TaxTMI Updates e-Newsletter
Oct 05,2021

Advance ruling void ab initio for fraud or suppression of material facts - Proviso to Section 98(2) - non-admission where question is already pending in proceedings - Application disclosure obligations in Form GST ARA-01 (column 17) - Authority's power under Section 104 to declare advance ruling void

Advance ruling void ab initio for fraud or suppression of material facts - Proviso to Section 98(2) - non-admission where question is already pending in proceedings - Application disclosure obligations in Form GST ARA-01 (column 17) - Authority's power under Section 104 to declare advance ruling void - Whether the advance ruling pronouncing classification and taxability in Advance Ruling No. GUJ/GAAR/R/78/2020 was vitiated by suppression of material facts and therefore liable to be declared void ab initio under the CGST/GGST Acts. - HELD THAT: - The Appellate Authority found on the record that when the appellant filed Form GST ARA-01 they ticked both items in column 17, thereby representing that the question was neither pending nor decided in any proceedings under the Act. Materially, officers of the DGGI had visited the appellant's premises and recorded statements prior to the filing of the advance ruling application, a fact which the Authority concludes was not disclosed in the application or recorded in the personal hearing. Had the pending proceedings been disclosed, the proviso to sub section (2) of section 98 would have precluded admission of the application and the advance ruling would not have been issued. Section 104 authorises the Authority or Appellate Authority to declare an advance ruling void ab initio where it is obtained by fraud, suppression of material facts or misrepresentation; applying that provision, the Appellate Authority held that the advance ruling was obtained by suppression of material facts and is therefore liable to be set aside. The Appellate Authority therefore did not examine the substantive classification issue since the ruling was vitiated by non disclosure and suppression of material facts. [Paras 15, 16, 17, 19, 21]

The advance ruling No. GUJ/GAAR/R/78/2020 is declared void ab initio for suppression of material facts and for non compliance with the proviso to section 98(2); the ruling is modified accordingly.

Final Conclusion: The Appellate Authority set aside and declared Advance Ruling No. GUJ/GAAR/R/78/2020 void ab initio under the CGST Act, 2017 and GGST Act, 2017 on the ground of suppression of material facts, without adjudicating the substantive classification question.

Composite supply of works contract - original works - pertaining to railways - definition of "railway" under the Railway Act, 1989 - concessional rate of GST for works pertaining to railways

Composite supply of works contract - original works - The contract qualifies as a composite works contract involving original works for the purposes of Entry No.3(v)(a) of Notification No.11/2017-Central Tax (Rate). - HELD THAT: - The Appellate Authority noted that GAAR had already found the contract to be in the nature of new works and falling within the definition of "original works" and also that the contract involves transfer of property in goods in relation to immovable property, thereby satisfying the definition of a "works contract". The authority accepted those findings and treated conditions (i) and (ii) required by Entry No.3(v)(a) - that the supply be a composite works contract and that it relates to original works - as fulfilled. [Paras 14]

Conditions that the contract is a composite works contract and that it involves original works are satisfied.

Pertaining to railways - definition of "railway" under the Railway Act, 1989 - concessional rate of GST for works pertaining to railways - The works contract awarded to the appellant pertains to railways and therefore falls within Clause 3(v)(a) of Notification No.11/2017-Central Tax (Rate). - HELD THAT: - The authority examined the documentary record: NHSRCL's memorandum and object clause showing its high-speed rail mandate and majority government ownership; the Letter of Acceptance by NHSRCL to RITES for shifting existing railway infrastructure in connection with the High Speed Rail Project; RITES' subsequent LOA to the appellant; RITES' invoices to NHSRCL charging 12% GST; and the Form-III/VI contract labour authorization naming NHSRCL as Principal Employer. The scope of work (track work, pavement alongside track, high mast lighting, ESS, warehouses, EIMWB, admin buildings and associated works) was compared with the statutory definition of "railway" under section 2(31) of the Railway Act, 1989 and found to fall within its clauses (b), (c) and (d). On this basis the authority concluded that the contract indisputably pertains to railways. The authority also rejected the GAAR's view that absence of a direct agreement between RITES and Ministry of Railways or an express label of "Government Railway" on the contract precluded the finding; the documentary matrix furnished was held sufficient to establish that the works relate to NHSRCL's railway project. [Paras 14, 18]

The work contracted by the appellant pertains to railways and therefore the contract is covered by Clause 3(v)(a) of Notification No.11/2017-Central Tax (Rate).

Final Conclusion: The appeal is allowed; the Advance Ruling No. GUJ/GAAR/R/36/2020 dated 03.07.2020 is modified to hold that the appellant's works contract is a composite works contract involving original works pertaining to railways and is therefore covered by Clause 3(v)(a) of Notification No.11/2017-Central Tax (Rate).

Parts of warship - essential and integral part - meaning of 'part' - end-user certificate - customised military specification - reduced GST rate 5% under Sr. No. 252 of Notification No.01/2017-Integrated Tax (Rate)

Parts of warship - essential and integral part - meaning of 'part' - end-user certificate - customised military specification - reduced GST rate 5% under Sr. No. 252 of Notification No.01/2017-Integrated Tax (Rate) - Whether the Marine-Pressure and Non-Pressure Tight Cables supplied to the Indian Navy are essential and integral parts of a submarine warship and therefore eligible for GST at the reduced rate of 5% under Sr. No. 252 of Notification No.01/2017-Integrated Tax (Rate). - HELD THAT: - The Authority examined the ordinary meaning of 'part' and held that an integral element essential to an object qualifies as a 'part'. The appellant produced a technical write-up showing the cables are custom-manufactured to Indian Navy specifications, possess specialized electrical, mechanical, chemical and environmental properties for underwater submarine use, and are not suitable for commercial applications. The appellant also furnished an End-User Certificate from the Rear Admiral and a detailed clarification from the Indian Navy confirming that the cables are designed exclusively for submarine warship use, are fitted onboard to power essential equipment (including weapon launchers), and that absence of these cables would render such equipment non-operational and the warship ineffective in operations. On this factual and technical basis the Authority concluded the cables are integral and essential to the submarine warship. Applying that conclusion to Sr. No. 252 of the Notification, the Authority held that such goods, being parts of warship, attract the reduced GST rate of 5%. [Paras 17, 18, 19, 20, 21]

The marine pressure tight and non-pressure tight cables manufactured and supplied to the Indian Navy are essential and integral parts of submarine warship and the appellant is eligible for GST at 5% under Sr. No. 252 of Notification No.01/2017-Integrated Tax (Rate).

Final Conclusion: The Advance Ruling of the Gujarat AAR is modified: the appellant's marine pressure tight and non-pressure tight cables are held to be essential and integral parts of submarine warship and eligible for the reduced GST rate of 5% under Sr. No. 252 of Notification No.01/2017-Integrated Tax (Rate).

Classification under Chapter 39 (Plastics and articles thereof) - parts of general use excluded from Section XVI / Chapter 84 by Note 1(g) - rule of specificity under General Rule 3(a) for tariff interpretation - Customs Tariff Act interpretation applies to GST classification - Advance Ruling binding only on applicant and jurisdictional officer (Section 103)

Classification under Chapter 39 (Plastics and articles thereof) - Heading 3923.50 (stoppers, lids, caps and other closures of plastics) - Heading 3926 (residual entry) - rule of specificity under General Rule 3(a) for tariff interpretation - Imported plastic mechanical liquid dispensers are classifiable under Heading 3923.50 of the Customs Tariff Act, 1975 and not under Heading 3926 or any other heading. - HELD THAT: - The dispensers are predominantly made of plastic and are intended to be screwed or fitted on to bottles/containers, performing the function of caps, lids or closures while also dispensing liquid. Chapter 39 covers plastics and articles thereof; Heading 3923 specifically covers articles for packing or conveyance of goods and stoppers, lids, caps and other closures of plastics. Heading 3926 is a residual entry for plastic articles not classified elsewhere. Applying Rule 3(a) of the General Rules for interpretation, the heading providing the most specific description is preferred to a more general/residual heading. As 3923.50 gives a specific description matching the nature and function of the product, it must be preferred over the general residual Heading 3926. Consequently the product is rightly classifiable under Heading 3923.50. [Paras 12]

Product classifiable under Heading 3923.50 of the Customs Tariff Act, 1975.

Parts of general use excluded from Section XVI / Chapter 84 by Note 1(g) - Chapter 84 (mechanical appliances for projecting, dispersing or spraying liquids) - The dispensers are not classifiable under Chapter 84 (Heading 8424) because they are plastic parts of general use excluded by Note 1(g) to Section XVI. - HELD THAT: - Chapter 84 deals with mechanical appliances for projecting, dispersing or spraying liquids or powders. However Note 1 to Section XVI lists goods not covered by Chapters 84 and 85, including 'parts of general use, as defined in Note 2 to Section XV, of base metal or similar goods of plastics (Chapter 39)'. The dispensers are plastic parts that can be fitted to bottles/containers of any make and thus qualify as parts of general use. Therefore they fall outside Chapter 84 and, even if they might otherwise be considered 'parts' of appliances in 8424, Note 1(g) excludes such plastic parts of general use from Chapter 84, bringing them within Chapter 39 instead. [Paras 10, 13]

Items are excluded from Chapter 84 by Note 1(g) to Section XVI and cannot be classified under Heading 8424.

Customs Tariff Act interpretation applies to GST classification - applicability of Notification No.1/2017-Central Tax (Rate) for GST rate - Classification under the Customs Tariff Act governs the GST tariff item; once classified under Heading 3923.50, the GST rate is determined by Notification No.1/2017-Central Tax (Rate). - HELD THAT: - Classification for GST purposes is to be made in accordance with the First Schedule to the Customs Tariff Act, 1975 (HSN) including section and chapter notes and general rules. Notification No.1/2017-Central Tax (Rate) adopts those tariff headings for determining GST rates and directs application of the First Schedule interpretation rules. Having classified the product under Heading 3923.50, the applicable rate must therefore be taken from the schedules to the notification. [Paras 9, 12]

Customs Tariff classification governs GST tariff determination under the Notification.

GST rate applicable to goods classifiable under Heading 3923.50 - Schedule III entry Sr. No. 108 of Notification No.1/2017-Central Tax (Rate) - Goods classifiable under Heading 3923.50 attract GST at 18% (9% CGST + 9% SGST) as per Schedule-III entry Sr. No.108 of Notification No.1/2017-Central Tax (Rate). - HELD THAT: - Having held the product to fall under Heading 3923.50 (caps, lids, caps and other closures of plastics), the authority examined the schedules to Notification No.1/2017-Central Tax (Rate). The entry for Chapter/Heading 3923 appears at Sr. No.108 of Schedule-III, which prescribes GST at 18% (9% CGST + 9% SGST) for articles for conveyance or packing of goods of plastics including stoppers, lids, caps and other closures, subject to specified exceptions not relevant here. Therefore the applicable GST rate on the product is 18%. [Paras 14, 15]

GST leviable at 18% (9% CGST + 9% SGST) on the product under Heading 3923.50.

Advance Ruling binding only on applicant and jurisdictional officer (Section 103) - Decisions of other Advance Ruling Authorities are not binding on the appellant; advance rulings are binding only on the applicant and the concerned officer as per Section 103. - HELD THAT: - The appellant relied on an earlier Advance Ruling from another jurisdiction classifying similar sprayers under Heading 8424. The authority observed that under Section 103 of the CGST Act, 2017, an advance ruling is binding only on the applicant who sought it and the jurisdictional officer insofar as that applicant is concerned. Consequently, an AAR decision elsewhere does not control the classification in the present case and cannot be relied upon as binding precedent to overturn the classification reached here. [Paras 11]

Other AAR decisions are not binding on the appellant; an AAR binds only the applicant and the concerned officer.

Final Conclusion: The appeal is allowed in part: the Advance Ruling dated 03.07.2020 is modified. The imported 'Plastic Mechanical Liquid Dispenser' is classifiable under Chapter sub-heading 3923.50 of the Customs Tariff Act, 1975 and is liable to GST at 18% (9% CGST + 9% SGST).

Classification under Heading 5903 of the Customs Tariff Act, 1975 - exclusion by Chapter Note 2(a) of Chapter 59 - HSN Explanatory Notes as interpretative guidance - precedential value of CBEC Circular No.433/66/98-CX-6 - reliance on laboratory test report (ATIRA) for classification - application of General Rules for interpretation of the First Schedule

Classification under Heading 5903 of the Customs Tariff Act, 1975 - reliance on laboratory test report (ATIRA) for classification - precedential value of CBEC Circular No.433/66/98-CX-6 - Fusible interlining fabrics of cotton of the appellant are classifiable under Heading 5903 of the First Schedule to the Customs Tariff Act, 1975. - HELD THAT: - The appellate authority examined the ATIRA test report and compared the sample's characteristics with the exclusion criteria and the conditions for Heading 5903. The ATIRA report records that the fabric is polymer coated on one side (coating not visible to naked eye), is bendable without fracturing around a 7 mm cylinder, is not completely embedded in plastic, is coated on one side and bears a dot-matrix design, and contains 85% or more cotton. On a point-by-point comparison the authority found that these results satisfy the criteria for classification under Heading 5903. The authority further observed that even if an apparent anomaly arose with respect to partial coating (Chapter Note 2(a)(4)), Circular No.433/66/98-CX-6 treats fusible interlining fabrics (spattered/sprayed with thermoplastic particles and capable of bonding on application of heat/pressure) as within Heading 5903 as an exception to that exclusion. The authority also considered other AAR and appellate orders adopting the same view and held that, on the evidence and persuasive administrative guidance, the appellant's product is classifiable under Heading 5903. [Paras 11, 12, 16, 19]

The product 'Fusible Interlining Fabrics of Cotton' is correctly classifiable under Heading 5903 of Chapter 59 of the First Schedule to the Customs Tariff Act, 1975.

Exclusion by Chapter Note 2(a) of Chapter 59 - HSN Explanatory Notes as interpretative guidance - application of General Rules for interpretation of the First Schedule - The Advance Ruling authority did not err in applying and referring to the HSN Explanatory Notes alongside Chapter Note 2(a); the explanatory notes are consistent with the chapter note and assist in classification. - HELD THAT: - The appellate authority reviewed GAAR's reasoning and found that GAAR had considered the General Rules, Chapter Note 2(a) and the HSN Explanatory Notes. It concluded that the conditions set out in the HSN Explanatory Notes are not materially different from the criteria in Chapter Note 2(a); the chapter note identifies exclusions while the explanatory notes articulate positive conditions for inclusion under Heading 5903. Consequently, comparing the test results with the explanatory notes was not legally impermissible, and GAAR did not misread or negate Chapter Note 2(a). The authority also relied on the statutory provision in Notification No.1/2017 and the settled interpretative approach that the First Schedule, its section and chapter notes and the General Explanatory Notes apply to the notification. [Paras 11]

GAAR did not misread Chapter Note 2(a) nor act contrary to the General Rules; use of the HSN Explanatory Notes for guidance was permissible and consistent with Chapter Note 2(a).

Final Conclusion: The appeal is dismissed. The Advance Ruling GUJ/GAAR/R/86/2020 dated 17.09.2020 is confirmed: the appellant's fusible interlining fabrics of cotton are classifiable under Heading 5903 of Chapter 59 of the First Schedule to the Customs Tariff Act, 1975.

Classification under Harmonized System of Nomenclature (HSN) - Interpretation of GST rate notifications with reference to Customs Tariff entries - Primacy of specific descriptive condition in notification entry (90% fly ash content) for exclusion - Application of General Rules for Interpretation of Customs Tariff (Rule 1 and Rule 2(a)) - Extension of limitation for filing appeals under Notification No.35/2020 and No.55/2020

Extension of limitation for filing appeals under Notification No.35/2020 and No.55/2020 - Condonation of delay - Admissibility of the appeal by condoning delay in filing the appeal. - HELD THAT: - The appellant received the GAAR order on 09.07.2020 and was required to file appeal within 30 days. The appeal was filed on 31.08.2020. Notification No.35/2020 (as amended by Notification No.55/2020) extended time limits for actions falling between 20.03.2020 and 30.08.2020, permitting filing up to 31.08.2020. The appellant's filing date therefore falls within the extended period and no delay is found in filing the appeal. [Paras 11]

Delay in filing the appeal is condoned and the appeal is admitted for regular hearing.

Classification under Harmonized System of Nomenclature (HSN) - Interpretation of GST rate notifications with reference to Customs Tariff entries - Primacy of specific descriptive condition in notification entry (90% fly ash content) for exclusion - Application of General Rules for Interpretation of Customs Tariff (Rule 1 and Rule 2(a)) - Whether the product 'Fly Ash Bricks' manufactured and supplied by the appellant is classifiable under entry Sr.No.225B of Schedule I (and thereby taxable at 5%) or excluded therefrom and taxable under Sr.No.453 of Schedule III (at 18%). - HELD THAT: - The product is classifiable under Customs Tariff heading 6815 (specific sub heading 68159910 'Bricks and tiles of fly ash'), a fact not in dispute. The rate notifications incorporate the First Schedule to the Customs Tariff Act and the rules for its interpretation. Notification No.01/2017 initially placed Fly Ash Bricks at Sr.177 (12% up to 14.11.2017). Amendment by Notification No.41/2017 inserted an entry (Sr.225A) in Schedule I for 'Fly ash bricks or fly ash aggregate with 90 percent or more fly ash content' (5%) w.e.f.15.11.2017; subsequently re numbered as Sr.225B by Notification No.24/2018. The description in Sr.225B expressly confines the concessional entry to (a) Fly Ash Bricks with 90% or more fly ash content, (b) Fly Ash Aggregate with 90% or more fly ash content, and (c) Fly Ash Blocks. The appellant has asserted, and produced test evidence, that their Fly Ash Bricks contain only 60% fly ash. On a plain reading, the specific descriptive condition (90% or more fly ash content) operates to exclude Fly Ash Bricks containing less than 90% fly ash from Sr.225B. Rule 2(a) of the General Rules (inclusion of unfinished/incomplete articles) is inapplicable because Fly Ash Bricks are finished goods. The Court therefore applies Rule 1 principles (primacy of heading and notes and notification text) and gives effect to the specific condition in the rate notification. Consequently, Fly Ash Bricks of the appellant do not fall under Sr.225B and, being not listed in Schedules I, II, IV, V or VI after omission from Sr.177, are classifiable under Sr.453 of Schedule III w.e.f. 15.11.2017. [Paras 14, 18, 23, 25, 26]

The product 'Fly Ash Bricks' of the appellant is classifiable under Tariff item 68159910; taxable at 12% up to 14.11.2017 and, being excluded from the concessional Sr.No.225B by reason of containing less than 90% fly ash, taxable under Sr.No.453 of Schedule III at 18% with effect from 15.11.2017.

