TaxTMI Updates e-Newsletter
Oct 03,2023

Quashing of summary report under Rule 142(5) of the Central Goods and Services Tax Rules, 2017 - Validity of service of show cause notice via GST portal - Technical glitch affecting generation of system generated show cause notice - Requirement of communication of grounds of show cause notice - Power to withdraw and reissue order for fresh show cause notice

Validity of service of show cause notice via GST portal - Technical glitch affecting generation of system generated show cause notice - Requirement of communication of grounds of show cause notice - Quashing of summary report under Rule 142(5) of the Central Goods and Services Tax Rules, 2017 - Power to withdraw and reissue order for fresh show cause notice - Summary report dated 21.02.2019 quashed and set aside as the show cause notice on which it proceeded was defective and its grounds were not communicated; liberty granted to withdraw and issue fresh notice. - HELD THAT: - The State filed an affidavit admitting that the proceedings resulting in the DRC 07 order dated 21.02.2019 for the tax period July 2017 to March 2018 proceeded from a show cause notice published on the GST portal which did not contain the system generated performa and included attachments pertaining to other dealers. The deponent described this as a technical glitch which prevented automatic generation of the system performa and thereby failed to communicate the grounds on which the notice was issued to the dealer. In those circumstances the court found the order founded on that defective notice could not stand; accordingly the summary report dated 21.02.2019 was quashed and set aside. The State was permitted the limited liberty to withdraw the impugned order and to initiate fresh proceedings by issuing a proper show cause notice in accordance with the prescribed procedure. [Paras 8, 9]

Summary report dated 21.02.2019 quashed and set aside; liberty granted to withdraw the order and issue fresh show cause notice.

Final Conclusion: The petition is partly allowed: the summary report dated 21.02.2019 is quashed and set aside for defect in the show cause notice due to a technical glitch, with liberty to the State to withdraw the order and issue a fresh notice; the challenge to the order dated 14.11.2018 was withdrawn by the petitioner.

Audi alteram partem - ex parte disposal - duty to decide appeals on available records - reconciliation of Input Tax Credit between FORM GSTR-3B and FORM GSTR-2A - departmental obligation to verify portal records - application of Circular No. 183/15/2022-GST dated 27-12-2022 - remand for fresh adjudication upon deposit of disputed tax

Audi alteram partem - ex parte disposal - Whether the impugned ex parte order violated the principles of natural justice - HELD THAT: - The Court found that the petitioner had been given repeated notices of personal hearing and multiple opportunities to appear before the Appellate Authority but chose not to be represented. In these circumstances the Appellate Authority was entitled to proceed ex parte. The principle of fairness does not require the authority to await the assessee's presence where repeated opportunities have been afforded and the assessee deliberately abstains. Accordingly, the contention of violation of the rule of fair hearing was rejected.

The challenge to the impugned order on the ground of violation of natural justice is dismissed.

Reconciliation of Input Tax Credit between FORM GSTR-3B and FORM GSTR-2A - duty to decide appeals on available records - departmental obligation to verify portal records - application of Circular No. 183/15/2022-GST dated 27-12-2022 - remand for fresh adjudication upon deposit of disputed tax - Whether the impugned order was sustainable on merits having regard to the failure to reconcile alleged mismatches and to consider the departmental Circular - HELD THAT: - Although the Appellate Authority was justified in disposing the appeal ex parte, it remained obliged to examine and decide the appeal on the basis of available records. The Court held that the Appellate Authority did not make adequate attempts to reconcile the alleged mismatch between ITC claimed in FORM GSTR-3B and entries in FORM GSTR-2A, including verification from departmental/online records. The authority also failed to consider Circular No.183/15/2022-GST dated 27-12-2022 which prescribes the departmental approach where suppliers have misreported supplies (e.g., B2B reported as B2C or wrong GSTIN declared). For these reasons the impugned order was held unsustainable and was set aside, with the matter remanded for fresh consideration on merits.

Impugned order set aside; appeal to be heard afresh in accordance with law after compliance with deposit condition.

Final Conclusion: Writ petition allowed; impugned appellate order quashed because the Appellate Authority failed to reconcile records and consider the relevant Circular; matter remanded for fresh hearing and disposal on merits upon deposit of twenty per cent of the disputed tax together with amounts already paid under sub section (6) of section 107 within seven days, to be completed within eight weeks.

Setting aside of impugned order and remand for fresh disposal on merits - interim refund or adjustment of amounts recovered pending final adjudication - condonation of belated tax payment not determinative of relief - direction to file fresh representation before authority

Setting aside of impugned order and remand for fresh disposal on merits - Impugned order dated 06.12.2022 set aside and matter remitted to respondents for fresh decision on merits within thirty days. - HELD THAT: - The Court found that although the petitioner had belatedly paid the tax for the months of September 2019 and October 2019 and filed returns for March 2020 on 11.11.2020, the impugned order of 06.12.2022 was passed after issuance of earlier notices and the petitioner had not responded to subsequent notices. Despite recording that the petitioner was at fault for non-response, the Court, on consideration of overall facts and circumstances and the payment of tax and filing of return, exercised its discretionary jurisdiction to set aside the impugned order and remit the matter for fresh consideration on merits. The respondents are directed to pass a fresh order in accordance with law within thirty days from receipt of the copy of this order. [Paras 3]

Impugned order set aside; matter remitted for fresh decision on merits within thirty days.

Interim refund or adjustment of amounts recovered pending final adjudication - Amount recovered on 05.05.2023 to be refunded or adjusted subject to final outcome of proceedings. - HELD THAT: - The Court directed that the sum recovered directly from the petitioner's bank account shall either be refunded to the petitioner or adjusted, pending the final determination by the respondents following the remand. This is an interim protective direction to preserve the petitioner's position until the authority disposes of the matter afresh. [Paras 4]

Amount recovered to be refunded or adjusted pending final outcome.

Direction to file fresh representation before authority - Petitioner permitted to file a fresh representation within one week; writ petition disposed of. - HELD THAT: - The Court permitted the petitioner to file a fresh representation with the respondents within one week from receipt of the order, thereby enabling the authority to consider the petitioner's contentions before passing the fresh order on merits. Consequentially, the writ petition was disposed of and connected petitions closed, with no costs. [Paras 4, 5]

Petitioner to file fresh representation within one week; writ petition disposed of.

Final Conclusion: Writ petition allowed in part: the impugned order dated 06.12.2022 is set aside and the matter is remitted to the respondents for fresh adjudication on merits within thirty days; the amount recovered on 05.05.2023 shall be refunded or adjusted pending the final outcome; petitioner to file a fresh representation within one week; writ petition disposed of with no costs.

Ultra vires amendment to policy by subordinate notification - Operational guidelines cannot impose conditions repugnant to policy - End-user restriction - Implementation notification versus amendment/withdrawal power of the State - Legitimate expectation and promissory estoppel

Ultra vires amendment to policy by subordinate notification - Operational guidelines cannot impose conditions repugnant to policy - End-user restriction - Validity of Notification dated 07.03.2019 inserting an Explanation to Clause 7.5(aa) of I.P. 2016 which disqualifies reimbursement where any subsequent taxable person claims ITC - HELD THAT: - The Court held that the Explanation added by the Department of Industries by Notification dated 07.03.2019, which in effect imposes an 'end user' restriction that denies SGST reimbursement where any recipient subsequently claims ITC, introduced an additional condition not stipulated in the Industrial Policy and was beyond the scope of a notification issued under Clause 10.7 (which is limited to laying down implementation guidelines). Reliance was placed on binding precedents that operational or implementing notifications cannot negate or curtail benefits expressly promised by the policy. The second part of the Explanation, creating a blanket disqualification where ITC is availed by any subsequent taxable person, was held to be an impermissible condition, ultra vires the policy and without jurisdiction. [Paras 36, 40, 41]

Notification dated 07.03.2019 inserting the Explanation to Clause 7.5(aa) is without jurisdiction, ultra vires I.P. 2016 and is quashed to the extent it imposes the end-user/ITC-based disqualification.

Implementation notification versus amendment/withdrawal power of the State - Legitimate expectation and promissory estoppel - Even if the impugned Notification were treated as an exercise of the State's power to amend/withdraw policy benefits, whether such curtailment could be sustained in the absence of pleaded or established supervening public interest - HELD THAT: - The Court addressed the alternative contention, applying principles of legitimate expectation and promissory estoppel. It observed that the State, by earlier amendment to substitute NET VAT with SGST and by deleting the enabling 'Note', had represented that benefits would not be further curtailed; investors relied on that representation. Absent any pleaded or demonstrated overriding public interest or justification, retrospective or retrospective-effect curtailment of an accrued entitlement is arbitrary and violative of Article 14. The Court relied on recent authoritative decisions holding that the State must give reasons grounded in public interest to defeat acquired rights arising from policy representations. [Paras 42, 50]

Curtailment of benefits in the absence of any pleaded or established supervening public interest is unsustainable; the Notification cannot be applied so as to destroy accrued and vested rights and is violative of Article 14.

Operational guidelines cannot impose conditions repugnant to policy - Basis for computation of SGST reimbursement for the petitioner-unit (whether reimbursement must be calculated with reference to the expanded unit maintaining separate records) - HELD THAT: - The petitioner had maintained separate books of account for the expanded unit as required by Clause 7.5(b). The Court found that the reimbursement must be calculated with reference to the expanded unit alone where separate records have been maintained and certified by the Commercial Taxes Department. The State was therefore directed to compute and sanction the incentive accordingly. [Paras 51, 52, 53]

Respondents are directed to calculate the SGST reimbursement keeping in view the expanded unit alone (since separate records are maintained) and to sanction and disburse the amount claimed for the periods 2017-18 to 2022-23.

Final Conclusion: Notification dated 07.03.2019 is quashed to the extent it introduces an ITC/end-user disqualification; the High Powered Committee's decision keeping the earlier sanction in abeyance and the communication denying subsidy are set aside; respondents are directed to compute SGST reimbursement for the expanded unit and release the subsidy for 2017-18 to 2022-23 within three months.

Input Tax Credit - limitation on Input Tax Credit under Section 16(4) read with Section 39 read with Rule 61(5) of the CGST Rules, 2017 - challenge to amendment of Rule 61(5) by Notification No.49/2019 - Central Tax (CT) dated 09.10.2019 - interim stay subject to pre-deposit - alternate remedy

Input Tax Credit - limitation on Input Tax Credit under Section 16(4) read with Section 39 read with Rule 61(5) of the CGST Rules, 2017 - interim stay subject to pre-deposit - Admission of challenge to the Assessment Order dated 25.07.2023 and grant of interim stay of further proceedings subject to deposit of 10% of the disputed tax. - HELD THAT: - The petition impugns the Assessment Order in Form GST DRC-07 dated 25.07.2023 on the ground that the petitioner availed Input Tax Credit beyond the limitation prescribed under Section 16(4) read with Section 39 and Rule 61(5) of the CGST Rules, 2017. The Court admitted the petition and granted an interim stay of all further proceedings on the assessment, conditioned upon the petitioner paying 10% of the disputed tax confirmed by the impugned order within four weeks. The stay is expressly made subject to such compliance. [Paras 4, 5]

Petition admitted and interim stay granted on the assessment proceedings, subject to deposit of 10% of the disputed tax within four weeks.

Challenge to amendment of Rule 61(5) by Notification No.49/2019 - Central Tax (CT) dated 09.10.2019 - alternate remedy - Admission of challenge to the amendment of Rule 61(5) by Notification No.49/2019 - Central Tax (CT) dated 09.10.2019 in W.P.No.26908 of 2023. - HELD THAT: - The petitioner has separately challenged the amendment to Rule 61(5) by Notification No.49/2019 - Central Tax (CT) dated 09.10.2019. Although an alternate remedy exists, the Court was inclined to admit the writ petition challenging the amendment and took it on file for consideration. The Court coupled the admission of both writ petitions and directed the respondents to file their counter by the next listed date. [Paras 4]

Writ petition challenging the amendment to Rule 61(5) admitted; respondents directed to file counter by the listed date.

Final Conclusion: Writ petitions challenging the Assessment Order dated 25.07.2023 and the amendment to Rule 61(5) by Notification No.49/2019 admitted; interim stay of further proceedings on the assessment granted subject to payment of 10% of the disputed tax within four weeks; matters listed for further hearing with respondents to file their counter.

Cancellation of provisional registration - principles of natural justice - opportunity of personal hearing - Rule 24(3) of the Central Goods and Services Tax Rules, 2017 - relegation for fresh consideration / remand

Cancellation of provisional registration - Rule 24(3) of the Central Goods and Services Tax Rules, 2017 - principles of natural justice - opportunity of personal hearing - Validity of the order cancelling the appellant's provisional registration where the appellant did not file a response to the show-cause notice and was not granted a personal hearing. - HELD THAT: - The Court held that although the appellant failed to file any response to the show-cause notice and authorities may proceed ex parte, the mandate of Rule 24(3) requires that before taking action for cancellation the appropriate officer must inform the person and fix a date for personal hearing. The authority could not bypass that requirement; accordingly, the cancellation order cannot stand without affording the authorised representative an opportunity of personal hearing. The Court therefore set aside the order of cancellation and directed that the matter be remitted to the Commercial Tax Officer for fresh consideration after service of the order and opportunity to file a response and be heard in person. The Court observed that if the mismatch is reconciled and no other legal impediment exists, the registration may be restored so the appellant can file returns and discharge statutory dues. [Paras 7, 8, 9, 10]

Order of cancellation dated 30th January, 2018 set aside; matter remanded to the Commercial Tax Officer to permit submission of response and to afford personal hearing, and then decide on merits in accordance with law.

Relegation for fresh consideration / remand - Interim treatment of an existing notice issued by the revenue (DRC-01 dated 4th March, 2023) pending fresh decision on remand. - HELD THAT: - As ancillary relief flowing from the remand, the Court directed that the Deputy Commissioner of State Tax who issued the DRC-01 notice shall keep that notice in abeyance until the Commercial Tax Officer takes a decision in accordance with the directions to afford hearing and reconsider the cancellation. This interim direction is contingent upon the authority's compliance with the remand procedure and the appellant's submission of its response within the time stipulated by the Court. [Paras 11]

DRC-01 notice dated 4th March, 2023 to be kept in abeyance until the authority decides the matter after receiving the appellant's response and holding personal hearing.

Final Conclusion: The appeal and writ petition are allowed to the extent that the cancellation of the provisional registration dated 30th January, 2018 is set aside; the matter is remanded to the Commercial Tax Officer to permit the appellant to file a response within 15 days, to afford a personal hearing and to decide the matter on merits in accordance with law, and the DRC-01 notice is directed to be kept in abeyance in the interim.

Validity of electronic service of notice and order - Non-requirement of physical service under statutory notice provisions - Failure to claim input tax credit precluding relief - Availability of statutory appellate remedy and requirement to exhaust alternate remedy - Extension of limitation during COVID-19 and consequential filing deadlines - Condonation of delay under statutory provision - Scope of judicial review under Article 226 - limited to jurisdictional error, breach of natural justice or violation of fundamental rights

Validity of electronic service of notice and order - Non-requirement of physical service under statutory notice provisions - Electronic upload of notices and orders on the portal constituted a proper mode of service and absence of physical service did not vitiate the assessment orders. - HELD THAT: - The Court held that Section 169 of the Bihar Goods and Services Tax Act contemplates multiple modes of service, including electronic modes. The petitioner admitted that the notices and assessment orders were uploaded on the portal and served by e-mail/auto-population. Given the increased use and expediency of digital modes during the Covid period, the choice of electronic service did not amount to denial of notice or breach of procedure. The contention that physical service should have been preferred during the pandemic was rejected as misplaced. [Paras 1, 8]

The electronic mode of service by upload and e-mail was proper and did not invalidate the assessment orders.

Failure to claim input tax credit precluding relief - Denial of input tax credit was sustained as the petitioner failed to make the claim in accordance with the statutory provisions. - HELD THAT: - The Court noted that the omission to claim input tax credit arose from the petitioner's failure to comply with the claim procedure under the Act. Consequently, the assessment which disallowed the input tax credit was not found to be susceptible to interference on grounds of procedural infirmity in the mode of service alone. [Paras 2]

The challenge to the disallowance of input tax credit failed because the petitioner had not claimed it as required by law.

Availability of statutory appellate remedy and requirement to exhaust alternate remedy - Scope of judicial review under Article 226 - limited to jurisdictional error, breach of natural justice or violation of fundamental rights - Writ jurisdiction under Article 226 could not be invoked in place of the statutory appellate remedy under Section 107 in the absence of any jurisdictional error, breach of natural justice or violation of fundamental rights. - HELD THAT: - The Court reiterated that where a specific appellate remedy exists, the High Court should ordinarily refrain from exercising its extraordinary writ jurisdiction unless there is a strong case such as breach of natural justice, jurisdictional error, or violation of fundamental rights. The petitioner had an appealable remedy under Section 107 of the BGST Act but did not avail it. No plea of jurisdictional excess, want of jurisdiction, or infringement of fundamental rights was made. Accordingly, the petition for writ relief challenging assessment computation and taxable turnover was not maintainable. [Paras 3, 5, 6, 8]

Petition dismissed for failure to exhaust statutory appellate remedy and absence of grounds warranting exercise of writ jurisdiction.

Extension of limitation during COVID-19 and consequential filing deadlines - Condonation of delay under statutory provision - The petitioner failed to avail the extended period for filing appeal permitted by the Supreme Court's order in Suo Motu Writ Petition (C) No. 3 of 2020 and also did not seek condonation within the statutory period; hence no timely appeal was filed. - HELD THAT: - The Court observed that limitation was extended by the Supreme Court for the period 15.03.2020 to 28.02.2022 and that appeals could be filed within ninety days from 01.03.2022 (i.e., on or before 29.05.2022). The BGST Act also permits condonation of delay under Section 107(4) within the additional one-month period; even applying that provision the last date would have been 28.06.2022. The petitioner did not file an appeal within these extended timelines or seek condonation as available under the statute. Where the statute prescribes a specific period for delay condonation, courts cannot enlarge that period. [Paras 4, 6, 7]

No appeal was filed within the extended limitation period and the statutory condonation window was not availed; delay therefore militates against the petitioner.

Final Conclusion: The writ petition was dismissed. The Court held that electronic service by portal/e-mail was valid, the denial of input tax arose from the petitioner's failure to claim it, the petitioner's remedy lay under Section 107 which was not availed within the extended or condonation periods, and there was no jurisdictional defect or breach of natural justice warranting interference under Article 226.

Revision u/s 263 - disallowance of claim of deduction u/s 80IA - tribunal granted relief to assessee - as per HC[ 2022 (9) TMI 1512 - CALCUTTA HIGH COURT] Tribunal correctly noted the factual contend with regard to the purchases which were undertaken assessee as also the terms and conditions of the agreement entered into by the assessee with the concerned highways department and having been factually satisfied that the deduction claimed by the assessee is admissible, had granted relief - also for the previous assessment years Tribunal had granted relief for assessee and in the absence of any distinguished feature in the nature of contract the Rule of Consistency has to be applied

HELD THAT:- Though there is delay of 219 days in filing this special leave petition, we nevertheless heard learned ASG on the merits of the matter.

