TaxTMI Updates e-Newsletter
Sep 30,2021

Regular bail under Section 439 Cr.P.C. - economic offences and approach to bail - statement recorded under Section 70 of the CGST Act as deemed judicial proceedings - custodial necessity for further investigation - cooperation with investigation and its relevance to bail - severity of punishment and its bearing on bail - reasonable possibility of securing presence of the accused and risk of tampering with witnesses

Regular bail under Section 439 Cr.P.C. - economic offences and approach to bail - custodial necessity for further investigation - cooperation with investigation and its relevance to bail - severity of punishment and its bearing on bail - statement recorded under Section 70 of the CGST Act as deemed judicial proceedings - Grant of bail to the accused-petitioner in proceedings under the CGST Act. - HELD THAT: - The court balanced the special considerations applicable to economic offences with the accused's rights to bail. The petitioner had been in custody for thirty days and there was no record of further investigative action after 06.09.2021, indicating that continued custodial detention was not necessary for investigation. The petitioner had appeared in compliance with summons, cooperated with investigation, and had given a statement under Section 70 of the CGST Act (an inquiry deemed to be judicial proceedings), which included incriminating admissions but also demonstrated cooperation. There was no material to indicate likelihood of abscondence or of tampering with witnesses, and the petitioner is resident within the forum's territorial jurisdiction, making presence at trial reasonably secure. The court also considered the gravity of the offence and the maximum sentence (which may extend to five years), and applied the settled factors for bail in economic-offence cases, concluding that on balance bail was warranted subject to conditions. [Paras 20, 21, 22, 23, 24]

The accused-petitioner is released on bail on furnishing bail bond with two sureties, subject to conditions restricting travel without permission, deposit of passport/visa if any, non-tampering with evidence or witnesses, and other appropriate conditions as may be imposed by the trial court.

Final Conclusion: Bail granted to the petitioner in the CGST prosecution after balancing the seriousness of the alleged economic offence against the absence of necessity for further custodial interrogation, the petitioner's cooperation and presence on summons, and the lack of prima facie risk of flight or witness-tampering; release ordered on bond and specified conditions.

Re-opening of assessment on the basis of the Shah Commission Report - Clubbing of writ petitions - Review on the ground of error apparent on the face of the record - Basis for reassessment: under invoicing in export of iron ore

Re-opening of assessment on the basis of the Shah Commission Report - Clubbing of writ petitions - Review on the ground of error apparent on the face of the record - Whether the Review application succeeds in showing an error apparent on the face of the record because Writ Petition No.1104 of 2017 was wrongly clubbed with other petitions. - HELD THAT: - The Court examined the reasons for reopening the assessment as recorded by the Department and the order dated 17/11/2017 rejecting the assessee's objections. That material demonstrates that, although the reopening letter referred to information from the DCIT Circle, New Delhi, the substantive basis for reopening and for quantifying the alleged under invoicing in exports was the Shah Commission Report. The consideration of objections and the computation methodology repeatedly relied on the Shah Commission Report. On that basis the issue in Writ Petition No.1104 of 2017 was the same as in the other petitions with which it was clubbed. No error apparent on the face of the record was shown that would justify review of the Court's earlier order. [Paras 5]

Review application dismissed; clubbing of Writ Petition No.1104 of 2017 with the other petitions was correct and no error apparent on the face of the record was shown.

Final Conclusion: The Review application is dismissed. The Court held that the reopening of assessment for assessment year 2010-2011 was substantively grounded on the Shah Commission Report, justifying the clubbing of Writ Petition No.1104 of 2017 with other similar petitions, and no error apparent on the face of the record was established.

Vicarious liability of directors for company tax dues under section 179(1) - requirement of prior recovery efforts from the company before invoking director's liability - burden on director to prove non-recovery not attributable to gross neglect, misfeasance or breach of duty - private agreement or arbitral award cannot extinguish statutory tax liability (rights in rem vs rights in personam) - principles of natural justice - opportunity to be heard before proceedings under section 179(1)

Requirement of prior recovery efforts from the company before invoking director's liability - vicarious liability of directors for company tax dues under section 179(1) - Whether the Revenue was obliged to establish that tax dues could not be recovered from the company before proceeding against the director under Section 179(1), and whether such recovery steps were in fact taken in the present case. - HELD THAT: - The Court held that Section 179(1) imposes vicarious responsibility on directors but must be applied subject to the primary condition that the tax dues could not be recovered from the company. The Assessing Officer must record that tax dues could not be recovered before proceeding against directors. The orders under challenge (dated 29.01.2018 and 01.04.2021) record issuance of demand notices, notices under section 221(1), attachment of bank accounts and partial recoveries, and a specific finding that despite notices and attachments the entire outstanding dues could not be recovered, leaving the Department no option but to recover from directors. On this factual basis the Court sustained the invocation of Section 179(1) against the petitioner. [Paras 17, 18, 20, 21, 22]

The Court found that the condition precedent - inability to recover from the companies despite appropriate steps - was satisfied and justified proceedings against the director under Section 179(1).

Burden on director to prove non-recovery not attributable to gross neglect, misfeasance or breach of duty - Whether the Revenue must prove gross neglect, misfeasance or breach of duty by the director, or whether the burden lies on the director to displace the statutory presumption. - HELD THAT: - Interpreting the language of Section 179(1), the Court held the statutory burden lies on the director to prove that non-recovery cannot be attributed to his gross neglect, misfeasance or breach of duty. The Court relied on precedent to confirm that it is for the director to establish absence of such conduct; failure to discharge that burden justifies imposition of liability. Consequently, the petitioner's contention that the Revenue must demonstrate gross neglect was rejected. [Paras 18, 19, 23, 24]

The Court held the burden to prove absence of gross neglect, misfeasance or breach of duty rests on the director and not on the Revenue; the petitioner did not discharge that burden.

Private agreement or arbitral award cannot extinguish statutory tax liability (rights in rem vs rights in personam) - Whether the Memorandum of Understanding, Settlement Deed and Arbitral Award which purportedly allocated tax liabilities to another director could bind the Revenue and preclude recovery under Section 179(1). - HELD THAT: - The Court observed that such instruments govern rights in personam between private parties and cannot bind a statutory authority in respect of rights in rem like tax liabilities. Citing settled principle that rights in rem are not amenable to private arbitration, the Court held that private apportionment of income tax liability cannot absolve a director of statutory liability under Section 179(1). Thus the MOU, Settlement Deed and Arbitral Award could not prevent the Department from recovering statutory dues from directors. [Paras 25, 26]

The Court held that private agreements or arbitral awards cannot extinguish or alter statutory tax liabilities and do not preclude recovery under Section 179(1).

Principles of natural justice - opportunity to be heard before proceedings under section 179(1) - Whether the petitioner was denied a fair opportunity of being heard before initiation of proceedings under Section 179(1). - HELD THAT: - The Court examined the departmental record and noted that a show-cause notice dated 19.09.2017 was issued to the petitioner, furnishing details of outstanding demands and providing a time-limit to reply; the notice was dispatched by speed post and no reply was received by the stipulated date. Notices were issued to all three directors on the same date and at least one co-director filed a reply. The Court concluded that principles of natural justice were complied with. [Paras 14, 15, 16]

The Court found that the petitioner was given a reasonable opportunity to respond and that principles of natural justice were satisfied prior to passing the Section 179(1) order.

Final Conclusion: The writ petition was dismissed on merits: the Court upheld invocation of Section 179(1) against the petitioner for Assessment Years 2006-07 to 2009-10, held that the departmental steps showed inability to recover the full demand from the companies, that the burden lay on the director to prove absence of gross neglect, that private agreements/arbitral awards could not preclude statutory recovery, and that natural justice requirements were met.

Definition of "appellant" under the Direct Tax Vivad Se Vishwas Act, 2020 - deemed pendency of appeal on the specified date - effect of condonation of delay on original filing date - scope and interpretative role of CBDT circular/FAQ in administering the VsV Act - power of designated authority to reject declarations as never made

Definition of "appellant" under the Direct Tax Vivad Se Vishwas Act, 2020 - deemed pendency of appeal on the specified date - effect of condonation of delay on original filing date - Whether the petitioner qualifies as an "appellant" under the VsV Act because his appeal, filed with an application for condonation of delay and subsequently admitted/condoned by the ITAT, must be treated as pending as on the specified date. - HELD THAT: - The Court examined the statutory definition of "appellant" and the concept of the "specified date" (31.01.2020) in the VsV Act, having regard to the object and purpose of the legislation to provide a final resolution of pending direct tax disputes. Reliance was placed on the principle that condonation of delay, when granted by the competent appellate authority, relates back to the original date of filing so that there is, in effect, no delay; accordingly an appeal whose delay has been condoned is to be treated as if filed within time. The Court read the CBDT Circular/FAQ as clarificatory but held that the restrictive construction urged by the Revenue (requiring application for condonation to be filed on or before the circular date and admitted before filing of declaration) would frustrate the statutory scheme and produce irrational classification. Applying settled principles of limitation and the effect of condonation, the Court concluded that where an appeal filed with a condonation plea is allowed by the appellate authority before the date of filing the declaration (and within the extended period for declaration), the appeal is to be considered pending for the purposes of the Act and the person qualifies as an "appellant" under Section 2(1)(a)(i). [Paras 37, 38]

The petitioner is an "appellant" within the meaning of the VsV Act because the ITAT's condonation of delay operates to treat the appeal as filed in time, and hence the appeal must be regarded as pending for the purpose of eligibility under the Act.

Scope and interpretative role of CBDT circular/FAQ in administering the VsV Act - power of designated authority to reject declarations as never made - Whether the rejection of the petitioner's Forms No.1 and 2 by the designated authority was legally sustainable in view of the petitioner's entitlement to be treated as an appellant and the guidance contained in the CBDT Circular/FAQ. - HELD THAT: - The Court recognised that CBDT circulars and FAQs are clarificatory and intended to guide field authorities; they cannot override the Act's express provisions. While circulars may be binding on officers in administration, a narrowly restrictive reading of FAQ No.59 that prevents deeming an appeal pending despite subsequent condonation would be inconsistent with the Act's object and with established principles concerning the effect of condonation and pendency. Applying these principles to the facts - the petitioner filed Forms No.1 and 2 within the extended declaration period and the ITAT had condoned delay before the last date for declaration - the Court found the respondent's rejection contrary to law. The Court therefore held that the declaration could not be treated as never made on the basis advanced by the respondent and that the procedural outcome (rejection) must be set aside to permit participation in the VsV scheme. [Paras 35, 36, 38]

The rejection of the petitioner's declaration is quashed; the designated authority must accept the petitioner's declaration and process it in accordance with the VsV Act and Rules.