Final Conclusion: The appeal is dismissed. The Advance Ruling No. GUJ/GAAR/R/20/2020 dated 02.07.2020 is confirmed insofar as appealed: Fly Ash Bricks are classifiable under Tariff item 68159910, taxable at 12% up to 14.11.2017 and at 18% w.e.f. 15.11.2017, and the appellant's challenge to classification under the concessional entry Sr.No.225B is rejected.

Classification under Tariff Item 2302 40 00 - Levy of GST at concessional rate under entry Sr. No. 103A of Schedule I of Notification No. 1/2017 - Distinction between 'Rice Bran' and 'Husk' - Strict construction of exemption notifications

Classification under Tariff Item 2302 40 00 - Chapter 23 - residues and wastes used as animal feeding stuffs - Whether the product termed 'Rice Bran (22+ Oil)' is classifiable as bran, sharps or other residues under Tariff Item 2302 40 00 of the First Schedule to the Customs Tariff Act, 1975. - HELD THAT: - The authority examined the composition and method of manufacture disclosed by the appellant - predominantly Rice Husk (a by product from manufacture of Poha and Mamra) mixed with sludge/wax oil derived from rice/sunflower origin raising oil content to about 22%. The Explanatory Notes to HSN Chapter 23 and to heading 2302 describe residues and by products from cereal working used mainly as animal feeding stuffs; the appellant's product fits within that description because its main ingredient is rice husk and the added material is of rice/sunflower origin. The earlier GAAR classification under Chapter 38 was based on perceived insufficiency of process details and an assumption that the appellant was a chemical industry; on the facts supplied the product is not a residual chemical industry waste and therefore cannot be classified under Chapter 38. Applying the statutory tariff description and HSN Explanatory Notes, the product is classifiable under Tariff Item 2302 40 00 as 'bran, sharps and other residues of other cereals'. [Paras 7, 8, 11]

The product 'Rice Bran (22+ Oil)' supplied by the appellant is classifiable under Tariff Item 2302 40 00 of the First Schedule to the Customs Tariff Act, 1975.

Levy of GST at concessional rate under entry Sr. No. 103A of Schedule I of Notification No. 1/2017 - Strict construction of exemption notifications - Distinction between 'Rice Bran' and 'De-oiled Rice Bran' / 'cattle feed' - Whether the product of the appellant is exempt as 'cattle feed' under Sr. No. 102 of Notification No. 2/2017 (or as 'rice bran' under Sr. No. 103B) or is leviable to GST under Sr. No. 103A of Notification No. 1/2017 at 5%. - HELD THAT: - The authority noted the legal distinction between 'husk' and 'rice bran' under relevant Indian Standards: rice bran is the pericarp/bran layer and germ of rice obtained in milling, not a product created by adding oil to husk. The appellant failed to prove that the resultant material is 'rice bran' in industry or common parlance; merely labelling the product 'Rice Bran (22+ Oil)' does not alter its character. The appellant also did not establish that the product itself is 'cattle feed' as opposed to an ingredient for cattle feed; exemption entries must be strictly construed and the burden to prove entitlement lies on the claimant. Given the product's conformity with the tariff description for bran/residues, and absence of evidence it is rice bran or finished cattle feed, the appropriate notification entry is Sr. No. 103A of Notification No. 1/2017 (bran, sharps and other residues), which attracts GST at 5% (2.5% CGST + 2.5% SGST). [Paras 10, 11]

The product is not covered by the exemption at Sr. No. 102 nor by Sr. No. 103B for rice bran; it is covered by Sr. No. 103A of Schedule I of Notification No. 1/2017 and is leviable to GST @ 5% (2.5% CGST + 2.5% SGST).

Final Conclusion: The Advance Ruling of the GAAR dated 17.03.2020 is modified: the appellant's product 'Rice Bran (22+ Oil)' is classifiable under Tariff Item 2302 40 00 and attracts GST under Sr. No. 103A of Notification No. 1/2017 at the concessional rate of 5% (2.5% CGST + 2.5% SGST).

Inter-State supply - place of supply - location of supplier - export of goods - integrated goods and services tax (IGST) levy on inter-State supplies - Paragraph 7 of Schedule III - supply from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India - territorial jurisdiction of the IGST Act

Inter-State supply - place of supply - location of supplier - integrated goods and services tax (IGST) levy on inter-State supplies - Paragraph 7 of Schedule III - supply from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India - Whether IGST is leviable on merchant trade transactions where goods move directly between places outside India without entering India, when the supplier's principal place of business is in India. - HELD THAT: - The Appellate Authority examined the charging provision for IGST on inter-State supplies and the statutory rules for determining place of supply. Where movement of goods terminates for delivery outside India, the place of supply is outside India (finding on place of supply). The term 'supplier' as defined in the CGST Act leads to the natural meaning of 'location of supplier' being the place where the supplier or his principal place of business is located; thus a supplier whose principal place of business is in India is a supplier located in India. Consequently, a transaction where the supplier is located in India but the place of supply is outside India falls within the statutory definition of inter-State supply under the IGST Act and is therefore subject to IGST unless an exemption or other provision applies. The Authority then considered the statutory amendment inserting Paragraph 7 in Schedule III of the CGST Act, which treats supplies of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India as neither a supply of goods nor services with effect from 01.02.2019. The amendment was held to be prospective as notified; accordingly IGST was leviable on the described merchant trade transactions from 01.07.2017 until 31.01.2019, but such transactions are not leviable to IGST with effect from 01.02.2019 when Paragraph 7 applies. [Paras 11, 12, 17]

IGST was payable on the appellant's merchant trade transactions from 01.07.2017 to 31.01.2019; with effect from 01.02.2019 such transactions are not treated as supply and IGST is not payable.

Final Conclusion: The Advance Ruling is modified: IGST applies to the merchant trade transactions for the period 01.07.2017 to 31.01.2019, but following insertion of Paragraph 7 in Schedule III the same transactions are not subject to IGST with effect from 01.02.2019.

Works contract services - classification under service codes 995423 and 995424 - exemption for services by a Government entity against grants - pure service excluding works contract or composite supplies involving supply of goods - specific provision prevails over general provision - entry 3(vi) of Notification 11/2017 (specific construction services) versus residual entry 3(vii)

Works contract services - pure service excluding works contract or composite supplies involving supply of goods - classification under service codes 995423 and 995424 - Taxability of works contract services supplied by the applicant to Greater Hyderabad Municipal Corporation (GHMC). - HELD THAT: - The supply to GHMC involves substantial supply of goods as shown by the contract estimate and therefore is not a 'pure service' within entry 3 of Notification 12/2017, which exempts only pure services not involving works contracts or composite supplies of goods. The activities fall under general construction service tariff code 995423/995424 (laying electric power lines and related works) and are covered by the residual entry (entry 3(vii) / retained entry) attracting the standard concessional scheme for such works. Consequently, the supply is taxable under CGST and SGST at the combined rate reflected in the notification (9% CGST and 9% SGST), i.e., taxable @18%.

Supply of works contract services by the applicant to GHMC is taxable @18%.

Works contract services - classification under service codes 995423 and 995424 - entry 3(vi) of Notification 11/2017 (specific construction services) versus residual entry 3(vii) - Taxability of works contract services procured by the applicant from a third party for supplying the same services to GHMC. - HELD THAT: - The contractor's supplies to the applicant are for the execution of the same works (general construction services under service codes 995423/995424). These services do not fall within the limited list in entry 3(vi) (which covers specific construction works meant predominantly for non-commercial use such as certain civil structures) and therefore the specific concessional entry does not apply. The contractor's supplies are covered by the residual entry and taxable under CGST and SGST at the applicable rates for general construction services, resulting in taxation at the combined rate of 18%.

Works contract services procured by the applicant from a third party for supplying to GHMC are taxable @18%.

Exemption for services by a Government entity against grants - works contract services - Eligibility for exemption for supply of works contract services by the applicant to the Irrigation & CAD (I & CAD) department. - HELD THAT: - Notification 32/2017 (entry 9(c)) exempts 'service by a Government Entity to Central Government, State Government, Union territory, local authority or any person specified ... against consideration received ... in the form of grants.' The applicant, being a Government entity, is eligible for exemption to the extent that the supplies to I & CAD are made against grants received from the Government. The exemption applies only to the portion of supplies covered by such grants.

Supply of works contract services by the applicant to I & CAD is exempt to the extent grants are received against those supplies.

Works contract services - classification under service codes 995423 and 995424 - entry 3(vi) of Notification 11/2017 (specific construction services) versus residual entry 3(vii) - Taxability of works contract services procured by the applicant from a third party for supplying the same services to I & CAD. - HELD THAT: - The third-party contractor's supplies to the applicant for execution of the works do not fall within the narrowly drawn entry 3(vi) and instead constitute general construction services under service codes 995423/995424. Such supplies are therefore covered by the residual entry (entry 3(vii) / retained entry) and are taxable under CGST and SGST at the applicable rates for those services, resulting in taxation at the combined rate of 18%.

Works contract services procured by the applicant from a third party for supplying to I & CAD are taxable @18%.

Works contract services - classification under service codes 995423 and 995424 - Taxability of supply of works contract services by the applicant to South Central Railway. - HELD THAT: - The works contracted for South Central Railway are general construction services involving long-distance/overland electric power lines, transformer stations and related works falling under service code 995423/995424. These activities are not within the specific concessional list of entry 3(vi) and therefore fall within the residual entry attracting the standard rate for such general construction services. The supplies are taxable under CGST and SGST at the combined rate of 18%.

Supply of works contract services by the applicant to South Central Railway is taxable @18%.

Works contract services - classification under service codes 995423 and 995424 - Taxability of works contract services procured by the applicant from a third party in order to supply the same to South Central Railway. - HELD THAT: - The turnkey contractor engaged by the applicant to execute the electrical works for South Central Railway supplies general construction services under service codes 995423/995424. Those supplies do not fall within entry 3(vi) and are therefore covered by the residual entry, rendering them taxable under CGST and SGST at the standard combined rate for such services.

Works contract services procured by the applicant from a third party for supplying to South Central Railway are taxable @18%.

Final Conclusion: The Authority rules that the applicant's works contract supplies for laying/altering electric power lines and allied works fall under general construction service codes 995423/995424 and, except where supplies are made by the Government entity against grants (eligible for exemption to that extent), such supplies and corresponding contractor supplies are taxable under CGST and SGST at the combined rate of 18%; the specific concessional entry 3(vi) does not apply to these electrical/conduit works as a specific provision excludes them in favour of the residual entry.

Provisional attachment of bank accounts under Rule 159(5) of the CGST Rules, 2017 - alternative remedy bars writ jurisdiction - decision on objections to attachment by competent authority by a reasoned order

Alternative remedy bars writ jurisdiction - precedential application - Maintainability of the writ petition in view of an alternative statutory remedy under Rule 159(5) of the CGST Rules, 2017. - HELD THAT: - The Court applied the settled principle that writ jurisdiction should not ordinarily be exercised where an effective alternative remedy is available before the competent authority. Reliance was placed on the Court's prior decision in Watermelon Management Services Private Limited v. Commissioner, Central Tax, GST Delhi (East) & Anr., to hold that the existence of objections filed under Rule 159(5) constitutes such an alternative remedy. Consequently, the petition was not entertained on merits.

Writ petition not entertained on merits because an alternative remedy under Rule 159(5) is available and has been invoked by the petitioner.

Provisional attachment of bank accounts under Rule 159(5) of the CGST Rules, 2017 - decision on objections to attachment by competent authority by a reasoned order - Direction to the respondent to decide the objections filed under Rule 159(5) to the provisional attachment of the petitioner's bank accounts. - HELD THAT: - Although the Court refrained from commenting on the merits of the challenge to the provisional attachment, it directed the respondent to consider and decide the objections already filed by the petitioner under Rule 159(5) of the CGST Rules, 2017. The decision was to be a reasoned order rendered in accordance with law within the time specified by the Court. The Court left the substantive rights and contentions of the parties open for the authority's consideration.

Respondent directed to decide the objections to the provisional attachment by way of a reasoned order in accordance with law on or before 05th October, 2021; matter disposed without comments on merits.

Final Conclusion: Writ petition disposed of: petition not entertained on merits due to availability of alternative remedy under Rule 159(5); respondent directed to decide the objections to the provisional attachment by a reasoned order in accordance with law on or before 05th October, 2021, with no adjudication on substantive merits and rights of parties left open.

Regular bail - interim bail on furnishing personal bond and sureties - custodial interrogation not required - documentary evidence - cooperation condition as bail term - investigation under the Central Goods and Services Tax regime - right to seek bail after prolonged custody under criminal procedure

Regular bail - custodial interrogation not required - documentary evidence - interim bail on furnishing personal bond and sureties - cooperation condition as bail term - Grant of interim bail to the petitioners in the ongoing CGST investigation/complaint. - HELD THAT: - The Court considered the stage of custody and the nature of evidence in the investigation registered under the CGST framework. Noting that the petitioners had been in custody for about seventy days and that a complaint had already been filed, the Court found that custodial interrogation of the petitioners was not required at that stage and that the primary evidence was documentary in nature. The Court therefore deemed it appropriate to release the petitioners on interim bail subject to prescribed terms, while preserving the respondent's right to continue the investigation and adduce evidence. The Court also directed exchange of written submissions by the parties within specified time frames and listed the matters for further hearing, thereby keeping the substantive allegations and disputed legal/contentious issues (including assessment, satisfaction under the CGST provisions, and prima facie culpability) open for adjudication at the trial or on final hearing. [Paras 13, 15, 16]

Petitioners released on interim bail on furnishing personal bonds with sureties and subject to cooperation and other conditions; written submissions to be filed and matter listed for further hearing.

Final Conclusion: Interim bail granted to the petitioners on conditions (personal bond and two sureties each, cooperation with investigation, and no leave of the country without Court's permission); parties directed to file written submissions and matters listed for further hearing.

Regular bail - interim bail made absolute - compliance with bail conditions - custodial interrogation unnecessary where investigation is complete and case is documentary - initiation of proceedings under Section 74 of the CGST Act

Regular bail - interim bail made absolute - compliance with bail conditions - custodial interrogation unnecessary where investigation is complete and case is documentary - initiation of proceedings under Section 74 of the CGST Act - Interim bail granted earlier to the petitioner is made absolute and regular bail is granted subject to compliance with conditions previously imposed. - HELD THAT: - The petitioner had earlier been released on interim bail by a Coordinate Bench subject to specified conditions, including furnishing a bank guarantee and undertakings. The petitioner complied with those conditions. The court noted that the petitioner had been in custody from 07.12.2020 until 16.03.2021, that the challan has been filed before the Judicial Magistrate Ist Class, and that proceedings under Section 74 of the CGST Act have been initiated. Given that the case is primarily based on documentary evidence, investigation qua the petitioner is complete, and the statutory adjudicatory process for determination of tax liability is proceeding, the court found no purpose in remanding the petitioner to custody. The observations and relief are restricted to the bail application and not an expression on the merits of the underlying allegations or trial.

Order dated 16.03.2021 granting interim bail is made absolute and the petitioner is granted regular bail, subject to continuing compliance with the conditions imposed earlier.

Final Conclusion: The petition under Section 439 Cr.P.C. is allowed; the interim bail order is made absolute and regular bail is granted subject to the conditions imposed earlier, without prejudice to the merits of the case or the ongoing trial and adjudicatory proceedings.

Dismissal for default/non-prosecution - Opportunity to be heard after repeated listings - Closure of connected miscellaneous petitions - No order as to costs

Dismissal for default/non-prosecution - Opportunity to be heard after repeated listings - The writ petition is dismissed for default/non-prosecution due to persistent non-appearance of the petitioner despite multiple opportunities. - HELD THAT: - The Court recorded that there was no representation for the writ petitioner across successive listings and that respondents were represented. The matter was listed repeatedly (including four prior listings) to afford the petitioner an opportunity to appear; the matter was passed over and recalled as a matter of abundant caution. Having regard to the trajectory of non-appearance over multiple consecutive listings and the intention to give repeated opportunities, the Court concluded that dismissal for default/non-prosecution was warranted. Connected miscellaneous petitions were ordered closed and the Court directed that there shall be no order as to costs.

Writ petition dismissed for default/non-prosecution; connected WMPs closed; no order as to costs.

Final Conclusion: The High Court dismissed the writ petition for default/non-prosecution after multiple listings in which the petitioner did not appear, closed connected miscellaneous petitions and made no order as to costs.

Jurisdiction to adjudicate revenue demand - requirement of pre-show cause consultation - right to personal hearing - scope of remand - interim stay

Interim stay - issue of notice and counter-affidavit - disclosure of amounts paid and liabilities - Stay granted on operation of the impugned Order in Original dated 30.06.2020 and directions issued to respondent to file counter affidavit and disclose amounts - HELD THAT: - The petitioner challenged the Order in Original dated 30.06.2020 and the show cause notice dated 20.02.2020 on grounds including lack of jurisdiction of the officer who adjudicated the demand, absence of pre show cause consultation, denial of personal hearing, and that the adjudication exceeded the scope of the remand by the Commissioner (Appeals I). The High Court issued notice and directed the respondent to file a counter affidavit within four weeks, to indicate (inter alia) amounts already paid by the petitioner towards service tax and cess and the liability as per the ST 3 returns for the periods expressly identified in the record. Pending service of notice and filing of the counter affidavit, the Court stayed operation of the impugned order dated 30.06.2020 and listed the matter for further hearing.

Notice issued; respondent to file counter affidavit within four weeks disclosing amounts paid and liabilities for the specified periods; operation of the impugned order dated 30.06.2020 stayed; matter listed for further hearing.

Final Conclusion: Writ petition admitted for consideration; interim stay granted on the impugned order dated 30.06.2020, notice issued to the revenue with directions to file a counter affidavit disclosing amounts paid and liabilities for October 2016 to March 2017 and April 2017 to June 2017, and the matter posted for further hearing.

