requisite amount. Therefore those appeals could not have been dismissed for non-compliance with the interim order. The Tribunal and earlier orders had failed to take these facts into account, and in consequence dismissal of those appeals on the ground of non-deposit was incorrect. [Paras 2, 3, 10, 12]

Appeals of directors could not have been dismissed for non-compliance where one had exemption and another had already deposited the pre-deposit; such dismissals were not sustainable.

Final Conclusion: The High Court dismissed the Revenue's appeal and upheld the CESTAT order restoring the appeal after the pre-deposit was made; the appellate authority was directed to decide the appeal on merits. All pending applications were dismissed and no costs were awarded.

Release of seized goods on furnishing bank guarantee - option to pay fine in lieu of confiscation - provisional clearance of import goods pending investigation - prima facie reliability of visual examination report - power to levy duty and charges on released goods

Provisional clearance of import goods pending investigation - release of seized goods on furnishing bank guarantee - Petitioner permitted provisional clearance of the imported goods on furnishing a bank guarantee. - HELD THAT: - Petitioner sought provisional release of the goods even if they were to be treated as restricted. The Court accepted the petitioner's concession to furnish security and directed provisional clearance upon deposit of a bank guarantee of a nationalised bank. All rights and contentions of the parties were kept open, and the Court limited its order to provisional release subject to the security and ongoing investigation. [Paras 3, 8, 9, 10, 12]

Upon petitioner furnishing a bank guarantee of a nationalised bank for the sum fixed by the Court, the respondents shall permit provisional clearance of the goods.

Prima facie reliability of visual examination report - The examination report based on visual inspection was held prima facie unreliable. - HELD THAT: - The report relied upon by the revenue described the goods as crude rounded structures resembling bangles but contained the author's disclaimer stating its conclusions were 'as per our best knowledge' without explaining the basis of that knowledge. The Court found that a visual-only examination with such a disclaimer did not inspire prima facie confidence and therefore was not a sufficient basis to refuse provisional relief. [Paras 7]

The Court was not satisfied with the reliability of the examination report prepared on visual examination and treated it as inadequate for denying provisional relief.

Option to pay fine in lieu of confiscation - power to levy duty and charges on released goods - Court recorded the legal scope of Section 125 of the Customs Act and accepted its applicability as a legal basis for considering release or fines in lieu of confiscation. - HELD THAT: - The Court referred to Section 125 which provides that where confiscation is authorised an option to pay a fine in lieu may be given, and that such fine shall not exceed the market price less applicable import duty; additionally subsection (2) permits recovery of duty and charges. The provision was relied upon by the petitioner in support of provisional release on terms and for the Court's consideration of appropriate security and conditions. [Paras 4, 5, 6]

Section 125 was found relevant to the legal framework for imposing fines in lieu of confiscation and for conditioning any release upon payment of duties and charges as applicable.

Provisional clearance of import goods pending investigation - Investigation was directed to be completed and certain administrative cooperation ordered. - HELD THAT: - The Court directed completion of the investigation by 31st December 2024 and noted that inputs from DGFT were outstanding. The Court specifically directed DGFT to respond to existing communications and to cooperate with the Customs Officer by 10th October 2024 so that the investigation can be completed within the stipulated timeline. [Paras 11]

Investigation to be completed by 31st December 2024 and DGFT to respond to the Customs communications by 10th October 2024.

Final Conclusion: Petitioner granted provisional clearance of the imported goods upon furnishing a bank guarantee of a nationalised bank in the sum directed by the Court; the examination report was found prima facie unreliable; Section 125 was noted as the statutory framework relevant to fines in lieu of confiscation and duties; investigation to be completed by 31 December 2024 with DGFT directed to respond by 10 October 2024.

Bank guarantee for re-export - re-export permission subject to security - verification of country of origin certificate - 3% value addition under Product Specific Rule - change in classification at sub heading (CTSH)

Bank guarantee for re-export - re-export permission subject to security - Permissibility and operational terms of requiring a bank guarantee as condition for permitting re export of imported Platinum Ingots covered by specified bills of entry - HELD THAT: - The Court recorded the petitioner's undertaking to furnish a bond for the full value of the goods and a Scheduled Bank guarantee equal to 10% of the value of the imported Platinum Ingots in the form and format prescribed by the department. On that basis the Court directed that upon furnishing the bank guarantee respondents shall forthwith permit re export of the Platinum Ingots covered by the 19 bills of entry. The court specified that the bank guarantee may be a single comprehensive instrument or multiple instruments as the petitioner deems appropriate and directed an initial validity of the bank guarantee up to 31st December 2024. The Court accepted this undertaking as binding and treated compliance with the security condition as the operative precondition for immediate re export. [Paras 5, 6]

Petitioner to furnish bond and Scheduled Bank guarantee of 10% in specified format; upon such furnishing respondents to permit re export; bank guarantee valid initially up to 31st December 2024.

Verification of country of origin certificate - 3% value addition under Product Specific Rule - change in classification at sub heading (CTSH) - Requirement and scope of verification of origin/PSR compliance and the timeline for completion, together with consequences of the verification report - HELD THAT: - The Court noted the department's position that while the goods meet the CTSH criterion, the claimed 3% value addition under the Product Specific Rule required verification because the asserted manufacturing process (simple melting and casting) made the claimed quantum of value addition appear high. The Court directed respondents to complete the verification/investigation into the Country of Origin Certificate and the genuineness of the claimed value addition on or before 31st October 2024, and specifically directed the Director, International Customs Division to attend to and respond to the communication from the Commissioner so that the investigation is completed within the stipulated period. The Court provided for two possible outcomes: if the verification report is not adverse to the petitioner, respondents shall, within a week of petitioner's request, cancel and return the bank guarantee; if the report is adverse, the petitioner shall renew the bank guarantee for one year and in any event until completion of adjudication proceedings. The Court expressly kept all rights and contentions open and clarified that no observation on the merits of the underlying claim was made. [Paras 9, 10, 11, 12, 13]

Verification of the Country of Origin Certificate and genuineness of the 3% value addition is remanded to the respondents/Director, ICD to be completed by 31st October 2024; non adverse report will lead to cancellation and return of the bank guarantee on request, while an adverse report will require the petitioner to renew the bank guarantee for one year and until adjudication is complete.

Final Conclusion: Petitioner furnished an undertaking to provide the prescribed bond and 10% Scheduled Bank guarantee; upon furnishing the security respondents to permit re export immediately; the question of genuineness of origin/value addition is remitted for verification by the Director, ICD to be completed by 31st October 2024 with the specified consequences for the bank guarantee, all other rights and contentions being kept open; no observations were made on the merits.

Limitation for refund claims under exemption notification - Computation of limitation where duty is paid provisionally under provisional assessment - Harmonious construction of notification with Section 27(1B)(C) of the Customs Act - Validity and effect of Board Circular No. 23/2010-Customs in prescribing date of payment

Computation of limitation where duty is paid provisionally under provisional assessment - Harmonious construction of notification with Section 27(1B)(C) of the Customs Act - Validity and effect of Board Circular No. 23/2010-Customs in prescribing date of payment - Whether the one year time limit in Notification No.102/2007 read with Notification No.93/2008 for refund claims is to be computed from the date of payment of provisional duty or from the date of finalisation/adjustment of duty after final assessment when provisional assessment has been resorted to - HELD THAT: - The Court held that Section 27(1B)(C) prescribes that where duty is paid provisionally under section 18 the one year limitation is computed from the date of adjustment of duty after final assessment (or reassessment). The Tribunal correctly interpreted the notification harmoniously with this statutory provision and declined to give overriding effect to the Board Circular which treated date of provisional payment as determinative. The Delhi High Court decision in Pioneer India Electronics (and the tribunal precedents following it) supports the construction that, in cases of provisional assessment, a refund claim can be entertained if filed within the period computed from the date of final assessment, and that the notification must be read consistently with Section 27(1B)(C). Consequently, the Tribunal's conclusion that the refund in the present case was within time on the basis of computation from final assessment was legally sound. [Paras 5, 6, 8]

The limitation for filing the refund claim in cases of provisional assessment is to be computed from the date of adjustment after final assessment in terms of Section 27(1B)(C), and the Tribunal rightly held the refund claim to be within time.

Final Conclusion: The appeal is dismissed; no substantial question of law arises and the Tribunal's order allowing the refund as within time is upheld.

Refund of amounts deposited under protest - limitation in refund claims where payment is not a duty but a deposit - payment under duress / enforced payment treated as deposit and not duty - no prescribed formality for lodging protest under Customs law - effect of SRF Limited on availability of CVD exemption to importer of final product - interest on delayed refund under Section 27A of the Customs Act

Limitation in refund claims where payment is not a duty but a deposit - payment under duress / enforced payment treated as deposit and not duty - effect of SRF Limited on availability of CVD exemption to importer of final product - Whether the amounts paid by the appellant were duty or merely deposits paid under protest/duress and whether the refund claim is barred by limitation - HELD THAT: - The Tribunal held that the amounts deposited by the appellant were not leviable duties but deposits made under compulsion at the insistence of the department and, in view of the SRF Limited decision, the CVD was not leviable on the imports in question. Relying on Telecare Network India Pvt Ltd and earlier Tribunal authorities, the Court reasoned that where payment is not a duty but a compelled deposit, limitation for refund does not apply and the revenue cannot rely on statutory limitation provisions to defeat a legitimate refund claim. The Tribunal noted absence of adjudication or a show cause notice at the time of deposit and found the payments to be non-duties for the purpose of limitation and unjust enrichment analysis, entitling the appellant to refund. [Paras 7, 10]

Amounts paid were deposits and not duties; refund claim is not barred by limitation and the appellant is entitled to refund.

Refund of amounts deposited under protest - no prescribed formality for lodging protest under Customs law - Whether the absence of the words 'Under Protest' on the communication/TR-6 challans or lodging the protest after payment defeats treatment of the payment as 'under protest' - HELD THAT: - The Tribunal held that there is no prescribed format under the Customs or Central Excise law for lodging a protest and that an act performed under compulsion need not contain the literal words 'under protest' to qualify. The contents of the appellant's letter dated 06.06.2014 conveyed protest; procedural strictness insisting that protest precede payment was rejected as untenable. Reliance was placed on P&H High Court and Tribunal precedents (Ind Swift Lands Ltd, Amarjothi Spinning Mills, Kodak India) to conclude that substantive compliance and the circumstances showing compulsion suffice to treat the deposit as made under protest. [Paras 8, 9]

Absence of the literal words 'Under Protest' or lodging the protest after payment does not preclude treatment of the deposit as made under protest.

