TaxTMI Updates e-Newsletter
Sep 30,2022

Risky exporter - refund of Integrated Goods and Services Tax (IGST) - duty drawback - Standard Operating Procedure - treat as representation - personal hearing - speaking order - writ of mandamus

Risky exporter - refund of Integrated Goods and Services Tax (IGST) - Standard Operating Procedure - treat as representation - Whether the petitioner's grievance regarding classification as a "risky exporter" and consequent denial of IGST refund and duty drawback should be re-examined by the jurisdictional authority by treating the writ petition as a representation. - HELD THAT: - The Court directed that respondent no.3/Commissioner shall treat the writ petition as a representation and examine the stand taken by the petitioner in its rejoinder. The matter of classification as a "risky exporter" and the denial of refund/duty drawback is not finally adjudicated on merits by this Court; instead the Commissioner is required to re-consider the matter afresh in light of the petitioner's rejoinder and the applicable Standard Operating Procedure. The Court thereby remitted the substantive controversy for fresh administrative consideration rather than deciding entitlement to refund itself. [Paras 8]

Respondent no.3/Commissioner to treat the writ petition as a representation and re-examine the petitioner's classification and refund claims afresh.

Personal hearing - speaking order - Whether the petitioner is to be afforded a personal hearing and whether the authority must pass a speaking order recording reasons of its decision. - HELD THAT: - The Court directed that an opportunity of personal hearing be afforded to the authorised representative of the petitioner and specified the date and time for appearance. Thereafter the Commissioner is required to pass a reasoned (speaking) order and furnish a copy to the petitioner. The directions impose procedural safeguards on the re-examination mandated by the Court, ensuring the petitioner's representations are heard and the decision is recorded with reasons. [Paras 8]

The authorised representative shall be given a personal hearing and the Commissioner shall pass and furnish a speaking order following that hearing.

Final Conclusion: The writ petition is disposed of by remitting the matter to respondent no.3/Commissioner to treat the petition as a representation, afford a personal hearing to the authorised representative on the specified date, and thereafter pass a speaking order within the timeline directed by the Court; liberty to challenge the fresh order is preserved.

Reopening of assessment - change of opinion - tangible material - reasons recorded at the time of issuing notice - supplementation of reasons - conscious application of mind - deduction in computation of capital gains - concealment or suppression of material facts

Reopening of assessment - change of opinion - tangible material - Validity of notices issued under Sections 147/148 for reopening the assessment - HELD THAT: - The Court held that reassessment must be founded on tangible material demonstrating escapement of income and not on a mere change of opinion. The reasons recorded at the time of issuance of the impugned notices do not disclose any fresh tangible material that would justify reopening; instead they reflect a change of opinion about the allowability of a deduction previously accepted. Reopening on the basis of such change of opinion amounts to impermissible review and is not an exercise of reassessment jurisdiction under Sections 147/148. [Paras 21, 24, 25, 26]

Notices under Sections 147/148 are invalid as they are founded on a mere change of opinion and not on tangible material; therefore reopening is not justified.

Reasons recorded at the time of issuing notice - supplementation of reasons - Permissibility of supplementing or amending reasons for reopening after issuance of notice - HELD THAT: - Applying settled precedent, the Court reiterated that the validity of a reopening notice is to be judged by the reasons recorded at the time the notice was issued. Reasons cannot be supplemented, improved, or augmented subsequently by affidavit, communication, or oral submissions to cure defects in the original reasons. The Respondents relied on additional grounds in the objection disposal which were not part of the recorded reasons; such post hoc additions cannot sustain the reopening. [Paras 21, 22]

Reasons recorded with the impugned notices cannot be supplemented or amended later to validate the reopening; post-issuance additions are impermissible.

Conscious application of mind - deduction in computation of capital gains - Whether the Assessing Officer had applied mind in the original scrutiny assessment when allowing the deduction under Section 48 - HELD THAT: - The record shows the petitions were selected for limited scrutiny specifically to examine the claimed deductions from capital gains; the Assessing Officer considered the documents and, by a speaking order, accepted the deduction. A regular assessment order arising from such scrutiny raises a presumption of application of mind. The contention that there was no conscious application of mind is therefore rejected on these facts. [Paras 15, 16, 17, 27]

Assessment under Section 143(3) involved conscious application of mind and the deduction was considered and allowed; absence of application of mind is not established.

Concealment or suppression of material facts - reasons recorded at the time of issuing notice - Whether there was concealment or suppression of material facts (sale deed/MOU) justifying reopening under the proviso to Section 147 - HELD THAT: - The reasons recorded with the impugned notices do not allege suppression or concealment of the sale deed or MOU. The record indicates that these documents were produced during limited scrutiny and the deduction was granted after considering them. The subsequent claim of concealment in the objection-disposal communication is inconsistent with the contemporaneous reasons for reopening and cannot supply a valid ground for reassessment. [Paras 18, 19, 23]

No concealment or suppression of material facts is established; the reopening cannot be sustained on that ground.

Final Conclusion: The impugned notices under Sections 147/148 are quashed and set aside as issued without jurisdiction because they rest on a mere change of opinion and not on tangible material, the reasons recorded at issuance cannot be supplemented later, and the original scrutiny order shows application of mind and no concealment; writ petitions are allowed and there is no order as to costs.

Seized material must pertain to the assessment years to be incriminating under Section 153C - Requirement of a live link between seized documents and additions made - Assumption of jurisdiction under Section 153C is vitiated where incriminating material does not relate to the years reopened - Protective additions cannot be sustained once substantive additions in the related search group are deleted

Seized material must pertain to the assessment years to be incriminating under Section 153C - Requirement of a live link between seized documents and additions made - Seized documents recovered from the premises of the Minda Group do not constitute incriminating material for the assessment years in question and therefore cannot sustain the additions. - HELD THAT: - The satisfaction note placed on record was dated 29.01.2016 and related to A.Ys. 2008-09 to 2013-14, making the search year effectively A.Y. 2016-17; however, no document seized during the search pertained to Assessment Year 2011-12. The Supreme Court's decision in Commissioner of Income Tax-III, Pune v. Sinhgad Technical Education Society establishes that seized material is incriminating under Section 153C only if it pertains to the assessment years sought to be reopened. The appellate authorities below concurrently found that no incriminating material was brought on record to sustain the additions and that there was no live link between the seized material and the additions. Consequently the documents recovered from the issuing authority (Minda Group) cannot be treated as incriminating for the respondent-assessee for the assessment years under challenge.

No incriminating material was found as regards the assessment years in dispute; the seized documents do not sustain the additions.

Assumption of jurisdiction under Section 153C is vitiated where incriminating material does not relate to the years reopened - Protective additions cannot be sustained once substantive additions in the related search group are deleted - The Assessing Officer's assumption of jurisdiction to make protective additions was erroneous and protective additions do not survive in view of deletion of substantive additions in the Minda Group appeals. - HELD THAT: - Given the absence of incriminating material pertaining to the assessment years in question and concurrent findings by the lower appellate authorities accepting the genuineness of the share capital, the Court held that the Assessing Officer erroneously assumed jurisdiction under Section 153C to reopen the respondent's returns. Further, by a separate order in related appeals, the substantive additions in different concerns of the JP Minda Group have been upheld as deleted by the ITAT; therefore, there is no basis for protective additions in the hands of the respondent-assessee.

Assumption of jurisdiction to make protective additions was erroneous; protective additions do not arise and the appeals do not raise any substantial question of law.

Final Conclusion: The appeals are dismissed: the seized material did not pertain to the assessment years under challenge, the Assessing Officer's assumption of jurisdiction under Section 153C was misplaced, substantive additions in the related Minda Group matters having been deleted, and consequently the protective additions in the respondent's hands do not survive.

Validity of additions under Section 153A in absence of incriminating material - Incriminating nature of seized documents (share certificates) in search proceedings - Admissibility of statements recorded under Section 132(4) without opportunity of cross-examination - Reliance on post-search enquiries and third-party statements for making additions - Effect of pending SLP on applicability of a coordinate bench precedent - Validity of notices under Section 133(6) and assessment of investor companies' networth

Validity of additions under Section 153A in absence of incriminating material - Whether additions under Section 153A could be sustained where assessments had attained finality and no incriminating material was found during search. - HELD THAT: - The Court held that where the assessment has attained finality prior to the date of search and no incriminating documents/materials were found and seized at the time of search, additions under Section 153A cannot be sustained; such cases are to be treated as non-abated assessments. The Court relied upon its prior decisions and concluded that the ITAT and CIT(A) concurrently found absence of incriminating material and that those findings precluded the assumption of jurisdiction under Section 153A to make the impugned additions. The Court noted that the pending SLP in a separate matter did not operate as a stay on the precedent relied upon. The conclusion follows the determinative reasoning that absence of incriminating material defeats the basis for reopening under Section 153A. [Paras 8, 9, 10, 14]

Additions under Section 153A were unsustainable and the appeals did not raise any substantial question of law.

Incriminating nature of seized documents (share certificates) in search proceedings - Whether share certificates found during search constituted incriminating material justifying additions. - HELD THAT: - The Court accepted the ITAT's finding that share certificates (or their photocopies) merely record transactions already disclosed in the assessee's books and, in the present cases, were not used by the AO as the basis for additions under Section 68. The Tribunal observed that the AO relied on post-search investigation reports and third-party statements rather than the seized share certificates; the Revenue failed to place material on record to show the seized documents were original or incriminating. Accordingly, the mere seizure of share certificates did not constitute incriminating material to sustain reopening. [Paras 5, 10, 11]

Seized share certificates (or photocopies) were not incriminating in the facts of these cases and did not justify additions.

Admissibility of statements recorded under Section 132(4) without opportunity of cross-examination - Whether statements of third parties recorded under Section 132(4) could be relied upon when the assessee was denied opportunity to cross-examine the witness. - HELD THAT: - The Court agreed with the ITAT that statements recorded under Section 132(4) do not by themselves constitute incriminating material and, where the assessee was denied an opportunity to cross-examine the declarant (here, Mr. Rajesh Agarwal), such statements cannot be relied upon. The Court noted authority supporting exclusion of untested statements and emphasised that failure to allow cross-examination is a serious procedural flaw, rendering reliance on such statements impermissible. [Paras 6, 12, 13]

The statement of the third party was excluded and could not be the basis for additions in the absence of cross-examination.

Validity of notices under Section 133(6) and assessment of investor companies' networth - Whether the investor companies were bogus/accommodation entries because notices under Section 133(6) were returned unserved and whether they had sufficient networth to make investments. - HELD THAT: - The Court recorded the concurrent findings of the Tribunal and CIT(A) that investor companies had filed detailed replies to Section 133(6) notices and furnished requisite details, and that the networth figures shown in the record supported their capacity to make the stated investments. The Court agreed with the ITAT's appraisal of the networth table, concluding that the investor companies were not shown to be sham entities for the purpose of these assessments. [Paras 4, 7, 11]

Investor companies were not bogus and had sufficient networth; non-receipt of notices did not render them non-genuine on the record before the Court.

Effect of pending SLP on applicability of a coordinate bench precedent - Whether the pendency of Revenue's SLP in another matter prevents this Court from following its own precedents relied upon by the assessee. - HELD THAT: - The Court observed that although a SLP in M/s Apar Industries Ltd. was pending before the Supreme Court, there was no stay in favour of the Revenue. Applying settled principles, the Court held that in absence of any stay the High Court's precedents remain binding and the issues in these appeals are covered by the judgments of this Court and relevant Supreme Court authorities cited. [Paras 2, 9]

Pending SLP did not preclude the Court from applying its precedents; no stay existed to alter applicability.

Final Conclusion: The High Court concluded that the additions could not be sustained: seized documents were not shown to be incriminating, the third-party statement was inadmissible without cross-examination, investor companies' replies and networth supported genuineness, and therefore no substantial question of law arose; the appeals were dismissed.

Treatment of excise duty refund as profit from business - deduction under Section 80-IC - nexus between excise duty refund and manufacturing activity - characterisation of excise duty refund as operationalising an exemption - precedential effect of Meghalaya Steels and Ponni Sugars

Treatment of excise duty refund as profit from business - deduction under Section 80-IC - nexus between excise duty refund and manufacturing activity - Whether the excise duty refund received by the assessee forms part of "profits and gains of business" for computing net profit eligible for deduction under Section 80-IC - HELD THAT: - The court accepted the view, as followed by the Gauhati High Court in Commissioner of Income-tax vs. Meghalaya Steels Ltd., that a refund of central excise duty granted under exemption notifications is essentially the operationalisation of an exemption and does not prima facie bear the character of income; alternatively, even if treated as income, the refund has a direct and inextricable nexus with the industrial/manufacturing activity because payment and refund of excise duty arise only from such activity. The judgment noted consistent decisions of other High Courts and the dismissal of the revenue's appeals, including by the Supreme Court, on the same issue, and applied those precedents to hold that the excise duty refund could be regarded as profit or gain derived from the industrial activity for the purposes of Section 80-IC, thereby supporting the allowance of the deduction.

The Tribunal's deletion of additions and allowance of deduction under Section 80-IC in respect of the excise duty refund is upheld; the substantial question of law is answered against the revenue.

Final Conclusion: The revenue's appeal is dismissed; the excise duty refund is either not income in character as it operationalises an exemption or, if income, has direct nexus with manufacturing activity and is includible for computing net profit for claiming deduction under Section 80-IC.

Condonation of delay due to COVID 19 lockdown - weight of CBDT circular on monetary exempt limit for penny stocks - unexplained cash credits under Section 68 - exemption under Section 10(38) for long term capital gains - piercing the veil of manipulative penny stock transactions

Condonation of delay due to COVID 19 lockdown - weight of CBDT circular on monetary exempt limit for penny stocks - Application for condonation of delay in filing the appeal - HELD THAT: - The Court examined the cause of the delay of 1081 days and observed that a substantial portion occurred during the lockdown period. The Court noted earlier consideration of an identical issue in Principal Commissioner of Income Tax 15, Kolkata v. Dinesh Kumar Bansal (HUF) and the effect of CBDT guidance that the monetary exempt limit would not apply to LTCG/STCG involving penny stocks. Applying that reasoning, the Court concluded that the delay ought to be condoned and allowed the application for condonation.

Delay in filing the appeal is condoned and the condonation application is allowed.

Unexplained cash credits under Section 68 - exemption under Section 10(38) for long term capital gains - piercing the veil of manipulative penny stock transactions - Whether the Tribunal erred in deleting additions and allowing the claim of LTCG/exemption where transactions in penny stocks were alleged to be manipulative and tantamount to unexplained credits - HELD THAT: - The High Court considered the substantial questions of law raised by the revenue challenging the Tribunal's deletion of additions and allowing of LTCG/exemption. The Court found that an identical legal question had been addressed in a batch of cases (including PCIT v. Swati Bajaj) where the appeals by the revenue were allowed. Finding no distinguishing features in the present case, the Court followed that precedent and held that the Tribunal's view could not stand. The Court therefore answered the substantial questions of law in favour of the revenue, effectively accepting that the Tribunal erred in its treatment of the transactions and in allowing the claimed exemption without sustaining the additions.

The appeal is allowed on the merits; the substantial questions of law are answered in favour of the revenue.

Final Conclusion: Delay in filing the appeal is condoned; following earlier decisions on identical issues relating to penny stock LTCG and the CBDT guidance, the revenue's appeal under Section 260A is allowed and the substantial questions of law are answered in favour of the revenue; the stay application is closed.

Taxability of salary of non-resident seafarer - accrual versus receipt basis of taxation - rectification under section 154 - mistake apparent from record - duty of tax authorities to apply benefits in favour of assessee - precedent and binding decisions as ground for rectification - application of CBDT circulars in assessment proceedings - remand for fresh consideration by assessing officer

Taxability of salary of non-resident seafarer - accrual versus receipt basis of taxation - application of CBDT circulars in assessment proceedings - Whether salary shown in the assessee's return as having accrued in India could be taxed in India merely because it was so shown, when the assessee was employed and rendered services outside India. - HELD THAT: - The Court held that the mere fact that the assessee included the foreign salary in the return or that such amounts were credited to an NRE account in India does not, without more, establish that the income accrued or became chargeable to tax in India. The orders of the assessing officer, the CIT(A) and the Tribunal which treated the income as taxable on that basis were found to be perverse in view of binding decisions of this Court and applicable CBDT circulars indicating that salary of a non-resident seafarer for services rendered on a foreign ship is not includible in total income merely because credited to an Indian bank account. The Court also relied on the principle that tax authorities have a duty to apply provisions beneficial to the taxpayer and the Board's circulars which instruct officers to assist taxpayers in securing reliefs where appropriate. Applying these principles, the Court concluded that the foreign salary ought not to have been treated as taxable in India on the facts before the authorities and directed reassessment in accordance with law and relevant circulars.

The impugned orders holding the foreign salary taxable on the stated basis were quashed; the assessment is to be reviewed and the foreign salary excluded from taxable income if found not chargeable under law and relevant CBDT circulars.

Rectification under section 154 - mistake apparent from record - precedent and binding decisions as ground for rectification - remand for fresh consideration by assessing officer - Whether the assessee's applications for rectification under section 154 should have been entertained where the Tribunal and authorities had ignored binding decisions and CBDT circulars. - HELD THAT: - The Court concluded that refusal to rectify was erroneous where the authorities failed to consider binding decisions of the jurisdictional High Court and applicable CBDT circulars that were on record at the time the Tribunal and lower authorities decided the matter. Citing the principle that non-consideration of a jurisdictional court's decision is a "mistake apparent from the record," the Court found that rectification under section 154 was maintainable. Rather than disposing the controversy finally on merits at appellate level, the Court quashed the impugned orders and remanded the matter to the Assessing Officer to review the assessment afresh in the light of the binding precedents, CBDT circulars and the law on the subject and to grant appropriate relief under section 10(6)(viii) if warranted.

Applications for rectification ought to have been entertained; impugned orders are quashed and the assessment is remitted to the Assessing Officer for reconsideration and grant of relief in accordance with law and relevant circulars.

