TaxTMI Updates e-Newsletter
Sep 29,2022

Validity of pre-deposit made from electronic credit ledger - mandated pre-deposit for preferring appeal under GST proceedings - obligation of appellate authority to decide appeal on merits despite mode of deposit - clarificatory circular permitting utilization of electronic credit ledger for payment of output tax

Validity of pre-deposit made from electronic credit ledger - clarificatory circular permitting utilization of electronic credit ledger for payment of output tax - Pre-deposit made by the assessee from the electronic credit ledger satisfies the mandatory pre-deposit requirement and cannot be rejected solely because it was not made from the electronic cash ledger. - HELD THAT: - The Court noted that the assessee firm had made the mandatory 10% pre-deposit through the electronic credit ledger before the First Appellate Authority. Reliance was placed on a Government clarificatory circular dated 06.07.2022 which clarifies that payments towards output tax, whether self-assessed or payable as a consequence of proceedings under the GST laws, can be made by utilization of amounts available in the electronic credit ledger of a registered person. The First Appellate Authority rejected the appeal only because the deposit was not made from the electronic cash ledger and did not decide the matter on merits. The Court held that the appellate authority was not justified in insisting on deposit from the cash ledger when a valid pre-deposit had already been made from the electronic credit ledger and therefore the appeal could not be summarily rejected on that ground.

The impugned order rejecting the appeal for want of pre-deposit from the cash ledger was set aside; the pre-deposit from the electronic credit ledger was held valid.

Obligation of appellate authority to decide appeal on merits - The First Appellate Authority must decide the appeal on merits and is directed to do so within a stipulated time. - HELD THAT: - Having found that a valid pre-deposit existed, the Court directed that the First Appellate Authority should not insist upon a fresh pre-deposit from the electronic cash ledger as a condition to entertain the appeal. The appellate authority was ordered to decide the appeal on merits in accordance with law. The Court provided a limited procedural direction by setting aside the impugned order and mandating adjudication on merits within one month from production of a certified copy of the order.

The matter was remitted to the First Appellate Authority to decide the appeal on merits within one month from production of certified copy of this order.

Final Conclusion: Writ petition partly allowed; the impugned order dated 16.06.2022 under Section 74(9) of the GST Act for financial year 2017-18 is set aside and the First Appellate Authority is directed to decide the appeal on merits (without insisting on deposit from the electronic cash ledger) within one month from production of a certified copy of this order.

Regular bail - discretion to enlarge on bail - custodial interrogation not required - offences triable by Magistrate - insufficiency of prosecution material regarding misappropriation - conditions of bail - prima facie observations not binding on trial court - Sanjay Chandra principle

Regular bail - discretion to enlarge on bail - custodial interrogation not required - offences triable by Magistrate - insufficiency of prosecution material regarding misappropriation - Sanjay Chandra principle - Applicant entitled to be enlarged on regular bail. - HELD THAT: - The Court exercised its discretionary power to grant regular bail after considering that the applicant has been in custody since 10.3.2022, the investigation is complete and the charge-sheet filed, no incriminating material was recovered from the applicant during custody making further custodial interrogation unnecessary, and the offences are triable by a Magistrate. The Court also noted that the prosecution could not demonstrate the quantum of any misappropriation under Input Tax Credit nor produce a complaint from the GST Officer alleging misappropriation of public funds. Reliance was placed on the principles in Sanjay Chandra reported in [2012] 1 SCC 40. Without undertaking detailed discussion of the evidence, these factors led the Court to conclude that the case is fit for bail.

Application allowed and applicant ordered to be released on regular bail.

Conditions of bail - personal bond - Bail is subject to specified conditions and furnishing of bond and surety. - HELD THAT: - The bail was granted on execution of a personal bond with one surety to the satisfaction of the trial court and subject to conditions including prohibition on misusing liberty or acting to prejudice the prosecution, surrender of passport, prior permission before leaving India, monthly reporting at the police station for six months, and furnishing and not changing residence without permission of the trial court. The Court directed adherence to these conditions and permitted the trial court to modify them as lawful.

Bail to be granted on specified bond and conditions as recorded.

Prima facie observations not binding on trial court - Trial court shall not be influenced by the prima facie observations made in this order. - HELD THAT: - The High Court expressly recorded that its prima facie observations in the bail order are not to influence the trial court's adjudication at trial, preserving the trial court's independent assessment of evidence and issues.

Trial court to proceed independently, uninfluenced by this Court's prima facie remarks.

Final Conclusion: The successive bail application is allowed: the applicant is released on regular bail on executing the prescribed bond and surety and subject to the enumerated conditions; the trial court may modify conditions as appropriate and must not be influenced by the High Court's prima facie observations.

Authentication of orders by digital signature under Rule 26(3) of the CGST Rules - validity and legal effect of an unsigned / not digitally signed order - commencement of limitation period upon communication of a digitally authenticated order - restoration and remand of an appeal for fresh consideration on merits - requirement of personal hearing and reasoned order on re-admission

Authentication of orders by digital signature under Rule 26(3) of the CGST Rules - validity and legal effect of an unsigned / not digitally signed order - commencement of limitation period upon communication of a digitally authenticated order - Effect of absence of digital signature on an order of cancellation of registration and the date from which limitation to file an appeal runs. - HELD THAT: - The Court found that Rule 26(3) of the CGST Rules requires orders issued under Chapter III to be authenticated by a digital signature or other notified mode. The original order dated 14 November 2019 was not digitally signed by the issuing authority and therefore, in the Court's view, lacked legal effect until the signature was affixed for attestation on 19 May 2021. The respondent's reliance on electronic receipt of an unsigned order would render the statutory authentication requirement redundant and was rejected. Consequently, the period of limitation for filing the appeal did not commence from the date of the unsigned upload but from the date on which the order was authenticated by the issuing authority for the purposes of attestation. [Paras 4, 5]

Absence of the prescribed digital signature renders the order ineffective for the purpose of commencing limitation; limitation commenced only when the order was digitally authenticated/attested.

Restoration and remand of an appeal for fresh consideration on merits - requirement of personal hearing and reasoned order on re-admission - Relief to be granted in view of the defect in authentication and manner of disposal on re-admission of the appeal. - HELD THAT: - Because the appellate authority dismissed the appeal as time-barred without regard to the defective authentication of the original order, the Court quashed and set aside the impugned appellate order and restored the appeal to the file of the Appellate Authority (Respondent No.3). The Appellate Authority was directed to consider the appeal on merits in accordance with law. Before passing any order, the Appellate Authority must grant the petitioner a personal hearing with at least seven working days' advance notice and pass a reasoned order. The Court expressly refrained from expressing any opinion on the merits. [Paras 6, 7, 9]

Impugned order quashed; appeal restored and remanded for fresh consideration on merits with directions for personal hearing and issuance of a reasoned order.

Final Conclusion: The order dismissing the appeal as time-barred is quashed because the original cancellation order lacked the prescribed digital authentication; the appeal is restored to the Appellate Authority for fresh consideration on merits, after affording the petitioner at least seven working days' notice for personal hearing and thereafter passing a reasoned order.

Transitional credit under GST - filing of Form GST TRAN-1 and TRAN-2 - extension of time for filing transitional forms - implementation of Supreme Court directions in Filco Trade Centre

Filing of Form GST TRAN-1 and TRAN-2 - extension of time for filing transitional forms - transitional credit under GST - Whether the writ petition seeking directions for filing/revision of Form GST TRAN-1 and TRAN-2 and related reliefs is maintainable in view of the decision of this Court in W.P.No.15082 of 2018 and the Supreme Court's order in Filco Trade Centre - HELD THAT: - The parties agreed that the present petition is covered by the earlier decision of this Court in W.P.No.15082 of 2018 and batch, which itself was considered in light of the Supreme Court's order in Union of India v. Filco Trade Centre Pvt. Ltd. The Supreme Court directed reopening of the common portal for filing TRAN-1 and TRAN-2 for a specified two-month window, permitted filing or revision of forms by aggrieved registered assessees, required GSTN to ensure technical readiness, afforded officers 90 days thereafter to verify claims and pass orders after giving opportunity, and directed that allowed transitional credit be reflected in the Electronic Credit Ledger. The High Court recorded that those directions sufficiently cover the petitioners' interests and that no grievance subsists. On that basis, the writ petition was disposed of in conformity with the Supreme Court's directions. [Paras 3, 4, 5, 6, 7]

Writ petition disposed of as covered by the earlier decision and the Supreme Court's directions in Filco Trade Centre; no costs.

Final Conclusion: The High Court disposed of the writ petition as being covered by its earlier order in W.P.No.15082 of 2018 and the Supreme Court's directions in Filco Trade Centre, recording that the reliefs sought are adequately addressed by those directions; miscellaneous applications closed and no order as to costs.

Personal bond in lieu of bank guarantee - security for disputed tax and penalty - conditional stay pending disposal of appeal - modification of impugned order

Personal bond in lieu of bank guarantee - security for disputed tax and penalty - Permission to furnish a personal bond instead of a bank guarantee for the balance of disputed tax and penalty in respect of the assessment years 2003-2004 and 2004-2005. - HELD THAT: - The Court, noting that the petitioner had already remitted 50% of the disputed tax and that identical requests had previously been allowed by this Court, directed that the petitioner be permitted to furnish a personal bond for the balance of tax and penalty in lieu of the bank guarantee required by the appellate authority. The respondents did not contest the request. The impugned orders dated 25.08.2022 were therefore modified to permit the alternative security in the limited manner stated.

Petitioner permitted to furnish a personal bond for the balance of tax and penalty for AY 2003-2004 and AY 2004-2005 in place of a bank guarantee; impugned orders modified to that extent.

Conditional stay pending disposal of appeal - modification of impugned order - Grant of stay of the balance of disputed tax and penalty until disposal of the appeals, conditional upon furnishing of the personal bond. - HELD THAT: - Subject to the petitioner furnishing the personal bond within four weeks, the Court ordered a stay of the balance of disputed tax and penalty until the appeals before the first appellate authority are disposed of. This stay is expressly conditional and limited to the security arrangement sanctioned by the Court, and the impugned orders stand modified only to this extent.

On furnishing the personal bond within four weeks, stay granted on the balance of the disputed tax and penalty till disposal of the appeals; modification of the impugned orders limited to this relief.

Final Conclusion: Writ petitions disposed by modifying the impugned orders dated 25.08.2022 to permit the petitioner to furnish a personal bond in lieu of a bank guarantee for the balance of disputed tax and penalty for AY 2003-2004 and AY 2004-2005, and, upon such furnishing within four weeks, a stay of the balance until disposal of the appeals; no costs.

Summons in GST investigation - Compliance with Instruction No.3 of 2020-2023 (GST-Investigations) dated 17.08.2022 - Recording of statements in accordance with Paramvir Singh Saini v. Baljit Singh - Joining investigation by video-conferencing - Requirement to indicate broad contours of enquiry in summons - Interim protection from coercive action

Summons in GST investigation - Compliance with Instruction No.3 of 2020-2023 (GST-Investigations) dated 17.08.2022 - Recording of statements in accordance with Paramvir Singh Saini v. Baljit Singh - Requirement to indicate broad contours of enquiry in summons - Joining investigation by video-conferencing - Obligations of the respondents when issuing fresh summons and conducting recording of statements, and the petitioners' undertaking to join investigation. - HELD THAT: - The High Court directed that, if fresh summons are issued to the petitioners or their officers, the respondents must follow the guidelines contained in Instruction No.3 of 2020-2023 (GST-Investigations) dated 17.08.2022. The Court further directed that, when statements are recorded, the directions laid down by the Supreme Court in Paramvir Singh Saini v. Baljit Singh shall be observed. The petitioners gave an assurance that they and/or their directors or officers will join the investigation when summoned. The Court observed that it would assist the process if the broad contours of the enquiry are indicated in the summons so that time of the investigating officer and the person summoned is not wasted, while noting that this does not preclude asking questions to confront the person with information available to the officer or requiring production of documents necessary for investigation. [Paras 2, 3, 4]

Fresh summons, if issued, shall follow Instruction No.3 (2020-2023) and statements shall be recorded in conformity with Paramvir Singh Saini; petitioners shall be permitted to join and may be allowed to join by video-conference, and summons should, where practicable, indicate the broad contours of the enquiry.

Interim protection from coercive action - Prayer for interim protection against coercive action by the investigating authority. - HELD THAT: - The Court noted that there was presently no apprehension warranting a ruling on the petitioners' request for interim protection against coercive action. Consequently the Court did not adjudicate that prayer and declined to rule on it at this stage. [Paras 4]

Prayer for interim protection from coercive action is not ruled upon at present.

Final Conclusion: The petition is disposed of by directing adherence to Instruction No.3 (2020-2023) for any fresh summons and compliance with Paramvir Singh Saini during recording of statements; the petitioners have given an undertaking to join the investigation and may be permitted to join by video-conference; the request for interim protection from coercive action is left undecided.

Allowance of business losses not claimed in the original return where omission is a bona fide mistake - requirement to revise return during assessment proceedings under Section 139(5) of the Income tax Act - rectification of apparent mistake under Section 154 - concurrent findings of fact by appellate authorities and limitation on re appreciation of evidence by the High Court under Section 260A - power of tribunal to consider and grant relief in assessment proceedings to arrive at correct tax liability - genuineness of sundry creditors and additions on account of alleged bogus purchases - deletion of addition on account of static creditors where assessee retracts earlier surrender and places documents showing subsequent adjustments

Allowance of business losses not claimed in the original return where omission is a bona fide mistake - power of tribunal to consider and grant relief in assessment proceedings to arrive at correct tax liability - Whether the appellate authorities rightly permitted the Assessee to claim business losses on futures and options which were not claimed in the original return. - HELD THAT: - The Court accepted the concurrent conclusion of the ITAT and CIT(A) that the omission to claim the loss in the return arose from a mistake which was rectified in the audited accounts and by a revised computation filed during assessment proceedings. Relying on the principle that the tribunal has wide powers to ensure assessment of the correct tax liability, and having regard to precedents cited in the reasoning, the Court held that the appellate authorities were justified in allowing the claim rather than being constrained by the fact that the claim was not made in the original return. The Court observed that the error could also have been corrected by the AO in the assessment proceedings and that no infirmity was shown in the appellate findings that the omission was a bona fide mistake. [Paras 6, 10, 11]

The allowance of the business loss not claimed in the original return was upheld.

Genuineness of sundry creditors and additions on account of alleged bogus purchases - rectification of apparent mistake under Section 154 - concurrent findings of fact by appellate authorities and limitation on re appreciation of evidence by the High Court under Section 260A - Whether the addition made by the AO treating sundry creditors as bogus purchases was correctly sustained. - HELD THAT: - The Court noted that the AO had initially disallowed an amount but a rectification application showed a typographical error in the recorded figure; the CIT(A) corrected that apparent mistake. On merits, both CIT(A) and the ITAT examined bank statements and other record evidence and were satisfied as to the genuineness of sundry creditors to a large extent, deleting the addition accordingly and remanding a limited portion (Saket project) for verification. The High Court declined to re appreciate evidence, observing that under Section 260A it was confined to substantial questions of law and could not disturb concurrent fact findings absent perversity. No deficiency was pointed out in the appellate authorities' fact finding. [Paras 5, 7, 8]

Deletions of the addition relating to sundry creditors were upheld; the limited remand for verification remained appropriate and the High Court refused to re appreciate evidence.