Interest on delayed refund under Section 27A of the Customs Act - Whether the appellant is entitled to interest on delayed refund - HELD THAT: - Having held that the amount deposited was refundable, the Tribunal directed that the appellant is entitled to refund along with interest on delayed refund as per the applicable statutory provision. The Tribunal therefore allowed interest in addition to the principal refundable amount. [Paras 10, 11]

Appellant entitled to refund of the deposited amount together with interest on delayed refund as per law.

Final Conclusion: The impugned order rejecting the refund as time-barred is set aside; the appeal is allowed and the appellant is entitled to refund of the amounts deposited (treated as refunds of deposits paid under protest) together with interest on delayed refund in accordance with law.

Penalty under Section 112(a) of the Customs Act - vicarious liability of customs house agent (CHA) - requirement of a positive act or omission rendering goods liable for confiscation - need for cogent, tangible and reliable evidence to establish abetment

Penalty under Section 112(a) of the Customs Act - vicarious liability of customs house agent (CHA) - requirement of a positive act or omission rendering goods liable for confiscation - need for cogent, tangible and reliable evidence to establish abetment - Whether the appellant CHA can be held liable to penalty under Section 112(a) for misdeclaration of goods where the misdeclaration is attributable to the importer and the CHA's manager misused the digital signature - HELD THAT: - The Tribunal held that imposition of penalty under Section 112(a) requires establishment of a positive act or omission by the person which would render the goods liable for confiscation or proof of abetment. Mere lack of due diligence or failure to take additional precautions by an authorised CHA, acting on documents and details provided by the importer, does not by itself attract penal consequences under Section 112(a). The adjudicating findings did not demonstrate prior knowledge or a mala fide act/omission by the appellant CHA that would constitute abetment. Although the CHA's manager misused the digital signature, separate action has been initiated against him; that fact does not sustain vicarious liability of the appellant on the record before the Tribunal. The Tribunal relied on analogous reasoning in Rajesh Maikhuri v. Commissioner of Customs [reproduced], emphasising that cogent, tangible and reliable evidence is necessary to penalise an abettor and that penalties cannot be imposed on assumptions or presumptions. [Paras 6, 7, 8, 9]

Penalty imposed on the appellant under Section 112(a) is not sustainable and is set aside.

Final Conclusion: The appeal is allowed; the penalty imposed on the appellant under Section 112(a) is quashed as vicarious liability could not be established on the facts and the requisite positive act/abetment was not proved.

Admissibility of electronic evidence - Section 138C of the Customs Act - Section 65B of the Indian Evidence Act - original electronic record versus secondary copy - Admissibility of computer printouts as primary evidence - Re-determination of transaction value under the Customs Valuation Rules, 2007 - extended period of limitation for recovery under Section 28(4) of the Customs Act - amendment of documents under Section 149

Admissibility of electronic evidence - Section 138C of the Customs Act - Section 65B of the Indian Evidence Act - original electronic record versus secondary copy - Admissibility of computer printouts as primary evidence - Admissibility of excel sheets/computer printouts retrieved from the proprietor's mobile as evidence without the certificate required under Section 138C. - HELD THAT: - The Tribunal applied the reasoning of the apex court on electronic evidence, distinguishing original electronic records from secondary copies. The excel sheets were retrieved in the presence of the proprietor from his own mobile and admitted by him; they bore identifying details (invoice number, date, container number, item description, quantity and RMB values) corresponding to the importer's Bills of Entry. In these circumstances the documents were treated as original/primary electronic records and did not require a certificate under Section 138C. The Tribunal relied on the principle that the mandatory certificate is required for secondary copies produced in proceedings, whereas original electronic records may be adduced by establishing ownership/operation of the device and authenticity. Given the proprietor's admissions, the provenance and content of the retrieved documents, and the authorities on Sections 65A/65B of the Evidence Act, the contention that the documents were inadmissible for want of a certificate was rejected. [Paras 6]

Documents retrieved from the proprietor's mobile are admissible as original electronic records and no certificate under Section 138C was required in the facts of this case.

Re-determination of transaction value under the Customs Valuation Rules, 2007 - Rejection of declared transaction value - Rule 3 of CVR, 2007 - sequence of valuation rules - Validity of rejection of declared transaction value and subsequent re-determination by the proper officer based on retrieved invoices/excel sheets. - HELD THAT: - The Tribunal examined whether the proper officer could reject the declared transaction value and re-determine value without sequential application of valuation rules. It found that the recovered invoices/excel sheets matched the importer's filed documents in all particulars except value and description, and that the importer had altered invoices to undervalue and mis-declare goods. On this factual foundation the Tribunal accepted the departmental re-determination of transaction value under the Valuation Rules and held there was no infirmity in the manner or quantum of re-determination. The court also noted the absence of any acceptable explanation or evidence from the importer to displace the retrieved documents. [Paras 5, 6]

Rejection of the declared transaction value and re-determination under the Valuation Rules, 2007 is valid and the findings of the authorities below suffer no infirmity.

Extended period of limitation for recovery under Section 28(4) of the Customs Act - suppression of facts and mis-statement - amendment of documents under Section 149 - Whether the extended period under Section 28(4) is invocable for recovery of differential duty in view of suppression/mis-declaration by the importer. - HELD THAT: - The Tribunal found that the importer had manipulated invoices and mis-declared values, conduct that was unearthed only during investigation. Such deliberate suppression and mis-statement rendered the duty shortfall apparent and made invocation of the extended five-year limitation period under Section 28(4) appropriate. The Tribunal also observed that Section 149 permits amendment of documents where documentary evidence in existence at the time of clearance is later discovered, supporting reassessment. Consequently, the differential duty recovery within the extended period was held to be maintainable. [Paras 6]

Extended period under Section 28(4) is properly invoked; differential duty demand within the extended period is maintainable.

Final Conclusion: The Tribunal held that the electronic invoices retrieved from the proprietor's mobile were admissible as original electronic records without a Section 138C certificate, upheld the rejection and re-determination of the declared transaction value under the Valuation Rules, and found the extended limitation under Section 28(4) invocable for recovery; accordingly the Order-in-Original confirming demand and penalties was upheld and the appeal dismissed.

Oppression and mismanagement - Power to direct purchase of shares under Section 242(2)(b) - Deadlock in company affairs - Relief to end the matters complained of - Power to grant relief despite absence of established oppression - Private company restriction on transfer of shares

Power to direct purchase of shares under Section 242(2)(b) - Relief to end the matters complained of - Deadlock in company affairs - Oppression and mismanagement - Legality of the NCLT order directing the company to purchase the petitioner's shares under Section 242(2)(b) where the impugned order does not record express findings of established oppression or mismanagement - HELD THAT: - The Tribunal correctly noted that under Section 242(2)(b) it has power to direct purchase of a member's shares by the company. The appellate court held that the power to grant such relief may be exercised to bring to an end the matters complained of and to resolve a deadlock in the affairs of a company, even where a prior express finding of oppression or mismanagement has not been recorded in the same terms relied upon by the appellant. The judgment relied on the principle in M.S.D.C. Radharamanan that a court or Tribunal can, in appropriate circumstances, grant relief to do substantial justice between the parties and end a deadlock, and applied that principle to the facts before it. The NCLT had considered the parties' submissions, the factual matrix including the private company's articles restricting open-market sale of shares and earlier precedents of share transfers in the company, and concluded that directing purchase of shares would end the dispute and facilitate smooth functioning. The appellate court found the decisions cited by the appellant distinguishable on facts or law and held that the NCLT's exercise of its statutory power to direct purchase of shares to end the controversy was not illegal. [Paras 10, 11, 15, 17, 18]

The NCLT order directing purchase of the petitioner's shares under Section 242(2)(b) is lawful; the appeal is dismissed.

Final Conclusion: The appeal is dismissed; the impugned NCLT order directing purchase of shares under Section 242(2)(b) to end the dispute and resolve a deadlock in the company is upheld as within the Tribunal's lawful discretion.

Pre-existing dispute - Section 9 dismissal for pre-existing dispute - plausible contention requiring further investigation - real, substantial and bona fide dispute - Mobilox principle on notice of dispute

Pre-existing dispute - Section 9 dismissal for pre-existing dispute - Mobilox principle on notice of dispute - Existence of a pre-existing dispute at the time of issuance of the demand notice and validity of dismissal of the Section 9 petition - HELD THAT: - The Tribunal examined the pleadings, communications and the suit filed by the Corporate Debtor and concluded that the Corporate Debtor had, prior to the Section 9 filing, raised a dispute regarding defective consignments (invoices of 08.01.2019) and had instituted a civil suit (TS 1380/2021) which predated the Section 9 application. Applying the settled Mobilox test, the Adjudicating Authority was required only to ascertain whether a plausible, non-spurious dispute existed that warranted further investigation; it need not resolve the merits. The correspondence and the filing of civil proceedings showing complaints about sub-standard goods and the consequences claimed by the Corporate Debtor established a real and bona fide dispute affecting the parties' commercial relationship. Consequently, the Adjudicating Authority rightly treated that dispute as pre-existing and dismissed the Section 9 petition on that ground. [Paras 40, 42, 43, 44, 45]

The Section 9 petition was correctly dismissed by the Adjudicating Authority because a pre-existing dispute existed prior to the demand notice.

Scope of pre-existing dispute - dispute relating to invoices not included in Section 9 - Whether disputes relating to earlier invoices not specifically claimed in the Section 9 application can constitute a pre-existing dispute barring CIRP initiation - HELD THAT: - The Tribunal held that disputes concerning earlier supplies and alleged defective goods, though not the subject-matter of the five invoices claimed in the Section 9 application, were relevant to the overall commercial relationship and could validly form the basis of a pre-existing dispute. The operational creditor's assertion that only the five 2019 invoices were claimed did not negate the existence of prior contentions which affected payment and credit dealings. The Adjudicating Authority therefore permissibly treated the earlier quality disputes and the consequent civil litigation as material to conclude that a pre-existing dispute existed. [Paras 36, 40, 41, 42, 43]

Disputes arising from earlier invoices and quality complaints, though not included in the Section 9 claim, were sufficient to establish a pre-existing dispute and bar CIRP initiation.

Plausible contention requiring further investigation - standard of inquiry at admission stage - Standard of adjudicatory scrutiny at the admission stage under Section 9 when a dispute is alleged - HELD THAT: - The Tribunal reaffirmed that at the Section 9 admission stage the Adjudicating Authority's role is limited to determining whether the respondent has placed before it a plausible, non-spurious contention or whether there is a record of dispute. The Court need not adjudicate the merits; it must separate spurious defences from those that genuinely require adjudication. The materials on record - the reply containing detailed allegations of defective goods, their testing, and the institution of civil proceedings - met the threshold of a plausible contention necessitating rejection of the Section 9 petition. [Paras 34, 44]

The Adjudicating Authority applied the correct, limited standard at the admission stage and legitimately rejected the Section 9 application upon finding a plausible pre-existing dispute.