Final Conclusion: Appeal allowed; orders of assessing officer, CIT(A), Tribunal and CPC rejecting rectification and treating the foreign salary as taxable are quashed and the assessment restored to the file of the Assessing Officer for review and compliance with binding precedents and CBDT circulars, with directions to grant relief where appropriate within six weeks.

Entitlement to exemption under Section 54 for capital gains on purchase of residential property - joint purchase with spouse and constructive ownership - finality of scrutiny assessment where claim was examined and accepted - reassessment on change of opinion

Entitlement to exemption under Section 54 for capital gains on purchase of residential property - joint purchase with spouse and constructive ownership - Petitioner entitled to claim exemption under Section 54 in respect of LTCG for AY 2015-16 though the new residential property was purchased jointly with his wife. - HELD THAT: - The Court found on admitted facts that the petitioner sold the Delhi property and reinvested the sale proceeds in the New Property within the stipulated time and that the entire purchase consideration and stamp duty were paid by the petitioner. Relying on the reasoning in Ravinder Kumar Arora, the Court held that inclusion of the wife's name on the title does not defeat the exemption where the assessee is the actual payer and constructive owner. Section 54 requires that the house be purchased by the assessee, and does not mandate purchase exclusively in the assessee's name; purposive and liberal interpretation of the beneficial provision is to be preferred. Accordingly, the conditions of Section 54 were satisfied on the admitted material and the petitioner's claim of exemption stands upheld. [Paras 8, 9, 11]

Exemption under Section 54 allowed; joint registration with wife does not disentitle the petitioner where he alone paid the consideration and is the constructive owner.

Finality of scrutiny assessment where claim was examined and accepted - reassessment on change of opinion - Reopening of assessment by notice under Section 148/148A was not sustainable as it amounted to re-assessment based on change of opinion and there was no new information to justify reopening. - HELD THAT: - The Court recorded that the Assessing Officer had earlier scrutinised the petitioner's return, examined the sale and purchase documents and bank statements, and completed assessment under Section 143(3) accepting the LTCG claim. The subsequent initiation of re-assessment proceeded on the basis of a conjectural view about joint ownership and payments notwithstanding that the same material had been available and considered during the earlier assessment. In the absence of any fresh material or information justifying re-opening, the action was held to be impermissible as amounting to change of opinion. [Paras 3, 10, 11]

Notice under Section 148 and order under Section 148A(d) quashed as re-opening was founded on change of opinion and no new information warranted reassessment.

Final Conclusion: Writ petition allowed; order dated 28th July, 2022 under Section 148A(d) and notice dated 28th July, 2022 under Section 148 for AY 2015-16 set aside and the petitioner's claim of exemption under Section 54 upheld.

Liability of directors of private company under Section 179 - Condition precedent of recovery attempts from the company - Burden on director to prove absence of gross neglect, misfeasance or breach of duty - Effect of ongoing Corporate Insolvency Resolution Process before NCLT on recovery

Liability of directors of private company under Section 179 - Condition precedent of recovery attempts from the company - Whether the condition precedent under Section 179 - that tax due from the private company cannot be recovered despite attempts - was satisfied before issuing notices to the directors. - HELD THAT: - The Department's counter, which remained uncontroverted, sets out steps taken to recover the demands from the company including service of demand notices, issuance of notices under Section 221(1), dismissal of first appeals, communications calling for remittance, bank attachments that produced no funds, and an ITAT order rejecting the company's stay application. Although the show-cause notices and impugned orders themselves do not narrate these attempts, the unchallenged counter establishes that reasonable measures were taken and proved unsuccessful. The company's presence before the NCLT corroborates its inability to satisfy the demands. On this foundation the Court held that the statutory precondition for proceeding under Section 179 was fulfilled and that the action against the directors was not premature. [Paras 6, 7, 8, 12]

Condition precedent for invoking Section 179 stood satisfied and issuance of notices to the directors was not premature.

Burden on director to prove absence of gross neglect, misfeasance or breach of duty - Effect of ongoing Corporate Insolvency Resolution Process before NCLT on recovery - Whether the petitioning directors discharged their statutory burden to prove that non-recovery of tax could not be attributed to any gross neglect, misfeasance or breach of duty on their part. - HELD THAT: - Section 179 places on each director the onus to demonstrate that non-recovery is not attributable to gross neglect, misfeasance or breach of duty by him. The replies filed by the petitioners to the show-cause notices were held to be bald and unsupported; they did not establish that the petitioners had taken all reasonable efforts to ensure the company's compliance with statutory dues or that they were free from neglect or misconduct. In the absence of such proof, the statutory liability remained attracted under Section 179 and the impugned orders could not be faulted. [Paras 13, 14]

Petitioners failed to discharge the burden; orders imposing joint and several liability on the directors under Section 179 were upheld.

Final Conclusion: The writ petitions were dismissed; the impugned orders under Section 179 were sustained because the Department's attempts to recover tax from the company were shown to be unsuccessful and the directors did not prove absence of gross neglect, misfeasance or breach of duty.

Addition on account of bogus purchases - reassessment based on information from sales tax authorities - burden on revenue to corroborate intelligence before making additions - restriction of additions to a percentage where genuineness is not conclusively disproved - concurrent findings of fact by appellate authorities - distinction where search uncovers falsity in books of account

Addition on account of bogus purchases - reassessment based on information from sales tax authorities - restriction of additions to a percentage where genuineness is not conclusively disproved - concurrent findings of fact by appellate authorities - Validity of restricting the addition for alleged bogus purchases to a percentage where the Assessing Officer acted on information from Sales Tax authorities without further corroborative inquiry. - HELD THAT: - The Assessing Officer reopened assessment and made addition solely on the basis of information received from the Maharashtra Sales Tax Department without conducting internal inquiry or producing independent corroborative material to establish that the purchases were bogus or that the sums were returned to the assessee. The assessee produced documentary evidence before the appellate authorities to establish the genuineness of purchases, and neither the CIT(A) nor the Tribunal ruled out the possibility of the dealer being engaged in bogus billing but reached concurrent findings that the material on record did not justify treating the entire purchases as income. The Tribunal and CIT(A) therefore applied a limited estimation (5%) of the alleged bogus purchases in the total facts and circumstances. The decision in N. K. Industries Ltd. was distinguished on facts: there the search revealed falsity in regular books and fictitious invoices, warranting disallowance of the full purchases; those circumstances are not present here. Given the absence of dependable material before the AO and the concurrent factual findings by the appellate authorities, no substantial question of law arose and the revenue's appeal was dismissed.

Appeal dismissed; concurrent factual findings sustaining a restricted (5%) addition upheld and N. K. Industries distinguished on facts.

Final Conclusion: The High Court dismissed the revenue's appeal against the Tribunal's order for assessment year 2010-11, upholding the concurrent finding that additions could be restricted to a percentage in the absence of corroborative material and distinguishing precedents where search revealed falsity in books of account.

Breach of principles of natural justice - right of the assessee to opportunity to respond to draft assessment order under the faceless assessment scheme - obligation to consider adjournment requests during Covid-19 pandemic - remand for fresh adjudication from the stage of draft assessment order

Breach of principles of natural justice - right of the assessee to opportunity to respond to draft assessment order under the faceless assessment scheme - obligation to consider adjournment requests during Covid-19 pandemic - Assessment order was vitiated by denial of opportunity to the petitioner to respond to the draft assessment order and by refusal of adjournment during the pandemic. - HELD THAT: - The Court found that the faceless assessment procedure afforded a statutory right to the assessee to reply to and object to the draft assessment order before it culminated in a final order. The respondent declined the petitioner's requests for adjournment and curtailed the petitioner's opportunity to furnish further details and documents, despite pandemic-related constraints and extant government extensions of assessment timelines. The Court relied on its earlier reasoning that when statute provides for an opportunity of hearing, denial of that opportunity operates prejudicially to the assessee. In the circumstances of the second-wave Covid-19 pandemic, greater leniency was required and the department's refusal to grant time was criticized as impermissibly inflexible. [Paras 5]

The assessment order dated 05.05.2021 and related notices are quashed on the ground of breach of natural justice for denial of opportunity to respond to the draft assessment order.

Remand for fresh adjudication from the stage of draft assessment order - The assessment proceedings were remitted for fresh consideration from the stage of the draft assessment order, with directions to afford opportunity to the petitioner to file a reply. - HELD THAT: - The Court directed that the Assessing Officer shall take up the proceedings afresh from the stage of the draft assessment order and pass an appropriate order after giving the petitioner an opportunity to file its reply. The Court imposed a timeline for completion of the reassessment process and made clear that the quashing was confined to procedural breach; no opinion was expressed on the merits of the assessment. [Paras 6]

Proceedings remanded to the Assessing Officer to be renewed from the draft assessment stage, with an opportunity to the petitioner to file its reply and completion within twelve weeks; no adjudication on merits by this Court.

Final Conclusion: The petition is allowed: the assessment order and consequential notices dated 05.05.2021 are quashed for breach of natural justice in denying the petitioner opportunity to respond to the draft assessment order; proceedings are remanded to the Assessing Officer for fresh adjudication from the draft stage after affording the petitioner an opportunity to file its reply, to be completed within twelve weeks, with no expression of opinion on merits.

Levy of penalty for non-compliance under section 271(1)(b) - Effect of subsequent compliance and framing of assessment under section 143(3) r.w.s. 153A on penalty proceedings - Requirement of statutory mode and quantum in levy of penalty under section 271(1)(b) - Parity of penalty provisions under section 272A(1)(d) with section 271(1)(b)

Levy of penalty for non-compliance under section 271(1)(b) - Effect of subsequent compliance and framing of assessment under section 143(3) r.w.s. 153A on penalty proceedings - Whether penalty under section 271(1)(b) was leviable where the assessee took adjournments, subsequently furnished required documents during assessment proceedings and the assessment was framed on merits under section 143(3) r.w.s. 153A. - HELD THAT: - The Tribunal found on record that the assessee sought adjournments on the dates specified in the notices and thereafter furnished the required documents and details during the scrutiny proceedings. The Assessing Officer himself recorded in the assessment order framed under section 143(3) r.w.s. 153A that online submissions and required details were furnished by the assessee's authorised representative. The Tribunal applied the principle that where assessment is finally framed under section 143(3) (and not under section 144), subsequent compliance in the assessment proceedings is to be regarded as good compliance and earlier defaults cannot be treated as willful non-compliance justifying penalty. Reliance was placed on the Coordinate Bench decision noted in the order to the same effect. On these findings, the Tribunal concluded that there was no justification for imposition of penalty under section 271(1)(b) and deleted the penalty. [Paras 11, 12, 13, 14, 16]

Penalty under section 271(1)(b) deleted in view of subsequent compliance and framing of assessment on merits under section 143(3) r.w.s. 153A.

Requirement of statutory mode and quantum in levy of penalty under section 271(1)(b) - Whether the part penalty sustained by the Commissioner (Appeals) at a sum not in accordance with the statutory provision for quantum under section 271(1)(b) was sustainable. - HELD THAT: - The Tribunal noted that clause (ii) of sub section (1) of section 271 specifies the statutory quantum for each default. The Commissioner (Appeals) had sustained a portion of the penalty at a figure inconsistent with the statutory prescription. Applying the principle that where a statute prescribes a specific mode or manner for doing a thing it must be followed, the Tribunal held that sustaining a part penalty inconsistent with the statutory provision was not permissible and the Commissioner (Appeals) erred in doing so. [Paras 15]

Sustaining of part penalty at the sum not in accordance with statutory quantum under section 271(1)(b) was erroneous; the order of Commissioner (Appeals) on quantum set aside.

Parity of penalty provisions under section 272A(1)(d) with section 271(1)(b) - Whether the reasoning and result in the lead appeal would apply to other appeals in which penalties were levied under section 271(1)(b) and under section 272A(1)(d) (being pari materia). - HELD THAT: - The Tribunal observed that the facts and grounds in the other appeals were identical or similar to the lead case and that penalties under section 272A(1)(d) are pari materia with section 271(1)(b). Given the finding that subsequent compliance leading to framing of assessment under section 143(3) r.w.s. 153A negated the basis for penalty, the Tribunal applied the same adjudication mutatis mutandis to all twelve appeals and to penalties levied under section 272A(1)(d), directing deletion of those penalties as well. [Paras 17, 18, 19]

The lead adjudication applies to the other appeals and penalties under section 272A(1)(d) are deleted; all twelve appeals allowed.

Final Conclusion: The Tribunal held that penalties for alleged non compliance under section 271(1)(b) could not be sustained where the assessee subsequently furnished the required documents and the assessment was framed on merits under section 143(3) r.w.s. 153A; the Commissioner (Appeals) also erred in sustaining a part penalty inconsistent with the statutory quantum. The same conclusion was applied mutatis mutandis to the other appeals and to penalties imposed under section 272A(1)(d), and all twelve appeals were allowed.

Doctrine of merger of intimation u/s 143(1) into assessment order u/s 143(3) - Invalidity of intimation where notice u/s 143(2) precedes intimation u/s 143(1) - Effect of non-reflection of order/demand on electronic portal

Doctrine of merger of intimation u/s 143(1) into assessment order u/s 143(3) - Invalidity of intimation where notice u/s 143(2) precedes intimation u/s 143(1) - Whether adjustments made by intimation under section 143(1)(a), issued after issuance of notice under section 143(2) and prior to completion of scrutiny assessment, survive or are merged into the subsequent assessment order under section 143(3). - HELD THAT: - The Tribunal accepted the assessee's contention that an intimation under section 143(1)(a) is a summary exercise and, once scrutiny proceedings under section 143(2) are initiated and a final assessment order under section 143(3) is passed, the earlier intimation ceases to operate and merges into the final assessment. The Tribunal noted authoritative statements to this effect (including reliance on the principle that exercise under sub section (1) is different from sub sections (2) and (3)) and that the assessment order dated 20.12.2019 operated as the final adjudication in the matter. The Tribunal further observed that where notice under section 143(2) has been issued prior to an intimation, it is impermissible for the assessing officer to make fresh adjustments by exercising powers under section 143(1) in respect of matters subject to scrutiny. Applying these principles to the facts, the Tribunal recorded that the intimation dated 25.03.2019 did not survive independently because scrutiny proceedings were taken up and a final assessment was passed, which in practice resulted in the intimation and any demand consequential to it being removed or merged into the section 143(3) order. [Paras 6, 7]

Intimation under section 143(1)(a) issued after initiation of scrutiny cannot operate independently and is merged into the later section 143(3) assessment; intimation adjustments do not survive where scrutiny and final assessment have been completed.

Effect of non-reflection of order/demand on electronic portal - Doctrine of merger of intimation u/s 143(1) into assessment order u/s 143(3) - Whether the appeal remains live where the intimation and consequential demand are not reflected on the Department's electronic system and the assessing officer's records indicate merger or removal of the intimation/demand. - HELD THAT: - The Revenue furnished a factual report stating that the intimation dated 25.03.2019 and the consequent demand were not reflected in the online system and that the intimation had been merged into the subsequent assessment order. The Tribunal treated this factual position as dispositive on the technical/administrative aspect raised by the assessee. Because the very cause of grievance (the standalone operation of the intimation and its demand) did not exist on the records or portal and had been subsumed into the final assessment, the Tribunal concluded that there was no subsisting grievance against the intimation. On this technical basis, without adjudicating the substantive merits of the additions, the Tribunal allowed the appeal as infructuous. [Paras 8, 9]

As the intimation and related demand were not reflected on the electronic system and were merged into the section 143(3) assessment, the grievance against the intimation stood rendered infructuous and the appeal was allowed on that technical basis.

Final Conclusion: The appeal was allowed on technical grounds: the intimation under section 143(1)(a) dated 25.03.2019 stood merged into the later scrutiny assessment order dated 20.12.2019, the intimation and its demand were not reflected on departmental records/portal, and consequently there remained no subsisting grievance against the intimation.

Scope of section 143(1) of Income Tax Act - adjustments under section 143(1) on debatable and controversial issues - retrospective amendment cannot be invoked for adjustments under section 143(1) - delayed payment of employees' contribution to Provident Fund/ESI and deductibility under section 36(1)(va)/section 43B - remand for fresh adjudication of undisposed appellate issues

Scope of section 143(1) of Income Tax Act - adjustments under section 143(1) on debatable and controversial issues - delayed payment of employees' contribution to Provident Fund/ESI and deductibility under section 36(1)(va)/section 43B - retrospective amendment cannot be invoked for adjustments under section 143(1) - Validity of addition of Rs.58,72,654/- made by intimation/adjustment under section 143(1) in respect of delayed employees' contribution to Provident Fund and ESI for AY 2019-20. - HELD THAT: - The Tribunal found (i) it is undisputed that the employees' contributions were paid after the statutory due dates under PF/ESI law but before the due date for filing return under section 139(1); (ii) whether the Finance Act, 2021 amendments to section 36(1)(va) and section 43B are retrospective or prospective is debatable and controversial; (iii) adjustments under section 143(1) on debatable or controversial questions of law are beyond the scope of that provision. Relying on precedent authorities and earlier decisions favourable to the assessee which were available as on the date of the 143(1) intimation, the Tribunal held that Revenue's addition by way of intimation/adjustment under section 143(1) on this debatable issue was unfair and bad in law. The Tribunal further observed that retrospective amendments cannot be invoked to sustain additions made by section 143(1) intimation. In view of these reasons the appellate authority erred in confirming the addition and the same was directed to be deleted. The Tribunal expressly refrained from deciding the abstract question whether the 2021 amendments are prospective or retrospective, treating that question as academic in the context of its decision to set aside the 143(1) adjustment.

Addition of Rs.58,72,654/- made by adjustment/intimation under section 143(1) is deleted; Ld. CIT(A) erred in confirming the addition.

Remand for fresh adjudication of undisposed appellate issues - Treatment of the assessee's grounds relating to adjustment of interest amounts and disallowance of TDS credit which were not decided by the Ld. CIT(A). - HELD THAT: - Grounds 11 and 12 raised before the CIT(A) concerning adjustment of amounts on account of interest on TDS, interest on GST and interest on PPF, and the claim of TDS credit were not adjudicated in the CIT(A) order. At hearing both parties requested restoration of these issues to the file of the CIT(A). The Tribunal accepted the request and restored the matters to the CIT(A) for fresh decision on merits after giving the assessee a reasonable opportunity to be heard. For statistical purposes these grounds are treated as partly allowed.