We do not find any infirmity in the impugned order. The special leave petition is, hence, dismissed, while condoning the delay in filing the special leave petition.

Income from house property - profits and gains of business or profession - source of income - letting as part of business (turning property to account) - object clause of Memorandum of Association - stock-in-trade

Income from house property - profits and gains of business or profession - letting as part of business (turning property to account) - object clause of Memorandum of Association - stock-in-trade - Whether the rentals and receipts on sale of the assessee's properties for AYs 2012-2013 and 2015-2016 are assessable as income from house property/capital gains or as business income - HELD THAT: - Applying the settled principle that the head under which income is taxable is determined by its direct source, the Tribunal found on facts that the assessee-company carried on real estate development as its business and that letting and sale of properties formed integral modes of realising value in the course of that business. The company's objects, as amended, and its systematic activities of acquiring, improving, letting and selling property demonstrated that the properties were held for turning to account as part of a trading operation rather than merely as capital assets held by a landowner. The Tribunal noted that letting per se may denote ownership income, but where letting and realisation form an integral part of a business model-confirmed here by the object clause, pattern of transactions, reinvestment of proceeds and commercial decisions to sell land which could not be developed-the income is business income. The absence of depreciation claims did not assist the assessee; indeed it was consistent with the Revenue's case that the assets were treated as stock-in-trade. Past return processing under section 143(1) did not amount to an acceptance by the Revenue of the head of income. Reliance on earlier decisions was examined and distinguished on facts, and the Tribunal applied the tests laid down by the Apex Court to decide the matter of fact in this case. [Paras 4, 5]

Assessments for AYs 2012-2013 and 2015-2016 are upheld by treating the rental receipts and receipts on sale of property as business income.

Final Conclusion: The Revenue's appeals are allowed; the Tribunal holds that, on the facts, the assessee's receipts from letting and sale of properties for AY 2012-2013 and AY 2015-2016 are assessable as business income rather than as income from house property or capital gains.

Notice under section 143(2) time-barred - nullity of assessment framed under section 143(3) where notice under section 143(2) is time-barred - proviso to section 143(2) prescribing six months limitation - non-est of assessment for failure to comply with proviso to section 143(2) - estoppel by silence - failure to object during assessment proceedings does not cure jurisdictional time-bar

Notice under section 143(2) time-barred - proviso to section 143(2) prescribing six months limitation - non-est of assessment for failure to comply with proviso to section 143(2) - Whether the notice issued under section 143(2) dated 15/10/2018 was time-barred having regard to the belated return filed under section 139(4) on 07/02/2018 and whether the consequent assessment under section 143(3) is null and void. - HELD THAT: - The Tribunal found as an admitted fact that the assessee filed a belated return under section 139(4) on 07/02/2018 and that the scrutiny notice under section 143(2) was issued on 15/10/2018. Applying the proviso to section 143(2), which requires issuance of scrutiny notice within six months from the end of the financial year in which the return is furnished, the last permissible date for issuing the notice was 30/09/2018. The notice dated 15/10/2018 was therefore beyond the statutory period. Relying on the ratio of the Hon'ble Supreme Court in ACIT v. Hotel Blue Moon and the Delhi High Court in CIT v. Chetan Gupta, the Tribunal held that failure to adhere to the time limit prescribed by the proviso renders the assessment order non-est and therefore null and void. For these reasons the CIT(A)'s deletion of the addition was upheld. [Paras 6, 7]

Notice under section 143(2) dated 15/10/2018 was time-barred and the assessment framed under section 143(3) is null and void.

Estoppel by silence - failure to object during assessment proceedings does not cure jurisdictional time-bar - doctrine of compliance with statutory limitation - Whether the Revenue can be relieved on the ground that the assessee did not raise the limitation objection during assessment proceedings or that failure to issue notice under section 153C was a curable mistake under section 292BB. - HELD THAT: - The Tribunal rejected the Department's contention that the assessee's failure to raise the limitation objection during the course of assessment proceedings precludes the assessee from challenging the notice later. The Tribunal held that the Assessing Officer is bound to follow statutory limitation while issuing a notice under section 143(2), and established precedents negate the submission that procedural silence by the assessee cures a jurisdictional defect. Consequently, the contention that the matter should be remitted because of a curable mistake under section 292BB was not accepted. [Paras 8]

The Revenue's plea that the assessee's silence during assessment proceedings or a curable clerical mistake should validate the time-barred notice is rejected.

Final Conclusion: The Tribunal dismissed the Revenue's appeal; the scrutiny notice dated 15/10/2018 was held time-barred under the proviso to section 143(2) and the assessment under section 143(3) for Assessment Year 2017-18 was declared null and void, and the Department's objections based on the assessee's alleged silence during proceedings were rejected.

Tax deduction at source on rent under section 194-I - Exemption from TDS under section 194-A(3)(iii)(f) for notified corporations - CBDT Circular No.35/2016: lump-sum lease premium not rent - Remand for de novo adjudication in light of subsequent circular

Tax deduction at source on rent under section 194-I - CBDT Circular No.35/2016: lump-sum lease premium not rent - Remand for de novo adjudication in light of subsequent circular - Whether the additional premium paid to MMRDA is payment in the nature of rent liable to TDS under section 194-I - HELD THAT: - The Tribunal noted CBDT Circular No.35/2016 which treats lump-sum lease premium or one-time upfront lease charges that are not adjustable against periodic rent for acquisition of long-term leasehold rights as not being payments in the nature of rent for purposes of section 194-I. The circular was issued after the AO's orders under section 201(1)/(1A) in these appeals and the conditions in the circular have not been examined by the authorities below. In view of this subsequent clarification, the Tribunal remitted the issue to the file of the AO for fresh adjudication de novo in the light of CBDT Circular No.35/2016, affording both parties opportunity to lead material relevant to the conditions laid down in the circular. [Paras 13, 14]

Remanded to the Assessing Officer for de novo adjudication in light of CBDT Circular No.35/2016; CIT(A)'s order on this point set aside and Revenue's appeals allowed for statistical purposes to that extent.

Exemption from TDS under section 194-A(3)(iii)(f) for notified corporations - Notification No. S.O.3489 dated 22/10/1970 - Whether interest paid on delayed payment of additional premium to MMRDA was liable to TDS under section 194-A - HELD THAT: - The Tribunal applied the statutory exemption in section 194A(3)(iii)(f) and observed that the Central Government, by Notification No. S.O.3489 dated 22/10/1970, has notified corporations established by a Central, State or Provincial Act for the purposes of that exemption. MMRDA, being constituted under the Mumbai Metropolitan Region Development Authority Act, 1974, falls within the notified class. Accordingly, payments of interest to MMRDA are excluded from TDS liability under section 194-A and the assessee cannot be held an 'assessee in default' for non-deduction of tax on such interest; the demand and interest raised by the AO under section 201(1) and section 201(1A) were therefore deleted for A.Y. 2008-09. [Paras 15, 16]

Assessee's appeal allowed on this point; demand and interest for non-deduction under section 194-A deleted for assessment year 2008-09.

Final Conclusion: The Tribunal remanded the question of TDS liability under section 194-I on the additional premium to the Assessing Officer for fresh adjudication in light of CBDT Circular No.35/2016, and allowed the assessee's challenge to the TDS demand under section 194-A in respect of interest paid to MMRDA by applying the notification under section 194A(3)(iii)(f); overall the assessee's appeal for 2008-09 is allowed and the Revenue's appeals for 2008-09, 2010-11 and 2011-12 are permitted for statistical purposes insofar as the section 194-I issue is remanded.

Exercise of jurisdiction under Section 263 of the Income Tax Act - Twin conditions for reopening under Section 263 (erroneous order and prejudice to revenue) - Applicability of proviso to Section 194I / TDS liability on rent paid to multiple landlords

Exercise of jurisdiction under Section 263 of the Income Tax Act - Twin conditions for reopening under Section 263 (erroneous order and prejudice to revenue) - Validity of the Principal Commissioner of Income Tax's order under Section 263 setting aside the assessment order - HELD THAT: - The Tribunal examined whether the ld. Pr.CIT correctly concluded that the assessment order dated 15/02/2021 was erroneous and prejudicial to the interests of revenue so as to satisfy the twin conditions of Section 263. The Pr.CIT's action rested on an observation that rent payments of Rs. 3,84,000/- had been debited without deduction of TDS and that the Assessing Officer did not verify the issue. The assessee, however, produced tenancy agreements, bank entries and ledger evidence before the Tribunal showing rent paid to four different persons at Rs. 96,000/- each per annum. The Tribunal found no material in the assessment order to demonstrate that the AO's acceptance of returned income was so prima facie incorrect as to attract Section 263; further, the ld. Pr.CIT did not record findings on the assessee's reply before setting aside the assessment. Even if lack of verification by the AO is assumed, the Tribunal held that the statutory twin conditions required for invoking Section 263 were not satisfied in the present facts. [Paras 8]

The revocation under Section 263 is unsustainable and the order of the ld. Pr.CIT setting aside the assessment is quashed.

Applicability of proviso to Section 194I / TDS liability on rent paid to multiple landlords - Whether the payments of rent attracted liability to deduct TDS under the proviso to Section 194I and thus warranted disallowance under Section 40(a)(ia) - HELD THAT: - The Tribunal considered the factual position and documentary evidence demonstrating that the assessee paid rent to four distinct landlords for separate premises, each receiving Rs. 96,000/- per annum, with corresponding bank debits and tenancy agreements. On this basis the Tribunal concluded that the threshold requirement in the proviso to Section 194I was not attracted in respect of payments to each individual landlord. Accordingly, the AO's acceptance of the claim for rent expenses could not be held to be prejudicial to revenue on the ground of failure to deduct TDS. [Paras 8]

The payments do not attract TDS under the proviso to Section 194I and no disallowance under Section 40(a)(ia) was warranted.

Final Conclusion: The appeal is allowed; the order passed by the Principal Commissioner of Income Tax under Section 263 is set aside as the twin conditions for exercise of jurisdiction under Section 263 are not satisfied and the rent payments do not attract the proviso to Section 194I.

Condonation of delay - limitation extended due to COVID-19 pandemic - admission of appeal under section 249(3) of the Act - disallowance of business expenditure for lack of verifiable vouchers - ad-hoc disallowance of 10% restricted to 5% - disallowance under section 40A(3) for cash payments in land purchase - appellate power to enhance assessment under section 251(1)(a) of the Act

Condonation of delay - limitation extended due to COVID-19 pandemic - admission of appeal under section 249(3) of the Act - Whether the appeal filed after delay could be admitted by condoning the delay - HELD THAT: - The assessee filed the appeal with a delay of 167/175 days and sought condonation on account of the COVID-19 lockdown. The Tribunal examined the affidavit and applied the Supreme Court direction extending limitation for periods falling between 15.03.2020 and 14.03.2021 (M.A. No. 665/2021 in SMW(C) No.3/2020 dt.15.07.2020) by 90 days from 15.03.2021. Applying that extension, the Tribunal treated the appeal as filed within limitation and, invoking its power to admit appeals under section 249(3), held there was sufficient cause to condone the delay and admitted the appeal for hearing. [Paras 1, 2]

Delay condoned and appeal admitted.

Disallowance of business expenditure for lack of verifiable vouchers - ad-hoc disallowance of 10% restricted to 5% - Validity of disallowance of 10% of marketing commission and site development expenses and correctness of restricting disallowance to 5% - HELD THAT: - The assessee claimed site development expenses and marketing commission but failed to produce verifiable supporting documents such as target details, individual commission particulars, complete addresses or genuine bills/invoices; only ledger extracts and self made vouchers were placed on record. The AO therefore disallowed 10% as ad hoc disallowance; the CIT(A) reduced the disallowance to 5% of the total claimed amount after considering the record. The Tribunal found that no cogent or verifiable evidence was produced before either the AO or the CIT(A) to demonstrate genuineness of the expenditure and hence declined to interfere with the appellate authority's restriction to 5%. [Paras 3, 9]

Order of the CIT(A) restricting the disallowance to 5% is sustained.

Disallowance under section 40A(3) for cash payments in land purchase - Sustainability of addition under section 40A(3) in respect of cash payments made at time of agreement for land purchases - HELD THAT: - The assessee made cash payments totalling Rs. 9,20,000 on two occasions at the time of agreements. The assessee's plea that cash payments were made at sellers' insistence and were withdrawn from bank accounts, and that vendors' agricultural status justified exemption under Rule 6DD, was unsupported by any corroborative material or vendor confirmations. The Tribunal also noted payments were not made on bank holidays and no evidence of business expediency by vendors was produced. In the absence of materials substantiating the claimed justification for cash payments, the Tribunal confirmed the CIT(A)'s addition under section 40A(3). [Paras 10, 12]

Addition under section 40A(3) confirmed.

Appellate power to enhance assessment under section 251(1)(a) of the Act - Whether the CIT(A) acted beyond jurisdiction in enhancing the assessment - HELD THAT: - The Tribunal considered the scope of the CIT(A)'s powers and noted that under the statutory provision reproduced (section 251(1)(a)), the Commissioner (Appeals) may confirm, reduce, enhance or annul an assessment. Applying that provision, the Tribunal held that the CIT(A) had co terminus power with the AO to enhance the assessment after considering materials on record; consequently the ground asserting enhancement to be outside the CIT(A)'s powers was rejected. [Paras 13]

Enhancement by the CIT(A) is intra vires and the ground is dismissed.

Final Conclusion: The appeal is dismissed: delay in filing is condoned and the appeal admitted; the CIT(A)'s direction reducing the ad hoc disallowance to 5% is sustained; the addition under section 40A(3) for cash payments is confirmed; and the CIT(A)'s enhancement of assessment is held to be within appellate power under section 251(1)(a).

Hearing of appeals expeditiously - time-bound disposal of appeals by Commissioner (Appeals) - objective of prompt disposal under Section 250(6A) - effect of garnishee/attachment proceedings pending appellate disposal

Hearing of appeals expeditiously - time-bound disposal of appeals by Commissioner (Appeals) - objective of prompt disposal under Section 250(6A) - effect of garnishee/attachment proceedings pending appellate disposal - Direction to the Commissioner (Appeals) to take on board and decide the appeal filed by the petitioner for AY 2017-18 within a specified time-frame. - HELD THAT: - Petitioner filed appeal against the assessment order dated 14.11.2019 before the Commissioner (Appeals) on 23.02.2020 which has not been heard for over three years while garnishee/attachment action was initiated by the assessing officer. The Court referred to the object of Sub-Section (6A) of Section 250 - namely early hearing and disposal of appeals - observing that although that provision pertains to appeals under Section 246A, its objective underscores the need for prompt disposal generally. In view of the unexplained delay and the pendency of attachment proceedings, the Court directed respondent No.1 to take the appeal on board and dispose it expeditiously, fixing a specific time-bound period for disposal to protect the appellate right of the assessee and to prevent prejudice from enforcement measures taken during prolonged inaction by the appellate authority. [Paras 5, 6]

Respondent No.1 directed to hear and dispose of the appeal filed on 23.02.2020 against the assessment order dated 14.11.2019 for AY 2017-18 within three months from receipt of a copy of the order.

Final Conclusion: Writ petition disposed of by directing the Commissioner (Appeals) to take on board and decide the appeal for AY 2017-18 within three months from receipt of the order; no order as to costs.

Re-opening of assessment under Section 148 - reason to believe - borrowed satisfaction - change of opinion - regular assessment and applicability of the additional condition where assessment completed under Section 143(3) - requirement of independent verification before re-opening

Reason to believe - borrowed satisfaction - requirement of independent verification before re-opening - Validity of the notice under Section 148 insofar as the Assessing Officer relied on information from the Insight Portal without independent application of mind or verification. - HELD THAT: - The Court found that the reasons recorded for re-opening merely stated that information was available on the Insight Portal regarding high value cash deposits and did not explain how that material produced a formed belief that income had escaped assessment. There was no indication that the Assessing Officer applied independent mind or undertook verification of the Portal information before recording satisfaction. Reliance on raw information from the Portal, without linking it to facts which would establish escapement of income as regards the petitioner, amounted to borrowed satisfaction and was insufficient to invoke jurisdiction under Section 148. The Court applied the settled principle that a reason to believe must be based on tangible material and an independent satisfaction of the AO and not on the ipse dixit or mere change of opinion arising from the same material considered earlier. [Paras 9, 12]

Notice under Section 148 was invalid for being founded on borrowed satisfaction and lack of independent verification.

Regular assessment and applicability of the additional condition where assessment completed under Section 143(3) - re-opening of assessment under Section 148 - Validity of re-opening where the reasons erroneously stated that the return had been processed only under Section 143(1) and that no regular assessment as defined had been made. - HELD THAT: - The reasons for re-opening incorrectly recorded that the return was processed only under Section 143(1) and that no assessment as defined by the statute had been completed. The Court noted that the assessment for AY 2017-18 had in fact been completed under Section 143(3), which qualifies as a 'regular assessment' under Section 2(40). Proceeding to re-open a completed assessment on the basis of such fundamentally incorrect facts undermines the statutory prerequisite for reopening and indicates a lack of valid foundation for the Assessing Officer's belief. [Paras 10, 12]

Re-opening was unsustainable because it proceeded from materially incorrect factual premises about the nature of the original assessment.

Change of opinion - re-opening of assessment under Section 148 - Whether the re-opening impermissibly sought to re-examine matters already considered and concluded in the regular assessment, amounting to impermissible change of opinion. - HELD THAT: - The record showed that detailed questionnaires and notices had been issued during the original assessment, and the petitioner had furnished the requested particulars, bank statements and lists of customers. An assessment under Section 143(3) was thereafter passed accepting the material to the extent reflected in that order. The Court observed that re-opening the same issues solely on the basis of change of opinion - here prompted by information on the Insight Portal - is not permissible, because reassessment power is not a review and cannot be exercised merely to take a different view of the same material which was considered during the original assessment. [Paras 11, 12]

Re-opening constituted an impermissible change of opinion as it revisited matters already considered in the regular assessment.

Final Conclusion: The notice dated 31.03.2021 under Section 148 for AY 2017-18 is quashed: it was issued without statutory jurisdiction because (i) it rested on borrowed satisfaction from the Insight Portal without independent verification, (ii) it proceeded on materially incorrect facts regarding the nature of the original assessment, and (iii) it amounted to reopening by way of change of opinion on issues already dealt with in the regular assessment. Consequential steps taken pursuant to that notice do not survive.

Revisionary jurisdiction under Section 263 - erroneous and prejudicial to the interest of revenue - scope of inquiry under Section 142(1) - exclusive domain of the Assessing Officer - requirement of inquiry and verification before invoking revisional power

Revisionary jurisdiction under Section 263 - erroneous and prejudicial to the interest of revenue - exclusive domain of the Assessing Officer - Whether the Principal Commissioner's initiation and exercise of revisional power under Section 263 was justified where the Assessing Officer had conducted inquiry and applied his mind in framing the assessment. - HELD THAT: - The Tribunal found, and this Court concurs, that the Assessing Officer examined the bank statement entries and the eligibility for deduction under Section 10AA, applied his mind and framed the assessment accordingly. The revisional jurisdiction under Section 263 cannot be invoked merely because the revisional authority disagrees with a plausible view taken by the Assessing Officer. Section 142(1) confers broad inquiry powers on the Assessing Officer, and where inquiries and verification have been made and the AO has reached an opinion within his domain, the revisional authority cannot substitute its own appreciation absent a finding of failure of inquiry or lack of verification. The Principal CIT did not demonstrate that the AO failed to make inquiries or that the assessment order was made without requisite verification; rather, the dispute related to the view taken by the AO on the same material. Consequently, the initiation and order under Section 263 were held to be invalid and were rightly quashed by the Tribunal. [Paras 5, 6]

Tribunal's quashing of the order passed under Section 263 upheld; exercise of revisional jurisdiction was unjustified as the AO had conducted sufficient inquiry and applied his mind.