Appeal maintainability and correctness of impugned order - Maintainability of the appeal and correctness of upholding the Adjudicating Authority's order - HELD THAT: - Having concluded that a pre-existing dispute was shown to exist and that the Adjudicating Authority applied the correct legal standard in dismissing the Section 9 petition, the Tribunal found no infirmity in the impugned order. The appeal under Section 61(1) of the IBC did not disclose error in law or fact warranting interference. Accordingly, the Adjudicatory Authority's order of dismissal was upheld and the appeal dismissed. [Paras 34, 43, 45, 46]

The appeal is dismissed and the Impugned Order upholding the dismissal of the Section 9 petition is affirmed.

Final Conclusion: The Tribunal upheld the Adjudicating Authority's dismissal of the Section 9 petition on the ground of a pre-existing dispute (including prior complaints about defective goods and a civil suit), applying the Mobilox standard that mandates rejection where a plausible, bona fide dispute predating the demand notice exists; the appeal is dismissed and the impugned order is affirmed.

Distribution of assets under Section 53 - Priority of unsecured financial creditors over operational creditors - Related party financial creditor and its consequences - Admission of claim as unsecured financial debt - Intelligible differentia between financial and operational debts

Distribution of assets under Section 53 - Priority of unsecured financial creditors over operational creditors - Related party financial creditor and its consequences - Admission of claim as unsecured financial debt - Swiss Ribbons-validation of Section 53 - Whether an operational creditor is entitled to priority in distribution of the liquidation estate over an admitted unsecured financial creditor (including a related party financial creditor). - HELD THAT: - The Court proceeded on the undisputed premise that the claim of Respondent No.2 had been admitted as an unsecured financial debt and that admission was not challenged in the CIRP (paras. 8, 9, 16). On a plain reading of Section 53(1) the waterfall places financial debts owed to unsecured creditors ahead of "any remaining debts and dues" which include operational debts (para. 13). The Supreme Court's reasoning in Swiss Ribbons, reproduced and applied by the Tribunal, recognizes an intelligible differentia between financial debts and operational debts tied to the objectives of the Code and upholds the priority accorded to unsecured financial creditors (paras. 14-15, 11). The definition of "financial debt" (Section 5(8)) and regulatory scheme do not exclude claims by related parties from being admitted as financial debt; consequences of related-party status (for example, restrictions under Section 21 or Section 29A in other contexts) do not ipso facto convert an admitted unsecured financial claim into equity for the purposes of distribution under Section 53 (paras. 17, 16). Earlier authorities relied upon by the appellant (including NCLT decisions and judgments dealing with resolution plans or schemes) were held not to be apposite to the statutory distribution in liquidation, and the Tribunal distinguished those precedents on that basis (paras. 18-21, 24-27). Applying these principles, the Appellant cannot claim priority over an admitted unsecured financial creditor, even if the creditor is alleged to be a related party, since Section 53 makes no distinction between related and unrelated unsecured financial creditors for distribution purposes and its constitutional validity has been upheld. [Paras 11, 13, 16, 17, 28]

Appellant's claim to priority over the admitted unsecured financial creditor is rejected; an operational creditor has no priority over an admitted unsecured financial creditor (including a related party) in the distribution under Section 53.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority did not err in rejecting the IA: distribution under Section 53 places admitted unsecured financial debt ahead of operational debt and an operational creditor cannot claim priority over an admitted unsecured financial creditor (whether or not a related party).

Operational creditor - resolution plan approval - Section 30(2)(b) compliance - liquidation value comparison - fair and equitable distribution

Operational creditor - Section 30(2)(b) compliance - liquidation value comparison - resolution plan approval - Whether approval of a resolution plan proposing nil payment to admitted operational creditors is impermissible under Section 30(2)(b) of the IBC - HELD THAT: - The Tribunal examined the admitted operational claims and the Resolution Plan which proposed nil payment to all operational creditors. Section 30(2)(b) requires that a resolution plan provide for payment to operational creditors not less than the amount they would receive on liquidation or under the distribution priority in section 53, whichever is higher, and that such distribution be fair and equitable. The Appellate Tribunal relied on its earlier decision in Company Appeal (AT) (Insolvency) No.1063 of 2022 holding that where the liquidation-distribution mechanism yields nil to operational creditors, a plan proposing nil payment does not contravene Section 30(2)(b). The court observed that although non-payment to operational creditors may be harsh, the current statutory scheme permits such an outcome if liquidation value comparison results in nil, and that any change must come from the Legislature or competent authorities. Applying that precedent and principle to the facts before it, the Tribunal found no non-compliance with Section 30(2)(b) in approving the plan and declined to interfere with the Adjudicating Authority's approval of the Resolution Plan. [Paras 7, 8, 9]

Appeal dismissed; approval of the Resolution Plan upheld as compliant with Section 30(2)(b) given that liquidation-distribution would yield nil to operational creditors.

Final Conclusion: The Tribunal dismissed the appeal and upheld the Adjudicating Authority's approval of the Resolution Plan, concluding that proposing nil payment to admitted operational creditors did not violate Section 30(2)(b) where the liquidation-distribution comparison produced nil, and that the decision is governed by existing Tribunal precedent.

Validity of resolution plan approval within CIRP period - challenge to valuation conducted under CIRP Regulations - inclusion of third party/promoter assets in resolution plan - treatment of leasehold rights and buildings constructed by lessee in CIRP - admission of homebuyers' claims as financial creditors/allotment letter holders - scope of judicial review of Committee of Creditors' commercial wisdom under Section 30(2) - entitlement of operational creditors and employees under Section 30(2)(b)

Validity of resolution plan approval within CIRP period - Whether the resolution plan was approved after expiry of the CIRP period and therefore void - HELD THAT: - Form H initially recorded 13.06.2021 as the expiry date but also recorded a pending exclusion application. The Adjudicating Authority subsequently granted exclusions by orders dated 11.01.2022 (60 days exclusion) and 20.06.2022 (further two days), which, read with Form H, operate to extend the CIRP period to cover 13.08.2021 when the CoC approved the plan. On that basis the Tribunal held that the plan approval did not occur after expiry of the CIRP period and the ground that the plan was approved outside the CIRP period fails.

Plan approval was within the extended/excluded CIRP period; no invalidation on that ground.

Challenge to valuation conducted under CIRP Regulations - scope of judicial review of Committee of Creditors' commercial wisdom under Section 30(2) - Whether the valuation reports obtained by the RP were so defective as to vitiate approval of the resolution plan - HELD THAT: - Two registered valuers were appointed under Regulation 35 and produced fair and liquidation values. Discrepancies alleged by promoters related to differences in measured areas and item by item valuation, but the valuers based their work on materials available (including PMLA/ED records) and the reports were placed before the CoC without objection. Following authority that judicial interference with valuation is limited and where CoC relies on statutory valuation mechanism the Tribunal declined to revalue or upset the plan on valuation grounds. The Tribunal observed valuation is not an exact science and that no Member of CoC had challenged the valuers' reports before NCLT.

No interference with the plan on valuation grounds; valuation challenge rejected.

Inclusion of third party/promoter assets in resolution plan - treatment of leasehold rights and buildings constructed by lessee in CIRP - Section 18(1)(f) explanation - exclusion of third party assets - Whether clauses of the approved resolution plan could extinguish rights of non corporate debtor persons (promoters/related parties/lessee) and treat third party assets as corporate assets - HELD THAT: - The Tribunal examined (a) inclusion of certain promoter related lands and (b) Clauses 13.4-13.6 which purported to cancel/terminate a registered lease (dated 24.09.2008) and to extinguish the lessee's rights and the lessee's rights in buildings thereon. The RP had not terminated the lease during CIRP (termination would have required payment of construction cost under the lease). The Tribunal applied Section 18(1)(f) and the Explanation (which excludes third party assets and assets of subsidiaries from RP's automatic takeover) and authorities establishing that third party assets/rights are not to be extinguished by CIRP except in accordance with law. The Tribunal held that Clauses 13.4-13.6 impermissibly extinguish lessee's rights and are contrary to Section 30(2)(e) and other provisions; those clauses could not stand. For other promoter owned parcels (Fursungi 7.33 acres) the Tribunal accepted the factual finding that those parcels were acquired using corporate/group funds and formed part of the integrated township and therefore were properly included in the plan; that challenge failed in that respect.

Clauses 13.4-13.6 (which extinguished the lessee's leasehold/building rights) are deleted from the resolution plan; lessee's rights and buildings are not treated as extinguished. Separate promoter asset challenges were rejected where there was evidence the parcels formed part of corporate/group project.

Inclusion of third party/promoter assets in resolution plan - Whether Survey No. 326/1 (Bavdhan) as included in Appendix IV should include the area registered in the name of DS Kulkarni & Company (appellant) or be modified - HELD THAT: - The PAO/ED schedule relied upon by the RP included parts of Survey No.326/1 (distinct parcels and areas recorded in different names). The RP acknowledged he included the whole survey number on the basis of the PAO and was not aware of the registered sale deeds in favour of the partnership firm shown in 7/12 extract. The Tribunal analysed the records and PAO and concluded that the portion recorded in the partnership firm's name (0H41R; 20.5R+20.5R) was not covered by the PAO and therefore could not properly be taken as corporate asset. To make the plan compliant the Appendix had to be read down so as to exclude the 0H41R belonging to the partnership firm.

Appendix IV Item No.10 (Survey No.326/1) must be modified to exclude the area of 0H41R recorded in the name of DS Kulkarni & Company.

Admission of homebuyers' claims as financial creditors/allotment letter holders - treatment of homebuyers in information memorandum and plan - Whether certain homebuyers whose claims were rejected by the RP (for lack of evidence of payment to the corporate debtor) are entitled to admission and inclusion in the resolution plan - HELD THAT: - Homebuyers produced allotment letters issued by the corporate debtor (or by DSK Global where the development/relationship acknowledged in the registered developer agreements), ledger entries and bank/payment records showing payments or adjustments; some had registered tripartite agreements. The RP had directed submission under Form CA and allowed allotment letters and related documents as relevant documentation. The Tribunal held that where the corporate debtor itself had issued allotment letters acknowledging payment, and/or where registered agreements and ledger entries supported the claim, the RP should not have mechanically rejected claims on the ground that amounts did not separately appear in corporate debtor bank ledgers (particularly given that group entities were inter related and records were constrained by attachments). The Tribunal set aside the RP's rejection for the affected homebuyers and directed SRA to treat them equally with other admitted homebuyers under the plan.

Claims of the identified homebuyers are to be admitted; RP's rejection is set aside and SRA directed to give them the same treatment as other admitted homebuyers and to provide the allotted units as per the resolution plan.