Final Conclusion: The writ petition is allowed. The rejection of the petitioner's Forms No.1 and 2 is quashed and the designated authority is directed to accept and process the petitioner's declaration under the VsV Act within three days, permitting the petitioner to participate in the scheme and comply with the remaining payment requirements in accordance with law.

Violation of principles of natural justice - Non-compliance of Section 144B(1)(xvi)(b) of the Income Tax Act - Quashing of draft assessment order under Section 144C(1) of the Income Tax Act - Opportunity to file objections and seek personal hearing - Direction to AO to reopen portal and accept electronic/email filing

Violation of principles of natural justice - Non-compliance of Section 144B(1)(xvi)(b) of the Income Tax Act - Quashing of draft assessment order under Section 144C(1) of the Income Tax Act - Impugned draft assessment order dated 29th August 2021 was passed in violation of statutory requirement and principles of natural justice and is liable to be quashed with directions for fresh consideration. - HELD THAT: - The Court found that the Respondents issued a show cause notice dated 27th August 2021 affording the Petitioner time up to 23:59 hours of 3rd September 2021 to file written objections and, if required, seek a personal hearing. Despite that, the Respondents passed the draft assessment order under Section 144C(1) on 29th August 2021, i.e., before expiry of the period allowed for filing objections. This early passing of the draft order amounted to non-compliance with the mandatory provision identified as Section 144B(1)(xvi)(b) and resulted in denial of the opportunity to be heard, constituting a breach of the principles of natural justice. In view of this procedural defect, the Court quashed the draft assessment order and directed a fresh exercise of the power under Section 144C(1), giving the Petitioner a specified time to file objections and directing the Assessing Officer to facilitate filing by making the online portal functional and accepting email submissions. [Paras 6]

Draft assessment order dated 29th August 2021 quashed; matter remitted for fresh draft assessment in compliance with Section 144B(1)(xvi)(b) and principles of natural justice with specific procedural directions.

Final Conclusion: The writ petition is allowed to the extent that the draft assessment order dated 29th August 2021 is quashed; the Petitioner is directed to file objections by 24th September 2021 and the Assessing Officer to pass a fresh draft assessment order under Section 144C(1) on or before 30th September 2021, with the portal functionality restored and email filing permitted.

Validity of notice under Section 148 issued to a deceased person - Requirement to issue notice to the correct person for reopening assessment - Deemed status of legal representative under Section 159(3) of the Income Tax Act

Validity of notice under Section 148 issued to a deceased person - Requirement to issue notice to the correct person for reopening assessment - Impugned notice dated 30.03.2019 issued in the name of the deceased assessee is invalid - HELD THAT: - The Court held that jurisdiction to reopen an assessment under Section 148 is predicated upon issuance of notice to a correct person and that a notice issued in the name of a dead person cannot confer jurisdiction. Reliance was placed on the Court's earlier decision in Savita Kapila which treated issuance of notice to a deceased person as non est. The petitioner produced the deceased's death certificate and it was admitted that the notice was issued only in the name of the deceased and not in the name of any legal representative. Having found that the notice was addressed to a dead person, the Court concluded it did not validly commence proceedings under Section 148 and therefore quashed the notice and all consequential proceedings. [Paras 8, 11]

Impugned notice quashed and set aside; all proceedings consequent thereto set aside.

Deemed status of legal representative under Section 159(3) of the Income Tax Act - Section 159(3) cannot validate a notice issued in the name of the deceased where the notice was not addressed to the legal representative - HELD THAT: - The respondent contended that Section 159(3) deems a legal representative of a deceased assessee to be an assessee and thus the notice could be proceeded against the legal heirs. The Court observed that Section 159(3) applies where proceedings are initiated or pending against an assessee when he is alive or where the legal representative is specifically the addressee. Since the impugned notice was issued only in the name of the deceased and not in the name of his legal representatives, Section 159(3) could not be invoked to validate the notice. Consequently, reliance on Section 159(3) was rejected. [Paras 6, 9, 10]

Section 159(3) does not save the notice; respondent's reliance on it is rejected.

Final Conclusion: The petition is allowed: the notice dated 30.03.2019 issued in the name of the deceased is quashed and set aside and all proceedings consequent thereto are also set aside; no order as to costs.

Vivad Se Vishwas Scheme - pendency of appeal for purposes of settlement scheme despite delay or condonation not having been granted - competence of designated authority to assess validity or maintainability of an appeal while considering a declaration - acceptance of declaration where appeal was pending on the specified date - definition of "appellant" under the scheme

Pendency of appeal for purposes of settlement scheme despite delay or condonation not having been granted - definition of "appellant" under the scheme - Whether the declaration under the Vivad Se Vishwas Scheme could be rejected on the ground that the appeal was time barred or that condonation of delay had not been granted by the appellate authority. - HELD THAT: - The Court applied the scheme's definition of "appellant" and the settled principle that an appeal filed and pending on the specified date remains an appeal even if ultimately found to be irregular, incompetent or time barred. Citing the reasoning reproduced from prior decisions, the Court held that it is not for the designated authority to adjudicate the competence or validity of the appeal when considering a declaration under the scheme; the only relevant question for the authority is whether an appeal was filed and pending as on the specified date. Consequently, rejection of the declaration solely because the appeal's delay had not been condoned or because the appeal might be irregular was impermissible. [Paras 9, 11]

The communications rejecting the petitioner's declaration on the ground that the appeal was time barred/condonation was not granted are quashed and set aside; the respondent could not refuse the declaration for that reason.

Vivad Se Vishwas Scheme - competence of designated authority to assess validity or maintainability of an appeal while considering a declaration - acceptance of declaration where appeal was pending on the specified date - Whether the respondent must accept the petitioner's declaration under the Vivad Se Vishwas Scheme and the consequential administrative directions necessary for completion of the settlement process. - HELD THAT: - Following the conclusion that the declaration could not be rejected for the reasons stated by the respondent, the Court directed that the declaration be accepted if otherwise valid. The Court observed that non availability of an order from the appellate authority cannot be a reason for denying scheme benefits. The respondent was directed to accept the declaration by a specified date and stipulated an outer date for payment under the scheme, while also directing that any consequential declarations be processed without delay. [Paras 9, 10, 11]

The respondent is directed to accept the declaration for A.Y. 2014 15 and to permit completion of the scheme process, with specified timelines for acceptance and payment; the petition is allowed and the rule made absolute.

Final Conclusion: The impugned communications rejecting the petitioner's declaration under the Vivad Se Vishwas Scheme for A.Y. 2014 15 are quashed; the respondent is directed to accept the declaration (if otherwise valid) and to permit payment and completion of the scheme process within the timelines fixed by the Court.

Faceless assessment procedure - mandatory show cause notice and draft assessment order - non est assessment for non-compliance with Section 144B procedure - principles of natural justice - remand for fresh compliance with statutory procedure

Faceless assessment procedure - mandatory show cause notice and draft assessment order - non est assessment for non-compliance with Section 144B procedure - remand for fresh compliance with statutory procedure - Validity of the assessment and demand raised for Assessment Year 2018-2019 where no prior show cause notice and draft assessment order were issued under the faceless assessment scheme. - HELD THAT: - The court examined the scheme of faceless assessment and held that Section 144B(1)(xvi)(b) of the Act mandatorily requires that, where any variation prejudicial to the assessee is proposed, a notice calling upon the assessee to show cause and a draft assessment order must be served before passing the final assessment. Section 144B(9) makes assessment under section 143(3) or section 144 non est if not made in accordance with the procedure under Section 144B. The impugned assessment and demand were rendered vitiated because no prior show cause notice or draft assessment order was issued. Reliance on compliance with principles of natural justice could not substitute for or cure non-observance of the statutory procedure: when power is conferred to act in a particular manner, it must be exercised in that manner and not otherwise. In consequence, the impugned assessment, notice of demand and consequent penalty show cause notices were set aside and the matter remitted to the Assessing Officer to issue the statutory show cause notice and draft assessment order and thereafter pass a reasoned order in accordance with law. [Paras 8, 9, 10, 11, 12]

Impugned assessment order, demand notice and penalty show cause notices set aside; matter remitted to Assessing Officer to issue show cause notice and draft assessment order and thereafter pass a reasoned order in accordance with Section 144B.

Final Conclusion: The writ petition is allowed to the extent that the assessment order, notice of demand and penalty show cause notices for AY 2018-2019 are set aside and the matter is remitted for fresh action strictly in accordance with the mandatory procedure under Section 144B, including issuance of a show cause notice and draft assessment order, followed by a reasoned order.

Territorial jurisdiction - maintainability of writ petitions - doctrine of dominus litis - situs of an appellate tribunal - cause of action doctrine and multiplicity of forums - dismissal for lack of territorial jurisdiction - leave to approach the appropriate High Court

Territorial jurisdiction - maintainability of writ petitions - doctrine of dominus litis - situs of an appellate tribunal - Writ petitions before the High Court of Madras are not maintainable and are dismissed for want of territorial jurisdiction. - HELD THAT: - The Court applied the principles summarized in the cited Division Bench decision, observing that the doctrines of dominus litis and situs of an appellate tribunal are distinct: dominus litis affords the suitor options, whereas the situs of an appellate forum fixes the single High Court in which an appeal or writ may be entertained. The Court noted that allowing a cause of action approach could result in multiple High Courts having jurisdiction, which the statute does not contemplate. On that basis, and on facts showing the relevant authorities and appellate forum fall outside the territorial reach of the Madras High Court, the petitions were held not maintainable before this Court. The Court expressly confined its order to the question of territorial jurisdiction and did not adjudicate the merits of the underlying dispute. The petitioners were left at liberty to approach the High Court having territorial jurisdiction (specifically the High Court of Kerala) if so advised.

Writ petitions dismissed for lack of territorial jurisdiction of the Madras High Court; merits not decided; liberty granted to move the appropriate High Court.