Issues regarding the interest adjustments and TDS credit are restored to the file of the Ld. CIT(A) for fresh adjudication after affording opportunity to the assessee.

Final Conclusion: The appeal is partly allowed: the addition made by intimation/adjustment under section 143(1) in respect of delayed employees' contributions to PF/ESI for AY 2019-20 is set aside and deleted; the remaining issues left undecided by the CIT(A) are restored to the CIT(A) for fresh decision after affording the assessee an opportunity to be heard.

Rectification under Section 154 - mistake apparent from record - deemed income under Section 69/69A - application of higher tax rate under Section 115BBE - requirement of satisfaction before invoking Section 69/69A - scope of rectification where the issue is debatable - penalty under Section 270A vis-a -vis Section 271AAC

Rectification under Section 154 - mistake apparent from record - deemed income under Section 69/69A - application of higher tax rate under Section 115BBE - scope of rectification where the issue is debatable - Whether the Assessing Officer could, by a rectification order under Section 154, revise tax on additions by applying Section 115BBE when the assessment order did not invoke Sections 69/69A and the nature of addition under those sections was in dispute. - HELD THAT: - The Tribunal found on the facts recorded in the assessment that the AO had not invoked Sections 69/69A while making the impugned addition and had, in relation to the same assessment, proceeded under Section 270A for penalty in respect of under-reporting - a course indicating a conscious classification rather than an inadvertent omission. The source for the money lending business was not disputed and ownership of loose sheets was denied by the assessee, making the question whether the addition properly fell under Section 69A debatable. Section 115BBE is contingent on the satisfaction required under Sections 69/69A; where invocation of those sections is itself a matter of controversy, applying the higher tax rate through a rectification under Section 154 would extend section 154 beyond correcting a prima facie mistake apparent from the record. Reliance was placed on precedent holding that where the characterisation of income under a particular section is not already determined in the assessment and is debatable, rectification under Section 154 to alter tax consequences is not permissible. For these reasons the Tribunal held the AO's exercise of power under Section 154 to apply Section 115BBE invalid and deleted the rectification. [Paras 8, 9, 10, 11]

Rectification order under Section 154 applying Section 115BBE to the impugned addition was not permissible where invocation of Sections 69/69A was not made in the assessment and the question was debatable; rectification deleted.

Final Conclusion: The appeal is allowed; the rectification under Section 154 which enhanced tax liability by applying Section 115BBE to the addition is set aside and deleted.

Onus of proof in claiming expenditure - disallowance on estimate basis - reasonableness and proportionality of disallowance - commercial improbability of declared profit rate - section 40(a)(ia) disallowance for non-deduction of TDS - double disallowance - remand for verification

Onus of proof in claiming expenditure - disallowance on estimate basis - reasonableness and proportionality of disallowance - commercial improbability of declared profit rate - Whether the disallowance of Rs.85,56,088/- (10% of specified expenditures) was sustainable where the assessee failed to produce bills and vouchers and whether the quantum of disallowance was reasonable in light of the declared net profit rate. - HELD THAT: - The Tribunal accepted the settled proposition that the onus is on the assessee to prove the genuineness of expenditures by producing bills and vouchers, therefore disallowance on estimate basis was permissible where vouchers were not furnished. However, the Tribunal found the specific estimate of 10% of the aggregated expenditure excessive because it produced an implausible net profit rate of 37.78% in the business context, whereas the assessee had declared a net profit of 9.29%. Balancing the need to uphold the onus principle with the commercial improbability created by the AO's estimate, the Tribunal reduced the disallowance to a lumpsum amount of Rs.10,00,000/- as meeting the ends of justice and directed accordingly, thereby partly allowing the assessee's challenge to the quantum while upholding the principle permitting estimate disallowance when supporting documents are not produced. [Paras 10]

Partly allowed; disallowance sustained in principle but reduced to a lumpsum disallowance of Rs.10,00,000/-.

Section 40(a)(ia) disallowance for non-deduction of TDS - double disallowance - remand for verification - Whether the disallowance of Rs.1,00,764/- under section 40(a)(ia) should stand where the assessee's computation of income showed a suo moto disallowance including that amount. - HELD THAT: - The Tribunal noted from the assessee's computation that an amount of Rs.1,32,828/- had been suo moto disallowed, which included the sum the AO disallowed under section 40(a)(ia). Given this, the Tribunal found it appropriate to remit the matter to the Assessing Officer for verification of the computation statement and factual satisfaction. The Tribunal directed the AO to verify the assessee's claim and, if satisfied, to delete the addition. For present purposes the issue was allowed for statistical purposes by way of remand rather than final adjudication on merits. [Paras 11]

Allowed for statistical purposes; issue restored to the file of the Assessing Officer for verification and appropriate deletion of the addition if justified.

Final Conclusion: The appeal is allowed for statistical purposes: the disallowance of Rs.85,56,088/- is upheld in principle but reduced to a lumpsum of Rs.10,00,000/-, and the disallowance under section 40(a)(ia) is remitted to the Assessing Officer for verification of the assessee's computation and appropriate deletion if established.

Trademark infringement - trade dress infringement - importation of infringing goods - Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 - suspension of clearance of imported goods - supply of information to the right holder - injunctive relief

Importation of infringing goods - suspension of clearance of imported goods - injunctive relief - Whether injunctive relief against the Customs authority (Defendant No.2) was required to prevent import of the goods in Container No. ECNU4006477 into India - HELD THAT: - The Court recorded the assurance made by counsel for the Customs authorities that import of the goods in the subject container would not be permitted and noted the written statement from the Customs office confirming that the goods had not been allowed to be imported into India. Having found that the Customs authorities had suspended clearance and no importation into India had taken place, the plaintiffs did not press for further relief. In view of the factual finding that the impugned consignment has not been permitted to enter India, the Court held that grant of the injunction against Defendant No.2 was not necessary. The plaintiffs were, however, left free to pursue remedies in India or in foreign jurisdictions as appropriate. [Paras 11, 13, 16, 18]

The import had been stopped by Customs; injunction against Defendant No.2 was not required and paragraph 5 of the prayer was satisfied.

Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 - supply of information to the right holder - The scope of Customs' obligations under the IPR Rules in relation to suspected infringing imports and supply of information to the right holder - HELD THAT: - The Court summarised the relevant provisions of the IPR Rules, noting that Customs may suspend clearance where it has reason to believe goods infringe IP rights and that, at the request of the right holder, Customs shall inform the name and address of the importer and may provide additional relevant information. Having found that Customs had acted to prevent importation in this case, the Court directed that Customs be bound to comply with enforcement of the IPR Rules in future and observed that any details available with Customs (such as importer, seller or manufacturer as per shipping documents) may be intimated to the plaintiffs on request under the mechanism provided by the Rules. [Paras 15, 17, 18, 19]

Customs is bound to enforce the IPR Rules and, upon request, to furnish available information to the right holder in accordance with the Rules.

Final Conclusion: The suit was disposed of on the basis that Customs had not permitted the subject consignment to be imported into India; the injunction against Defendant No.2 was therefore unnecessary, and the Customs authorities were directed to continue to enforce the IPR Rules and to provide information to the right holder on request.

Classification of goods for export duty based on Fe content - determination of Fe content on Wet Metric Tonne (WMT) basis - Dry Metric Tonne (DMT) basis applicable prospectively from Finance Act, 2022 w.e.f. 1 May 2022 - binding force of Supreme Court precedent under Article 141 of the Constitution - administrative/ advisory circular not issued under Section 151A cannot form basis of assessment - remand to assessing authority for fresh adjudication in accordance with law

Determination of Fe content on Wet Metric Tonne (WMT) basis - classification of goods for export duty based on Fe content - binding force of Supreme Court precedent under Article 141 of the Constitution - Whether the Fe (iron) content for classification of iron ore for export duty assessments prior to 1 May 2022 had to be determined on the Wet Metric Tonne (WMT) basis. - HELD THAT: - The Court examined Gangadhar Narsingdas Agarwal (Single Judge, Division Bench and Supreme Court) and distilled principles establishing that iron ore is exported in natural (moist) condition, that recognized mathematical/formulaic methods exist to derive Fe content in moist material from laboratory (dry) analysis, and that classification must relate to the weight/condition of the goods at the time of export. The Tariff headings for chapter 2601 did not expressly prescribe any dry-weight measure prior to the Finance Act, 2022 amendment; the legislative change adopting DMT was introduced only w.e.f. 1 May 2022. The Court therefore held that for assessments pertaining to periods before that amendment the Wet (WMT) method, as approved by the Supreme Court and reflected in the Board's 17 February 2012 communication, governs the determination of Fe content for classification and consequent levy of export duty. [Paras 46, 51, 53]

Fe content for classification in assessments prior to 1 May 2022 must be determined on WMT basis in accordance with Gangadhar Agarwal and the CBEC communication dated 17 February 2012.

Administrative/ advisory circular not issued under Section 151A cannot form basis of assessment - GA Circular No. 02/2019 - Whether General Alert Circular No. 02/2019 dated 12/15 April 2019 could be used as the basis for finalizing assessments in the matters before the Court. - HELD THAT: - The Court accepted the Revenue's position that the GA Circular is an internal advisory and not issued under Section 151A; such advisory communications cannot be treated as binding instructions for adjudication. Independent of that administrative character, the Court observed that even if the GA Circular recognises BIS/ISI testing methods, those methods must be applied consistent with the legal principle that, for the period prior to 1 May 2022, classification/Fe determination follows the WMT approach as settled by the Supreme Court. Consequently the GA Circular could not form the basis of assessments for the relevant period. [Paras 52]

GA Circular No. 02/2019 is administrative/advisory (not issued under Section 151A) and cannot be the basis for assessment of the export consignments in question.

Quashing of orders inconsistent with binding precedent - classification of goods for export duty based on Fe content - Whether the impugned orders-in-original finalising provisional assessments by applying DMT for the relevant shipments were sustainable. - HELD THAT: - The Assistant Commissioner, though aware of the decision in Gangadhar Agarwal and the CBEC clarification, accepted DMT in finalizing the provisional assessments for shipments prior to 1 May 2022. The Court held that acceptance of DMT for those assessments was contrary to the binding Supreme Court precedent and the Board communication applying the WMT method. Acting contrary to Article 141 precedent rendered the impugned orders unsustainable. [Paras 60, 61]

The impugned orders-in-original are quashed for being contrary to law and binding precedent.

Remand to assessing authority for fresh adjudication in accordance with law - Remand of the matters to the Assistant Commissioner of Customs for fresh adjudication. - HELD THAT: - Having set aside the impugned orders, the Court directed that the matters be remanded to the Assistant Commissioner to hear the petitioners and pass fresh orders applying the legal principles stated: (i) use of WMT for determinations pertaining to periods before 1 May 2022; and (ii) not to base assessments on GA Circular No. 02/2019. The Court provided a timeframe for compliance and required that the fresh adjudication be in accordance with the discussed principles. [Paras 63]

Matters remanded to the Assistant Commissioner of Customs to decide afresh in accordance with law within three months.

Final Conclusion: The writ petition is partly allowed. For assessments prior to 1 May 2022 the Fe content for classification must be determined on the Wet Metric Tonne (WMT) basis as per the Supreme Court in Gangadhar Agarwal and the CBEC communication of 17 February 2012; GA Circular No. 02/2019 (not issued under Section 151A) cannot form the basis of assessment; the impugned orders-in-original are quashed; and the matters are remanded to the Assistant Commissioner for fresh adjudication in accordance with these principles within three months.

Provisional release under section 110A of the Customs Act, 1962 - Confiscation under section 111 read with section 115 of the Customs Act, 1962 - Conditions for provisional release and requirement of security/bond - Non compliance with Food Safety and Standards Regulations as ground for seizure - Distinguishing precedents on facts when imposing conditions for release

Provisional release under section 110A of the Customs Act, 1962 - Conditions for provisional release and requirement of security/bond - Distinguishing precedents on facts when imposing conditions for release - Whether provisional release of the seized goods should be dealt with under section 110A and what role the Customs authorities have in imposing conditions and security for such release. - HELD THAT: - The court observed that section 110A empowers the adjudicating authority to release seized goods pending adjudication on taking a bond with such security and conditions as the authority may require. While the petitioner sought immediate court ordered provisional release, the court noted that the Customs authorities are vested with the power to consider release and to determine appropriate conditions and security. The Division Bench decision relied upon by the petitioner was held to be fact specific and distinguishable on account of different facts (including valuation and different breaches alleged here); therefore that precedent could not be mechanically applied. The court recorded that the petitioner had earlier applied for provisional release but had expressed inability to furnish a bank guarantee; hence the matter called for exercise of discretion by the competent authority under section 110A rather than for an unconditional judicial direction to release without conditions. [Paras 5]

Provisional release is to be considered and granted (if at all) by the competent Customs authority under section 110A subject to such conditions and security as the authority deems fit; the court declined to substitute its own conditions or order unconditional release.

Non compliance with Food Safety and Standards Regulations as ground for seizure - Confiscation under section 111 read with section 115 of the Customs Act, 1962 - Whether permission to re export the seized goods should be granted by this Court as part of the petitioner's relief. - HELD THAT: - The court noted that the goods were intercepted and subsequently kept in a warehouse after being transported away from the port, and that the seizure was on grounds of alleged breaches of Food Safety and Standards requirements. Given the factual posture and the seizure having been recorded, the court declined to grant the part of the prayer seeking permission to re export the goods. The court expressly refrained from adjudicating the merits of any claim for re export and left the petitioner free to pursue available legal remedies before the appropriate authorities. [Paras 5]

Permission to re export was not granted by the court; petitioner may pursue appropriate remedies before competent authorities.

Provisional release under section 110A of the Customs Act, 1962 - Whether pending applications by the petitioner for provisional release must be decided by the Customs authorities within a specified time. - HELD THAT: - Recognising that the petitioner had pending letters/applications for provisional release, the court directed the competent Customs authority to consider and decide those applications in exercise of powers under section 110A. The court emphasised that it would not express any opinion on the merits or on the nature of conditions to be imposed, leaving assessment of appropriate security and other conditions to the authority's discretion. A specific short timeline was imposed to ensure prompt administrative action. [Paras 6]

Pending applications for provisional release are to be considered and decided by the competent Customs authority within one week from the date of the order, with the authority to impose appropriate conditions; the court did not opine on merits or on the conditions to be imposed.

Final Conclusion: The petition is disposed of by directing the competent Customs authority to consider and decide the petitioner's pending applications for provisional release under section 110A within one week, leaving the question of re export and the nature of conditions or security to the appropriate authorities; no opinion was expressed on the merits.

Classification of imported goods as parts suitable solely or principally for a particular machine - refund of excess customs duty on reclassification - accessories treated with principal goods for tariff classification - interest on delayed refunds under Section 27A of the Customs Act, 1962

Classification of imported goods as parts suitable solely or principally for a particular machine - refund of excess customs duty on reclassification - accessories treated with principal goods for tariff classification - Refund claim covers duty paid on both the epoxy coils and their accessories where the goods are classifiable as parts solely/principally for the generator under tariff heading 8503. - HELD THAT: - The writ court examined the refund application together with the CESTAT order and the supporting documents (invoices, catalogues and supplier's certification) and concluded that the imported epoxy stator coils were specially made for the Sharavathi generators and suitable solely/principally for use with those machines. The refund application expressly sought relief for both coils and accessories and the duty computation related to four bills of entry (coils and accessories). Interpreting the CESTAT order holistically and avoiding a narrow, isolated reading of a reference to a single tariff entry, the court held it was not tenable for the revenue to accept reclassification of coils under 8503 while denying the same treatment to the accessories. The impugned order insofar as it refused refund in respect of accessories was therefore quashed and the authorities directed to pay the refund for accessories along with the refund for coils. [Paras 8, 9, 10, 11]

Impugned order quashed to the extent it rejected refund for accessories; refund for both coils and accessories to be paid forthwith.

Interest on delayed refunds under Section 27A of the Customs Act, 1962 - refund of excess customs duty on reclassification - Interest on the refunded amount is payable from three months after receipt of the refund application under Section 27A of the Customs Act, 1962, until payment. - HELD THAT: - The court applied Section 27A, which mandates payment of interest where a refund is not made within three months from receipt of the refund application. The refund application in this case was dated 27.08.1994; accordingly interest on the amounts found payable (including for accessories) is recoverable from the date three months after that application until the date of actual refund. The court noted the assistant commissioner had limited interest to the date of the CESTAT order, which was contrary to Section 27A, and accordingly directed interest in accordance with the statute. [Paras 12, 13]

Interest on the refunded amounts to be paid from three months after the date of the refund application until payment, in terms of Section 27A.

Final Conclusion: Writ petition allowed: the impugned order is quashed insofar as it denied refund in respect of accessories; refund for coils and accessories to be paid with applicable interest in terms of Section 27A within six weeks; no costs.

Provisional release of seized goods - bond securing value of goods - bank guarantee equivalent to percentage of duty differential - effect of Advance Ruling Authority's determination - detention certificate and demurrage/detention charges

Provisional release of seized goods - effect of Advance Ruling Authority's determination - bank guarantee equivalent to percentage of duty differential - Provisional release of the goods detained by the revenue and the terms on which such release should be ordered. - HELD THAT: - The Advance Ruling Authority had affirmed the petitioner's classification of the goods under CTH 8424 and its review application was dismissed, which entitled the petitioner to seek release of the goods. Ordinarily, in view of the ARA's determination, the goods should have been released provisionally on a personal bond. The petitioner expressed willingness to execute a bond for the entire value of the goods and to furnish a bank guarantee. The court accepted the proposition that the bank guarantee, where furnished, is ordinarily to relate to a prescribed percentage of the differential duty leviable on the goods and not to the entire value. Having regard to the position and the petitioner's offer, the court directed provisional release on execution of a bond securing the entire value and on furnishing a bank guarantee equivalent to 25% of the duty differential, finding that this arrangement meets the ends of justice. The provisional release directed is without prejudice to the parties' contentions on the merits of the underlying dispute. [Paras 11, 12, 14]

Goods ordered released provisionally on petitioner executing a bond for the entire value and furnishing a bank guarantee equivalent to 25% of the duty-differential; release to be without prejudice to merits.