Entitlement of operational creditors and employees under Section 30(2)(b) - scope of judicial review of Committee of Creditors' commercial wisdom under Section 30(2) - Whether the low payout percentages offered to operational creditors and employees require interference with the approved resolution plan - HELD THAT: - Operational creditors and employees complained of very low payout percentages. The Tribunal recalled that interference with CoC's commercial decision is limited and is permissible only where the plan fails statutory tests under Section 30(2) (including fair and equitable treatment under sub section (2)(b) and compliance with other statutory requirements). The appellants did not establish a specific statutory non compliance or that the plan contravened Section 30(2)(b) entitlements. On the pleadings and record the Tribunal concluded there was no basis to set aside the plan on this ground.

No interference with the plan on account of the alleged low payouts to operational creditors and employees; appeals on these grounds dismissed.

Final Conclusion: The Tribunal dismissed appeals contesting timing of plan approval and valuation. It upheld the approved resolution plan generally but directed specific modifications to render it lawful: (a) deletion of Clauses 13.4-13.6 so as not to extinguish the lessee's leasehold and building rights; (b) modification of Appendix IV to exclude the 0H41R of Survey No.326/1 recorded in the name of DS Kulkarni & Company; and (c) direction that specified homebuyers whose claims were wrongly rejected be admitted and given the same treatment and units as other admitted homebuyers. Appeals by certain promoters/group entities and challenges by operational creditors/employees for higher payouts were dismissed. Parties to whom relief was granted have liberty to seek further directions if the modifications are not implemented.

Section 45 of the PMLA - offences cognizable and non-bailable - Section 436A of the Cr.P.C. - maximum period for which an undertrial prisoner can be detained/right to speedy trial - Article 21 - right to speedy trial and personal liberty - Primacy of constitutional protection over restrictive statutory bail provisions where trial delay infringes fundamental rights

Section 436A of the Cr.P.C. - maximum period for which an undertrial prisoner can be detained/right to speedy trial - Section 45 of the PMLA - offences cognizable and non-bailable - Article 21 - right to speedy trial and personal liberty - Whether the applicant, having undergone detention equal to one-half of the maximum prescribed sentence and where trial is unlikely to conclude within a reasonable time, is entitled to bail despite the non-bailable rigours of Section 45 of the PMLA. - HELD THAT: - The Court applied the principle that Section 436A of the Cr.P.C., being a subsequent and beneficial statutory provision, applies to accused under the PMLA and can operate notwithstanding the restrictive bail framework of Section 45 of the PMLA. The Court relied on the Supreme Court's exposition that where an undertrial has suffered detention up to one-half of the maximum sentence and there is no prospect of trial concluding within a reasonable time, the constitutional right to speedy trial under Article 21 and the statutory relief in Section 436A can justify release on bail. The affidavit and record show the applicant was arrested on 05.03.2021 in the PMLA case and had completed 3 years and 6 months (half of the 7-year maximum) as of 05.09.2024; the prosecution proposed 9 witnesses in the PMLA matter and the connected scheduled offence involved 256 proposed witnesses and voluminous material, with simultaneous trial unlikely to conclude soon. The Public Prosecutor opposed bail and opportunity to oppose was given, but the twin conditions of Section 45 (satisfaction that accused is not guilty and not likely to commit offence on bail) yield to the necessity of protecting Article 21 where continued detention would amount to punishment without trial. The Court found no indication that delay was attributable to the accused or that the applicant posed a flight risk, and noted mitigating factors including substantial attachment/recovery of properties and the applicant's age and health, supporting that bail could be granted with conditions. [Paras 11, 12, 16, 17, 18]

The applicant, having undergone detention equal to one-half of the maximum sentence and facing trial unlikely to conclude soon, is entitled to the benefit of Section 436A of the Cr.P.C. and may be released on bail notwithstanding the non-bailable rigours of Section 45 of the PMLA.

Conditions for bail and supervisory safeguards - Protection against tampering with prosecution evidence and witness intimidation - On what terms and conditions bail should be granted to the applicant in the ECIR registered by the Enforcement Directorate. - HELD THAT: - Having reached satisfaction that statutory and constitutional prerequisites for release under Section 436A are met, the Court formulated specific bail conditions to address prosecution concerns and ensure attendance and non-interference with the trial. Conditions include furnishing a personal bond with solvent sureties, restrictions on entering District Pune except for court/ED requirements, weekly reporting to a specified police station, disclosure and upkeep of contact and residential particulars, prohibition on tampering with evidence or influencing witnesses or the complainant, surrender of passport, and an undertaking to attend trial and cooperate with the trial court without seeking unnecessary adjournments. These conditions are tailored to mitigate risk of flight, tampering, or obstruction while preserving the applicant's liberty pending trial. [Paras 21, 22, 23, 24]

Bail granted on terms: personal bond with one or two solvent sureties, territorial and reporting restrictions, prohibition on interference with prosecution witnesses/evidence, surrender of passport, disclosure of contact details, and obligation to attend trial and cooperate with the court.

Final Conclusion: Bail granted to the applicant in ECIR/MB/ZO-II/03/2020: the Court held that Section 436A Cr.P.C. and Article 21 justify release after detention equal to one-half of the maximum sentence where trial delay is excessive; bail was ordered with specified conditions, and the trial court is to decide the case on merits uninfluenced by these observations.

Refund of service tax on input services used in export - applicability of Notification No. 41 of 2012 for rebate of service tax - transitional refund of duties paid under existing law pursuant to Section 142(4) of the CGST Act - relevance of CBIC Circular No. 37/11/2018 to transitional refund claims

Refund of service tax on input services used in export - applicability of Notification No. 41 of 2012 for rebate of service tax - transitional refund of duties paid under existing law pursuant to Section 142(4) of the CGST Act - relevance of CBIC Circular No. 37/11/2018 to transitional refund claims - Entitlement to refund of service tax paid on input services received prior to the appointed day but used in exports effected during the GST regime. - HELD THAT: - The Tribunal examined whether rebate provided by Notification No. 41 of 2012 in respect of service tax on input services remains available where the services were received before the appointed day and the goods were exported after the appointed day. The adjudicating authority had allowed the refund on fulfillment of conditions under the Notification; the Commissioner (Appeals) set aside that allowance on the view that the Notification ceased to apply post-GST. The Tribunal applied Section 142(4) of the CGST Act, which directs that refund claims filed after the appointed day for duties or taxes paid under the existing law in respect of goods or services exported before or after the appointed day shall be disposed of in accordance with the provisions of the existing law. The Tribunal also noted and relied upon CBIC Circular No. 37/11/2018 and earlier decisions on identical questions which support permitting refund in similar circumstances. Concluding that the appellate authority's interpretation was contrary to the transitional provision and the applicable clarification, the Tribunal held that the appellant satisfied the conditions for refund under the existing law and was therefore entitled to the rebate of service tax paid on input services. [Paras 5, 6, 7, 8, 9]

The impugned order is set aside; the appellant is entitled to refund of the service tax paid on the input services and the appeal is allowed with consequential benefits as per law.

Final Conclusion: The Tribunal allowed the appeal, holding that refund of service tax paid on input services (received prior to the appointed day) in respect of exports made during July 2017 to March 2018 is permissible under the existing law read with Section 142(4) of the CGST Act and relevant CBIC clarification; the impugned appellate order was set aside and refund granted with consequential relief.

Non-speaking order - application of precedent - requirement of reasoned judgment - remand for fresh decision after affording opportunity - expeditious disposal

Non-speaking order - application of precedent - requirement of reasoned judgment - Impugned CESTAT order set aside for being cryptic and non-speaking due to simple application of an earlier decision without adequate reasoning - HELD THAT: - The Court examined the impugned CESTAT order and found it to be cryptic and non-speaking because the Tribunal allowed the appeals solely by stating that the decision in J.P. Transformers (reported 2014 (36) STR 961 (Allahabad)) 'squarely applied' to the present facts without addressing whether that precedent was fully applicable to all aspects and issues of the case. The Supreme Court expressly refrained from adjudicating the merits but concluded that the Tribunal's reliance on the earlier judgment, without independent reasoning or consideration of distinguishing facts, rendered the order unsustainable and necessitated its setting aside. [Paras 2, 3]

Impugned order set aside on grounds of being non-speaking; Tribunal's conclusion based solely on earlier decision held inadequate

Remand for fresh decision after affording opportunity - expeditious disposal - Matter remanded to CESTAT for fresh decision after affording parties opportunity to be heard; expedition directed - HELD THAT: - Having set aside the impugned order, the Court remanded the matter to the CESTAT for a fresh decision. The remand requires the Tribunal to consider the issues afresh, afford due opportunity to the parties to raise all contentions, and render a reasoned decision addressing the applicability (or inapplicability) of the precedent relied upon by the earlier order. As the matter is old, the Court directed the CESTAT to endeavour to decide the case as early as possible and left all questions and contentions open to be urged before the Tribunal. [Paras 4, 5, 6]

Remitted to CESTAT for fresh adjudication after hearing parties, with a direction for expeditious disposal; all contentions left open

Final Conclusion: The Supreme Court set aside the cryptic, non-speaking CESTAT order that had mechanically applied an earlier decision, remitted the matter to the CESTAT for fresh consideration after affording the parties an opportunity to be heard, and directed expeditious disposal while leaving all contentions open.

Taxable service - tour operator - planning, scheduling, organizing and arranging - place of provision of service - destination-based consumption tax - Export of Services Rules, 2005 - Section 64 (exclusion of Jammu & Kashmir) - extended period of limitation

Taxable service - tour operator - planning, scheduling, organizing and arranging - place of provision of service - Whether the services rendered by the appellants in relation to tours to Jammu & Kashmir constitute taxable tour-operator services. - HELD THAT: - The tribunal held that the taxable element is the activity of "planning, scheduling, organizing and arranging" tours and not the physical travel (the "tour") itself. The appellant carried out these activities from the taxable territory; bookings of hotels, transport and other arrangements were made by the appellant from its office in taxable territory and thus constitute services provided in taxable territory. The fact that the ultimate consumption (the travel) may occur in Jammu & Kashmir does not convert the place of provision of the tour-operator service into Jammu & Kashmir. Analogies of tailor/coaching/ticket-booking were applied to show that location of use does not alter place of provision where the service is performed in taxable territory. Consequently, the service is taxable. [Paras 5, 7, 11]

The tour-operator activity of planning, scheduling, organizing and arranging is a taxable service provided in taxable territory and the tax demand in respect thereof is sustainable.