Deletion of addition on account of static creditors where assessee retracts earlier surrender and places documents showing subsequent adjustments - concurrent findings of fact by appellate authorities and limitation on re appreciation of evidence by the High Court under Section 260A - Whether the addition on account of static creditors should have been sustained notwithstanding the assessee's subsequent retraction and documentary evidence. - HELD THAT: - The CIT(A) and ITAT observed that the assessee retracted its initial surrender and produced documents, ledger accounts and evidence of adjustments or write offs in subsequent periods, some of which were declared as income in a later year. The AO had not pointed to any discrepancy in those documents or questioned their veracity. The appellate authorities therefore correctly concluded that the AO could not rely solely on the initial letter of surrender to make the addition. The Revenue did not point to material contradicting these fact findings. [Paras 9]

The deletion of the addition on account of static creditors was upheld.

Concurrent findings of fact by appellate authorities and limitation on re appreciation of evidence by the High Court under Section 260A - Whether a substantial question of law arises for consideration under Section 260A warranting interference with the ITAT's and CIT(A)'s concurrent findings. - HELD THAT: - The Court observed that the appellate authorities had returned concurrent findings of fact in favour of the assessee and that the ITAT is the final fact finding authority in such appeals. No material was placed on record to show any perversity or illegality in those findings. Given that the dispute turned on appreciation of evidence and concurrent factual conclusions, the High Court found no substantial question of law for consideration under Section 260A and declined to interfere. [Paras 12]

No substantial question of law arises and the appeal is dismissed.

Final Conclusion: The High Court dismissed the Revenue's appeal, upholding the deletions made by the appellate authorities in respect of the business loss (found to be a bona fide mistake), the sundry creditors (subject to a limited remand), and the static creditors, and held that no substantial question of law arose under Section 260A to merit interference with concurrent findings of fact.

Treatment of gifts as explained property - unexplained assets and income under section 69B - reconciliation with VDIS disclosures - search and seizure and valuation of jewellery - burden of proof for claimed gifts

Treatment of gifts as explained property - unexplained assets and income under section 69B - reconciliation with VDIS disclosures - burden of proof for claimed gifts - Whether the addition made in respect of gold coins totalling 237 grams (valued at Rs.7,39,440/-) seized during search was rightly treated as unexplained and includible in the assessee's income. - HELD THAT: - The tribunal examined the assessee's explanation that the gold coins were received as gifts on occasions such as Diwali, Raksha Bandhan, wife's birthday and on the daughter's marriage, and that substantial jewellery had been earlier disclosed in VDIS-1997 and IDS-2016. The department carried out independent valuation and reconciliation; a portion of jewellery remained unreconciled and the AO treated the entire value of the 237 grams as unexplained under section 69B. The tribunal accepted that, given the stature of the family, customary practices of gifting gold, prior disclosures under VDIS/IDS and the small proportion of the coins relative to the total jewellery seized, some part of the coins could be credited as explained. However, the assessee failed to produce documentary evidence to fully substantiate the entire claim of gifts. Balancing these facts, the tribunal credited 137 grams as explained gifts and held that only 100 grams remain unexplained. The AO was directed to recompute the addition accordingly.

Addition partly deleted; 137 grams of gold coins to be accepted as gifts and only the value of 100 grams to be treated as unexplained-AO to recompute the addition.

Final Conclusion: Appeal partly allowed: the tribunal accepted part of the assessee's claim of gifts (137 gms) and directed recomputation so that only 100 gms of the seized gold coins are treated as unexplained and added to income.

Taxability of interest earned on interest-bearing maintenance security (IBMS) - principle of mutuality as applied to registered societies - set-off of interest payable to members against interest income earned - deduction of interest while computing income from other sources (Section 57(iii)) and exclusion of registered societies from disallowance under Section 40(ba) - precedential value of Coordinate Bench decisions and their application by following benches

Taxability of interest earned on interest-bearing maintenance security (IBMS) - Interest received by the assessee on IBMS is not taxable in the hands of the society where it is matched by corresponding liability to pay interest to members and is therefore not chargeable as income of the society. - HELD THAT: - The Tribunal noted that the assessee received interest on bank deposits created out of IBMS and claimed exemption, while the Assessing Officer taxed the same as income from other sources. Relying on the Coordinate Bench decision in Belaire Condominium Association (which itself considered the Supreme Court decision in Bangalore Club v. CIT), the Tribunal accepted that where the society holds security deposits and places them on deposit with the bank, and there is a direct nexus between interest earned on such deposits and the obligation to pay interest to members, the receipts cannot be treated as the society's taxable income. The Tribunal observed that the interest payable to members is deductible against the interest earned and that the existence of TDS on payments to members does not convert the interest receipts into the society's taxable income. Following the Coordinate Bench, the Revenue's grounds were held to be without merit and the CIT(A)'s deletion of the addition was upheld. [Paras 7, 8, 9]

Addition of interest on IBMS made by the AO is not sustainable and the Revenue's appeal in respect thereof is dismissed.

Principle of mutuality as applied to registered societies - precedential value of Coordinate Bench decisions and their application by following benches - The principle of mutuality, as interpreted in the relevant precedents relied upon by the Coordinate Bench, does not lead to taxing the interest in the hands of the society where the receipts are matched by a corresponding liability to members; the Tribunal followed the Coordinate Bench decision on this point. - HELD THAT: - Although the Assessing Officer invoked the Supreme Court's decision in Bangalore Club to deny the mutuality-based exemption, the Tribunal observed that the Coordinate Bench in Belaire considered Bangalore Club and distinguished the factual matrix. The present Bench respectfully followed the Coordinate Bench's reasoning that where the society's objects and the contractual obligations (apartment buyer agreements) create a direct nexus between deposits, bank interest and interest payable to members, the receipts do not constitute income of the society under the mutuality concept. Consequently, the Revenue's reliance on Bangalore Club did not warrant upsetting the CIT(A)'s order. [Paras 8, 9]

The mutuality-based reasoning as applied by the CIT(A) and the Coordinate Bench is accepted; the Revenue's challenge on this ground fails.

Set-off of interest payable to members against interest income earned - deduction of interest while computing income from other sources (Section 57(iii)) and exclusion of registered societies from disallowance under Section 40(ba) - Interest paid to members on security deposits is allowable as a deduction against interest earned by the society; the disallowance provision invoked by the AO is not attracted to registered societies and is inapplicable while computing income from other sources. - HELD THAT: - The Tribunal reproduced and accepted the Coordinate Bench's analysis that the interest expenditure incurred by the society is wholly and exclusively for earning the interest income and therefore is deductible. The Bench noted that the provision relied upon by the AO to disallow such payments excludes registered societies and, in any event, applies to computation of business income whereas the receipts here are assessed under income from other sources. The Tribunal further observed that Section 57(iii) (as considered by the Coordinate Bench) permits the deduction in question. On these bases the Tribunal directed that the AO allow set-off of interest payable to members against interest earned. [Paras 8]

Interest payable to members on IBMS is deductible against interest earned by the society; the AO's disallowance is not justified.

Final Conclusion: The Revenue's appeal is dismissed; the order of the CIT(A) deleting the addition of interest on IBMS is sustained and the Assessing Officer is directed to allow set-off/deduction of interest payable to members in computing the society's taxable income.

Deductibility of employer contribution to approved superannuation fund under Section 36(1)(iv) - Scope and application of Rules 87 and 88 (ordinary annual contribution and initial contribution) - Ad hoc / lump-sum contribution consequent to actuarial shortfall - Interaction between rule prescribed ceilings and contributions not in the nature of initial or ordinary annual contributions

Deductibility of employer contribution to approved superannuation fund under Section 36(1)(iv) - Scope and application of Rules 87 and 88 (ordinary annual contribution and initial contribution) - Ad hoc / lump-sum contribution consequent to actuarial shortfall - Whether an ad hoc or lump sum interim contribution to an approved superannuation fund, made to rectify an actuarial shortfall and not constituting an initial contribution or an ordinary annual contribution, is subject to the ceiling prescribed by Rules 87 and 88 and hence deductible under Section 36(1)(iv). - HELD THAT: - Section 36(1)(iv) permits deduction for sums paid by an employer as contribution to an approved superannuation fund "subject to such limits as may be prescribed" and to such conditions as the Board may specify where contributions are not annual contributions. Rules 87 and 88 prescribe limits only for ordinary annual contributions and for initial contributions. The Tribunal found, and the Revenue did not dispute, that the impugned payment was neither an ordinary annual contribution nor an initial contribution but a one time payment made to remedy an actuarial shortfall so that the fund could meet its obligations. Where a contribution does not fall within the categories for which ceilings are prescribed by the rules, no ceiling under Rules 87 or 88 applies to that contribution. The Court declined to decide collateral contentions concerning allowance under Section 37 and confined itself to the construction that the rules' limits are inapplicable to contributions which are neither initial nor ordinary annual contributions. The Tribunal's reliance on the coordinate decision in Glaxo Smithkline Pharmaceuticals was noted and the High Court of Bombay's affirmation of that decision was recorded, supporting the conclusion that the Tribunal rightly allowed the assessee's appeal on this legal premise.

The ad hoc/lump sum contribution made to meet an actuarial shortfall, being neither an initial nor an ordinary annual contribution, is not subject to the ceilings in Rules 87 and 88; the Tribunal was correct in allowing the assessee's claim.

Final Conclusion: Appeal dismissed. The substantial question of law is answered against the Revenue: a one time ad hoc contribution (not being an initial or ordinary annual contribution) to an approved superannuation fund is not constrained by the limits fixed in Rules 87 and 88 and the Tribunal's order in favour of the assessee is upheld.

Set-off of interest earned on share application money against public issue expenses - taxability of interest on share application money - incidental income versus primary-purpose test - statutory mandatory requirement to deposit share application money

Set-off of interest earned on share application money against public issue expenses - taxability of interest on share application money - incidental income versus primary-purpose test - statutory mandatory requirement to deposit share application money - Interest earned on share application money is eligible to be set off against public issue expenses where the deposit in bank was made to comply with statutory mandatory requirement and the interest was incidental to that purpose. - HELD THAT: - The Court applied the ratio of the Supreme Court in CIT v. Shree Rama Multi Tech Ltd., holding that where money (share application money) is deposited in a bank to comply with a statutory requirement and the earning of interest is merely incidental and not the primary purpose of the deposit, the interest income is not taxable as independent income but is eligible to be set off against public issue expenses. Conversely, where surplus money is deposited primarily to earn interest, such interest is taxable. On the facts, the appellant had deposited share application monies in banks in the pre allotment period and the accrued interest was inextricably linked to the requirement to raise share capital; therefore the interest was incidental and deductible against the expenses of the public issue. Applying Shree Rama Multi Tech Ltd., the Court concluded that the Tribunal's order upholding taxability of the interest could not stand and set aside that order. [Paras 16, 17, 18]

Substantial question answered for the assessee: interest on share application money is to be set off against public issue expenses; Tribunal order set aside and appeals allowed.

Final Conclusion: The appeals are allowed; the Tribunal's order is set aside and the interest earned on share application monies (for AY 1995-96) is to be set off against public issue expenses, applying the ratio of Shree Rama Multi Tech Ltd.; no order as to costs.

Principles of natural justice - reasonable opportunity of personal hearing - best judgment assessment under Section 144 - notice under Section 148 - remand for fresh consideration after hearing

Principles of natural justice - reasonable opportunity of personal hearing - Whether the petitioners were denied a reasonable opportunity of personal hearing amounting to violation of principles of natural justice. - HELD THAT: - The Court found that respondents had accepted the petitioners' request for personal hearing and therefore were obliged to provide reasonable notice to enable effective participation. The record showed the personal hearing notice was uploaded on the e-portal on 28/03/2022 at 2:37 p.m. for a hearing fixed the same day at 5:30 p.m., giving the petitioners roughly three hours' notice. Given the shortness of notice, the petitioners' assertion that relevant officers (being a Government Company engaged in election duty) and their counsel could not effectively attend or arrange representation was held to have merit. Reliance was placed on authorities recognising the necessity of pre-decisional hearing even where not expressly provided by statute, and that a party must be given opportunity to rebut adverse imputations before civil consequences are visited upon it. On these facts the Court held there was failure of natural justice in the peculiar circumstances. [Paras 9, 10, 14]

Findings of failure of natural justice were recorded and the impugned orders were quashed on this ground.

Best judgment assessment under Section 144 - notice under Section 148 - remand for fresh consideration after hearing - Disposition of the assessment orders passed under Section 144 and consequential penalty notices in view of the procedural infirmity. - HELD THAT: - Without adjudicating the merits of the assessment, the Court set aside the impugned orders dated 30/03/2022 which assessed income by invoking Section 144 following initiation under Section 148, on account of the procedural defect identified. The consequential penalty notices were also set aside for the present. The matter was remanded to the Assessing Officer with directions to grant the petitioners a reasonable opportunity of hearing and to dispose of the Show Cause Notices dated 19/03/2022 in accordance with law. The petitioners were granted liberty to file further replies within 15 days from the date of the order. All substantive contentions on merits were expressly left open for fresh consideration by the respondents. [Paras 15, 16, 17, 18, 19]

Impugned assessment and consequential penalty orders quashed; matter remitted for fresh consideration after granting reasonable opportunity of hearing; liberty granted to file further replies within 15 days.

Final Conclusion: The High Court quashed the assessments dated 30/03/2022 and the consequential penalty notices for Assessment Years 2017-18 and 2015-16 due to failure to afford a reasonable opportunity of personal hearing; the matter is remitted to the Assessing Officer for fresh disposal after granting such opportunity and permitting the petitioners to file further replies within 15 days, with all merits left open.

Remand jurisdiction of the appellate tribunal - power to remit for verification - decide on available record without remand - remand report - verification of documentary evidence by Assessing Officer

Remand jurisdiction of the appellate tribunal - decide on available record without remand - remand report - Direction of remand by the ITAT in respect of upward adjustment on account of Management Consultancy Fee paid to an associated enterprise - HELD THAT: - The High Court held that the ITAT's order remanding the issue to the Assessing Officer/Transfer Pricing Officer for fresh determination was not appropriate where the assessee stated it had no further evidence to place on record and where documents relied upon by the assessee were already before the Tribunal. Applying the principle that remand is an exception and should not be exercised routinely, the Court set aside the remand direction insofar as it required fresh adjudication by the AO and directed the ITAT to decide the issue on the basis of the documents filed by the assessee. The Court clarified that if the ITAT requires further verification it may seek a remand report from the AO, but it must itself determine the controversy on the available record. [Paras 12, 13]

Remand direction set aside; ITAT directed to decide the management consultancy fee issue on the documents on record, with power to seek a remand report if further verification is necessary.