Final Conclusion: The writ petitions are dismissed solely on the ground of lack of territorial jurisdiction; no adjudication on merits was undertaken and the petitioners may approach the High Court of competent territorial jurisdiction.

Higher rate of depreciation for motor vehicles used in the business of hiring - qualification of vehicles used in own business versus vehicles let out on hire - treatment of composite receipts incorporating hire charges - binding effect of coordinate bench decisions and consistency in tax proceedings - res judicata principles in income-tax proceedings and finality by conduct

Higher rate of depreciation for motor vehicles used in the business of hiring - treatment of composite receipts incorporating hire charges - binding effect of coordinate bench decisions and consistency in tax proceedings - res judicata principles in income-tax proceedings and finality by conduct - Claim for higher rate of depreciation (30%) on vehicles for Assessment Year 2006-07 upheld by CIT(A) and Tribunal. - HELD THAT: - The Tribunal and the Commissioner of Income Tax (Appeals) applied the coordinate-bench decision in the assessee's own earlier years and examined the factual matrix to conclude that the assessee's use of tippers, loaders and similar vehicles constituted a business of hiring rather than merely use in the assessee's own operations. The Commissioner found that the assessee recovered hire charges as part of composite receipts and also received substantial standalone hire receipts, indicating regularity and that hiring was not a stray incident. The Court relied on the principle that, although traditional res judicata does not strictly apply to income-tax proceedings, where a fundamental factual position has been consistently decided and allowed to attain finality by the parties, it is inappropriate to permit a change of position in a subsequent year. Applying that principle to the facts and the prior ITAT decision in the assessee's favour, the Tribunal correctly declined to disturb the allowance of the higher rate of depreciation and deleted the disallowance made by the AO. [Paras 3, 6, 7]

Allowance of higher rate of depreciation affirmed; disallowance deleted and appeal dismissed.

Final Conclusion: The substantial question is answered against the revenue and in favour of the assessee: the higher rate of depreciation was correctly allowed for AY 2006-07 by applying the prior coordinate-bench findings and the principle that a consistently accepted factual position, allowed to attain finality, should not be disturbed in subsequent assessment years.

Non-application of Section 12AA from 1st April 2021 - Procedure for fresh registration under Section 12AB - Requirement to process applications made under Section 12A(1)(ac)(i) - Cancellation of registration under Section 12AB(4) - Keeping show-cause notice in abeyance pending re-registration

Non-application of Section 12AA from 1st April 2021 - Procedure for fresh registration under Section 12AB - Validity of issuing a show-cause notice under Section 12AA(3) after 1 April 2021 in view of Section 12AA(5) and the new scheme of Section 12AB - HELD THAT: - The Court held that Sub section (5) of Section 12AA, which provides that nothing contained in that Section shall apply on or after 1st April 2021, and the introduction of Section 12AB for "Procedure for fresh registration" manifestly displace the earlier procedural regime. Where a trust enjoyed registration under the earlier regime, the legislature intended that such trusts shall seek re registration as provided under Section 12A(1)(ac) and Section 12AB. In that statutory scheme the authority has to process applications made under Section 12A(1)(ac)(i) and grant registration for a period of five years under Section 12AB(1)(a), and only thereafter cancellations for non genuineness or non compliance are to be carried out under Section 12AB(4) or (5). Consequently, the respondent lacked jurisdiction to proceed with the impugned proceedings under Section 12AA(3) in the face of the new statutory scheme and pending disposal of the re registration application, and the impugned notice cannot be prosecuted further until the re registration process is completed. [Paras 26, 27, 33, 34, 35]

The show cause notice issued under Section 12AA(3) cannot be proceeded with and is to be kept in abeyance pending disposal of the re registration application under Section 12AB.

Requirement to process applications made under Section 12A(1)(ac)(i) - Procedure for fresh registration under Section 12AB - Obligation of the Principal Commissioner/Commissioner to process the petitioner's application dated 04.05.2021 made under Section 12A(1)(ac)(i) and the consequence of such processing - HELD THAT: - Section 12AB(1)(a) requires that on receipt of an application made under clause (ac) of sub section (1) of Section 12A (specifically sub clause (i)), the Principal Commissioner or Commissioner shall pass an order in writing registering the trust or institution for a period of five years. The Court found that the petitioner had filed an online application dated 04.05.2021 and that the application should be processed by the competent authority under Section 12AB. The Court noted that any confusion or non receipt can be cured by the petitioner submitting a hard copy to the Principal Commissioner/Commissioner and that pending disposal of that application the existing notice cannot be proceeded with. Once registration is granted under Section 12AB, the revenue may, if satisfied under Section 12AB(4) or (5), take action to cancel registration after following the prescribed procedure and affording opportunity of hearing. [Paras 29, 30, 31, 32, 36]

The Principal Commissioner/Commissioner is directed to process the petitioner's 04.05.2021 application under Section 12AB(1)(a) and pass a written order registering the trust for five years; only thereafter may cancellation proceedings under Section 12AB(4)/(5) be instituted.

Keeping show-cause notice in abeyance pending re-registration - Cancellation of registration under Section 12AB(4) - Interim directions as to the impugned show cause notice, submission of hard copy of the re registration application and subsequent course of action by the revenue - HELD THAT: - Having found that the new statutory scheme requires re registration before cancellation proceedings under Section 12AB can be pursued, the Court directed that the impugned notice dated 10.08.2021 be kept in abeyance. The petitioner was permitted to submit a hard copy of the online application dated 04.05.2021 to the Principal Commissioner/Commissioner within two weeks, whereupon the authority shall process the application under Section 12AB. If registration is granted for five years, the respondent may then proceed with any action under Section 12AB(4)/(5), utilising the allegations in the impugned notice and after affording reasonable opportunity of hearing. [Paras 35, 36, 37]

Impugned notice kept in abeyance; petitioner permitted to submit hard copy within two weeks; respondent to process application and may thereafter proceed under Section 12AB(4)/(5) in accordance with law.

Final Conclusion: Writ petition disposed: the show cause notice dated 10.08.2021 under Section 12AA(3) is kept in abeyance; the petitioner's online application dated 04.05.2021 is to be processed by the Principal Commissioner/Commissioner under Section 12AB(1)(a) and registration for five years shall be granted; after such registration the revenue may proceed, if appropriate, under Section 12AB(4)/(5); petitioner permitted to furnish hard copy of the application within two weeks.

Invalidity of penalty notice for failure to specify limb of Section 271(1)(c) - penalty under Section 271(1)(c) for concealment or furnishing inaccurate particulars - requirement of specific charge in quasi judicial penalty proceedings - bonafide mistake in claim of depreciation

Invalidity of penalty notice for failure to specify limb of Section 271(1)(c) - requirement of specific charge in quasi judicial penalty proceedings - Whether the penalty levied under Section 271(1)(c) is sustainable where the notice under Section 274 read with Section 271(1)(c) does not specify whether proceedings are for concealment of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal found that the notice issued under Section 274 read with Section 271(1)(c) did not specify which limb of Section 271(1)(c) - concealment of particulars of income or furnishing inaccurate particulars of income - was invoked. The Assessing Officer's notice and the assessment order likewise failed to articulate the specific charge. The Tribunal relied on the ratio in the decision in M/s SSA's Emerald Meadows , affirmed by the Supreme Court by dismissal of SLP, and the line of authority in Commissioner of Income Tax v. Manjunatha Cotton & Ginning Factory , as well as the decision of the Delhi High Court in Pr. CIT v. M/s. Sahara India Life Insurance Company Ltd. , to hold that a penalty notice which does not identify the limb of Section 271(1)(c) renders the notice and consequent penalty proceedings bad in law. Applying these precedents, the Tribunal concluded that the inception of penalty proceedings was vitiated by the absence of a specific charge and therefore the penalty could not be sustained. The Tribunal further noted that the claim of depreciation was a bonafide mistake and, in any event, did not require examination on merits once the notice was held void. [Paras 7, 8]

Penalty under Section 271(1)(c) quashed because the notice did not specify whether proceedings were for concealment or for furnishing inaccurate particulars; penalty set aside and Assessing Officer directed to cancel it.

Final Conclusion: The appeal is allowed: the penalty imposed under Section 271(1)(c) for AY 2013-14 is quashed because the notice did not specify which limb of Section 271(1)(c) was invoked; the Assessing Officer is directed to cancel the penalty.

Penalty under Section 271(1)(c) of the Income-tax Act - notice under Section 274 read with Section 271(1)(c) - distinction between concealment of income and furnishing of inaccurate particulars - validity of penalty notice requiring specification of the limb of Section 271(1)(c)

Penalty under Section 271(1)(c) of the Income-tax Act - notice under Section 274 read with Section 271(1)(c) - distinction between concealment of income and furnishing of inaccurate particulars - Whether the penalty levied under Section 271(1)(c) is sustainable when the notice issued under Section 274 read with Section 271(1)(c) does not specify whether proceedings are for concealment of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal found that the notice dated 25.03.2013 did not specify which limb of Section 271(1)(c) was invoked and that the Assessing Officer's own records and the assessment order similarly failed to particularise whether the charge was concealment or furnishing of inaccurate particulars. The Tribunal applied the ratio of the decisions relied upon by the assessee, observing that the Karnataka High Court decision in CIT v. Manjunatha Cotton & Ginning Factory and its follow-up in CIT v. SSA's Emerald Meadows , which was not entertained by the Supreme Court, establish that a penalty notice which does not specify the limb of Section 271(1)(c) is bad in law. The Tribunal also noted the Delhi High Court decision in Pr. CIT v. M/s. Sahara India Life Insurance Company Ltd. endorsing the requirement that the notice must make clear whether the proceedings are for concealment or for furnishing inaccurate particulars. Applying these precedents, and observing that the assessment additions (made by applying Section 44AE rates) and the fact that the assessee did not pursue a quantum appeal could not be equated with deliberate concealment or furnishing of inaccurate particulars where no specific charge was set out, the Tribunal concluded that the inception of the penalty proceedings was vitiated and therefore the penalty could not be sustained.

Penalty under Section 271(1)(c) quashed because the notice under Section 274 read with Section 271(1)(c) did not specify whether penalty proceedings were for concealment of income or for furnishing of inaccurate particulars.

Final Conclusion: Both appeals for A.Y. 2010-11 and A.Y. 2014-15 are allowed and the penalty orders under Section 271(1)(c) are set aside because the initiating notice failed to specify the applicable limb of Section 271(1)(c).