Export of Services Rules, 2005 - Section 64 (exclusion of Jammu & Kashmir) - destination-based consumption tax - Whether the Export of Services Rules, the referenced circulars or the exclusion of Jammu & Kashmir operate to treat the services as outside taxable territory or otherwise exempt the appellants. - HELD THAT: - The tribunal found that the Export of Services Rules, 2005 and related circulars apply where either the client or place of performance is outside India. In the present case both the service provider and service recipient are located within India and the services were performed from taxable territory; hence the Export Rules and Circular No.111/5/2009-ST are inapplicable. Section 64 does exclude services provided in Jammu & Kashmir from levy, but that exclusion applies only where the taxable service itself is provided in J&K. Here the taxable activity (planning, scheduling, organizing and arranging) was carried out in taxable territory, so Section 64 does not exempt the appellants. [Paras 6, 8]

Export of Services Rules and the cited circulars do not apply; Section 64 exclusion of J&K is not attracted because the taxable activities were carried out in taxable territory.

Planning, scheduling, organizing and arranging - Whether pre-planned package tours amount to "self-service" outside the taxable ambit because planning etc. are undertaken before customers approach the appellant. - HELD THAT: - The tribunal rejected the appellant's claim that planning/scheduling/organizing were completed prior to any customer approaching (and thus were self-service). It observed booking of transport, hotels and vehicles cannot realistically be completed without client-specific details (names, numbers). The brochures represent an offer; the actual taxable activities of planning and arranging occur after clients engage the appellant. There is no evidence on record showing the appellant completed the planning/arranging prior to client approach; the claim is unsubstantiated. [Paras 2, 9]

The contention that pre-planned package tours constitute self-service outside taxable ambit is untenable and not substantiated; the planning/arranging activities are taxable.

Extended period of limitation - Whether the department could invoke the extended period of limitation in view of the appellants' bona fide belief and absence of suppression. - HELD THAT: - The tribunal noted that the statutory treatment and scope of 'tour operator' had been a matter of genuine controversy and reference to larger-bench decisions. The appellants held a bona fide belief they were not liable, relied on departmental letters and prior practice, and there was no specific finding of deliberate suppression or mis-declaration. On these facts the tribunal concluded the extended period of limitation should not be invoked. [Paras 12, 13]

Extended period of limitation will not be invoked; the demand is to be limited to the normal period.

Remand - Whether further proceedings are required to quantify and determine duty liability within the limitation period. - HELD THAT: - While holding the taxable character of the services, the tribunal found the extended period cannot be invoked and therefore directed that determination of duty liability, if any, be carried out by the original adjudicating authority within the period of limitation. The matter of quantification and recovery was not finally adjudicated on merits and has been remanded for determination consistent with the findings on limitation and taxability. [Paras 13]

Matter remanded to the original adjudicating authority for determination of duty liability, if any, within the period of limitation.

Final Conclusion: The appeals are allowed partly: the Tribunal upholds that the appellants' tour-operator activities of planning, scheduling, organizing and arranging tours to Jammu & Kashmir are taxable as services performed in taxable territory and the Export Rules/Section 64 exclusion do not apply; however, extended limitation cannot be invoked in the facts and the matter is remanded to the original adjudicating authority to determine any duty liability within the normal limitation period.

Erection, commissioning and installation incidental to the sale of goods - no separate service tax where entire contract value has suffered excise/customs duty - incidental processes treated as continuation of manufacturing activity - substance of contract to determine sale versus works contract

Erection, commissioning and installation incidental to the sale of goods - no separate service tax where entire contract value has suffered excise/customs duty - Liability to pay service tax on erection, commissioning and installation of machines sold where the sale price was inclusive of such services and excise duty was paid on the entire value. - HELD THAT: - The Tribunal found that the assessee manufactured and sold textile machines under contracts and invoices which expressly covered supply as well as erection, commissioning and installation at the buyer's site, with no separate consideration or segregated amount for those activities. The entire invoice value had been subjected to central excise (or customs) duty. Applying the principle that processes incidental to manufacture or necessary to render the goods operational at the buyer's premises form part of the sale (and are a continuation of the manufacturing activity), the Tribunal held that no distinct service value existed on which service tax could be imposed. The decision relied upon consistent precedents of this Tribunal and other fora holding that where the composite contract is a lump-sum sale inclusive of incidental erection/commissioning and the full value has suffered excise/customs duty, the activities cannot be taxed separately as services. The Tribunal noted that the question whether the contract is a sale or a works contract is to be determined from the substance of the contract, but on the facts here the dominant character was sale with incidental services included in the assessable value for excise/customs, thereby precluding separate service tax liability. The Tribunal expressly did not decide alternative classification issues (such as levy under works contract service) because the matter was resolved on the ground of excise/customs having been paid on the entire value.

Service tax demand on erection, commissioning and installation set aside; no service tax payable because the activities were incidental to sale and the entire contract value had been subjected to excise/customs duty.

Final Conclusion: The appeal filed by Revenue is dismissed; the impugned order dropping the service-tax demand is upheld because the erection, commissioning and installation formed part of the sale and the entire value had suffered excise/customs duty, leaving no separate taxable service value.

Input service - nexus between input services and output services - services used in relation to setting-up, expansion or modernization as input services - interpretation of the main part versus the inclusive part of the definition of input service - availability of Cenvat credit for services used indirectly or in relation to provision of output services

Input service - nexus between input services and output services - services used in relation to setting-up, expansion or modernization as input services - interpretation of the main part versus the inclusive part of the definition of input service - Whether Cenvat credit of service tax paid on consultancy and geotechnical investigation services procured for proposed expansion / additional berths at the port is admissible - HELD THAT: - The Tribunal applied the post-1.4.2011 formulation of the definition of input service and held that services which are used whether directly or indirectly, in or in relation to the provision of output services fall within the main part of the definition. The fact that the inclusive part no longer specifically referred to "setting-up" does not exclude services used for expansion or creation of new facilities if such services are covered by the main part. Reliance placed on precedent (including Kakinada Seaports Ltd., Shell India, Pepsico and coordinate Bench decisions) was accepted: investigative, design and consultancy services procured for feasibility, design, tendering and supervision for additional berths or modernization have a direct nexus with the provision and expansion of port services and therefore qualify as input service. The Tribunal rejected the Revenue's contention that the deletion of "setting-up" from the inclusive part or the distinction drawn with capital goods precludes credit, observing that the main part's wide language (including "directly or indirectly" and "in relation to") admits such services unless specifically excluded.

Cenvat credit on the disputed consultancy and geotechnical investigation services used for proposed expansion/modernisation of port facilities is admissible.

Final Conclusion: Revenue's appeal is dismissed; the Commissioner (Appeals) order allowing the respondent's claim for Cenvat credit on the disputed services is upheld and the recovery, interest and penalty confirmed in the original order are set aside in respect of those credits.

Interpretation of Section 67(1)(i) - value of taxable service - "such service" doctrine - abatement for wages and statutory contributions - manpower recruitment and supply agency service - application of precedent in UOI v. Intercontinental Consultants

Interpretation of Section 67(1)(i) - "such service" doctrine - value of taxable service - abatement for wages and statutory contributions - manpower recruitment and supply agency service - Whether reimbursable employee-related expenses recovered from clients (salary, wages, PF/ESI contributions, allowances, etc.) are includible in the gross taxable value for manpower recruitment and supply agency services under Section 67 of the Finance Act, 1994 for the stated period. - HELD THAT: - Applying the principle that Section 67(1)(i) requires valuation of the consideration "for such service", the Tribunal followed the Supreme Court's interpretation in UOI v. Intercontinental Consultants that only the service element qua consideration for the taxable service can be charged and that Rule 5(1) (to the extent it sought to include other expenditures) is repugnant to Sections 66 and 67. On that basis and by reference to the Tribunal's precedent in M.P. Security Force and other decisions, the amounts reimbursed as wages, salaries and statutory employer contributions and similar pass-through payments were held to be excludible from the gross taxable value. The Tribunal also relied on authorities holding that where payments are collected as agent/for payment of employees or directly paid by the service receiver into statutory accounts, those amounts do not constitute consideration for the service and are not includible in valuation. The Tribunal thus concluded that only administrative/service charges constitute the taxable gross value for manpower supply services during the relevant period. [Paras 10, 11]

Reimbursable employee-related expenses are not includible in the gross taxable value under Section 67(1)(i) for manpower recruitment and supply agency services; the appellant is entitled to abatement for wages and statutory contributions for the period in question.

Final Conclusion: The impugned order confirming demand by including reimbursed employee costs in the taxable value is set aside; appeals allowed and appellant entitled to consequential relief, the assessable value to include only service/administrative charges for the relevant period.

Investment in mutual funds not amounting to trading of securities - exempted service under Cenvat Credit Rules - reversal of CENVAT credit under Rule 6(3) / Rule 6(3A) of CCR, 2004 - requirement of separate records for inputs/input services used for exempted services - distinction between investment income and consideration for service

Investment in mutual funds not amounting to trading of securities - reversal of CENVAT credit under Rule 6(3) / Rule 6(3A) of CCR, 2004 - distinction between investment income and consideration for service - Whether the appellant's investment of surplus cash in mutual funds constitutes trading of securities or an exempted service thereby attracting reversal of CENVAT credit under Rule 6(3)/6(3A) of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal applied established precedent holding that mere investment of surplus funds in mutual funds, reflected in financial statements as investing activities and shown as other income or capital gains, does not constitute trading in securities or the provision of a service to another. Trading in securities, as treated by the authorities relied upon, involves transferability and activities requiring licensing (e.g., by SEBI) and is an activity distinct from an investor's redemption or investment for own account. Rule 6(1)/6(3) of the Cenvat Credit Rules mandates reversal only where the output is an exempted service; therefore, unless the activity qualifies as a "service" (i.e., an activity carried out by one person for another for consideration), Rule 6 cannot be invoked. The Tribunal followed earlier decisions which held that (i) investment in mutual funds/shares is not per se trading in securities, (ii) inputs/input services are not used in or in relation to such investments, and (iii) trading in securities is not a "service" for the purposes of reversal under Rule 6. Applying these principles to the facts, and noting absence of evidence that the appellant carried on trading in securities for others or held itself out as a securities trader, the demand founded on proportionate reversal under Rule 6(3)/6(3A) could not be sustained.

The demand for payment under Rule 6(3)/6(3A) based on treating investment in mutual funds as an exempted service/trading of securities is set aside and the appeal is allowed.

Final Conclusion: Following Tribunal precedents, investment of surplus cash by the appellant in mutual funds was held not to amount to trading in securities or an exempted service; consequently the impugned demand under Rule 6(3)/6(3A) of the Cenvat Credit Rules, 2004 was unsustainable and has been set aside.