Remand jurisdiction of the appellate tribunal - verification of documentary evidence by Assessing Officer - decide on available record without remand - Restoration by the ITAT of addition made on account of alleged Out of Books Receivables and the consequential remand to the Assessing Officer - HELD THAT: - The Court found that the ITAT's remand for verification by the AO should be set aside to the extent that the assessee had no further evidence to place on record and had already filed the documents. The High Court directed the ITAT to determine the genuineness and taxability of the alleged out of books receivables on the basis of the material before it, while retaining the limited power to obtain a remand report if the Tribunal considers additional verification strictly necessary. [Paras 12, 13]

Remand direction set aside; ITAT to decide the OBR issue on the documents on record, with the option to seek a remand report for limited verification if required.

Remand jurisdiction of the appellate tribunal - power to remit for verification - decide on available record without remand - Remand by the ITAT concerning verification of reversal of unutilised provision for taxes and computation of book profits under Section 115JB - HELD THAT: - The High Court accepted the assessee's stance that the figures relied upon could be verified from the audited accounts and computations already on record and that no further evidence would be placed by the assessee. Accordingly, the Court set aside the ITAT's remand to the AO to the limited extent that the Tribunal must now decide the entitlement to deduction of unutilised provision of taxes on the basis of documents filed. The Tribunal remains entitled to seek a remand report if it needs further limited verification, but routine remand was disapproved. [Paras 12, 13]

Remand direction set aside; ITAT directed to decide the book profit computation issue on the documents on record, with liberty to seek a remand report only if additional verification is strictly necessary.

Decide on available record without remand - Claim for deduction of Corporate Social Responsibility expenditure - HELD THAT: - The Court declined to entertain the appellant's proposed question on CSR expenditure. The ITAT's finding that the amounts were in the nature of charity and not CSR expenditure within Schedule VII of the Companies Act, 2013 was a factual conclusion that the appellant failed to demonstrate any infirmity in. Accordingly, the question was not admitted for consideration. [Paras 15]

Question on CSR disallowance not entertained; ITAT's factual conclusion upheld.

Final Conclusion: Appeal partly allowed. Directions of remand issued by the ITAT in respect of Management Consultancy Fees, Out of Books Receivables and computation of book profits are set aside to the limited extent that the ITAT is directed to decide those issues on the basis of documents filed by the assessee; the Tribunal may, if strictly necessary, seek a remand report from the Assessing Officer for limited verification. The challenge to disallowance of CSR expenditure is not entertained.

Assessment against a dead person is nullity - jurisdictional defect in issuance of notice to deceased - notice under section 148 as a jurisdictional notice - legal representatives' participation as condition to validate assessment proceedings - inapplicability of Section 292B where notice is issued to a dead person

Assessment against a dead person is nullity - notice under section 148 as a jurisdictional notice - legal representatives' participation as condition to validate assessment proceedings - inapplicability of Section 292B where notice is issued to a dead person - Validity of assessment and consequential orders passed pursuant to a notice issued to a deceased person. - HELD THAT: - The Court held that initiation and continuation of assessment or reassessment proceedings pursuant to a notice issued to a deceased person is a nullity and amounts to a jurisdictional defect. Authority for this principle was applied from the Division Bench decision in Urmilaben Anirudhhasinji Jadeja, where it was recognised that a notice under section 148 is jurisdictional and, if issued to a dead person, cannot be validated merely by subsequent steps. The Court reiterated that proceedings may be maintained only where the legal representatives have submitted to the jurisdiction and actively participated in the assessment or reassessment; mere intimation of death or forwarding of the death certificate by a person does not constitute submission or participation sufficient to attract the deeming provisions. Consequently, Section 292B cannot be invoked to cure a defect where the notice has been issued to a deceased person and the legal representatives did not submit to the jurisdiction or participate in the proceedings. Applying these principles to the facts, the petitioner had notified the authorities of the assessee's death and furnished the death certificate, did not submit to jurisdiction or participate in the proceedings, yet the assessing authority proceeded to issue notice and pass assessment ex parte. Those proceedings and consequential revision order could not be sustained and were set aside. [Paras 5, 6, 7]

Impugned notice, assessment order and consequential revision order passed pursuant thereto are set aside as being invalid for having been framed against a deceased person.

Final Conclusion: The petition is allowed: the assessment order dated 26.12.2018, the demand notice of the same date and the order dated 24.3.2021 under Section 264 are quashed and set aside, the proceedings having been initiated and continued against a dead person and therefore being without authority of law.

Reopening of assessment on basis of an audit objection - change of opinion versus reason to believe under Section 147/148 - material constituting "information" for reassessment - interpretation of law by audit party cannot itself constitute basis for reassessment - perversity of finding of suppression of facts

Reopening of assessment on basis of an audit objection - change of opinion versus reason to believe under Section 147/148 - interpretation of law by audit party cannot itself constitute basis for reassessment - Validity of reopening the assessment (reassessment proceedings under Section 147/148) initiated on the basis of an audit objection and alleged change of opinion - HELD THAT: - The Court held that reopening of assessment based solely on an interpretation by the audit wing does not furnish the requisite "information" or independent material to form a bona fide reason to believe that income has escaped assessment. Reliance was placed on the principle that the audit party may bring the law to the notice of the ITO but its opinion on application or interpretation of the law cannot be treated as material to found reassessment; the ITO must independently evaluate the law and form his own reason to believe. The assessment in this case was reopened on the same set of materials and on an audit objection which merely reflected an interpretation change. The reassessment therefore amounted to a change of opinion by the assessing officer and was not supported by any new material or discovery of fact. In these circumstances the CIT(A)'s conclusion that the reopening was invalid was upheld and the Tribunal's contrary conclusion was set aside.

Reopening on the basis of the audit objection and the assessing officer's change of opinion was invalid; reassessment quashed on this ground.

Perversity of finding of suppression of facts - requirement that assessee disclose material facts - Whether the Tribunal was justified in holding that the assessee suppressed material facts and that the assessing officer had not examined the claim - HELD THAT: - The Court found the Tribunal's findings that the assessee suppressed material facts to be perverse. The record showed that the Chartered Accountant's certificate and requisite particulars (sales turnover and costs) were furnished in the statutory format, the matter was discussed with the assessing officer at original assessment, and rectification proceedings under Section 154 were twice invoked on the same issue. The CIT(A) had correctly noted that the assessing officer had earlier allowed the deduction after consideration and that the audit wing's interpretation could not be equated with suppression of material facts. There was no basis in the reasons for reopening to conclude suppression or that the original assessment was made without examination; consequently the Tribunal's reversal of the CIT(A) on these points was unsustainable.

Tribunal's findings of suppression of facts and of lack of examination at original assessment were set aside as perverse; assessee had not suppressed material facts.

Final Conclusion: The appeal is allowed; the reassessment initiated on the basis of an audit objection and change of opinion was invalid and the tribunal's contrary findings (including suppression of facts) were set aside, answers being in favour of the assessee.

Reopening of assessment under section 148 of the Income Tax Act - Disposal of objections to reopening - Section 142(1) procedural notices during reopening proceedings - Judicial remand for administrative consideration without adjudication on merits

Disposal of objections to reopening - Reopening of assessment under section 148 of the Income Tax Act - Objections dated 1.12.2021 filed by the petitioner against the notice under section 148 were to be considered and disposed of afresh by the Income Tax authority. - HELD THAT: - The Court directed that the competent authority of the respondent Income Tax department shall consider the objections submitted by the petitioner on 1.12.2021 to the reopening notice issued under section 148 for Assessment Year 2015-2016 on their own merits and in accordance with law. The court expressly refrained from examining or expressing any view on the merits of the reopening itself and left all contentions open for determination by the authority. The authority was further directed to complete consideration and disposal of the objections within eight weeks from receipt of the order. The Court noted that notices under section 142(1) had been issued during the reopening proceedings but did not decide on the validity of those notices; instead it required the departmental authority to address the objections in the prescribed time-frame. [Paras 6]

The Income Tax authority is directed to consider and dispose of the petitioner's objections to the section 148 reopening notice within eight weeks on merits and in accordance with law; the court has not adjudicated the merits and keeps all contentions open.

Final Conclusion: Writ petition disposed by directing the respondent Income Tax authority to consider and dispose of the objections to the reopening notice for Assessment Year 2015-2016 within eight weeks; no decision was reached on the merits of the reopening and all substantive contentions remain open.

Assessment against deceased - notice under section 148 of the Income Tax Act - legal representatives' participation in assessment proceedings - inapplicability of section 292B where notice is issued to a dead person - jurisdictional defect and nullity of proceedings commenced against a dead person

Assessment against deceased - notice under section 148 of the Income Tax Act - legal representatives' participation in assessment proceedings - inapplicability of section 292B where notice is issued to a dead person - jurisdictional defect and nullity of proceedings commenced against a dead person - Validity and maintainability of reopening proceedings initiated by a notice dated 30.03.2021 under section 148 addressed to the deceased assessee for Assessment Year 2017-2018. - HELD THAT: - The Court applied settled law that an assessment or reassessment cannot be validly commenced against a person who is dead, and that issuing a jurisdictional notice to a dead person renders the proceedings a nullity unless the legal representatives have submitted to the jurisdiction and participated in the proceedings. The Division Bench's reasoning in the cited decisions establishes that section 292B cannot be invoked to validate a notice issued to a deceased assessee where the legal representatives have not waived the notice requirement, have not submitted to the Assessing Officer's jurisdiction, and have not participated in the proceedings. In the present case the deceased assessee died on 20.08.2019 and the notice under section 148 was issued on 30.03.2021. The petitioner, as legal representative, communicated by letter dated 16.02.2022 that the noticee had died and objected to the jurisdiction; there is no material to show any participation by the legal representative that could be construed as submission to jurisdiction. Accordingly, the impugned notice issued to the deceased is without authority of law, and continuation of proceedings pursuant thereto cannot be sustained. [Paras 5, 6]

The notice dated 30.03.2021 issued under section 148 to the deceased assessee is illegal and set aside; the Income Tax authorities shall not proceed against the said dead assessee.

Final Conclusion: The petition is allowed: the reopening notice dated 30.03.2021 addressed to the deceased assessee for Assessment Year 2017-2018 is held to be invalid and is set aside; the Income Tax authorities are directed not to proceed against the dead assessee.

Dependent agent permanent establishment - obligation to deduct tax at source under Section 195 - disallowance under Section 40(a)(i) - privity of contract - business connection / permanent establishment

Dependent agent permanent establishment - obligation to deduct tax at source under Section 195 - disallowance under Section 40(a)(i) - privity of contract - Whether the assessee constituted a dependent agent permanent establishment of CCPL in India for extended warranty contracts, thereby attracting an obligation to deduct tax at source and justifying disallowance under Section 40(a)(i). - HELD THAT: - The Tribunal affirmed the Commissioner (Appeals) finding that the assessee did not act as a dependent agent of CCPL in respect of extended warranty transactions. The court observed that extended warranty was optional for customers and the assessee purchased warranty from CCPL but independently negotiated the price with Indian customers and retained part of the consideration. Sales invoices for extended warranty were raised in the assessee's own name without reference to CCPL, establishing privity of contract between the assessee and the customers. There was no evidence that the assessee was compelled to purchase warranties only from CCPL or that CCPL exercised control making the assessee a dependent agent; nor was any material produced by Revenue to controvert these factual findings. On these facts the Tribunal held that CCPL had no business connection or PE in India in respect of the warranty transactions and consequently there was no income chargeable to tax in India of CCPL that would trigger the assessee's obligation to deduct tax under Section 195 or warrant disallowance under Section 40(a)(i). [Paras 5, 7, 9]

The finding that the assessee is not a dependent agent PE of CCPL is affirmed; there was no obligation to deduct tax under Section 195 and the disallowance under Section 40(a)(i) was rightly deleted.

Final Conclusion: Revenue's appeal is dismissed; the Tribunal upholds the deletion of the addition/disallowance as the assessee was not a dependent agent PE of the non-resident and no tax deduction under Section 195 was required.

Interpretation of 'debenture' and inclusion of 'bond' for Income-tax Act purposes - Applicability of concessional rate under Section 194LD to interest from non-convertible debentures - Use of Companies Act definition by reference where term is undefined in the Income-tax Act - Binding effect of jurisdictional High Court precedent

Interpretation of 'debenture' and inclusion of 'bond' for Income-tax Act purposes - Applicability of concessional rate under Section 194LD to interest from non-convertible debentures - Debentures, including non-convertible debentures issued by Indian companies, fall within the meaning of 'bond' for purposes of the Income-tax Act and therefore interest thereon is eligible for taxation at the concessional rate provided by section 194LD, subject to satisfaction of other conditions. - HELD THAT: - The Tribunal held that the Income-tax Act does not define 'debenture' and, in such absence, the Companies Act definition and common parlance may be relied upon. The Tribunal applied the reasoning of the jurisdictional High Court in DIT v. Shree Visheshwar Nath Memorial Public Ch. Trust, which explained that the term 'debenture' as understood in common parlance and in the Companies Act includes bonds and that a restricted meaning should not be given when the Act is silent. On this basis the Tribunal concluded that rupee-denominated non-convertible debentures are to be treated as 'bonds' for Income-tax Act purposes and the concessional tax rate under section 194LD applies to interest earned thereon, overruling the Assessing Officer and the DRP which had treated NCDs as distinct from bonds. [Paras 6, 7]

Assessee's appeal allowed; interest from the relevant non-convertible debentures held to be within 'bond' and eligible for taxation at the concessional rate under section 194LD.

Final Conclusion: The orders of the Assessing Officer and DRP were set aside and the Tribunal allowed the appeal, holding that non-convertible debentures qualify as 'bonds' for Income-tax Act purposes and the concessional rate under section 194LD applies to interest from those instruments.

Presumptive taxation under section 44ADA - Deduction of expenses as percentage of gross professional receipts - Estimation of income and allowance of expenses in survey-derived disclosures - Evidentiary value of survey records and diary entries

Presumptive taxation under section 44ADA - Deduction of expenses as percentage of gross professional receipts - Estimation of income and allowance of expenses in survey-derived disclosures - Evidentiary value of survey records and diary entries - Whether, in respect of gross professional receipts disclosed during survey, the assessee is entitled to deduction of 50% under section 44ADA or some other reasonable percentage of expenses, and whether the AO/CIT(A)'s allowance of 25% is appropriate. - HELD THAT: - The assessee, an advocate, during a survey disclosed gross undeclared professional receipts which were accepted as gross receipts by the AO and the CIT(A). Section 44ADA permits presumptive deduction of 50% of gross receipts for professionals only where gross receipts do not exceed Rs.50 lakh; in the present case admitted gross receipts exceed that threshold, so section 44ADA is not applicable. The Tribunal nevertheless noted that the declared amounts are gross receipts (not net), that the AO had itself made an estimate of allowable expenses, and that the assessee would have incurred ordinary professional expenses (e.g., filing fees, clerkage). Given that the AO/CIT(A) allowance of 25% was a guess estimate on the lower side, the Tribunal held that, in the interest of justice and equity and guided by the rationale of section 44ADA (as a clue to a reasonable allowance), a 40% deduction towards expenses from the disclosed gross receipts is appropriate and should be allowed. [Paras 8, 9]

The Tribunal held that section 44ADA does not apply as gross receipts exceed Rs.50 lakh, but increased the allowance for expenses from 25% (as allowed by AO/CIT(A)) to 40% of the gross receipts disclosed during survey and partly allowed the appeal.