Final Conclusion: The appeal is dismissed. No substantial question of law arises; the Tribunal correctly quashed the revisional order under Section 263 as the Assessing Officer had conducted requisite inquiries and reached a plausible view within his exclusive domain.

Late fee under Section 234E of the Income Tax Act, 1961 - applicability of machinery provision under Section 200A(1)(c) - remand for fresh decision on representations - abeyance of recovery proceedings

Late fee under Section 234E of the Income Tax Act, 1961 - applicability of machinery provision under Section 200A(1)(c) - judicial precedents relied upon by the petitioner - Petitioner's contention that no late fee under Section 234E is payable for the specified assessment years was not adjudicated on merits and was directed to be considered afresh by the respondents. - HELD THAT: - The court observed that the petitioner had contended that the machinery under Section 200A(1)(c) was incorporated only from 01.06.2015 while the dispute relates to Assessment Years 2012-2013 and 2013-2014, and relied on earlier decisions of other fora. Rather than deciding the question of liability under Section 234E on the merits, the court directed the respondents to independently dispose of the petitioner's pending representations, including the last representation dated 07.02.2023. The court thereby remitted the substantive issue of liability to the administrative respondents for fresh consideration and decision. [Paras 3, 7, 8, 9]

Substantive question of liability to pay late fee under Section 234E remitted to the respondents for independent disposal of the petitioner's representations.

Remand for fresh decision on representations - abeyance of recovery proceedings - Interim measure concerning recovery proceedings was ordered pending disposal of the representations. - HELD THAT: - The court directed that the respondents shall dispose of the petitioner's representations within six weeks from receipt of a copy of the order. Pending that exercise, the court ordered that all recovery proceedings in relation to the demand notice shall be kept in abeyance. The writ petition was disposed of on this basis. [Paras 9, 10, 11]

Respondents to decide the representations within six weeks; recovery proceedings stayed in the meantime and the writ petition disposed of.

Final Conclusion: Writ petition disposed by remitting the question of liability under Section 234E to the respondents for fresh consideration of the petitioner's representations within six weeks; recovery proceedings in respect of the demand notice are stayed pending that decision.

Attribution of inward freight charges to purchase price (composite transaction vs separate contract) - Tax Deduction at Source relating to contract payments (application of section 194C) - Disallowance for failure to deduct TDS (application of section 40(a)(ia)) - Non-attraction of TDS on mere purchase and sale transactions

Attribution of inward freight charges to purchase price (composite transaction vs separate contract) - Tax Deduction at Source relating to contract payments (application of section 194C) - Disallowance for failure to deduct TDS (application of section 40(a)(ia)) - Non-attraction of TDS on mere purchase and sale transactions - Whether the addition of Rs. 16,15,291 representing inward freight expenses is sustainable by invoking section 194C read with section 40(a)(ia) where freight appears as part of supplier's invoice and no separate contract with transporter exists. - HELD THAT: - The Tribunal examined the invoices and the accounting treatment and found that the supplier's bills contained a break-up showing purchase cost inclusive of transportation charges, demonstrating that the inward freight formed part and parcel of the purchase of goods. There was no independent contract between the assessee and any transporter for the disputed freight amounts. On that factual foundation and applying settled principle that TDS provisions do not ordinarily apply to pure purchase and sale transactions, the Tribunal concluded that the assessee was not obliged to deduct TDS under section 194C and consequently the disallowance under section 40(a)(ia) was unwarranted. The order of the Commissioner (Appeals) confirming the addition was set aside and the Assessing Officer was directed to delete the addition.

Addition of Rs. 16,15,291 on account of inward freight disallowed; CIT(A)'s order set aside and Assessing Officer directed to delete the addition.

Validity of reassessment framed under provisions for income escaping assessment (section 147/144) - Challenge to formation and validity of assessment framed under section 144 read with section 147. - HELD THAT: - The grounds attacking the validity of the assessment (grounds 1 to 4) were not argued before the Tribunal by the assessee's authorised representative. In the absence of any submissions on these points, the Tribunal dismissed these grounds as infructuous without adjudication on the merits.

Grounds 1 to 4 dismissed as infructuous for want of argument.

Premature adjudication - Ground No. 6 regarding an unspecified issue raised by the assessee. - HELD THAT: - The Tribunal found the matter raised in ground No. 6 to be premature and not requiring determination at the present stage, and accordingly declined to decide it.

Ground No. 6 dismissed as infructuous.

Final Conclusion: The appeal is partly allowed: the addition of inward freight of Rs. 16,15,291 is deleted as TDS under section 194C/40(a)(ia) was not attracted where freight formed part of purchase invoices and no separate contract with transporters existed; other contested grounds were dismissed as infructuous.

Penalty under section 271(1)(c) for furnishing inaccurate particulars of income - Mere disallowance of claim not amounting to concealment or furnishing inaccurate particulars - Admission of additional evidence under Rule 46A of the Income-tax Rules - Show-cause notice and levy of minimum penalty

Penalty under section 271(1)(c) for furnishing inaccurate particulars of income - Mere disallowance of claim not amounting to concealment or furnishing inaccurate particulars - Whether penalty under section 271(1)(c) could be sustained where the claim for exemption was disallowed but there was no finding of furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal recorded that the sole question was confirmation of penalty levied under section 271(1)(c) following disallowance of exemption claimed under section 54B. The Assessing Officer and the Commissioner (Appeals) disallowed the exemption and levied/confirmed the minimum penalty after observing absence of supporting documents before the AO and rejection of additional evidence by the CIT(A). The Tribunal applied settled law that an erroneous claim or a claim disallowed on merits does not, by itself, amount to furnishing inaccurate particulars or concealment of income. Reliance was placed on precedent holdings that denial of a claim on merit does not automatically attract penalty under section 271(1)(c) and that there must be a finding of inaccurate or false particulars. Following those authorities and the material on record, the Tribunal concluded there was no finding that details in the return were incorrect or false and therefore the statutory requirement for imposing penalty was not satisfied. Consequently, the penalty was deleted. [Paras 2, 8, 9, 10]

Penalty of Rs. 1,30,258/- imposed under section 271(1)(c) is deleted and the appeal is allowed.

Final Conclusion: The Tribunal deleted the penalty imposed under section 271(1)(c) for A.Y. 2011-12, holding that disallowance of the exemption on merits did not constitute furnishing inaccurate particulars of income; the assessee's appeal is allowed.

Condonation of delay - preference for substantial justice over technical objections - power to condone delay under Limitation Act principles - disallowance under Section 40(a)(ia) read with Section 194 - addition under Section 40A(3) for cash payments exceeding Rs. 20,000 - remand for fresh adjudication

Condonation of delay - preference for substantial justice over technical objections - power to condone delay under Limitation Act principles - Whether the delay in filing the appeal before the CIT(A) should be condoned - HELD THAT: - The Tribunal found that the learned CIT(A) dismissed the appeal solely on limitation grounds without examining the merits. Applying the principle that courts should prefer substantial justice over technicalities and the requirement that "every day's delay must be explained" be applied pragmatically, the Tribunal observed that Revenue did not show any prejudice or undue advantage resulting from the belated filing. The assessee had relied on a rectification order and explained that a rectification application was pending before the AO. In these circumstances and looking to the totality of facts the Tribunal concluded that the delay ought to be condoned and the appeal should not have been dismissed in limine.

Delay in filing the appeal before the CIT(A) is condoned and the appeal is restored for adjudication on merits.

Disallowance under Section 40(a)(ia) read with Section 194 - addition under Section 40A(3) for cash payments exceeding Rs. 20,000 - remand for fresh adjudication - Whether the impugned additions under the provisions invoked by the AO were justified - final adjudication remitted to the CIT(A) - HELD THAT: - The Tribunal noted that the learned CIT(A) did not examine the substantive contention of the assessee that the additions were wrongly made (including that no single cash payment to an individual exceeded the statutory threshold and that tax deduction provisions were misapplied). Consequently, the Tribunal remanded the matter to the learned CIT(A) to examine and decide the correctness of the impugned additions and to pass a speaking order thereon. The remand requires the CIT(A) to consider the assessee's contentions on merits and to record reasons while deciding the additions.

Impugned additions are remitted to the learned CIT(A) for fresh consideration and speaking adjudication on their correctness.

Final Conclusion: Delay in filing the appeal before the CIT(A) is condoned and the appeal is restored for adjudication on merits; the matter concerning additions under the provisions invoked by the AO is remitted to the learned CIT(A) for fresh, speaking consideration.

Assessment under section 144 - ex parte assessment for non-compliance - deduction under section 57 (income from other sources) - onus on assessee to substantiate claimed deductions - service of notice by RPAD and sufficiency of opportunity - penalty under section 271(1)(c) for concealment/suppression - inapplicability of presumptive taxation principle under section 44AD to receipts treated as income from other sources

Assessment under section 144 - ex parte assessment for non-compliance - deduction under section 57 (income from other sources) - onus on assessee to substantiate claimed deductions - service of notice by RPAD and sufficiency of opportunity - Validity of the assessment under section 144 and the disallowance of the deduction claimed under section 57 - HELD THAT: - The Tribunal upheld the findings of the Assessing Officer and the Commissioner (Appeals) that the assessee failed to discharge the primary onus to substantiate the deduction claimed under section 57 for receipts shown as "income from other sources." The record showed repeated notices (including 143(2) and multiple 142(1) notices) dispatched by RPAD and at least two acknowledgements, yet the assessee did not attend, file evidence, seek adjournment, or provide details of the claimed expenses. In those circumstances the AO was justified in passing an assessment under section 144 and disallowing the claimed deduction. The CIT(A)'s scrutiny of the assessment folder, deletion of the double addition and substitution of the disallowance amount were affirmed. The Tribunal also rejected the contention that the presumptive taxation principle under section 44AD could be applied, holding that section 44AD relates to business income and is not applicable to receipts classified as income from other sources. Case law relied upon by the assessee was found distinguishable because no documentary evidence was produced to show the nature of receipts or connection of expenses to those receipts.

Assessment under section 144 confirming disallowance of the claimed deduction under section 57 is upheld; applicability of section 44AD rejected.

Penalty under section 271(1)(c) for concealment/suppression - service of notice by RPAD and sufficiency of opportunity - onus on assessee to substantiate claimed deductions - Validity of levy of penalty under section 271(1)(c) - HELD THAT: - Penalty proceedings followed confirmation of the disallowance by the CIT(A). The Assessing Officer issued a show cause notice for penalty which was served by RPAD, but the assessee did not respond. Given the assessee's continued failure to substantiate the claimed expenditure before the AO, CIT(A) and the Tribunal, the Tribunal found no error in the imposition of the minimum penalty under section 271(1)(c). The assessee's written submissions without supporting evidentiary material were insufficient to negate the basis for penalty.

Penalty under section 271(1)(c) is confirmed.

Final Conclusion: Both the quantum appeal and the penalty appeal are dismissed: the ex parte assessment under section 144 disallowing the section 57 deduction is sustained (section 44AD held inapplicable), and the penalty under section 271(1)(c) is confirmed.

Comparability - arm's length price (ALP) - Resale Price Method (RPM) - dataset (current year plus two preceding years) - weighted average of current and two preceding years - computation of ALP under rule 10CA (arm's length range and sub-rule (7) arithmetical mean) - exclusion of non-comparable entities from the comparable set

Comparability - exclusion of non-comparable entities from the comparable set - Resale Price Method (RPM) - Validity of the exclusion by the CIT(A) of eight companies from the list of comparables finalized by the TPO for benchmarking SDTs - HELD THAT: - The Tribunal examined the assessee's functional profile and accepted that the assessee is a trader of frozen fish and seafood without processing to make products ready-to-eat, and that the Resale Price Method was the most appropriate method applied. The Tribunal analysed each of the eight challenged comparables on their functions, manufacturing/processing activities, presence of value added ready to eat products, integrated operations (trawling to processing), fixed asset base and other business segments, and found them to be substantially different from the assessee. On that factual and functional basis the Tribunal upheld the CIT(A)'s exclusion of Tolar Ocean Products Pvt. Ltd., Forstar Frozen Foods Pvt. Ltd., Nekkanti Sea Foods Ltd., Asvini Fisheries Pvt. Ltd., Apex Frozen Foods, Shree Datt Aquaculture Farms Pvt. Ltd., Uniroyal Marine Exports Ltd. and Gadre Marine Exports Pvt. Ltd. from the comparable set. [Paras 15, 17, 19, 21, 23]

The exclusions of the eight companies from the list of comparables by the CIT(A) are sustained.

Arm's length price (ALP) - dataset (current year plus two preceding years) - weighted average of current and two preceding years - computation of ALP under rule 10CA (sub-rule (7) arithmetical mean) - Whether ALP for the SDT must be determined by the approach adopted by the CIT(A) using current year data and simple mean, or mandatorily under rule 10CA using datasets and weighted averages - HELD THAT: - The Tribunal observed that the statutory framework was amended so that where more than one price is determined the ALP shall be computed as prescribed, and rule 10CA prescribes construction of a dataset placing values of comparables in ascending order and, where relevant, computing PLI of comparables by considering weighted averages of current year plus up to two preceding years. Sub rule (4) provides percentile based arm's length range for datasets of six or more entries; sub rule (7) provides that where sub rule (4) is not applicable (i.e., where dataset has two to five comparables), the ALP shall be the arithmetical mean of all values included in the dataset. The Tribunal held that these provisions govern the computation of ALP for the year under consideration. Since only four comparables survived, sub rule (7) of rule 10CA applies, mandating that the PLI of each comparable be computed by taking the weighted average of current and two preceding years (as per rule 10CA(2) and (3)) and the ALP be the arithmetic mean of those weighted PLI values. Consequently, reliance on rules 10B(4) and 10B(5) and using only current year simple averages (as directed by the CIT(A)) was incorrect. [Paras 24, 26, 28, 30, 31]

ALP must be determined under rule 10CA; with four comparables sub rule (7) applies, requiring arithmetic mean of comparables' PLIs where each comparable's PLI is computed by weighted averages of current and two preceding years.

Arm's length price (ALP) - dataset (current year plus two preceding years) - remand for computation - Remand to the AO/TPO for recomputation of ALP in accordance with rule 10CA and providing opportunity of hearing to the assessee - HELD THAT: - After upholding the exclusions and determining the correct legal framework for computation of ALP under rule 10CA (with sub rule (7) applicable to the four comparables), the Tribunal set aside the CIT(A)'s order and remanded the matter to the AO/TPO with a direction to recompute the ALP of the specified domestic transactions of purchase of frozen fish and seafood consistent with the Tribunal's discussion. The remand contemplates recomputation in the hue of the Tribunal's conclusions and mandates that the assessee be afforded a reasonable opportunity of hearing. [Paras 31, 34]

Matter remitted to AO/TPO to recompute ALP of the SDTs in accordance with rule 10CA and the Tribunal's directions; assessee to be given reasonable opportunity of hearing.

Final Conclusion: The Tribunal partly allowed the Revenue's appeal: it sustained the CIT(A)'s exclusion of eight non comparable companies from the comparable set, held that ALP must be computed under rule 10CA (with sub rule (7) applying to the four surviving comparables, requiring weighted average PLIs over current and two preceding years and the arithmetic mean), set aside the CIT(A)'s contrary computation, and remitted the matter to the AO/TPO for recomputation with opportunity of hearing; the assessee's cross objection was dismissed.

Summary order. Application for condonation of delay dismissed; civil appeal dismissed while leaving open any question of law to be agitated in other appropriate proceedings.

Summary order. The Civil Appeals are dismissed; delay is condoned and pending applications, if any, stand disposed of.

Summary order. Civil Appeals dismissed; delay condoned; pending applications, if any, disposed of.

Refund of deposit paid at provisional clearance - principle of unjust enrichment - binding effect of precedents in Customs-Excise disputes

Refund of deposit paid at provisional clearance - principle of unjust enrichment - binding effect of precedents in Customs-Excise disputes - Whether deposits made at the time of provisional clearance are refundable and whether the principle of unjust enrichment applies; and whether the decision in Commissioner of Customs v. Hindustan Zinc Limited is binding. - HELD THAT: - The Court noted that an identical question had been recently considered and decided in Commissioner of Customs v. Hindustan Zinc Limited, where the Court applied and held binding the earlier decisions in Commissioner of Central Excise, Mumbai-II v. Allied Photographics India Ltd. and Commissioner of Customs, New Delhi v. M/s. Oriental Exports, New Delhi. Relying on those precedents and their reasoning, the present appeal raising the refundability of provisional-deposit payments and the applicability of the principle of unjust enrichment was resolved by following the Hindustan Zinc decision. No fresh departure from those authorities was made.

The revenue's appeal is rejected and dismissed, the Hindustan Zinc reasoning being applied as binding authority.

Final Conclusion: Appeal dismissed; the Court applied and followed the decision in Commissioner of Customs v. Hindustan Zinc Limited, treating the earlier authorities as binding on the question of provisional deposit refundability and unjust enrichment.

Refund of Terminal Excise Duty - Entitlement of EOU entities to procure from DTA suppliers as deemed exports - application of Chapter 8 of the Foreign Trade Policy - policy circular dated 15.03.2013 - para 6.11(c)(ii) of the Foreign Trade Policy - binding effect of Supreme Court precedent

Refund of Terminal Excise Duty - Entitlement of EOU entities to procure from DTA suppliers as deemed exports - para 6.11(c)(ii) of the Foreign Trade Policy - policy circular dated 15.03.2013 - binding effect of Supreme Court precedent - Validity of the Single Judge's direction for refund of Terminal Excise Duty to an EOU in light of the Supreme Court's decision in Sandoz Private Limited - HELD THAT: - The Court held that the question whether EOU entities that procured and imported specified goods from DTA suppliers are entitled to treatment as deemed exports under the Foreign Trade Policy is no longer open, in view of the Supreme Court's decision in Sandoz Private Limited. That decision construed Chapter 8 of the FTP together with the policy circular dated 15.03.2013 and concluded that EOUs who procured such goods from DTA suppliers without payment of duty were to be regarded as having been ab initio exempted from liability under para 6.11(c)(ii) of the FTP, entitling them to the relief claimed. Applying that binding precedent, the High Court found no error in the Single Judge's order directing refund of Terminal Excise Duty and affirmed the entitlement of the respondent-assessee to the refund under the said statutory and policy framework. [Paras 3, 4, 5]

The Single Judge's direction for refund of Terminal Excise Duty is upheld; the writ appeal is dismissed and connected application is dismissed.