Incriminating material requirement for disturbing a concluded assessment consequent to search - Assessment concluded on date of search - limitation on making additions without incriminating material - Abated assessment after search - power to make additions based on material found and subsequent inquiries - Addition on account of unexplained investment and its proof (Section 69) - Reliability of statements recorded during search and during assessment proceedings; corroboration and retraction - Estimation of value of assets on basis of statement where documentary evidence is absent

Incriminating material requirement for disturbing a concluded assessment consequent to search - Assessment concluded on date of search - limitation on making additions without incriminating material - Estimation of value of assets on basis of statement where documentary evidence is absent - Deletion of addition of Rs. 1,85,000 made for alleged purchase of Maruti 800 in Assessment Year 2003-04. - HELD THAT: - The Tribunal found that the assessee had filed return for AY 2003-04 well before the search (return filed 17/2/2004; search on 12/12/2006) so the assessment stood concluded as on date of search and could not be reopened or disturbed except on the basis of incriminating material found during the search. The assessing officer made the addition solely on the basis of a statement recorded during assessment proceedings and there is no reference to any incriminating material discovered in the search. Following the decision of the Delhi High Court in CIT v. Kabul Chawla, the Tribunal held that in absence of incriminating material the addition in a concluded assessment is not sustainable. The Tribunal also noted the vehicle's registration indicated purchase after the impugned year and that the AO's estimate was based on surmise rather than evidence. For these reasons the addition was reversed and deleted. [Paras 6, 7]

Addition of Rs. 1,85,000 for AY 2003-04 deleted; appeal allowed.

Incriminating material requirement for disturbing a concluded assessment consequent to search - Assessment concluded on date of search - limitation on making additions without incriminating material - Estimation of value of assets on basis of statement where documentary evidence is absent - Deletion of additions made in Assessment Year 2004-05 in respect of purchases of motor cars where no incriminating material from search was relied upon. - HELD THAT: - The Tribunal observed that the assessee's return for AY 2004-05 was filed before the search and the due date for issue of notice had elapsed, so the assessment was concluded as on the date of search. The additions under challenge were made on the basis of statements recorded during assessment proceedings and there was no reference in the assessment order to any incriminating material found during the search. Reliance was placed on the same principle from CIT v. Kabul Chawla that a concluded assessment cannot be disturbed after a search in absence of incriminating material. The Tribunal further accepted documentary evidence showing the Maruti Zen was purchased on 01.03.2005 and therefore could not be added for AY 2004-05. In consequence the additions were deleted. [Paras 12, 13]

Additions for AY 2004-05 deleted; appeal allowed.

Abated assessment after search - power to make additions based on material found and subsequent inquiries - Addition on account of unexplained investment and its proof (Section 69) - Estimation of value of assets on basis of statement where documentary evidence is absent - Sustainment of addition of Rs. 1,85,000 in Assessment Year 2005-06 for purchase of Maruti 800 where assessment was abated and AO relied on statements and lack of documentary proof of source. - HELD THAT: - For AY 2005-06 the Tribunal noted the return was filed on 28/2/2006 and the search on 12/12/2006 occurred before the expiry of the due date for issue of notice (30/9/2007), hence the assessment was abated (not concluded) and the AO retained power to make additions based on material found during search and on inquiries into the return. The AO recorded the assessee's statement and found the assessee could not furnish adequate evidence to substantiate source of funds for the Maruti 800; the AO estimated the cost and made the addition. The assessee's assertions that the purchase was from declared incomes were not supported by documentary evidence. On this basis, and because the AO's action was within jurisdiction for an abated assessment, the Tribunal found no infirmity in upholding the addition. [Paras 19, 20]

Addition of Rs. 1,85,000 for AY 2005-06 sustained; appeal dismissed.

Reliability of statements recorded during search and during assessment proceedings; corroboration and retraction - Addition on account of unexplained investment and its proof (Section 69) - Estimation of value of assets on basis of statement where documentary evidence is absent - Upholding of addition of Rs. 15 lakhs as unexplained investment for renovation/household items in Assessment Year 2007-08 and partial confirmation of additions for foreign tour expenditure; overall dismissal of appeal for that year. - HELD THAT: - The Tribunal recorded that the assessee, in a statement during the search and again during assessment proceedings, admitted having invested approximately Rs. 15 lakhs on renovation including furniture and fixtures and agreed to disclose that amount. The assessee did not produce any evidence of retraction or of coercion, nor documentary proof to explain the source of the expenditure. The Tribunal found the statement to be corroborated by its repetition and the absence of retraction or evidence to the contrary, and therefore the AO and CIT(A) were justified in treating it as unexplained investment under the statutory provision and making the addition. With respect to the foreign tour addition, the CIT(A) had examined income levels and confirmed a portion of the addition; those decisions were left intact. The Tribunal found no error in the lower authorities' conclusions and dismissed the appeal for AY 2007-08. [Paras 27, 28, 29, 30, 31]

Addition of Rs. 15 lakhs for AY 2007-08 upheld and appeal dismissed; partial confirmation of foreign tour addition sustained as per lower authority.

Final Conclusion: The Tribunal allowed the appeals for Assessment Years 2003-04 and 2004-05 by deleting additions made in absence of incriminating material from the search, and dismissed the appeals for Assessment Years 2005-06 and 2007-08 thereby sustaining the additions for those years where the assessments were not concluded at the time of search or where the assessee's statements were treated as corroborative and unexplained by documentary evidence.

Tax deduction at source on commission under section 194H - Characterisation of discount as part of sale consideration versus commission - Principal-to-principal sale versus principal-agent relationship - Admissibility of additional evidence and powers of the Commissioner (Appeals) under section 250(4) read with Rule 46A - Precedential effect of High Court decisions and forum jurisdiction in choice of binding precedent - Application of the principle favouring the assessee where judicial opinions diverge (Vegetable Products principle)

Admissibility of additional evidence and powers of the Commissioner (Appeals) under section 250(4) read with Rule 46A - Validity of CIT(A)'s admission and reliance on additional documents in appeal despite the Assessing Officer not being given opportunity under Rule 46A - HELD THAT: - The Tribunal found that the assessee had raised the grievance of denial of opportunity before the CIT(A) and that the CIT(A) exercised powers under section 250(4) to call for and examine documents necessary for adjudication. Given that the Assessing Officer had failed to provide a proper opportunity to the assessee during assessment proceedings, the CIT(A)'s admission and consideration of additional material was held to be within his jurisdictional powers and not a contravention of Rule 46A. The Tribunal emphasised that the First Appellate Authority's powers are co-terminus with those of the Assessing Officer to call for information and that no further opportunity to the AO is mandated when CIT(A) proceeds under section 250(4). [Paras 5]

Ground alleging violation of Rule 46A is dismissed; CIT(A)'s admission of additional evidence sustained

Tax deduction at source on commission under section 194H - Characterisation of discount as part of sale consideration versus commission - Principal-to-principal sale versus principal-agent relationship - Precedential effect of High Court decisions and forum jurisdiction in choice of binding precedent - Application of the principle favouring the assessee where judicial opinions diverge (Vegetable Products principle) - Whether discounts offered to distributors on sale of recharge coupon vouchers and starter kits attract TDS under section 194H or form part of sale consideration on principal-to-principal basis - HELD THAT: - The Tribunal held that the transactions, on the facts of the assessee's case, constituted sales on a principal-to-principal basis and the discount reflected in the transaction formed part of the sale consideration rather than commission liable to TDS under section 194H. In reaching this conclusion the Tribunal observed that (a) the assessee's registered jurisdiction placed it under the Allahabad High Court and thus adverse decisions of other High Courts were not binding on the assessee; (b) there existed authoritative decisions, including the Karnataka High Court and several coordinate benches of the Tribunal, holding that similar discounts on prepaid cards and starter kits do not amount to commission; and (c) when judicial opinions diverge, the view favourable to the assessee ought to be adopted following the Supreme Court's guidance in Vegetable Products. The Tribunal also relied on coordinate-bench reasoning that where the distributor pays the net sale price and ownership vests in the distributor on delivery, the difference between distributor's sale to retailers and the price paid to the assessee is the distributor's business income and not commission attracting section 194H. Applying these principles, the Tribunal upheld the CIT(A)'s finding that no TDS liability arose and no default under section 201(1) could be attributed to the assessee. [Paras 5]

Section 194H held not applicable to the discounts on sale of recharge vouchers and starter kits; departmental grounds on merits dismissed and CIT(A) order upheld

Final Conclusion: Both departmental appeals for Assessment Years 2008-09 and 2009-10 are dismissed: the CIT(A)'s admission of additional evidence was valid, and on the merits the discounts to distributors were held to be part of sale consideration in principal-to-principal transactions and not commission subject to TDS under section 194H; accordingly no default under section 201(1) was established.

Exemption under section 54 for reinvestment in residential property - Prospective effect of statutory amendment to section 54 - Cost of improvement as deductible adjustment to long term capital gains

Exemption under section 54 for reinvestment in residential property - Prospective effect of statutory amendment to section 54 - Claim for exemption under section 54 in respect of investment made in purchase of a residential house outside India prior to the 2014 amendment is allowable. - HELD THAT: - The Tribunal examined whether the proviso added by the Finance Act, 2014 (inserting the words 'in India') operates retrospectively or prospectively. Noting that the plain statutory text prior to the 2014 amendment did not mandate acquisition within India, and having regard to judicial decisions of the jurisdictional and other High Courts and coordinate benches, the Tribunal held the 2014 amendment to be prospective with effect from 1.4.2015 (AY 2015-16). The assessee's reinvestment in a residential property in the UK in July 2013 therefore satisfied the pre amendment statutory requirement of investment in a residential house and entitled her to exemption under section 54 for the year under appeal. The Tribunal accepted the literal reading of the unamended provision and followed precedent holding that the amendment did not affect earlier years. [Paras 7]

The Department's appeal challenging allowance of deduction under section 54 is dismissed and the exemption granted by the CIT(A) is upheld.