Value of taxable supply under Section 15 of the GST Acts - consideration under GST - incidental expenses and amounts charged at or before delivery under Section 15(2)(c) - inclusion of reimbursements in transaction value - pure agent exclusion under Rule 33 of the GST Rules - non-applicability of pre GST valuation precedents and foreign VAT authorities to GST valuation

Value of taxable supply under Section 15 of the GST Acts - consideration under GST - incidental expenses and amounts charged at or before delivery under Section 15(2)(c) - inclusion of reimbursements in transaction value - Amount recovered as reimbursement from customer for ATF procured by the appellant is includible in the value of the rental service supplied by the appellant. - HELD THAT: - The Appellate Authority applied Section 15 of the GST Acts to the contractual facts and concluded that the cost of ATF arranged/provided by the appellant is an activity done in respect of the supply of "rental services of aircrafts" and that the amount recovered as reimbursement from the recipient falls within the definition of "consideration." The Authority held that such reimbursements satisfy the terms of Section 15(2)(c) as they are amounts charged for something done by the supplier in respect of the supply at the time of or before delivery of the service, and therefore must be included in the transaction value. The Authority also rejected the appellant's contention that the reimbursement is not consideration because the contract separately stipulated fixed monthly and flying hour charges, observing that helicopters cannot be operated without fuel and the contract treats provision/arrangement of ATF as part of the scope of work. Consequently the reimbursement forms part of the price actually paid or payable and is taxable under GST. [Paras 31, 34, 35, 36]

Amount recovered as reimbursement for ATF procured for use in helicopters is includible in the value of the rental service supplied by the appellant.

Pure agent exclusion under Rule 33 of the GST Rules - inclusion of reimbursements in transaction value - Whether the appellant qualified as a 'pure agent' under Rule 33 so as to exclude ATF reimbursements from the value of supply - held: conditions of Rule 33 are not satisfied. - HELD THAT: - Rule 33 requires satisfaction of conditions both in the rule and in the Explanation to treat an expenditure as incurred by a 'pure agent' and hence excluded. The Authority examined each condition: (a) contractual arrangement to act as pure agent; (b) supplier neither intends to hold nor holds title to the goods procured; (c) goods not used for supplier's own interest; (d) receipt only of actual amount incurred; and the three rule conditions including separate indication in invoice and that supplies procured are in addition to supplier's own services. On facts the contract assigned to the appellant the primary responsibility to arrange ATF at most locations and the ATF procured enabled the appellant to perform the rental service (i.e. used for the appellant's own interest of effecting the supply). The appellant did not satisfactorily demonstrate the other conditions (including documentary proof of no markup). Therefore none of the requisite conditions of Rule 33 were fulfilled and the exclusion could not be availed. [Paras 37, 39, 40, 41, 42]

Appellant is not a 'pure agent' under Rule 33; ATF reimbursements cannot be excluded from the value of supply.

Non-applicability of pre GST valuation precedents and foreign VAT authorities to GST valuation - Value of taxable supply under Section 15 of the GST Acts - Whether pre GST case law, circulars on moulds/dies, VAT precedents or foreign VAT authorities dictate a contrary outcome - held: they are not applicable to compel exclusion of reimbursements under GST. - HELD THAT: - The Authority considered reliance placed by the appellant on pre GST decisions (including authorities under Section 67 of the Finance Act, 1994), Circular No.47/21/2018 (moulds/dies), VAT case law and foreign authorities. It observed that GST valuation is governed specifically and in detail by Section 15 and Rule 33; therefore principles from pre GST statutes or VAT regimes cannot override or displace the statutory tests in GST. The circular dealing with moulds/dies concerns a different factual and legal context and advance rulings cited by the appellant are not binding beyond the applicant. Similarly, foreign VAT authorities and UK VAT guidance are not applicable. Accordingly those precedents and guidance did not assist the appellant in avoiding inclusion of ATF reimbursements under GST. [Paras 43, 44, 45, 47]

Pre GST judgments, the cited circular and foreign/VAT authorities do not alter the applicability of Section 15 and Rule 33; hence they do not permit exclusion of the reimbursements.

Final Conclusion: The Advance Ruling issued by GAAR is confirmed. The reimbursement received by the appellant from its customer for ATF procured for helicopters is includible in the value of the rental service under Section 15 of the GST Acts and Rule 33 does not apply because the appellant has not established it acted as a 'pure agent'; the appeal is therefore dismissed.

Exemption under Section 10B - Manufacture versus processing (blending of tea) - Strict interpretation of tax exemption provisions - Benefit of ambiguity in exemption provisions favors the Revenue - Use of external statutes or policy to enlarge exemption

Exemption under Section 10B - Manufacture versus processing (blending of tea) - Strict interpretation of tax exemption provisions - Benefit of ambiguity in exemption provisions favors the Revenue - Use of external statutes or policy to enlarge exemption - Entitlement to deduction under Section 10B for blending of tea and permissibility of relying on other statutes or policy for defining 'manufacture'. - HELD THAT: - The Court held that Section 10B must be interpreted in accordance with settled principles governing tax exemptions, including the Constitution Bench ruling that exemption provisions are to be construed strictly and any ambiguity in an exemption provision must be resolved in favour of the Revenue. The historical legislative scheme shows that earlier iterations of Sections 10A/10B expressly included 'processing' within 'manufacture', but after substitution w.e.f. April 1, 2001 the term 'manufacture' was not defined in Section 10B; Parliament has, where it intended to extend benefit, inserted clarifying explanations (for example Explanation 4). Given the absence of a definition in the substituted Section 10B, the Court declined the assessee's invitation to import definitions from other statutes (such as the SEZ Act) or export/import policy documents to expand the scope of 'manufacture' for the purpose of claiming exemption. The Court further relied on authoritative precedent that blending or mixing of tea constitutes processing and not manufacture (as held in Tara Agencies), and reiterated that courts cannot read words into a taxing statute to enlarge an exemption. Applying these principles, the Court answered the substantial question against the assessee and in favour of the Revenue, holding that the assessee carrying on blending of tea is not entitled to deduction under Section 10B on the basis of importing definitions from other statutes or policies. [Paras 44, 45]

The substantial question is answered in favour of the Revenue and against the assessee: the blending of tea does not attract exemption under Section 10B and external statutes or policy cannot be invoked to enlarge the scope of the exemption.

Final Conclusion: Appeals resolved against the assessee: entitlement to deduction under Section 10B for tea blending is negatived; the Court applied strict interpretation of exemption provisions and refused to import definitions from other statutes or policies. Appeal relating to AY 2005-06 was dismissed as withdrawn.

Pre-emptive purchase under Section 269UD - requirement of adequate show cause notice and reasonable opportunity of hearing - duty to disclose materials on which pre emptive purchase is proposed (including valuation and comparable sale instances) - persuasive value of Charity Commissioner's sanction in exercise of power under Section 269UD

Requirement of adequate show cause notice and reasonable opportunity of hearing - The show cause notice issued under Chapter XX C was legally insufficient and did not afford a reasonable opportunity of hearing. - HELD THAT: - The appropriate authority's show cause notice contained no materials, provisional conclusions or particulars explaining why an order under pre-emptive purchase under Section 269UD was contemplated. The Court applied settled principles that a show cause notice is not a mere formality and must indicate the precise scope and the materials or provisional findings on which adverse action is proposed so that the affected persons can correct or controvert them. A vague notice bereft of the basis for the proposed exercise of power denies a fair hearing and is legally inadequate. The Court relied on analogous precedent emphasising that provisional conclusions must be briefly specified in the notice so that the transferor and transferee are not left unaware of the grounds prompting the authority's prima facie conclusion. [Paras 6, 8, 9]

Show cause notice was defective for want of particulars and did not afford a reasonable opportunity of showing cause; the impugned order cannot stand on that basis.

Duty to disclose materials on which pre emptive purchase is proposed (including valuation and comparable sale instances) - The appropriate authority was under a duty to disclose the valuation report and comparable sale instances relied upon before passing an order under Section 269UD. - HELD THAT: - The appropriate authority relied on a valuation report and six sale instances in the impugned order, but those materials were neither disclosed in the show cause notice nor furnished to the petitioner at any stage. The Court held that the authority must furnish the materials it intends to rely upon so that the affected parties have an effective opportunity to rebut or explain those materials. The authority cannot justify a curt or vague notice by asserting that the petitioner should be deemed to know local sale instances; disclosure of the basis for the proposed action is incumbent on the authority. [Paras 6, 10]

Failure to disclose the valuation and comparable sale particulars amounted to denial of effective opportunity; the impugned order is unsustainable on that ground.

Persuasive value of Charity Commissioner's sanction in exercise of power under Section 269UD - The Charity Commissioner's sanction, given after application under the Bombay Public Trusts Act, is a material factor that the appropriate authority must consider and explain if it disagrees with that sanction. - HELD THAT: - The Court observed that the Charity Commissioner's sanction is granted after applying mind to the interest, benefit and protection of the trust, including the reasonableness of the sale price. While the sanction is not absolutely binding on the Income tax authority, it carries persuasive weight and cannot be brushed aside without dealing with the reasons why the Charity Commissioner's conclusion is incorrect. The appropriate authority ought to have specifically addressed and explained its reasons for not accepting the Charity Commissioner's sanction when proposing compulsory purchase. [Paras 7, 9]

The appropriate authority erred in failing to engage with or explain its disagreement with the Charity Commissioner's sanction; that failure vitiates the impugned order.

Final Conclusion: Impugned order dated 28th April 1993 quashed and set aside for want of adequate show cause particulars, non disclosure of relied upon materials and failure to deal with the Charity Commissioner's sanction; appropriate authority directed to issue the no objection certificate under Section 269UL within four weeks (or the order to be treated as such if no authority exists).

Depreciation under Appendix I to the Income Tax Rules, 1962 - classification of motor lorries as "motor lorries used in a business of running them on hire" - distinction between vehicles used in own business and vehicles run on hire for higher rate of depreciation - application of a prior appellate decision as binding precedent

Depreciation under Appendix I to the Income Tax Rules, 1962 - classification of motor lorries as "motor lorries ... used in a business of running them on hire" - Assessee entitled to higher rate of depreciation on motor lorries under Clause III(3)(ii) of Appendix I where vehicles are treated as used in the business of running them on hire. - HELD THAT: - The High Court examined the claim for depreciation at the higher rate under Appendix I and held that the question is no longer res integra. The Court followed the reasoning and conclusion recorded in the earlier decision in ITA No.96/2015, applying that precedent to the facts of the present appeal. For the Assessment Year 2008-09 the vehicles used by the assessee (oil tankers transporting fuel) were to be treated so as to attract the higher rate of depreciation under Clause III(3)(ii), thereby reversing the Departmental treatment at the lower rate. [Paras 3]

Appeal allowed and assessee held entitled to higher depreciation under Appendix I

Distinction between vehicles used in own business and vehicles run on hire - Finding that the work undertaken by the assessee constituted running motor vehicles on hire was accepted and corrected in favour of the assessee. - HELD THAT: - The Tribunal's conclusion that the assessee was not engaged in running the vehicles on hire was reconsidered in light of the earlier appellate determination in ITA No.96/2015. Applying that precedent, the Court concluded that it was not disputed that the trucks were not used for some other non-hiring business, and therefore the characterization supporting higher depreciation stands. [Paras 3]

Tribunal's contrary finding set aside and characterization in favour of assessee upheld

Application of a prior appellate decision as binding precedent - Challenge to the Tribunal's factual finding as perverse was rejected by applying the prior appellate decision and answering the contention in favour of the assessee. - HELD THAT: - Although the assessee contended that the Tribunal's finding of fact was perverse and contrary to the documents on record, the High Court applied the legal conclusions in ITA No.96/2015 to the present appeal and, for the reasons stated in that earlier judgment, answered the contention in the assessee's favour rather than undertaking a fresh fact-finding exercise. [Paras 3]

Contention of perversity rejected; appeal allowed by following earlier decision

Final Conclusion: Following and applying the decision in ITA No.96/2015, the High Court allowed the appeal for Assessment Year 2008-09 and held the assessee entitled to the higher rate of depreciation under Appendix I; the Tribunal's contrary findings were set aside.

Allowability of provision for anticipated losses under the completed contract method in accordance with AS-7 - principle of matching cost and revenue and revenue neutrality of year-shifting of allowances - treatment of interest on fixed deposits as business income where inextricably linked to primary business and availability for set-off of brought forward losses

Allowability of provision for anticipated losses under the completed contract method in accordance with AS-7 - principle of matching cost and revenue and revenue neutrality of year-shifting of allowances - Provision for anticipated losses debited to profit and loss account in respect of long-term contracts is allowable deduction for AYs 2011-12 and 2012-13. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that where a taxpayer consistently follows the completed contract/percentage completion method in accordance with AS-7 and the method of accounting has been accepted by the department, a provision for anticipated losses made in conformity with AS-7 and duly debited to audited accounts is allowable. The Tribunal relied on the reasoning in the Delhi High Court decision in CIT v. Triveni Engineering & Industries Ltd., observing that Accounting Standards indicate the point in time when provisions for known liabilities and losses should be made and that recognising provisions in the year when revenue is also recognised accords with the matching principle. The Tribunal further noted that disturbing the year of allowability would be revenue neutral because true profit or loss would crystallise on completion of the contract, and the AO cannot reject an accepted consistent method of accounting merely because estimates were employed, unless the method is demonstrably incorrect or changed without justification. Applying these principles to the facts, including acceptance of the accounting method by the department and recognition of revenue in the year, the Tribunal affirmed deletion of the additions made by the AO. [Paras 11, 12, 13]

Grounds No.1 & 2 for AYs 2011-12 and 2012-13 are dismissed and the additions disallowed by the CIT(A) are upheld.

Treatment of interest on fixed deposits as business income where inextricably linked to primary business and availability for set-off of brought forward losses - Interest earned on fixed deposits placed out of business funds and maintained to meet business exigencies (including as margin for bank guarantees) is business income and available for set-off of brought forward losses for AY 2012-13. - HELD THAT: - The Tribunal endorsed the CIT(A)'s factual finding that the assessee earned interest on FDRs purchased from business funds to ensure ready availability of funds for execution of contracts (including margin for bank guarantees), and that such deposits were maintained in the course of carrying on the core business. Reliance was placed on authorities establishing that interest on deposits may be treated as business income where it has an inextricable nexus with the business activity; mere classification under a different head does not preclude such treatment. The Tribunal noted that similar interest had been treated as business income in other assessment years and that certain deposits were available funds used for business exigencies. On these facts, the CIT(A)'s allowance of set-off of brought forward losses against the interest income was sustained. [Paras 14, 15, 16, 17]

Ground No.3 for AY 2012-13 is dismissed and the CIT(A)'s order allowing set-off against the interest income is confirmed.

Final Conclusion: Both appeals filed by the Revenue for AYs 2011-12 and 2012-13 are dismissed; the Tribunal upheld the CIT(A)'s allowance of provisions for anticipated losses made in accordance with AS-7 and the treatment of interest on FDRs as business income available for set-off of brought forward losses.

Forfeiture of convertible share warrants as transfer within the meaning of section 2(47) - share warrant as a capital asset - extinguishment of rights constituting transfer - disallowance of short term capital loss on forfeiture - assessment under section 153C - precedential effect of Tribunal and High Court decisions

Forfeiture of convertible share warrants as transfer within the meaning of section 2(47) - share warrant as a capital asset - disallowance of short term capital loss on forfeiture - precedential effect of Tribunal and High Court decisions - assessment under section 153C - Whether the disallowance of the short term capital loss claimed on forfeiture of convertible share warrants can be sustained in assessment framed under section 153C for AY 2009-10. - HELD THAT: - The Tribunal accepted the assessee's contention that the forfeiture of convertible share warrants resulted in extinguishment of the assessee's right to obtain shares and therefore amounted to a transfer for purposes of section 2(47), bringing the instrument within the character of a capital asset. The Tribunal relied on the decision in the group-company appeal (M/s Pavitra Commercials Ltd.) where the Tribunal held that forfeiture extinguished the right to share ownership and accordingly allowed the claim. That Tribunal order was affirmed by the Hon'ble Delhi High Court which observed that the earlier Delhi High Court decision in CIT v. Chand Ratan Bagri treating share warrants as capital assets remained binding. No contrary binding precedent from the Delhi High Court or the Supreme Court was placed before the Tribunal. In these circumstances, and in the absence of distinguishing facts or binding adverse authority, the Tribunal directed deletion of the addition made by the Assessing Officer in the assessment framed under section 153C. The Tribunal therefore concluded that the disallowance could not be sustained and followed the established precedents relied upon by the assessee.

The disallowance of the short term capital loss on forfeiture of convertible share warrants is deleted and the Assessing Officer is directed to give effect to the deletion.

Final Conclusion: Following the Tribunal's and the Hon'ble Delhi High Court's precedent that share warrants are capital assets and that forfeiture effects an extinguishment amounting to transfer under section 2(47), the appeal is allowed; the addition disallowing the short term capital loss on forfeiture for AY 2009-10 is deleted and the AO is directed to give effect to the order.

Onus of proof for unaccounted sales from stock-in-trade - income escaping assessment by nondisclosure of sale proceeds of prospectus - retrospective effect of curative amendment to Section 40(a)(ia) enabling deduction where TDS deducted in the previous year is deposited by the due date of filing return

Income escaping assessment by nondisclosure of sale proceeds of prospectus - onus of proof for unaccounted sales from stock-in-trade - Whether addition made on account of alleged nondisclosure of income from sale of prospectus is sustainable. - HELD THAT: - The Tribunal upheld the CIT(A)'s order and dismissed the assessee's appeal on this point. The assessee claimed large expenditure on prospectus (stock held for sale) but declared sales at a token rate; the Assessing Officer treated the balance as income escaped assessment. The Tribunal agreed that, on preponderance of probabilities, unsold prospectuses held as stock would ordinarily be sold at the printed price and that the onus lay on the assessee to produce cogent evidence to show that sale proceeds were duly accounted for or that the balance stock remained unsold. The CIT(A) had granted substantial relief on the basis that the AO had not shown every registrant had purchased prospectus and accepted possible disposal as waste/scrap to the extent of Rs.50,000/-, but the Tribunal found no further basis for relief because the assessee failed to discharge its primary onus to account for the sales proceeds; consequently the appellate order of the CIT(A) was upheld and the addition sustained.

Addition on account of alleged nondisclosure of sale of prospectus is sustained; assessee's appeal on this issue dismissed.

Retrospective effect of curative amendment to Section 40(a)(ia) enabling deduction where TDS deducted in the previous year is deposited by the due date of filing return - Whether expenditure disallowed under Section 40(1)(ia)/40(a)(ia) for TDS deposited after the previous year but before the due date of filing return is allowable in the relevant assessment year. - HELD THAT: - The Tribunal followed the Supreme Court's decision in Calcutta Export Company and subsequent High Court authority to hold that the Finance Act, 2010 amendment to Section 40(a)(ia) is curative and should be given retrospective effect from the date of insertion of the provision (assessment year 2005-06). Applying that principle, the Tribunal held that where TDS was deducted during the previous year and deposited to the government on or before the due date for filing the return under Section 139(1), the related expenditure is allowable in that previous year even if the deposit to government occurred after the end of the previous year but before the return due date. The assessee had deposited the TDS before the due date of filing returns and therefore succeeds on this issue.