Final Conclusion: The appeal is dismissed; the Single Judge's order directing refund of Terminal Excise Duty is affirmed in view of the Supreme Court's decision in Sandoz Private Limited, there is no order as to costs, and the connected miscellaneous petition is dismissed.

Interference with ongoing investigation - power of arrest under Section 104 of the Customs Act, 1962 - summons under Section 108 of the Customs Act, 1962 - status of a person arrested vis-a -vis being an "accused" - preventive detention under Section 3(1) of the Conservation of Foreign Exchange & Prevention of Smuggling Activities Act, 1974 (COFEPOSA) - authority to proceed pending adjudication of questions of law by a superior court

Interference with ongoing investigation - The writ petition seeking quashing of the ongoing DRI investigation into M/s Shri Mahadev Ji Exports was not maintainable and is dismissed. - HELD THAT: - The High Court held that interference with an ongoing investigation is permissible only in rare and exceptional cases where it is manifest that no offence has been committed. Having considered the material on record, the Court found that the petition did not meet the threshold required to warrant quashing of the investigation or to thwart it at this stage. The Court therefore declined to exercise its constitutional or inherent powers to set aside the investigation. [Paras 7]

Writ seeking certiorari to quash the investigation dismissed.

Power of arrest under Section 104 of the Customs Act, 1962 - status of a person arrested vis-a -vis being an "accused" - summons under Section 108 of the Customs Act, 1962 - Arrest under Section 104 does not automatically convert the person arrested into an "accused" and does not preclude issuance of summons during the course of an enquiry or investigation. - HELD THAT: - The Court observed that Section 104 empowers Customs officers to arrest upon forming an opinion that an offence under specified provisions has been committed, but formation of that opinion and consequent arrest cannot be equated with the legal status of an "accused", which ordinarily arises when cognizance is taken or a charge-sheet is filed. The power to arrest is conferred to be used in aid of ongoing enquiry or investigation, and the statute equally empowers authorities to summon persons required for participation in such inquiry. Thus, prior arrest does not bar issuance of further summons in the investigation. [Paras 8, 9]

Submission that arrest rendered the petitioner an "accused" thereby precluding further summons rejected; issuing of summons in aid of investigation upheld.

Preventive detention under Section 3(1) of the Conservation of Foreign Exchange & Prevention of Smuggling Activities Act, 1974 (COFEPOSA) - The COFEPOSA detention order against the petitioner's father does not demonstrate that the DRI's investigation had concluded or preclude further investigative steps against the petitioner. - HELD THAT: - The Court explained that Section 3(1) COFEPOSA is a preventive provision aimed at restraining persons believed to be habitually engaged in offences prejudicial to economic security. The detention order records satisfaction based on voluntary statements and other material indicating involvement and propensity to continue offending. Such preventive detention does not establish finality of the criminal investigation nor does it justify quashing of summons or other investigative measures directed at the petitioner. [Paras 10]

Submission that COFEPOSA detention proves conclusion of investigation and invalidates summons rejected.

Authority to proceed pending adjudication of questions of law by a superior court - Pending the Supreme Court's consideration of framed questions of law, the DRI and other authorities are not restrained from proceeding in accordance with law. - HELD THAT: - While the Supreme Court has framed certain questions of law in a separate matter concerning the DRI and summons, the High Court observed there is no interim restraint on authorities from carrying out their statutory functions. Consequently, the existence of the reference in the higher court did not warrant halting the present investigation or issuance of summons. [Paras 11]

No restraint on authorities; investigation and lawful steps may continue pending higher court adjudication.

Final Conclusion: The writ petition challenging the DRI investigation and successive summons was dismissed; the Court refused to quash the investigation, rejected the contention that prior arrest converted the petitioner into an "accused" disqualifying further summons, held that the COFEPOSA detention of the petitioner's father does not indicate investigational finality, and recorded that authorities may continue to proceed in accordance with law notwithstanding pending questions before the Supreme Court.

Release of perishable goods pending assessment - assessment on filing of bills of entry for warehousing - warehousing in refrigerated warehouse to preserve perishable cargo - change of consignee by issuance of NOC - interim equitable directions to protect perishable cargo

Assessment on filing of bills of entry for warehousing - release of perishable goods pending assessment - Respondent No.5 to file Bills of Entry for the seven consignments and Customs/Assessment-cum-Authorised Officer to pass assessment orders for warehousing purpose within specified time frames. - HELD THAT: - The Court, recognising the urgency arising from the perishable nature of the consignments and the inability of Customs to assess without Bills of Entry, directed respondent No.5 to file Bills of Entry in respect of all seven Bills of Lading within one week. Thereafter the Customs Authorities and the Assessment-cum-Authorised Officer, Kandla SEZ, were directed to pass assessment orders on those Bills of Entry within one week of receipt for the purpose of warehousing, with a clarification that assessment for home consumption may follow as per future orders of the Court. These interlocutory directions were issued without prejudice to the parties' respective rights and contentions and solely to ensure preservation and lawful release of the perishable goods. [Paras 11]

Directed filing of Bills of Entry by respondent No.5 and directed Customs/Assessment-cum-Authorised Officer to pass assessment orders for warehousing within the time specified.

Warehousing in refrigerated warehouse to preserve perishable cargo - interim equitable directions to protect perishable cargo - On release, respondent No.5 to arrange warehousing of the goods in a refrigerated warehouse if required, and to maintain proper accounts of warehousing and related costs. - HELD THAT: - Given the perishable character of the consignments, the Court ordered that upon Customs assessment and release, respondent No.5 shall arrange warehousing of the goods in a refrigerated warehouse if necessary. The respondent was further directed to maintain details and proper accounts of costs incurred for warehousing and compliance with the interim order. These directions aim to secure the condition of the cargo pending adjudication of ownership and final assessment. [Paras 11]

Respondent No.5 to arrange for warehousing in refrigerated facility if required and to keep proper accounts of incurred costs.

Interim equitable directions to protect perishable cargo - security for interim arrangements - Interim financial security and cost allocation: both petitioners ordered to deposit security with the Court and to bear warehousing costs as may be directed in further orders. - HELD THAT: - To secure the interim arrangement and ensure costs of warehousing are met, the Court directed both petitioners to deposit amounts with the Registry within one week (as a condition of the interim regime) and stipulated that warehousing costs shall be borne by the petitioners of both matters as may be directed in further orders. This allocation and requirement of security were made in aid of preserving the perishable cargo and without prejudice to rights on the substantive dispute of ownership and assessment. [Paras 11]

Both petitioners to furnish security by depositing with the Court and to be responsible for warehousing costs as may be ordered subsequently.

Final Conclusion: Interim relief granted to ensure preservation and lawful release of the perishable consignments: respondent No.5 to file Bills of Entry and arrange warehousing (including refrigerated storage if required), Customs/Assessment-cum-Authorised Officer to complete assessment for warehousing within the stipulated time, petitioners to provide security and bear warehousing costs; matter posted for further orders.

Classification under Customs Tariff headings - Chapter Note 5(A) exclusion of compounded rubber - scope of "reclaimed rubber" under heading 4003 - meaning of "waste, parings and scrap" for heading 4004 - import policy determination based on tariff classification - application of Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 to rubber waste

Classification under Customs Tariff headings - Chapter Note 5(A) exclusion of compounded rubber - scope of "reclaimed rubber" under heading 4003 - Imported coloured rubber granules are classifiable under heading 4003 as reclaimed rubber and not under headings 4001/4002 or 4004. - HELD THAT: - The Tribunal examined the scope of headings 4001-4004, Chapter Note 5(A) and Chapter Note 3. Chapter Note 5(A) excludes from headings 4001 and 4002 any rubber compounded with vulcanising agents, accelerators or pigments; the imported granules contain carbon black, accelerators and pigments and thus cannot remain under 4001/4002. The imported product is presented as granules (a primary form under Chapter Note 3) and the processes recorded (devulcanisation, mechanical and thermal processing, blending and granulation) convert used tyres into a material having the essential character of reclaimed rubber. HS explanatory notes show reclaimed rubber includes rubber obtained from used articles, especially tyres, by softening/devulcanising and removal of unwanted matter, and that granules/powders in primary forms fall under heading 4003. The Tribunal therefore concluded that the goods fit within heading 4003 as reclaimed rubber and not within heading 4004 which covers waste, parings and scrap as defined by Chapter Note 6 or as granules merely of ground waste. [Paras 8, 9, 11, 12, 13]

Goods classified under chapter heading 4003 as reclaimed rubber.

Meaning of "waste, parings and scrap" for heading 4004 - scope of "reclaimed rubber" under heading 4003 - Imported coloured rubber granules are not 'waste, parings and scrap' of heading 4004 and thus do not fall within the import restrictions applicable to that heading. - HELD THAT: - Chapter Note 6 defines 'waste, parings and scrap' as rubber waste from the manufacture or working of rubber and rubber goods definitely not usable as such because of cutting-up, wear or other reasons, and HS notes describe category (3) as ground waste of vulcanised rubber used as filler. The Tribunal found the product is the result of further manufacturing processes yielding reclaimed rubber granules intended for use in finished products (tiles, mats, pavers) and not merely ground unusable scrap. The Commissioner (Appeals) had not given detailed reasoning to justify treating the granules as waste; on the material before the Tribunal, the granules better fit within reclaimed rubber under heading 4003 rather than waste under 4004. [Paras 10, 11, 12]

Goods do not fall within the definition of 'waste, parings and scrap' under heading 4004.

Import policy determination based on tariff classification - Import policy applicable to the consignment is determined by its tariff classification and, being classifiable under heading 4003, the goods attract a 'Free' import policy. - HELD THAT: - The ITC(HS) entries show heading 4003 is subject to a 'Free' import policy while heading 4004 is 'Restricted'. Because the Tribunal classified the imported granules under heading 4003, the importation does not fall under the restrictions applicable to heading 4004 and therefore the policy condition invoked in the impugned order (restriction requiring DGFT authorisation) does not apply. [Paras 7, 12]

Import of the consignment is not subject to the restrictions applicable to heading 4004 and is 'Free' under heading 4003.

Application of Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 to rubber waste - The Hazardous and Other Wastes Rules, 2016 restrictions and Prior Informed Consent procedure for 'waste parings and scrap of rubber' (Basel No. B3080) do not, on the material before the Tribunal, apply to the imported reclaimed rubber granules. - HELD THAT: - Schedule III to the HW Rules lists 'waste parings and scrap of rubber' under Part B (Basel No. B3080) and prescribes procedures and permissions for importers where applicable. The Tribunal observed that the entry in Part B applies to 'waste, parings and scrap' and, having held that the consignment consists of reclaimed rubber granules rather than waste parings and scrap, concluded that the Prior Informed Consent/permission regime under the HW Rules was not attracted to these imports. [Paras 14]

HW Rules, 2016 restrictions for rubber waste are not applicable to the imported goods as classified.

Import policy determination based on tariff classification - Absolute confiscation, denial of redemption and penalty imposed pursuant to classification under heading 4004 are not sustainable. - HELD THAT: - Because the Tribunal reclassified the goods under heading 4003 and found no applicability of the HW Rules restrictions, the grounds on which the Commissioner (Original) and Commissioner (Appeals) ordered absolute confiscation and denied redemption based on mis-declaration and lack of DGFT authorisation fall away. The impugned order did not sustain the detailed reasoning necessary to treat the goods as restricted waste and therefore confiscation and consequent measures were set aside. [Paras 12, 15]

Impugned order of absolute confiscation and deletion of redemption option is set aside; appeal allowed in favour of the appellants.

Final Conclusion: The Tribunal held that the imported coloured rubber granules are classifiable as reclaimed rubber under heading 4003 (primary form: granules), not as waste under heading 4004; consequently the restrictions and HW Rules procedure invoked for waste do not apply, and the orders of absolute confiscation and denial of redemption were set aside with the appeal allowed.

Suspension of licence under regulation 16 of Customs Broker Licencing Regulations, 2018 - Requirement of recorded reasons and urgency for suspension - Requirement of post-suspension hearing and decision within prescribed period - Prejudice to public interest or jeopardy to investigations as justification for suspension

Suspension of licence under regulation 16 of Customs Broker Licencing Regulations, 2018 - Prejudice to public interest or jeopardy to investigations as justification for suspension - Requirement of recorded reasons and urgency for suspension - Requirement of post-suspension hearing and decision within prescribed period - Whether continuation of the suspension of the appellant's customs broker licence was justified under regulation 16. - HELD THAT: - The Tribunal confined its examination to the narrow question of justifiability of suspension under regulation 16. Regulation 16 permits suspension in appropriate cases where immediate action is necessary and requires reasons to be recorded; it also mandates an opportunity of hearing and a decision within the prescribed timeframe. The impugned order did not demonstrate that continued operation of the appellant would prejudice public interest or jeopardize investigations; the decision to suspend was taken more than a month after seizure, and the appellant's responsible person had been examined prior to suspension without anything recorded that would justify immediate suspension. The Tribunal further noted that many months had elapsed and the prescribed timeframe for initiation of proceedings had passed, and that the impugned order did not reflect deliberation on the requisite intent to suspend. On these grounds the suspension was held to be unjustified and the continuation order could not be sustained. [Paras 5, 6, 7]

The continuation of suspension under regulation 16 was set aside and the licence suspension revoked with immediate effect.

Final Conclusion: The Tribunal set aside the order continuing the suspension and directed immediate revocation of the appellant's customs broker licence suspension for lack of justification under regulation 16.

Breach of duties under Customs Broker Licencing Regulations - standard of proof for administrative inquiry - scope of regulatory jurisdiction of customs broker licensing - duty to verify identity and existence of importer/supporting manufacturer - liability for diversion of imported goods prior to customs clearance

Breach of duties under Customs Broker Licencing Regulations - duty to verify identity and existence of importer/supporting manufacturer - Whether the appellant breached obligations in regulation 10(d) and 10(m) of the Customs Broker Licencing Regulations, 2018. - HELD THAT: - The Tribunal found no evidence that the appellant had failed to undertake preliminary ascertainment of the existence and identity of the importer or that the appellant had communicated instructions to transporters other than those of the authorised importer or its delegate. The impugned inquiry rested on findings of diversion of goods and on statements implicating third parties, but there was no factual foundation to conclude that the appellant omitted the requisite inquiries or otherwise contravened the duties in regulation 10. On this basis the Tribunal held the inquiry report and the licensing authority's acceptance of it were without foundation and could not sustain the detriments imposed. [Paras 6, 7, 10]

Findings of breach of regulation 10(d) and 10(m) are not supported by evidence and are set aside.

Scope of regulatory jurisdiction of customs broker licensing - liability for diversion of imported goods prior to customs clearance - Whether activities occurring after customs clearance or outside the licensed functions of customs brokers fall within the regulatory ambit of the Customs Broker Licencing Regulations, 2018. - HELD THAT: - The Tribunal reiterated that customs broking is a specialised, licensed function under section 146 of the Customs Act, 1962 and that the Regulations govern performance of those licensed customs-clearance functions within the customs framework. Activities that occur after clearance of goods or that fall outside the authorised customs-broking functions are beyond the jurisdiction of the Customs Broker Licencing Regulations. Consequently, alleged diversions occurring before or after the point at which goods leave customs control do not ipso facto render the broker liable under the Regulations unless there is evidence of regulatory duty-breach within the licensed functions. [Paras 8, 9]

Regulations govern licensed customs-broking functions; activities beyond those functions are outside the Regulations' jurisdiction and cannot sustain the sanctions imposed.

Standard of proof for administrative inquiry - Whether the inquiry report furnished sufficient foundation to impose extreme detriments (revocation, forfeiture and penalty) on the appellant. - HELD THAT: - The Tribunal examined the inquiry record and found that the conclusions imputing inefficiency and contravention to the broker were not supported by independent evidence of the appellant's wrongful acts. Testimony of transporters denied receiving directions from the broker, and there was no allegation of misdeclaration in the bills of entry. In the absence of probative material linking the appellant to the diversion or to a failure of mandated inquiries, the inquiry report and the licensing authority's consequent sanctions could not be sustained. [Paras 7, 10]

The inquiry report lacked the necessary evidential foundation to justify the extreme sanctions; the report and the consequent order are set aside.

Final Conclusion: The appeal is allowed; the Tribunal set aside the licencing authority's order that had revoked the customs broker licence, forfeited the security deposit and imposed a penalty, holding that the findings of breach were unsupported by evidence and that the Regulations do not extend to activities beyond the licensed customs-broking functions.

Suspension of licence under Regulation 16 of CBLR, 2018 - Requirement of immediate action to justify ex parte suspension - Preventive nature of suspension vis-a -vis punitive proceedings - Duty of Customs Broker in KYC verification - Effect of subsequent enquiry/inquiry report under Regulation/Rule 17

Suspension of licence under Regulation 16 of CBLR, 2018 - Requirement of immediate action to justify ex parte suspension - Preventive nature of suspension vis-a -vis punitive proceedings - Whether the Commissioner validly suspended the appellant's Customs Broker licence under Regulation 16 of CBLR, 2018 by demonstrat ing an immediate need for suspension. - HELD THAT: - The Tribunal held that Regulation 16 empowers the Commissioner to suspend a customs broker's licence in appropriate cases "where immediate action is necessary", and such preventive power must be exercised with clear reasons recorded demonstrating the necessity of immediate intervention. The facts show a temporal gap between the exports (around May 2021) and the suspension (February/March 2023), and the impugned order does not set out cogent findings or evidence establishing any ongoing or imminent illegality or that documents filed by the appellant were fabricated or manipulated. The Revenue failed to prove that the exporter was non-existent at the time of export or that the broker had connived in fraud. Reliance on the public-domain information about Aadhaar verification and on an earlier cancellation of one GSTIN did not suffice to demonstrate the kind of immediacy contemplated by the Regulation. Decisions of coordinate fora and High Courts were noted to emphasise that the power under the immediate-suspension limb is preventive and requires specific, recorded reasons; absent such reasoning and proximate danger, continuation of suspension is unsustainable. [Paras 8, 9, 10]

The suspension of the appellant's Customs Broker licence under Regulation 16 was not supported by a recorded finding of necessity for immediate action and is unsustainable.

Duty of Customs Broker in KYC verification - Effect of Inquiry Report under Regulation/Rule 17 - Whether the appellant had failed in its KYC obligations and whether the Inquiry Report exonerating the appellant affected the validity of the suspension. - HELD THAT: - The Tribunal accepted the Inquiry Officer's findings under Rule/Regulation 17 which concluded that the broker had submitted KYC documents and had taken reasonable steps to verify the exporter; there was no evidence contradicting the broker's defence that KYC was done prior to export. The Court recorded that physical verification of the exporter's premises and issues concerning grant or correctness of GSTIN are matters for the authority that issues the GST registration and are not necessarily the responsibility of the broker. Given the Inquiry Report's conclusion that Regulations 10(d), 10(e) and 10(n) were not breached by the broker, continuation of suspension lacked a solid foundation. [Paras 12, 13]

The Inquiry Report exonerating the appellant undermines the basis for suspension; the appellant's KYC conduct was found adequate on the material before the Inquiry Officer.