Final Conclusion: Appeal partly allowed; section 44ADA not applicable due to gross receipts exceeding the statutory threshold, but on estimation the Tribunal allowed 40% deduction for expenses against the survey-disclosed gross professional receipts instead of 25% allowed earlier.

Disallowance of interest - business purpose test - prudence of commercial decisions - allowability of business expenditure - use of borrowed funds

Disallowance of interest - business purpose test - prudence of commercial decisions - use of borrowed funds - Disallowance of interest of Rs.9,56,529/- (50% of interest claimed) upheld by lower authority was not sustainable. - HELD THAT: - The CIT(A) sustained the disallowance on the view that the assessee had sufficient bank and FDR balances yet obtained fresh loans at higher interest rates and therefore the borrowed funds were not applied to the business. The Tribunal observed that the Revenue impermissibly substituted its view of commercial prudence for that of the assessee and entered into the shoes of a businessman to decide when the assessee should deploy its own funds or borrow. Where the assessee has funds and there is no finding of diversion to non business purposes, the Revenue cannot disallow interest merely because, in its opinion, the assessee ought to have used internal funds instead of borrowing. Applying this principle, the Tribunal set aside the CIT(A)'s confirmation of the addition and allowed the interest claim. [Paras 6, 7]

Addition of interest disallowance set aside and interest allowed.

Allowability of business expenditure - business purpose test - Funeral expenses of Rs.4,000/- incurred in relation to microfinance clients were allowable as business expenditure. - HELD THAT: - The assessee claimed the payment as an expense incurred to maintain client relationships, specifically payments made to microfinance clients on the death of family members. The Revenue rejected the claim as not relating to business. The Tribunal, on the facts and circumstances, held that the expenditure was incurred for business expediency and client relationship management and therefore deserved allowance. The Tribunal directed that the expense be allowed. [Paras 6, 8]

Funeral expense allowed as business expenditure.

Final Conclusion: The appeal is allowed: the disallowance of interest confirmed by the CIT(A) is set aside and the funeral expense is allowed.

Seizure under Section 108 of the Customs Act, 1962 - provisional release under Section 110A of the Customs Act, 1962 - conditions for provisional release - modification of conditions of provisional release - infructuousness of writ petition - disposal of modification petition in accordance with law

Seizure under Section 108 of the Customs Act, 1962 - provisional release under Section 110A of the Customs Act, 1962 - infructuousness of writ petition - Validity of the challenge to the seizure after provisional release order - HELD THAT: - The petitioner had challenged the seizure of the imported vehicle made under a mahazar dated 14.07.2021. Subsequently, the Commissioner of Customs (Import), Maharashtra, ordered provisional release of the vehicle on 29.12.2021 subject to specified conditions. The Court observed that the interim order of provisional release has, as of the date of this order, become final and that a further challenge to the original seizure has thereby been rendered infructuous. In view of the subsequent administrative action granting provisional release on conditions, the writ petition contesting the seizure no longer calls for substantive adjudication and is accordingly closed. [Paras 5, 7, 9]

Writ petition rendered infructuous by the provisional release order and closed.

Conditions for provisional release - modification of conditions of provisional release - disposal of modification petition in accordance with law - Whether the petitioner may seek modification of the conditions imposed for provisional release and the procedure for such a request - HELD THAT: - The Court noted that there is no bar on the petitioner approaching the Commissioner to seek modification of the conditions originally imposed for provisional release. The order recognises that different Commissionerates may impose differing conditions in analogous cases, but without determining factual parity between those matters. The Court granted liberty to the petitioner to file a petition for modification of the conditions; any such modification petition, if filed, is to be heard and disposed of by the appropriate authority after hearing the petitioner and in accordance with law. The Court did not adjudicate the merits of any specific modification request and confined itself to granting procedural liberty to seek variation before the administrative authority. [Paras 7, 9]

Liberty granted to seek modification of the conditions; any modification petition to be disposed of by the appropriate authority after hearing, in accordance with law.

Final Conclusion: The writ petition challenging seizure is closed as infructuous in view of the provisional release order dated 29.12.2021; the petitioner is granted liberty to seek modification of the conditions of provisional release and any such modification petition shall be heard and disposed of by the appropriate authority in accordance with law.

Limitation for filing appeal - date of receipt of order - inadvertent clerical error in prescribed form - condonation of delay - remand for fresh consideration

Limitation for filing appeal - date of receipt of order - inadvertent clerical error in prescribed form - Whether the appeal before the Commissioner (Appeals) was time barred having regard to the date of receipt of the Order in Original and the date entered in Form C.A.1. - HELD THAT: - The Tribunal found that the Order in Original was signed by the adjudicating authority on 06.04.2015 and the appellant received the impugned order on 09.06.2015. The Commissioner (Appeals) had treated the date of receipt as 09.03.2015 as stated in Form C.A.1 and computed limitation accordingly. The Tribunal concluded that the date recorded in Form C.A.1 was an inadvertent mistake which could not override the contemporaneous record showing the OIO signing date and actual receipt date. Computing limitation from the date of receipt (09.06.2015) made the appeal due on 08.08.2015; the appeal was filed on 13.08.2015, resulting in a five day delay which falls within the period that can be condoned. Given these facts, the question of time bar was not appropriately determined by the Commissioner (Appeals) without addressing the apparent clerical error and the appellant's entitlement to seek condonation. [Paras 5, 6, 7]

The Tribunal held that the Commissioner (Appeals) erred in mechanically accepting the date in Form C.A.1 and treating the appeal as time barred; the matter requires further consideration of limitation and condonation in light of the correct receipt date.

Condonation of delay - remand for fresh consideration - Appropriate remedy and further directions where delay appears to be inadvertent and within a condonable period. - HELD THAT: - Having found that the appeal was filed with a short delay attributable to an inadvertent error in the date entered in Form C.A.1 and that the delay falls within the period ordinarily subject to condonation, the Tribunal did not decide the condonation application on merits. Instead, it set aside the impugned order and remanded the matter to the Commissioner (Appeals) with directions to permit the appellant to file an application for condonation of delay, to consider that application on its merits, and thereafter to hear the appeal on merits. The Tribunal emphasised that the Commissioner (Appeals) should not mechanically compute limitation without addressing the error and giving the appellant an opportunity. [Paras 6, 7]

The impugned order is set aside and the matter is remanded to the Commissioner (Appeals) to permit filing of an application for condonation, consider it, and decide the appeal on merits after giving the appellant an opportunity.

Final Conclusion: Impugned order rejecting the appeal as time barred set aside; matter remanded to the Commissioner (Appeals) to allow the appellant to file for condonation of delay, to consider that application, and thereafter to adjudicate the appeal on merits.

Provisional release of imported goods - consistency in appellate orders - application of precedent of the Supreme Court - remand by appellate authority - compliance with statutory requirements for import of second hand goods

Consistency in appellate orders - application of precedent of the Supreme Court - remand by appellate authority - The remand ordered by the Commissioner (Appeals) was unsustainable and set aside for being inconsistent with the binding precedent relied upon by other adjudications. - HELD THAT: - The Tribunal examined the First Appellate Authority's remand in the light of the Hon'ble Supreme Court's decision in M/s. Delhi Photocopiers and this Bench's order in M/s. S.P. Associates, both of which had been applied by the same Commissioner (Appeals) in other, similar matters to allow provisional release. The Commissioner (Appeals) in the present matter remanded to the Adjudicating Authority instead of following those precedents and did not record any distinguishing facts to justify a different course. That inconsistent stand renders the remand unsustainable. Having regard to the precedents and absence of peculiar facts on record, the Tribunal concluded that the remand must be set aside. [Paras 6, 7, 8]

The impugned remand by the Commissioner (Appeals) is set aside.

Provisional release of imported goods - compliance with statutory requirements for import of second hand goods - The goods in question are to be provisionally released subject to compliance with statutory requirements and within the timeline directed by the Tribunal. - HELD THAT: - Relying on the same Supreme Court and Tribunal precedents applied in comparable cases, the Tribunal directed provisional release of the impugned goods. The release is conditional: the goods must be cleared for consumption within the timeframe directed by this Bench provided the respondents have complied with other statutory requirements applicable to the imports. The Tribunal thereby granted relief to the respondent and negated the effect of the earlier remand which had withheld provisional release. [Paras 8, 9]

The Adjudicating Authority is directed to provisionally release the goods and they must be cleared for consumption within 10 days from receipt of the order if statutory requirements are complied with.

Final Conclusion: The Revenue's appeals are dismissed and the respondent's cross objections are allowed; the appellate remand is set aside and the Adjudicating Authority directed to provisionally release the goods, subject to compliance with applicable statutory requirements and clearance within 10 days.

Provisional release of seized/imported goods - application of precedent/stare decisis in Customs adjudication - confiscation for contravention of import conditions

Provisional release of seized/imported goods - application of precedent/stare decisis in Customs adjudication - Whether the Revenue's appeals against the First Appellate Authority's order allowing the importer's appeals and ordering provisional release should be sustained or dismissed in view of binding precedents. - HELD THAT: - The Tribunal examined the impugned First Appellate Authority order which had allowed the importer's appeals and directed provisional release of the goods by following the earlier decisions of this Bench in M/s. S.P. Associates and the Hon'ble Supreme Court in M/s. Delhi Photocopiers. The Tribunal noted that it had applied the same ratio in a recent decision in The Commissioner of Customs, Chennai-II v. M/s. Kutty Impex and found no change in the material facts in the present case that would distinguish or displace the earlier rulings. In these circumstances the Tribunal concluded that the First Appellate Authority correctly applied the cited precedents to permit provisional release notwithstanding the Adjudicating Authority's findings of non-compliance and proposals for confiscation and penalties. The Tribunal therefore declined to disturb the appellate order and followed the established ratio which governed provisional release in similar factual and legal settings.

The Revenue appeals are dismissed and the First Appellate Authority's order allowing the appeals and directing provisional release is upheld.

Final Conclusion: The Tribunal dismissed the Revenue's appeals and upheld the First Appellate Authority's direction for provisional release, following the ratio of earlier decisions of this Bench and the Hon'ble Supreme Court applied to the undisputed facts of the case.

Relevancy of statements under Section 138B of the Customs Act, 1962 - Onus of proof under Section 123 of the Customs Act, 1962 - Reasonable belief of smuggling based on appearance and markings - Admissibility of oral statements not tested under Section 138B - Confiscation and penalty for smuggled goods

Relevancy of statements under Section 138B of the Customs Act, 1962 - Admissibility of oral statements not tested under Section 138B - Whether statements of persons recorded during investigation could be relied upon in adjudication in absence of compliance with Section 138B. - HELD THAT: - The Tribunal examined the scope of Section 138B and held that statements recorded before a gazetted customs officer are relevant only in the circumstances specified therein; accordingly, the adjudicating authority must have the witness before it (or satisfy the conditions in sub clauses (a) or (b)) before relying on such statements. Applying this principle to the facts, the Tribunal found non compliance with Section 138B and, following its precedent in M/s. Anil Gadodia, excluded the statements of Shri Ankit Bansal and other oral statements relied upon by the parties. Consequently, those statements could not be read into evidence for the purpose of proving ownership or provenance of the seized gold. [Paras 8]

Statements recorded during investigation were not admissible evidence for adjudication in the absence of compliance with Section 138B and were excluded.

Reasonable belief of smuggling based on appearance and markings - Confiscation and penalty for smuggled goods - Whether the seized gold could be reasonably believed to be of foreign origin and thus smuggled, thereby justifying confiscation and penalties. - HELD THAT: - The Panchnama registered the recovery of three gold bars bearing the inscription "RAND REFINERY LTD, SOUTH AFRICA" and other particulars which were not disputed by the appellant; the departmental jewellery appraiser's report corroborated weight, purity and serial/lot numbers. The Tribunal held that these particulars furnished a reasonable belief for the officers that the goods were of foreign origin. Once such reasonable belief exists, Section 123 operates to shift the burden to the possessor/owner to prove that the goods are not smuggled. Applying the evidence, the Tribunal found the appellant's explanations and documents insufficient to dispel the reasonable belief of smuggling and therefore upheld confiscation and imposition of penalty. [Paras 9, 10, 15]

The appearance and markings on the seized bars gave rise to a reasonable belief of smuggling; confiscation and penalties were rightly confirmed.

Onus of proof under Section 123 of the Customs Act, 1962 - Whether the appellant discharged the burden placed upon him by Section 123 to prove the gold was not smuggled. - HELD THAT: - The Tribunal analysed the documentary material (invoices, purchase/stock registers, delivery challan, bank statements and letters) produced by the appellant. It found material inconsistencies: the defence that impurities were added later to convert legally purchased gold into bars bearing foreign marks was contradicted by the purity figures in invoices and by timing and manner of submission of defence. The absence of the claimed delivery challan on the person at seizure, delay in producing defence letters, and the possibility of post seizure fabrication led the Tribunal to conclude that the appellant failed to discharge the onus under Section 123. The Tribunal also noted that even excluding oral statements (for non compliance with Section 138B), the documentary evidence was insufficient. [Paras 11, 12, 13, 15]

Appellant failed to discharge the burden under Section 123; documents were insufficient to prove non smuggled origin.

Admissibility of oral statements not tested under Section 138B - Confiscation and penalty for smuggled goods - Whether exclusion of the contested oral statements affected the ultimate conclusion on confiscation and penalty. - HELD THAT: - Although the Tribunal excluded the oral statements for non compliance with Section 138B, it separately assessed the remaining documentary and material evidence. Finding the Panchnama and departmental appraiser's report reliable and the appellant's documentary defence manipulative and delayed, the Tribunal concluded that exclusion of the oral statements did not undermine the case against the appellant. On the totality of admissible evidence, the confiscation and penalties remained sustainable. [Paras 8, 9, 15]

Exclusion of oral statements did not vitiate the outcome; confiscation and penalties were sustainable on admissible material.

Final Conclusion: The Tribunal excluded the recorded statements for non compliance with Section 138B but, on admissible material (Panchnama, appraiser's report and documentary records), found a reasonable belief of smuggling and that the appellants failed to discharge the onus under Section 123; consequently, confiscation of the three gold bars and imposition of penalties were upheld and the appeals were dismissed.