Expenditure disallowed under Section 40(1)(ia) is allowable for AY 2005-06 to the extent TDS was deposited by the due date for filing return; assessee succeeds on this issue.

Final Conclusion: The appeal is partly allowed: the Tribunal sustains the addition for undisclosed sale of prospectuses (assessee fails to discharge onus) but allows deduction for expenditure where TDS deducted in the previous year was deposited by the due date for filing the return for AY 2005-06 in accordance with the retrospectively applied curative amendment to Section 40(a)(ia).

Revisional jurisdiction under Section 263 - Assessing Officer's power under Section 153A in respect of unabated assessments - Requirement of incriminating material to make additions in completed assessments under Section 153A - Erroneous and prejudicial to the interest of revenue standard (Malabar test)

Revisional jurisdiction under Section 263 - Assessing Officer's power under Section 153A in respect of unabated assessments - Requirement of incriminating material to make additions in completed assessments under Section 153A - Erroneous and prejudicial to the interest of revenue standard (Malabar test) - Whether the Principal CIT validly exercised revisional jurisdiction under Section 263 by holding the AO's order under section 153A/143(3) to be erroneous and prejudicial to the revenue in respect of AY 2014-15 where the assessment was completed before the search and no incriminating material was found. - HELD THAT: - The Tribunal examined whether the twin conditions in Malabar Industries - that the AO's order must be erroneous and prejudicial to the interest of the revenue - were satisfied so as to justify exercise of revisional power under section 263. It is an admitted fact that the scrutiny assessment for AY 2014-15 was completed on 3.9.2016 and the search took place on 8.11.2016, hence the assessment was unabated on the date of search. Binding precedents, including CIT vs. Kabul Chawla and other High Court and Tribunal decisions referred to in the order, establish that for completed (unabated) assessments an AO exercising powers under section 153A can make additions or reassess only on the basis of incriminating material unearthed during the search or requisition. The AO, having noted absence of any incriminating material for AY 2014-15, reiterated the original assessment dated 3.9.2016. The Principal CIT's action setting aside that order under section 263 was therefore founded on disagreement with a view which, on the facts, was taken consistently with settled law. Where the AO has adopted a course permissible in law and no incriminating material exists to justify disturbance of a completed assessment, the AO's order cannot be regarded as erroneous and prejudicial to the revenue within the Malabar test. Consequently the Principal CIT lacked the requisite foundation to invoke revisional jurisdiction to direct a fresh assessment in respect of AY 2014-15. [Paras 8, 9, 13, 14]

Principal CIT's exercise of revisional jurisdiction under section 263 was without jurisdiction and the order issued under section 263 is quashed; the AO's order under section 153A/143(3) for AY 2014-15 is not erroneous or prejudicial to revenue.

Final Conclusion: Appeal allowed; impugned order of the Principal CIT dated 25.03.2021 under section 263 quashed insofar as it directed fresh assessment for AY 2014-15, the assessment framed by the AO under section 153A/143(3) reiterating the original assessment is upheld.

Revision under section 263 - erroneous and prejudicial to the interests of the revenue - two views permissible in law - section 50C - valuation and 10% proviso - adoption of stamp duty value for computation of capital gains

Revision under section 263 - erroneous and prejudicial to the interests of the revenue - two views permissible in law - section 50C - valuation and 10% proviso - Whether the Principal Commissioner of Income Tax was justified in invoking section 263 to set aside the assessment order for AY 2009-10. - HELD THAT: - The Tribunal examined the assessment and the Pr. CIT's revision and found that the Assessing Officer had adopted a view on adoption of market value for computation of long-term capital gain which was one of the courses permissible in law. The Pr. CIT's conclusion that the assessment order was erroneous and prejudicial to revenue was tested against the twin conditions required for exercise of jurisdiction under section 263. The Tribunal noted the subsequent computation in AY 2012-13 where the assessee had used a particular market value and that the SRO value differed by less than 10%. In light of the retrospective operation of the Finance Act amendment to section 50C (third proviso) and the coordinate tribunal decisions relied upon, the variation was within the threshold that permits adoption of the value offered by the assessee. Applying the principle in Malabar Industries (that where two views are possible an AO's view cannot be treated as erroneous and prejudicial unless unsustainable in law), the Tribunal held that the AO's approach was a tenable view and not legally unsustainable. Consequently, the conditions to invoke section 263 were not satisfied and the Pr. CIT's order setting aside the assessment could not be sustained. [Paras 9]

Order of the Principal Commissioner under section 263 set aside and the assessment order of the Assessing Officer for AY 2009-10 restored.

Final Conclusion: Appeal allowed: the Tribunal set aside the Pr. CIT's revision order under section 263 and restored the assessment order for AY 2009-10 on the grounds that the AO's view was legally tenable (including application of the section 50C proviso and the principle that where two views are possible the AO's view cannot be treated as erroneous and prejudicial to revenue).

Valuation of inventories - stock-in-trade - business loss arising from diminution in value of inventory - distinction between trading/capital loss and loss on valuation of inventory - addition under section 68 as unexplained cash credit - application of Accounting Standard 2 and section 145 for inventory valuation

Valuation of inventories - business loss arising from diminution in value of inventory - distinction between trading/capital loss and loss on valuation of inventory - application of Accounting Standard 2 and section 145 for inventory valuation - Whether the loss claimed by the assessee was a trading/capital loss from sale of shares or a business loss on account of diminution in value of inventory, and whether such loss could be disallowed and added back as unexplained cash credit. - HELD THAT: - The Tribunal accepted the findings of the first appellate authority that the assessee had not sold the disputed scrips during the year and continued to hold them as stock-in-trade in the succeeding assessment year. The records and the assessee's financials showed valuation of closing stock at lower of cost or net realizable value in accordance with Accounting Standard 2 and the method under section 145, producing a diminution from opening stock to closing stock which gave rise to the loss. The Assessing Officer had treated the claimed diminution as a loss on sale and, relying on investigation reports, concluded a pre-arranged bogus sale and framed an addition under section 68; however the assessment order did not explain how the figure of loss on sale was derived nor when any sale took place. Given the absence of any trading activity or sale, the Assessing Officer's conclusions were based on incorrect and misconceived facts and were contradictory to the return and financial statements. The CIT(A) correctly examined the purchase dates, year-end quoted prices, and the stock records, and held that the loss was on valuation of inventory and not a sale-induced trading or capital loss; consequently the addition under section 68 could not be sustained. [Paras 7]

The addition of Rs. 3,86,56,040/- made as unexplained cash credit was vacated; the loss was held to arise from valuation of inventory in conformity with AS-2 and section 145 and not from sale of shares.

Final Conclusion: The Tribunal dismissed the revenue appeal, upholding the CIT(A)'s deletion of the addition under section 68 and holding that the loss was on account of diminution in the value of closing stock (valued in accordance with AS-2 and section 145) and not a sham loss on sale of shares.

Supervisory jurisdiction under section 263 - erroneous and prejudicial to the interests of revenue - allowability of deduction under section 54F - principle of audi alteram partem / opportunity of hearing - debateable issue and permissible appellate view

Supervisory jurisdiction under section 263 - allowability of deduction under section 54F - debateable issue and permissible appellate view - Validity of assumption of jurisdiction by the Principal Commissioner under section 263 to set aside the assessment framed under section 143(3) in respect of the claim under section 54F. - HELD THAT: - The Tribunal held that the Assessing Officer had made specific enquiries regarding the claim under section 54F, received explanations and was satisfied with the eligibility of the deduction. The question whether construction commenced before sale precluded the claim was shown to be supported by a line of judicial precedents and therefore was not a case of a view so untenable as to be characterised as an error. Where the issue is debatable and the A.O. has taken a plausible view supported by law, the superior authority cannot substitute its own view by invoking section 263; assumption of revisional jurisdiction in such circumstances is without authority. Consequently the PCIT's conclusion that the assessment was "erroneous and prejudicial" was unsustainable and the revisional directions were illegal. [Paras 13]

Assumption of jurisdiction under section 263 and quashing of the assessment on the ground that the A.O.'s order was erroneous and prejudicial was unwarranted and set aside.

Principle of audi alteram partem / opportunity of hearing - supervisory jurisdiction under section 263 - Effect of non-service of show cause notice and total lack of meaningful opportunity to the assessee in the section 263 proceedings. - HELD THAT: - The Tribunal found that the solitary show cause notice was purportedly sent by email and, on the material, was not received; further the notice was signed on the date fixed for hearing at a time after the scheduled hearing slot, and no further notice was issued. The PCIT's casual approach resulted in total denial of effective opportunity to the assessee. Citing authority that an order passed in breach of the audi alteram partem rule is a nullity, the Tribunal concluded that the defect was fatal and incurable; accordingly the revisional order could not be sustained on this ground as well. [Paras 14, 15]

Revisional order passed without affording a real and effective opportunity to the assessee is void and is quashed.

Final Conclusion: The appeal is allowed; the revisional order passed by the Principal Commissioner under section 263 is set aside and quashed both because the A.O.'s view on the section 54F claim was a plausible and debatable view not vitiating the assessment, and because the PCIT failed to afford the assessee a real and effective opportunity of hearing.

Income from other sources - profits and gains of business or profession - business of money lending despite absence of licence - principle of consistency - deduction - wholly and exclusively for the purpose of business

Income from other sources - profits and gains of business or profession - business of money lending despite absence of licence - principle of consistency - Whether the interest income of Rs. 97,48,764/- should be assessed under the head "Profits and gains of business or profession" or under "Income from other sources" for A.Y. 2013-14. - HELD THAT: - The Tribunal held that where an assessee is regularly engaged in systematic and organised lending activity, the absence of a statutory licence (e.g., under the Money Lenders Act or as an NBFC) does not by itself preclude characterization of interest receipts as business income. The Tribunal relied on precedents recognizing money lending activity sans licence as business, and placed weight on the fact that the assessee had consistently offered similar interest receipts as business income in the two immediately preceding assessment years (accepted after scrutiny). In the absence of any change in facts, the department could not adopt an inconsistent view. Applying the principle of consistency and the factual finding that lending was a regular business activity during the year, the interest income was to be taxed under the head "Profits and gains of business or profession" and not under "Income from other sources." [Paras 7]

Set aside the orders of the lower authorities on this issue and direct the Assessing Officer to assess the interest income of Rs. 97,48,764/- under "Profits and gains of business or profession."

Deduction - wholly and exclusively for the purpose of business - Whether the employee benefit expenses of Rs. 10,71,000/- are deductible as expenses incurred wholly and exclusively for the purpose of business. - HELD THAT: - The Tribunal found that the assessee had furnished particulars (names, assigned jobs, PANs and amounts paid) in respect of the employee benefit expenses, and that the Assessing Officer did not make further enquiries or seek additional substantiation before disallowing the claim. The CIT(A)'s rejection rested on the view that the salaries related to financial and marketing activities which, in his view, were not the assessee's business; however, the Tribunal found on the record that the assessee was carrying on finance and consultancy activities alongside trading. Given the factual material furnished and the absence of cogent inquiry by the AO or convincing contrary material, the disallowance could not be sustained. [Paras 9]

Vacated the disallowance; the employee benefit expenses of Rs. 10.71 lac are allowable.

Deduction - wholly and exclusively for the purpose of business - profits and gains of business or profession - Whether legal and professional fees of Rs. 5,84,745/- are allowable as business expenditure. - HELD THAT: - The Assessing Officer disallowed the expenditure for want of documentary proof that it was incurred wholly and exclusively for business. The CIT(A) sustained the disallowance on the premise that the related interest income had not been treated as business income. Having held that the interest income is business income, the Tribunal concluded that legal and professional fees incurred in relation to that business activity and other regular corporate compliances were deductible. The Tribunal also noted that the assessee had produced bills and the payee particulars and had deducted TDS on such payments. [Paras 11]

Set aside the disallowance and direct the Assessing Officer to allow the legal and professional fees of Rs. 5,84,745/- as business expenditure.

Final Conclusion: The appeal is allowed: the interest income of Rs. 97,48,764/- to be assessed as business income; the disallowances of employee benefit expenses and legal and professional fees are vacated and those expenses are to be allowed; the remaining general grounds were dismissed as not pressed.

Section 43B - actual payment requirement under Sec. 43B - One Time Settlement (OTS) - credit of waived interest in profit and loss account - double taxation - remission/cessation of liability under section 41(1)

Section 43B - actual payment requirement under Sec. 43B - One Time Settlement (OTS) - credit of waived interest in profit and loss account - double taxation - Entitlement of the assessee to deduction of interest aggregating to Rs. 3,23,84,509/- in A.Y. 2010-11 in view of partial actual payment under OTS and prior disallowances under Sec. 43B in earlier years. - HELD THAT: - The Tribunal held that interest of Rs. 1,91,19,083/- actually paid under the OTS during the year under consideration is deductible under Sec. 43B. As to the remaining interest of Rs. 1,32,65,426/-, where that amount had been disallowed under Sec. 43B in the earlier years and the corresponding portion formed part of the interest waived and credited in the assessee's profit & loss account for A.Y.2010-11, allowing deduction of that amount in A.Y.2010-11 would avoid double taxation. The Tribunal endorsed the CIT(A)'s approach that the claim is permissible subject to verification that (i) the interest waived was credited in the profit & loss account for the year under consideration, (ii) such waived interest has been included in the figure of 'Profit' taken to the computation of income, and (iii) the said interest was disallowed under Sec. 43B in the earlier years. Reliance was placed on the principle that credit-back of an expense not allowed in earlier years is not taxable, and on the Madras High Court decision in CIT v. Samudra Shoe Overseas Ltd. which recognised deduction on waiver where interest had earlier been disallowed under Sec. 43B. [Paras 9, 10]

Deduction allowed for the amount actually paid under OTS and for the balance waived interest to the extent it had earlier been disallowed under Sec. 43B and was credited to profit & loss, subject to verification.

Credit of waived interest in profit and loss account - One Time Settlement (OTS) - remission/cessation of liability under section 41(1) - Direction to the Assessing Officer to verify specified facts regarding the waived interest and its treatment in the assessee's accounts. - HELD THAT: - The Tribunal upheld the CIT(A)'s direction that the AO should verify the records to ascertain (i) the correct amount of interest waived that was credited by the assessee in its profit & loss account for A.Y.2010-11; (ii) whether such waived interest was included in the figure of 'Profit' taken to the computation of income; and (iii) that the said interest had been disallowed under Sec. 43B in the earlier years. The verification is necessary to determine entitlement to deduction and to prevent double taxation; the Tribunal found no infirmity in remanding these limited factual/verificatory matters to the AO. [Paras 4, 8]

AO directed to carry out verification of the waived interest credits and prior disallowances as set out by the CIT(A).

Final Conclusion: The Tribunal upheld the CIT(A)'s order: allowance under Sec. 43B of the amount actually paid under the OTS and allowance of the balance waived interest to the extent it was earlier disallowed and credited to profit & loss, subject to the AO's verification; the revenue's appeal is dismissed.

Classification of income as business income or short term capital gain - intention at the time of purchase as determinative test - period of holding as a material but not sole factor - conversion of a capital asset into stock-in-trade and its tax consequences under sub-section (2) of Sec. 45 - precedential value of G. Venkataswami Naidu & Co. on intention test

Classification of income as business income or short term capital gain - period of holding as a material but not sole factor - intention at the time of purchase as determinative test - conversion of a capital asset into stock-in-trade and its tax consequences under sub-section (2) of Sec. 45 - Whether the CIT(A) was justified in bifurcating the surplus on sale of shares into business income (for shares held not more than 5 days) and short term capital gain (for shares held more than 5 days) solely on the basis of period of holding - HELD THAT: - The Tribunal held that although period of holding is a material factor, it cannot be the sole criterion for classifying receipts as business income or short term capital gain. The determinative test is the intention of the assessee at the time of purchase of the shares, as laid down in G. Venkataswami Naidu & Co.; if shares were purchased with intention to resell at a profit they amount to stock-in-trade and profits are business income, whereas shares bought to be held are capital assets and gains on their sale are capital gains. Where part of a lot has been treated as capital asset (and taxed as STCG), it is implicit that the entire lot was purchased with intention to hold as capital asset; consequentially, other shares from the same lot cannot be given a different treatment merely because sold after a shorter holding period. If the assessee converts or treats the shares as stock-in-trade, the consequences are governed by sub-section (2) of Sec. 45, which mandates bifurcation (fair market value on conversion treated as full value of consideration for capital gains and subsequent profit on sale assessed as business income). The Tribunal therefore modified the CIT(A)'s approach and directed the AO to re-determine the re-characterization of income in accordance with these principles. [Paras 8]

CIT(A)'s standalone use of a five-day holding-period yardstick is not sustainable; the matter is remitted to the AO to re-determine characterisation of income applying the intention test and Sec. 45(2) consequences where conversion to stock-in-trade is found.

CBDT Circular No. 6/2016 and its scope - classification of listed shares as stock-in-trade by option of assessee - Whether the CBDT Circular No. 6/2016 relied upon by the assessee supports his claim that income must be treated as capital gain - HELD THAT: - The Tribunal observed that the Circular states (i) where an assessee, irrespective of period of holding, opts to treat listed shares and securities as stock-in-trade, income would be business income; and (ii) where shares/securities are held for more than 12 months and the assessee desires to treat the income as capital gain, the AO should not dispute it; otherwise, the nature of the transaction continues to be decided in light of earlier CBDT instructions. Applying the Circular to the facts, the Tribunal held the assessee's reliance on Circular No. 6/2016 to be misplaced and not determinative in his favour. [Paras 9]

Assessee's reliance on CBDT Circular No. 6/2016 is misplaced; the Circular does not mandate the outcome claimed by the assessee in the facts of this case.

Final Conclusion: The appeal is partly allowed: the Tribunal holds that holding period alone cannot determine classification of income; intention at purchase is the determinative test and where part of a lot is treated as capital asset the entire lot should ordinarily receive the same treatment unless converted to stock-in-trade, in which case Sec. 45(2) consequences apply. The matter is remitted to the AO to give effect to these observations; the assessee's reliance on CBDT Circular No. 6/2016 is rejected.