Administrative processing of provisional release applications - Timeline for the respondents to process the petitioner's application for provisional release. - HELD THAT: - In addition to directing provisional release on specified securities, the court mandated that upon the petitioner taking necessary steps, the respondents shall process the application for release expeditiously and, in any event, not later than two days from receipt of a copy of the order. The respondents were required to ensure compliance with this timeframe. This administrative direction is procedural and intended to give effect to the substantive relief ordered. [Paras 13]

Respondents directed to process the petitioner's application for provisional release within two days of receipt of a copy of the order.

Final Conclusion: The petition succeeds to the extent that the respondent is directed to release the detained goods provisionally on the petitioner executing a bond for the entire value and furnishing a bank guarantee equivalent to 25% of the duty-differential; the respondents must process the release application within two days of receipt of this order, and the directions are without prejudice to the merits of the dispute.

Classification dispute - advance ruling by Customs Authority for Advance Rulings - challenge to show-cause notice - interim stay of statutory notice - necessity of impleading a necessary party - allegation of fraud or misrepresentation in seeking advance ruling

Advance ruling by Customs Authority for Advance Rulings - allegation of fraud or misrepresentation in seeking advance ruling - classification dispute - The CAAR ruling classifying the imported goods under CTH 84248990 stands and the CAAR's rejection of the respondents' review application and of allegations of fraud/misrepresentation was noted. - HELD THAT: - The court recorded that CAAR had ruled in favour of the petitioner on 05.10.2021, holding the goods under CTH 84248990, and that the respondents' review application was dismissed on 08.08.2022. CAAR's reasoning, including findings that there was no evidence of fraud or misrepresentation and that the advance ruling was not vitiated, was noted by this Court. On the material before it, the court observed that the classification dispute, as adjudicated by CAAR, stood settled in favour of the petitioner and that the respondents' contentions alleging fraud had been rejected by CAAR. [Paras 10, 14, 15]

CAAR's ruling in favour of the petitioner and its rejection of the fraud/misrepresentation allegation is recorded and treated as dispositive for the purposes of interim consideration.

Challenge to show-cause notice - interim stay of statutory notice - Operation of the show-cause notice dated 08.07.2022 is stayed pendente lite. - HELD THAT: - Having noted that the show-cause notice arises from the same classification dispute which CAAR had adjudicated in the petitioner's favour and that CAAR had dismissed the respondents' review and rejected fraud allegations, the Court concluded that the steps taken towards adjudication appeared prima facie to be fraught with legal flaws or impediments. In light of these findings and the pendency of the writ petition, the Court granted an interim stay on the operation of the show-cause notice until the next date of hearing. [Paras 16, 17]

The operation of the show-cause notice dated 08.07.2022 is stayed until the next date of hearing.

Necessity of impleading a necessary party - Commissioner of Customs (Preventive), Jodhpur, is a necessary party and was ordered to be arrayed as respondent no.4. - HELD THAT: - The show-cause notice challenged in the writ petition had been issued by the Commissioner of Customs (Preventive), Jodhpur. The Court held that that authority was a necessary party for adjudication of the petition and, on the petitioner's oral application, directed that the Commissioner be impleaded as respondent no.4 and that an amended memo of parties be filed within one week. Notice was issued to the newly arrayed party. [Paras 9, 10, 11]

Commissioner of Customs (Preventive), Jodhpur, is impleaded as respondent no.4 and notice is issued to that respondent.

Amendment of writ petition - Amendment of the writ petition to challenge the show-cause notice was permitted and the amended writ petition was taken on record. - HELD THAT: - The Court allowed the petitioner to amend the writ petition to include challenge to the show-cause notice and to substitute certain prayers as sought. The amended writ petition was taken on record and the respondents were permitted to file a counter-affidavit within a time bound schedule. [Paras 6, 7, 18]

Amendment allowed; amended writ petition taken on record and respondents directed to file counter-affidavit within three weeks.

Final Conclusion: The Court recorded that CAAR had ruled in the petitioner's favour and rejected allegations of fraud, permitted amendment of the writ petition and impleading of the Commissioner of Customs (Preventive), Jodhpur, and granted an interim stay on the operation of the show-cause notice dated 08.07.2022 pending further hearing.

Final assessment - principles of natural justice - show-cause notice - speaking order - valuation enhancement - de novo assessment - power to finally assess under Section 18(2) of the Customs Act, 1962

Final assessment - principles of natural justice - show-cause notice - valuation enhancement - power to finally assess under Section 18(2) of the Customs Act, 1962 - speaking order - Validity of the impugned final assessment of 95 bills of entry and compliance with requirements of natural justice and reasoned decision-making. - HELD THAT: - The Court found that although the authority has the power to finally assess under Section 18(2) of the Customs Act, 1962, the impugned order is legally infirm. The valuation of the goods covered by the 95 bills of entry was enhanced but the basis for such enhancement was not communicated to the importer; no show-cause notice was issued prior to finalisation and the impugned order contains no reasons linking material to the conclusion. The coordinate Bench's earlier direction to finally assess within six weeks did not dispense with statutory requirements of natural justice or the obligation to record reasons. Accordingly the impugned order is set aside and the matter remitted for a de novo exercise: the authority must issue a show-cause notice detailing the proposed valuation, furnish the relevant material relied upon, grant a personal hearing to the petitioner or its authorised representative, and thereafter pass a speaking order. If that speaking order is adverse, the petitioner may challenge it as per law. [Paras 23, 24, 25, 26, 27]

Impugned order set aside; respondent to re-assess the 95 bills of entry de novo after issuing a show-cause notice, providing relied-upon material, granting personal hearing and passing a reasoned speaking order.

Final Conclusion: Writ petition disposed of: the order dated 24.09.2020 is set aside and the respondent is directed to undertake a fresh final assessment of the 95 bills of entry in accordance with law by issuing a show-cause notice, furnishing material, affording personal hearing and passing a speaking order; petitioner may challenge any adverse order as per law.

Condition No. 104 of the exemption notification - non-scheduled (passenger) services - non-scheduled (charter) services - transfer of NSOP - requirement of fair notice in show cause proceedings - scope of DGCA's authority to grant/monitor NSOP - charter operations versus private use - wet lease and dry lease distinction

Transfer of NSOP - requirement of fair notice in show cause proceedings - Validity of the Commissioner's confirmation of demand and confiscation in respect of Helicopters AZU and AZV on the ground that the appellant had transferred its NSOP to Vectra Aviation Pvt. Ltd. (VAPL). - HELD THAT: - The Tribunal held that the Commissioner confirmed the demand on a ground-transfer of the NSOP to VAPL-which was not alleged in the show cause notice. The show cause notice had alleged lease/long-term contracts but did not put the appellant to notice that it had transferred its NSOP to a group company. Reliance on authoritative precedent (as cited in the judgment) establishes that revenue cannot sustain an adjudication on a ground not raised in the show cause notice and which the party was not required to meet. Accordingly, the confirmation of demand and the order for confiscation (with redemption option) insofar as based on the finding of transfer of NSOP are vitiated for lack of notice and must be set aside. [Paras 21, 22, 24]

Confirmation of demand and confiscation in respect of Helicopters AZU and AZV on the ground of transfer of NSOP is set aside for being a ground not raised in the show cause notice; appeal allowed on this issue and cross-objections rejected.

Condition No. 104 of the exemption notification - non-scheduled (passenger) services - non-scheduled (charter) services - scope of DGCA's authority to grant/monitor NSOP - charter operations versus private use - wet lease and dry lease distinction - Applicability and interpretation of Condition No. 104 - including whether NSOP (passenger) covers charter operations, whether published tariff or issuance of tickets is mandatory, and whether Customs can independently examine DGCA permit validity absent DGCA action. - HELD THAT: - The Tribunal accepted and applied the Larger Bench's conclusions. Condition No. 104 must be read with the definitions in the Aircraft Rules: an activity falling within the definition of "air transport service" and being other than scheduled (passenger) air transport falls within NSOP (passenger). There is no requirement in the exemption notification that a published tariff or per seat basis be mandatory; chartering the entire aircraft falls within NSOP (passenger). The DGCA's clarifications and the CARs permit charter and wet lease operations within NSOP privileges; consequently Customs cannot re open or probe the validity of a DGCA permit in the absence of cancellation or action by DGCA, and Customs may act on the importer's undertaking only when DGCA holds that permit conditions have been violated. Similarly, absence of issuance of tickets or non filing of passenger manifests relates to CAR compliance and does not, by itself, invalidate entitlement to the exemption under Condition No. 104. Applying these principles, the Tribunal upheld the setting aside of demands so far as Helicopter AZX and the penalties against individual directors were concerned and rejected the Department's contentions to the contrary. [Paras 15, 16, 25]

Larger Bench's interpretations of Condition No. 104 accepted and applied; demands in respect of Helicopter AZX and penalties against individual directors dismissed; appeals dismissed where the Department challenged those favorable findings.

Final Conclusion: The appeal in respect of Helicopters AZU and AZV is allowed and the Commissioner's demand and confiscation order insofar as based on the unpleaded ground of transfer of NSOP is set aside; cross objections by the Department are rejected. The Departmental appeals against the dropping of demand for Helicopter AZX and against penalties on individual directors are dismissed.

Condonation of delay - discretionary power to condone delay - proof of service of appeal memo - limitation bar to appeal - virtual hearing facility and acceptance of written submissions

Condonation of delay - discretionary power to condone delay - proof of service of appeal memo - limitation bar to appeal - Whether the Tribunal should interfere with the Commissioner (Appeals) order dismissing the appeal as time-barred for delay of 23 days in the absence of proof of delivery of the appeal memo - HELD THAT: - The Tribunal held that condonation of delay is a discretionary power which may be exercised only upon demonstration of sufficient cause. The Commissioner (Appeals) dismissed the appeal on limitation ground because no delay-condonation petition had been filed and there was a delay of 23 days. The appellant produced a photocopy of a postal receipt purportedly showing dispatch to the Commissioner (Appeals), but did not establish any nexus between the sender and the appellant company, nor provided proof of receipt by the Commissioner (Appeals) or a reliable delivery date. In the absence of satisfactory proof of delivery of the appeal memo sent through the postal department, there is no basis for this Tribunal to override the exercise of discretion by the Commissioner (Appeals) in refusing to condone the delay. Accordingly the order-in-appeal dismissing the appeal on limitation grounds was confirmed. [Paras 2, 3, 4, 5]

Tribunal confirmed the Commissioner (Appeals) order dismissing the appeal as time-barred for want of condonation in absence of proof of delivery, and refused to interfere.

Virtual hearing facility and acceptance of written submissions - Whether the Tribunal would permit virtual hearing or decide the matter on the appellant's written submissions - HELD THAT: - The Tribunal recorded receipt of a written request for virtual hearing and an alternative request to decide on written submissions. It noted that, following re-opening after the pandemic, the CESTAT grants only physical hearings as per the Head Office circular. The written submissions filed were poorly structured and largely unintelligible; the limited gist that could be extracted did not demonstrate any irregularity in the Commissioner (Appeals) order. Given the procedural restriction on virtual hearings and the inadequate quality of the written submission, the Tribunal declined to accept the written submissions as a basis to decide in favour of the appellant. [Paras 2]

Request for virtual hearing was refused in view of the Tribunal's practice; the alternative request to decide on the appellant's written submissions was not accepted because the submissions were unintelligible and insufficient.

Final Conclusion: The appeal is dismissed; the order of the Commissioner of Customs (Appeals-II), JNCH, Nhava Sheva dated 31.10.2017 dismissing the appeal on limitation ground is confirmed. The Tribunal refused the appellant's request for virtual hearing and declined to decide the matter on the inadequate written submissions.

Non-scheduled (passenger) service - Condition No. 104 of the exemption notification - undertaking to Customs to use aircraft only for specified purpose - air transport service (definition in Rule 3(9) of the Aircraft Rules) - scheduled (passenger) air transport service (definition in Rule 3(49) of the Aircraft Rules) - charter operations within non-scheduled (passenger) services - private aircraft versus public transport aircraft - jurisdiction of DGCA to monitor compliance of CAR and permits

Condition No. 104 of the exemption notification - undertaking to Customs to use aircraft only for specified purpose - air transport service (definition in Rule 3(9) of the Aircraft Rules) - Use of the imported aircraft in the manner pleaded by the appellant did not constitute a breach of Condition No. 104 or the undertaking to Customs. - HELD THAT: - The Tribunal applied the definitions in the Aircraft Rules and the explanation to Condition No. 104 and held that Condition No. 104 requires that the aircraft be used for "non-scheduled (passenger) services", defined as air transport services other than scheduled services. The appellants used the aircraft to transport persons for remuneration; such use falls within the definition of "air transport service" and, because it did not satisfy the three criteria of scheduled services, it qualified as non-scheduled (passenger) service. The Larger Bench's reasoning - adopted by this Bench - establishes that the appellant's activities therefore complied with Condition No. 104 and the undertaking given at import, and no violation of the undertaking has been shown on the material before Customs. Consequently the denial of exemption on that ground could not be sustained. [Paras 32, 33, 34, 35, 37]

The demand of duty and denial of exemption on the ground of breach of Condition No. 104/undertaking is not sustainable.

Charter operations within non-scheduled (passenger) services - non-scheduled (passenger) service - Chartering the entire aircraft is permissible while operating as a non-scheduled (passenger) service; charter operations do not fall outside the scope of non-scheduled (passenger) services. - HELD THAT: - The Tribunal examined the Aircraft Rules, the definitions in Condition No. 104 and the Civil Aviation Requirements (CAR 1999) and concluded there is no restriction that non-scheduled (passenger) services must be per-seat or that chartering is prohibited. CAR 1999 expressly recognizes that a non-scheduled operator may conduct charter operations. A conjoint reading shows that remuneration may be fixed in various modes (seat-wise or by charter) and that such modes remain within "air transport service" and thus within non-scheduled (passenger) service when not meeting the characteristics of scheduled services. [Paras 32, 33, 34]

An operator holding a non-scheduled (passenger) permit may carry out charter operations; chartering does not by itself violate the exemption condition.

Requirement of issuing passenger tickets - non-scheduled (passenger) service - There is no obligation under the exemption or the Aircraft Rules/CAR that a non-scheduled (passenger) operator must issue passenger tickets as a precondition for being a non-scheduled operator eligible for the exemption. - HELD THAT: - The Tribunal contrasted the Policy Guidelines and CAR provisions: while CAR 1999 (paragraph 9.7) states that non-scheduled operators shall issue tickets in accordance with the Carriage by Air Act and DGCA requirements, the Policy Guidelines and definitions do not make issuance of tickets a defining or mandatory element of non-scheduled (passenger) service for purposes of the exemption. The Larger Bench held that non-issuance of tickets does not demonstrate that the operator is not rendering non-scheduled (passenger) service and therefore non-issuance cannot, by itself, justify denial of exemption. [Paras 33, 34]

Non-issuance of passenger tickets does not render a non-scheduled (passenger) operation outside the scope of the exemption.

Private aircraft versus public transport aircraft - air transport service (definition in Rule 3(9) of the Aircraft Rules) - Carriage of personnel of group companies for remuneration does not convert the aircraft into a private aircraft; such use remains public transport (not private) where carriage is for remuneration and the undertaking/permit contemplates such operations. - HELD THAT: - Relying on the definitions in the Aircraft Rules, the Tribunal observed that "public transport" covers carriage of persons for remuneration and that an air transport undertaking is one whose business includes carriage for hire or reward. There is no requirement that passengers be members of the general public distinct from group companies; personnel of group companies transported for remuneration are nonetheless persons transported for hire/reward. The existence of negotiated tariffs or hire pursuant to tenders satisfies the purpose of published tariff; absence of a formal published tariff does not convert the operation into private use. [Paras 33]

Use of the aircraft to carry group-company personnel for remuneration did not amount to private use and did not breach the exemption conditions.

Jurisdiction of DGCA to monitor compliance of CAR and permits - undertaking to Customs to use aircraft only for specified purpose - Customs cannot invoke the undertaking and demand duty on the ground of breach of the exemption unless the DGCA (the competent civil aviation authority) has found that the permit-holder violated the permit/conditions; monitoring and finding of non-compliance is for DGCA. - HELD THAT: - The Tribunal construed the exemption and its legislative history to show that the exemption was granted based on representations and conditions specified by the Civil Aviation Ministry and the DGCA. Condition No. 104 incorporates compliance with DGCA conditions and CARs; accordingly, the competent civil aviation authority is primarily responsible for monitoring compliance. The Larger Bench held, and this Bench accepted, that Customs may act on the undertaking to demand duty only when the civil aviation authority has adjudicated that the permit conditions were breached. Since DGCA had not found any violation and had renewed permits, Customs could not act independently to invoke the undertaking and demand duty. [Paras 34, 35]

Absent a finding by DGCA that permit conditions were violated, Customs had no jurisdiction to invoke the undertaking and demand duty.

Final Conclusion: The impugned order of the Commissioner dated 31.08.2010 is set aside in so far as it relates to the appellant; the Tribunal held that the appellant's use of the aircraft fell within "non-scheduled (passenger) service", that chartering and non-issuance of tickets did not amount to breach, that carriage of group-company personnel for remuneration was not private use, and that Customs could not demand duty on the undertaking unless DGCA first found a violation; the appeals are allowed and the penalties are not sustained.