Provisional release of seized/imported goods pending adjudication or appeal - redetermination of transaction value under the Customs Valuation Rules - confiscation for contravention of import conditions and related penal consequences under the Customs Act - requirement of DGFT authorization for import of second hand goods under the Foreign Trade Policy - compulsory registration and BIS compliance for electronic goods under the Compulsory Registration Order - binding effect of precedent on provisional release where facts are not distinguishable

Provisional release of seized/imported goods pending adjudication or appeal - binding effect of precedent on provisional release where facts are not distinguishable - Whether the First Appellate Authority correctly ordered provisional release of the impugned goods and whether the Tribunal should interfere with that order in view of earlier precedents. - HELD THAT: - The Tribunal examined the impugned order of the First Appellate Authority which allowed the respondent's appeal and ordered provisional release of the imported used MFDs. The First Appellate Authority had followed the decision of this Bench in Commissioner of Customs v. M/s. S.P. Associates and the judgment of the Supreme Court in M/s. Delhi Photocopiers. The Tribunal noted that it had applied the same ratio in Commissioner of Customs v. M/s. Kutty Impex and that there was no change in the factual matrix in the present case that would distinguish it from those precedents. In those circumstances the Tribunal concluded that the First Appellate Authority was correct in ordering provisional release and that interference was not warranted.

The appeal is dismissed and the order of the First Appellate Authority ordering provisional release of the goods is upheld.

Final Conclusion: The Revenue's appeal is dismissed; the appellate order directing provisional release of the impugned goods-made in conformity with earlier decisions of this Bench and the Supreme Court and not distinguishable on facts-is affirmed.

Penalty under Section 112(b) of the Customs Act, 1962 - knowledge or reason to believe - acquisition of possession or being in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with goods - requirement of corroboration for statements of co-noticees/co-accused - mens rea as an essential ingredient for imposition of penalty - proof requirement for imposing penalty under Section 112(b) - physical dealing or comparable conduct

Penalty under Section 112(b) of the Customs Act, 1962 - knowledge or reason to believe - acquisition of possession or being in any way concerned in dealing with goods - requirement of corroboration for statements of co-noticees/co-accused - mens rea as an essential ingredient for imposition of penalty - Whether the appellant was liable to penalty under Section 112(b)(i) of the Customs Act, 1962 for financing activities connected with alleged gold smuggling - HELD THAT: - The Tribunal analysed Section 112(b) and held that imposition of penalty requires (i) that the person acquired possession of or was in some way concerned in physically dealing with goods covered by Section 111, and (ii) that the person knew or had reason to believe those goods were liable to confiscation. The adjudicating authority's conclusion that the appellant "knowingly funded" the smuggling was based primarily on a printout retrieved from a third party's pen drive and on statements of other persons. The Tribunal found no independent documentary or corroborative evidence establishing that the appellant had knowledge of, or was in any way concerned with, the physical dealing or movement of the smuggled gold. The appellant's recorded statement admitted lending money on interest secured by a blank signed cheque and produced ledger entries and documents showing adjustment of one advance against purchase of a plot; he denied any dealings in gold. The Tribunal emphasised settled law that statements of co noticees/co accused require independent corroboration before they can be the foundation for penal consequences. Applying precedent and ejusdem generis interpretation of the phrase "in any other manner dealing with", the Tribunal concluded that mere financial transactions or the appearance of the appellant's name in third party records do not establish the requisite physical dealing or knowledge needed for Section 112(b). Consequently, the Department failed to prove mens rea or that the appellant fell within the activities enumerated in Section 112(b), and the penalty could not be sustained. [Paras 5]

Penalty under Section 112(b)(i) could not be sustained as there was no proof that the appellant had the requisite knowledge or was in any way concerned in dealing with the smuggled goods.

Final Conclusion: The appeal is allowed; the penalty imposed under Section 112(b)(i) of the Customs Act, 1962 is set aside and consequential relief is granted.

Penalty under Section 112(b) of the Customs Act - knowledge or reason to believe that goods are liable to confiscation - acquisition of possession or being in any way concerned in dealing with goods - mens rea requirement for imposition of penalty - requirement of physical dealing/possession for liability under Section 112(b) - insufficiency of third party documentary entries to prove culpable knowledge

Penalty under Section 112(b) of the Customs Act - knowledge or reason to believe that goods are liable to confiscation - acquisition of possession or being in any way concerned in dealing with goods - requirement of physical dealing/possession for liability under Section 112(b) - insufficiency of third party documentary entries to prove culpable knowledge - Whether penalty under Section 112(b) could be imposed on the appellant for alleged financing of gold smuggling - HELD THAT: - The Tribunal examined the statutory test for imposition of penalty under Section 112(b): (i) the person must have acquired possession of, or be in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling, purchasing or otherwise dealing with goods; and (ii) the person must have known or had reason to believe that such goods were liable to confiscation under Section 111. Applying these requirements, the Tribunal found no evidence that the appellant ever acquired possession of, or physically dealt with, the smuggled gold, or was otherwise engaged in any of the enumerated physical acts in relation to the goods. The appellant consistently stated that his role was lending money in the ordinary course of a finance business and produced documentation of loans secured by mortgages; entries retrieved from a third party's pen drive and ledger (showing an interest receipt) did not establish that funds were provided for smuggling or that the appellant had knowledge of such use. Statements of alleged co investors that initially implicated the appellant were retracted, and the investigation did not pursue corroborative questioning of those persons after the appellant's statement, leaving the record deficient to establish culpable knowledge. The Tribunal relied on the established principle - reflected in prior decisions considered by the authority - that Section 112(b) requires mens rea and, where liability is premised on being "in any other manner dealing with" goods, that phrase is to be read ejusdem generis with the preceding physical acts so as to require comparable dealing or physical connection with the goods. Given absence of any finding that the appellant physically dealt with the goods or knew or had reason to believe they were liable to confiscation, the conditions for imposing penalty under Section 112(b) were not satisfied and the penalty could not be sustained. [Paras 5, 6]

Penalty under Section 112(b) set aside as the requirement of knowledge and physical dealing with goods was not proved.

Final Conclusion: The appeal is allowed: the penalty imposed under Section 112(b) of the Customs Act, 1962 on the appellant is set aside and consequential relief granted.

Mandatory pre-deposit requirement under section 129E of the Customs Act - pre-deposit as a condition precedent to entertainment of appeal - absence of power in the Tribunal or Commissioner (Appeals) to waive or reduce pre-deposit after amendment - peremptory effect of 'shall not' in statutory bar to entertaining appeals

Mandatory pre-deposit requirement under section 129E of the Customs Act - pre-deposit as a condition precedent to entertainment of appeal - absence of power in the Tribunal or Commissioner (Appeals) to waive or reduce pre-deposit after amendment - Whether the appeal could be entertained despite non-compliance with the pre-deposit requirement prescribed by section 129E of the Customs Act. - HELD THAT: - The Tribunal examined the amended statutory regime introduced w.e.f. 06.08.2014 and held that the requirement of depositing the specified percentage before filing an appeal is mandatory and constitutes a condition precedent to the right of appeal. Post-amendment, the discretionary power previously available to appellate authorities to dispense with or scale down the pre-deposit has been removed by the Legislature. The Tribunal relied on the Supreme Court's decision in Narayan Chandra Ghosh (and subsequent reiterations) which affirmed that where a statute conditions the exercise of a right of appeal upon fulfillment of a pre-deposit, appellate forums cannot entertain the appeal without compliance; they cannot grant waivers beyond what the statute permits. Consistent authority from High Courts (including Delhi and Madhya Pradesh) was also noted to the effect that courts cannot waive or direct appellate authorities to act contrary to the clear statutory mandate embodied by the peremptory language 'shall not'. Applying these principles to the facts, since the appellant had not made the statutory pre-deposit, the Tribunal had no jurisdiction to admit or proceed with the appeal.

The appeal cannot be entertained for non-compliance with the mandatory pre-deposit under section 129E and is therefore dismissed.

Final Conclusion: The appeal is dismissed for failure to make the mandatory pre-deposit required by section 129E of the Customs Act; the Tribunal has no power to waive or reduce that pre-deposit beyond what the statute itself permits.

Withdrawal of petition under Rule 44 of NCLT Rules, 2016 - Leave for withdrawal under Rule 82 of NCLT Rules, 2016 - Hearing - commencement and scope for application of Rule 44(2) - Application of Order II/Order XXIII CPC to subsequent petitions - Tribunal's power to regulate procedure under Section 424 of the Companies Act, 2013 - Principles of natural justice - opportunity to file counter/replication - Effect of filing a fresh waiver application while an earlier waiver application is pending - Allegations of perjury and effect of death of alleged deponent under Section 394(2) CrPC

Withdrawal of petition under Rule 44 of NCLT Rules, 2016 - Leave for withdrawal under Rule 82 of NCLT Rules, 2016 - Hearing - commencement and scope for application of Rule 44(2) - Whether the NCLT was justified in permitting withdrawal of CP/29/CHE/2021 under Rule 44(2) when a second waiver application (CP/95/CHE/2021) had been filed and whether Rule 82 applied instead. - HELD THAT: - The Tribunal examined Rule 44(2) and Rule 82 and concluded that Rule 82 is directed to withdrawal of applications filed under Section 241 (proceedings in rem) and contemplates leave in that special context. In the present case no admitted petition under Section 241 had been instituted in law because numbering/registration under Rule 29 occurs only upon admission; the proceeding on file at the relevant time was the waiver application under Section 244. As the pleadings in CP/29/CHE/2021 were not complete and no hearing on merits had begun, Rule 44(2) was the applicable provision. The NCLT therefore had jurisdiction to permit withdrawal under Rule 44(2) and to take CP/95/CHE/2021 on file for further consideration. The Tribunal held that Rule 82 could not be invoked on these facts and that permitting withdrawal under Rule 44(2) was legally permissible and not vitiated by legal flaws. [Paras 131, 134, 135, 136, 137]

NCLT correctly permitted withdrawal of CP/29/CHE/2021 under Rule 44(2); Rule 82 did not apply on the facts and the withdrawal was valid.

Principles of natural justice - opportunity to file counter/replication - Hearing - commencement and scope for application of Rule 44(2) - Whether the impugned order breached principles of natural justice by not granting the appellants a further opportunity to file a counter before allowing withdrawal. - HELD THAT: - The Tribunal noted that the concept of 'hearing' requires the court/tribunal to apply its mind to the merits and that on the material the pleadings in CP/29/CHE/2021 were not complete and no substantive hearing on merits had taken place. The NCLT had heard detailed oral arguments on 15.09.2021 and granted time for written submissions; it was not mandatory under Rule 44(2) to direct the filing of a formal counter in every withdrawal application. Rule 111(1) permits the Tribunal, in its discretion, to require filing of objections; the Tribunal legitimately exercised its discretion in permitting withdrawal without insisting on a formal counter. On these findings there was no denial of natural justice. [Paras 131, 132, 133, 136]

No breach of natural justice; the opportunity given and the Tribunal's exercise of discretion satisfied procedural fairness.

Application of Order II/Order XXIII CPC to subsequent petitions - Effect of filing a fresh waiver application while an earlier waiver application is pending - Tribunal's power to regulate procedure under Section 424 of the Companies Act, 2013 - Whether filing of a second waiver application and a second company petition during pendency of the first would be barred by provisions of the Code of Civil Procedure (Order II / Order XXIII) and whether the NCLT erred in allowing the second petition to be taken on file. - HELD THAT: - The Tribunal held that the procedural code (CPC) is not strictly binding on the NCLT/Appellate Tribunal which may regulate its own procedure subject to principles of natural justice (Section 424). The circumstances showed that the second waiver application (CP/95/CHE/2021) was filed before the first was formally withdrawn and that the NCLT, after hearing parties on 11.08.2021, directed rectification of procedural irregularities and listed the matter for further hearing. Precedents and principles were considered, including that if a second petition is filed before withdrawal of the first, Order XXIII does not automatically bar the second; the Tribunal found that permitting the respondents to withdraw the earlier waiver and proceed with the fresh waiver to consolidate facts and avoid multiplicity of proceedings was a legitimate exercise of discretion. Accordingly, the NCLT's approach to take CP/95/CHE/2021 on file was upheld. [Paras 127, 128, 138, 139]

The NCLT did not err in taking the second waiver application on file; CPC provisions did not operate to bar the procedure given the Tribunal's power under Section 424 and the factual matrix.

Allegations of perjury and effect of death of alleged deponent under Section 394(2) CrPC - Whether alleged procedural lapses in affidavits, notary registration and asserted perjury vitiated the withdrawal order or mandated further criminal proceedings. - HELD THAT: - The Tribunal observed that the applications alleging perjury raised technical objections concerning dates of stamp papers, notarisation and subsequent filings but did not identify substantive fabrication of documents. The first respondent (deponent) had died on 21.01.2022 and the Tribunal noted that criminal proceedings for perjury against a deceased person abate under Section 394(2) CrPC. Further, no application to initiate prosecution for perjury under Section 340 CrPC had been pursued by the appellants; in any event the closure of interlocutory applications by the NCLT as part of the withdrawal order had become final between the parties who had not taken further steps. For these reasons the alleged affidavit/notary defects did not invalidate the withdrawal order. [Paras 71, 148, 149]

Perjury allegations and notary-related objections did not nullify the withdrawal; criminal proceedings (if any) abate on death and no prosecution was instituted.

Final Conclusion: The Appellate Tribunal upheld the NCLT's order permitting withdrawal of CP/29/CHE/2021 under Rule 44(2), its decision to take CP/95/CHE/2021 on file, and found no breach of natural justice or legal infirmity in the procedure adopted; the appeals were dismissed and the impugned order sustained.

Decree-holder as a class of creditor under Section 3(10) - moratorium under Section 14(1) prohibiting execution of decrees and transfer of assets - Explanation to Section 18 excluding third party assets held in trust from corporate debtor's assets - balancing moratorium with preservation and maximisation of assets of the corporate debtor

Decree-holder as a class of creditor under Section 3(10) - moratorium under Section 14(1) prohibiting execution of decrees and transfer of assets - Legal status of decree holders under the IBC and the effect of the moratorium on their right to execute decrees. - HELD THAT: - The Court affirmed that the IBC's definition of "creditor" includes a "decree holder" and that such a decree signifies a judicially determined claim which, in that sense, is an admitted claim against the corporate debtor. However, the Court explained that the statutory moratorium under Section 14(1)(a) and 14(1)(b) operates to freeze the decree holder's right to execute a decree once the insolvency commencement date is declared. The moratorium bars institution or continuation of proceedings for execution of judgments or decrees and bars transfer, encumbrance or disposal of the corporate debtor's assets, thereby subjecting the decree holder's entitlement to the checks and balances of execution law and to the additional fetters imposed by the IBC. The Court therefore endorsed the view that while decree holders are creditors under the Code, execution of their decrees is constrained by the moratorium envisaged by the IBC. [Paras 11, 12, 14, 15]

Decree holders are recognised as a class of creditors under the IBC, but their right to execute decrees is frozen by the moratorium provisions of Section 14(1) and by the Code's restrictions on dealing with the corporate debtor's assets.