Final Conclusion: The Tribunal set aside the suspension of the Customs Broker licence, holding that the Commissioner had not recorded reasons demonstrating the necessity for immediate preventive action under Regulation 16 and that the Inquiry Report exonerating the broker further vitiated the basis for continuation of suspension; the appeal was allowed.

Misdeclaration of country of origin - classification as stock-lot versus new goods - transaction value and applicability of Customs valuation - residual Rule 9 of CVR'07 - natural justice and adequacy of adjudication

Misdeclaration of country of origin - classification as stock-lot versus new goods - Whether the imported footwear were correctly declared as Chinese origin stock-lot goods. - HELD THAT: - The Tribunal accepted the findings of the Adjudicating Authority that on joint physical examination only a nominal number of footwear were of Chinese origin while most were of Austrian origin. The Adjudicating Authority examined the Bill of Entry, correspondence with the seller and the importer's later shifting explanations, and concluded that the consignments consisted of brand-new footwear imported at discounted rates as part of stock clearance by the exporter rather than sale of seconds or used goods. Reliance was placed on analogous authority recognizing that goods must be treated according to their actual place of manufacture. The Tribunal found the Adjudicating Authority's factual conclusions on origin and on the true nature of the goods to be reasoned and justified, and not liable to interference.

The finding that the goods were misdeclared as Chinese-origin stock-lot items is upheld.

Transaction value and applicability of Customs valuation - residual Rule 9 of CVR'07 - Whether the transaction value declared in the Bill of Entry could be accepted or whether residual Rule 9 of CVR'07 must be applied for valuation. - HELD THAT: - The Adjudicating Authority held that the value shown in the Bill of Entry was a heavily discounted figure reflecting the exporter's stock clearance and was not the real value with nexus to actual sale price; consequently, transaction value under Section 14 and Rule 3(1) of CVR'07 was not applicable. The Authority further found that Rules 4 to 8 could not be applied because comparable values for similar Austrian-origin goods at the place of importation were not available. On these bases the Authority applied the residual Rule 9 of CVR'07 to determine value. The Tribunal found that the Adjudicating Authority had considered the statutory valuation scheme, the absence of applicable earlier rules, and the factual matrix, and that its conclusion to apply residual Rule 9 was a reasoned application of the valuation rules.

The Adjudicating Authority's conclusion that transaction value did not apply and that residual Rule 9 of CVR'07 was applicable is affirmed.

Natural justice and adequacy of adjudication - Whether the adjudication complied with principles of natural justice and whether the Tribunal should interfere despite the appellant's non-appearance. - HELD THAT: - The record shows that the Adjudicating Authority granted personal hearing and the hearing was attended by representatives of the noticee; the Order-in-Original contains detailed findings and reasons on origin, nature and valuation of the goods. The Tribunal noted the appellant's repeated non-attendance before it but, in the interest of justice, examined the record with assistance from the Authorized Representative for the Department. Finding the Adjudicating Authority's order to be detailed, reasoned and in compliance with natural justice, the Tribunal declined to disturb the findings.

The adjudication is held to be procedurally fair and reasoned; no interference is warranted despite the appellant's non-appearance.

Final Conclusion: The Tribunal dismissed the appeal and upheld the Adjudicating Authority's order: the goods were misdeclared, transaction value was not applicable, residual Rule 9 of CVR'07 applied for valuation, and the adjudication complied with natural justice.

Principles of Natural Justice - Ex-parte proceedings - Substituted service by publication - Recall of ex-parte order - Admission of Section 9 application under IBC - Reasonable opportunity to appear and file reply

Principles of Natural Justice - Reasonable opportunity to appear and file reply - Whether the admission of the Section 9 petition violated the Principles of Natural Justice by not giving the Corporate Debtor adequate opportunity to be heard. - HELD THAT: - The Tribunal examined the sequence of listings, service attempts and the Corporate Debtor's conduct. Notices were sent by email and by registry pursuant to the order dated 17.09.2021, and substituted service by paper publication was ordered on 15.11.2021 and effected thereafter. The Adjudicating Authority recorded multiple adjournments and the Corporate Debtor repeatedly did not appear. An application to recall the ex-parte order dated 22.02.2022 was filed on 09.07.2022 but remained in defect and was not listed. The Tribunal found no bona fide explanation for the non-appearance, noting that the summons had been received prior to the substituted service direction and that the recall application did not sufficiently explain the delay or when the Corporate Debtor became aware of the proceedings. In these circumstances, the Adjudicating Authority's finding that reasonable opportunity had been afforded and that there was no breach of natural justice was upheld. [Paras 14, 15]

No violation of the Principles of Natural Justice; adequate opportunity was given and the Adjudicating Authority did not err in proceeding to admit the petition.

Ex-parte proceedings - Substituted service by publication - Recall of ex-parte order - Admission of Section 9 application under IBC - Whether the Adjudicating Authority properly admitted the Section 9 application after having set the Corporate Debtor ex parte and despite a pending but defectively filed recall application. - HELD THAT: - The Tribunal reviewed the orders of the Adjudicating Authority dated 17.09.2021 and 22.02.2022 and the subsequent conduct of the parties. The Adjudicating Authority had directed service by all available means, observed that substituted service was effected by publication, and recorded non-appearance leading to ex parte proceedings. The recall application filed on 09.07.2022 was not listed because it remained in defect (including defective vakalatnama). The Adjudicating Authority gave reasons in its admission order noting repeated opportunities afforded to the Corporate Debtor and the failure to prosecute the recall IA or to clear defects; accordingly, the Tribunal found no error in admitting the Section 9 application and saw no ground to remit the matter for deciding the unlisted IA. [Paras 5, 6, 9, 10, 16]

Admission of the Section 9 application was valid; no interference warranted with the Adjudicating Authority's order admitting the petition.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority's admission of the Section 9 petition is upheld as there was substituted service, repeated opportunities to the Corporate Debtor, no satisfactory justification for non appearance, and the recall application remained defectively filed and unlisted.

Restoration of petition - dismissal for non-prosecution - condonation of delay - sufficient cause - non-granting of restoration without cogent reasons

Restoration of petition - dismissal for non-prosecution - condonation of delay - sufficient cause - Whether the restoration application filed after dismissal for non-prosecution should be allowed where delay was not explained or condoned. - HELD THAT: - The Appellant attributed non-appearance to the advanced age and serious illness of its Authorized Representative and to the erstwhile counsel's failure to follow up. The Adjudicating Authority recorded repeated non-appearances and dismissed the petition for non-prosecution. The Appellant filed a restoration application after the period prescribed under the rules but did not accompany it with a separate application seeking condonation of the delay nor did it provide cogent reasons sufficient to constitute "sufficient cause" for the delay. The Tribunal noted the settled principle, as relied upon by the Respondent from Esha Bhattacharjee Vs. Managing Committee of Raghunathpur Nafar Academy & Ors. , that condonation of delay is not to be granted as a matter of course and a liberal approach is inappropriate where no proper grounds are shown. Applying that principle to the facts, the Tribunal found the explanations inadequate and held that there was no sufficient cause to allow restoration. The Tribunal therefore declined to go into the merits and upheld the Adjudicating Authority's dismissal for non-prosecution. [Paras 6, 7, 8]

Restoration application refused; dismissal for non-prosecution upheld for want of sufficient cause to condone the delay.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority rightly dismissed the petition for non-prosecution and no sufficient cause was shown to condone the delay in seeking restoration. No order as to costs.

Ascertained and crystallised demand - res judicata and estoppel - priority of statutory dues / first charge vis-a -vis IBC - power of Resolution Professional to admit or reject claims - primacy of the Insolvency and Bankruptcy Code over other statutes

Ascertained and crystallised demand - res judicata and estoppel - Whether the Appellant's claim, founded on Best Judgment Assessment orders, amounted to an ascertained/crystallised demand and whether the Appellant was precluded by res judicata/estoppel from pursuing the same before the Adjudicating Authority. - HELD THAT: - The Tribunal found that the claim submitted by the Appellant in Form F rested upon Best Judgment Assessment orders and that no regular assessment had been completed to convert those estimates into an ascertained and crystallised demand. The Tribunal relied on its earlier order directing that the Commercial Taxes Department place only ascertained, crystallised demands before the Resolution Professional after regular assessment. Because the Appellant pursued the same grounds and same sum previously determined, and had failed to produce a crystallised demand, the Tribunal concluded that the Appellant was prohibited by the principles of res judicata and estopped from reopening identical contention before the Adjudicating Authority. [Paras 28, 30, 31, 32, 33]

The Appellant's claim based on Best Judgment Assessment was not an ascertained/crystallised demand and the Appellant was precluded by res judicata/estoppel from agitating the same; the impugned order in IA No.393/2022 was rightly upheld on that basis.

Priority of statutory dues / first charge vis-a -vis IBC - primacy of the Insolvency and Bankruptcy Code over other statutes - Whether the statutory provisions relied upon by the Appellant confer a 'first charge' on the corporate debtor's property that overrides the IBC regime and entitles the Appellant to rank pari passu with secured creditors. - HELD THAT: - The Tribunal examined the interplay between the contested statutory provisions and the IBC. It referred to precedents and authority indicating that certain statutory provisions do not operate to override the priority scheme under the IBC. The Tribunal agreed with the Adjudicating Authority's observation that the relevant GST/KGST/IGST provisions, as interpreted in the impugned order, do not confer a priority that displaces the Code's scheme; consequently the Appellant could not be treated as having a first charge ranking at par with secured creditors in the insolvency process. The Tribunal also noted earlier judicial pronouncements limiting the effect of alleged statutory first charges in the face of the IBC's overriding provisions. [Paras 36]

The Adjudicating Authority's conclusion that the Appellant's statutory provisions do not create a first charge overriding the IBC was free from legal error and is affirmed.

Power of Resolution Professional to admit or reject claims - ascertained and crystallised demand - Whether the Resolution Professional acted beyond power in rejecting the Appellant's claim and whether the Information Memorandum or Resolution Plan was thereby rendered null and void. - HELD THAT: - The Tribunal recorded that the Resolution Professional rejected the Appellant's claim because it was founded on Best Judgment Assessment estimates and not on an ascertained/crystallised demand. The Tribunal recalled its prior direction that only crystallised demands arising from regular assessment be placed before the Resolution Professional and the Committee of Creditors. Given the absence of a regular assessment crystallising the Appellant's demand, the rejection by the Resolution Professional was treated as consistent with the Tribunal's earlier directions and with the requirement that resolution applicants be informed only of ascertained liabilities. [Paras 29, 30, 31, 33]

The Resolution Professional's rejection of the claim, on the ground that it was not an ascertained/crystallised demand, was not shown to be illegal or to vitiate the Information Memorandum or Resolution Plan; the Adjudicating Authority's order stands.

Final Conclusion: The Company Appeal (AT) (CH) (Ins) No.302/2023 is dismissed. The Tribunal affirmed that the Appellant's claim based on Best Judgment Assessment was not an ascertained/crystallised demand, that the Appellant was precluded by res judicata/estoppel from reopening identical grounds, and that the Adjudicating Authority correctly held that the contested statutory provisions do not override the priority scheme of the IBC; connected interim applications are closed and no costs are awarded.

Substituted service by publication - service by electronic mail - recall under Rule 49 of the NCLT Rules, 2016 as a statutory remedy - effectiveness of service where registered office is not in possession or control of the corporate debtor - maintainability of an appeal against dismissal of a recall application - revival and remand of proceedings to the Adjudicating Authority for fresh hearing

Substituted service by publication - service by electronic mail - effectiveness of service where registered office is not in possession or control of the corporate debtor - Validity of substituted service by newspaper publication (and absence of email service) where the registered office was not in the possession or control of the corporate debtor and notices at the registered address were returned 'left'. - HELD THAT: - The Tribunal found on the material before it that notices sent to the corporate debtor at its registered office in Mumbai were returned with the remark 'left' and that the registered office had been under the control/possession of the official assignee since 2013. Subsequent correspondence showed that the corporate debtor was conducting affairs from a Jaipur address and the financial creditor had earlier corresponded with that Jaipur address. Although the Adjudicating Authority ordered substituted service by newspaper publication and directed service by email, there is no proof on record that any email service was effected. In these circumstances the Tribunal concluded that publication in newspapers at Mumbai was not effective notice to the corporate debtor, which remained unaware of the proceedings. The Tribunal therefore held that the factual premise for treating the admission as valid (i.e., effective service) was absent and that recall was justified.

Substituted publication at Mumbai, without proven email service, was not effective where the registered office was not under the corporate debtor's control and the corporate debtor conducted business from Jaipur; recall was warranted.

Recall under Rule 49 of the NCLT Rules, 2016 as a statutory remedy - maintainability of an appeal against dismissal of a recall application - Whether the appeal challenging the Adjudicating Authority's dismissal of the recall application under Rule 49 is maintainable and whether the recall application should be allowed. - HELD THAT: - The Tribunal examined the respondent's contention that the appeal was not maintainable because the original admission order was not separately challenged. It distinguished authorities concerning review or SLPs against review/dismissal orders where the original order was not challenged, observing that recall under Rule 49 is a statutory remedy available to seek recall of an order. On the facts - namely, ineffective service and the corporate debtor's unawareness - the Tribunal found sufficient cause for recall. Accordingly, it allowed the appeal, set aside the impugned order dismissing the recall application, and allowed I.A. No. 522 of 2020.

Appeal against dismissal of the recall application is maintainable; recall under Rule 49 is allowed on the facts and the order dismissing the recall is set aside.

Revival and remand of proceedings to the Adjudicating Authority for fresh hearing - Relief to follow upon allowing the recall - whether the CIRP admission is to be set aside permanently or whether the matter is to be revived and remitted for fresh adjudication. - HELD THAT: - Rather than finally confirming or setting aside the CIRP admission on merits, the Tribunal revived the company petition (CP(IB) No. 903(MB)/2019) and remitted the matter to the Adjudicating Authority for fresh hearing and decision. The Tribunal permitted the corporate debtor to file a reply to the Section 7 application within two weeks and directed the Adjudicating Authority to fix a date after two weeks and decide the matter expeditiously. The Tribunal thereby confined its order to correcting the procedural defect (lack of effective service) and ensuring the parties a fresh opportunity to contest the Section 7 proceeding on merits.

CP(IB) No. 903(MB)/2019 is revived and remitted to the Adjudicating Authority for fresh hearing; the corporate debtor may file a reply within two weeks and the Adjudicating Authority shall proceed expeditiously.

Final Conclusion: The Tribunal allowed the appeal, holding that substituted publication at Mumbai (without proved email service) was ineffective where the registered office was not under the corporate debtor's control and the corporate debtor was unaware of proceedings; the recall under Rule 49 was therefore allowed, the order dismissing the recall set aside, and the insolvency petition revived and remanded to the Adjudicating Authority for fresh adjudication with directions to permit filing of a reply and to proceed expeditiously.

Extension of CIRP period - resolution professional's authority to apply for extension - liberty to apply for extension granted by a higher court - committee of creditors' instruction to seek extension - xpath:ends of justice

Resolution professional's authority to apply for extension - liberty to apply for extension granted by a higher court - Validity of rejecting the Resolution Professional's application for extension on the ground that liberty to apply had been granted only to named appellants before the Supreme Court - HELD THAT: - The Tribunal held that the liberty granted by the Hon'ble Supreme Court to specific appellants to apply for extension did not preclude the Resolution Professional from filing an application for extension. Extension of the CIRP period is an application properly to be made by the Resolution Professional, who conducts the CIRP. Where the Committee of Creditors instructed the Resolution Professional to seek an extension, the Adjudicating Authority's rejection solely because the liberty had been granted to other persons was not sustainable. The Tribunal accordingly found that the Resolution Professional was entitled to file the application despite the Supreme Court having granted liberty to named parties.

Adjudicating Authority's ground of rejection based on liberty being available only to named appellants is not sustainable; the Resolution Professional could file the application.

Extension of CIRP period - committee of creditors' instruction to seek extension - xpath:ends of justice - Whether extension of the CIRP for a further period should be granted - HELD THAT: - On the merits the Tribunal noted that two resolution plans had been received and required consideration and voting by the Committee of Creditors. Given that the CoC had instructed the Resolution Professional to seek a limited extension to enable the voting and lawfully conclude the CIRP, and in view of the circumstances where plans awaited CoC action, the Tribunal concluded that the ends of justice warranted granting the requested extension. The Tribunal therefore set aside the Adjudicating Authority's order and allowed the application for extension.

I.A. No. 2889 of 2023 is allowed and the CIRP period is extended for a further 60 days.

Final Conclusion: Both appeals are allowed; the order dated 24.07.2023 is set aside, I.A. No. 2889 of 2023 is allowed and the CIRP is extended for a further 60 days to enable the Committee of Creditors to consider and vote on the resolution plans.

Suspension of initiation of corporate insolvency resolution process under Section 10A - Invocation of a demand guarantee and liability arising on service of notice of demand - Date of default determined by terms of guarantee deed - Continuing guarantee and post-invocation adjustments

Invocation of a demand guarantee and liability arising on service of notice of demand - Date of default determined by terms of guarantee deed - Suspension of initiation of corporate insolvency resolution process under Section 10A - Continuing guarantee and post-invocation adjustments - Whether the Section 7 application is barred by Section 10A on the ground that the date of default qua the corporate guarantor fell within the prohibited period. - HELD THAT: - The Tribunal held that the corporate guarantor's liability under the Deed of Guarantee was a demand obligation which arose only upon service of the notice of demand in the form provided by the guarantee. The notice invoking the corporate guarantee was issued on 12th June, 2020 calling for payment within two business days, and therefore the amount became due on 16th June, 2020. That date falls within the period of prohibition created by Section 10A. The subsequent realisation/appropriation of part amounts by sale of pledged shares and the later demand notice dated 13th May, 2022 reflecting adjustments did not create a fresh date of default outside the prohibited period; such post-invocation adjustments cannot alter the fact that the default in respect of the guarantee occurred on 16th June, 2020 when the guarantor became liable on the demand made. Consequently the Section 7 application filed on 12th July, 2022 was held to be barred by Section 10A and the Adjudicating Authority did not err in dismissing the application on that ground. [Paras 5, 11, 14, 18]

Section 7 application barred by Section 10A as the date of default qua the guarantor was 16th June, 2020; appeal dismissed.

Final Conclusion: The Tribunal affirmed that the corporate guarantor's liability arose on the demand notice dated 12th June, 2020 (date of default 16th June, 2020), which falls within the Section 10A prohibition, and accordingly dismissed the appeal.

Recall of directions - stay of investigation - reassignment of proceedings and liberty to hear applications - protection of incipient investigations from interference - recourse to inherent jurisdiction under Section 482 of the Code of Criminal Procedure, 1973

Reassignment of proceedings and liberty to hear applications - recall of directions - Whether the Single Judge was precluded by this Court's earlier order from entertaining an application for recall of the directions issued on 13 April 2023. - HELD THAT: - This Court had directed on 28 April 2023 that the Acting Chief Justice reassign the pending proceedings to a Judge other than the Judge who passed the earlier order, and that the Judge to whom the matter was reassigned would be at liberty to take up all applications in that regard. The Single Judge's concluding statement that the earlier direction 'becomes a closed chapter' and that the matter was therefore barred was inconsistent with the liberty expressly conferred by this Court. The Court accepted the petitioner's objection to that aspect of the Single Judge's reasoning but declined to set aside the impugned order for other reasons explained separately. [Paras 5, 6]

The Single Judge erred in treating the earlier direction as barring further applications; the reassigned Judge retained liberty to entertain applications for recall of the directions.