Cost of improvement as deductible adjustment to long term capital gains - Expenditure on stamp duty, registration, conversion of leasehold to freehold and professional fees relating to the property sold constitute cost of improvement and are allowable. - HELD THAT: - The Tribunal noted that the Assessing Officer did not dispute the genuineness of the expenditure and that the expenses were inextricably linked to the property and incurred to obtain lawful title and enhance the sale value. Observing that cost of improvement has a wide ambit and includes expenses incurred for improvement and saleability of the property, the Tribunal concluded that registration expenses, conversion charges, stamp duty and professional fees formed part of cost of improvement and should be allowed while computing long term capital gains. The matter was remitted to the Assessing Officer for consequential adjustment. [Paras 8]

The Cross Objection is allowed and the Assessing Officer is directed to allow the claimed expenses as cost of improvement.

Final Conclusion: The Department's appeal is dismissed; the assessee's cross objection is allowed - exemption under section 54 for reinvestment outside India prior to the 2014 amendment is upheld for AY 2014-15, and the impugned expenses are to be allowed as cost of improvement.

Amendment of Scheme of Amalgamation - appointed date ante dating and justification - compliance with MCA Circular dated 21st August, 2019 under Section 232(6) - appointed date as acquisition date for Ind AS 103 - amendment of reliefs relating to meeting of unsecured creditors - no restructuring or waiver of creditors' rights

Appointed date ante dating and justification - compliance with MCA Circular dated 21st August, 2019 under Section 232(6) - appointed date as acquisition date for Ind AS 103 - Amendment of the Scheme to introduce justification for an appointed date significantly ante dated beyond a year from filing, in compliance with the MCA clarification, is permissible. - HELD THAT: - The Tribunal considered the MCA Circular (General Circular No. 09/2019) clarifying that an 'appointed date' may be a calendar date or event based, and that where it is significantly ante dated beyond a year from filing, the scheme must specifically bring out the justification and it should not be against public interest. The circular also treats the appointed date as the 'acquisition date' for conformity with accounting standards (Ind AS 103). Applying that clarification to the present proposals, the Tribunal accepted that the applicants had commenced the proposal earlier, that delay caused by the pandemic led to significant ante dating of the appointed date, and that stakeholders (including financial creditors) relied on the commitment to merger. On that basis the Tribunal held that amending the scheme to add the required justification would satisfy the circular and is allowable. [Paras 7, 8, 9]

Amendment of the Scheme to incorporate the justification for the appointed date is permitted and may be allowed.

Amendment of reliefs relating to meeting of unsecured creditors - no restructuring or waiver of creditors' rights - amendment of Scheme of Amalgamation - Amendment of the reliefs sought in the main application limited to the meeting of unsecured creditors may be allowed where secured creditors and shareholders have consented and the scheme does not restructure or waive creditor obligations. - HELD THAT: - The applicants sought to amend reliefs only as to convening the meeting of unsecured creditors. The Tribunal noted that secured creditors holding a large majority and equity shareholders holding the requisite majority had filed affidavits consenting to the scheme, and that the proposed scheme did not involve any waiver, restructuring of financial or operational debt, or variation of debt obligations requiring a Creditors Responsibility Statement. The unsecured creditors' constituency was described as fluctuating and not adversely affected. On this basis the Tribunal was satisfied that permitting the amendment of reliefs confined to unsecured creditors' meeting was appropriate. [Paras 3, 6, 9]

Amendment of the reliefs in relation to the meeting of unsecured creditors is allowed, subject to filing amended papers.

Final Conclusion: Both Company Applications are allowed: applicants are directed to file amended CA(CAA)s within 15 days to incorporate the justification for the appointed date and the amended reliefs relating to unsecured creditors, consistent with the MCA circular and the Tribunal's observations.

Admission and verification of claims by Resolution Professional - duty of Resolution Professional under Section 18 to collate and verify claims - proof of claim in Form C - requirement of board resolution and third party lender consent for validity of a corporate guarantee - discretion to provisionally admit or reject claims pending documentary evidence - updation of Committee of Creditors voting share on admission of claims

Admission and verification of claims by Resolution Professional - duty of Resolution Professional under Section 18 to collate and verify claims - proof of claim in Form C - discretion to provisionally admit or reject claims pending documentary evidence - requirement of board resolution and third party lender consent for validity of a corporate guarantee - updation of Committee of Creditors voting share on admission of claims - Whether the Resolution Professional erred in partially rejecting the Applicant's Form C claim and was obliged to admit the full claim and update the CoC voting shares accordingly. - HELD THAT: - The Tribunal examined the role and duty of the Resolution Professional to receive, collate and verify claims (Section 18), and held that the RP is required to apply his mind and verify documentary support before admitting claims rather than acting as a mere rubber stamp. The RP received the Applicant's claim and revised claim after a delay but, having regard to the materials on record and objections from other lenders as to the validity of the corporate guarantee and absence of supporting board/resolution records, provisionally admitted only that portion supported by available documents. The Tribunal noted that other financial creditors had raised objections that the corporate guarantee may be void for want of prior consortium consent and that the Applicant had not placed conclusive evidence (including consistent secretarial records) to establish entitlement to the full claim. The RP's approach of admitting the claim to the extent supported and refusing the unsupported part was therefore a conscientious application of mind. The Tribunal further observed that the Applicant had been included in CoC and had exercised its voting rights (including voting against the resolution plan) and was not prejudiced; consequently there was no basis to direct reopening of e voting or mandatory admission of the disputed portion without documentary proof. [Paras 24, 25]

Application seeking direction to admit the full Form C claim and to update CoC voting share is rejected; MA 3545 of 2019 (in CP No. 2285 of 2018) is disposed of as rejected and IA 518 of 2021 is disposed of as infructuous.

Final Conclusion: The Tribunal affirms the Resolution Professional's verification role and discretion to admit claims only to the extent supported by documentary evidence; the Applicant's prayer for admission of the full claim and consequential updation of CoC voting share is refused and the related miscellaneous and interlocutory applications are disposed accordingly.

Retention of employees under an approved resolution plan - Binding nature of an approved resolution plan and finality of admitted claims - Power to liquidate under Section 33 of the Insolvency and Bankruptcy Code - Section 32A retrospective effect and protection against reopening of claims - Role and obligation of the Monitoring Agency in implementation of a resolution plan

Power to liquidate under Section 33 of the Insolvency and Bankruptcy Code - Binding nature of an approved resolution plan and finality of admitted claims - Application under Section 33(3) / Section 33(4) seeking liquidation of the corporate debtor on account of alleged contravention of the approved resolution plan - HELD THAT: - The Tribunal examined the prayer to liquidate the corporate debtor on the ground that the successful resolution applicant had not complied with terms of the approved resolution plan. The Tribunal observed that the resolution plan was approved by this Tribunal on August 1, 2019 and that the successful resolution applicant had taken over management and retained employees pursuant to the plan. The Tribunal treated the present challenge as effectively seeking to modify or revisit the terms of the approved resolution plan. Citing the settled position that the adjudicating authority does not have jurisdiction to re-write or modify the commercial terms approved by the Committee of Creditors and ratified by the Tribunal, the application for liquidation under Section 33 was rejected. The Tribunal therefore declined to exercise liquidation power on the facts pleaded, since the relief sought would amount to altering the approved plan rather than establishing a ground of liquidation permissible under the Code. [Paras 15, 16]

IA 447 of 2020 disposed of as rejected; prayer for liquidation under Section 33 refused.

Binding nature of an approved resolution plan and finality of admitted claims - Section 32A retrospective effect and protection against reopening of claims - Whether the Tribunal can direct payment of amounts beyond the claims admitted in the resolution process or otherwise re-open admitted/decided claims after approval of the resolution plan - HELD THAT: - The Tribunal noted that the employees had filed claims which were partly admitted by the resolution professional and that the approved resolution plan provided for payment of pending salaries within a specified period. The Tribunal referred to authority holding that a successful resolution applicant must know the quantum of claims when taking over and that claims, once decided and a resolution plan approved, cannot be re-opened to saddle the successful resolution applicant with 'undecided' claims. The Tribunal also recorded that the amendment to Section 32A has retrospective/clarificatory effect, reinforcing that post-approval attempts to re-open or alter admitted claims are impermissible. On that basis, the Tribunal held that a prayer directing payment of the larger claimed amount (beyond admitted claims) would amount to modification of the approved resolution plan and cannot be permitted. [Paras 11, 14, 15]

Prayer to direct payment of the full claimed amount beyond the admitted claim rejected; approved resolution plan cannot be modified by this Adjudicating Authority.

Role and obligation of the Monitoring Agency in implementation of a resolution plan - Retention of employees under an approved resolution plan - Allegation that the Monitoring Agency and the successful resolution applicant failed to implement payment terms of the resolution plan (including pending salaries and retention of employees) - HELD THAT: - The Tribunal recorded the applicants' contention that the Monitoring Agency (appointed under the resolution plan) failed to ensure implementation and that the successful resolution applicant did not pay certain months' salaries as per employment. While noting these factual allegations, the Tribunal treated the remedial step sought-compelling payment or liquidation-as impermissible to the extent it required modification of the approved plan or re-opening of admitted claims. The decision therefore does not direct modification or new payment obligations beyond what was admitted and provided for under the approved plan, and rejects the application seeking such relief. The Tribunal's order thus leaves the established terms of retention and payment in the approved plan intact and declines to enforce a broader obligation that would alter those terms. [Paras 9, 10, 13, 15]

Allegation of failure by Monitoring Agency and resolution applicant noted but not remediable by altering the approved resolution plan; reliefs seeking enforcement beyond admitted claims rejected.

Final Conclusion: The application under Section 33 was rejected. The Tribunal held that the approved resolution plan and the quantum of admitted claims are final and cannot be modified by this Adjudicating Authority; reliance was placed on the retrospective/clarificatory effect of Section 32A and precedents emphasizing finality of admitted claims, and no direction was issued to alter the approved plan or to liquidate the corporate debtor.