Explanation to Section 18 excluding third party assets held in trust from corporate debtor's assets - balancing moratorium with preservation and maximisation of assets of the corporate debtor - Whether the impugned observations should be applied so as to affect the Review Petitioner whose rights had crystallised and whose decreed property was held in trust and kept out of the CIRP. - HELD THAT: - On the specific facts placed before the Court, it was found that the Review Petitioner's rights in the decreed property had crystallised prior to admission of the CIRP and that the property was effectively held in custodia legis and in constructive trust for the Review Petitioner. The Court relied on the Explanation to Section 18, which excludes assets owned by third parties but in the possession of the corporate debtor held under trust or contractual arrangement from the corporate debtor's assets. The Court accepted the NCLT's factual conclusion that the property was kept out of the CIRP, that the Review Petitioner had maintained the property under orders of the Bombay High Court, and that realisation of certain receivables was necessary to advance the CIRP meaningfully. Given this factual matrix, the Court held that the Impugned Judgement had failed to balance the moratorium with the Explanation to Section 18 and the object of maximising assets, and accordingly modified the Impugned Judgement so as not to affect the Review Petitioner's crystallised rights in the subject property, subject to the payment of the balance consideration. [Paras 9, 10, 11, 14, 15]

Impugned observations and conclusions are modified insofar as they would affect the Review Petitioner's crystallised rights in the decreed property held in trust; the Review Petitioner's rights are protected subject to payment of the balance consideration.

Final Conclusion: Review petition allowed in part: the Court upheld the general legal position that decree holders are creditors but their execution rights are fettered by the IBC moratorium; on the distinct facts of this case the impugned order is modified so it shall not affect the Review Petitioner's crystallised rights in the decreed property (subject to payment of the outstanding consideration).

Entitlement of legal heirs to remuneration approved by CoC - ratification of RP's remuneration and insolvency resolution process costs by the Committee of Creditors - insolvency resolution process costs and their components under Regulation 31 - liability of creditors to bear CIRP costs in proportion to voting share - non-liability for legal fees not ratified by the Committee of Creditors

Entitlement of legal heirs to remuneration approved by CoC - ratification of RP's remuneration and insolvency resolution process costs by the Committee of Creditors - The legal heirs of the deceased Resolution Professional are entitled to claim the remuneration and costs which were approved and ratified by the Committee of Creditors. - HELD THAT: - The adjudicatory record shows that the remuneration and expenses incurred by the erstwhile Resolution Professional were placed before and ratified by the CoC in the 1st, 2nd and 4th meetings. Regulation 31 identifies expenses incurred on or by the interim/resolution professional to the extent ratified under Regulation 33 as insolvency resolution process costs. Applying those regulatory provisions, the Tribunal held that the amounts approved by the CoC constitute CIRP costs payable by the creditors, and therefore the legal heirs of the deceased Resolution Professional are entitled to claim the approved remuneration and costs. [Paras 13]

Entitlement of legal heirs to remuneration and costs approved by CoC is upheld.

Non-liability for legal fees not ratified by the Committee of Creditors - The Appellant is not liable to pay the legal fees paid to the advocate which were not approved or ratified by the Committee of Creditors. - HELD THAT: - The minutes show that the fee payable to the advocate was not ratified by the CoC. Relying on the principle that only expenses approved/ratified by the CoC qualify as CIRP costs payable by creditors, and following the cited precedent applied by the Tribunal, the direction of the Adjudicating Authority to make the Appellant liable for such unratified legal expenses was found to be erroneous and was set aside. [Paras 15]

Direction to make Appellant liable for advocate's fee not ratified by CoC is set aside; Appellant not liable for such legal expenses.

Liability of creditors to bear CIRP costs in proportion to voting share - The Appellant's liability to pay the approved remuneration and CIRP costs is limited to its proportionate share corresponding to its voting percentage (25.54%), and the direction to share equally is modified. - HELD THAT: - The Adjudicating Authority had directed equal contribution by creditors whereas the statutory and regulatory scheme contemplates that creditors bear CIRP costs proportionately to their voting share. The Appellant, having 25.54% voting share, accepted liability to pay proportionately. The Tribunal held the equal-sharing direction to be contrary to the IBC and relevant regulations and accordingly modified the order so that the Appellant pays its proportionate share of the total approved amount. [Paras 14, 16, 17]

Order modified to require Appellant to pay its proportionate share of the approved CIRP costs and remuneration.

Final Conclusion: The appeal is allowed in part: (a) the legal heirs of the deceased RP are entitled to the remuneration and CIRP costs ratified by the CoC; (b) the direction to make the Appellant liable for unratified advocate's fees is set aside; and (c) the Appellant's liability for the approved amount is confined to its proportionate share of the total approved CIRP costs.

Admission of claim in CIRP - proof of discharge of debt - reliance on unaudited balance sheet - internal correspondence between related entities - transaction entries and PEMI/EMI - sham or collusive transaction - role of Resolution Professional in verification of claims

Internal correspondence between related entities - proof of discharge of debt - Whether the Adjudicating Authority could treat internal correspondence between the Corporate Debtor and its sister concern as establishing discharge of the debt owed to the Appellant. - HELD THAT: - The Court held that the letters exchanged between the Corporate Debtor and RDPL (27.07.2020 and 18.02.2021) at best record an offer by RDPL to adjust an amount said to be with DHFL; they do not show any actual transaction by which the Appellant's debt was discharged. The letter of 18.02.2021 merely states an offer and refers to a past NEFT entry of 19.11.2018; there is no material demonstrating that RDPL actually remitted funds to DHFL or that DHFL credited the Corporate Debtor's loan account such as to extinguish the liability. The Adjudicating Authority erred in treating those internal, promoter-linked communications as dispositive proof of discharge.

Internal correspondence did not establish discharge of the Appellant's loan; reliance on it by the Adjudicating Authority was erroneous.

Reliance on unaudited balance sheet - proof of discharge of debt - Whether the unaudited balance sheet of the Corporate Debtor as at 31.03.2021 could be relied upon to conclude that the DHFL loan stood discharged. - HELD THAT: - The Court observed that the balance sheet relied upon was expressly unaudited and contained no explanation or transactional detail demonstrating how the earlier-reflected DHFL liability was extinguished. Mere omission of the loan in an unaudited statement does not prove repayment or discharge; absent supporting transactional evidence, the Adjudicating Authority's reliance on such a document to reject the claim was unjustified.

The unaudited balance sheet did not establish discharge of the debt and was an inappropriate basis for rejecting the Appellant's claim.

Transaction entries and PEMI/EMI - proof of discharge of debt - Whether the transactions dated 19.11.2018 in the Appellant's and RDPL's accounts proved that RDPL's credited amount remained with DHFL and thereby discharged the Corporate Debtor's liability. - HELD THAT: - The Court examined the loan account entries and RDPL's statement which show a payment (PEMI/EMI) on 19.11.2018 and, on the same date, a corresponding disbursement entry of the same amount. This pattern indicates that the amount was paid to DHFL and simultaneously re-disbursed as a loan, completing and exhausting the transaction. Consequently, the amount could not be said to be lying with DHFL as an available credit to be adjusted later in favour of the Corporate Debtor. The Adjudicating Authority's characterization of the entries as proving discharge was incorrect.

The 19.11.2018 entries reflect payment and immediate re-disbursement, not an available credit with DHFL to discharge the Corporate Debtor's liability; they do not prove repayment.

Sham or collusive transaction - role of Resolution Professional in verification of claims - Whether the transactions were shown to be sham or collusive so as to justify rejection of the Appellant's claim, and whether the Resolution Professional properly verified the claim. - HELD THAT: - Although the Resolution Professional and Respondent contended collusion, the Adjudicating Authority did not record any finding that the transactions were sham or collusive. The Court found no material on record demonstrating that the loan disbursal itself was denied or that the transactions were a sham; nor did the Resolution Professional correctly verify and adjudicate the Appellant's claim in the manner required. The absence of findings of sham/ collusion and lack of proper verification by the Resolution Professional weighed against upholding the rejection.

There was no finding of a sham or collusive transaction sufficient to reject the claim; the Resolution Professional erred in not properly verifying the Appellant's claim.

Admission of claim in CIRP - role of Resolution Professional in verification of claims - What relief should follow from the errors found in the Adjudicating Authority's rejection of the Appellant's claim. - HELD THAT: - Because the Adjudicating Authority's conclusions that the debt was discharged were unsustainable on the materials relied upon, and because the Resolution Professional did not correctly verify the claim, the Court concluded the impugned order must be set aside. The appropriate remedy is to allow the I.A. filed by the Appellant, direct the Resolution Professional to admit the claim as filed in Form C after proper verification, and reconstitute the Committee of Creditors accordingly.

Impugned order set aside; I.A. No. 182 of 2022 allowed; Resolution Professional directed to admit the Appellant's claim and reconstitute the CoC.

Final Conclusion: The Adjudicating Authority's denial of the Appellant's claim was unsustainable: internal correspondence and an unaudited balance sheet did not prove discharge, the 19.11.2018 entries show payment and immediate re-disbursement (not an available credit), and there was no material establishing a sham transaction. The impugned order is set aside; the I.A. of the Appellant is allowed and the Resolution Professional is directed to admit the claim and reconstitute the Committee of Creditors. Parties to bear their own costs.

Locus standi - intervention petition - statutory compliances prior to approval of resolution plan - role and domain of the Committee of Creditors - competence of Adjudicating Authority in competition/combination issues

Locus standi - intervention petition - public interest filing in CIRP - Whether the Applicant, an industry association and outsider to the CIRP, has locus to maintain the Intervention Petition seeking directions regarding consideration of Resolution Plans. - HELD THAT: - The Tribunal examined the position of the Applicant who is neither a financial creditor, an operational creditor nor a related party of the Corporate Debtor and who admitted to being an outsider to the CIRP. Relying upon precedent and the statutory scheme under the Code, the Tribunal observed that the approval of a resolution plan lies within the domain of the Committee of Creditors and that the Applicant is not entitled to intervene at the stage when the CoC is deliberating upon resolution plans. The Tribunal also noted that the Applicant is not materially affected merely by the submission of resolution plans and that the reliefs sought could not be entertained at this stage by an outsider to the CIRP. Accordingly the Intervention Petition was held not maintainable and rejected. [Paras 6, 7]

The Applicant has no locus to file the Intervention Petition and the petition is rejected.

Statutory compliances prior to approval of resolution plan - role and domain of the Committee of Creditors - proviso to Section 31(4) and compliance with other laws - Whether statutory compliances (including those under the Competition Act) required by the proviso to Section 31(4) must be ensured before approval of a resolution plan by the Committee of Creditors. - HELD THAT: - The Tribunal relied on the decision in Bank of Maharashtra v. Videocon Industries and its own earlier authority to hold that statutory compliances mandated by the proviso to Section 31(4) do not form part of the commercial wisdom of the CoC and therefore must be ensured before the CoC approves a resolution plan. At the same time, the Tribunal recognised that, in the present matter, the CoC was still deliberating and no approval had been given; accordingly the Tribunal did not go into merits of any alleged competition contravention. The finding is that while statutory compliances must be met prior to approval, the Adjudicating Authority will not pre-empt or adjudicate the competitive combination question at the stage when the CoC is considering plans. [Paras 6]

Statutory compliances required by the proviso to Section 31(4) must be ensured before the CoC approves a resolution plan; however, the Tribunal will not decide questions of combination/competition at the stage when the CoC has not approved any plan.

Competence of Adjudicating Authority in competition/combination issues - role of Competition Commission of India - Whether the Adjudicating Authority can adjudicate on the existence of a combination under the Competition Act in respect of a resolution plan while the CoC is deliberating. - HELD THAT: - Parties contended that combination issues fall within the exclusive domain of the Competition Commission of India. The Tribunal observed that it is not the stage nor the forum to determine whether a proposed resolution plan constitutes a combination under the Competition Act while the CoC is yet to approve any plan. The Tribunal therefore declined to adjudicate the competition/combination question in the present interlocutory proceeding, noting that resolution applicants may approach the Competition Commission as required and that statutory approvals are to be obtained as mandated prior to final approval. [Paras 4, 6]

The Adjudicating Authority will not decide combination/competition issues at the stage of CoC deliberations; such matters are for the Competition Commission of India and for statutory process as applicable.

Final Conclusion: The Intervention Petition filed by the Applicant was held not maintainable and is rejected. The Tribunal reiterated that statutory compliances required by the proviso to Section 31(4) must be ensured before the CoC approves a resolution plan, but declined to adjudicate competition/combination issues at the stage when the CoC is deliberating; the main Company Petition is listed for further hearing.

Validity of show-cause notice - requirement to disclose provisional conclusions and precise scope - Interpretation of enabling provision permitting RBI to regulate acquisition or transfer of immovable property - Scope of prohibition on transfer of immovable property by persons resident outside India - Permissibility of holding, owning or transferring immovable property inherited from a person resident in India - Liability of power of attorney holder / legal counsel in transactions executed on behalf of executors

Validity of show-cause notice - requirement to disclose provisional conclusions and precise scope - Show-cause notice dated 5th October 2017 was vitiated for being vague and for failing to indicate the precise scope and provisional conclusions on which the authority proposed to act. - HELD THAT: - The Court emphasised settled principles that a show-cause notice must inform the affected person of the material and provisional conclusions relied upon so as to enable effective reply and correction or controversion. Authorities were cited to the effect that a vague notice which does not specify the grounds or the precise scope denies reasonable opportunity. The impugned notice did not indicate the allegations requiring statutory explanation and therefore failed to disclose the matters on which the petitioner was expected to reply. [Paras 7, 8]

The show-cause notice was quashed for want of requisite specificity and for failing to give a meaningful opportunity to the petitioner to show cause.

Interpretation of enabling provision permitting RBI to regulate acquisition or transfer of immovable property - Scope of prohibition on transfer of immovable property by persons resident outside India - The provisions relied upon in the show-cause notice - the enabling clause permitting RBI to regulate acquisition/transfer and Regulation 8 prohibiting transfer by persons resident outside India - did not, on their proper construction, support the allegation that repatriation of sale proceeds without prior RBI permission constituted the pleaded contravention. - HELD THAT: - The Court observed that Section 6(3) of FEMA is an enabling provision empowering RBI to make regulations about acquisition or transfer of immovable property by persons resident outside India; Regulation 8 prohibits transfer by persons resident outside India 'save as otherwise provided' and, as framed, relates to transfer of immovable property rather than repatriation of sale proceeds. The show-cause notice relied on these provisions but did not show how they applied to repatriation of sale proceeds in the facts of this case. [Paras 5, 6, 8]

The provisions invoked by respondent no.2 do not, in the circumstances alleged, render the petitioner liable for contravention with respect to repatriation of sale proceeds.

Permissibility of holding, owning or transferring immovable property inherited from a person resident in India - Sub-section (5) of Section 6 of FEMA permits a person resident outside India to hold, own or transfer immovable property in India if inherited from a person who was resident in India; this provision negates the asserted prohibition in the facts of the present case. - HELD THAT: - The admitted facts in the show-cause notice established that the immovable property was inherited by the deceased from parents who were residents in India and that the executors merely disposed of such inherited property and repatriated the sale proceeds to the beneficiaries. Sub-section (5) specifically allows holding, ownership and transfer in such circumstances, and therefore the charge premised on prohibition under Regulation 8/Section 6(3) was unsustainable. [Paras 9]

The transactions in question fell within the permissibility conferred by Section 6(5) and did not constitute a contravention of the provisions cited in the show-cause notice.