Penalty under Rule 26(1) of the Central Excise Rules, 2002 - Personal liability of company directors and office bearers - Knowledge or reason to believe as basis for penalty - Notice requirements for imposition of penalty - Requirement of confiscation for levy of penalty - Mens rea and imposition of penalty

Penalty under Rule 26(1) of the Central Excise Rules, 2002 - Personal liability of company directors and office bearers - Knowledge or reason to believe as basis for penalty - Penalty under Rule 26(1) can be imposed on the appellants (Managing Director, President, Vice President) who were concerned in clandestine removals where they knew or had reason to believe goods were liable to confiscation. - HELD THAT: - The court found on the material on record, including confessional statements and the statutory audit report, that clandestine removals and maintenance of parallel records were longstanding and carried out with the active knowledge and connivance of senior functionaries. Rule 26(1) penalises any person who is in any way concerned in removing excisable goods which he knows or has reason to believe are liable to confiscation. The statement of the in charge Managing Director admitted the practice of overselling, maintenance of duplicate records and signing of ER 1 returns that concealed the excess clearances. In these circumstances the adjudicating authority and the Tribunal were justified in holding that the appellants were personally liable to penalty under Rule 26(1). [Paras 7, 8, 9, 26]

Penalty under Rule 26(1) sustained against the appellants on the facts.

Penalty under Rule 26(1) of the Central Excise Rules, 2002 - Notice requirements for imposition of penalty - The show cause notice and Order in Original adequately put the appellants on notice as to the nature of the contravention and the invocation of Rule 26(1). - HELD THAT: - The court examined the show cause notice (including paragraph 7 and its sub paragraphs) and concluded that the allegations and the documentary and testimonial materials set out therein made clear the nature of the offence and that the persons called upon were alleged to have dealt with excisable goods liable to confiscation. The Tribunal and adjudicating authority referred to the relevant evidentiary material and confessional statements; therefore the Amrit Foods requirement that the assessee be put on notice as to the exact nature of penalty was satisfied on these facts. [Paras 7, 10]

Notice requirement fulfilled; no infirmity for failure to specify sub rule (the facts showed invocation of sub rule (1)).

Requirement of confiscation for levy of penalty - Penalty under Rule 26(1) of the Central Excise Rules, 2002 - Penalty under Rule 26(1) can be imposed notwithstanding absence of a separate order of confiscation of the goods in question where the material establishes concern in removal of goods liable to confiscation. - HELD THAT: - The appellants contended that Rule 26 could not be invoked without a proposal and order for confiscation. The court observed that the adjudicating authority quantified demand of duty and relied on admissions and documentary evidence of clandestine removals; given that Rule 26(1) penalises dealing with goods which a person knows or has reason to believe are liable to confiscation, the absence of a separate confiscation order did not preclude imposition of penalty on the facts. The authorities below had concurrent findings of fact that clandestine removals occurred and were known to the appellants. [Paras 4, 8, 10]

Absence of a prior confiscation order did not vitiate levy of penalty under Rule 26(1) on the facts of the case.

Mens rea and imposition of penalty - Knowledge or reason to believe as basis for penalty - No separate mens rea beyond knowledge or reason to believe was required; admitted knowledge sufficed to sustain penalty. - HELD THAT: - The appellants argued that mens rea was not established. The court noted that Rule 26(1) operates where a person 'knows or has reason to believe' goods are liable to confiscation. The admitted statements, corroborated by other witnesses and audit findings, established such knowledge and the deliberate decision of the management committee to over sell. Thus the requisite mental element under Rule 26(1) was satisfied and the Tribunal rightly upheld the penalty. [Paras 7, 8, 10, 26]

Penalty sustained as knowledge/reason to believe was proved; absence of separate mens rea finding did not invalidate penalty.

Reliance on partial statements and evidentiary weight - Personal liability of company directors and office bearers - The Tribunal was justified in relying on parts of statements and other documentary evidence that corroborated the case against the appellants despite non cooperation by some persons. - HELD THAT: - The Tribunal and adjudicating authority assessed confessional statements and corroborative documentary materials, including the statutory audit report, to conclude systemic clandestine removals with involvement of senior functionaries. Where certain directors did not appear for investigation, the authorities relied on available records and admissions of other employees and the in charge Managing Director. The High Court found no error in accepting such evidence and in drawing inferences of liability against directors who abstained from cooperating, given the totality of evidence. [Paras 5, 7, 10, 26]

Tribunal's reliance on available statements and documents was permissible; no fault in sustaining penalty on that basis.

Final Conclusion: Concurrent findings of fact that clandestine removals and maintenance of parallel records were carried out with the knowledge of senior functionaries render the levy of penalty under Rule 26(1) sustainable; the show cause notice and adjudication met notice requirements, absence of a confiscation order did not preclude penalty on these facts, and no substantial question of law is made out - appeals dismissed.

Application of Notification No. 33/99-CE (eligibility for exemption/refund) - Finality of adjudicatory orders - Prohibition on re-agitation of previously decided identical issues - Estoppel against the Revenue for taking a contrary stand after acquiescence

Finality of adjudicatory orders - Prohibition on re-agitation of previously decided identical issues - Estoppel against the Revenue for taking a contrary stand after acquiescence - Whether the Revenue could reopen and agitate entitlement to benefit under Notification No.33/99-CE for the period July, 1999 to May, 2002 which was earlier decided in favour of the respondent by the CESTAT. - HELD THAT: - The Court recorded that CESTAT had earlier, by order dated 20.01.2005, affirmed the Commissioner's order in favour of the respondent for the period July, 1999 to May, 2002 and that the Revenue did not challenge that order. The subsequent show cause notice dated 05.09.2003 encompassed the same period which had been finally adjudicated in the CESTAT order. Reliance was placed on Supreme Court dicta disallowing the Revenue from taking a different stand after having accepted or acquiesced in an earlier decision on the same question; permitting re-agitation would produce inconsistency and uncertainty. Having regard to the finality of the CESTAT order and the Revenue's failure to contest it, the Court held that the Revenue was disentitled to reopen the identical issue raised in the later show cause notice, and there was no scope for interference with the impugned CESTAT decision. [Paras 6, 7, 10, 11]

The Revenue is precluded from re-agitating entitlement to benefit under Notification No.33/99-CE for July, 1999 to May, 2002; no interference is warranted with the CESTAT decision.

Final Conclusion: The appeal is dismissed: the CESTAT's earlier decision in favour of the respondent for the period July, 1999 to May, 2002 has attained finality and the Revenue cannot challenge the same by re-issuing a later show cause notice that includes the identical period.

Interest on excess duty - provisional assessment - relevant date for payment of interest - interest on short payment of duty from the due date - adjustment of interest against interest payable - refund of interest on excess duty

Interest on excess duty - relevant date for payment of interest - refund of interest on excess duty - adjustment of interest against interest payable - Entitlement of the appellant to refund/adjustment of interest on excess duty paid consequent to finalisation of provisional assessments for 2002-03 to 2009-10. - HELD THAT: - The Tribunal applied the law as settled by the High Court of Karnataka that the relevant date for computation of interest is the date on which duty was due to be paid and not the date of final assessment, and that interest on short payment is payable from the due date. Because the method for calculating interest was under judicial consideration, the authorities had kept computation of interest on both excess and short-paid duty pending. After the High Court decision clarified the relevant date, the appellant quantified interest payable to it on excess duty and interest payable to the Government on short payment and sought adjustment with refund of the balance. The authorities below refused refund on the ground that the final assessment orders were not challenged; the Tribunal found this untenable because the computations themselves had been deferred pending judicial determination of the relevant date. The appellant had, moreover, paid the interest due to the Government without demand. In these circumstances and applying the settled principle on the relevant date for interest, there was no valid reason to withhold refund/adjustment of the interest due to the appellant, and the impugned order withholding the refund was set aside with consequential relief to the appellant. [Paras 6, 7]

Appeal allowed; impugned order set aside and interest on excess duty for 2002-03 to 2009-10 to be adjusted/refunded to the appellant with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, setting aside the orders refusing refund/adjustment of interest and directing release of the interest due to the appellant for the period 2002-03 to 2009-10 in accordance with the High Court's ruling on the relevant date for computation of interest.

Liability of the principal manufacturer for excise duty on waste and scrap generated at a job worker's premises - job work under Notification No. 214/86 - CE - demand of excise duty on scrap cleared by job worker without payment of duty - Rule 4(5)(a) of the Cenvat Credit Rules (liberal construction and absence of principal's liability) - binding effect of consistent tribunal decisions in the appellant's own case

Liability of the principal manufacturer for excise duty on waste and scrap generated at a job worker's premises - demand of excise duty on scrap cleared by job worker without payment of duty - Rule 4(5)(a) of the Cenvat Credit Rules (liberal construction and absence of principal's liability) - binding effect of consistent tribunal decisions in the appellant's own case - Principal manufacturer is not liable to pay Central Excise duty on waste and scrap generated at the job worker's factory and cleared by the job worker without payment of duty for the disputed period. - HELD THAT: - The Tribunal considered whether the principal manufacturer, who sent raw materials to job workers under Notification No. 214/86 - CE, is liable to pay excise duty on waste and scrap generated at the job worker's premises and cleared by the job worker without payment. The Bench applied settled precedent in the appellant's own earlier decisions, which held that the obligation to pay duty in such circumstances existed only under the erstwhile Rule 57F(3) and is not found in the subsequent Cenvat/CENVAT Credit regime. On examination, Rule 4(5)(a) of the Cenvat Credit Rules, 2004 does not impose liability on the principal manufacturer for waste and scrap generated at the job worker's end; the provision was held to be more liberal and not to create such a charge. The Tribunal therefore followed its consistent earlier orders in the appellant's cases (cited by order numbers and dates) and concluded that the impugned demands cannot be sustained, warranting setting aside of the orders and allowance of the appeals with consequential relief as per law.

Impugned orders set aside; appeals allowed with consequential reliefs, if any.

Final Conclusion: The Tribunal, following its prior decisions in the appellant's own cases and construing Rule 4(5)(a) of the Cenvat Credit Rules, 2004 as not imposing liability on the principal manufacturer for waste and scrap cleared by job workers without payment of duty, set aside the impugned demands and allowed the appeals with consequential relief, if any.

Extended period of limitation - suppression of facts - proviso to Section 11A(1) of the Central Excise Act, 1944 - self-assessment - onus on Revenue to prove mens rea

Extended period of limitation - suppression of facts - proviso to Section 11A(1) of the Central Excise Act, 1944 - self-assessment - onus on Revenue to prove mens rea - Whether the extended period under the proviso to Section 11A(1) could be invoked in respect of demands for December, 2003 to March, 2006 - HELD THAT: - The Court considered the show cause notice allegations, the appellant's contemporaneous records (Forms A, B, C, D-3 and monthly stock registers), repeated departmental and Accountant General audits that raised no objection, and the fact that D-3 intimations and returns were furnished. The adjudicating order did not identify any specific deliberate concealment or positive act showing an intent to evade duty; it relied largely on post-facto statements of third parties. In law, invocation of the proviso requires proof of deliberate suppression, fraud, collusion or wilful misstatement by the assessee - a mens rea which the Revenue must establish. The Court reviewed binding authorities holding that mere omission, difference of opinion, incorrect self-assessment, or detection only on audit do not ipso facto amount to suppression with intent to evade. Given the appellant's production of required records and the absence in the show cause notice or adjudication of particularized findings showing deliberate suppression with intent to evade duty, the proviso to Section 11A(1) could not be invoked. Consequently the demand, being founded on the extended period, could not be sustained. [Paras 43, 44, 60, 61]

The extended period under the proviso to Section 11A(1) is not invocable for the period December, 2003 to March, 2006; the demand based on the extended period cannot be sustained.