Deductibility of employees' contribution to PF and ESI under section 36(1)(va) - Non obstante operation of section 43B and its applicability to employees' contribution - Prospective effect of Finance Act, 2021 amendments (Explanation 5 to section 43B and Explanation 2 to section 36(1)(va)) - Effect of payment before due date of filing return under section 139(1) on disallowance under section 43B - Binding precedent of the jurisdictional High Court (Rajasthan High Court) and consequent application by the Tribunal

Deductibility of employees' contribution to PF and ESI under section 36(1)(va) - Non obstante operation of section 43B and its applicability to employees' contribution - Prospective effect of Finance Act, 2021 amendments (Explanation 5 to section 43B and Explanation 2 to section 36(1)(va)) - Effect of payment before due date of filing return under section 139(1) on disallowance under section 43B - Binding precedent of the jurisdictional High Court (Rajasthan High Court) and consequent application by the Tribunal - Sustenance of additions disallowing deduction of employees' PF and ESI contributions paid after statutory due date but before the due date of filing return under section 139(1). - HELD THAT: - The Tribunal found that in the present appeals the employees' contributions to PF and ESI were deposited belatedly under the respective statutes but were paid prior to filing of the return of income under section 139(1). The Tribunal followed earlier decisions of various Benches of the ITAT (including the Jodhpur Bench) and the binding decisions of the jurisdictional Rajasthan High Court which hold that where such contributions are deposited before the due date for filing the return, they cannot be disallowed under section 43B read with section 36(1)(va). The Tribunal noted the subsequent amendments introduced by the Finance Act, 2021 (Explanation 2 to section 36(1)(va) and Explanation 5 to section 43B) but observed that those amendments have effect from 1.4.2021 and are therefore not applicable retrospectively to the assessment years under consideration. Applying the binding jurisdictional precedents and the principle that the prospective amendment does not affect earlier years, the Tribunal held that the additions sustained by the Assessing Officer and the CIT(A) are not sustainable and are required to be deleted. [Paras 8, 11, 12]

Impugned additions disallowing deduction of employees' PF and ESI contributions (paid after statutory due date but before filing of return under section 139(1)) are deleted and the appeals are allowed.

Final Conclusion: Following binding jurisdictional precedents and noting that the Finance Act, 2021 amendments operate with effect from 1.4.2021, the Tribunal deleted the additions made for delayed deposit of employees' PF and ESI where such amounts were paid before filing of the return under section 139(1), and allowed the appeals.

Exemption under Section 10(38) - onus of proof under Section 68 - contract notes and evidence of payment of securities transaction tax as proof of sale on stock exchange - preponderance of probabilities / human conduct test - opportunity of cross-examination - remand for fresh consideration

Contract notes and evidence of payment of securities transaction tax as proof of sale on stock exchange - Assessee failed to produce contract notes showing time date stamp and payment of securities transaction tax to prove sale on the stock exchange. - HELD THAT: - The Tribunal examined the material placed before it and directed the authorised representative to produce contract notes evidencing online sale with time date stamp and payment of securities transaction tax. The papers produced comprised a purchase invoice, share certificate, dematerialisation documents and the broker's ledger, but no contract notes of sale on the stock exchange platform were produced before the Assessing Officer, CIT(A) or the Tribunal. In this factual matrix the Tribunal held that the absence of contract notes and evidence of STT is a material lacuna which precludes acceptance of the assessee's claim that the transactions were effected on the exchange. The Tribunal therefore recorded the finding that the assessee had not discharged the evidential burden to establish sale on the stock exchange. [Paras 10, 11, 12]

Finding that the assessee did not produce contract notes or STT evidence and thereby failed to establish online sale of shares.

Exemption under Section 10(38) - onus of proof under Section 68 - remand for fresh consideration - Claim of long term capital gain exempt under Section 10(38) was not finally adjudicated but remanded to the Assessing Officer for fresh examination in light of production of requisite evidence. - HELD THAT: - Although the Assessing Officer and CIT(A) reached adverse conclusions relying on investigation reports, trading patterns and preponderance of probabilities, the Tribunal emphasised that contract notes and STT payment are documents of paramount importance to determine whether the claimed gains arose from bona fide stock exchange transactions. Given the absence of such documents, the Tribunal set aside the issue and remitted it to the Assessing Officer with directions to admit and consider all pleadings and evidence that the assessee may file, to make necessary enquiries and to decide the claim in accordance with law. [Paras 13]

Matter remitted to the Assessing Officer for fresh adjudication of the claim of exemption under Section 10(38), with liberty to the assessee to produce evidence and to raise all contentions.

Opportunity of cross-examination - preponderance of probabilities / human conduct test - Failure to grant cross examination on statements relied upon by revenue was not held to vitiate the proceedings in the circumstances of this case. - HELD THAT: - The Tribunal considered the assessee's plea that he was not permitted to cross examine parties whose statements were relied upon. Noting precedent cited by the parties, the Tribunal held that the lower authorities were not in error in declining cross examination in the facts of the case and that the impugned findings had been reached on the available material, investigative reports and the assessee's omissions. However the Tribunal nonetheless remitted the substantive claim for fresh consideration because of the specific evidentiary lacuna (absence of contract notes). [Paras 12]

Lower authorities' refusal to grant cross examination was not faulted on the facts, but this did not preclude remand for fresh adjudication of the substantive claim.

Final Conclusion: The appeal is allowed for statistical purposes; the Tribunal set aside the adverse findings insofar as they determine the exemption claim and remanded the issue to the Assessing Officer to examine the assessee's claim of long term capital gain exempt under Section 10(38) after permitting production of requisite evidence and conducting such enquiries as may be necessary.

Prohibition on suits by real owner in respect of benami property under Section 4(1) of the Benami Transactions (Prohibition) Act, 1988 - exception for Hindu undivided family and fiduciary holding under Section 4(3) of the Benami Transactions (Prohibition) Act, 1988 - rejection of plaint under Order VII Rule 11 CPC for non maintainability - fiduciary capacity / trustee concept

Prohibition on suits by real owner in respect of benami property under Section 4(1) of the Benami Transactions (Prohibition) Act, 1988 - exception for Hindu undivided family and fiduciary holding under Section 4(3) of the Benami Transactions (Prohibition) Act, 1988 - rejection of plaint under Order VII Rule 11 CPC for non maintainability - Whether the plaint claiming title in respect of a property alleged to be benami is barred under Section 4(1) of the Benami Transactions (Prohibition) Act, 1988 and liable to be rejected under Order VII Rule 11 CPC in the absence of pleadings bringing the case within the exception in Section 4(3). - HELD THAT: - On scrutiny of the plaint alone (the limited scope at the stage of Order VII Rule 11), the respondents pleaded that the property was purchased by their father in 1961 and stood in the name of Savitri Devi as a benami holder. The plaint did not allege that Savitri Devi held the property as a coparcener of a Hindu undivided family or that the property was held for the benefit of all coparceners, facts which are necessary to invoke the exception in Section 4(3) of the Act, 1988. While the concept of fiduciary capacity is recognised and disputes on fiduciary character may require evidence (and thus cannot always be decided at the pleadings stage), those contentions must nonetheless appear on the face of the plaint when a defendant seeks rejection under Order VII Rule 11. In the absence of any pleading to bring the case within the statutory exception, the suit is hit by the clear bar in Section 4(1) and therefore not maintainable. The Court accordingly reversed the trial Court's dismissal of the defendants' Order VII Rule 11 application and proceeded to reject the plaint. [Paras 8, 9, 10]

The plaint is barred by Section 4(1) of the Benami Transactions (Prohibition) Act, 1988 and, having no pleadings to attract the exception in Section 4(3), is rejected under Order VII Rule 11(d) CPC; the revision is allowed and the suit stands terminated.

Final Conclusion: The High Court allowed the revision, set aside the trial Court's order, allowed the petitioners' application under Order VII Rule 11 CPC and rejected the plaint as barred by Section 4(1) of the Benami Transactions (Prohibition) Act, 1988 for want of pleadings invoking the Section 4(3) exception; the civil suit proceedings are terminated.

Review under Order XLVII Rule 1 CPC - error apparent on the face of the record - new and important matter not available earlier - completion of import-time of import for statutory purposes - actual user condition and enforceability post-release for home consumption - pre-eminence of DGFT interpretation of Foreign Trade Policy - right to re-export imported goods prior to release from customs bond - application of Garden Silk Mills and M. J. Exports precedents

Review under Order XLVII Rule 1 CPC - error apparent on the face of the record - new and important matter not available earlier - Whether the review petition discloses grounds entitling the Revenue to review the Court's order dated 4th September, 2019 - HELD THAT: - The Court held that review jurisdiction is circumscribed by Order XLVII Rule 1 CPC and its recognized grounds. The impugned order recorded a concession by learned counsel for the respondents permitting re-export and disposed the writ petition on that basis. The review petition did not demonstrate any error apparent on the face of the record nor did it establish discovery of new material which, despite due diligence, could not have been produced earlier. Although the Court, in view of public revenue implications, entertained submissions under the residual "any other sufficient reason" head, on merits no valid basis for review was made out. The review petition therefore failed to satisfy the statutory tests for review and could not succeed. [Paras 2, 29, 30, 40, 41]

Review petition dismissed for failure to establish any ground under Order XLVII Rule 1 CPC.

Completion of import-time of import for statutory purposes - actual user condition and enforceability post-release for home consumption - right to re-export imported goods prior to release from customs bond - application of Garden Silk Mills and M. J. Exports precedents - Whether Notification 50/2017-Cus and its actual user condition could be invoked to deny re-export while the goods remained in Customs bond and before filing of the bill of entry for home consumption - HELD THAT: - Relying on Garden Silk Mills, the Court adopted the legal position that import is completed only when goods become part of the mass of goods within the country and the taxable event is reached upon filing the bill of entry for home consumption. As the Gold Dore Bars were still within Customs bond and no bill of entry for home consumption had been filed for the remaining consignment, the goods were not 'imported into India' for the purpose of invoking Notification 50/2017-Cus. Consequently, any actual user condition attached to that notification could not be enforced at that stage. The Court further explained that the question of compliance with an actual user condition arises only upon release for home consumption, which had not occurred. The Court examined and distinguished M. J. Exports-I, noting that the Supreme Court recognizes the right to re-export imported goods in appropriate circumstances and that findings in M. J. Exports-I concerning implied prohibition were context-specific to the nature of goods and the licence conditions there. Therefore, the Revenue's reliance on the notification and the DGFT licence condition could not legally defeat the petitioner's entitlement to re-export while the goods remained in bond. [Paras 33, 34, 35]

Notification 50/2017-Cus and its actual user condition did not preclude re-export of the goods while they remained in Customs bond and before filing of bill of entry for home consumption.

Pre-eminence of DGFT interpretation of Foreign Trade Policy - application of Garden Silk Mills and M. J. Exports precedents - Whether the DGFT clarification permitting export of gold and its interpretation of the licence could be disregarded by Customs to deny re-export - HELD THAT: - The Court observed that interpretation of the Foreign Trade Policy and related licences falls within the competence of the DGFT, whose views are entitled to pre-eminent consideration. The petitioner had sought and received a specific clarification from the DGFT that gold was freely exportable and there was no restriction on its export, the factual position being fully disclosed to DGFT including that the goods remained in Customs bond and had been imported against a licence with an actual user condition. Given the DGFT's clarification and authoritative role in interpreting FTP provisions, the Customs authorities' contrary stance had no sustainable basis. The Court accordingly found no justification for treating the DGFT's view as inconsequential when deciding entitlement to re-export. [Paras 36, 37, 38]

DGFT's interpretation and clarification in favour of permitting re-export prevails and customs could not disregard it to deny re-export.

Final Conclusion: The review petition was dismissed. The Court held that (i) the review did not satisfy the limited grounds under Order XLVII Rule 1 CPC; (ii) Notification 50/2017-Cus and any actual user condition could not be invoked while the goods remained in Customs bond and prior to filing of bill of entry for home consumption; and (iii) the DGFT's clarification that gold is freely exportable and its authoritative interpretation of the FTP supported the petitioner's entitlement to re-export.

Preventive detention - prejudicial activity - live-link or causal connection between past activity and detention - stale or illusory grounds for detention - delay in passing detention order and its effect on validity - subjective satisfaction of the detaining authority - smuggling as act or omission rendering goods liable to confiscation

Prejudicial activity - live-link or causal connection between past activity and detention - Whether there existed a live-link or causal connection between the alleged prejudicial activity and the passing of the detention order. - HELD THAT: - The court examined the chronology placed on record and observed that the only specific transactional act alleged to constitute prejudicial activity was the on-paper export under shipping bill dated 11.12.2018. The time-chart and other material did not disclose any further prejudicial activity by the petitioner between 11.12.2018 and the detention order dated 15.01.2021 (served 23.01.2021). In light of settled jurisprudence requiring a proximate and rational nexus between past conduct and the necessity for preventive detention, the court found that the causal link had snapped given the more-than-two-year gap and the absence of subsequent prejudicial acts. The court therefore concluded that the detention order lacked the required live-link to justify preventive detention under the statute. [Paras 16, 17, 18, 21, 22]

No live-link or causal connection existed between the alleged prejudicial activity and the detention order; the link had snapped.

Stale or illusory grounds for detention - delay in passing detention order and its effect on validity - Whether the grounds of detention were stale, illusory or lacked real nexus with the need for preventive detention, rendering the order invalid because of delay. - HELD THAT: - Applying authorities that distinguish mere delay from delay that renders grounds stale or lacking nexus, the court held that where a detention order rests on stale incidents that do not furnish a reasonable prognosis of future misconduct, the order becomes punitive and unsustainable. Here, the only act specifically relied upon dated to 11.12.2018, and the court found that a gap of over two years made the ground stale and illusory for the purpose of preventive detention. The court observed that preventive detention is drastic and permissible only where past conduct bears a proximate and rational connection to the need for detention; absent that nexus, and having regard to the delay, the detention order could not be sustained. [Paras 19, 20, 21, 22]

The grounds were stale and lacked a real nexus with the preventive detention order; delay rendered the detention unsustainable.

Subjective satisfaction of the detaining authority - preventive detention - Whether the detaining authority had legitimately arrived at the subjective satisfaction required for preventive detention. - HELD THAT: - While recognizing that courts do not substitute their judgment for the executive's subjective satisfaction, the court reaffirmed that such satisfaction must be grounded on material of rationally probative value and relevant to the statutory object. The court concluded that where the authority has taken into account stale incidents that have gone to seed, it is permissible to infer that the satisfaction was not genuine. On the facts, because the order relied on stale material without a proximate causal connection to present danger of prejudice, the necessary subjective satisfaction was not shown to be validly or reasonably reached. [Paras 18, 21, 22, 23]

The detaining authority's subjective satisfaction was not supported by material of rational probative value and therefore was not validly arrived at.

Final Conclusion: The detention order dated 15.01.2021 (served 23.01.2021) was quashed and set aside because the sole specific act relied upon dated 11.12.2018, creating a gap of over two years that broke the requisite live-link and rendered the grounds stale; the petitioner was directed to be released forthwith unless held in custody in another matter.

Failure to consider representations in antidumping sunset review - recommendatory nature of the Designated Authority's findings - Central Government's duty to make final determination on antidumping recommendations - distinction between user questionnaire response and import questionnaire response in antidumping proceedings - final findings under Rule 17(1)(b) of the Antidumping Rules

Impleading necessary party - Petitioner directed to implead the Commissioner of Customs, NER Custom House, Shillong - 1 as respondent no. 5. - HELD THAT: - Having considered the nature of the grievance and the role of the Customs authorities in matters arising from antidumping measures and importation, the Court required the petitioner to implead the Commissioner of Customs, NER Custom House, Shillong - 1, so that the Customs Department may participate in the proceedings. The order for impleadment was recorded to ensure that all relevant authorities are before the Court while the matter progresses. [Paras 2]

Commissioner of Customs, NER Custom House, Shillong - 1 is to be impleaded as respondent no. 5.

Recommendatory nature of the Designated Authority's findings - Central Government's duty to make final determination on antidumping recommendations - Designated Authority's final findings are recommendatory and the Central Government remains to make the final determination. - HELD THAT: - Relying on the principle affirmed by the Supreme Court in Saurashtra Chemicals Ltd., the Court noted that findings or recommendations of the Designated Authority in antidumping investigations are recommendatory in nature and do not constitute the final determination. The Central Government alone is required to make the final decision on the recommendation; in the present case the Central Government had not yet made that final determination. [Paras 8]

The Central Government retains the duty to make the final determination on the Designated Authority's recommendation.

Failure to consider representations in antidumping sunset review - distinction between user questionnaire response and import questionnaire response in antidumping proceedings - remand for fresh consideration by Central Government - Central Government directed to take note that the import questionnaire response and other representations submitted by the petitioner during the sunset review were not given due consideration by the Designated Authority, and to give them due consideration in making the final determination. - HELD THAT: - The Designated Authority, in its final finding, recorded that the petitioner Century Ply was both an importer and a consumer but stated that the petitioner should have filed a user questionnaire response rather than an import questionnaire response. The Court observed that this conclusion indicates the import questionnaire response and the petitioner's submissions may not have been considered by the Designated Authority. Because the Central Government has not yet issued the final determination, the Court requested that the Central Government note this aspect, examine the import questionnaire response and any other representations submitted during the sunset review (to the extent permissible in law), and give them due consideration when completing the final determination. [Paras 9, 11, 12]

Matter remitted to the Central Government to take note of and give due consideration to the import questionnaire response and any other admissible representations submitted by the petitioner during the sunset review before making the final determination.

Final Conclusion: Writ petition disposed of by directing impleadment of the Customs Commissioner and by requesting the Central Government, which alone makes the final antidumping determination, to consider the petitioner's import questionnaire response and any other admissible representations (previously not considered by the Designated Authority) when deciding the matter.

Redemption fine in lieu of confiscation - market price as basis for fixation of fine - Section 125 of the Customs Act, 1962 - appellate interference with quantum of fine as a finding of fact - repeat offending as an aggravating factor

Redemption fine in lieu of confiscation - market price as basis for fixation of fine - Section 125 of the Customs Act, 1962 - appellate interference with quantum of fine as a finding of fact - Validity of the Tribunal's reduction of the redemption fine imposed under Section 125 where the adjudicating authority did not determine the market price of the confiscated goods - HELD THAT: - The Court held that Section 125 requires that a redemption fine in lieu of confiscation must be fixed having regard to the market price of the goods confiscated (less duty in case of imports), and that the authority imposing the fine must follow that statutory prerequisite. The Commissioner (COC (I)) in the present case did not conduct even a sample market survey or record how the redemption fine was arrived at, and therefore there was no basis in the adjudicating order to sustain the high quantum of fine. The Tribunal gave reasons for reducing the fine to 35% of the transaction value by referring to earlier consistent decisions and by treating the question of appropriate quantum as essentially a finding of fact involving considerations such as margin of profit and demurrage. The Court noted binding guidance in Mansi IMPEX that market price determination is a pre-requisite, and in Stoneman Marble Industries that reduction of redemption fines by the Tribunal is essentially a factual conclusion not normally raising a pure question of law. As the Commissioner had not discharged the statutory requirement of determining market price and the Tribunal recorded factual bases for reduction, the Tribunal's interference with the quantum was justified and the appeal by the Revenue had to be dismissed. [Paras 8, 9, 12, 13]

Tribunal rightly reduced the redemption fine; the appeal is dismissed.