Liability of power of attorney holder / legal counsel in transactions executed on behalf of executors - Petitioner, being the power of attorney holder and legal counsel engaged by the executors of the will, could not be held liable on the facts pleaded for the alleged contravention. - HELD THAT: - The Court noted the petitioner acted as legal counsel and as attorney for the executors in effecting the sale and repatriation, and that the substantive legal position (including applicability of Section 6(5)) absolved the underlying transaction from being a breach. On these facts, there was no basis to proceed against the petitioner personally under the provisions invoked in the notice. [Paras 3, 9]

Petitioner cannot be held liable in the circumstances and the show-cause proceedings against it were unsustainable.

Final Conclusion: Writ petition allowed; the show-cause notice dated 5th October 2017 and the subsequent notices dated 27th September 2019 and 17th October 2019 are quashed and set aside. No order as to costs.

Proviso to Section 45(1) of the PMLA - sick and infirm exception to statutory bail conditions - Grant of bail on medical grounds - Adequacy of prison medical facilities versus need for hospital-level care - Application of dictionary meaning to statutory phrase 'sick and infirm' - Non-application of twin conditions in Section 45(1) where proviso is attracted

Proviso to Section 45(1) of the PMLA - sick and infirm exception to statutory bail conditions - Application of dictionary meaning to statutory phrase 'sick and infirm' - Applicant falls within the proviso to Section 45(1) PMLA as being 'sick and infirm'. - HELD THAT: - The court examined the medical records and Medical Board reports from Atal Bihari Vajpayee Institute of Medical Sciences and found that the applicant suffers from multiple chronic and serious ailments including a non-functional right kidney and a left kidney functioning at approximately 30% capacity, a permanent pacemaker for cardiac disease, prior major surgeries, and infections contracted in custody (syphilis and COVID-19). The court relied on the ordinary dictionary meanings of 'sick' and 'infirm' to interpret the proviso and observed that these conditions, coupled with advanced age, bring the applicant within the scope of 'sick or infirm' thereby attracting the proviso. Once the proviso applies, the applicant need not satisfy the twin conditions under Section 45(1) that would otherwise govern bail in PMLA matters. [Paras 36, 38, 42, 44, 46]

Applicant is both sick and infirm and thus falls within the proviso to Section 45(1) PMLA.

Grant of bail on medical grounds - Adequacy of prison medical facilities versus need for hospital-level care - Applicant's medical condition cannot be adequately managed within jail medical facilities and warrants grant of bail on medical grounds. - HELD THAT: - The court addressed whether the applicant's ailments required treatment or monitoring beyond the capacity of prison medical facilities. Noting that prisons provide general medical care but are not equipped to offer the special, intensive and emergent monitoring needed for a person with a single functioning kidney at 30% capacity and multiple life threatening comorbidities, the court held that the applicant requires hospital-level care and constant monitoring which cannot be promptly and effectively provided in jail. The court distinguished precedents cited by the respondent where prison treatment was found adequate or where ailments were of a less serious nature, and relied upon medical board findings confirming the chronicity and seriousness of the applicant's conditions. [Paras 40, 41, 42, 43, 44]

The applicant suffers from conditions that cannot be effectively addressed in jail and is therefore entitled to bail on medical grounds.

Non-application of twin conditions in Section 45(1) where proviso is attracted - Grant of bail on terms - Having attracted the proviso, the applicant was granted regular bail on specified conditions. - HELD THAT: - The court recorded that once the proviso to Section 45(1) applies to a person who is sick or infirm, the stringent twin conditions in Section 45(1) need not be satisfied. Applying that principle to the facts and medical findings, the court allowed the bail application and imposed conditions to secure attendance and prevent interference with the investigation, including personal bond with surety, appearance as directed, provision of mobile number to the IO, informing change of address, surrender of passport and prohibition on criminal activity or tampering with evidence. The application was disposed of by the court subject to those terms. [Paras 35, 45, 46, 47, 48]

Bail granted to the applicant on medical grounds subject to enumerated conditions.

Final Conclusion: The High Court found the applicant to be 'sick and infirm' within the proviso to Section 45(1) PMLA, concluded that his medical needs could not be adequately met in jail, and accordingly granted regular bail subject to specified conditions to ensure attendance and non interference with the investigation.

Anticipatory bail - pre-trial custody - prima facie case - juvenile/age at time of offence as bail factor - grant of bail subject to conditions - option of fixed deposit in lieu of sureties - imposition of stringent bail conditions to protect investigation - prohibition on influencing witnesses or tampering with evidence

Anticipatory bail - juvenile/age at time of offence as bail factor - prima facie case - Petition for anticipatory bail by the petitioner was allowed. - HELD THAT: - The Court considered the nature of allegations against the petitioner, the fact that the alleged acts relate to 2011-2013 when the petitioner was about 15-17 years old and a student, the petitioner's declaration of no criminal antecedents, and the Directorate's decision not to arrest all accused contemporaneously. Having regard to the petitioner's young age at the time of the alleged offences, his stated non-involvement in day-to-day business affairs, and that the case against each accused stands on a different footing, the Court concluded that there was no justification to subject the petitioner to pre-trial custody at the stage of framing of charges. The Court applied established principles governing grant of bail, including weighing the cumulative circumstances and the absence of factors necessitating custodial detention, while expressly not commenting on the merits of the prosecution case. [Paras 6, 7, 8, 9, 11]

Petition for anticipatory bail was allowed and the petitioner was directed to be released on bail subject to conditions.

Grant of bail subject to conditions - option of fixed deposit in lieu of sureties - imposition of stringent bail conditions to protect investigation - prohibition on influencing witnesses or tampering with evidence - The specific terms and modalities on which bail would be granted were prescribed, including bail bonds, surety or alternative fixed deposit, and restrictive conditions to safeguard the investigation. - HELD THAT: - The Court prescribed that on arrest the petitioner be released on furnishing a personal bond and one surety to the satisfaction of the trial court, with the trial court verifying the surety's ability to produce the petitioner if required. Alternatively, the petitioner may furnish a personal bond and lodge a fixed deposit as described by the Court (including conditions as to banks, automatic renewal, disabling online liquidation, and communication to the court and bank). The Court adopted the pragmatic approach endorsed in its earlier order allowing the accused to choose between sureties and fixed deposits and to switch between modes. The Court further imposed standard restrictive conditions to protect the investigation: attendance bonds, obligation to update contact details, and an express prohibition on influencing, intimidating, inducing or threatening witnesses or tampering with evidence. The Court emphasised that these conditions are in addition to the regular bail-bond formalities and that observations do not constitute any opinion on merits. [Paras 15, 16, 17, 18, 19]

Bail was made subject to furnishing the prescribed personal bond with surety or alternatively the specified fixed deposit and on compliance with the enumerated restrictive conditions; the petitioner is entitled to choose the mode of security.

Final Conclusion: Anticipatory bail granted to the petitioner; release on arrest directed subject to specified personal bond and surety or, alternatively, fixed deposit security, together with conditions to ensure attendance and to prevent interference with the investigation.

Anticipatory bail - consideration of criminal antecedents in bail - age and student status of accused as a factor in bail - prima facie case and discretionary grant of bail - conditions of bail including surety or fixed deposit - prevention of tampering with evidence and intimidation of witnesses

Anticipatory bail - prima facie case and discretionary grant of bail - Petitioner entitled to protection from arrest under Section 438 Cr.P.C. in the present proceedings. - HELD THAT: - Applying settled principles governing bail, the Court considered the cumulative effect of relevant circumstances including the nature of allegations, the fact that the Enforcement Directorate had not earlier arrested the accused, and that the charges against different accused stand on distinct footings. Reliance was placed on authorities recognising that bail is the norm and pre-trial custody should be ordered only where circumstances such as likelihood of fleeing, tampering with evidence, or intimidating witnesses exist. Without expressing any opinion on merits, and having regard to the totality of circumstances peculiar to this case, the Court concluded that there was no justification to consign the petitioner to pre-trial custody at the stage of framing of charges. [Paras 9, 10, 11, 12, 14]

Petitioner shall be released on bail if arrested, subject to the terms and conditions specified by the Court.

Consideration of criminal antecedents in bail - age and student status of accused as a factor in bail - Previous criminal antecedents of the petitioner shall not be treated as a decisive factor for denial of bail in the present case. - HELD THAT: - The Court observed that the petitioner was about 18-20 years old at the time of the alleged offences (2011-2013) and was a college student who, according to his affidavit, had no connection with day-to-day business affairs. In view of the petitioner's age at the time of the alleged commission and the nature of allegations specific to him, the Court declined to treat earlier criminal history as a ground to refuse bail at this stage. [Paras 5, 8, 11]

Criminal antecedents shall not preclude grant of bail to the petitioner in the facts and circumstances of this case.

Conditions of bail including surety or fixed deposit - prevention of tampering with evidence and intimidation of witnesses - Specific bail conditions to secure attendance and protect the investigation were prescribed, including monetary bond/surety or alternative fixed deposit, reporting obligations, and prohibitions against influencing witnesses or tampering with evidence. - HELD THAT: - The Court framed detailed, pragmatic conditions to balance the accused's liberty and the public interest in an unimpeded investigation. The petitioner was directed to furnish a personal bond and either surety(s) to the satisfaction of the trial court or, alternatively, a fixed deposit in lieu of surety, with procedural safeguards for creation of lien and bank endorsements. The order further required disclosure of contact particulars on the bond, obligation to inform courts/police of any change, execution of attendance bond, and an explicit prohibition on influencing or intimidating witnesses or tampering with evidence. The Court noted that such conditions can adequately address risks (if any) of interference with the investigation. [Paras 17, 18, 19, 20, 21]

Grant of bail is subject to furnishing the prescribed bond/surety or fixed deposit and compliance with the enumerated reporting and conduct conditions; breach may invite appropriate action.

Final Conclusion: Anticipatory bail is granted to the petitioner in the stated proceedings; if arrested the petitioner shall be released on bail subject to the specified bond/surety or alternative fixed deposit arrangements and the attendant reporting and non-interference conditions, without any expression of opinion on the merits.

Input service - CENVAT credit - sales promotion - commission/consignment agent - clarificatory amendment/Explanation to Rule 2(l) - retrospective effect - extended period of limitation - suppression of facts - tribunal as last fact-finding authority

Input service - CENVAT credit - sales promotion - commission/consignment agent - Services rendered by consignment/commission stockists qualify as input services for the purpose of claiming CENVAT credit where such services include warehousing, distribution, sales promotion and other associated activities. - HELD THAT: - The Tribunal and this Court examined the agreements and contemporaneous material and found that the consignment stockists performed activities going beyond mere trading or order-procurement - including warehousing, distribution, sales promotion, market representation and related services - which fall within the definition of input service under Rule 2(l). The Board circular recognising credit where there is an element of sales promotion and judicial authorities treating advertising/sales promotion as input-stage services were applied. The adjudicating authority's characterisation of the agents' role as only trading was reversed on the facts, since the agreements and conduct indicated services that form part of the value of the final product and therefore are eligible for input credit. [Paras 7, 10, 13, 15]

Services of the consignment/commission stockists were held to be eligible input services and CENVAT credit was allowable.

Clarificatory amendment/Explanation to Rule 2(l) - retrospective effect - The Explanation inserted into Rule 2(l) by notification dated 03.02.2016, clarifying that sales promotion includes services by way of sale of dutiable goods on commission basis, is clarificatory and to be given retrospective effect. - HELD THAT: - Having regard to the legislative purpose of extending the benefit of credit and the character of the Explanation as a clarification of the scope of 'sales promotion', the Court accepted the Tribunal's view that the amendment is declaratory. Reliance was placed on principles that favour retrospective effect for clarificatory provisions intended to remove doubt and to give effect to the legislative object of conferring benefit. [Paras 11]

The Explanation is retrospective in nature and clarifies that sales by commission agents fall within sales promotion for Rule 2(l) purposes.

Extended period of limitation - suppression of facts - Invocation of the extended period of limitation was unsustainable as there was no material to demonstrate wilful suppression of facts by the assessee. - HELD THAT: - The show-cause notice alleged 'suppression of material facts' but did not disclose the basis for invoking extended limitation. The assessee had disclosed the payments and credits in returns and had undergone earlier audit without objection. On these facts the Court upheld the Tribunal's view that extended limitation could not be validly invoked. [Paras 14]

Extended period of limitation was not sustainable and could not be invoked against the assessee.

Tribunal as last fact-finding authority - The Tribunal did not err in independently examining facts and materials and in substituting the adjudicating authority's findings where justified; it is the last fact-finding authority empowered to confirm, modify or reverse the adjudicating order. - HELD THAT: - The Court rejected the Revenue's contention that the Tribunal improperly substituted findings without testing the adjudicating authority's correctness. Given the Tribunal's role it was entitled to peruse agreements, invoices and material afresh and record its own findings; the approach adopted by the Tribunal in this case was within its jurisdiction and not erroneous. [Paras 8]

Tribunal's independent fact-finding and consequent reversal of the adjudicating authority's order was permissible and not vitiated.

Final Conclusion: The appeal by the Revenue is dismissed. The Tribunal's allowance of CENVAT credit in respect of services rendered by consignment/commission stockists (including sales promotion), the retrospective operation of the Explanation to Rule 2(l), the rejection of invocation of extended limitation, and the Tribunal's independent fact-finding are upheld.

Validity of searches and seizure under Section 67(1) and (2) of the CGST Act - Quashment of panchnama and challenge to seizure - Delay and laches in seeking judicial review - Requirement of showing prejudice for interim relief against search action - Availability of contested issues for adjudication before the assessing authority - Challenge to refusal of de-sealing and compliance with Trade Notice

Validity of searches and seizure under Section 67(1) and (2) of the CGST Act - Quashment of panchnama and challenge to seizure - Delay and laches in seeking judicial review - Requirement of showing prejudice for interim relief against search action - Challenge to multiple panchnamas and searches conducted on 15.06.2020, 17.06.2020, 04.07.2020 and 06.07.2020 seeking quashment of the panchnamas and allied reliefs - HELD THAT: - The panchnamas exhibited at the factory gate and the presence of the security guard at the time of search indicate that the petitioner was aware of the searches; no specific prejudice from the repeated inspections was demonstrated. The court emphasised that where a show cause notice has been issued, the petitioner has the opportunity to dispute the contents of the panchnamas and other aspects of the search in the adjudication proceedings. Given the lapse of about two years before seeking judicial intervention and the absence of demonstrated prejudice, the petition seeking quashment of the panchnamas and interim relief was not maintainable. The court therefore declined to set aside the panchnamas and observed that the petitioner may raise all available grounds before the adjudicating authority in response to the show cause notice. [Paras 5, 6]

The challenge to the panchnamas and searches is dismissed for want of substance and due to delay; the petitioner may contest the matters before the adjudicating authority.