Patent illegality - public policy of India - fraud vitiating arbitral awards - res judicata - pre-contractual negotiations admissibility - force majeure - termination and repudiatory breach - Article 7(c) and Article 11 interpretation - challenge under Section 34 of the Arbitration and Conciliation Act, 1996 - limits on reappreciation of evidence by courts

Pre-contractual negotiations admissibility - patent illegality - challenge under Section 34 of the Arbitration and Conciliation Act, 1996 - Exclusion by the Arbitral Tribunal of evidence of pre-contractual negotiations amounted to patent illegality and vitiated the award. - HELD THAT: - The Court found that the Tribunal wrongly excluded evidence of pre-contractual negotiations when no specific basis under the IBA Rules (Article 9(2) or 9(3)) was recorded to justify exclusion and when Devas did not seek exclusion; the excluded material was relevant to the interpretation of Article 7 and to the parties' intentions. The Tribunal's reliance on the IBA Rules to discard that evidence in a domestic arbitration (between Indian parties) was impermissible in the circumstances and constituted a patent illegality on the face of the award because it ignored material evidence that affected the outcome. [Paras 44, 45, 46, 55, 168]

The exclusion of pre-contractual negotiation evidence by the Tribunal is a patent illegality that vitiates the award.

Termination and repudiatory breach - Article 7(c) and Article 11 interpretation - force majeure - patent illegality - The Arbitral Tribunal's contemporaneous findings on force majeure, inability to obtain/retain clearances, and repudiatory breach were self-contradictory and thereby patently illegal. - HELD THAT: - The Court identified internal contradictions in the Tribunal's reasoning: it held the Cabinet Committee on Security decision was an act of government in sovereign capacity covered by Article 11 (force majeure) and yet concluded Antrix wrongfully repudiated the contract; it also held that Antrix lacked orbital slot coordination but simultaneously held Article 7(c) did not apply because it requires 'inability to obtain' not 'inability to retain'. These conflicting findings and the reasoning that Dr Radhakrishnan could have prevented the CCS decision (thereby imputing control over sovereign decision-making) were held to be perverse and amount to patent illegality under Section 34 jurisprudence because the Tribunal both accepted and rejected the same factual/legal premise, producing conclusions that no reasonable tribunal could sustain. [Paras 109, 112, 113, 168, 169]

The Tribunal's internally inconsistent findings on force majeure, Article 7(c), and repudiatory breach constitute patent illegality and invalidate the award.

Fraud vitiating arbitral awards - res judicata - public policy of India - Concurrent findings of fraud against Devas by NCLT, NCLAT and the Supreme Court render the arbitral award infected by fraud and contrary to the public policy of India. - HELD THAT: - The Court took judicial notice of, and relied upon, the concurrent findings of fraudulent formation and conduct of Devas recorded by the NCLT and affirmed by NCLAT and the Supreme Court. The Supreme Court held that the seeds of the commercial relationship were a product of fraud and that every consequence thereof (agreements, disputes, awards) was infected. The present Court held that an award induced or affected by such fraud is in conflict with the fundamental policy of Indian law and with the most basic notions of justice, and therefore falls within the public policy exception under Section 34. The prior judicial findings operate as res judicata inter partes and were admissible for this determination. [Paras 156, 159, 170, 171, 172]

The award is vitiated by fraud, conflicts with the public policy of India, and cannot be allowed to stand.

Limits on reappreciation of evidence by courts - patent illegality - Setting aside the award was permissible on established narrow grounds (patent illegality and public policy) without impermissible reappreciation of evidence. - HELD THAT: - The Court applied the established constraints on interference with arbitral awards: while courts should not reappreciate evidence, they may set aside an award for patent illegality where the tribunal's view is not a possible one, where conclusions are perverse or based on no evidence, or where an award is induced by fraud and thus contrary to the fundamental policy of Indian law. The Court concluded that the Tribunal's exclusion of material evidence, its contradictory findings, and the established fraud satisfied these limited thresholds under Section 34 jurisprudence and Delhi Airport Metro/ Ssangyong principles. [Paras 165, 166, 168, 169, 170]

Interference with the award was confined to recognised narrow grounds and was justified on the bases of patent illegality and conflict with public policy.

Final Conclusion: The objections under Section 34 are allowed: the arbitral award dated 14.09.2015 is set aside as suffering from patent illegality, infected by fraud and contrary to the public policy of India; pending applications disposed of.

Condonation of delay under proviso to Section 61(2) of the Insolvency and Bankruptcy Code, 2016 - exclusion of time under Section 12(2) of the Limitation Act, 1963 - due diligence requirement for obtaining certified copy of the order - limitation period commences from pronouncement of order in open court - 30 days limitation and discretionary extension of 15 days for appeals under the IBC - annexation/availability of certified copy and Rule 22(2) of the NCLAT Rules

Condonation of delay under proviso to Section 61(2) of the Insolvency and Bankruptcy Code, 2016 - 30 days limitation and discretionary extension of 15 days for appeals under the IBC - limitation period commences from pronouncement of order in open court - Whether the delay in filing the appeal could be condoned under the proviso to Section 61(2) of the I&B Code. - HELD THAT: - The Tribunal held that the limitation for filing an appeal under Section 61(2) begins to run from the date the adjudicating authority pronounces the order in open court. The statutory window is thirty days, with a discretionary extension of fifteen days only upon sufficient cause; this outer limit cannot be exceeded. The appellant was present when the order was pronounced on 06.05.2022, hence the thirty-day period expired on 06.06.2022 and the outer 45-day limit expired on 20.06.2022. The appeal filed on 06.07.2022 was therefore beyond the permissible period and the delay could not be condoned. [Paras 11, 12, 15]

Delay condonation application dismissed and memo of appeal rejected as barred by time.

Exclusion of time under Section 12(2) of the Limitation Act, 1963 - due diligence requirement for obtaining certified copy of the order - annexation/availability of certified copy and Rule 22(2) of the NCLAT Rules - Whether time for obtaining certified copy under Section 12(2) Limitation Act could be excluded where the application for certified copy was made after the expiry of the limitation period. - HELD THAT: - The Tribunal applied Section 12(2) but held that its benefit is not available where the application for a certified copy is made only after the expiry of the statutory period for filing the appeal. Relying on authority and the Supreme Court's guidance in V. Nagarajan, the court emphasised the obligation of the aggrieved party to exercise due diligence and apply for a certified copy upon pronouncement of the order; a litigant cannot await a free certified copy or delay applying so as to prevent limitation from running. Because the appellant applied for the certified copy on 15.06.2022-after the thirty-day period had expired-the exclusion under Section 12(2) could not be invoked to save the appeal. [Paras 5, 6, 11, 12]

Benefit of Section 12(2) not available; delay cannot be excluded since certified copy was applied for after expiry of limitation.

Final Conclusion: The application under the proviso to Section 61(2) IBC for condonation of delay is dismissed; the appeal is barred by limitation and the memo of appeal is rejected.

Power to revive an insolvency application - inherent power of the Tribunal under Rule 11 of NCLT Rules - minimum threshold of default for initiation of CIRP - prospective operation of substantive amendments - vested right to initiate proceedings subject to conditions

Power to revive an insolvency application - inherent power of the Tribunal under Rule 11 of NCLT Rules - Adjudicating Authority has jurisdiction and power to revive a Company Petition/insolvency application. - HELD THAT: - The Tribunal held that the Adjudicating Authority was incorrect in observing that there is no enabling provision in the Code to revive an application. Reliance was placed on this Tribunal's decisions (including Shree Bhadra Parks and Resorts Ltd.) which recognized the exercise of inherent power, and Rule 11 of the NCLT Rules, to restore or revive applications where justice so requires. The impugned observation denying any power to revive was therefore erroneous and the Adjudicating Authority does not lack jurisdiction to revive a petition. [Paras 5, 6, 7]

The Adjudicating Authority erred in holding that it had no power to revive the application; it possesses jurisdiction to revive an insolvency application.

Minimum threshold of default for initiation of CIRP - prospective operation of substantive amendments - vested right to initiate proceedings subject to conditions - An application under Section 9 filed after 24.03.2020 must satisfy the amended Section 4 threshold of Rs. 1 crore; therefore the Appellant's Section 9 application filed on 08.09.2021 for an amount below that threshold was not entertainable. - HELD THAT: - Section 4, as amended by the notification dated 24.03.2020, raised the minimum amount of default to Rs. 1 crore and is a substantive condition for initiating CIRP; such substantive amendments operate prospectively. Authority and precedents of this Tribunal and guidance from the Supreme Court establish that a litigant's vested right to sue or initiate proceedings is subject to conditions enacted thereafter if those conditions affect substantive entitlement. Consequently, even where the underlying default occurred before 24.03.2020, an application filed after that date must meet the Rs. 1 crore threshold. The Appellant's Section 9 application filed on 08.09.2021 for a claim below Rs. 1 crore therefore did not fulfil Section 4 and was non-entertainable; in those circumstances revival of the application would serve no purpose. [Paras 11, 17, 19, 22, 26]

The Section 9 application filed on 08.09.2021 for an amount below Rs. 1 crore was not entertainable and the Adjudicating Authority's order refusing revival is upheld on that ground.

Final Conclusion: The Tribunal held that while the Adjudicating Authority has jurisdiction to revive an insolvency application, the Appellant's Section 9 application filed on 08.09.2021 was non entertainable as it did not meet the Rs. 1 crore threshold prescribed by the Section 4 notification dated 24.03.2020; the appeal is dismissed.

Adjudicating authority's jurisdiction to order possession of corporate debtor's assets - duties of the interim/resolution professional to take control and custody of assets under Section 18(1)(f) of the Insolvency and Bankruptcy Code, 2016 - validity of agreements without consideration and requirement of writing and registration under Section 25 of the Contract Act, 1872

Adjudicating authority's jurisdiction to order possession of corporate debtor's assets - The Adjudicating Authority had jurisdiction to direct handover of possession of assets belonging to the Corporate Debtor to the Resolution Professional. - HELD THAT: - The NCLT's direction requiring the appellant to hand over possession of the property to the Resolution Professional was within its competence because the order concerned taking possession of assets belonging to the corporate debtor. The court distinguished the facts from Embassy Property Developments (mining lease/government action) where the NCLT had purported to exercise jurisdiction over actions of a sovereign authority; in the present case the order merely enforced transfer of possession of assets admitted to be owned by the corporate debtor. Given the statutory duty of the IRP/RP to take custody of the corporate debtor's assets, the Adjudicating Authority did not exceed its jurisdiction in issuing the possession direction. [Paras 11, 14]

NCLT's order directing handover of possession to the RP was within jurisdiction and correctly made.

Duties of the interim/resolution professional to take control and custody of assets under Section 18(1)(f) of the Insolvency and Bankruptcy Code, 2016 - The IRP/RP is statutorily obliged to take control and custody of assets over which the corporate debtor has ownership rights, including the property in question. - HELD THAT: - Section 18(1)(f) of the IBC requires the IRP to take control and custody of assets over which the corporate debtor has ownership rights (tangible and intangible, whether or not in possession of the corporate debtor). Where the appellant admitted the corporate debtor's ownership of the property, the IRP/RP was entitled and obliged to take possession. This statutory obligation reinforced the validity of the NCLT's direction for handover of possession. [Paras 8, 9, 11]

IRP/RP was entitled and obliged under Section 18(1)(f) IBC to take custody of the asset and the NCLT correctly directed handover.

Validity of agreements without consideration and requirement of writing and registration under Section 25 of the Contract Act, 1872 - The Leave and License Agreement relied upon by the appellant, being without consideration and unregistered, was void and did not entitle the appellant to resist possession being taken by the RP. - HELD THAT: - The Leave and License Agreement expressly provided that no license fee would be charged and thus was without consideration. Section 25 of the Contract Act renders agreements without consideration void unless saved by specified exceptions, including that the agreement be in writing and registered. The document relied upon by the appellant was unregistered and did not fall within the statutory exceptions; consequently it did not create a legally enforceable right to retain possession against the RP seeking to take custody of the corporate debtor's asset. [Paras 7, 12, 13]

The Leave and License Agreement was void for want of consideration and registration and did not prevent the RP from taking possession.

Final Conclusion: The Appeal is dismissed. The NCLT rightly directed the appellant to hand over possession of the corporate debtor's property to the Resolution Professional: the RP has a statutory duty to take custody of the asset and the appellant's unregistered, no-consideration Leave and License agreement did not entitle it to resist possession.

Outstanding debt recoverability - resolution professional's duty to recover actionable claims into the corporate estate during CIRP - applicability of limitation to debts payable on demand after commencement of CIRP - piercing the corporate veil and personal liability of directors - necessity and propriety of impleading directors as parties

Outstanding debt recoverability - resolution professional's duty to recover actionable claims into the corporate estate during CIRP - An amount of Rs. 50 lakhs is outstanding and recoverable by the Corporate Debtor from Appellant No.1 Company. - HELD THAT: - The Tribunal accepted the RP's forensic examination of the Corporate Debtor's ledger and financial statements and noted admissions by Appellant No.1 (through its director) acknowledging receipt of Rs. 50 lakhs. The SPA relied upon by the appellants does not involve the Corporate Debtor and contains no authorization showing that the Corporate Debtor had permitted set-off of the advance against any share transaction. The RP issued demand notices after discovery of the ledger entry and pursued recovery as part of her obligations under CIRP. In view of the ledger entries, bank records relied upon by the RP and the appellants' own admission, the sum of Rs. 50 lakhs remained unpaid and recoverable from Appellant No.1 Company. [Paras 14, 15, 16, 17]

The finding that Rs. 50 lakhs is due and recoverable by the Resolution Professional from Appellant No.1 Company is affirmed.

Applicability of limitation to debts payable on demand after commencement of CIRP - The claim for recovery of Rs. 50 lakhs is not barred by limitation. - HELD THAT: - Although the alleged advance was made in 2016, there is no loan agreement stipulating a repayment period and the sum was payable on demand. The RP issued formal demand notices after the Corporate Debtor entered CIRP and brought the actionable claim into the corporate estate. Given the absence of a contractual repayment timeline and that the RP acted promptly on assuming control of the Corporate Debtor, the Tribunal held that the limitation plea did not defeat the claim. [Paras 20]

The defence of limitation is rejected and the recovery claim is maintainable.

Piercing the corporate veil and personal liability of directors - necessity and propriety of impleading directors as parties - The Adjudicating Authority erred in directing joint and several recovery from the individual directors; liability is confined to Appellant No.1 Company. - HELD THAT: - The Tribunal recognised the separate legal personality of the company and observed that while the Adjudicating Authority may pierce the corporate veil, it must record clear reasons delineating how and to what extent individual members are liable. The Adjudicating Authority had not furnished such reasons when fixing personal liability on the directors. Although the appellants were impleaded and there was argument about their control, the requisite findings and delineation for imposing personal liability were absent. Consequently, the Tribunal limited recovery to the corporate entity and set aside the portion of the impugned order making directors jointly and severally liable. [Paras 21, 22]

Personal liability of Appellants No.2 to 4 is not sustained; recovery is directed only against Appellant No.1 Company.

Final Conclusion: The appeal is partly allowed: the finding that Rs. 50 lakhs with interest is due is affirmed, the limitation defence is rejected, but the direction for joint and several recovery from the individual directors is set aside; recovery is confined to the corporate debtor (Appellant No.1 Company), which is directed to pay the amount with interest within four weeks.

Dissolution of corporate debtor - Early dissolution under the insolvency regime - Insufficiency of realizable assets to justify liquidation costs - Commercial wisdom of the Committee of Creditors - Inherent powers of the Adjudicating Authority under procedural rules for expedient justice - Continuance of personal liability of directors and guarantors despite corporate dissolution

Dissolution of corporate debtor - Early dissolution under the insolvency regime - Insufficiency of realizable assets to justify liquidation costs - Commercial wisdom of the Committee of Creditors - Application by the Resolution Professional for dissolution of the Corporate Debtor was allowed and the Corporate Debtor was ordered to be dissolved immediately. - HELD THAT: - The Adjudicating Authority, after noting that the registered assets and realizable properties of the corporate debtor were effectively exhausted and that the secured creditor had already proceeded to recover mortgaged assets, concluded that continuing with CIRP or formal liquidation would only increase costs without any prospect of meaningful realization. The sole member of the Committee of Creditors (State Bank of India) had resolved, with 100% voting, not to proceed with the resolution process and to seek dissolution. The Tribunal relied on the statutory framework permitting dissolution where assets have been completely liquidated and on the provision allowing application for early dissolution when realizable properties are insufficient and no further investigation is required. Exercising powers under the Code read with Regulation 14 of the Liquidation Regulations and Rule 11 of the NCLT Rules, the Authority found this a fit case for immediate dissolution without undergoing the full liquidation process. [Paras 6, 7, 8, 9]

IA(IBC)/134/KOB/2021 is allowed and M/s. Nassco Trading India Private Limited is ordered to be dissolved with immediate effect.

Inherent powers of the Adjudicating Authority under procedural rules for expedient justice - Directions on statutory communication and discharge of the resolution professional - Continuance of personal liability of directors and guarantors despite corporate dissolution - Ancillary directions were issued: the Registry to forward the order to the Registrar of Companies and the RP to forward copies to statutory authorities; the Resolution Professional was discharged; and dissolution does not absolve personal liabilities/guarantees of directors/promoters. - HELD THAT: - The Authority directed compliance measures consequent to dissolution: sending a copy of the order to the Registrar of Companies and to other statutory authorities including IBBI. The Resolution Professional was discharged from his duties from the date of the order. The Tribunal expressly clarified that corporate dissolution would not relieve any director or promoter of personal liabilities or guarantees. These directions were issued as incidental and necessary steps accompanying dissolution to ensure statutory and administrative closure while preserving personal liabilities. [Paras 9]

Order to forward copy to Registrar of Companies and other statutory authorities; Resolution Professional discharged; personal liabilities/guarantees of directors/promoters remain unaffected by dissolution.

Final Conclusion: The application for dissolution filed by the Resolution Professional was allowed: the Tribunal, noting absence of realizable assets, the sole CoC member's resolution for dissolution, and that secured creditors had already pursued recovery, ordered immediate dissolution of the Corporate Debtor and issued consequential directions including statutory notifications, discharge of the RP, and preservation of personal liabilities of directors/guarantors.