Preferential transaction - ordinary course of business - look-back period - avoidance of preferential transaction - burden of proof on resolution professional - forensic audit

Preferential transaction - ordinary course of business - look-back period - Whether the payment of Rs. 47,26,000 made in Financial Year 2018-19 to Respondent No.1 constituted a preferential transaction under Section 43 of the Insolvency and Bankruptcy Code, 2016. - HELD THAT: - The Tribunal found that the Applicant failed to furnish substantial proof to characterise the payment as a preferential transaction. Evidence on record showed that Respondent No.1 had been providing unsecured loans to the Corporate Debtor since 2013 and that the transaction in question was a refund of an advance (received from M/s Mind Estates Private Limited) which had originally been funded from Respondent No.1's loans. The ledger and balance sheet entries for Financial Years 2017-18 and 2018-19 demonstrated ongoing lending and repayments between the parties, and a substantial outstanding remained due to Respondent No.1 after the payment. The payment was therefore held to be in the ordinary course of business and bona fide, not a transfer giving Respondent No.1 a preferential position vis-a -vis other unsecured financial creditors within the statutory look-back period. The Tribunal also noted the Resolution Professional's omission to conduct a forensic audit and the absence of corroborative material relied upon to establish preference. [Paras 26, 27, 28, 29, 30]

The payment of Rs. 47,26,000 is not a preferential transaction under Section 43; it was a bona fide refund in the ordinary course of business.

Final Conclusion: The application under Sections 43 and 44 of the Insolvency and Bankruptcy Code seeking avoidance and recovery of the said payment is dismissed for want of proof; IA No. 1396 of 2020 in C.P. (IB) No. 3540/MB/C-II/2018 is rejected with no costs.

Stay on constitution of Committee of Creditors - interpretation of appellate order for effecting interim relief - exclusion of period from Corporate Insolvency Resolution Process timeline - authority of Adjudicating Authority to exclude CIRP time on account of higher forum stay

Stay on constitution of Committee of Creditors - interpretation of appellate order for effecting interim relief - The order dated 4.3.2020 of the Hon'ble NCLAT operated as a stay on constitution of the Committee of Creditors until further orders. - HELD THAT: - The Tribunal examined the language of the order dated 4.3.2020 and the subsequent order dated 23.7.2020. The statement recorded on 4.3.2020 that the appellant wished to settle and that the COC 'may not be constituted till the next date' was read in context and held to have the effect of restraining constitution of the COC so as to enable the appellant to pursue settlement. The later order dated 23.7.2020 expressly permitted the RP to constitute the COC and proceed in accordance with law, which the Tribunal treated as a clear indication that a prior restraint had been in operation and was lifted by the 23.7.2020 order. The Tribunal therefore concluded that the first order must be understood as imposing a temporary stay on constitution of the COC. [Paras 8, 11]

The Tribunal held that the NCLAT order of 4.3.2020 amounted to a stay on constitution of the COC, subsequently vacated by the order of 23.7.2020.

Exclusion of period from Corporate Insolvency Resolution Process timeline - authority of Adjudicating Authority to exclude CIRP time on account of higher forum stay - The Adjudicating Authority correctly excluded the period 4.3.2020 to 27.7.2020 (146 days) from the CIRP timeline pursuant to the stay by the Hon'ble NCLAT, and that exclusion did not warrant interference. - HELD THAT: - Having accepted that the NCLAT had stayed constitution of the COC from 4.3.2020 until permission was granted on 23.7.2020 (communicated on 27.7.2020), the Tribunal found the Adjudicating Authority's exclusion of the intervening period from the CIRP duration to be in accordance with law. The RP's constitution of the COC on 29.7.2020 following receipt of the 23.7.2020 order was consistent with the timeline accepted by the Adjudicating Authority. On this basis, the Tribunal found no error in permitting the 146-day exclusion. [Paras 12, 13]

The Tribunal upheld the Adjudicating Authority's order excluding 4.3.2020 to 27.7.2020 from the CIRP period as lawful and refused to interfere.

Final Conclusion: The appeal is dismissed. The Tribunal affirmed that the NCLAT's order of 4.3.2020 operated as a temporary stay on constitution of the COC which was lifted by the 23.7.2020 order, and that the Adjudicating Authority rightly excluded the period 4.3.2020 to 27.7.2020 (146 days) from the CIRP timeline.

Admission of insolvency petition under Section 9 - existence of operational debt and default - ex-parte proceeding - imposition of moratorium under Section 14 - appointment and confirmation of interim resolution professional - duties of IRP under Section 15, 17 and 18

Admission of insolvency petition under Section 9 - existence of operational debt and default - ex-parte proceeding - The Section 9 petition filed by the applicant was admitted and the corporate insolvency resolution process (CIRP) was initiated against the respondent. - HELD THAT: - The Tribunal found that the applicant established the existence of an operational debt and default by producing invoices, alleging supply of goods, and showing service of a statutory demand under the Code. The respondent failed to appear despite notice and was declared ex parte. Having considered the applicant's submissions and the documents on record, and noting absence of any defence or reply from the respondent, the Tribunal held that the statutory threshold for admission under Section 9 was met and admitted the petition, thereby initiating CIRP.

Section 9 petition admitted; CIRP against the respondent initiated with immediate effect.

Imposition of moratorium under Section 14 - A moratorium under Section 14 of the Code was imposed from the date of the order till completion of the CIRP. - HELD THAT: - On admission of the Section 9 petition and commencement of CIRP, the Tribunal applied the statutory moratorium. The order restrains institution or continuation of suits or proceedings against the respondent, transfer or disposal of its assets or rights, actions to enforce security interests, and recovery of property occupied by the respondent; it also preserves supply of essential goods or services as specified and notes exceptions notified by the Central Government. The moratorium is recorded to operate from the date of the order until completion of the CIRP.

Moratorium imposed in the terms recorded in the order, effective from the date of the order until completion of the CIRP.

Appointment and confirmation of interim resolution professional - duties of IRP under Section 15, 17 and 18 - The Tribunal confirmed the appointment of the proposed interim resolution professional and directed him to perform statutory duties and file a report within the prescribed time. - HELD THAT: - The applicant proposed an individual as interim resolution professional (IRP). The Tribunal confirmed the nomination, recorded the IRP's registration details as provided, and directed the IRP to undertake the functions mandated by the Code, specifically to act in terms of Sections 15, 17 and 18, to take such steps as required under statute and to submit his report to the Bench within 30 days. The direction confines the IRP to statutory responsibilities arising from commencement of CIRP.

Proposed IRP confirmed; IRP to discharge statutory duties and file report within 30 days.

Final Conclusion: The Tribunal admitted the Section 9 petition, declared the respondent ex parte, initiated CIRP, imposed the statutory moratorium under Section 14, and confirmed the interim resolution professional who was directed to perform statutory duties and file a report within 30 days.

Valid service of demand notice and application - existence of operational debt and default - admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - commencement of moratorium under Section 14 - obligation to furnish provisional funds for IRP functions

Valid service of demand notice and application - Service of the Section 8 demand notice and of the Section 9 application on the corporate debtor was effective and the corporate debtor was proceeded ex parte. - HELD THAT: - The Tribunal found that the Section 8 demand notice was sent to the registered office, site address and to the directors and that postal returns bearing endorsements such as "Door closed" or "Addressee left without instructions" do not preclude service where the sender has correctly addressed and dispatched the communication. Email delivery to the corporate debtor's registered email address was not bounced back and was treated as delivered. The corporate debtor did not reply to the notice and did not appear, and the Tribunal recorded that the corporate debtor was proceeded against ex parte. [Paras 6]

Service and notice held effective; corporate debtor proceeded ex parte.

Existence of operational debt and default - The claim of the applicant that an operational debt was due and payable and that there was a date of default was accepted. - HELD THAT: - On the material placed on record the Tribunal noted supply of goods as per purchase orders, non-payment of the admitted outstanding amount, dishonour of a post-dated cheque and absence of any dispute raised by the corporate debtor regarding quality or the principal sum. The Tribunal recorded the outstanding claim in Form V and accepted the date of default as pleaded, concluding that default in payment of an operational debt was established and uncontroverted. [Paras 4, 5, 7, 8, 11]

Operational debt and date of default established; debt admitted for purposes of Section 9.

Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - The Section 9 application was complete and admitted by the Tribunal under Section 9(5). - HELD THAT: - The applicant filed the application in the prescribed form, filed the affidavit required under Section 9(3)(b) and complied with Rule 6 requirements. Considering the uncontroverted material establishing operational debt and default, the Tribunal held the application complete and admitted it under Section 9(5) of the Code. [Paras 10, 11]

Section 9 application admitted.

Appointment of Interim Resolution Professional - An Interim Resolution Professional (IRP) was appointed by the Tribunal. - HELD THAT: - As the applicant had not proposed an IRP, the Tribunal appointed Ms. Archana Singhal as Interim Resolution Professional subject to there being no pending disciplinary proceedings and directed the IRP to file the requisite consent and disclosures within one week from the order. [Paras 12]

IRP appointed with directions to submit consent and statutory disclosures.

Commencement of moratorium under Section 14 - obligation to furnish provisional funds for IRP functions - On admission, moratorium under Section 14 was ordered and the applicant was directed to furnish provisional funds to enable the IRP to perform statutory functions. - HELD THAT: - Upon admission of the Section 9 application, the statutory moratorium envisaged under Section 14(1) was declared to operate in relation to the corporate debtor, with applicable provisions of Sections 14(2) to 14(4) to apply during the moratorium. The Tribunal further directed the applicant to deposit provisional funds with the IRP to meet expenses and enable performance of IRP functions, subject to adjustment by the Committee of Creditors. [Paras 13, 14]

Moratorium declared and applicant directed to deposit provisional funds for IRP functions.

Jurisdiction to entertain the Section 9 application - The Tribunal had territorial jurisdiction to entertain the application. - HELD THAT: - The Tribunal noted that the registered office of the corporate debtor is situated within its territorial jurisdiction and therefore it was competent to hear and decide the Section 9 application. [Paras 9]

Tribunal has jurisdiction to entertain the application.

Communication of order and statutory compliances - Directions issued for communication of the order to parties, IRP, IBBI and ROC and for related compliances. - HELD THAT: - The Tribunal directed registry to communicate the order to the applicant and corporate debtor, intimate and forward the IRP appointment, require the applicant to provide the paper book to the IRP, and directed forwarding of the order to IBBI and ROC for record and updating of master data with ROC to send a compliance report to the NCLT Registrar. [Paras 15]

Directions issued for communication of the order and statutory compliances.

Final Conclusion: The Section 9 application under the Insolvency and Bankruptcy Code, 2016 filed by the applicant was admitted after holding service effective and the existence of an operational debt and default established; an Interim Resolution Professional was appointed, moratorium under Section 14 was declared, the applicant directed to furnish provisional funds for the IRP, and consequential communications and statutory compliances were ordered.