Challenge to refusal of de-sealing and compliance with Trade Notice - Availability of contested issues for adjudication before the assessing authority - Objection to the order dated 27.05.2021 refusing de-sealing for non-compliance with Trade Notice No.04/2020-21 and collateral challenge to the Trade Notice - HELD THAT: - The writ petition did not persuade the court to exercise extraordinary writ jurisdiction to adjudicate the merits of the refusal to de-seal or the validity of the Trade Notice. The court declined to decide these contentions in the writ petition and indicated that such objections can be raised and considered in the statutory adjudication proceedings arising from the show cause notice. The judgment records that the petitioner had earlier instituted related writ petitions and that the present challenge, raised after final disposal of those matters, is not appropriate for writ relief in the circumstances. [Paras 4, 5, 6]

The challenge to the order refusing de-sealing and to the Trade Notice is not adjudicated by this court and is to be raised and decided before the adjudicating authority in the statutory proceedings.

Final Conclusion: Writ petition seeking quashment of the panchnamas and related reliefs is dismissed; petitioner is left to raise all contentions, including challenges to de-sealing and the Trade Notice, before the adjudicating authority; petition dismissed without notice.

Levy of excise duty on goods lost or broken during storage and handling - CENVAT credit reversal as remedy for lost/damaged finished goods - applicability of departmental circulars on tolerance for breakage - retrospective application of administrative circulars - jurisdiction of Appellate Tribunal under proviso to Section 35B of the Central Excise Act, 1944

Levy of excise duty on goods lost or broken during storage and handling - CENVAT credit reversal as remedy for lost/damaged finished goods - Demand of excise duty on bottles of beverages broken during manufacture, storage and handling - HELD THAT: - The Tribunal held that the central question was whether duty was exigible on broken bottled beverages. It found that breakages occurred during production, storage and handling and that the appellant had reversed the CENVAT credit attributable to the inputs used in the broken finished goods. The Tribunal rejected the lower authority's reliance on the later Circular dated 9.7.2010 to impose duty for earlier periods, noting that the 1971 and 1975 Board instructions on breakage tolerance remained operative until 9.7.2010 and that the appellant had followed those instructions. Having regard to the reversal of CENVAT credit by the appellant and the continued operation of the earlier circulars for the period in question, the Tribunal concluded that the demands could not be sustained and set aside the impugned orders. [Paras 4, 5]

Demand for duty on the broken bottles is not sustainable; impugned orders set aside and appeals allowed.

Applicability of departmental circulars on tolerance for breakage - retrospective application of administrative circulars - Whether the CBEC circulars of 8.9.1971 and 17.9.1975 applied to the periods under dispute and whether Circular dated 9.7.2010 could be applied to earlier periods - HELD THAT: - The Tribunal observed that the 1971 and 1975 circulars allowed writing off breakage up to 0.5% and remained in force until the Board issued the 2010 circular. It held that the Commissioner(Appeals)'s reliance on the 2010 circular to deny benefit for periods prior to its issuance was incorrect. The Tribunal treated the earlier circulars as relevant for the disputed periods and took into account that the appellant had complied substantially with the post-2010 position by reversing the CENVAT credit. On this basis the Tribunal concluded that the 2010 circular could not be applied to negate the benefit available under earlier instructions for the periods in question. [Paras 4]

The 1971 and 1975 circulars applied to the periods under dispute; Circular dated 9.7.2010 could not be used to deny the benefit for prior periods.

Jurisdiction of Appellate Tribunal under proviso to Section 35B of the Central Excise Act, 1944 - Whether the CESTAT had jurisdiction to entertain the appeals under proviso to Section 35B in respect of loss/breakage claimed during storage/handling - HELD THAT: - The Tribunal examined the preliminary objection raised belatedly by the Revenue under proviso (a) to Section 35B, which excludes Tribunal jurisdiction in appeals relating to loss of goods occurring in transit or storage. It found the objection was raised late and barred by delay and laches, and on merits held that the present controversy concerned the question of demandability of duty and applicability of Board circulars rather than a pure loss claim covered by the proviso. The Tribunal therefore concluded that the proviso did not oust its jurisdiction in the facts of these appeals. [Paras 4]

Objection to Tribunal's jurisdiction under proviso to Section 35B is not sustainable; Tribunal has jurisdiction to decide these appeals.

Final Conclusion: Appeals allowed; impugned orders set aside. The Tribunal held that demands for duty on broken bottled beverages for the periods in dispute were not sustainable, observed that the 1971 and 1975 Board circulars were applicable to those periods and that the 2010 circular could not be used to deny earlier benefits, and rejected the Revenue's jurisdictional objection under proviso to Section 35B.

Admissibility of electronic evidence - procedure under Section 36B of the Central Excise Act - Pen drive evidence inadmissibility - validity of Panchnama and competence of Panch witnesses - waiver of procedural objection for non raising before the original authority - remand for fresh adjudication de hors electronic data

Admissibility of electronic evidence - procedure under Section 36B of the Central Excise Act - Pen drive evidence seized during search is not admissible as the mandatory procedure under Section 36B was not followed. - HELD THAT: - The Tribunal found no material on record to show that the statutory procedure prescribed under Section 36B of the Central Excise Act was complied with in respect of the Pen drive seized during the search. In the absence of compliance with the mandatory procedure, the contents of the Pen drive cannot be taken as admissible evidence and therefore cannot support confirmation of duty demands which rely upon that data. [Paras 7, 8, 9, 11]

Pen drive evidence rejected as inadmissible for want of compliance with Section 36B; demands based solely or substantially on that data cannot be sustained on that basis.

Validity of Panchnama and competence of Panch witnesses - waiver of procedural objection for non raising before the original authority - Objection to addresses of Panch witnesses, not raised before the original adjudicating authority, is waived and cannot be entertained at the appellate stage. - HELD THAT: - The appellants did not raise the contention regarding the Panch witnesses' addresses in their reply to the show cause notice or during personal hearing before the Commissioner. The Tribunal held that recording of permanent addresses in the Panchnama does not of itself invalidate the Panchnama, and that, absent an allegation and opportunity to the department, the appellants cannot be permitted to raise that procedural objection for the first time on appeal. [Paras 10]

Objection to Panch witnesses' addresses is not admitted as it was not raised before the original authority; the Panchnama is not set aside on that ground.

Remand for fresh adjudication de hors electronic data - Matters remanded to the Adjudicating Authority to re-examine and decide demands based on documents seized (Serial nos. 1-5) ignoring evidence derived from the Pen drive. - HELD THAT: - The Tribunal observed that the impugned order confirmed composite demands, some founded on documents physically resumed during search and others on the Pen drive data. Having excluded the Pen drive evidence for non compliance with Section 36B, the Tribunal directed that the Adjudicating Authority should independently examine the documents and records resumed (serial nos. 1-5) and determine whether any duty liability can be sustained on that basis, without relying on the Pen drive. The remand requires fresh adjudication of those demands de hors the electronic data that has been held inadmissible. [Paras 11, 12, 13]

Impugned order set aside and matter remanded for fresh decision on demands at Serial nos. 1-5, to be decided ignoring Pen drive evidence; appeals allowed to that extent.

Final Conclusion: The Tribunal held the Pen drive evidence inadmissible for non compliance with Section 36B, refused to admit a belated challenge to the Panch witnesses' addresses, set aside the impugned order and remanded the matter to the Adjudicating Authority to re decide the demands based on the documents actually resumed (Serial nos. 1-5) without reliance on the Pen drive; the appeals are allowed to that extent.

Second sale - first point of sale - levy of sales tax on subsequent sale where tax already paid at first point - supply of goods to contractor amounting to sale when value is deducted from contractor's bill - production of statutory Form IX-C - directory or mandatory - point of levy under Section 11 of the Bihar Finance Act, 1981

Supply of goods to contractor amounting to sale when value is deducted from contractor's bill - second sale - Transaction of supply of cement by the assessee to its contractor, with recovery by deduction from the contractor's bills, constitutes a second sale. - HELD THAT: - The Court accepted the legal proposition, following the ratio of the Apex Court decisions cited and the parties' admissions, that when the selling dealer deducts the price of goods from the contractor's bill, ownership passes and the transaction is a second sale. The judgment records that this proposition was not disputed by the assessee and is supported by the authorities referenced in the proceedings. [Paras 5]

Supply of cement to the contractor with deduction from the contractor's bill amounts to a second sale.

First point of sale - levy of sales tax on subsequent sale where tax already paid at first point - point of levy under Section 11 of the Bihar Finance Act, 1981 - Whether the second sale of cement is liable to tax where statute/notification prescribes levy only at the first point of sale and tax on the cement has already been paid at that first point. - HELD THAT: - The Court examined Section 11 of the Bihar Finance Act, 1981 and the Notification dated 26th December, 1977 and found that the State had prescribed taxation of cement only at the first point of sale. As it was admitted that tax had been charged and discharged on the initial purchase, the Court held that a subsequent sale of cement could not be subjected to tax again. The Court further relied on precedents holding that where the statutory point of levy is the first sale and tax has been paid, a later sale of the same goods is not leviable to tax. [Paras 6, 8, 10]

Second sale of cement is not subject to levy of tax where cement is chargeable only at the first point of sale and tax on that first sale has been paid.

Production of statutory Form IX-C - directory or mandatory - Whether non-production of statutory Form IX-C at the time of the subsequent sale disentitles the dealer from claiming that the subsequent sale is not taxable, thereby justifying re-levy of tax. - HELD THAT: - The Court noted that the Revenue's contention at the writ stage relied on procedural requirements such as producing Form IX-C to establish prior payment of tax. Examining the statutory scheme and relevant authority (including a Patna High Court decision), the Court held that production of Form IX-C is directory and not a condition precedent to prevent levy of tax where it is otherwise admitted that tax was paid at the first point of sale. Consequently, failure to furnish Form IX-C did not justify imposing tax again on cement already subjected to tax at the first point. [Paras 7, 8, 9]

Non-production of Form IX-C does not warrant levy of tax on a subsequent sale where tax on the goods was chargeable and has been paid at the first point of sale.

Final Conclusion: The writ petition is dismissed. Although the transaction amounted to a second sale, cement was taxable only at the first point of sale and had already suffered tax; non-production of Form IX-C did not justify a second levy, and the Tribunal's order setting aside the additional levy is upheld. No order as to costs.

Age of ink - expert opinion for determination of the age of writing - forensic examination of documents - non-availability of reliable scientific method - petition under Section 293 Cr.P.C.

Age of ink - expert opinion for determination of the age of writing - forensic examination of documents - non-availability of reliable scientific method - Whether the documents marked Ex.P.1 to Ex.P.8 should be forwarded for forensic examination at Nutron Activation Analysis, Bhabha Atomic Research Centre, Mumbai for ascertaining the age of the ink and related expert opinion. - HELD THAT: - The trial-accused sought, under Cr.M.P.No.2 of 2021, an order to send the promissory notes and cheques (Ex.P.1 to Ex.P.8) for expert examination to determine the age of the ink used for signatures and for comparison with the contents. The learned Principal District and Sessions Judge refused the prayer after noting that there is no reliable or available scientific method in this State to determine the age of writing and that even the institution identified (Nutron Activation Analysis, BARC, Mumbai) can only give at best an approximate range and its opinion would not be exact; further, documents relating to prosecutions and other litigations are not customarily sent to that institution. The High Court, after reviewing earlier decisions of this Court and other High Courts which have held that the age of ink cannot be determined with scientific accuracy in the State and that sending documents for such opinion would likely cause confusion and delay, concurred with that approach. Having considered the non-availability and unreliability of any such mechanism and the precedents rejecting similar requisitions, the Court found no illegality in the impugned order dismissing the petition and upheld the view that the relief sought was not maintainable. [Paras 15, 16]

The petition seeking to forward Ex.P.1 to Ex.P.8 for expert determination of the age of the ink is dismissed for lack of any reliable scientific method and in view of binding precedents.

Expeditious disposal of pending appeal - procedural direction - Whether any directions should be issued for the disposal of the pending criminal appeal arising out of the conviction in S.T.C.No.201 of 2018. - HELD THAT: - The Criminal Appeal (Crl.A.No.1 of 2020) against the conviction and sentence remains pending since 2020. In view of dismissal of the petition for forensic examination and the interest of finality, the High Court exercised its supervisory jurisdiction to give a limited procedural direction for earlier disposal of the appeal. This direction is administrative and intended to ensure expeditious adjudication of the appeal. [Paras 16, 17]

The Principal District and Sessions Judge, Tiruchirappalli is directed to dispose of Crl.A.No.1 of 2020 within two months from receipt of a copy of this order.

Final Conclusion: Criminal Revision Petition dismissed; petition to send disputed documents for expert determination of the age of the ink refused for want of any reliable scientific method and in view of precedents, and the trial Court is directed to dispose of the pending criminal appeal within two months.

Validity of advisory for dealing with import of exotic live species of animals and birds - legality of executive advisory - declaration within six months grants immunity from explaining source - protection from confiscation and seizure of declared exotic live species and progeny - immunity from prosecution under civil, fiscal and criminal statutes for declarant and transferee - declarations after the advisory window carry no exemption and require compliance with extant laws

Validity of advisory for dealing with import of exotic live species of animals and birds - legality of executive advisory - The advisory dated 11.06.2020 issued by the Ministry of Environment, Forest and Climate Change is legally valid and its challenge in this PIL is dismissed. - HELD THAT: - The Court examined and accepted the reasoning of several High Courts which had upheld the same Advisory. Reference to the judgment of the Allahabad High Court and other High Courts was treated as a complete answer to the present challenge, and a Special Leave Petition against the Allahabad High Court decision had been dismissed by this Court. On this basis the Advisory's legality was affirmed and the petition was dismissed.

Advisory held valid; writ petition dismissed on merits.

Declaration within six months grants immunity from explaining source - protection from confiscation and seizure of declared exotic live species and progeny - immunity from prosecution under civil, fiscal and criminal statutes for declarant and transferee - declarations after the advisory window carry no exemption and require compliance with extant laws - A declaration made within the six-month window under the Advisory confers the stated exemptions; declarations made after the window do not attract those exemptions and require full compliance with applicable laws. - HELD THAT: - The Court interpreted the Advisory to mean that if a declaration is made within the six-month period, the exotic live species so declared (and its progeny) and the declarant or transferee(s) are exempt from explaining the source, are not liable to confiscation or seizure by Central or State agencies, and the declarant and transferee(s) are immune from prosecution under civil, fiscal and criminal statutes. The Court rejected any contrary interpretation as one that would defeat the object of the Advisory and lead to absurdity. Conversely, any declaration made after the expiry of the window carries no such exemption and the declarant must comply with all requisite documentation under extant laws and regulations.

Declarations within the six month window attract the Advisory's exemptions; declarations after the window do not and must comply with existing legal requirements.

Final Conclusion: The petition is dismissed; the Advisory dated 11.06.2020 is upheld and construed to grant the specified exemptions for declarations made within the six month window while declarations made after that period do not enjoy such exemptions and must comply with extant law.