Financial debt - default - admission of petition under section 7 of the IBC - limitation and acknowledgement/fresh period of limitation - moratorium under section 14 of the IBC - appointment of Interim Resolution Professional

Financial debt - default - There exists a financial debt due from the Corporate Debtor to the Financial Creditor and the Corporate Debtor has defaulted in repayment. - HELD THAT: - On the material placed on record the Tribunal noted disbursement of funds on 07.02.2014 and that the Corporate Debtor, through its pleadings, admitted receipt of the loan by the erstwhile director. Repayments were made into the Financial Creditor's bank account and, on the basis of admissions in the reply and supplementary affidavits together with the bank records, the Adjudicating Authority concluded that a financial debt subsists and that default has occurred. The Tribunal applied the principle that, for a section 7 petition, the adjudicating authority must be satisfied from records or evidence produced that a default has occurred and that a disputed debt being

Liquidation value for dissenting financial creditor - class voting and authorised representative binding effect - validity of e voting procedure in CIRP - duty of the resolution professional to procure approvals for implementation - environmental clearance as a condition precedent for revival and implementation of a resolution plan

Liquidation value for dissenting financial creditor - duty of the resolution professional to calculate liquidation value - Individual homebuyers are not entitled to separate liquidation values as 'dissenting financial creditors' and therefore no obligation to provide liquidation value to each homebuyer arose under Section 30. - HELD THAT: - The Tribunal held that homebuyers constitute a separate class of financial creditors who vote as a class and that an individual within that class cannot assume the legal character of a dissenting financial creditor merely because he or she is not in the majority. Reliance was placed on the reasoning in Jaypee Kensington Boulevard Apartments Welfare Association & Ors. that an individual homebuyer's dissatisfaction does not convert them into a dissenting financial creditor for the purpose of claiming liquidation value. Consequently, the contention that the resolution professional was obliged to calculate and disclose a separate liquidation value attributable to each homebuyer before putting the plan to vote was rejected as not arising under the statutory scheme; the obligation to prepare liquidation value estimates for the corporate debtor as a whole, as performed by registered valuers under the CIRP Regulations, suffices for the CoC's consideration. [Paras 5]

No separate liquidation value need be provided to individual homebuyers and the RP was not in breach for not furnishing such per homebuyer liquidation figures.

Class voting and authorised representative binding effect - validity of e voting procedure in CIRP - The e voting process and the vote cast by the authorised representative for the homebuyers were valid and binding on the class, and the voting conducted (including extensions and communication of addenda) complied with the Code and CIRP Regulations. - HELD THAT: - The Tribunal found that the authorised representative (AR), appointed by the class, is empowered to act for and bind the class and that communication to the AR is deemed communication to all members of the class. The minutes of the CoC meetings and email communications showed that the AR participated in deliberations, was apprised of addenda, and had opportunity to change or retain votes after extensions of the voting window. The statutory provision governing the manner of the AR casting votes was applied to hold that the requisite majority is to be measured among those members of the class who actually cast their votes; therefore a 65.69% majority among voting homebuyers satisfied the threshold and rendered the AR's vote in favour effective. The Tribunal observed that if class members were dissatisfied with the AR, the remedy was replacement of the AR, which was not pursued, and that the AR's vote would not have been materiality altered even if changed given the overall CoC voting share. [Paras 6, 7, 8]

E voting and the AR's vote were valid; challenges to the voting process were dismissed.

Environmental clearance as a condition precedent for revival and implementation of a resolution plan - duty of the resolution professional to procure approvals for implementation - Concerns about non procurement of Environmental Clearances (EC) did not render the RP's conduct improper; the RP took steps to procure EC and the applications remain pending before competent authorities. - HELD THAT: - The Tribunal acknowledged that EC is a mandatory compliance for revival and implementation of the plan and that the apprehensions of the homebuyers in this regard are legitimate. However, the RP had actively engaged relevant authorities, filed applications, and pursued statutory and quasi judicial remedies (including before the National Green Tribunal and state authorities). On the material before the Tribunal, these steps demonstrated that the RP appreciated the importance of EC and had not acted adversely to the interests of the CoC or homebuyers. As the EC applications are pending, the Tribunal did not find grounds to impugn the plan or the RP's conduct on this basis. [Paras 9]

No fault was found with the RP's conduct in relation to attempting to procure EC; the objection did not afford grounds to set aside the Plan.

Final Conclusion: The application challenging the resolution plan and the conduct of the CIRP was dismissed for lack of merit; the Tribunal upheld the validity of the voting process, the binding effect of the authorised representative's vote for the homebuyers' class, rejected the claim for separate liquidation values for individual homebuyers, and found no impropriety in the RP's steps to procure required environmental clearances.

Voluntary Liquidation - Declaration of Solvency - Dissolution under section 59(7) of the Insolvency and Bankruptcy Code, 2016 - Liquidator's Final Report - Public Announcement and Claim Submission - Creditor approval threshold under proviso to sub-section (3) of Section 59 - Compliance with IBBI (Voluntary Liquidation Process) Regulations

Voluntary Liquidation - Declaration of Solvency - Liquidator's Final Report - Compliance with IBBI (Voluntary Liquidation Process) Regulations - Whether the petitioner complied with statutory and regulatory requirements for voluntary liquidation and is entitled to dissolution under section 59(7) of the Code. - HELD THAT: - The Tribunal examined the petition and annexed documents including the Board resolution adopting a Declaration of Solvency, the members' special resolution appointing the liquidator, the public announcement for claim submission, the liquidator's preliminary and final reports and filings with the Registrar and IBBI. The record shows the liquidation commencement date, appointment and intimations to tax authorities, opening and closure of the liquidation bank account, submission of the liquidator's Final Report as required under the Regulations and that realizations and payments to members were effected. On that basis the Tribunal found that the affairs of the company have been completely wound up and its assets liquidated, and that the procedural and regulatory formalities for voluntary liquidation have been complied with, entitling the company to dissolution under section 59(7). [Paras 17, 18]

Petition allowed and company dissolved under section 59(7) of the Code.

Creditor approval threshold under proviso to sub-section (3) of Section 59 - Public Announcement and Claim Submission - Whether the proviso to sub-section (3) of Section 59 requiring approval by creditors having two-thirds value arose in the present case. - HELD THAT: - The Tribunal noted that creditors had been paid off during the liquidation process and that claims were received only from three operational creditors and none from financial creditors, workmen or other stakeholders in response to the public advertisement. Because the creditors had already been paid, the requirement of approval by creditors amounting to two-thirds in value under the proviso did not arise. [Paras 10, 18]

The proviso to sub-section (3) of Section 59 was not applicable and did not impede dissolution.

Final Conclusion: The Tribunal found that the company complied with the statutory and regulatory requirements for voluntary liquidation, that its affairs were wound up and assets liquidated, that the creditors' approval threshold under the proviso to Section 59(3) was not applicable, and accordingly allowed the petition and ordered dissolution of the company with directions to serve the order on the Registrar of Companies.

Reason to believe - provisional attachment under Section 5(1) of PMLA - adjudicating authority's jurisdiction under Section 8(1) of PMLA - recording reasons in writing - continuation of attachment - relegation to the Special Court for release of attached property - taking possession under Section 8(4) of PMLA as an exception

Reason to believe - provisional attachment under Section 5(1) of PMLA - recording reasons in writing - Validity of the provisional attachment made under Section 5(1) of PMLA in the absence of recorded reasons to believe - HELD THAT: - The Court examined Section 5(1) and held that provisional attachment can be made only where the authorised officer has a 'reason to believe', recorded in writing, based on material in his possession that (a) the person is in possession of proceeds of crime and (b) such proceeds are likely to be concealed, transferred or dealt with so as to frustrate confiscation proceedings. The Court applied established authorities emphasizing that 'reason to believe' must have a rational nexus or live link with the material relied upon and cannot be mere recital or rubber-stamping. On the facts, the provisional attachment order merely paraphrased the statutory language and did not disclose or record any independent reasons satisfying Section 5(1). Consequently the attaching authority lacked jurisdiction to provisionally attach the property. [Paras 23, 29, 37, 40]

Provisional attachment was without jurisdiction and therefore invalid for want of recorded reason to believe.

Adjudicating authority's jurisdiction under Section 8(1) of PMLA - recording reasons in writing - continuation of attachment - Legality of the adjudicating authority issuing notice under Section 8(1) and confirming attachment without forming and recording its own reason to believe - HELD THAT: - The Court held that Section 8(1) requires the Adjudicating Authority to have its own 'reason to believe' that the noticee has committed an offence under Section 3 or is in possession of proceeds of crime before issuing a show-cause notice; this reason must be formed on the material before it and be discernible. Reliance on reasons recorded (or not) by the attaching officer is insufficient; both stages require reasons. Applying these principles and the decision in J. Sekhar, the Court found the show-cause notice and the confirmation order to be mechanically issued without the Adjudicating Authority forming or communicating independent reasons, thereby vitiating the adjudication and confirmation. [Paras 24, 29, 38, 41, 43]

The adjudicating authority's issuance of notice and confirmation of attachment were invalid for failure to form and record its own reason to believe.

Relegation to the Special Court for release of attached property - continuation of attachment - taking possession under Section 8(4) of PMLA as an exception - Whether the Appellate Tribunal could, after holding the attachment and adjudication orders to be fundamentally flawed, nonetheless remit the appellant to the Special Court and direct continuation of attachment - HELD THAT: - The Court analysed the Appellate Tribunal's approach: although the Tribunal recorded findings that the provisional attachment and confirmation suffered from jurisdictional infirmities and violations of natural justice, it nevertheless directed that the attachment continue and granted liberty to approach the Special Court under Section 8(8). The High Court held that relegating the appellant to the Special Court in those circumstances amounted to abdication of the Tribunal's adjudicatory function and permitting an illegality to persist. The Court also noted the limited and exceptional character of taking possession under Section 8(4) (and related principles in Vijay Madanlal Choudhary), and observed that reliance on Section 8(8) to justify continuing an attachment found to be without jurisdiction was misplaced. [Paras 15, 44, 46, 49, 50]

Appellate Tribunal erred in relegating the appellant to the Special Court and directing continuation of attachment after finding the attachment orders to be without jurisdiction; such course was impermissible.

Release of attached property - Whether the attached property should be released to the appellant - HELD THAT: - Given the conclusions that the provisional attachment and the confirmation by the Adjudicating Authority were vitiated by jurisdictional defects (absence of recorded reasons to believe and procedural infirmities), the High Court held that the natural consequence was release of the property from attachment. The Court exercised its appellate jurisdiction under Section 42 to set aside the impugned direction of continuation and ordered release of the specified land to the appellant. [Paras 46, 50, 51, 52]

Attached property (855.7130 acres as per Annexure L2) is to be released to the appellant.

Final Conclusion: The appeal is allowed. The High Court held that the provisional attachment and the adjudicating authority's confirmation were vitiated for want of recorded 'reason to believe' and other procedural defects; the Appellate Tribunal erred in relegating the appellant to the Special Court and directing continuation of attachment despite holding those orders to be without jurisdiction. The respondent is directed to release the specified attached land to the appellant.

Requirement of a subsisting predicate scheduled offence for action under the Prevention of Money Laundering Act - Quashing of FIR and antecedent order nullifying consequential ECIR and enforcement proceedings - Effect of final quashing by a Court of competent jurisdiction on money laundering proceedings - Scope of disclosure under Section 66(2) of the PMLA versus creation of a registered scheduled offence - Finality of High Court quashing order notwithstanding filing of a Special Leave Petition

Quashing of FIR and antecedent order nullifying consequential ECIR and enforcement proceedings - Effect of final quashing by a Court of competent jurisdiction on money laundering proceedings - Whether ECIR No. ECIR/07/HIU/2021 and all consequential proceedings survive in view of the High Court of Bombay having quashed FIR No. 129/2021 and the antecedent order - HELD THAT: - The High Court held that the Bombay High Court's order dated 4 May 2022 quashed in toto the order of the Judicial Magistrate and FIR No. 129/2021. Because the FIR and the antecedent order were nullified, there was no subsisting predicate for the ECIR which had been recorded expressly on the basis of that FIR. Applying the principle that illegality at the root vitiates subsequent proceedings, the Court concluded that the ECIR and all consequential actions must be set aside. The Court relied on the ratio in Vijay Madanlal Choudhary (paras 253 and 467(v)(d)) that PMLA action cannot be sustained absent a registered or subsisting scheduled offence and on authority that where the foundational order is a nullity, subsequent proceedings fall away. [Paras 12, 13, 14, 24]

ECIR No. ECIR/07/HIU/2021 is quashed and all proceedings arising therefrom are set aside.

Requirement of a subsisting predicate scheduled offence for action under the Prevention of Money Laundering Act - Scope of disclosure under Section 66(2) of the PMLA versus creation of a registered scheduled offence - Whether the ED could sustain the ECIR or take provisional/other action under PMLA merely on disclosure or information under Section 66(2) in absence of a registered scheduled offence - HELD THAT: - The Court held that Section 66(2) authorises sharing of information with other authorities but does not itself crystallize a scheduled offence or substitute for registration of such an offence. Relying on the Supreme Court's exposition in Vijay Madanlal Choudhary, the Court reasoned that PMLA authorities cannot act on a notional assumption that property is proceeds of crime; there must be a registered scheduled offence or an inquiry/complaint pending before a competent forum, and if that offence is finally quashed or the accused finally absolved, PMLA action cannot be maintained. Thus mere disclosure under Section 66(2) cannot sustain the ECIR once the predicate FIR has been quashed. [Paras 20, 21, 22]

Section 66(2) does not permit sustaining ECIR/ PMLA proceedings in the absence of a subsisting registered scheduled offence; the ECIR cannot be maintained on the basis of mere disclosure or assumption.

Finality of High Court quashing order notwithstanding filing of a Special Leave Petition - Effect of final quashing by a Court of competent jurisdiction on money laundering proceedings - Whether the pendency of a Special Leave Petition filed by the ED undermines the finality of the Bombay High Court's quashing order and prevents this Court from granting relief - HELD THAT: - The Court held that the Bombay High Court's quashing order was complete and operated as a final extinguishment of the FIR for present purposes. The mere filing of an SLP by the ED (which was not a party to the writ petitions before the Bombay High Court) did not dilute the finality of that order; the situation fell within the class contemplated by the Supreme Court in Vijay Madanlal Choudhary where a quashing by a competent High Court produces finality vis a vis PMLA proceedings. Accordingly, the existence of an SLP did not preclude this Court from quashing the ECIR and related measures. [Paras 18, 23, 24]

The pendency of an SLP before the Supreme Court did not negate the finality of the Bombay High Court's quashing order and did not prevent this Court from setting aside the ECIR and consequential measures.

Final Conclusion: The petitions seeking declaration on constitutionality of PMLA provisions are infructuous in view of the Supreme Court's decision; ECIR No. ECIR/07/HIU/2021 (predicated on FIR No. 129/2021) is quashed, all proceedings and coercive steps arising from it are set aside, and the Look Out Circulars issued pursuant to that ECIR are also set aside.

Interim bail on medical grounds - adequacy of medical treatment provided in custody - twin conditions under Section 45 of the PMLA - seriousness of offences under the PMLA - reliance on medical status report - requirement of specific inadequacy of treatment at custodial facility to justify interim release

Interim bail on medical grounds - adequacy of medical treatment provided in custody - seriousness of offences under the PMLA - reliance on medical status report - Application for interim bail on medical grounds was dismissed. - HELD THAT: - The Court applied the principle that interim bail on medical grounds requires satisfaction that custodial medical treatment is inadequate or that the accused requires treatment at a particular outside medical institute which cannot be provided in custody. The Court relied on the Supreme Court's observations in State of U.P. that grant of interim bail is inappropriate where treatment in a recognised medical facility and by a medical board has been carried out and no shortcoming in such treatment is shown. The Status Report and medical documents on record show that after the incident of 14 July 2022 the applicant was promptly attended to in jail, taken to Deen Dayal Upadhayay Hospital in emergency, referred to RML/Safdarjung and subsequently to GB Pant Hospital for cardiology and neurology evaluation; investigations including 2D ECHO were done, oral medications prescribed, and advice given for neurosurgery evaluation and outpatient neurology review. The applicant's current condition was recorded as stable and there is nothing in the report indicating that the treatment being provided is unsatisfactory or that specialized care unavailable in the referred hospitals is required. Given the serious nature of offences under the PMLA and the absence of any demonstrated inadequacy in custodial medical care, no ground was made out to grant interim bail. The Court also noted the relevance of the twin conditions under Section 45 of the PMLA when considering bail applications, and treated those considerations as pertinent to the present interim bail request.

Interim bail application dismissed; no direction for interim release on medical grounds.

Reliance on medical status report - directions to obtain specialised medical evaluation - Jail authorities directed to obtain neurological evaluation from GB Pant Hospital and place the report on record for the regular bail hearing. - HELD THAT: - While refusing interim bail, the Court directed the jail authorities to secure, without delay, a neurological evaluation of the applicant from GB Pant Hospital and to file a copy of that evaluation so it is available for consideration at the scheduled hearing of the regular bail application. This direction was given to ensure that the medical condition and any requirement for further treatment are properly documented for adjudication on the main bail application.

Jail authorities to obtain and file the neurological evaluation from GB Pant Hospital; compliance to be reported to the Court.

Final Conclusion: The application for interim bail on medical grounds is dismissed as the medical status report establishes that the applicant's condition is stable and that adequate treatment and referrals have been provided in custody; separately, the jail authorities are directed to obtain and file a neurological evaluation from GB Pant Hospital for consideration at the regular bail hearing.

Summary order. Transfer Petition disposed of in terms of the judgment dated 27.07.2022 passed by this Court in Special Leave Petition (Criminal) No. 4634 of 2014 etc.