Stay of investigation - protection of incipient investigations from interference - recourse to inherent jurisdiction under Section 482 of the Code of Criminal Procedure, 1973 - Whether this Court should interfere with the Single Judge's refusal to stay or stultify the investigations by the Enforcement Directorate and the Central Bureau of Investigation. - HELD THAT: - The Single Judge considered whether a stay of the investigations was warranted and concluded that there was no reason at the present stage to issue a direction that would stultify the investigation. Having examined the impugned order, this Court was inclined not to interfere because such interference would risk stifling investigations at an incipient stage. At the same time, the petitioner was afforded the right to pursue available legal remedies, including under Section 482 CrPC, and the observations in the impugned orders were not to operate as a bar on any competent court entertaining such remedies on their merits. [Paras 8, 9]

This Court declined to interfere with the Single Judge's refusal to stay the investigations, while preserving the petitioner's right to pursue legal remedies including under Section 482 CrPC.

Recall of directions - Whether the direction for payment of costs made earlier should remain in place. - HELD THAT: - Because this Court had permitted filing of applications before the Single Judge while disposing of the Special Leave Petition on 28 April 2023, the consequence of that permission made the earlier direction for payment of costs inapt. The Court therefore directed deletion of the costs direction to reflect that liberty to apply was preserved. [Paras 10]

The earlier direction for payment of costs is deleted.

Final Conclusion: The Special Leave Petition is disposed of: the reassigned Single Judge may entertain applications for recall of the directions; this Court will not interfere with the refusal to stay the investigations at this stage but preserves the petitioner's right to seek remedies including under Section 482 CrPC; the direction for payment of costs is deleted; pending applications, if any, are disposed of.

Quashing of ECIR - summons under Section 50 of the PMLA - prematurity of challenge at investigation stage - power under Section 482 Cr.P.C. to quash proceedings for abuse of process or mala fide - requirement of compliance with Section 19 of the PMLA before arrest - ECIR as an internal/non statutory document

Quashing of ECIR - ECIR as an internal/non statutory document - prematurity of challenge at investigation stage - power under Section 482 Cr.P.C. to quash proceedings for abuse of process or mala fide - Petition for quashing ECIR/KLZO II/19/2022 dismissed as premature; no interference with ongoing investigation. - HELD THAT: - The Court held that challenge to the ECIR at the incipient stage of investigation was premature and declined to quash the ECIR. While recognising the High Court's inherent jurisdiction under Section 482 CrPC to quash proceedings in cases of abuse of process or manifest mala fides, the Court found that the petitioner approached at a stage when investigation was ongoing and material had not been placed before it to justify quashing. The Court recorded that ECIR is an internal record and not a statutory document, and emphasised precedent that courts should ordinarily not stultify investigations at an early stage unless exceptional grounds of gross abuse are made out. Having noted limited material produced by the Enforcement Directorate (notably a co accused's statement) and subsequent court monitored proceedings in related writs, the Court concluded that interference with the ECIR was not warranted.

Application to quash the ECIR refused as premature; revisional petition disposed of on merits without quashing the ECIR.

Summons under Section 50 of the PMLA - requirement of compliance with Section 19 of the PMLA before arrest - prematurity of challenge at investigation stage - Prayer to quash the summons refused; interim protection ordered against coercive measures subject to statutory compliance. - HELD THAT: - The Court declined to quash the summons issued under Section 50(2)/(3) PMLA, observing that applications at the summons stage are generally premature. However, in view of the material and concerns raised, and relying on the Supreme Court's exposition of Section 19 PMLA in V. Senthil Balaji, the Court directed that no coercive action shall be taken against the petitioner by the Enforcement Directorate without strict adherence to the procedure mandated by Section 19(1)-(2) (including formation of reason to believe and forwarding of materials to the Adjudicating Authority as required). The protection is interlocutory and conditioned on compliance with statutory safeguards; the underlying summons and investigation remain undisturbed.

Summons not quashed; directed that ED shall not take coercive measures against the petitioner unless Section 19 PMLA requirements are complied with.

Final Conclusion: The revisional petition seeking quashing of the ECIR and summons is disposed of: the application to quash the ECIR and the summons is refused as premature, but the Enforcement Directorate is restrained from taking any coercive action against the petitioner unless it complies with the procedural safeguards under Section 19 of the PMLA as explained by the Supreme Court.

Finality of closure of predicate offence - Effect of closure/quashing of scheduled offence on prosecution under the Prevention of Money Laundering Act - Dependence of offence under PMLA on property being proceeds of crime - Stand alone offence argument under PMLA - Preservation of liberty to revive PMLA proceedings if predicate offence is reopened

Finality of closure of predicate offence - Effect of closure/quashing of scheduled offence on prosecution under the Prevention of Money Laundering Act - Dependence of offence under PMLA on property being proceeds of crime - Whether proceedings under the PMLA can continue after the predicate (scheduled) offence has been finally closed/quashed. - HELD THAT: - The Court applied the principle that an offence under Section 3 of the PMLA is dependent on illegal gain derived from criminal activity relating to a scheduled offence and that PMLA authorities cannot proceed on a notional assumption that a scheduled offence has been committed, as stated in Vijay Madanlal Choudhary and reiterated in Parvathi Kollur . The Court observed that in the present matter the predicate offence has been closed and that this closure has attained finality (paragraph 10). Having regard to the consistent view in Jagathrakshakan , Harish Fabiani , and the reasoning in Emta Coal , the Court concluded that PMLA proceedings could not be permitted to continue where the predicate offence has been finally closed/quashed. The Court noted the limited contention and authorities on the 'stand alone offence' point and recognized the caveat recorded by the Supreme Court in its disposal of the Special Leave Petition in Emta Coal, namely that liberty must be preserved to the Enforcement Directorate to revive proceedings if further action is taken in respect of the predicate offence (paragraph 18). The Court therefore acceded to the writ petition while expressly preserving the ED's right to take further steps under the PMLA should the predicate proceedings be reopened or further action occur. [Paras 10, 18, 19]

Writ petition allowed: proceedings arising from the ECIR in question are set aside in view of the final closure of the predicate offence, subject to the caveat preserving the Enforcement Directorate's liberty to revive PMLA proceedings if further action is taken in respect of the predicate offence.

Final Conclusion: The petition is allowed: having found that the predicate offence has been finally closed, the Court set aside the PMLA proceedings arising from the ECIR, while expressly preserving the respondent's right to revive proceedings if the predicate offence is thereafter re opened or further action is taken.

Cenvat credit - input service - Deposit Insurance service - negative list services - services by way of extending deposits, loans or advances - mandatory statutory obligation to insure deposits - precedential value of Larger Bench decision

Cenvat credit - input service - Deposit Insurance service - precedential value of Larger Bench decision - The entitlement of banks to avail Cenvat credit of service tax paid on premium for Deposit Insurance and Credit Guarantee Corporation (DICGC) as an input service. - HELD THAT: - The Court held that the question was squarely covered by the Larger Bench of the CESTAT in South Indian Bank (Tri.-LB), which concluded that the insurance service provided by DICGC to banks is an input service and that Cenvat credit of service tax paid for that service can be availed by banks for rendering output services. The High Court accepted the Larger Bench's consideration of the statutory scheme, the mandatory nature of compliance under RBI directives and the mandatory requirement to pay the premium in the course of conducting banking business, and therefore found the CESTAT to have correctly followed that precedent in allowing the respondents' appeals. [Paras 3, 9]

The appeals fail insofar as they dispute the entitlement to Cenvat credit on DICGC premium; the CESTAT was correct to apply the Larger Bench decision and allow the respondents' claims.

Negative list services - services by way of extending deposits, loans or advances - mandatory statutory obligation to insure deposits - Whether the negative list entry for 'services by way of extending deposits, loans or advances' (clause (n) of the negative list) excludes the banks' claim to Cenvat credit for the insurance service procured from DICGC. - HELD THAT: - The Court agreed with the Division Bench of the Kerala High Court and the Larger Bench that the negative list provision does not bring the insurance service within the exclusion. The Court noted that 'extending deposits' refers to the money transaction of accepting deposits, whereas the mandatory obligation to insure deposits arises after receipt of deposits and the payment of premium to DICGC is in the course of conducting the bank's business. Consequently, the service provided by DICGC is relatable to the banks' business and qualifies as an input service; compartmentalising activities to deny Cenvat credit would be contrary to the statutory scheme. [Paras 10, 11]

The negative list entry relied upon by the revenue does not preclude the banks from availing Cenvat credit for the DICGC insurance service.

Precedential value of Larger Bench decision - Whether any substantial question of law arises for this Court to entertain the revenue's appeals against the CESTAT orders. - HELD THAT: - The Court observed that the issues raised in the appeals were not different from those decided by the Larger Bench and that the Division Bench of the Kerala High Court had upheld that Larger Bench decision. The revenue did not demonstrate any unaddressed legal point or error in law that would warrant overturning the CESTAT's application of the Larger Bench or the Kerala High Court's agreement with it. Consequently, the Court found no substantial question of law to be decided. [Paras 11, 12]

No substantial question of law arises; both appeals are dismissed.

Final Conclusion: The High Court dismissed the revenue's appeals, holding that the CESTAT correctly followed the Larger Bench conclusion that the DICGC insurance service is an input service qualifying for Cenvat credit and that the negative-list provision relied on by the revenue does not preclude such credit; no substantial question of law was found to warrant interference.

Works Contract Service exemption under Notification No.25/2012 - Interpretation of "Railways" in an exemption notification - Valuation of works contract - abatement under Rule 2A of Service Tax (Determination of Value) Rules, 2006 - Reverse Charge Mechanism - correct period, applicable rate and abatement in computation - Cum-tax benefit under Section 67(2) - Penalty under sections 77, 78 and 78A - requirement of suppression/intent for imposition

Works Contract Service exemption under Notification No.25/2012 - Interpretation of "Railways" in an exemption notification - Whether services in relation to railway infrastructure (works contract; erection, installation and commissioning) are exempt under Notification No.25/2012 - HELD THAT: - The Tribunal held that Notification No.25/2012 grants exemption to services rendered to "Railways" without qualification that the railway must be for public carriage of passengers or goods. The adjudicating authority impermissibly imported a restrictive meaning from the Railways Act, 1989; there is no such restriction in the exemption notification or the taxing statute. The Tribunal followed and relied upon earlier decisions to conclude that the exemption applies to all railway infrastructure, whether operated by Government or private entities, and therefore demands confirmed for works contract and erection/commissioning services are unsustainable. [Paras 11]

Demands confirmed in respect of work contract service and erection, installation and commissioning service in relation to railways are set aside.

Valuation of works contract - abatement under Rule 2A of Service Tax (Determination of Value) Rules, 2006 - Cum-tax benefit under Section 67(2) - Correct valuation/abatement and taxable value for repair and maintenance services rendered in relation to railway (treatment of Rites Haldia, Rites Chandrapura, Bhushan Steel and exclusion of opening balance for DVC Mejia) - HELD THAT: - The Tribunal examined the transactions and documentary evidence and held: where the service is works contract relating to immovable property (signalling and telecommunication systems), valuation under Rule 2A requires taxing 60% of the total amount (not 70%) for Rites Haldia and Rites Chandrapura. For Bhushan Steel, documentary evidence (VAT TDS certificate and work order) established that materials were supplied and the contract qualified as works contract service; abatement at 60% was accordingly allowable. For DVC Mejia, opening ledger balances are not part of service provided during the relevant period and must be excluded in computing taxable value. The Tribunal also held that the appellant correctly availed cum-tax/cum-duty adjustment under Section 67(2) because service tax was not collected from recipients; the appellant's computation of tax paid with interest was accepted and the residual demand corresponding to these issues was set aside. [Paras 12]

Balance demand of Rs.14,69,556 confirmed on repair and maintenance services is set aside; taxable value adjusted as per Rule 2A and cum-tax benefit under Section 67(2) accepted.

Reverse Charge Mechanism - correct period, applicable rate and abatement in computation - Whether the balance demand under reverse charge mechanism (RCM) of Rs.76,148 is sustainable in view of incorrect period/rates and abatement adopted by the department - HELD THAT: - The Tribunal considered the appellant's computations and submissions that demands for certain services were raised for periods prior to RCM applicability (RCM effective from 01.07.2012), that GTA abatement was incorrectly applied at 70% instead of 75% for the earlier period, and that incorrect rates of service tax/cess were applied for particular periods. Accepting the appellant's calculations and reasoning, the Tribunal held that the departmental computation resulted in excess demand; the residual RCM demand of Rs.76,148 was not sustainable and was set aside. [Paras 13]

Balance RCM demand of Rs.76,148 is set aside; the remaining RCM demand as quantified in the impugned order is upheld.

Penalty under sections 77, 78 and 78A - requirement of suppression/intent for imposition - Whether penalties under sections 77(1)(a), 78 on the appellant company and under section 78A on the director are imposable - HELD THAT: - The Tribunal observed that the tax demands (where sustained) had been paid along with interest and there was no evidence of suppression of facts or intention to evade tax. In the absence of material establishing mens rea or suppression, the statutory preconditions for imposition of penalties under sections 77, 78 and 78A were not satisfied. Accordingly, the Tribunal concluded that penalties imposed on the company and on the director cannot be sustained. [Paras 14, 15]

Penalties imposed under sections 77(1)(a), 78 and 78A are set aside.

Final Conclusion: The Tribunal allowed the appeals in part: demands for work contract service and erection/installation/commissioning in relation to railways were quashed; valuation adjustments and set-offs (including Rule 2A application, exclusion of opening balances, and Section 67(2) benefit) were accepted resulting in the setting aside of the residual repair/maintenance and RCM demands indicated above; penalties under sections 77, 78 and 78A were set aside. The appeals are disposed of on these terms.

Export of services - business auxiliary services - service tax liability - benefit accrued outside India - service used in India - destination based consumption tax

Export of services - business auxiliary services - service tax liability - benefit accrued outside India - service used in India - Whether the GSA commission received by the appellant from foreign airlines is exigible to service tax as Business Auxiliary Services or is to be treated as export of services and therefore not liable to service tax. - HELD THAT: - The Tribunal found that the services provided by the appellant as General Sales Agent to the foreign airlines (Hann Air, S.N. Brussels and Iceland Air) were rendered to persons who did not have any office or establishment in India and that consideration was paid in convertible foreign exchange. Applying the principles that export of services requires the service to be provided to and paid for by a person outside India and that services consumed outside India are eligible for export treatment, the Tribunal held that such GSA services qualify as export of services and are not liable to service tax under Business Auxiliary Services where the statutory conditions for export are satisfied. The Tribunal relied on its earlier reasoning in Paul Merchants , and on precedents including Microsoft Corporation (I) Pvt. Ltd. and GAP International Sourcing (India) Pvt. Ltd. , to the effect that service tax is a destination-based consumption tax and the taxability is determined with reference to the person paying for the service and the place of consumption. The Appellate Tribunal, New Delhi's decision disposing the related appeals on export grounds and the subsequent dismissal of Revenue's appeal to the Supreme Court as not pressed were followed. Applying that ratio to the present appeal, the adjudicating authority's demand under Business Auxiliary Services was found unsustainable for the period in dispute where the export conditions are fulfilled. [Paras 5, 8]

Appeal allowed by applying the ratio of the CESTAT, New Delhi; the GSA commission is to be treated as export of services and not exigible to service tax where the conditions for export of services are fulfilled.

Final Conclusion: The appeal is allowed on the same terms as CESTAT New Delhi Final Order No. 52656-52659/2016 dated 28-07-2016: the GSA commission received from the specified foreign airlines is to be treated as export of services and not liable to service tax for the period in dispute where the export conditions are met.

Taxability of laying of cables under or alongside roads under Sub section (105) of Section 65 of the Finance Act, 1994 - Commercial and Industrial Construction service - applicability and retrospective effect of Board Circular No. 123/5/2010 TRU dated 24.05.2010 - reimbursement or collection of service tax by service recipient and entitlement to refund

Taxability of laying of cables under or alongside roads under Sub section (105) of Section 65 of the Finance Act, 1994 - Commercial and Industrial Construction service - applicability and retrospective effect of Board Circular No. 123/5/2010 TRU dated 24.05.2010 - Whether the appellant's activity of trenching and laying of PLB pipes and cables for BSNL is a taxable service as Commercial and Industrial Construction service or is excluded from service tax in view of the Board Circular dated 24.05.2010. - HELD THAT: - The Tribunal accepted the Board Circular No. 123/5/2010 TRU dated 24.05.2010 which expressly clarifies that laying of cables under or alongside roads is not a taxable service under any clause of sub section (105) of Section 65 of the Finance Act, 1994. The Circular, after analysing various service heads, treated the clarification as general in nature and directed that it be applied in individual cases depending on facts and circumstances; the Tribunal held that the Circular operates retrospectively for the facts of this case. Applying the Circular to the admitted facts that the appellant carried out trenching and laying of cables for BSNL, the Tribunal found no provision in sub section (105) attracting service tax on those activities and therefore set aside the demand confirmed by the adjudicating authority and the Commissioner (Appeals). [Paras 8]

The activity of laying cables under or alongside roads by the appellant is not a taxable service under sub section (105) of Section 65 and the demand is set aside.

Reimbursement or collection of service tax by service recipient and entitlement to refund - penalty relief where tax found not leviable - Whether the appellant is entitled to refund of amounts collected from the service recipient and whether penalties imposed are sustainable. - HELD THAT: - The Tribunal held that although the demand was set aside on the ground that the activity was not taxable, the amounts collected from the service recipient and already deposited by the appellant were correctly deposited and the appellant is not entitled to refund of such amounts. However, having found that no tax was leviable, the Tribunal set aside all penalties that had been imposed. [Paras 9]

Amounts collected from the service receiver and deposited shall not be refunded; penalties imposed are set aside.

Final Conclusion: Appeal allowed: demand confirmed by the adjudicating authority is set aside on the ground that laying of cables under or alongside roads is not taxable under sub section (105) of Section 65 in light of Board Circular No. 123/5/2010 TRU (applied retrospectively); deposited amounts collected from the service recipient are not refundable, and penalties are quashed.

Works contract service - construction of residential complex service - self service - abatement (67%) as indication of supply of material) - refund of amounts deposited where demand is set aside - Section 73(3) of the Finance Act, 1994

Works contract service - construction of residential complex service - abatement (67%) as indication of supply of material) - self service - Classification and taxability of construction of residential complex carried out with material for periods before and after 01.06.2007 and up to 01.07.2010. - HELD THAT: - The Tribunal found as an admitted fact that the appellants carried out construction along with supply of material (the show cause notice itself allowed 67% abatement), and therefore the activity falls within works contract service. Applying the legal position in Larsen & Toubro and subsequent decisions, the Tribunal held that where the activity is a composite works contract no service tax could be levied prior to 01.06.2007. For the period after 01.06.2007, a composite works contract is chargeable only under the works contract service head and not under the head of construction of residential complex service; a demand raised under the latter head for a works contract was therefore unsustainable. Further, relying on the Board Circular and the explanation inserted w.e.f. 01.07.2010, the Tribunal held that construction by builders/developers was not taxable as a service to buyers prior to 01.07.2010 (being in the nature of self service), and accordingly demands for the period prior to 01.07.2010 must be set aside. The Tribunal directed recomputation for periods post 01.07.2010 as may be applicable and permitted the assessees to opt for the works contract composition scheme for any liability going forward. [Paras 4]

Demand of service tax on construction with material is set aside for the period up to 01.07.2010; where it is a works contract the correct chargeability is under works contract service (from 01.06.2007) and any post-01.07.2010 liability to be recomputed following natural justice and allowing option for composition scheme.