Final Conclusion: The impugned order dated 31.03.2021 is set aside for being barred by limitation as the extended period could not be invoked; all six appeals are allowed.

In contravention with the fundamental policy of Indian law - patent illegality appearing on the face of the award - acknowledgement under Section 18 of the Limitation Act, 1963 - Article 55 of the Limitation Act, 1963 - Group of Companies doctrine - public policy of India - reasoned award under Section 31(3) of the Arbitration and Conciliation Act, 1996

Group of Companies doctrine - arbitration agreement binding non-signatory - Gita Power (holding company) was bound by the arbitration agreement and jointly and severally liable with OPG. - HELD THAT: - The Arbitral Tribunal found on the evidence of formation and performance of the contract that Gita Power actively participated in negotiations, issued the initial purchase orders and made advance payments which were subsequently affirmed by OPG. On the facts the two companies acted as a single economic enterprise and the Group of Companies doctrine applied. The Court held that an arbitral tribunal is entitled to determine whether a non-signatory is bound by the arbitration agreement from the express record, surrounding circumstances and conduct; the tribunal's conclusion was a possible view and not amenable to interference under Section 34(2-A).

Gita Power is bound by the arbitration agreement and jointly and severally liable with OPG.

Article 55 of the Limitation Act, 1963 - acknowledgement under Section 18 of the Limitation Act, 1963 - Enexio's claim for the outstanding principal amount was not barred by limitation. - HELD THAT: - The Court held the claim was an indivisible contractual claim for compensation and therefore governed by Article 55 (residuary article for contractual claims). The tribunal's factual findings-completion/commissioning events, claimant's request for performance guarantee test and the deeming provisions-established that the cause of action for the composite claim matured on expiry of 180 days after the claimant's request; limitation therefore began to run from 19 March 2016. Further, the minutes of meeting dated 19 April 2018 constituted an acknowledgement in writing within the meaning of Section 18 of the Limitation Act in respect of the items recorded, and the subsequent offer dated 26 May 2018 reinforced that position; a fresh period of limitation ran from the date of that acknowledgement, so that the request for arbitration of 2 May 2019 was within time. The court accepted the tribunal's application of these principles and refused to set aside the award on limitation grounds.

The claim for the outstanding principal amount was within limitation and not time barred.

Counterclaim treated as separate suit - limitation for counterclaim - Counterclaims for cost of repair/replacement of gearboxes and fan modules were barred by limitation. - HELD THAT: - The Court applied the principle that a counterclaim is a separate cause of action whose limitation is reckoned from the date its cause of action accrues. The tribunal found that the alleged defects giving rise to these counterclaims arose prior to the relevant limitation cut off and that there was no material showing these two counterclaims were included in the negotiations or acknowledged in the minutes dated 19 April 2018. Because the minutes did not refer to these specific items, they did not extend limitation for those counterclaims under Section 18, and the tribunal was justified in dismissing them as time barred.

Counterclaims for repair/replacement of gearboxes and fan modules were barred by limitation and correctly rejected.

Effect of time barred declaratory relief on substantive claim - debit notes and set off - Rejection of declaratory relief as time barred did not affect Enexio's claim for the outstanding principal amount. - HELD THAT: - The Court noted that limitation bars the remedy but not the underlying right. The debit notes were unilateral acts of the purchaser and the declaratory relief to invalidate them (Article 58) was time barred; that, however, did not automatically extinguish the contractor's substantive claim for outstanding contractual dues. The tribunal was entitled to decide on the substantive claim and whether any deduction ought to be adjusted against amounts due; rejecting the declaratory relief on limitation grounds therefore did not make the award perverse.

The time barred status of the declaratory relief did not vitiate the award for the outstanding principal amount.

Patent illegality appearing on the face of the award - reasoned award under Section 31(3) of the Arbitration and Conciliation Act, 1996 - The arbitral tribunal's reasoning was not patently illegal or perverse and no public policy cause for setting aside the award was made out. - HELD THAT: - The Court reviewed the standard under the 2015 amendments (limited scope of "public policy" and the narrow ground of patent illegality under Section 34(2 A)). It found the tribunal's factual findings and legal conclusions-on joint liability, limitation, and allocation of specific counterclaims-were intelligible, based on evidence, and comprised a possible view. The tribunal's reference to "ongoing negotiations" was read in context as applying the statutory doctrine of written acknowledgement (Section 18) together with the offer of 26 May 2018. Any imprecision in language did not amount to a perversity or patent illegality that would warrant setting aside the award under Section 34.

The award is not in conflict with public policy nor vitiated by patent illegality; it stands.

Final Conclusion: The Court dismissed the challenge to the arbitral award. Gita Power was held bound by the arbitration agreement and jointly and severally liable with OPG; Enexio's composite claim for the outstanding principal amount was governed by Article 55 and held within limitation (limitation extended by the written acknowledgement of 19 April 2018 and related communications); the counterclaims for gearbox and fan module repairs were correctly held time barred; rejection of time barred declaratory relief did not affect the substantive claim; and the award did not exhibit patent illegality or public policy infirmity warranting setting aside. Appeals dismissed; parties to bear their own costs.

Existence of an arbitration agreement - scope of jurisdiction under Section 11(6) - prima facie test for referral - limited judicial enquiry under Section 11 - joinder of non-signatories to arbitration - consent of non-signatory via conduct - composite transactions and commonality of subject matter - competence competence - party autonomy and privity

Scope of jurisdiction under Section 11(6) - existence of an arbitration agreement - prima facie test for referral - limited judicial enquiry under Section 11 - The limited scope of the referral court's enquiry under Section 11(6) and the standard of prima facie examination of the existence of an arbitration agreement. - HELD THAT: - The Court examined the evolution of Section 11 jurisdiction and concluded that the referral court's task is confined to examining the existence of an arbitration agreement by applying a prima facie test rather than conducting a detailed inquiry into disputed factual matters. Earlier wider powers recognised in SBP & Co. and Boghara Polyfab were legislatively constrained by Section 11(6A), and subsequent decisions (Duro Felguera, Garware, Vidya Drolia as clarified in In Re: Interplay and later authorities) require the referral court to ascertain only whether an arbitration clause exists and, where appropriate, to apply a prima facie assessment of formal validity. The Court emphasised that substantive and contested factual issues, including detailed evidentiary disputes, are ordinarily for the Arbitral Tribunal to decide under the doctrine of competence competence, and that overreaching at the Section 11 stage risks leaving a claimant forum less and frustrates the statute's object of expedition. [Paras 51, 56, 57, 59, 61]

The existence of an arbitration agreement is satisfied on a prima facie basis for the purposes of Section 11(6); the referral court's enquiry must remain limited and not resolve contested factual questions which should be left to the Arbitral Tribunal.

Joinder of non-signatories to arbitration - consent of non-signatory via conduct - composite transactions and commonality of subject matter - competence competence - party autonomy and privity - Whether, on a prima facie view, the SRG Group (a non signatory) should be referred to arbitration along with the signatory parties. - HELD THAT: - Having applied the limited Section 11 enquiry, the Court found that the FAA, read with Schedules 7 and 8, prima facie contemplates interdependent transactions involving Millenium and Deegee such that effective implementation may require the SRG Group's involvement. The Court recognised the legal principles set out in Cox and Kings that non signatories may be bound where there is evidence of an intention to be bound manifested by conduct, a defined legal relationship, or positive, direct and substantial participation in negotiation or performance. However, the Court observed that the question whether SRG consented to be bound raises multiple disputed factual issues (e.g., whether persons purportedly representing SRG actually did so, the import of marked emails and their non protest, the nature of due diligence disclosures, and SRG's asserted extra contractual demand). These matters are factually complex and are within the Arbitral Tribunal's province to decide after evidence is led. Consequently, rather than deciding on joinder at the Section 11 stage, the Court considered it appropriate to leave the determination of whether SRG is a veritable party to the arbitration agreement to the Arbitral Tribunal under Section 16, preserving the parties' rights to raise objections there. [Paras 70, 72, 78, 80, 81]

The referral court will not decide the complex factual question of whether the non signatory SRG Group is bound by the arbitration agreement; that issue is to be addressed by the Arbitral Tribunal, and the tribunal should be constituted.

Final Conclusion: The petition under Section 11 is allowed. On the limited prima facie examination required at the Section 11 stage the Court found an arbitration agreement to exist and, recognising that the question of whether the non signatory SRG Group is bound involves complex factual inquiries, appointed Mr. Akil Kureshi as sole arbitrator and left all rights and contentions of the parties (including the question of SRG's joinder) open for adjudication by the Arbitral Tribunal.

Prima facie case - discharge from prosecution - criminal conspiracy - evidentiary value of diary entries - role of an accused in the charge-sheet

Prima facie case - discharge from prosecution - evidentiary value of diary entries - Whether the respondent was correctly discharged for lack of a prima facie case linking him to the alleged offences and conspiracy - HELD THAT: - The Court examined the charge-sheet and materials relied upon by the prosecution and concluded that the allegations against the respondent consist largely of a bald assertion of participation in a conspiracy without particulars connecting him to the payments alleged. The specific transactions said to involve illegal gratification identify other individuals as payors and recipients; there is no intercepted telephonic conversation implicating the respondent and no direct allegation in the charge-sheet connecting him to the payment of the smaller gratification. The diary entries relied upon record the letters "DM" against contested amounts, but the prosecution itself, in its reply to the discharge application, admitted that "DM" referred to Dushyant Mulani and not the respondent. Although the top of the diary page bears the name "Dilipbhai", the material as a whole does not support an inference, on a prima facie basis, that the respondent was the person denoted by the diary entries. The respondent's name does not appear in the First Information Report and no witness has identified the diary entries as referring to him. On that basis the High Court's assessment that a prima facie case was not made out against the respondent was sustainable. [Paras 15, 16]

The High Court was correct in discharging the respondent for want of a prima facie case; the appeal is dismissed.

Final Conclusion: The Supreme Court dismissed the appeal and upheld the High Court's order discharging the respondent, holding that the material in the charge-sheet (including diary entries) did not establish a prima facie case against him and that his inclusion in the conspiracy allegations lacked sufficient particularity.