CENVAT credit on basis of debit notes - documentation requirements under Rule 9 of CENVAT Credit Rules, 2004 - reimbursement charges forming value of taxable service - availability of credit where service tax discharged by provider - distinction between diesel as ineligible input and service tax on related services

CENVAT credit on basis of debit notes - documentation requirements under Rule 9 of CENVAT Credit Rules, 2004 - Debit notes containing substantially the same particulars as required by rule 9 of the CENVAT Credit Rules, 2004 are acceptable documentary basis for availing CENVAT credit. - HELD THAT: - The Tribunal applied settled precedents of various High Courts and the Tribunal which hold that where debit notes contain all information prescribed by the Rules (name of service provider, description and value of service, service tax charged, registration particulars etc.), they are to be treated as invoices for the purpose of taking CENVAT credit. The court noted that the debit notes and invoices in the record reflected separate charges under the master service agreements and recorded discharge of service tax liability by the provider. In these circumstances, the form of the document being titled 'debit note' does not defeat availment of credit so long as the substantive requirements of rule 9 are met; reliance on contrary authorities concerned with different factual matrices (such as claims based on carbon copies or invalid invoices) was distinguished. [Paras 9]

Debit notes containing the requisite particulars under rule 9 are admissible for availing CENVAT credit; the Revenue's plea on this point fails.

Reimbursement charges forming value of taxable service - availability of credit where service tax discharged by provider - distinction between diesel as ineligible input and service tax on related services - Reimbursements for diesel and electricity, when charged as part of the taxable service and on which service tax has been discharged by the provider, permit the recipient to take CENVAT credit; the exclusion of diesel as an 'input' does not preclude credit for service tax paid on services associated with supply or provision of diesel/electricity. - HELD THAT: - The Tribunal observed that the audit conflated diesel as a good (which may be excluded as an input) with charges raised by the service provider forming part of the value of the taxable service. The debit notes showed separate adjustments for electricity and diesel, and the provider had discharged service tax under the Finance Act, 1994. The court reiterated the settled principle that once the provider has collected and deposited tax on the taxable service, the recipient cannot dispute the legality of that payment in order to deny its credit. Prior orders in the respondent's own proceedings and other authorities were relied upon to the effect that CENVAT credit may be availed of service tax paid on services associated with delivery or running of DG sets and similar services, even though duty on diesel goods itself is not an eligible input. [Paras 9]

Credits claimed against debit notes/invoices for reimbursements of diesel and electricity where the provider has discharged service tax are allowable; Revenue's challenge in this respect is rejected.

Final Conclusion: The Revenue's appeal challenging availment of CENVAT credit against debit notes and on reimbursements for diesel and electricity is dismissed; the adjudicating authority's dropping of recovery proceedings is upheld.

Penalty under section 78 of the Finance Act, 1994 - suppression of facts with intent to evade tax - interpretational dispute on classification of services - acceptance of demand and payment of tax with interest - status as a State Government undertaking and absence of mala fides

Penalty under section 78 of the Finance Act, 1994 - suppression of facts with intent to evade tax - interpretational dispute on classification of services - acceptance of demand and payment of tax with interest - status as a State Government undertaking and absence of mala fides - Whether the penalties imposed under section 78 should be sustained. - HELD THAT: - The Show Cause Notice arose from a departmental audit and the appellant accepted the demand and paid the tax with interest. The disputed items related to classification questions - e.g., whether amounts fell under original works or maintenance, and whether tax was exigible as manpower supply or works contract services - which are interpretational. The department adduced no evidence of any positive act of suppression with intent to evade tax. The appellant being an undertaking of the State Government of Tamil Nadu and the absence of malafide conduct weighed in favour of relief. Reliance placed by the appellant on Continental Foundation Joint Venture Vs. CCE , Gita Enterprises Vs. Commissioner of Customs and Central Excise , and Kerala Co-operative Deposit Guarantee Fund Board Vs. CCE was noted. For these reasons the Tribunal concluded that penalties under section 78 were not sustainable and should be set aside while leaving the confirmed demand and interest undisturbed.

Penalties imposed under section 78 of the Finance Act, 1994 are set aside; confirmation of demand and interest left intact.

Final Conclusion: The appeal is allowed to the extent of setting aside all penalties under section 78 of the Finance Act, 1994; the confirmation of the demand and interest remain undisturbed.

Definition of input service under the Cenvat Credit Rules - exclusion of construction services / works contract from input service - cenvat credit for repair and maintenance of factory premises - cenvat credit on Goods Transport Agency (GTA) / freight services - entitlement of receiver of service to credit irrespective of who deposited service tax

Definition of input service under the Cenvat Credit Rules - exclusion of construction services / works contract from input service - cenvat credit for repair and maintenance of factory premises - Cenvat credit availed on services characterized as repair and maintenance of factory premises is admissible as input service and cannot be disallowed as excluded construction services where the nature of work is repair/renovation and not new construction. - HELD THAT: - The Tribunal examined invoices and the nature of works (tile repair/fixing, floor repair, dismantling, fabrication of pipelines, installation works, STP tank-related fabrication) and held that these were services in the nature of repair and maintenance used in relation to the factory. The inclusive clause of the definition of input service specifically covers services for repair, renovation and modernization of a factory, and the mere civil character of the work does not convert every such service into excluded construction/works contract service. The decision follows the Tribunal's precedent in the appellant's own earlier final order which similarly treated such activities as repair and maintenance eligible for credit. Accordingly, the disallowance on the ground that these were excluded construction services was rejected. [Paras 13]

Cenvat credit for the repair and maintenance services received and used in relation to the factory is allowed.

Cenvat credit on Goods Transport Agency (GTA) / freight services - entitlement of receiver of service to credit irrespective of who deposited service tax - Cenvat credit on GTA/freight services is admissible to the appellant as the recipient of the service where the invoice indicates that service tax on freight was charged/deposited, and it is immaterial that the consignor deposited the service tax. - HELD THAT: - On remand the authority recorded that service tax in respect of the GTA/freight element had been charged and deposited by the consignor (supplier). The Tribunal held that the appellant, being the receiver of the GTA service and a manufacturer of dutiable goods, is entitled to take credit under the definition of input service. The fact that the consignor paid or deposited the service tax does not preclude the recipient from claiming credit where the invoice reflects the charge/deposit and the appellant actually received and used the service. Therefore the denial of credit on the ground that only the consignor was entitled was contrary to the earlier direction and merits allowing the credit to the appellant. [Paras 14]

Cenvat credit on the GTA/freight invoices is allowed to the appellant as the recipient of the service.

Final Conclusion: The impugned order is set aside; the appeal is allowed - cenvat credit is permitted for the repair and maintenance services of the factory premises and for the GTA/freight services (on the invoices where service tax was shown as deposited), and the appellant is entitled to consequential relief in accordance with law.

CENVAT credit admissibility of service tax paid - conditional exemption / abatement in service tax notifications as an option - revenue neutrality in relation to availment of credit - self-assessment obligation of taxable person for service tax - recovery of interest on wrongly availed CENVAT credit - penalty for irregular availment of CENVAT credit

CENVAT credit admissibility of service tax paid - conditional exemption / abatement in service tax notifications as an option - revenue neutrality in relation to availment of credit - Whether CENVAT credit availed on service tax paid by the appellant on 100% of inward freight (instead of on 25% after abatement) was admissible - HELD THAT: - The Tribunal accepted that payment of service tax by the appellant on the inward GTA charges was not disputed. Relying on precedent, the Tribunal held that where service tax has been paid and CENVAT credit taken, the credit equal to the tax paid cannot be disallowed merely because an abatement/concessional notification was available; a concessional notification in the service tax context is optional and the assessee may legally elect to pay tax on the full value. The Tribunal followed the view in Kalika Steel Alloys (T Mumbai) that payment on 100% is legal and a manufacturer who has paid service tax and taken credit is entitled to the CENVAT credit; the aspect of ''revenue neutrality'' cannot defeat the right to credit of the person who has himself paid tax and taken credit. Applying these authorities and the High Court decision relied upon, the Tribunal concluded that the impugned demand disallowing credit was unsustainable. [Paras 4]

CENVAT credit availed on service tax paid on 100% of inward freight is held admissible and the demand disallowing that credit is set aside.

Recovery of interest on wrongly availed CENVAT credit - penalty for irregular availment of CENVAT credit - self-assessment obligation of taxable person for service tax - Whether the demand for recovery of interest and imposition of penalty consequent to disallowance of the CENVAT credit was sustainable - HELD THAT: - The impugned order had recorded findings that interest and penalty were exigible because the credit was inadmissible and the appellant had failed to discharge obligations of self assessment and to obtain requisite declarations. However, because the Tribunal has held that the credit itself was admissible (the appellant had paid service tax and was entitled to credit), the foundation for recovery of interest and imposition of penalty in the impugned order fell away. The Tribunal therefore allowed the appeal against the entire order, which included the demand of interest and penalty. [Paras 4]

Demand for interest and penalty, being founded on the disallowance of credit, is set aside along with the impugned order.

Final Conclusion: Appeal allowed; impugned order disallowing CENVAT credit and directing recovery of interest and imposition of penalty set aside, the Tribunal holding that credit equal to service tax actually paid on 100% of inward freight was admissible for the period January 2005 to September 2007.

Reversal of cenvat credit with interest - non-compliance of Rule 6(3A) of the Cenvat Credit Rules treated as procedural lapse - mechanical invocation of the Rule 6(3)(i) 5%/6% alternative by revenue - ER-1 returns as evidence of credit reversal - extended period of limitation and requirement of wilful misstatement

Reversal of cenvat credit with interest - non-compliance of Rule 6(3A) of the Cenvat Credit Rules treated as procedural lapse - mechanical invocation of the Rule 6(3)(i) 5%/6% alternative by revenue - ER-1 returns as evidence of credit reversal - Whether failure to maintain separate accounts for common input services obliged the appellant to pay the prescribed 5%/6% amount on value of exempted goods despite having reversed the attributable input service credit with interest - HELD THAT: - The Tribunal held that non-compliance with the procedural requirements of Rule 6(3A) does not deprive an assessee of the substantive right to reverse proportionate credit; such non-compliance is at best a procedural lapse which can be condoned. The appellant had reversed the credit attributable to common input services and produced ER-1 returns showing the credit and clearances. The reversal of credit with interest is, following the dictum in Chandrapur Magnet Wires, akin to the assessee never having availed the credit. Reliance was placed on Tribunal and High Court authorities (including Philips Carbon Black and Surya Vistacom) that the revenue cannot mechanically invoke the 6%/5% option under Rule 6(3)(i) on behalf of an assessee who has reversed credit; if the adjudicating authority finds procedural non-compliance it may reject the claim, but it may not substitute the assessee's option by applying the alternative levy without proper basis. Applying these principles to the facts, the Tribunal found the demand unsustainable. [Paras 7, 8, 9, 10, 11]

The demand based on application of the 5%/6% rule was set aside and the appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that reversal of the attributable cenvat credit with interest (supported by ER-1 returns) precluded mechanical application of the 5%/6% alternative by the Department for the period July, 2010 to March, 2014; the demand was set aside.

Deposit during investigation treated as pre-deposit - refund claim - limitation and unjust enrichment - interest under Section 35FF - pre-deposit pursuant to stay order - rate of interest 12% per annum following precedent

Deposit during investigation treated as pre-deposit - refund claim - limitation and unjust enrichment - Refundability of the amount of Rs. 50,000 deposited on 30th January 2003 and whether that amount is hit by limitation or by the principle of unjust enrichment. - HELD THAT: - The Tribunal examined whether the voluntary deposit made during investigation could be disallowed from refund on the grounds of limitation and unjust enrichment. Relying on earlier decisions of this Tribunal and several High Courts, the Court held that an amount deposited during investigation must be treated as a pre-deposit for the purpose of refund and is not automatically barred by limitation or by the doctrine of unjust enrichment. The order below which had held the Rs. 50,000 to be time barred and hit by unjust enrichment was found to be erroneous. The Tribunal specifically noted precedents including Parle Agro Ltd and the decisions of the Madras, Allahabad and Gujarat High Courts in CCE vs Pricol Ltd , CCE vs Eveready Industries Ltd and Principal Commissioner of Customs vs H.V. Ceramics as supporting the view that deposits made during investigation are refundable and are not foreclosed by limitation or unjust enrichment in the circumstances considered. [Paras 8, 9]

The appellant is entitled to refund of the Rs. 50,000 deposited on 30th January 2003; the finding of limitation and unjust enrichment is set aside.

Interest under Section 35FF - rate of interest 12% per annum following precedent - pre-deposit pursuant to stay order - Whether interest under Section 35FF is payable on the full amount deposited (including the amount deposited during investigation and the pre-deposit) and at what rate. - HELD THAT: - The Tribunal considered whether interest under Section 35FF is payable only on amounts required to be deposited under Section 35F at the time of filing appeal or on the entire amount deposited (including amounts paid during investigation). Referring to the Tribunal's Division Bench decision in Parle Agro Ltd and the Supreme Court ruling in Sandvik Asia Ltd , and to Single Bench and High Court decisions upholding interest on such deposits, the Tribunal concluded that interest is payable on the full amount deposited during investigation as well as on the pre-deposit. The Tribunal held that interest is payable from the date of deposit until the date of refund and adopted the rate of 12% per annum as consistent with the cited precedents. The Commissioner (Appeals) was therefore held to have erred in restricting interest to only that portion required under Section 35F at the time of the second round appeal. [Paras 6, 9]

The appellant is entitled to interest under Section 35FF on the entire refunded amount of Rs. 8.5 lakhs from the date of deposit until the date of refund at 12% per annum.

Final Conclusion: The impugned order is set aside; the appellant is entitled to refund of the balance Rs. 50,000 and to interest under Section 35FF on the full refunded amount of Rs. 8.5 lakhs from the date of deposit until refund at 12% per annum. The Adjudicating Authority is directed to grant the balance refund and interest within 60 days.

Admissibility of CENVAT credit on broadcasting services - valid documents under Rule 9(1) of the Cenvat Credit Rules and Rule 4A of the Service Tax Rules - pure agent doctrine under Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 - burden of proof under Rule 9(5) of the Cenvat Credit Rules - eligibility of credit where invoices issued by Input Service Distributor/Head Office without ISD registration

Admissibility of CENVAT credit on broadcasting services - valid documents under Rule 9(1) of the Cenvat Credit Rules and Rule 4A of the Service Tax Rules - pure agent doctrine under Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 - burden of proof under Rule 9(5) of the Cenvat Credit Rules - CENVAT credit taken on broadcasting charges routed through an advertising agency (GMIPL) based on broadcasters' invoices and agency invoices is admissible. - HELD THAT: - The Tribunal examined the sample broadcaster invoices and found the appellant's name recorded as the client/recipient on each broadcaster invoice. Where the advertising agency acted as a conduit and furnished the broadcasters' invoices along with its own, the agency had facilitated provision of broadcasting services and qualified as a "pure agent" under Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006. The Tribunal applied earlier decisions (including Zapak and Indian Oil) and held that, on the facts, denial of credit because the agency did not itself discharge tax or claim credit was not justified. The Tribunal rejected the Commissioner's distinction of precedent, noting no contrary finding that the agency was not a pure agent and that the broadcasters' invoices identified the appellant as recipient. Although Rule 9(5) places the onus on the recipient to prove admissibility, the documentary record (broadcasters' invoices showing appellant as client, and agency invoices compiling them) satisfied the conditions for availing credit under Rule 9(1) and Rule 4A. [Paras 15, 25, 26, 27, 28]

Credit on broadcasting charges routed through GMIPL allowed; denial on ground that agency did not discharge service tax held unsustainable.

Eligibility of credit where invoices issued by Input Service Distributor/Head Office without ISD registration - valid documents under Rule 9(1) of the Cenvat Credit Rules and Rule 4A of the Service Tax Rules - CENVAT credit taken on invoices issued to various offices/godowns bearing the Head Office address (without ISD registration) is not to be disallowed on merits where procedural irregularity is curable. - HELD THAT: - The adjudicating authority found the appellant had availed credit on invoices issued by the Head Office while the Head Office was not registered as an Input Service Distributor. The Tribunal, following the decision in Doshion and the Bombay High Court's reasoning, held that non-registration under the Input Service Distributor rules is a procedural defect which is curable and does not automatically disentitle the assessee to CENVAT credit where records are maintained and verifiable. Accordingly, the Tribunal rejected the Commissioner's conclusion that such invoices were prima facie invalid for credit in circumstances where the defect was procedural and amenable to rectification. [Paras 4, 31, 32, 33]

Credit taken on invoices bearing Head Office address without ISD registration upheld as not being a ground for denial where the irregularity is procedural and curable.

Final Conclusion: Appeals allowed; impugned orders set aside. CENVAT credit on broadcasting charges routed through the advertising agency is admissible on the facts and agency invoices/broadcaster invoices; credit taken on invoices bearing Head Office without ISD registration cannot be denied as an incurable defect and is remediable under the authorities relied upon. Consequential issues of interest, limitation and penalty were not adjudicated.

Clandestine manufacture and removal - use of seized private records as basis for demand - extrapolation of average production from sampled production reports - admissibility and non-necessity of statements under section 9D procedure - parallel invoices as modus operandi for clandestine removal - penalty for dealing with excisable goods under Rule 26 of the Central Excise Rules - penalty under section 11AC consequential to confirmed duty demand

Clandestine manufacture and removal - use of seized private records as basis for demand - extrapolation of average production from sampled production reports - admissibility and non-necessity of statements under section 9D procedure - Validity of the duty demand calculated by extrapolating average production per heat from the assessee's seized private production records for the period July 2012 to 17 October 2012. - HELD THAT: - The Tribunal accepted that manufacture of MS ingots is a batch process (heats) and that the seized notebook reliably recorded heat numbers and composition while separate production reports for 14, 16 and 17 October 2012 (private records of the assessee) recorded per-heat quantities. Those production reports consistently showed per-heat production between 8.2 and 8.6 MT and an average of 8.447 MT per heat. Cross-check of weight-per-inch and volumetric density derived from the production reports matched the density of mild steel, supporting the records' consistency and reliability. There was no evidence that furnace capacity had been altered during the period; therefore batch-size would remain substantially constant. The absence of identified buyers or transporters did not negate manufacture proved by the assessee's own records. Statements recorded in investigation, though inadmissible without following the section 9D procedure, were unnecessary to sustain the demand because the appellant's private records themselves provided sufficient basis. Given these factors, extrapolation of average production from the sampled production reports to the heats recorded in the seized notebook was held reasonable and the duty demand based on that computation was upheld. [Paras 20, 21, 24, 25, 26]

Demand founded on extrapolation of average production per heat from the assessee's seized private records is sustained; no interference with the duty demand on this count.