Refund of amounts deposited where demand is set aside - Section 73(3) of the Finance Act, 1994 - Entitlement to refund of service tax deposited during investigation and whether refund is barred by Section 73(3). - HELD THAT: - The Tribunal found that the deposits made by the appellants were not payments under the proviso to Section 73(3) (which requires payment with interest and intimation to the department and ordinarily precludes issuance of a show cause notice). In the present case show cause notices were issued after deposits, so the payments cannot be treated as mandated under Section 73(3). Since the underlying demands have been set aside, the appellants are entitled to refund of the amounts deposited as a consequential relief. [Paras 5]

Appellants entitled to refund of amounts deposited; rejection of refund on the ground of Section 73(3) is not tenable.

Final Conclusion: The appeals are allowed: demands of service tax on construction of residential complexes where construction involved supply of material are set aside for the period prior to 01.07.2010 (and any post-01.07.2010 liability to be recomputed under the correct head with opportunity to avail composition); deposits made in relation to the set-aside demands are refundable because payment was not under Section 73(3).

Application of the Central Excise Valuation Rules to related persons - valuation of supplies between interconnected undertakings under Rule 10(a) and Rule 10(b) - residual application of Rule 11 of the Central Excise Valuation Rules - transaction value / Section 4 condition of non-related buyer and seller - valuation at 110% of cost of production for captive consumption

Application of Rule 10(a) of the Central Excise Valuation Rules to interconnected undertakings - inapplicability of Rule 11 where an earlier valuation rule applies - treatment of sales to related persons as transaction value where Rule 10(a) applies - Whether the value of goods sold by the appellant to JSPL and JPL was to be determined under Rule 10(a)/10(b) of the Valuation Rules or under residual Rule 11, and consequent validity of the demand made under Rule 11. - HELD THAT: - The Tribunal found it undisputed that the appellant and the two buyers were inter-connected undertakings and thus related persons under Section 4(3)(b)(i). Rule 11 is a residual provision and is applicable only where none of the preceding valuation rules apply. The determinative question was whether the relationship between the appellant and JSPL/JPL also satisfied any of the other forms of relatedness in Section 4(3)(b) (clauses (ii), (iii) or (iv)) or whether the buyer was a holding or subsidiary of the assessee. The record contained no allegation or evidence that the buyers were related to the appellant in those additional ways, nor that the appellant was the holding or subsidiary of either buyer. One buyer (JPL) was a subsidiary of the other buyer (JSPL), which brings the facts squarely within Rule 10(a) as framed in the Valuation Rules. Where Rule 10(a) applies, valuation must be made as if the parties were not related, i.e., on the transaction value; the assessee was therefore entitled to value sales to those buyers on the basis of transaction value and was not liable to have values determined under Rule 11. Consequently the demand framed and confirmed under Rule 11 read with Rule 4 could not be sustained. The Tribunal did not decide the extended limitation point as it disposed the matter on merits in favour of the appellant.

Demand determined under Rule 11 set aside; valuation governed by Rule 10(a) and duty payable on transaction value.

Final Conclusion: The appeal is allowed: the demand of differential duty determined under Rule 11 read with Rule 4 is set aside because the facts fall under Rule 10(a) of the Valuation Rules, requiring valuation as if the appellant and the buyers were not related (transaction value).

Applicability of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - presumption of commencement of production under the Rules - requirement of evidence for recovery of duty - compounded levy scheme under the Packing Machines Rules - impact of absence of state licence on levy of central excise

Applicability of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - compounded levy scheme under the Packing Machines Rules - Whether the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 and the compounded levy scheme could be applied to fasten duty liability on the appellant for the period 01.07.2008 to 30.11.2009. - HELD THAT: - The Tribunal found that the adjudicating authority relied solely on the prescriptions of the Rules to impose duty without any concrete evidence of manufacture of the notified goods. The show-cause and adjudication proceeded on the basis that absence of statutory declaration and monthly intimations led to a deemed finding of manufacture, but there was no inquiry or evidentiary basis to establish that the machines were used for production of the notified goods. The Court emphasised that the Rules cannot be invoked as a substitute for evidence of manufacture and that application of the compounded levy scheme requires factual foundation showing manufacture or use of packing machines for the notified goods. Consequently, the presumption invoked from non-filing of the declaration and returns, in absence of corroborative evidence of manufacture, was held to be unacceptable. [Paras 8, 11]

The Rules and compounded levy could not be validly applied to fasten duty on the appellant for the period 01.07.2008 to 30.11.2009 in the absence of evidence of manufacture; the demand based on the Rules was set aside.

Presumption of commencement of production under the Rules - requirement of evidence for recovery of duty - impact of absence of state licence on levy of central excise - Whether a presumption that production had commenced (and therefore duty was payable) could be sustained where the appellant lacked state licence to manufacture the notified product and there was no evidence of clandestine production, power consumption, raw material purchases, or destination of any produced goods. - HELD THAT: - The Tribunal criticised the adjudicating authority for overlooking that the appellant never obtained the requisite state licence to manufacture the notified product and that no verification was made regarding whether the machine was actually put to use for producing the notified goods. The Court observed that levying excise duty on goods that were illegal under state law, or on an assumption of manufacture without any evidentiary foundation, would be anomalous and unjustified. In the absence of evidence of clandestine production or any material indicia (such as power use, procurement of raw materials, or distribution), the presumption of commencement of production underpinning recovery was rejected. [Paras 9, 11]

The presumption of commencement of production could not be sustained; recovery of duty could not be ordered in the absence of evidence and notwithstanding the absence of a state licence.

Final Conclusion: The appeal is allowed and the impugned order is set aside: the demand and recovery under the Pan Masala Packing Machines Rules, 2008 (and attendant penalties) are unsustainable where there is no evidentiary foundation of manufacture during 01.07.2008 to 30.11.2009 and where the appellant lacked state licence; a mere presumption arising from non filing of declarations is inadequate to fasten excise liability.

Revenue neutrality - utilisation of CENVAT credit - retrospective amendment and recovery under Section 153(4) of the Finance Act, 2003 - area-based exemption notification - appropriation of refunds

Revenue neutrality - utilisation of CENVAT credit - retrospective amendment and recovery under Section 153(4) of the Finance Act, 2003 - Whether demand for recovery of amounts alleged to have been refunded in excess for the period upto 22.12.2002 is sustainable where the assessee subsequently utilised accumulated CENVAT credit thereby neutralising any alleged excess refund - HELD THAT: - The Tribunal held that where an assessee, after amendment of the exemption notification, diligently utilised accumulated CENVAT credit in subsequent months so that overall duty paid less credit equalled the position as on exhaustion in June 2003, there was no actual loss to the revenue. The retrospective operation of the amendment and the power of recovery under Section 153(4) were examined in the factual matrix where refunds originally allowed for earlier months were effectively neutralised by reduced refund claims in later months due to utilisation of CENVAT credit. Relying on precedents where similar factual patterns were treated as revenue-neutral (including New India Wire & Cables and Singla Cables), the Tribunal concluded that confirming a demand in such circumstances would defeat the purpose of the area-based exemption and is not sustainable. The Tribunal therefore found the recovery order impugned to be unsustainable on the facts.

Demand for recovery of alleged excess refunds for the period upto 22.12.2002 set aside as not sustainable; no recovery permissible in the facts of these appeals.

Appropriation of refunds - area-based exemption notification - Whether refunds sanctioned under the exemption notification for the months August 2006 to October 2006 could be appropriated to recover the amounts purportedly refundable for earlier period - HELD THAT: - The Tribunal held that appropriation of later refunds to recover the alleged excess earlier refunds was not justified where the overall position between duty paid and CENVAT credit, taken across the relevant periods, was revenue-neutral and the recovery itself was found unsustainable. The view in earlier Tribunal decisions was applied to conclude that the departmental appropriation of August-October 2006 refunds to adjust the disputed amounts was not required.

Appropriation of refunds relating to August 2006 to October 2006 set aside; those refunds were not liable to be appropriated to meet the disputed demand.

Final Conclusion: Both appeals allowed; impugned orders of recovery and appropriation set aside and consequential relief granted to the appellants on the basis that the disputed recoveries were not sustainable in view of revenue neutrality arising from subsequent utilisation of accumulated CENVAT credit.

Abatement of duty - Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - Rule 10 - compounded levy scheme - setting off suo motu of abated duty against subsequent month's liability - abatement is a reduction/diminution and not a refund

Abatement of duty - Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - Rule 10 - setting off suo motu of abated duty against subsequent month's liability - compounded levy scheme - Whether the appellant, having complied with the intimation, sealing and de-sealing procedure under Rule 10 of the PMPM Rules, was entitled to proportionate abatement for periods of non-production and thereby could pay duty only for days of operation (and set off the abated amount against subsequent month's duty) without first paying full monthly duty and then claiming refund. - HELD THAT: - Rule 10 of the PMPM Rules provides that where a factory does not produce notified goods for a continuous period of fifteen days or more, duty calculated on a proportionate basis shall be abated subject to prescribed intimation and sealing/de-sealing conditions. The Rule is silent as to any specific procedure requiring prior payment of full monthly duty and thereafter seeking refund. The ordinary meaning of "abatement" is reduction or diminution of duty, not refund. In the absence of any express procedural mandate in Rule 10 (unlike other compounded-levy rules which expressly provide for an order of abatement), an assessee who fulfils the conditions of Rule 10 becomes entitled to have duty reduced for the non-production period. Where the abatement claimed does not exceed the entitlement under Rule 10, calculating the proportionate duty and adjusting it against the duty payable in the succeeding month is not contrary to the statutory scheme and does not prejudice revenue. This view is consistent with judicial decisions which have held that abatement under Rule 10 may be claimed on compliance with its conditions and that there is no requirement to deposit full duty first; the Tribunal relied on and followed the reasoning in Thakkar Tobacco (Gujarat High Court), CCE v. Shakti Fragrances (Delhi High Court) and related authorities, and noted that administrative circulars treating abatement procedures do not create a statutory requirement to pay full duty before claiming abatement.

The appellant was entitled to proportionate abatement under Rule 10 for the specified periods of non-production and could pay duty only for days the packing machine was operated (and set off the abated amount), therefore the demand for full monthly duty for the periods in question is unsustainable.

Final Conclusion: The demand confirmed by the Adjudicating Authority was set aside and the appeal allowed, the Tribunal holding that abatement under Rule 10 is available on compliance with its conditions and that there is no requirement to deposit full monthly duty prior to claiming such abatement.

Determination of taxable turnover under Rule 8(5)(d) of the TNVAT Rules, 2007 - Levy under Section 5(1) of the TNVAT Act, 2006 - Deduction for labour charges and other charges where not ascertainable from books - Proof requirement for deduction for sub-contractors under proviso to Rule 8(5)(c) - Adjustment of tax deducted at source (TDS) against assessed liability - Availability of statutory appellate remedy under the TNVAT Act, 2006

Determination of taxable turnover under Rule 8(5)(d) of the TNVAT Rules, 2007 - Levy under Section 5(1) of the TNVAT Act, 2006 - Deduction for labour charges and other charges where not ascertainable from books - Validity of the assessment method used to determine taxable turnover for works contracts - HELD THAT: - The Court held that taxable turnover for works contracts must be determined strictly in accordance with Rule 8(5) of the TNVAT Rules, 2007 read with Section 5(1) of the TNVAT Act, 2006. Only amounts specified in clauses (a) to (i) of Rule 8(5) are permissible deductions. Where labour and other non-goods charges are not ascertainable from books produced before the assessing authority, deduction is permissible only at the prescribed percentage in the table to Rule 8(5)(d). A dealer cannot arbitrarily adopt a method contrary to Rule 8(5) (for example, adding an ad hoc percentage to purchases) without furnishing particulars of value of goods and services. The decision in Tvl. ITD Cementation India Ltd. relied upon by the petitioner was not applicable so as to permit the petitioner's claimed methodology; the assessment under Rule 8(5)(d) and Section 5(1) was therefore sustainable. The Court found other amounts confirmed in the impugned order also militated against interference under Article 226. [Paras 53, 54, 56, 57, 58]

Assessment upheld: taxable turnover determined in accordance with Rule 8(5) and Section 5(1) is valid; petitioner's alternate valuation method rejected and writ petition does not merit interference.

Proof requirement for deduction for sub-contractors under proviso to Rule 8(5)(c) - Adjustment of tax deducted at source (TDS) against assessed liability - Availability of statutory appellate remedy under the TNVAT Act, 2006 - Direction to adjust subsequently issued TDS certificates and procedure for further contest by statutory appeal - HELD THAT: - The Court noted that certain TDS certificates had been issued by the Greater Chennai Corporation during pendency of the petition and directed the petitioner to furnish those certificates to the assessing authority within thirty days. The assessing authority was directed to issue a corrigendum revising tax liability after adjusting the TDS certificates issued during pendency within sixty days. Thereafter the petitioner was granted liberty to file an appeal before the Appellate Authority within ninety days, and the Appellate Authority was directed to dispose of the appeal on merits as expeditiously as possible, preferably within six months. These directions amount to a limited remand for adjustment and for the statutory appellate process to be availed. [Paras 59, 60, 61, 62]

Petitioner to furnish TDS certificates; assessing authority to issue corrigendum adjusting liability; petitioner to pursue statutory appeal within prescribed time; appellate authority to decide expeditiously.

Final Conclusion: Writ petition dismissed. The assessment under Section 5(1) of the TNVAT Act, 2006 and Rule 8(5) of the TNVAT Rules, 2007 is sustained; petitioner directed to produce pending TDS certificates, the assessing authority to revise liability by corrigendum and petitioner given liberty to pursue statutory appeal within the time prescribed.

Reasoned order requirement in administrative decisions - settlement under Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Ordinance/Act - quashing for want of jurisdiction - refund adjustment under Rule 51 of the Bombay Sales Tax Rules, 1959 - jurisdictional limits between MVAT/CGST authorities and the Maharashtra Purchase Tax on Sugarcane Act, 1962

Reasoned order requirement in administrative decisions - settlement under Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Ordinance/Act - Impugned rejection order dated 21/08/2019 of application under Section 7 of the Settlement Ordinance was set aside for want of reasons and mechanical disposal. - HELD THAT: - The Court found that the Deputy Commissioner's short order rejecting the settlement application merely recited that the application was not in accordance with the Ordinance and recorded issuance of a show-cause notice, but did not address or record consideration of the contentions urged by the petitioner nor furnish reasons to disentitle the petitioner to settlement. The reply affidavit for the Revenue did not supply justifying reasons. For administrative decisions under the Settlement Ordinance, the absence of considered reasons rendered the rejection order bad in law and necessitated quashing and restoration for fresh decision in accordance with law.

Order dated 21/08/2019 rejecting the settlement application quashed and set aside; the settlement application is to be restored to the Deputy Commissioner for fresh decision in accordance with law.

Quashing for want of jurisdiction - refund adjustment under Rule 51 of the Bombay Sales Tax Rules, 1959 - jurisdictional limits between MVAT/CGST authorities and the Maharashtra Purchase Tax on Sugarcane Act, 1962 - Refund adjustment order dated 25/07/2019 under Rule 51 was held to be without jurisdiction and bad in law. - HELD THAT: - The Court observed that the Deputy Commissioner purported to invoke Rule 51 of the 1959 Rules to adjust refunds against dues said to arise under the Maharashtra Purchase Tax on Sugarcane Act, 1962, for the financial period 2012-13. The Court found no provision shown that empowered an authority under the MVAT Act or the CGST framework to exercise jurisdiction under the 1962 Act, and therefore the refund adjustment could not be sustained. Whether the 1959 Rules could be invoked in the circumstances was treated as a jurisdictional defect going to the root of the matter, leading to the conclusion that the refund adjustment order must be quashed.

Impugned refund adjustment order declared bad in law and set aside; matter restored for appropriate action consistent with jurisdictional limits.

Settlement under Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Act, 2023 - Petitioner permitted to file a fresh application under the subsequent 2023 Act and any such application to be decided independently and in accordance with law; all contentions left open. - HELD THAT: - The Court, while quashing the prior orders, expressly permitted the petitioner to apply under the later enactment (the 2023 Act). Any fresh application filed under the 2023 Act is to be considered on its own merits and decided in accordance with law. The Court did not adjudicate the merits of any such future application and kept all parties' contentions open for determination during that process.

Permission granted to file a fresh application under the 2023 Act; if filed it shall be decided independently in accordance with law and parties' contentions remain open.

Final Conclusion: The High Court quashed the Deputy Commissioner's rejection of the settlement application and the refund adjustment order for want of reasons and for lack of jurisdiction respectively, restored the matter for fresh decision in accordance with law, and allowed the petitioner leave to file a fresh application under the 2023 Act with all contentions kept open.

Exemption under Section 6(2) of the Central Sales Tax Act - transfer of documents of title during movement of goods - commencement and termination of movement upon delivery to and from carrier - validity of consignment-note endorsement lacking a date - trade circular clarifying transfer of documents and pre-existing orders

Exemption under Section 6(2) of the Central Sales Tax Act - transfer of documents of title during movement of goods - commencement and termination of movement upon delivery to and from carrier - Claim for exemption under Section 6(2) was allowable because the subsequent sale by transfer of documents of title occurred during inter state movement of the goods. - HELD THAT: - The Court examined Section 3 and Section 6(2) of the Central Sales Tax Act together with the statutory explanations and the Trade circular relied upon by the parties. Movement for the purpose of clause (b) of Section 3 commences when goods are delivered to a carrier and terminates when delivery is taken from the carrier. On the record the transporter issued the consignment note on 29th March 2008, which necessarily post dates receipt of the goods by the carrier. The endorsement on the consignment note in favour of the ultimate buyer, though undated, could not have been made before the consignment note was issued or before the carrier received the goods. The Revisional and Appellate Authorities misinterpreted the statutory scheme by treating the transfer as having occurred prior to commencement of movement; on the proper construction of the provisions and having regard to the documentary record the subsequent sale was effected by transfer of documents of title during the inter state movement and therefore falls within the exemption under Section 6(2).

Impugned orders rejecting the exemption were quashed and the petitioner entitled to the claim of exemption under Section 6(2).