Final Conclusion: The appeal is dismissed: the Tribunal validly reduced the redemption fine because the adjudicating authority failed to determine the market price as required by Section 125, and the Tribunal's reduction represented a permissible factual finding.

Statutory revision under Section 129DD of the Customs Act, 1962 - stay petition pending before revisional authority - suo-motu impleader of necessary party - direction to expeditious disposal - no expression on merits

Stay petition pending before revisional authority - direction to expeditious disposal - Pending stay petition before the Principal Commissioner (RA) to be disposed of within a specified time-frame - HELD THAT: - The Court noted that revisions filed by both the passenger and the Customs Department are pending before the Principal Commissioner (RA) at Mumbai and that a stay petition is also pending before that Revisional Authority. As the parties agreed that the stay petition is the immediate obstacle to resolution, the Court directed the Revisional Authority to decide the stay petition on its merits and in accordance with law within three weeks from the date of the order. The Court expressly refrained from expressing any view on the merits of the underlying matters while confining its direction to expedition of decision. [Paras 3, 5, 8, 9]

Third respondent directed to dispose of the stay petition within three weeks on its merits and in accordance with law; no opinion expressed on merits by this Court.

Statutory revision under Section 129DD of the Customs Act, 1962 - suo-motu impleader of necessary party - Suo-motu impleading of the Revisional Authority as a party and consequential administrative steps - HELD THAT: - The Court recorded that both the passenger and Customs have filed statutory revisions under Section 129DD before the Revisional Authority at Mumbai. In view of the pendency of those revisions and the stay petition before that Authority, the Court suo-motu impleaded the Principal Commissioner (RA) as third respondent. The Registry was directed to effect necessary amendments to the case file reflecting the impleading and to send a copy of the order to the impleaded third respondent forthwith. The Court clarified that these steps are administrative and do not prejudice the third respondent. [Paras 3, 4, 11]

Revisional Authority suo-motu impleaded as third respondent; Registry to carry out consequential amendments and to send a copy of this order to the impleaded third respondent.

Final Conclusion: Writ petition disposed of by directing the Revisional Authority to decide the pending stay petition within three weeks and by suo-motu impleading the Revisional Authority as third respondent; the Court did not express any view on the merits and there is no order as to costs.

The proper officer - jurisdictional vires of proceedings initiated by Directorate of Revenue Intelligence - want of jurisdiction as a ground cognisable in writ jurisdiction despite non-exhaustion of statutory appeal - application of Canon India ratio regarding entrustment of functions under Section 6

The proper officer - jurisdictional vires of proceedings initiated by Directorate of Revenue Intelligence - application of Canon India ratio regarding entrustment of functions under Section 6 - Validity of proceedings initiated under Section 28(1) of the Customs Act by Additional Director General, Directorate of Revenue Intelligence. - HELD THAT: - The Court applied the ratio of the Supreme Court in M/s. Canon India Private Limited and the subsequent High Court decisions which held that power to initiate and complete proceedings under Section 28 vests only in 'the proper officer' and that officers of the Directorate of Revenue Intelligence are not 'the proper officer' unless they have been validly appointed/entrusted with Customs functions under Section 6. The judgment noted that the Show Cause Notice in these matters was issued by the Additional Director General, DRI (admittedly not shown to be a Customs officer entrusted under Section 6) and therefore the initiation of proceedings was without jurisdiction. The Court accepted the view in the Karnataka High Court decision and held that the proceedings culminating in the impugned order are vitiated for want of jurisdiction; the authorities remain free to take action afresh in accordance with law and the Canon India ratio. [Paras 31, 32, 33]

Proceedings initiated by the Additional Director General, DRI under Section 28(1) are invalid for want of jurisdiction and the impugned orders are quashed; respondents may initiate fresh proceedings in accordance with law.

Want of jurisdiction as a ground cognisable in writ jurisdiction despite non-exhaustion of statutory appeal - Whether the petitioners could raise the jurisdictional challenge by way of writ petitions despite not having exhausted the statutory appeal remedy. - HELD THAT: - The Court reiterated the established principle that ordinarily writ petitions in tax matters are entertained after exhaustion of statutory remedies, but recognised exceptions where writ relief is permissible - namely, breach of natural justice, statutory violation, or want of jurisdiction. The Court held that the plea of want of jurisdiction, based on the subsequently clarified law in Canon India, could be entertained at any stage (including by direct writ against the order-in-original) because it goes to the very competence of the authority that passed the order. Consequently, non-exhaustion of the appellate remedy did not preclude the High Court from deciding the jurisdictional challenge in these petitions. [Paras 28, 30, 31]

The writ petitions can be entertained on the ground of want of jurisdiction despite non-exhaustion of statutory appeal; the jurisdictional challenge was accordingly allowed.

Final Conclusion: Writ petitions allowed; impugned adjudication orders (originating from a Show Cause Notice issued by the Additional Director General, DRI) are quashed for want of jurisdiction in view of the Canon India ratio; respondents are at liberty to initiate fresh proceedings in accordance with law. No order as to costs.

Separation of adjudicatory proceedings and criminal prosecution under the Customs Act - no prohibition to defer adjudication pending criminal trial - prejudice from parallel adjudication not presumed - quasi-judicial nature of adjudication proceedings - penalty under Sections 114A and 114AA of the Customs Act - evasion of duty under Section 135 of the Customs Act

Separation of adjudicatory proceedings and criminal prosecution under the Customs Act - no prohibition to defer adjudication pending criminal trial - prejudice from parallel adjudication not presumed - Challenge to summon dated 19.08.2021 and prayer to defer/quash adjudication proceedings till completion of criminal trial in C.C.No.131 of 2021 - HELD THAT: - The Court held that adjudication proceedings under the Customs Act (which may culminate in imposition of penalty under Sections 114A and 114AA) are distinct from criminal proceedings under Section 135 (evasion of duty). There is no provision in the Act prohibiting continuation of adjudication while criminal proceedings are pending, and the mere fact that some witnesses may be common to both fora does not establish that parallel adjudication will necessarily prejudice the accused in the criminal trial. The petitioner had earlier been granted relief insofar as nondisclosure of documents was concerned and, thereafter, was permitted by the department to cross-examine witnesses and was supplied the documents sought. Service-law principles permitting stay of departmental proceedings are inapposite here because both proceedings arise under the same statute but serve different purposes and standards (penalty by adjudication vs. criminal guilt beyond reasonable doubt). On these foundations the Court found no legal basis to quash or defer the impugned summon directing appearance for adjudication. [Paras 16, 17, 18, 20, 21]

Writ petition dismissed; impugned summon dated 19.08.2021 is not quashed and adjudication may proceed.

Final Conclusion: The High Court dismissed the writ petition and refused to quash or defer the adjudication summons dated 19.08.2021; adjudication proceedings may continue notwithstanding the parallel criminal case in C.C.No.131 of 2021.

Treatment of education cess and secondary and higher education cess as part of customs duty - eligibility for benefit under Clause 11 of CBIC Circular No.2/2020 for past debits in duty credit scrips - scope of Notification No.24/2015 - debit of duties through MEIS scrips - interpretation of Unicorn Industries (Supreme Court) in relation to exemption notifications and subsequent levies

Treatment of education cess and secondary and higher education cess as part of customs duty - interpretation of Finance Act, 2004 and Finance Act, 2007 - Education cess and secondary and higher education cess levied by the Finance Acts of 2004 and 2007 are to be treated as duties of customs and form part of the duty payable on imported goods. - HELD THAT: - The Court examined the statutory provisions in the Finance Act, 2004 (Sections 91, 93 and 94) and the Finance Act, 2007 (Sections 126 and 129) which declare the education cess and the secondary and higher education cess, respectively, to be duties of excise/customs in relation to specified goods. The statutory scheme makes the cesses payable as additions to and in the same manner as duties of customs and subjects them to the same rules regarding levy, collection, refunds and exemptions as applicable to customs duties. Consequently, when customs duty is calculated and paid, the attendant cesses, being declared duties of customs by Parliament, form part of the total duty payable on imported goods and are not separate, independent levies for the purpose of characterisation. [Paras 22, 23, 24, 25]

The cesses under the Finance Acts of 2004 and 2007 constitute part of the customs duty payable on imports.

Eligibility for benefit under Clause 11 of CBIC Circular No.2/2020 for past debits in duty credit scrips - scope of Notification No.24/2015 - debit of duties through MEIS scrips - interpretation of Unicorn Industries (Supreme Court) in relation to exemption notifications and subsequent levies - Whether the petitioner is entitled to the benefit under Clause 11 of CBIC Circular No.2/2020 in respect of past debits of education cess and secondary and higher education cess made by debiting MEIS scrips. - HELD THAT: - The Court considered the departmental Circular No.2/2020 which, while following the Supreme Court's observations in Unicorn Industries, directed that past cases where SWS (such as SWS) had been debited through duty credit scrips need not be reopened and such past debits may be accepted as revenue. The respondents had denied the benefit on the ground that Clause 11 applies only to debits of basic and additional customs duties and not to cesses. The Court held that, because the Finance Acts of 2004 and 2007 expressly treated the education cess and the secondary and higher education cess as duties of customs, past debits of those cesses by using MEIS scrips - where the goods were cleared and the debits had been accepted at the time - fall within the category of past debits which the Board decided should not be disturbed. The Court further held that the respondent's reliance on Unicorn Industries was a misfit in the present facts; the principle in that case does not preclude extending the administrative non-recovery treatment to past debits of cesses that are statutorily part of customs duty. Consequently, the impugned order rejecting the petitioner's claim for relief under Clause 11 was unsustainable. [Paras 26, 27, 28]

The petitioner is entitled to the benefit of Clause 11 of Circular No.2/2020 in respect of the past debits of education cess and secondary and higher education cess made by debiting MEIS scrips; the impugned order is quashed and the respondent directed to extend the benefit.

Final Conclusion: Writ petition allowed; impugned order quashed and respondent directed to extend the benefit of Clause 11 of CBIC Circular No.2/2020 dated 10.01.2020 to the petitioner in respect of past debits of education cess and secondary and higher education cess debited from MEIS scrips; no order as to costs.

Revocation of customs broker licence - misdeclaration and smuggling of contraband - mens rea / knowledge of the customs broker - negligence in permitting unauthorised/ex employee to act (expired H Card) - proportionality of penalty and alternative sanctions - forfeiture of security deposit as punishment

Mens rea / knowledge of the customs broker - misdeclaration and smuggling of contraband - The appellant customs broker did not have proved prior knowledge of the concealment of narcotic substance in the export consignment. - HELD THAT: - The Tribunal found that the exporter had supplied PAN, GST registration and a written declaration expressly stating that the shipment did not contain contraband. On the material on record there was no allegation or evidence establishing that the customs broker had prior knowledge or active facilitation of the smuggling. In these circumstances the proved infraction was the misdeclaration of the consignment by the exporter and not a demonstrated mens rea on the part of the broker; absence of prior knowledge was a determinative fact in assessing the broker's culpability. [Paras 6, 7]

No evidence proved prior knowledge of concealment by the customs broker; mens rea was not established.

Negligence in permitting unauthorised/ex employee to act (expired H Card) - revocation of customs broker licence - Allowing an ex employee with an expired H Card to file documents constituted a breach of the Customs Brokers Regulations, but that negligence alone did not warrant revocation of the licence. - HELD THAT: - The Tribunal accepted that the appellant permitted an ex employee whose H Card had expired to handle documents, which amounted to a regulatory violation. However, the wrongful act was characterised as negligence rather than active complicity in smuggling. Given that the violation arose from permitting an unauthorised person to act and not from proven facilitation of contraband, the Tribunal held that such negligence, although punishable, falls short of the extreme circumstances that justify permanent revocation of licence. [Paras 3, 5, 8]

The act of permitting an ex employee with an expired H Card is a violation but does not justify revocation of the licence.

Proportionality of penalty and alternative sanctions - forfeiture of security deposit as punishment - Revocation was disproportionate; upholding of penalty and forfeiture of security deposit is an adequate and proportionate sanction in the circumstances. - HELD THAT: - Applying the proportionality principle and relying on precedents treating revocation as an extreme remedy that impacts livelihood, the Tribunal concluded that a severe sanction like revocation was not warranted where there was no mens rea and the proven lapse related to unauthorised use of a G/H card. The Tribunal observed that forfeiture of security deposit and imposition of penalty address the regulatory breach and serve as an effective deterrent without the lifetime consequences of revocation, and therefore set aside the revocation while upholding penalty and forfeiture. [Paras 8, 9]

Revocation set aside; penalty and forfeiture of security deposit upheld as proportionate sanctions.

Final Conclusion: The appeal is partly allowed: the revocation of the customs broker licence is set aside as disproportionate given absence of proven prior knowledge, while the penalty and forfeiture of the security deposit are sustained as adequate punishment for the regulatory breach.

Strict construction of exemption notifications - interpretation of DGFT Public Notice No.30/2015-2020 - Para 2.58 FTP - power to relax provisions - condition 2(4) of the exemption notification concerning simultaneous SHIS and zero duty EPCG - enforcement of bond for recovery of customs duty - confiscation and penalties consequent on denial of exemption

Interpretation of DGFT Public Notice No.30/2015-2020 - Para 2.58 FTP - power to relax provisions - condition 2(4) of the exemption notification concerning simultaneous SHIS and zero duty EPCG - Whether the appellant, having surrendered unused SHIS scrips to the JDGFT and obtained cancellation, was required additionally to apply for or obtain a specific policy relaxation under Para 2.58 of the FTP to avail the benefit of the DGFT Public Notice and thereby preserve entitlement to zero duty EPCG exemption. - HELD THAT: - The Tribunal held that the Public Notice, issued in consultation with the Department of Revenue, provided a procedural option to exporters who had been incorrectly issued simultaneous benefits to choose and return one of the benefits. The disputed paragraph merely states the power DGFT would exercise under Para 2.58; it does not impose an obligation on the licencee to apply for or procure an express Policy Relaxation Committee order. Examination of Para 2.58 likewise does not prescribe a formal application requirement by the exporter. The appellant had surrendered unused SHIS scrips to the JDGFT Hyderabad, which cancelled them; nothing in the record shows any refusal by DGFT or the Policy Relaxation Committee to grant relief. The Revenue cannot read additional requirements into the Public Notice. Consequently, by surrendering and getting the SHIS cancelled, the appellant complied with the Public Notice and was not disentitled from claiming the exemption under the EPCG notification by virtue of Condition 2(4). [Paras 14, 15, 16, 17]

The appellant was not required to obtain a separate policy relaxation under Para 2.58 to avail the Public Notice; surrender and cancellation of unused SHIS scrips sufficed and the Public Notice applied in the appellant's favour.

Strict construction of exemption notifications - confiscation and penalties consequent on denial of exemption - enforcement of bond for recovery of customs duty - Whether the impugned order denying the EPCG exemption, invoking the bond for recovery, and ordering confiscation and penalties could be sustained in view of the appellant's compliance with the Public Notice. - HELD THAT: - The Tribunal accepted the principle that exemption notifications are to be strictly construed, but concluded that the Revenue had gone beyond the scope of the DGFT Public Notice by reading in an extra requirement (application to/relaxation by the Policy Relaxation Committee) which the Notice and Para 2.58 do not prescribe. Because the Public Notice was available to the appellant and the SHIS scrips were surrendered and cancelled, the foundational premise for denying the exemption (that Condition 2(4) was violated) failed. Consequent measures taken on that premise - recovery of duty by invoking bonds, confiscation of capital goods and imposition of penalties - could not be sustained. The Tribunal therefore set aside the impugned adjudicatory order and allowed the appeal with consequential relief. [Paras 2, 12, 16, 17]

Impugned denial of exemption, invocation of bond for recovery, confiscation and penalties were unsustainable and the adjudicating order is set aside.

Final Conclusion: The appeal is allowed. The Tribunal held that the appellant, having surrendered unused SHIS scrips which were cancelled, was entitled to the benefit of the DGFT Public Notice without a separate policy relaxation; consequently the denial of EPCG exemption and the resultant recovery, confiscation and penalties were set aside. Stay application disposed of.

Closure of transfer bonds under Section 67 of the Customs Act, 1962 - refund of differential customs duty paid under protest - principles of natural justice in bond-closure proceedings - Warehoused Goods (Removal) Regulations, 1963 - bond terms, discharge and forfeiture - applicability of Circular No. 96/2002-CUS to provisional assessments - delay/laches in contesting closure of transfer bonds and effect on entitlement to refund

Refund of differential customs duty paid under protest - delay/laches in contesting closure of transfer bonds and effect on entitlement to refund - Whether the appellant was entitled to refund of the differential customs duty paid under protest in respect of the alleged shortage of imported goods. - HELD THAT: - The Tribunal found that the shortfall in quantity (190 Kg against 112,000 Kg) gave rise to a demand of differential duty which was paid by the appellant under protest. The appellant's explanation attributing the marginal difference to evaporation and transit loss was first raised after the transfer bonds had been closed (first closure on 19.01.2014 and last on 11.02.2015), with no explanation for silence for over one and a half years. The Tribunal held that this unexplained delay and failure to contest the bond closures at the appropriate stage rendered the subsequent refund claim an afterthought, and therefore not a fit case for refund. The Tribunal accordingly upheld the rejection of the refund application. [Paras 5]

Refund claim rejected and the demand/differential duty was not refundable in the circumstances.

Closure of transfer bonds under Section 67 of the Customs Act, 1962 - Warehoused Goods (Removal) Regulations, 1963 - bond terms, discharge and forfeiture - principles of natural justice in bond-closure proceedings - Whether the closure of transfer bonds was procedurally improper or in breach of principles of natural justice entitling the appellant to relief. - HELD THAT: - The Tribunal examined the statutory framework under Section 67 and Regulations 3 and 4 of the Warehoused Goods (Removal) Regulations, 1963, which require execution of transfer bonds and prescribe that bonds stand discharged only upon production of a certificate of arrival within the prescribed period; otherwise the amount equal to import duty may be forfeited. The Tribunal observed that the bonds were closed in accordance with this procedure and that the appellant, as executor of the bonds, failed to contest the closures within the prescribed/appropriate stages. Thus the contention of denial of opportunity or breach of natural justice was rejected as the bond-closure process had been correctly applied. [Paras 5]

Closure of transfer bonds held lawful and not vitiated by breach of natural justice; no relief on this ground.