Parallel invoices as modus operandi for clandestine removal - use of seized private records as basis for demand - penalty under section 11AC consequential to confirmed duty demand - Validity of the duty demand based on 12 parallel invoices recovered during search operations. - HELD THAT: - The records showed for each of the listed invoice numbers there existed another invoice of the same number but with different date, consignee, quantity and vehicle details, and duty being paid on one invoice but not on the parallel counterpart. While maintaining extra copies of invoices is not prohibited, two invoices bearing the same number but different particulars cannot both be genuine; such parallel sets are a recognised modus operandi for clandestine removal. Revenue limited the demand to the 12 invoices actually detected and recovered during search. The Tribunal found no prejudice to the appellant from the show cause notice's initial mention of informer-supplied invoices and held that demand limited to the recovered parallel invoices was sustainable. Consequently interest and penalty under section 11AC related to this demand were also upheld. [Paras 28, 30, 31, 32]

Demand based on the 12 recovered parallel invoices is upheld; interest and penalty consequential to this demand are sustained.

Penalty for dealing with excisable goods under Rule 26 of the Central Excise Rules - Validity of the personal penalty of Rs. 50,000 imposed on the Director under Rule 26 of the Central Excise Rules. - HELD THAT: - It was undisputed that Shri Singh was a Director and directly responsible for the operations of the assessee. Given the confirmed findings of clandestine manufacture and parallel invoice irregularities involving excisable goods, imposition of penalty under Rule 26 was held to be fair and justified. The Tribunal found no reason to interfere with the penalty imposed on the director. [Paras 33, 34, 35]

Penalty of Rs. 50,000 imposed on the Director under Rule 26 is upheld.

Final Conclusion: The impugned order is affirmed in all respects contested before the Tribunal: the duty demand based on extrapolated production from the assessee's seized private records and the demand based on 12 recovered parallel invoices are sustained, attendant interest and penalties under section 11AC are upheld, and the personal penalty under Rule 26 imposed on the Director is maintained; both appeals are rejected.

Interest on refund of amounts deposited during investigation - rate of interest applicable to refunded deposits (6% v. 12%) - notification under section 35FF of the Central Excise Act - compensatory interest principle in Sandvik Asia Ltd. - precedential reliance on High Court and Tribunal decisions awarding higher interest

Interest on refund of amounts deposited during investigation - rate of interest applicable to refunded deposits (6% v. 12%) - notification under section 35FF of the Central Excise Act - compensatory interest principle in Sandvik Asia Ltd. - Entitlement of the appellant to interest at the rate of 12% instead of 6% on the amount deposited during investigation and subsequently refunded. - HELD THAT: - The Assistant Commissioner had sanctioned interest at 6% under the notification issued under section 35FF, and the Commissioner (Appeals) declined the appellant's claim for a higher rate. The Tribunal examined earlier decisions, including Allahabad High Court rulings and the Division Bench decision in Parle Agro, which applied the compensatory interest principle recognised in Sandvik Asia Ltd. to award 12% per annum where amounts were deposited during investigation and later ordered to be refunded. Having considered the rival authorities, the Tribunal preferred the view in Pace Marketing and Ebiz. Com. (as followed in Parle Agro) that where an amount is deposited during investigation and subsequently refunded, interest at 12% per annum is payable from the date of deposit until payment, and accordingly modified the orders under challenge to grant interest at 12% instead of 6%. [Paras 7, 9, 10]

The orders granting interest at 6% are modified and the appellant is entitled to interest at 12% per annum from the date of deposit till the date of payment.

Final Conclusion: Appeal allowed in part: interest on the refunded deposit is awarded at 12% per annum (in place of 6%) from the date of deposit until payment, and the orders below are modified accordingly.

Area based exemption - processes amounting to manufacture - marketability as a test of manufacture - exemption notification dated 10.06.2003 - precedent of the Tribunal

Area based exemption - processes amounting to manufacture - marketability as a test of manufacture - exemption notification dated 10.06.2003 - Whether the appellant's activity of producing nail polish by mixing base lacquer and colour solution excludes it from the benefit of the area based exemption by virtue of paragraph 4 of the Notification dated 10.06.2003. - HELD THAT: - The Tribunal held that the appellant's process of combining base lacquer and colour solution, with controlled mixing, adjustment of shades, use of viscometer to ensure fluidity and addition of pearlescent agents, effects a treatment that renders the resultant product marketable to the consumer as nail enamel. Applying the test of marketability as a test of manufacture and construing processes amounting to manufacture in the light of the statutory definition and Chapter Note, the Tribunal followed its Division Bench decision in GS Pharmabutors Pvt. Ltd. (Unit-II) vs Additional Director General (Adjudication) which found that similar treatment converts inputs into a new marketable product. The present facts were held to fall within that reasoning, and therefore the activity was not limited to mere packing, labelling or minor operations excluded by paragraph 4 of the Notification but amounted to manufacture attracting the benefit of the area based exemption under the exemption notification dated 10.06.2003. [Paras 8, 9, 10]

The appellant's activity amounts to manufacture and the appellant is entitled to the benefit of the area based exemption under the notification; the order of the Additional Director General is set aside.

Final Conclusion: The appeal is allowed: the order dated May 20, 2020 is set aside and the appellant is held entitled to the benefit of the area based exemption under the Notification dated 10.06.2003 in respect of its manufacture of nail polish.

Availment of Cenvat credit on basis of adjudicatory order - Prohibition on reopening settled benefits by a second show cause notice - Obligation to challenge an adverse adjudicatory order by appeal rather than unilateral reassessment - Distinguishing doctrine against suo moto refund/credit where excise duty refund is claimed - Imposition of penalty under the Central Excise Rules

Availment of Cenvat credit on basis of adjudicatory order - Prohibition on reopening settled benefits by a second show cause notice - Obligation to challenge an adverse adjudicatory order by appeal rather than unilateral reassessment - Whether Cenvat credit availed by the assessee on the basis of a prior adjudicatory order could be disallowed subsequently by issuance of a fresh show cause notice instead of by appeal. - HELD THAT: - The Tribunal held that the appellant had availed Cenvat credit pursuant to an earlier adjudicatory order and that, in the subsequent proceedings, a major portion of the credit was allowed on remand. The Revenue's attempt to deny the same credit by issuing a fresh show cause notice was impermissible; if Revenue disagreed with the earlier adjudicatory order it was obliged to challenge it by preferring an appeal before the appropriate authority. The facts were distinguished from decisions dealing with suo moto refunds of duty (where refund procedure under Section 11B and doctrine of unjust enrichment apply), since the present case concerned denial of previously granted input credit rather than a refund claim. Relying on the reasoning and precedents cited, the Tribunal concluded that the second-round proceedings could not nullify the benefit granted in the first adjudication by issuing another show cause notice, and therefore the demand based on such fresh proceedings could not be sustained.

Demand for disallowance of the Cenvat credit taken on the basis of the earlier adjudicatory order was held unsustainable and the appeal allowed in favour of the assessee.

Imposition of penalty under the Central Excise Rules - Prohibition on reopening settled benefits by a second show cause notice - Whether the penalty imposed under the Central Excise Rules in consequence of the disallowance could be sustained. - HELD THAT: - Because the Tribunal found the demand for disallowance (which formed the basis for the penalty) to be unsustainable for the reasons stated, the consequential imposition of penalty under the Central Excise Rules could not stand. The Tribunal observed that the Revenue could not bypass the appellate remedy against the earlier adjudicatory order by initiating separate proceedings which led to the penalty; accordingly, the penalty lacked a sustainable foundation.

Penalty imposed under the Central Excise Rules was not sustained as a consequence of allowing the appeal against the demand.

Final Conclusion: The appeal was allowed and the demand and penalty confirmed in the impugned orders were set aside, with consequential reliefs to the appellant.

Eligibility for concessional/exemption notification - parts or components of machinery - classification versus exemption interpretation - precedential applicability and distinguishing earlier classification decision

Eligibility for concessional/exemption notification - parts or components of machinery - classification versus exemption interpretation - Perforated Nickel Cylinders (Screen) manufactured by the appellant qualify for the concessional rate/exemption under Notification No. 6/2011-CE dated 01.03.2011 and Notification No. 12/2012-CE dated 17.03.2012. - HELD THAT: - The Tribunal found that the appellant had consistently classified the goods under chapter tariff heading 8442 50 31/84425031 (plates, cylinders and other printing components) and the Revenue did not dispute that classification. The limited question was entitlement to the benefit in List 2 (item 41) of Notification No. 6/2011 CE, which extends the concession to "parts or components of the machinery specified at item nos. (1) to (40)". Relying on the Tribunal's earlier decision in Stovec Industries Ltd. (Order No. A/12556-12557/2021 dated 30.11.2021), where identical facts and classification led to allowance of the notification benefit, the Tribunal applied that ratio to the present case. The decision in Harish Industries Engineers, relied on by Revenue, was held distinguishable because it concerned classification principles applicable to tariff determination, whereas the present dispute concerned interpretation and applicability of an exemption notification once classification under the relevant CTH was not contested. On that basis the adjudicating authority's demand and appropriation of amounts paid under protest were held unsustainable and the impugned orders were set aside.

Impugned orders set aside; appellant entitled to benefit of Notification No. 6/2011 CE dated 01.03.2011 and Notification No. 12/2012 CE dated 17.03.2012; appeals allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeals, holding that the perforated nickel cylinders are parts/components within the scope of the exemption notifications relied upon; earlier orders demanding duty were set aside and the appellant granted consequential relief.

Power of the Commissioner under Section 64(4) of the TNVAT Act - Delegation of quasi-judicial powers - Requirement of individual reasoned order and opportunity of hearing - Audit under Section 64(4) as a quasi-judicial exercise

Power of the Commissioner under Section 64(4) of the TNVAT Act - Delegation of quasi-judicial powers - Validity of the Single Judge's direction permitting the Commissioner to delegate the power to order an audit under Section 64(4) to an officer below the rank of Commissioner. - HELD THAT: - The Division Bench precedent considered Section 64(4) and held that the power to order an audit is vested in the Commissioner personally and does not permit delegation to lower authorities. The Court adopted that view and observed that the Commissioner must apply his own mind when recording the opinion that an audit is necessary; the power to delegate under Section 64(4) is not provided. Consequently, the direction of the learned Single Judge permitting delegation is unsustainable and liable to be set aside. [Paras 6, 7]

The Single Judge's direction to permit delegation is interfered with and set aside.

Audit under Section 64(4) as a quasi-judicial exercise - Requirement of individual reasoned order and opportunity of hearing - Nature and procedural requirements for exercising power under Section 64(4) - whether the Commissioner must record reasons and afford an opportunity to the dealer before ordering an audit. - HELD THAT: - Relying on the Division Bench ruling, the Court treated orders under Section 64(4) as quasi-judicial, not merely administrative. The Commissioner must record application of mind in individual cases, cannot issue omnibus or group audit orders, and must comply with principles of natural justice by giving notice and an opportunity of hearing before directing an audit. The Court left it open for the Commissioner to exercise his power afresh in conformity with these requirements. [Paras 8]

The Commissioner may exercise powers under Section 64(4) after giving the appellant an opportunity as indicated by the Division Bench; the matter must proceed by an individual, reasoned order complying with natural justice.

Final Conclusion: Writ appeal allowed; the Single Judge's direction permitting delegation is set aside. The Commissioner must personally exercise the power under Section 64(4) of the TNVAT Act, by recording application of mind and after affording the dealer an opportunity of hearing, in accordance with the Division Bench's ruling.

Deduction of value of goods under Section 3-F(2)(b) of the U.P. Trade Tax Act - sale in the course of inter-state trade or commerce under Section 3 of the Central Sales Tax Act - taxability of goods brought into the State and consumed in execution of a work contract - executive scope of work contract and deduction for sale value of goods

Deduction of value of goods under Section 3-F(2)(b) of the U.P. Trade Tax Act - sale in the course of inter-state trade or commerce under Section 3 of the Central Sales Tax Act - taxability of goods brought into the State and consumed in execution of a work contract - Whether the value of goods manufactured outside U.P. and brought into U.P. for installation and consumption in execution of the work contract is deductible from net taxable turnover under Section 3-F(2)(b) of the U.P. Trade Tax Act as being covered by Section 3 of the Central Sales Tax Act. - HELD THAT: - The Court examined Section 3-F(2) of the U.P. Trade Tax Act which permits deduction from net turnover of the amount representing the sale value of goods covered by Sections 3, 4 and 5 of the Central Sales Tax Act. The facts show the assessee manufactured the goods at its Vadodara plant and transferred them to Uttar Pradesh for installation and consumption pursuant to the contract. Such movement amounted to inter-state transfer attracting Section 3 of the Central Sales Tax Act. The Court relied on earlier coordinate-bench decisions holding that goods brought into the State and consumed in execution of a work contract constitute inter-state trade on which the State cannot levy tax, and therefore the sale value of those goods is deductible while computing tax under Section 3-F. Applying that principle to the present facts, the Tribunal correctly allowed the deduction under Section 3-F(2)(b) and set aside the assessing authority's addition. [Paras 7, 8, 9]

The value of goods manufactured outside U.P. and brought into U.P. for consumption in execution of the work contract is covered by Section 3 of the Central Sales Tax Act and is deductible under Section 3-F(2)(b) of the U.P. Trade Tax Act; the Tribunal's order partly allowing the assessee's appeal is upheld.

Final Conclusion: Revision dismissed; Tribunal was correct in holding that goods manufactured outside the State and brought into U.P. for execution of the work contract amount to inter-state sale under Section 3 CST and their value is deductible under Section 3-F(2)(b) of the U.P. Trade Tax Act.

Civil contempt - wilful disobedience of court orders and undertakings - sentence for contempt - purging of contempt - forensic audit - consequential orders in contempt jurisdiction - transmission of contempt deposit to executing court - attachment of assets / sequestration in execution

Civil contempt - wilful disobedience of court orders and undertakings - sentence for contempt - Contemnor nos.9 and 10 (Malvinder Mohan Singh and Shivinder Mohan Singh) guilty of civil contempt for wilful breach of the undertakings and orders of the Delhi High Court and this Court and sentenced. - HELD THAT: - The Court found that contemnor nos.9 and 10 knowingly and wilfully altered and diluted the shareholding of Fortis Healthcare Holding Pvt. Ltd. in Fortis Healthcare Ltd., in breach of repeated solemn undertakings before the High Court and orders of this Court, thereby defeating the decree-holder's ability to satisfy the foreign arbitral award. The conduct included converting unencumbered shares into encumbered shares and transferring control so as to frustrate enforcement. Having previously afforded them opportunity to purge the contempt, the Court concluded their offers and disclosed assets were inadequate and that they failed genuinely to purge the contempt. Considering the gravity of the misconduct the Court imposed the maximum sentence it deemed appropriate under its contempt jurisdiction. [Paras 35, 38, 41, 44, 45]

Contemnor nos.9 and 10 are held guilty of civil contempt and sentenced to six months imprisonment and fined; default sentence provided.

Purging of contempt - transmission of contempt deposit to executing court - Contemnor nos.1-8 (directors of IHFL and IVL) purged their contempt by depositing the directed amount; the deposit made shall be transmitted to the executing court and be available in execution. - HELD THAT: - Contemnor nos.1-8 complied with the Court's direction by depositing the specified sum, and the Court recorded that they had purged themselves of contempt. The Court ordered that the amount so deposited in the Registry be transmitted to the executing court along with accrued interest and made available for use in execution proceedings in relation to the foreign arbitral award. [Paras 9, 30, 51]

Contemnor nos.1-8 purged their contempt; the contempt deposit shall be sent to and be available to the executing court.

Forensic audit - consequential orders in contempt jurisdiction - attachment of assets / sequestration in execution - No final adjudication against the noticee banks and financial institutions; matter remitted for forensic analysis and factual enquiry by the executing court and High Court to determine bona fides of transactions and whether consequential measures are warranted. - HELD THAT: - The Court was unable, on the existing record, to reach a definitive conclusion whether the banks and financial institutions acted pursuant to antecedent contractual rights or in collusion to defeat the award. The Court recognised that resolving these questions requires detailed factual and documentary analysis, comparison of loan and pledge documents, and valuation exercises. Accordingly, the Court refrained from issuing immediate adverse directions against the noticees and directed the High Court and the executing court to consider appointing forensic auditor(s) to analyse transactions entered into by the noticee banks/financial institutions and to examine transactions between FHL and RHT; the executing court was also authorised to consider issuing appropriate process or consequential orders (including attachment/sequestration) as justified by the forensic findings. [Paras 27, 28, 29, 30]

Proceedings against banks/financial institutions not finally determined; High Court/executing court to consider appointment of forensic auditor(s) and thereafter take such steps (including consequential orders in the contempt/execution jurisdiction) as the facts justify.

Attachment of assets / sequestration in execution - Assets offered by contemnor nos.9 and 10 and certain shares/other assets held by noticee banks shall be available to the executing court and may be attached or otherwise dealt with in execution proceedings. - HELD THAT: - The Court held that properties and assets proffered by contemnor nos.9 and 10 in attempts to purge contempt, and certain shares remaining with noticee banks (for example those dealt with in earlier orders), shall be made available to the executing court. The executing court is to consider attachment or other appropriate remedies in accordance with law and on presentation of facts. The Court emphasised that it remains open to the executing court to pass directions justified by the circumstances, including examining whether assets nominally in third parties' names can be proceeded against. [Paras 30]

Assets offered by contemnors and certain shares with noticee banks shall be available to the executing court and may be attached or otherwise dealt with in execution as the executing court deems appropriate.

Final Conclusion: The contempt proceedings culminated in conviction and imprisonment and fine for contemnor nos.9 and 10 for wilful breach of court undertakings; contemnor nos.1-8 purged their contempt by deposit and that deposit will be transmitted to the executing court. No immediate punitive action was taken against the noticee banks and financial institutions; the High Court and the executing court are directed to consider appointing forensic auditor(s) to examine the transactions and to take such consequential steps (including attachment or other orders in execution) as may be warranted on the forensic analysis and factual enquiry.