Cenvat credit of service tax - Reverse Charge Mechanism - Proviso to Rule 4(7) of Cenvat Credit Rules, 2004 - Eligibility of credit where service tax is paid by recipient though liable to provider - Doctrine that payment accepted by department confers entitlement to credit

Cenvat credit of service tax - Reverse Charge Mechanism - Proviso to Rule 4(7) of Cenvat Credit Rules, 2004 - Eligibility of credit where service tax is paid by recipient though liable to provider - Whether the appellant is entitled to avail Cenvat credit of service tax paid by it as a service recipient, where under Notification No. 30/2012-ST the service provider was to bear a portion of the service tax but the appellant paid the entire service tax under the reverse charge mechanism. - HELD THAT: - The Tribunal found as an admitted fact that the appellant, though a service recipient, paid the service tax in full even in respect of the portion which, by notification, was to be borne by the service provider. The proviso to Rule 4(7) conditions availability of credit on payment of service tax by the person liable to pay; however, the Tribunal held that once service tax has in fact been paid and the payment is accepted, credit cannot be denied merely because a portion was nominally liable to another person. The reasoning follows earlier decisions of this Tribunal which applied the principle that where duty/tax is paid and accepted by the department, the recipient who has fulfilled other conditions for credit is entitled to avail Cenvat credit; attempts to characterise such payment as a deposit or to deny credit on that basis are not sustainable. Applying these precedents to the facts, the Tribunal concluded that the proviso does not operate to deny credit to the appellant who had paid the service tax, and the impugned order denying credit was unsustainable. [Paras 4, 5, 6]

Credit of service tax paid by the appellant as recipient is allowable; the impugned order denying Cenvat credit is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that where the service tax was paid by the service recipient (even though a portion was nominally payable by the service provider), Cenvat credit cannot be denied; the impugned order was set aside and consequential relief granted as per law.

Maintainability of declarations under the Sabka Vishwas (Legacy Dispute Resolution) Scheme - definition of "amount in arrears" and "amount of duty" under the Scheme - scope of relief under Section 124(1)(c) of the Scheme - administrative circulars cannot override statutory text - requirement of adjudication before recovery of interest and penalty under Central Excise - inapplicability of Section 142(1)(d) of the Customs Act to Central Excise by Notification No. 68/63-CE

Maintainability of declarations under the Sabka Vishwas (Legacy Dispute Resolution) Scheme - definition of "amount in arrears" and "amount of duty" under the Scheme - scope of relief under Section 124(1)(c) of the Scheme - administrative circulars cannot override statutory text - Declarations filed on Form SVLDRS-1 by the declarant who had paid the duty but faced only unquantified/unanudited interest and penalty liabilities were not maintainable under the Scheme and could not give rise to relief under Section 124(1)(c). - HELD THAT: - The Scheme defines "amount in arrears" and "amount of duty" as recoverable duty (Section 121(c) and 121(d)) and "tax dues" as an amount in arrears (Section 123(e)). Relief under Section 124(1)(c) is available only in respect of duty outstanding as an "amount in arrears"; interest or penalty do not constitute an "amount of duty" under the Scheme. Where the declarant had, by its own admission, discharged the entire Central Excise and Service Tax duty prior to filing the declaration, and no adjudication had quantified any interest or penalty by the cut-off date, there was no "tax dues" relatable to an "amount in arrears" to sustain a declaration. Circulars relied upon are administrative guidance within the legislative limits and cannot expand the statutory meaning to include unadjudicated interest or penalty; the Circulars therefore do not entitle the petitioners to the claimed relief. [Paras 27, 28, 29, 30, 31]

Both declarations on Form SVLDRS-1 were not maintainable insofar as they sought relief only in respect of unquantified or unadjudicated interest and penalty; no relief under Section 124(1)(c) could be granted.

Requirement of adjudication before recovery of interest and penalty under Central Excise - inapplicability of Section 142(1)(d) of the Customs Act to Central Excise by Notification No. 68/63-CE - Recovery communications seeking enforcement of interest and penalty without prior adjudication were premature and without jurisdiction; the garnishee procedure invoked under Section 142(1)(d) of the Customs Act was not applicable to Central Excise by the Notification relied upon. - HELD THAT: - Rule 8(4) of the Central Excise Rules makes Section 11 of the Act applicable for recovery of duty and penalty assessed under the Rules, which requires adjudication before enforcement. The impugned communications by respondent seeking recovery of interest and penalty were issued without any adjudication having been made and are therefore legally unsustainable. Further, Notification No. 68/63-CE does not render Section 142(1)(d) of the Customs Act applicable to Central Excise in the manner contended; the garnishee proceedings instituted under that provision are therefore without jurisdiction in this case. Consequently the recovery communications dated 17.03.2020 and 07.04.2020 were set aside and any amounts recovered are to be refunded within one month. [Paras 32, 33, 34]

Communications for recovery of interest and penalty issued without prior adjudication are set aside as premature and without jurisdiction; any sums recovered shall be refunded.

Business Transfer Agreement and allocation of liabilities - The question of allocation of interest and penalty liabilities between the transferor and transferee under the Business Transfer Agreement was not adjudicated and is left open for appropriate proceedings. - HELD THAT: - The court declined to record any conclusion on the effect of the Business Transfer Agreement dated 14.03.2017 on allocation of liabilities between the petitioners. It left the matter open for examination in appropriate proceedings before the competent authority or forum, and permitted the revenue to initiate valid adjudication for penalty and interest subject to existing limitation, noting that no extension of limitation was granted by the court. [Paras 35]

No adjudication on allocation of liabilities under the Business Transfer Agreement; matter left open for appropriate proceedings.

Final Conclusion: Writ petitions partly allowed: declarations under the Scheme filed in respect of paid duty but only unadjudicated interest/penalty held not maintainable and no relief granted under the Scheme; recovery communications for interest and penalty issued without prior adjudication set aside as premature and without jurisdiction and any amounts recovered to be refunded; allocation of liabilities under the Business Transfer Agreement left open for appropriate adjudication.

Distribution of Cenvat credit by input service distributor - Pro rata distribution under Rule 7(d) of Cenvat Credit Rules, 2004 - Permissive 'may' v mandatory 'shall' in Rule 7 - Availment of Cenvat credit in one unit where service used by multiple units

Pro rata distribution under Rule 7(d) of Cenvat Credit Rules, 2004 - Permissive 'may' v mandatory 'shall' in Rule 7 - Availment of Cenvat credit in one unit where service used by multiple units - Whether the appellant was precluded from availing entire Cenvat credit in its Koshamba unit for common input services used by both Koshamba and Jambusar units, by operation of Rule 7(d) of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal found no dispute on facts that the common input service was used by both units but credit was taken wholly at the Koshamba unit for February to March-2013. Applying the settled interpretation of Rule 7 as pronounced in earlier decisions relied upon (including the Bombay High Court in Oerlikon Balzers and followings), the Rule as it stood during the relevant period employed the word "may" and therefore afforded the assessee an option either to distribute credit pro rata or to avail the credit in one unit. The substitution making distribution mandatory by changing "may" to "shall" took effect w.e.f. 1-4-2016 and is not applicable to the period in issue. Consequently, denial of the credit merely because the assessee availed the credit in one unit was held unsustainable. The Tribunal followed the consistent judicial view that non-distribution during the relevant period did not constitute illegality and that demands based on such non-distribution could not be sustained. [Paras 4, 5, 6]

Impugned denial of proportionate Cenvat credit under Rule 7(d) set aside; appeal allowed and credit availed in the Koshamba unit held permissible for the period in question.

Final Conclusion: For the period February to March-2013 the assessee was entitled to avail the Cenvat credit in one unit notwithstanding the service related to more than one unit, since Rule 7 as applicable then used "may" and left distribution optional; the impugned order denying credit is set aside and the appeal is allowed.

Cenvat credit admissibility despite bill of entry bearing Head Office name - receipt and consumption of inputs at the factory unit as criterion for credit - obligation of adjudicating authority to independently verify documents produced in response to show cause notice - invocation of extended period of limitation left open for adjudication

Cenvat credit admissibility despite bill of entry bearing Head Office name - receipt and consumption of inputs at the factory unit as criterion for credit - Cenvat credit cannot be denied solely because the bill of entry bears the name and address of the Head Office; admissibility depends on receipt and use of the goods by the relevant manufacturing unit. - HELD THAT: - The Tribunal accepted the appellant's submission and precedents that a bill of entry in the name of the Head Office is not by itself a ground to deny Cenvat credit. The determinative test is whether the goods imported under that bill of entry were received by a unit of the assessee (here, the Silvasa Unit) and were used in manufacture of final products. The adjudicating authority erred in treating the bill of entry's addressee as conclusive against the appellant without independently examining the evidence of receipt and consumption. The Court applied this principle and held that denial on the sole ground of the bill of entry naming the Head Office was not sustainable. [Paras 5, 6]

The denial of Cenvat credit solely on the ground that the bill of entry bore the Head Office name is set aside.

Receipt and consumption of inputs at the factory unit as criterion for credit - obligation of adjudicating authority to independently verify documents produced in response to show cause notice - Whether the appellant established receipt and use of the imported goods at the Silvasa Unit and whether the adjudicating authority properly adjudicated those documentary submissions. - HELD THAT: - The Tribunal found that the adjudicating authority and Commissioner (Appeals) recorded that the appellant failed to satisfy the Audit Officer about receipt and use. The Tribunal disagreed with reliance on the Audit Officer's view in place of independent adjudicatory scrutiny. It observed that documents (SAP account entries, LR and other records) were produced before the adjudicating authority and it was incumbent on that authority to verify and form its own conclusion. Because the adjudicating authority did not undertake that independent verification and the record before the Tribunal was incomplete, the Tribunal declined to decide the factual question on the merits and directed a fresh adjudication limited to verification of receipt and use on the documents produced. [Paras 6, 7]

Matter remanded to the adjudicating authority for independent verification and fresh decision on receipt and consumption of the inputs at the Silvasa Unit.