Applicability of Circular No. 96/2002-CUS to provisional assessments - refund of differential customs duty paid under protest - Whether Circular No. 96/2002-CUS (relating to finalisation of provisional assessments) entitled the appellant to relief. - HELD THAT: - The Tribunal noted that Circular No. 96/2002-CUS deals with finalisation of provisional assessments. The facts did not disclose a case of provisional assessment and final assessment as contemplated by the Circular. Given that the appellant had accepted the noticed shortage while executing the transfer bonds and then failed to contest the bond closures in time, the Tribunal held the Circular inapplicable to the present circumstances and declined to grant relief on that basis. [Paras 5]

Circular No. 96/2002-CUS not applicable; no relief on that basis.

Final Conclusion: The impugned Order-in-Original and Order-in-Appeal upholding the demand and rejecting the refund were affirmed; the appeal is dismissed.

Superintendence under Article 227 - mandamus to National Company Law Tribunal - listing and joinder of connected proceedings - disposal of interlocutory application as not pressed

Listing and joinder of connected proceedings - superintendence under Article 227 - Whether the writ petition W.P.(C) No. 6798/2020 is intrinsically connected to Crl.M.(Co.) No. 3/2008 and should be placed before the same bench/appropriate judge for consideration. - HELD THAT: - The petitioner sought, by invoking the power of superintendence, directions to the NCLT to dispose of certain applications and framed the grievance as one of non-action rather than an assailable order. The record shows that the petitioner had earlier filed an interlocutory application (CM No. 23989/2021) seeking disposal of the writ petition de hors Crl.M.(Co.) No. 3/2008 but subsequently did not press that application. Having noted the petitioner's earlier submission that Co. Appl. No. 373/2008 is intrinsically linked to Crl.M.(Co.) No. 3/2008, and in view of the disposition of CM No. 23989/2021 as not pressed, the court concluded that the writ petition is connected to Crl.M.(Co.) No. 3/2008. In consequence and for coherent adjudication of the matters that are interlinked, the proceedings in W.P.(C) No. 6798/2020 were directed to be placed before Hon'ble Mr. Justice Jayant Nath for further orders on the specified date.

W.P.(C) No. 6798/2020 is to be placed before Hon'ble Mr. Justice Jayant Nath on 7.10.2021 as proceedings are intrinsically connected to Crl.M.(Co.) No. 3/2008; CM No. 23989/2021 disposed of as not pressed.

Final Conclusion: The petition was not adjudicated on its merits; the interlocutory application was treated as not pressed and the writ petition, being connected with Crl.M.(Co.) No. 3/2008, was directed to be placed before Hon'ble Mr. Justice Jayant Nath for appropriate consideration on 7.10.2021.

Section 340 Cr.P.C. - perjury - contempt of court - maintainability of proceedings after transfer to statutory forum (CLB/NCLT) - enforcement of court directions - affidavit verification of attendance and production of passport

Section 340 Cr.P.C. - maintainability of proceedings after transfer to statutory forum (CLB/NCLT) - Whether the High Court should proceed with Crl.M.(Co.) No.3/2008 seeking forwarding of a complaint under Section 340 Cr.P.C. when the Supreme Court directed the Company Law Board (CLB) to decide the underlying company petition and observed that the High Court need not proceed further with the criminal miscellaneous petition. - HELD THAT: - The Court recorded and applied the Supreme Court's directions in its order dated 8.5.2014 which directed the CLB to decide Company Petition No.114 of 2007 and observed that, since the CLB would decide the application under Section 340 Cr.P.C., the High Court need not proceed further with Crl.M.(Co.) No.3/2008. The High Court held that the Supreme Court's order supersedes earlier directions of this Court (including the order dated 16.8.2010) which had been made to aid adjudication of the petition. Consequently, disputes raised in the petition are to be adjudicated by the CLB/NCLT and the High Court is not to hear the petition further in this court. [Paras 13, 14, 16, 17, 18]

Crl.M.(Co.) No.3/2008 is not to be proceeded with by the High Court in view of the Supreme Court's direction that the CLB decide the company petition; the High Court will not adjudicate the petition further.

Contempt of court - enforcement of court directions - Whether contempt proceedings or enforcement of the High Court's order dated 16.8.2010 (including directions for affidavits and production of passport) could be entertained and whether an application to initiate contempt is maintainable before this Court. - HELD THAT: - The Court noted that an application (Co.Appln. No.1089/2018) seeking enforcement of the order dated 16.8.2010 and initiation of contempt proceedings had been earlier dismissed by a Co-ordinate Bench by order dated 3.12.2018. Having regard to the Supreme Court's direction and the Coordinate Bench's dismissal, the Court found no merit in the present application for contempt and recognized that the coordinate bench had already held that no case of contempt was made out. The High Court therefore declined to entertain the enforcement/contempt plea in these proceedings. [Paras 17, 18]

The application for enforcement of the order dated 16.8.2010 and initiation of contempt proceedings is without merit in this Court and cannot be proceeded with here in view of earlier dismissal by the Coordinate Bench.

Enforcement of court directions - affidavit verification of attendance and production of passport - Disposition of pending applications (Co.Appln. Nos. 577/2020, 602/2020 and 625/2020) seeking compliance with the directions of 16.8.2010 and related reliefs. - HELD THAT: - The Court examined the procedural posture including that the earlier applications seeking enforcement of the 16.8.2010 directions were considered by a Co-ordinate Bench and dismissed. In view of that dismissal, and because the reliefs sought in Co.Appln. Nos. 577/2020, 602/2020 and 625/2020 are linked to the same subject-matter already disposed of by the Coordinate Bench, the Court held that those applications must be placed before the same Judge (Hon'ble Mr. Justice Jayant Nath) who heard and disposed of Co.Appln. No.1089/2018. The Court therefore directed that, subject to administrative orders, the listed applications and Crl.M.(Co.) No.3/2008 be placed before Hon'ble Mr. Justice Jayant Nath for consideration. [Paras 16, 18, 19]

Co.Appln. Nos. 577/2020, 602/2020 and 625/2020 and Crl.M.(Co.) No.3/2008 are to be placed before Hon'ble Mr. Justice Jayant Nath for consideration.

Final Conclusion: The High Court held that, in view of the Supreme Court's direction that the CLB decide the company petition, the High Court should not proceed further with Crl.M.(Co.) No.3/2008; the Coordinate Bench's prior dismissal of enforcement/contempt relief is binding for present purposes and the applications seeking compliance with the High Court's earlier directions are to be placed before the Judge who disposed of the earlier enforcement application for his consideration.

Maintainability of a Section 7 application filed by a power of attorney holder - effect of acknowledgement in writing under Section 18 of the Limitation Act - burden on the financial creditor to prima facie demonstrate default and that the debt is not time barred - admissibility of additional documents at the stage of admission under Section 7

Maintainability of a Section 7 application filed by a power of attorney holder - authority of an officer pursuant to board resolution and general power of attorney - The application under Section 7 of the Code filed by the power of attorney holder was maintainable as the holder was an authorised person of the financial creditor. - HELD THAT: - The Court approved the NCLAT view in Palogix Infrastructure that a power of attorney which records general authorisation pursuant to a board resolution does not, by virtue of being called a 'power of attorney', disentitle the officer to act as the authorised representative for filing proceedings under Section 7. The power of attorney produced showed broad authority to conduct the bank's business and to commence and prosecute legal proceedings and to sign and file applications; such authority sufficed for the person who signed the Section 7 application to be treated as the authorised person. The objection that the POA was granted before the Code came into force without an express subsequent authorisation to invoke the Code was rejected on these facts. [Paras 11, 12]

Objection to maintainability on the ground that the application was filed by a power of attorney holder is untenable; the application was filed by an authorised person.

Effect of acknowledgement in writing under Section 18 of the Limitation Act - burden on the financial creditor to prima facie demonstrate default and non bar by limitation - consideration of materials placed on record by the corporate debtor at admission stage - The application under Section 7 was not barred by limitation because sufficient documentary material, including acknowledgements by the corporate debtor, justified invocation of Section 18 and a fresh period of limitation. - HELD THAT: - The Court reiterated that the financial creditor bears the primary obligation to prima facie show that a default has occurred and that the debt is not time barred; the Adjudicating Authority must satisfy itself on limitation at the admission stage. Section 18 is applicable to Section 7 proceedings so that a written acknowledgement by the debtor within the initial limitation period restarts limitation. Although the date of default was 30.09.2014 and the Section 7 application was filed on 25.04.2019, the corporate debtor itself had placed on record a letter dated 17.11.2018 and other documents acknowledging outstanding amounts and repayments up to and including 2019 20. The Adjudicating Authority permissibly relied upon those materials to conclude that the application fell within the extended limitation period under Section 18. The Court clarified that had such acknowledgement documents not been on record, the application would have been liable for dismissal for want of limitation; but on the facts before it, admission was justified. [Paras 21, 22, 23]

Admission of the Section 7 application was valid as sufficient acknowledgements extended limitation under Section 18 and the application was therefore within time.

Final Conclusion: Appeal dismissed: the Section 7 application was maintainable when filed by the power of attorney holder authorised by the bank, and the application was within limitation on account of written acknowledgements by the corporate debtor which revived the limitation period under Section 18 of the Limitation Act.

Approved Resolution Plan - waiver of security deposit - contract demand - enhanced voltage supply (132 KV) - moratorium - CIRP costs - statutory/regulatory dues of a discom

Approved Resolution Plan - waiver of security deposit - Whether the requests in the Resolution Plan for waiver/stay of security deposit for five years were specifically approved by the Adjudicating Authority and bind the Operational Creditor. - HELD THAT: - The Resolution Plan contained proposals requesting waiver/stay of bank guarantee/cash as security deposit for five years and directions to the discom. The Adjudicating Authority approved the Resolution Plan under section 31(1) but did not record any specific or explicit order granting the requested waivers or stay of security deposit. The Tribunal therefore held that the waiver proposals remained unapproved by any specific direction of the Adjudicating Authority, and cannot be treated as binding on the Operational Creditor. Absent an explicit approval in the NCLT order, the discom is not obliged to waive security deposits sought for enhanced or changed supply arrangements. [Paras 11, 22]

The proposed waiver/stay of security deposit for five years as sought in the Resolution Plan was not specifically approved by the Adjudicating Authority and is not binding on the Appellant.

Contract demand - enhanced voltage supply (132 KV) - Whether reconnection at the previously held contract demand covers subsequent requests for increase in contract demand or supply at higher voltage. - HELD THAT: - The Corporate Debtor was reconnected at its prior contract demand of 10 MVA through the existing 33 KV line. Subsequent requests, made after approval of the Resolution Plan, sought increases in contract demand (up to 45 MVA over time) and supply through a 132 KV line. The Tribunal held that reconnection at the existing contract demand does not subsume or automatically authorize later applications for enhanced contract demand or change in supply voltage. Such changes involve fresh regulatory/commercial requirements and are not covered by the approved Resolution Plan in the absence of specific approval. [Paras 14, 21]

Reconnection at the previous contract demand does not cover or oblige the Appellant to grant increases in contract demand or supply at 132 KV without compliance with applicable requirements.

Statutory/regulatory dues of a discom - CIRP costs - moratorium - How dues for electricity supplied during CIRP and after moratorium should be treated and who is liable to pay ongoing charges and future security deposits. - HELD THAT: - The Tribunal observed that accrued/contingent liabilities for power supply up to the date of approval were waived by the Resolution Plan. However, statutory or legitimate dues demanded by the discom for services supplied during CIRP should be paid out of CIRP costs, and the Resolution Professional must ensure such payment to keep the corporate debtor a going concern. Dues for electricity supplied after the moratorium has ceased are payable by the corporate debtor. Further, any future statutory or legitimate charges (including security deposits demanded for enhanced supply) are payable by the Successful Resolution Applicant/corporate debtor in accordance with relevant regulations; unilateral future waivers are not permissible. [Paras 12, 23, 24]

Dues for electricity supplied during the moratorium/CIRP should be discharged from CIRP costs (to be ensured by the Resolution Professional); dues after moratorium are payable by the corporate debtor; future security deposits/charges must be paid in accordance with extant regulations.

Approved Resolution Plan - commercial wisdom of CoC - Whether the commercial wisdom of the Committee of Creditors can be judicially revisited to construe an implicit waiver in the Resolution Plan. - HELD THAT: - The Tribunal noted the settled principle that the commercial wisdom of the CoC is generally not subject to judicial review. Nonetheless, where a Resolution Plan seeks specific reliefs (such as waiver of security deposit) those reliefs must be explicitly approved by the Adjudicating Authority to bind other stakeholders. Absent explicit adjudicative acceptance by the NCLT, the Tribunal will not read into the approval an order effecting waivers not reflected in the approval order. [Paras 11, 20, 22]

Commercial wisdom of the CoC cannot be invoked to supply an explicit approval that is absent from the Adjudicating Authority's order; explicit NCLT approval is necessary to bind the discom.

Final Conclusion: The impugned order is quashed and set aside to the extent it is taken to require the Appellant to grant waiver of security deposit or to provide enhanced supply without compliance with statutory/regulatory requirements. Security deposits and charges for any increase in contract demand or higher voltage supply must be paid in accordance with extant regulations; dues for supply during CIRP should be paid from CIRP costs (to be ensured by the Resolution Professional) and dues after the moratorium are payable by the corporate debtor.

Financial debt - financial creditor - time value of money - distinction between debt and financial debt - maintainability of application under Section 7 of the Insolvency and Bankruptcy Code - interest payable under Rule 17 of the Companies (Acceptance of Deposits) Rules, 2014

Financial debt - financial creditor - time value of money - distinction between debt and financial debt - maintainability of application under Section 7 of the Insolvency and Bankruptcy Code - interest payable under Rule 17 of the Companies (Acceptance of Deposits) Rules, 2014 - Whether the amount deposited by the appellant and the claimed interest thereon constitute a "financial debt" and whether the appellant is a "financial creditor" entitled to maintain an application under Section 7 of the IBC. - HELD THAT: - The Tribunal examined the definitions in the IBC and concluded that "debt" is a broader category whereas "financial debt" is a narrower subset that requires a disbursement against consideration for the time value of money. A claimant must establish the existence of a financial contract or arrangement demonstrating that money was borrowed with the time value of money attached. The appellant failed to produce any financial contract or agreement evidencing that the corporate debtor borrowed the deposited amount on terms importing the time value of money or that the funds were utilized as credit for the corporate debtor's business. Documentary material relied upon by the appellant (tax department notice, ROC notice, bank entries, emails and balance sheet) only showed an expectation of interest or a refund of principal but did not establish a contractual financial obligation falling within Section 5(8) and the appellant did not thereby satisfy the description of a "financial creditor" under Section 5(7). In the absence of an evidentiary financial contract or an arrangement having the commercial effect of a borrowing, the application under Section 7 was not maintainable and the Adjudicating Authority's conclusion was unassailable. [Paras 2, 7, 10, 11, 12]

The claimed deposit and interest do not qualify as a "financial debt" and the appellant is not a "financial creditor"; the Section 7 application was not maintainable.

Final Conclusion: The appeal is dismissed at the admission stage; the impugned order of the Adjudicating Authority rejecting the Section 7 application is upheld. No order as to costs.

Maintainability of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - pre-existing dispute - operational debt under Section 5(21) of the Insolvency and Bankruptcy Code, 2016 - time-barred claims and limitation - liability for municipal taxes under a commercial Business Conducting Agreement

Maintainability of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - pre-existing dispute - operational debt under Section 5(21) of the Insolvency and Bankruptcy Code, 2016 - Whether the Company Petition under Section 9 of the IBC was maintainable in view of admitted facts and existence of pre existing disputes between the parties and the nature of the claimed debt. - HELD THAT: - The Tribunal accepted the admitted factual matrix that the parties had executed a Business Conducting Agreement with two supplemental agreements, that municipal taxes, conducting fees and utility bills were claimed under those agreements, and that rival proceedings (R.A.D. Suit No. 348 of 2017 before the Court of Small Causes and Commercial Suit No. 187 of 2018 before the Bombay High Court) were pending. Viewing the matter in that factual context, the Appellate Tribunal concurred with the Adjudicating Authority that there existed a pre existing dispute between the parties which bore upon the nature and enforceability of the claimed obligations. The Tribunal noted authority and submissions regarding the scope of operational debt under Section 5(21) but, on the admitted record and having regard to the ongoing civil proceedings and contestations, held that the petition was not maintainable and that the Adjudicating Authority's dismissal was justified. [Paras 22, 23]

The Company Petition under Section 9 of the IBC was not maintainable and the Adjudicating Authority's dismissal on that ground is affirmed.

Time-barred claims and limitation - liability for municipal taxes under a commercial Business Conducting Agreement - Whether the municipal tax claims and other asserted dues were barred by limitation as at the date of filing the Company Petition. - HELD THAT: - The Tribunal accepted the finding of the Adjudicating Authority that the petition filed on 12.03.2018 could not include claims arising prior to 12.03.2015 as they were time barred. The admitted schedule of municipal taxes covering the period 01.06.2010 to 30.09.2017 was considered and the Tribunal agreed that amounts attributable to periods before 12.03.2015 could not be allowed in the Section 9 petition filed on 12.03.2018. This limitation finding formed part of the rationale for dismissing the petition. [Paras 22]

Claims arising prior to 12.03.2015 are time barred and the Adjudicating Authority's limitation finding is upheld.

Final Conclusion: The Appellate Tribunal affirmed the Adjudicating Authority's order dismissing the Company Petition under Section 9 of the IBC: the petition was not maintainable in view of pre existing disputes and related contested proceedings, and claims predating 12.03.2015 were time barred; the appeal is dismissed and the impugned order is affirmed.