Vicarious liability under Section 141 of the Negotiable Instruments Act - liability of non-executive/independent directors for dishonour of cheques - requirement of specific averments to fasten criminal liability on directors - quashing of criminal complaint as abuse of process where material does not disclose culpability

Liability of non-executive/independent directors for dishonour of cheques - requirement of specific averments to fasten criminal liability on directors - vicarious liability under Section 141 of the Negotiable Instruments Act - Whether the petitioner's prosecution as a Director can be sustained where he was an Additional Independent Non-Executive Director who had resigned prior to cheque dishonour and the complaint contains no specific averments showing he was in charge of the company's day-to-day affairs. - HELD THAT: - The complaint merely arrayed the petitioner as a Director without specific allegations demonstrating that, at the material time, he was in charge of and responsible for the conduct of the company's business. The petition is supported by Form DIR-12 and DIR-11 showing appointment on 26.02.2020 and resignation w.e.f. 08.12.2021, i.e., four months before the cheques were presented and dishonoured on 22.04.2022. The company's Master Data did not reflect the petitioner as Director and the Annual Report for 2020-21 shows the petitioner did not attend any of nine Board meetings or the AGM, indicating non-involvement in day-to-day affairs. Binding Supreme Court precedents require strict construction of penal vicarious liability under Section 141 and specific averments to fasten liability on Directors who are not in charge of daily management; mere designation as Director or generalised allegations are insufficient. Applying these principles, the Court found that the materials do not disclose that the petitioner was at the helm of affairs or privy to or signatory of the transaction, and continuation of proceedings against him would be an abuse of process. [Paras 10, 11, 12, 15, 16]

Criminal complaint against the petitioner is quashed and the summoning order set aside.

Final Conclusion: Taking into account the petitioner's resignation prior to dishonour, absence of any specific averments showing control of the company's affairs, and binding precedents requiring particularised pleadings to fasten vicarious liability on non-executive directors, the High Court allowed the petition, quashed the complaint against the petitioner and set aside the summoning order.

Inherent powers under Section 482 Cr.P.C. - Quashing criminal proceedings - Prosecution under Section 138 of the Negotiable Instruments Act - Abuse of process of court - When allegations taken at face value do not constitute an offence - Liability of non-signatories and non-partners in cheque dishonour prosecutions - Exercise of inherent jurisdiction sparingly to secure ends of justice

Prosecution under Section 138 of the Negotiable Instruments Act - Liability of non-signatories and non-partners in cheque dishonour prosecutions - Abuse of process of court - Whether criminal proceedings under Section 138 of the Negotiable Instruments Act against petitioners who are neither partners of the partnership firm nor signatories of the disputed instruments should be quashed as an abuse of process - HELD THAT: - The Court found as an admitted fact that the petitioners are neither partners of the partnership firm nor signatories of the cheques complained of, and that the instruments were signed by the authorised signatory of the partnership firm. Applying the established tests for exercise of inherent jurisdiction, and relying on the principles that the power under Section 482 must be exercised sparingly and to prevent abuse of process, the Court held that where, if the allegations in the complaint are accepted at face value, they do not constitute the offence as to the persons proceeded against, quashing is warranted. The Court noted that the complainant's civil suit did not implead the partnership firm partners nor seek relief against them, and that in related complaints other Courts had issued process only against the partnership firm and its partners. Given these facts, and the absence of material to show that the petitioners bore responsibility for issuance of the cheque, continuation of prosecution against them amounted to misuse of the criminal process. The Court distinguished the authorities relied upon by the complainant to the extent those required sterling incontrovertible material where a director/partner sought quash; on the present facts the basic averments themselves did not bring the petitioners within the class of persons liable under Section 138. Consequently, without further inquiry into evidence, the Court concluded that the trial court erred in issuing process against the petitioners and interference was warranted. [Paras 9, 10, 12, 13]

Proceedings in Criminal Case Nos. 6364 of 2018 and 6457 of 2018 are quashed qua the petitioners

Final Conclusion: The petitions under Section 482 Cr.P.C. are allowed; criminal proceedings in the specified cases are quashed insofar as they relate to the petitioners on the ground that prosecution against persons who were neither partners nor signatories amounted to abuse of process.

Quashing of summoning order under Section 482 Cr.P.C. - Criminal liability for dishonour of cheques under Section 138 of the Negotiable Instruments Act - Defence of cheque issued as security - Prima facie sufficiency of complaint and role of Magistrate in summoning - Defences to be proved at trial and not by way of quashing petition

Criminal liability for dishonour of cheques under Section 138 of the Negotiable Instruments Act - Defence of cheque issued as security - Prima facie sufficiency of complaint and role of Magistrate in summoning - Defences to be proved at trial and not by way of quashing petition - Validity of the Summoning Order dated 29.11.2018 in the complaint under Section 138 NI Act and whether it is liable to be quashed in exercise of inherent jurisdiction under Section 482 Cr.P.C. - HELD THAT: - The Court found that the issuance of the two cheques and their subsequent dishonour for insufficiency of funds are admitted on the record. The petitioner's contentions that the cheques were given only as security, that pledged goods were stolen, and that ledger entries relied upon by the complainant are inauthentic, constitute defences which require proof during trial. The learned Magistrate's function at the summoning stage is to assess whether a prima facie case is made out from the complaint; on the material before the Court, no infirmity was shown in the impugned summoning order. Accordingly, the matters relied upon by the petitioner do not warrant quashing of the complaint at this stage and are to be adjudicated in the trial process. [Paras 20, 21, 22, 23, 24]

Summoning Order dated 29.11.2018 is not liable to be quashed; the defences raised by the petitioner are matters for trial.

Final Conclusion: Petition under Section 482 Cr.P.C. dismissed and the Summoning Order dated 29.11.2018 passed by the Metropolitan Magistrate in Complaint Case No. CC 14338/2018 is upheld.

Vicarious liability of directors under Section 141 of the Negotiable Instruments Act - liability of non-executive directors - requirement of specific averments in complaint to fasten director's liability - role of being in charge of and responsible for conduct of company's business - quashing of complaint for absence of material averments

Liability of non-executive directors - requirement of specific averments in complaint to fasten director's liability - vicarious liability of directors under Section 141 of the Negotiable Instruments Act - quashing of complaint for absence of material averments - Whether the complaint and summons issued against the petitioner, a non-executive director, in proceedings under the Negotiable Instruments Act can be sustained in the absence of specific averments showing her role in or responsibility for the company's transaction. - HELD THAT: - The Court applied the settled principle that vicarious liability under Section 141 of the NI Act must be strictly construed and requires specific averments in the complaint demonstrating how the director was "in charge of and responsible for the conduct of the business" of the company or that the offence was with the director's consent, connivance, or attributable to her negligence. The petitioner was shown by uncontroverted Form DIR-12 to be a non-executive director and it was specifically pleaded that she did not manage day-to-day affairs. The complaint contained only a general averment that the directors were responsible for the conduct of the company, without any particularised factual allegations connecting the petitioner to the loan transaction, the issuance or signing of the cheque, or any dealings with the complainant. The Coordinate Bench's earlier order in respect of another director did not examine whether that director was non-executive; hence it is distinguishable. Reliance on the Apex Court's decisions (including the principle in Pooja Ravinder Devidasani and its reaffirmation in Sunita Palita) established that mere directorship, without material particularisation of the director's active control or participation in the relevant transaction, is insufficient to fasten criminal liability under the NI Act. Given the absence of specific averments against the petitioner and her status as a non-executive director, continuation of the complaint against her could not be permitted. [Paras 9, 10, 11, 12]

The complaint insofar as it relates to the petitioner is quashed.

Final Conclusion: Because the petitioner is a non-executive director and the complaint contains no specific averments linking her to the loan or cheque transaction or showing she was in charge of the company's business, the complaint and summons insofar as they relate to the petitioner are quashed.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Reverse onus clause - Burden of proof on the accused to rebut presumption - Dishonour of cheque for insufficiency of funds - Presentation and notice requirements for Section 138 - Appeal against acquittal under Section 378(4) Cr.P.C.

Offence under Section 138 of the Negotiable Instruments Act - Dishonour of cheque for insufficiency of funds - Presentation and notice requirements for Section 138 - Presumption under Section 139 of the Negotiable Instruments Act - Prosecution proved the ingredients of the offence under Section 138 and the presumptive operation of Section 139 was attracted. - HELD THAT: - The Court examined whether the cheque was drawn on the accused's account, presented to the bank, returned dishonoured for insufficiency of funds, and whether notice was given and not complied with. The complainant produced the cheque, the bank memo of return and the notice, and the accused admitted signature on the cheque. In view of admissions and documentary proof, the presumptive clause in Section 139 was activated, shifting the evidential burden to the accused to show that the cheque was not issued for discharge of any debt or liability. The trial court's acceptance of lapses in ancillary documentation did not negate the primary documentary and oral evidence establishing the statutory ingredients. [Paras 6, 11]

The ingredients of Section 138 were found established and the presumption under Section 139 applied.

Presumption under Section 139 of the Negotiable Instruments Act - Reverse onus clause - Burden of proof on the accused to rebut presumption - The accused failed to discharge the evidential burden cast upon him under Section 139 and the trial court erred in holding otherwise based on peripheral lapses of the complainant. - HELD THAT: - Although the accused pleaded misuse of blank signed cheques, no evidence was led by him to substantiate that defence. The Court reiterated the legal position that once the complainant proves the cheque and dishonour and the drawer's signature is admitted, Section 139 raises a presumption that the cheque was issued for discharge of liability and the accused must rebut that presumption. The trial court impermissibly drew an adverse inference against the complainant for not producing ancillary documents and, on that basis, concluded that the accused had discharged his burden; the High Court found that approach contrary to settled law and the evidence on record. [Paras 11, 12]

The accused did not rebut the presumption under Section 139 and the trial court's conclusion to the contrary was set aside.

Appeal against acquittal under Section 378(4) Cr.P.C. - Offence under Section 138 of the Negotiable Instruments Act - The acquittal was set aside, the respondent was convicted under Section 138 and sentence and compensation were imposed; bail was cancelled and surrender directed. - HELD THAT: - Applying the foregoing conclusions, the High Court allowed the appeal against acquittal, convicted the sole respondent for commission of the offence under Section 138, and considered mitigating and aggravating circumstances for sentencing. Having regard to the absence of prior conviction and other case aspects, the Court imposed a custodial sentence and directed payment of fine and compensation, providing the routine consequences for non-payment and cancelling bail with a surrender timeline. [Paras 13, 15, 16]

Acquittal set aside; respondent convicted under Section 138, sentenced to imprisonment and fine/compensation; bail cancelled and surrender directed.

Final Conclusion: The High Court allowed the appeal against acquittal, held that the requirements of Section 138 read with the presumption in Section 139 were satisfied and not rebutted by the accused, set aside the trial court's acquittal, convicted the respondent under Section 138, imposed sentence and compensation, cancelled bail and directed surrender.