Validity of consignment-note endorsement lacking a date - trade circular clarifying transfer of documents and pre-existing orders - Absence of a date on the consignment note endorsement did not, on the facts, defeat the petitioner's claim where the documentary chronology established that endorsement could not have preceded delivery to the carrier. - HELD THAT: - The lower Authorities treated the lack of a date on the endorsement as fatal because it precluded proof that title was transferred during movement. The High Court held that, given issuance of the consignment note by the transporter and the dates on the accompanying invoice and delivery challan, the endorsement could not have been effected before the carrier received the goods. The Trade circular was also held to support that pre existing orders or known parties do not negate a Section 3(b) sale if the physical or constructive transfer of documents of title during movement is otherwise established. Consequently the mere absence of a date on the endorsement did not justify disallowance of the exemption on the facts before the Court.

The authorities' reliance on absence of date was rejected and did not sustain disallowance of the exemption claim.

Final Conclusion: Writ petition allowed; the assessment, appellate and revisional orders disallowing the claim under Section 6(2) are quashed and the petitioner entitled to the claimed exemption, with consequential legal effects to follow.

Substantial estoppel - promissory estoppel - interpretation of incentive/special package - Industrial Promotional Assistance (IPA) - applicability of WBIS 2000 and WBIS 2004 - state policy and subsidy interpretation

Industrial Promotional Assistance (IPA) - interpretation of incentive/special package - Entitlement of the petitioners to payment of the balance IPA under the special package granted on March 2, 2006. - HELD THAT: - The special package expressly provided IPA at the rate of 75% of VAT and CST paid in the previous year and stated that IPA would be released "without any financial cap" by way of adjustment against VAT and CST liability of that year. The Court held that this language must be read in context and, since the IPA pertains exclusively to VAT and CST subsidies, the exemption from any financial cap applies to the package as a whole. The package separately limited applicability of WBIS 2000 only to specify which other subsidies (except Interest Subsidy) would apply; it did not render the 2000 Scheme wholly applicable. There is no reference in the special package to WBIS 2004, and the mere fact that the 2004 Scheme was in force when the package was issued does not permit importing its provisions into the special package. On these conclusions the Court found the petitioners entitled to the undisbursed balance under the special package and directed payment forthwith within three months. [Paras 40, 55, 56, 59, 60]

The petitioners are entitled to the balance IPA due under the special package and respondents are directed to disburse the balance within three months; the impugned order is set aside.

Applicability of WBIS 2000 and WBIS 2004 - state policy and subsidy interpretation - Whether the respondent authorities could invoke WBIS 2000 or WBIS 2004 (including caps in those schemes) to restrict or deny the special package benefits. - HELD THAT: - The Court rejected the respondents' attempt to read the 2000 and 2004 Schemes into the special package. The 2000 Scheme was referred to in the package only to indicate which other subsidies (except Interest Subsidy) the unit would be entitled to; it did not render the 2000 Scheme fully applicable. There is no mention of the 2004 Scheme in the special package; therefore the respondents could not lawfully construe the package by importing caps or provisions from the 2004 Scheme. The Court characterised the respondents' reliance on those schemes as erroneous, arbitrary and mala fide insofar as it was designed to defeat the petitioners' claim. [Paras 52, 53, 54, 57, 58]

The 2000 and 2004 WBIS schemes cannot be read down into the special package to impose financial caps or otherwise curtail the package benefits; respondents' reliance on those schemes to deny payment is rejected.

Substantial estoppel - promissory estoppel - Whether the petitioners can rely on estoppel (and if so, which doctrine) to enforce the special package after partial disbursals. - HELD THAT: - The Court distinguished promissory estoppel (which the Supreme Court has held not generally to bind the State in policy decisions) from substantial estoppel. Here a specific special package was granted and the respondents acted on it by disbursing subsidies for more than two years of the five-year tenure. The petitioners acted and spent resources on the basis of the granted package and received disbursements; there was no declared change of State policy. On these facts the Court held that substantial estoppel applies and that the respondents are bound to honour the package rather than relying on a later, inconsistent construction invoking other schemes. [Paras 47, 48, 49, 50, 51]

Substantial estoppel applies on the facts; the State cannot resile from the special package after acting on it and making partial disbursals.

Final Conclusion: WPA 9546 of 2019 is allowed; the order dated September 14, 2019 is set aside and the respondents are directed to disburse the balance amount due under the special package to the petitioners within three months; no order as to costs.

Writ jurisdiction under Article 226 - Challenge to show cause notice at pre assessment stage - Restraint in entertaining writ petitions against show cause notices - Limitation as a mixed question of fact and law - Limitation as a jurisdictional bar - Objection to notice to be raised before assessing authority - Right to personal hearing

Writ jurisdiction under Article 226 - Challenge to show cause notice at pre assessment stage - Restraint in entertaining writ petitions against show cause notices - Maintainability of writ petitions filed at the stage of pre assessment show cause notices asserting that the notices are barred by limitation - HELD THAT: - The High Court declined to entertain the batch of writ petitions at the stage of show cause notice. The court reiterated the settled principle that interference under Article 226 against mere show cause notices should be exercised with restraint and only in rare cases; ordinarily the appropriate course is to raise objections, including limitation pleas, before the authority issuing the notice. Reliance was placed on precedent that challenge to a show cause notice is not ordinarily a ground for immediate intervention. Further, limitation involves mixed questions of fact and law, which favours adjudication by the assessing authority first rather than pre emptive judicial interference.

Writ petitions dismissed at the show cause stage; court refused to interfere with the impugned notices.

Limitation as a mixed question of fact and law - Limitation as a jurisdictional bar - Objection to notice to be raised before assessing authority - Right to personal hearing - Procedure to be followed by the parties and the assessing authority where limitation is alleged against pre assessment notices - HELD THAT: - Although the court refused to quash the notices, it granted the petitioner liberty to raise objections, including the plea of limitation, before the assessing authority. The court directed that such objections be filed within six weeks from receipt of the order and directed the respondent authority to consider the objections after affording a reasonable opportunity of personal hearing. The order emphasises that the limitation plea and related factual matters are to be examined and decided by the competent authority in the assessment proceedings.

Petitioner permitted to file objections within six weeks; assessing authority to consider the objections and afford personal hearing; writ petitions disposed of accordingly.

Final Conclusion: The High Court declined to interfere at the show cause stage, holding that challenges to pre assessment notices on limitation grounds should ordinarily be raised before the assessing authority; the petitioner was granted liberty to file its objections within six weeks and the authority was directed to consider them after affording a personal hearing, whereupon the writ petitions were disposed of.

Tenure and retirement age - interim orders - protection of appointments made pursuant to court directions - retrospectivity of legislation - independence of judiciary

Tenure and retirement age - interim orders - protection of appointments made pursuant to court directions - Continuation in service of four Judicial Members of the CESTAT pending final disposal of the Writ Petition - HELD THAT: - The Court noted that the four Judicial Members were selected pursuant to a 2016 selection process when the parent legislation prescribed retirement at 62 years and that interim orders of this Court (including the order of 21 August 2018) operate to preserve the terms of appointment as they existed at the time of selection. Having regard to the principle that appointments made pursuant to interim directions of this Court cannot be nullified by subsequent legislation curtailing tenure, and to the observations in Madras Bar Association (2) and the concurring opinion emphasizing arbitrariness in curtailing tenure and the effect on judicial independence, the Court held that it would be unjust to permit the tenures to lapse between 18 April and 9 May, 2023. Accordingly, the four Judicial Members shall continue in service until the Writ Petition is finally disposed of. The Court directed listing for final hearing and required written submissions to be filed in advance. [Paras 4, 5, 6, 7, 8]

The four Judicial Members named in the order dated 3 March, 2023 shall continue in service pending final disposal of the Writ Petition; the matter is listed for final hearing on 11 July, 2023 and written submissions to be filed at least one week prior.

Final Conclusion: Pending final disposal of the Writ Petition, the four Judicial Members of the CESTAT shall continue in office until the case is finally adjudicated; the petition is listed for hearing on 11 July, 2023.

Dishonour of cheque under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal of statutory presumption - Cheque issued as security, undated or later dated after closure of drawer - Existence of drawer/company at the time of cheque presentation

Dishonour of cheque under Section 138 of the Negotiable Instruments Act - Existence of drawer/company at the time of cheque presentation - Whether the mandatory ingredients of Section 138 of the Negotiable Instruments Act were satisfied in respect of the cheque dated 24.10.2011. - HELD THAT: - The Court found that the company in whose name the cheque was allegedly issued had closed down in March, 2011, whereas the cheque bears date 24.10.2011 and was presented thereafter. The signature on the cheque was incomplete and evidence supports the petitioner's case that the cheque was undated and was given as security and only subsequently dated and presented by the complainant. On these facts the Court held that the mandatory provision of Section 138 (which requires that the cheque be drawn on an account maintained by the drawer and the conditions precedent be present) was not satisfied in the present case. The Court relied on the principle that dishonour must be viewed in the context of the statutory preconditions and applicable authorities which recognise that dishonour on grounds such as account closed or stoppage may not attract the section where the statutory conditions are absent. [Paras 21, 22, 23, 24, 25]

The conviction under Section 138 could not be sustained because the statutory ingredients were not present.

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal of statutory presumption - Cheque issued as security, undated or later dated after closure of drawer - Whether the presumption under Section 139 was rebutted by the petitioner. - HELD THAT: - The Court accepted the petitioner's evidence and documentary material indicating that all dues were cleared before the original company closed and that the cheque was retained by the complainant as security. The fact that the cheque was dated eight months after closure of the company and bore an incomplete signature, together with the petitioner's reply denying liability, prima facie established that the statutory presumption of discharge of a debt or liability raised by Section 139 had been rebutted. Having found the presumption rebutted on the material on record, the Court concluded that the complainant had not fulfilled the burden to prove a recoverable debt for which the cheque was drawn. [Paras 18, 19, 21, 23, 25]

The presumption under Section 139 was rebutted and the complainant failed to establish a lawful debt or liability.

Final Conclusion: Criminal Revision CRR 302 of 2020 is allowed; the impugned orders affirming conviction under Section 138 are set aside and the petitioner is acquitted and discharged. The deposit made before the trial court is permitted to be withdrawn and connected applications stand disposed of.

Legally enforceable debt - offence under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - unenforceability for being against public policy or defeated by statutory duty - effect of undervaluation of consideration in registered sale deeds on enforceability - beneficiary of undervaluation

Legally enforceable debt - unenforceability for being against public policy or defeated by statutory duty - effect of undervaluation of consideration in registered sale deeds on enforceability - Whether the alleged debt recorded in Ext.P8 Letter of Acknowledgment, given the registered sale deeds showing a lower consideration and the possibility of undervaluation, was a legally enforceable debt for the purposes of proceedings under Section 138 of the Negotiable Instruments Act. - HELD THAT: - The Court held that although the registered sale deeds recorded a much lower consideration, the parties had entered into Ext.P8 by mutual agreement and consensus ad idem making the revision petitioner liable for the larger sum. The possibility that Ext.P8 was executed to avoid payment of higher stamp duty under the Kerala Stamp Act did not render the debt unenforceable in criminal proceedings under Section 138, particularly because the petitioner was the beneficiary of the undervaluation. Thus, an agreement which results in undervaluation does not automatically make the debt non-recoverable under Section 138 where the transaction and liability are admitted and the complainer has complied with statutory preconditions. [Paras 15, 16, 17, 18]

Ext.P8 gave rise to a legally enforceable debt for the purposes of Section 138 despite undervaluation in the registered sale deeds; the debt was not rendered unenforceable by the prospect of stamp-duty implications or alleged public-policy considerations.

Offence under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - beneficiary of undervaluation - Whether proceedings under Section 138 were maintainable and the conviction sustainable where issuance and dishonour of the cheque, signature and liability were admitted and statutory formalities were complied with. - HELD THAT: - The Court noted that the issuance of the cheque, the signature thereon and the liability of the petitioner were not disputed, and that the complainant had complied with the procedural requirements of Sections 138 and 139. Given the admitted transaction and dishonour for insufficiency of funds, the Magistrate's conviction and sentence and the dismissal of the appeal by the Sessions Court were supported. The petitioner's contention that the debt was not legally recoverable was rejected on the ground that he was the beneficiary of the undervaluation and could not now repudiate the liability after defaulting on the cheque. [Paras 14, 15, 19]

Proceedings under Section 138 were maintainable and the conviction was sustainable because the transaction, issuance and dishonour of the cheque and compliance with statutory prerequisites were admitted.

Final Conclusion: The revision petition is dismissed; the conviction and sentence for the offence under Section 138 of the Negotiable Instruments Act, arising from the dishonour of the cheque and the admitted liability, are upheld.

Maintainability of complaint under Section 138 of the Negotiable Instruments Act where cheque was issued for and on behalf of a company - Arraignment of the company as accused and applicability of Section 141 - Requirement of service of demand notice on the company where cheque bears company seal and is issued by a director - Quashing of criminal proceedings for non-impleading of the company

Maintainability of complaint under Section 138 of the Negotiable Instruments Act where cheque was issued for and on behalf of a company - Arraignment of the company as accused and applicability of Section 141 - Requirement of service of demand notice on the company where cheque bears company seal and is issued by a director - Quashing of criminal proceedings for non-impleading of the company - Proceedings under Section 138 of the Negotiable Instruments Act prosecuted only against a director, where the cheque was issued for and on behalf of the company and the company was neither served with the demand notice nor impleaded as an accused, are not maintainable and liable to be quashed. - HELD THAT: - The Court found that the cheque in question was issued by the petitioner as a Director and bore the company's seal, and that no demand notice was served on M/s. Ashika Infra Projects Private Limited nor was the company made an accused. Relying on the principle articulated by the Supreme Court (as cited in Himanshu v. B. Shivamurthy and related authority), where the offence arises in the context of a company, Section 141 contemplates arraigning the company and permits proceedings against responsible persons only in that context; absent service of notice on, and arraignment of, the company, a complaint against the director alone is not maintainable. The High Court applied these authorities to the facts here, observed the factual parity (cheque signed as Director, company seal, no notice to company, company not impleaded) and concluded that continuation of prosecution would be impermissible. Consequently the revision was allowed and the complaint proceedings quashed. [Paras 24, 25, 26]

Revision allowed; proceedings in complaint case No. C/752 of 2019 under Section 138 N.I. Act quashed for non-impleading of the company and non-service of demand notice on the company.

Final Conclusion: The petition succeeds: prosecution under Section 138 was quashed because the cheque was issued for and on behalf of a company which was neither served with the statutory demand notice nor impleaded as an accused; consequently the complaint against the director alone was held not maintainable.

Cheque issued for time-barred debt - legally enforceable debt requirement under Section 138 of the Negotiable Instruments Act - written acknowledgement under Section 18 of the Limitation Act - cheque held as security and subsequent misuse

Cheque issued for time-barred debt - legally enforceable debt requirement under Section 138 of the Negotiable Instruments Act - written acknowledgement under Section 18 of the Limitation Act - cheque held as security and subsequent misuse - Whether the criminal proceedings in S.T.C. No.17 of 2020 under Section 138 of the Negotiable Instruments Act are liable to be quashed on the ground that the cheque was issued in respect of a time barred debt and not for a legally enforceable debt. - HELD THAT: - The complaint averred that the alleged loan was advanced on 21.04.2016 and that the cheque in question was issued on 13.08.2019, which, on the face of the averments, places issuance of the cheque beyond the period of limitation. The petitioner's contention that the cheque had earlier been handed to the complainant as security in 2015 and was thereafter misused by the complainant is not supported by documentary evidence on record. Crucially, the complaint contains only averments of a part repayment said to have occurred on 01.12.2016 but no contemporaneous written acknowledgement by the petitioner as required by Section 18 of the Limitation Act; mere averment in the complaint does not satisfy the statutory requirement for written acknowledgement to revive a barred debt. The Court applied the settled principle that a cheque issued in discharge of a debt which is barred by limitation does not attract the penal provision under Section 138 of the Negotiable Instruments Act, relying on earlier decisions including M/s. Jage Ram Karam Singh and another v. State and another and Samadharman and others v. S. Nataraja , and held that, on the materials and averments in the complaint, the cheque was issued for a time barred debt and therefore the proceedings under Section 138 were not maintainable. [Paras 6, 7, 8]

Proceedings in S.T.C. No.17 of 2020 are quashed.

Final Conclusion: The petition is allowed and the criminal proceedings in S.T.C. No.17 of 2020 on the file of the learned Judicial Magistrate No. II, Fast Track Court (Magisterial Level) Madurai are quashed on the ground that the cheque, as averred in the complaint, was issued in respect of a time barred debt and no written acknowledgement within the meaning of Section 18 of the Limitation Act was shown to revive the debt.

Liability of directors under Section 141 of the Negotiable Instruments Act - requirement of specific averments to show a director was in charge of and responsible for the conduct of the company's business - non-executive director not prima facie in charge of day-to-day affairs of the company - High Court's inherent power under Section 482 of the Code of Criminal Procedure to quash criminal proceedings to prevent abuse of process - exception of unimpeachable or uncontrovertible evidence permitting quashing despite presence of basic averment

Requirement of specific averments to show a director was in charge of and responsible for the conduct of the company's business - liability of directors under Section 141 of the Negotiable Instruments Act - non-executive director not prima facie in charge of day-to-day affairs of the company - Whether the complaint satisfies the requirements under Section 141 of the Negotiable Instruments Act to make non-executive directors liable and be proceeded against as accused persons. - HELD THAT: - The Court held that mere bald or generic averments that directors were "in charge of and responsible for the day-to-day affairs" are insufficient when non-executive directors are sought to be made accused. Where non-executive directors by definition do not participate in day-to-day management, the complaint must contain specific averments showing how and in what manner the particular directors were in charge of and responsible for the conduct of the company's business at the relevant time. Reliance was placed on the principles distilled in the cited authorities that the basic averment under Section 141 is a necessary but not always sufficient ingredient; the role of a director is a question of fact and cannot be presumed simply from board membership. The petitioners produced Form-32 from the Registrar of Companies showing their status as non-executive directors since 2007, which is an unimpeachable document undermining any general assertion of managerial control.

The complaint does not satisfy Section 141 as against the petitioners who are non-executive directors; they cannot be roped in as accused without specific averments showing responsibility for the company's affairs.

High Court's inherent power under Section 482 of the Code of Criminal Procedure to quash criminal proceedings to prevent abuse of process - exception of unimpeachable or uncontrovertible evidence permitting quashing despite presence of basic averment - Whether this Court should exercise its Section 482 Cr.P.C. jurisdiction to quash the complaint insofar as it concerns the petitioners. - HELD THAT: - Applying the established principle that the High Court may, in appropriate cases, quash complaints despite presence of the basic averment where unimpeachable, uncontrovertible evidence or totally acceptable circumstances show a director could not have been concerned with the offence, the Court found continued proceedings against the petitioners would be an abuse of process. The Form-32 record of their non-executive status constituted acceptable documentary material which, on an overall reading of the complaint, destroyed the substratum of culpability as to them. The Court emphasised that Section 482 powers are to be used sparingly but permit consideration of unimpeachable evidence at the threshold to prevent needless prosecution.

In exercise of its inherent jurisdiction under Section 482 Cr.P.C., the Court quashed the complaint insofar as it related to the petitioners.

Final Conclusion: The Criminal Original Petitions are allowed; the proceedings in C.C.No.2337 of 2019 are quashed insofar as the petitioners are concerned. The trial shall continue against the remaining accused and the trial court is directed to conclude proceedings within six months from receipt of this order.