Invocation of extended period of limitation left open for adjudication - Whether the extended period of limitation was correctly invoked and applied in denying Cenvat credit. - HELD THAT: - The Tribunal noted that extended period was invoked by the show cause notice and confirmed below. The lower authorities' conclusion on limitation relied on the view that the appellant had not disclosed that the credit was taken on an invalid document. Given the remand on the substantive issue of receipt and use, the Tribunal did not finally adjudicate the correctness of invoking the extended period and expressly kept the limitation issue open for the adjudicating authority to examine on reconsideration. [Paras 7]

Issue of invocation of extended period is kept open and to be considered by the adjudicating authority on remand.

Final Conclusion: The appeal is allowed in part: the denial of Cenvat credit solely because the bill of entry bore the Head Office name is set aside; the questions of receipt and use of inputs at the Silvasa Unit and the correctness of invoking the extended period are remanded to the adjudicating authority for fresh independent consideration.

Cenvat credit on services utilized for disposal of hazardous waste - definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004 - transportation service for disposal of hazardous waste treated as part of manufacturing activity - nexus between disposal of manufacturing-generated waste and manufacture of final product - distinction from removal of excisable goods as considered in Ultratech

Cenvat credit on services utilized for disposal of hazardous waste - definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004 - transportation service for disposal of hazardous waste treated as part of manufacturing activity - nexus between disposal of manufacturing-generated waste and manufacture of final product - Entitlement of the appellant to Cenvat credit on outward transportation charges borne for disposal of hazardous waste generated during manufacture. - HELD THAT: - The Tribunal held that transportation services paid for disposal of hazardous waste generated during the manufacturing process are input services within the meaning of the definition in Rule 2(l) of the Cenvat Credit Rules, 2004 because disposal is an activity integrally connected with and mandated by the manufacturing process. The court distinguished the facts from the Apex Court's decision in Ultratech (which dealt with removal of excisable goods), observing that here the waste is an unavoidable by-product generated during manufacture and its disposal is mandated by the State Pollution Control Board. Reliance was placed on the Tribunal's earlier decision in M/s L'Oreal India Pvt. Ltd., where services used for disposal of hazardous waste were held to have a direct nexus with manufacture and were allowed as input services. The Tribunal concluded that although the service is in the form of transportation, its character as disposal of manufacturing-generated hazardous waste brings it within the scope of input services and therefore eligible for Cenvat credit. [Paras 4, 5]

Credit on the transportation service for disposal of hazardous waste is admissible as input service; impugned order set aside and appeal allowed.

Distinction from removal of excisable goods as considered in Ultratech - Whether the Supreme Court decision in Ultratech governs the present case. - HELD THAT: - The Tribunal held that Ultratech is not applicable because that decision concerned removal of excisable goods and payment of duty, whereas the present case concerns mandatory disposal of hazardous waste generated during manufacture. The factual and legal matrix therefore differs materially, and the Apex Court's reasoning in Ultratech does not govern the entitlement to credit for services attributable to disposal of manufacturing-generated hazardous waste. [Paras 2, 4]

Ultratech not applicable to the facts; reliance on it to deny credit is misplaced.

Final Conclusion: The Tribunal allowed the appeal, reversing the lower authorities and holding that Cenvat credit is admissible on transportation services paid for disposal of hazardous waste generated during manufacturing, on the ground that such services qualify as input services with a direct nexus to manufacture; the Ultratech decision was held inapplicable on the facts.

Withholding issuance of declaration Form C / certificate in Form F without a reasoned order and opportunity of hearing - application of Rule 5(4)(ii) and Rule 8(2) of the CST (Delhi) Rules to Form F - requirement of audi alteram partem before depriving the assessee of statutory facility

Application of Rule 5(4)(ii) and Rule 8(2) of the CST (Delhi) Rules to Form F - withholding issuance of declaration Form C / certificate in Form F without a reasoned order and opportunity of hearing - Validity of debarring the petitioner from issuing Form 'F' from the online portal without issuance of a show cause notice, opportunity of hearing and a reasoned order - HELD THAT: - The Court examined Rule 5(4)(ii) of the CST (Delhi) Rules which, as construed in Infiniti Retail Limited (supra), requires that the Commissioner cannot withhold issuance of declaration Form 'C' without passing a reasoned order after affording the assessee an opportunity of hearing. Rule 8(2) of the CST (Delhi) Rules extends the provisions of sub-rules (2) to (4) of Rule 5, insofar as they relate to Declaration Form 'C', to certificate in Form 'F' with such changes as circumstances require. A conjoint reading of Rule 5(4)(ii) and Rule 8(2) therefore mandates that issuance of Form 'F' may be withheld only after the two pre-conditions of (i) affording an opportunity of hearing to the assessee and (ii) passing a reasoned order are satisfied. In the present case both pre-conditions were admittedly not complied with: no show cause notice or hearing was provided before the petitioner was debarred from issuing Form 'F' online. Consequently the debarring order was without authority under the applicable rules and contrary to the requirement of audi alteram partem. The Court expressly refrained from expressing any opinion on the merits of the alleged tax demands for FY 2014-15 and 2015-16 which the respondents relied upon to block the facility. [Paras 12, 13, 14, 15, 17]

The debarring of the petitioner from issuing Form 'F' on the online portal was invalid; respondents directed to enable the issuance of Form 'F' facility for the petitioner forthwith.

Final Conclusion: Petition allowed: in view of the statutory requirement that Form 'F' may be withheld only after a reasoned order following an opportunity of hearing under the CST (Delhi) Rules, the respondents are directed to restore the petitioner's online facility to issue Form 'F' forthwith; no opinion expressed on the asserted tax demands for other years.

Refund of tax - interest under Section 42 of the Delhi Value Added Tax Act - law of limitation - unjust enrichment - direction to administrative authority to decide claim expeditiously in accordance with law - Mafatlal Industries Ltd. v. Union of India (principle of unjust enrichment)

Refund of tax - law of limitation - unjust enrichment - direction to administrative authority to decide claim expeditiously in accordance with law - Claim for refund under the Delhi Value Added Tax Act was not adjudicated on merits by the Court but directed to be decided afresh by the concerned Respondent Authority in accordance with law, keeping in mind limitation and the principle of unjust enrichment. - HELD THAT: - The Court declined to adjudicate the refund claims on merits and instead directed the concerned Respondent Authority to decide the petitioner's refund claim (as set out in the memo) when preferred, in accordance with applicable law, rules, regulations and government policies, on the basis of evidence on record. The authority is to keep in mind the law of limitation and the principle of unjust enrichment as articulated by the nine-Judges Bench in Mafatlal Industries Ltd. v. Union of India. The decision is to be taken expeditiously and practicably. [Paras 3]

Refund claim remanded to the concerned Respondent Authority for fresh decision in accordance with law, limitation and the principle of unjust enrichment.

Interest under Section 42 of the Delhi Value Added Tax Act - direction to administrative authority to decide claim expeditiously in accordance with law - Claim for interest under Section 42 of the Delhi Value Added Tax Act was not allowed or denied by the Court; the entitlement to interest is to be considered by the concerned Respondent Authority when deciding the refund claim. - HELD THAT: - The petitioner sought interest under Section 42 on the refund amounts. The Court did not determine entitlement to interest on the merits but directed that the Respondent Authority, when deciding the refund claim, should also consider the claim for interest and decide it in accordance with law and applicable provisions, along with other relevant legal principles and evidence. [Paras 3]

Claim for interest remanded to the concerned Respondent Authority to be considered and decided in accordance with law when adjudicating the refund claim.

Final Conclusion: Writ petition disposed of by directing the concerned Respondent Authority to decide the petitioner's refund and interest claims for the stated tax periods afresh, in accordance with law, rules and government policies, on the basis of the record, mindful of limitation and the principle of unjust enrichment, and to do so expeditiously.

Judicial review under Article 226 - alternative remedy of statutory appeal - maintainability of writ petition - scope of appellate jurisdiction of Sales Tax Appellate Tribunal - condonation of delay

Alternative remedy of statutory appeal - maintainability of writ petition - scope of appellate jurisdiction of Sales Tax Appellate Tribunal - Whether the writ petition is maintainable in view of the availability of a statutory appeal to the Tamil Nadu Sales Tax Appellate Tribunal in respect of the assessment order for Assessment Year 2009-10 (CST). - HELD THAT: - The Court found that the assessment for Assessment Year 2009-10 (CST) has been finally passed by the First Appellate Authority and that the correctness of that order is to be tested before the Tamil Nadu Sales Tax Appellate Tribunal by way of the statutory appeal provided under the Act. The Tribunal is a specialized forum constituted to adjudicate sales tax appeals and is the appropriate forum for redressal of grievances arising from assessment orders. The petitioner had not preferred the statutory appeal as contemplated under the Act. Certain disputed facts requiring adjudication with reference to documents and evidence cannot be resolved in writ proceedings under Article 226 and are better addressed by the Tribunal. Accordingly, the Court declined to entertain substantive adjudication of the assessment in the exercise of writ jurisdiction and directed the petitioner to prefer the statutory appeal to the Tribunal, which would be the proper forum to decide the merits. [Paras 3, 4]

Writ petition not entertained on merits; petitioner directed to prefer statutory appeal before the Tamil Nadu Sales Tax Appellate Tribunal.

Judicial review under Article 226 - condonation of delay - The scope of judicial review under Article 226 in the context of a challenge to a tax assessment and whether the High Court should exercise its writ jurisdiction instead of the statutory appellate forum. - HELD THAT: - The Court reiterated that judicial review under Article 226 is confined to scrutiny of the process by which a decision is taken and not to supplant the decision itself; writ jurisdiction is not a substitution for the statutory appellate remedy. The petitioner raised factual disputes and legal contentions which require adjudication by the specialized Tribunal; hence the High Court refrained from exercising its extraordinary jurisdiction to determine those issues. The Court further observed that if the petitioner prefers an appeal to the Tribunal belatedly, the Tribunal may condone the delay, having regard to the pendency of the writ petition before the High Court, and proceed to decide the appeal on merits in accordance with law after affording opportunity to the petitioner. [Paras 5]

High Court limited to supervisory review of process; directed that the Tribunal may condone any delay and decide the statutory appeal on merits.

Final Conclusion: Writ petition disposed of by declining to adjudicate the merits of the assessment for Assessment Year 2009-10 (CST); petitioner granted liberty to prefer the statutory appeal before the Tamil Nadu Sales Tax Appellate Tribunal, which is directed to condone delay if necessary and decide the appeal on merits in accordance with law.