Duty of ex-management to furnish information and cooperate with Resolution Professional under Section 19 - Mandatoriness of directions under Section 19 to ensure expeditious conduct of CIRP - Power of Adjudicating Authority to direct non-cooperative personnel to comply with the Resolution Professional

Duty of ex-management to furnish information and cooperate with Resolution Professional under Section 19 - Mandatoriness of directions under Section 19 to ensure expeditious conduct of CIRP - Whether the suspended directors were under a legal obligation to cooperate with the Resolution Professional and furnish information and documents for smooth conduct of CIRP, and whether directions under Section 19 should be issued. - HELD THAT: - The Tribunal noted that Section 19(1) casts a duty on ex-management and other personnel of the corporate debtor to furnish information and all assistance to the Resolution Professional and that, where there is non-cooperation, the Adjudicating Authority has power to direct such persons to comply with the RP's instructions. The provisions were held to be mandatory to enable the RP to complete the Corporate Insolvency Resolution Process expeditiously and to manage the corporate debtor as a going concern. On the material before it the respondents had filed an affidavit affirming their participation in and cooperation with the CIRP and had undertaken to provide the information and documents sought; the Tribunal accepted that undertaking and observed that the respondents were cooperating. Consequently, the Tribunal found no present necessity to issue further coercive directions against the respondents. [Paras 7, 8, 9]

Respondents are under a statutory duty to cooperate with the Resolution Professional; having undertaken on affidavit to cooperate and provide available information and documents, the application for directions stands disposed.

Final Conclusion: The application under Section 19(2) was disposed of on the basis that the suspended directors have avowed cooperation and undertook to provide documents and information; liberty was granted to the Resolution Professional to move again if cooperation is not rendered.

Fraudulent preference and transfer - avoidance of transactions under the Insolvency and Bankruptcy Code - application of Section 43 and Section 66 of the Insolvency and Bankruptcy Code, 2016 - evidentiary sufficiency of engagement letters, invoices and tax compliances in proving bona fides of payments - proof of fraud and requirement of cogent evidence

Fraudulent preference and transfer - application of Section 43 of the Insolvency and Bankruptcy Code, 2016 - application of Section 66 of the Insolvency and Bankruptcy Code, 2016 - Whether the payments totalling Rs. 65 Lacs made by the Corporate Debtor to Ingenium Advisory LLP in three tranches were fraudulent or preferential and liable to be set aside under the IBC. - HELD THAT: - The Tribunal recorded admitted facts that the Corporate Debtor paid three tranches to the Appellant-LLP pursuant to two engagement letters, that the payments were reflected in the Corporate Debtor's books as advances, and that no invoices, service-tax/GST compliance or TDS deductions were produced. It also noted indicia of connection between the recipient LLP and the Corporate Debtor's promoter (common office address, shareholding links). On these facts the Adjudicating Authority drew an adverse inference regarding the bona fides of the transactions and concluded the transfers were not ordinary course business payments but suspect preferential/fraudulent transactions under the IBC. The Appellants' contention that the written engagement letters established the genuineness of the payments and that the Resolution Professional ought to have procured a forensic/transaction audit report did not persuade the Tribunal; the appellate court found no illegality in the Adjudicating Authority concluding that the agreements were suspicious and insetting aside the transfers. The Tribunal therefore affirmed the finding that the payments were liable to be treated as fraudulent/preferential under Sections 43 and 66 of the IBC on the material before the Adjudicating Authority. [Paras 32, 33]

The impugned order holding the payments to be fraudulent/preferential and directing contribution to the Corporate Debtor is affirmed.

Evidentiary sufficiency of engagement letters, invoices and tax compliances in proving bona fides of payments - proof of fraud and requirement of cogent evidence - Whether the engagement letters, without contemporaneous invoices, tax compliance (service tax/GST) and TDS, were sufficient to establish the genuineness of the payments. - HELD THAT: - The Tribunal found as admitted that the engagement letters were between the LLP and the promoter in his personal capacity and that the Corporate Debtor was not a party to those engagements. It was also an admitted fact that no invoice had been raised, no service-tax/GST charged and no TDS deducted. The financial statements of the LLP showed nil income from operations for 2016-17, undermining the claim of operational receipt. Taken together with the close commercial connections between the LLP and the promoter and the absence of satisfactory explanations to the Resolution Professional's queries, the Adjudicating Authority legitimately regarded the agreements as suspicious and not independently sufficient to prove the payments were bona fide business disbursements. The Appellants' argument that fraud must be positively proved did not prevent the Adjudicating Authority from drawing adverse inferences from the cumulative documentary and factual lacunae. [Paras 32]

The Adjudicating Authority's conclusion that the engagement letters and the record were insufficient to establish genuineness of the payments is upheld.

Final Conclusion: The Tribunal found no illegality in the Adjudicating Authority's order; the conclusion that the three payments to the Appellant-LLP were suspicious and liable to be treated as preferential/fraudulent under the IBC was affirmed and the appeal was dismissed.

Impleadment - interlocutory application for impleadment - prima facie case for impleadment - appeal is a continuation of original proceedings - party to be arrayed and permitted to file reply - liberty to raise all factual and legal issues including limitation

Impleadment - prima facie case for impleadment - appeal is a continuation of original proceedings - Application I.A. No. 260/2021 for impleadment of the intervenor in Comp. App. (AT) No. 61 of 2020 is to be allowed. - HELD THAT: - The Tribunal examined the interlocutory application seeking impleadment and applied the settled principle that an appeal is a continuation of the original proceedings; an applicant for impleadment must make out a prima facie case showing that his presence is just and necessary to enable effective and complete adjudication. Having considered the rival contentions and the attendant facts and circumstances, and while noting that the main appeal continues the original proceedings before the NCLT, the Tribunal concluded that impleadment was warranted in the interests of justice. The order allows the intervenor to be added as a party and to participate in the appeal process without deciding the merits of the underlying disputes, consistent with the principle that impleadment does not decide the substantive rights on the merits at the interlocutory stage. [Paras 17, 20]

I.A. No. 260/2021 is allowed and the intervenor is impleaded as a party entitled to file reply/response; consequential amendments to records to be made and timelines for service and rejoinder are directed.

Party to be arrayed and permitted to file reply - procedural directions for service and rejoinder - Consequential procedural directions following impleadment were issued and liberty granted for further pleadings. - HELD THAT: - Following allowance of the impleadment application, the Tribunal directed the Registry to carry out consequential amendments to the record and ordered that the intervenor be arrayed as the newly added party (second respondent). The Tribunal directed the appellant to serve the requisite material and paper books on the newly added party by email and physical copy within one week, permitted the intervenor to file its reply/response, and allowed the appellant a short period to file rejoinder thereafter. The Tribunal also granted liberty to the parties to raise all factual and legal issues (including limitation) in the main appeal and listed the matter for further hearing. [Paras 18, 19, 20, 21]

Registry to amend records; appellant to effect service within one week; intervenor permitted to file reply/response; appellant may file rejoinder within three days of receipt; matter listed for further hearing.

Final Conclusion: I.A. No. 260/2021 is allowed in the interests of justice; the intervenor is impleaded as a party and permitted to participate in the main appeal with specified procedural directions for amendment of records, service of papers and filing of pleadings; matter listed for further hearing.

Liquidation under Section 33(1) of the Insolvency and Bankruptcy Code, 2016 - termination of corporate insolvency resolution process where criteria for liquidation are not satisfied - rejection of application for liquidation on failure to establish statutory preconditions - power to impose costs and direct payment to public fund for misuse or non-cooperation

Liquidation under Section 33(1) of the Insolvency and Bankruptcy Code, 2016 - rejection of application for liquidation on failure to establish statutory preconditions - Application under Section 33(1) for liquidation of the corporate debtor rejected - HELD THAT: - The Adjudicating Authority examined whether the statutory conditions for passing an order under Section 33(1) were satisfied - namely, that before expiry of the CIRP period no resolution plan was received or that a plan was liable to be rejected under Section 31. The Tribunal found that no resolution plan had been placed before the authority by the Committee of Creditors with requisite approval, that the sole CoC member and its RP were not pursuing the CIRP, that the alleged assignee did not come forward after rejection of assignment, and that only a provisional balance sheet (and no audited accounts) was placed on record. On these facts the bench concluded that the criteria for passing a liquidation order under Section 33(1) were not satisfied and therefore the application for liquidation could not be granted. [Paras 11, 12]

Application for liquidation under Section 33(1) is rejected as the statutory preconditions for liquidation are not satisfied.

Termination of corporate insolvency resolution process where criteria for liquidation are not satisfied - Direction to terminate the CIRP forthwith - HELD THAT: - Having found that the prerequisites for an order under Section 33(1) were absent and noting prolonged inaction and lack of cooperation by the sole CoC member, its RP and the alleged assignee which prevented constitution and functioning of the CoC and impeded progress of the CIRP, the Tribunal directed that the CIRP be terminated forthwith. This direction followed the conclusion that no progress had been made in the resolution process and that continuation of CIRP was not warranted on the material before the authority. [Paras 12]

CIRP of the corporate debtor is terminated forthwith.

Power to impose costs and direct payment to public fund for misuse or non-cooperation - Imposition of costs on Operational Creditor, RP and alleged assignee and direction to file compliance affidavit - HELD THAT: - In exercise of authority to penalise conduct that hindered the CIRP and in view of prior observations concerning doubtful assignment and non-cooperation, the Tribunal directed imposition of costs. The bench ordered that each of the Operational Creditor, the RP of the corporate debtor and the alleged assignee pay the specified cost amount into the Prime Minister's Relief Fund and file a compliance affidavit with proof of payment within two weeks. This order was made as a penal and procedural measure attendant upon rejection of the liquidation application and termination of CIRP. [Paras 12]

Each of the Operational Creditor, the RP and the alleged assignee is directed to pay the prescribed cost into the Prime Minister's Relief Fund and file proof of payment within two weeks.

Final Conclusion: The application for liquidation under Section 33(1) is rejected for failure to satisfy statutory prerequisites; the corporate insolvency resolution process is terminated forthwith; and costs are imposed on the Operational Creditor, the RP and the alleged assignee with directions to deposit the specified amount in the Prime Minister's Relief Fund and file compliance affidavit within two weeks.

Chargeability under Section 66B in taxable territory - Place of provision of services relating to events - Reverse Charge Mechanism - Import of services

Chargeability under Section 66B in taxable territory - Place of provision of services relating to events - Reverse Charge Mechanism - Import of services - Whether service tax under the reverse charge mechanism is payable on media/broadcasting rights procured from a non resident for sporting events held outside India and broadcast for territory outside India. - HELD THAT: - The Tribunal examined Section 66B which levies service tax on services provided or agreed to be provided in the taxable territory, and Rule 6 of the Place of Provision of Services Rules, 2012 which fixes the place of provision of services relating to events as the place where the event is actually held. The media/broadcasting rights in question related to sporting events held outside India (Zimbabwe) and were procured from a non resident for broadcasting in Bangladesh only. On a conjoint reading, since the events were held outside the taxable territory and the services were neither provided in nor received in India, the transactions do not fall within the charge under Section 66B. The mere fact that the appellant (a trader of telecasting rights) is located in India does not render the services received in India. Consequently, the alleged import of services and imposition of service tax under the reverse charge mechanism were not sustainable.

Appeals allowed; impugned orders confirming service tax, interest and penalty set aside.

Final Conclusion: The Tribunal allowed the appeals, holding that media/broadcasting rights for sporting events actually held and broadcast outside India do not attract service tax under Section 66B or the reverse charge mechanism; the impugned orders confirming demand, interest and penalty were set aside and appellants entitled to consequential relief as per law.

Chargeability of service tax on reimbursements vis-a -vis professional fee - accrual (mercantile) basis versus cash/receipt basis for determination of taxable turnover - extended period of limitation in service tax assessments - exemption for services incidental to road construction including consulting engineer services under Notification No. 25/2012 ST (Sl. No. 13(a)) - reverse charge mechanism under Section 66A read with Notification No. 30/2012 ST - burden of proof on revenue to establish suppressed turnover

Accrual (mercantile) basis versus cash/receipt basis for determination of taxable turnover - burden of proof on revenue to establish suppressed turnover - Whether tax demand could be validly computed on gross receipts reflected in Form 26AS (cash/receipt basis) without further inquiry, and whether Revenue discharged its burden to establish suppression. - HELD THAT: - The Tribunal found that Form No. 26AS is a document maintained by the Income Tax Department on a cash/receipt basis for purposes such as TDS and is not a statutory document for determining taxable turnover under the Service Tax provisions. Service tax liability is computed on the accrual (mercantile) basis, which may differ from receipts recorded in Form 26AS. The show cause notice relied on gross turnover as reflected in Form 26AS without seeking explanation from the assessee about the nature or timing of items recorded therein. There was no allegation that the assessee failed to maintain proper financial records. On these facts the basis of the show cause notice was held incorrect and the Revenue was held not to have discharged the burden of proof to establish suppression. [Paras 11, 12]

Demand based solely on Form 26AS (receipt basis) was misconceived and cannot sustain the tax demand; burden lay on Revenue which was not discharged.

Extended period of limitation in service tax assessments - Whether extended period of limitation could be invoked against the appellant for the period 2011-12 to 2015-16. - HELD THAT: - The only allegation forming the basis for invoking the extended period was that the appellant had not paid service tax in time and had suppressed material facts. Given that the appellant was a registered assessee who filed returns and admitted and deposited service tax for the period in issue, and in view of the Tribunal's finding that the show cause notice's foundation (use of Form 26AS) was incorrect, the condition precedent for invoking the extended period was not established. Accordingly, the Tribunal held that extended period of limitation was not available to the Revenue under the facts of the case. [Paras 11, 12, 13]

Extended period of limitation cannot be invoked; invocation was unsustainable on the facts.

Exemption for services incidental to road construction including consulting engineer services under Notification No. 25/2012 ST (Sl. No. 13(a)) - Whether consulting engineer services provided in relation to road construction are exempt under Notification No. 25/2012 ST (Sl. No. 13(a)). - HELD THAT: - The Tribunal accepted the admitted facts that the appellant provided consulting engineer services related to road construction projects. It held that when road construction is exempt under the notification, ancillary activities and services related to road construction, including consulting engineer services, fall within the exemption. The Tribunal noted precedent and analogous conclusions that activities connected with road construction are part of the exempted work and thus the consulting services rendered in the present facts are covered by the exemption. [Paras 11, 13]

Appellant's consulting engineer services in relation to road construction are entitled to exemption under Notification No. 25/2012 ST (Sl. No. 13(a)).

Reverse charge mechanism under Section 66A read with Notification No. 30/2012 ST - Whether demand under reverse charge mechanism (RCM) for 'rent a cab' service as receiver of service was sustainable. - HELD THAT: - The Tribunal observed that for invoking liability under the reverse charge mechanism as contemplated by Section 66A read with the Notification, specific allegations as required by law must be made. In the present case there was no specific allegation satisfying the statutory requirement for RCM demand in respect of rent a cab service. On that basis the Tribunal found the RCM demand unsustainable. [Paras 14]

RCM demand in respect of rent a cab service was unsustained for lack of required specific allegation.

Final Conclusion: The appeal is allowed: the tax demand founded on Form 26AS (receipt basis) is set aside as misconceived; extended period of limitation cannot be invoked; consulting engineer services related to road construction are exempt under Notification No. 25/2012 ST (Sl. No. 13(a)); the reverse charge demand in respect of rent a cab service fails for want of specific allegation; consequential benefits to the appellant granted in accordance with law.

Exemption for services rendered to Railways - abatement for works contract service under valuation rules - reconciliation of turnover: accrual (books) versus cash (Form-26AS) - inadmissibility of Income Tax 40A(3A) proviso in service tax adjudication - exemption for trenching and laying of underground cables per administrative circular - credit for tax paid by challan / cenvat reconciliation and refund with interest - extended period of limitation where returns are not filed - penalty under procedural provisions: Section 76, Section 77(2) and Section 70 read with Rule 7C

Exemption for services rendered to Railways - reconciliation of turnover: accrual (books) versus cash (Form-26AS) - Whether exemption in respect of amounts received from Railways for work covered by the exemption notification should be allowed on the basis of books of account despite lower figures in Form-26AS. - HELD THAT: - The Tribunal found that the appellant's audited profit and loss account recorded the consideration for services to Railways and that the Commissioner himself recorded these figures in para 16 of the impugned order. Form-26AS reflects cash-based data compiled by the Income Tax Department and cannot displace accrual-based accounting in determining service tax liability. The Commissioner erred in denying exemption for the balance amount of consideration accounted in the P&L which was omitted in Form-26AS. Accordingly, no service tax is chargeable on the balance amount shown in the books for 2015-16. [Paras 3, 7, 8]

Exemption allowed for the balance amount of Rs. 5,22,651/- shown in P&L for 2015-16; no service tax payable on that amount.

Inadmissibility of Income Tax 40A(3A) proviso in service tax adjudication - Whether the proviso to Section 40A(3A) of the Income Tax Act can be applied to reject turnover claimed as sale of bricks for service tax purposes. - HELD THAT: - The Tribunal held that the deeming and disallowance machinery under Section 40A(3A) and (4) of the Income Tax Act operate within income tax assessments and do not have relevance for determining liability under service tax. The Commissioner cannot import that provision to disallow the sales turnover or to assume that cash receipts represent consideration for taxable services without documentary basis. A best-judgment assumption must rest on record evidence, which was lacking here. [Paras 11, 12]

Revenue's assumption rejecting sale of bricks is not sustainable; no service tax chargeable on sale of bricks.

Abatement for works contract service under valuation rules - reconciliation of turnover: accrual (books) versus cash (Form-26AS) - Whether abatement under Rule 2A of the Service Tax (Determination of Value) Rules, 2006 is available to the appellant in respect of works contract services and whether Revenue could deny abatement by assuming availment of CENVAT credit without proof. - HELD THAT: - The Tribunal noted that the Commissioner admitted use of materials in the works contract and therefore abatement, which reflects the goods component, was available at the prescribed rate. The Commissioner erred in refusing abatement merely because ST-3 returns were not found on electronic records and in assuming that the appellant may have taken CENVAT credit. Such an assumption unsupported by record is not permissible; tax liability must be computed after allowing abatement on the admitted turnover. [Paras 13, 15, 16]

Abatement to be allowed at the specified rate on the admitted turnover for works contract service; tax to be recomputed accordingly.

Exemption for trenching and laying of underground cables per administrative circular - Whether activity of laying underground cables for BSNL and others is exempt from service tax in light of the Board's Circular No. 123/5/2010-TRU and precedents. - HELD THAT: - The Tribunal accepted that the activity of trenching and laying underground cables falls within the scope of the Board's clarificatory Circular dated 24.05.2010 and followed a coordinate bench decision which set aside demand on identical facts. On that basis the demand in respect of laying of underground cables was held unsustainable. [Paras 17, 18]

Demand on account of laying of underground cables for BSNL and others is set aside; no service tax chargeable on that activity.

Credit for tax paid by challan / cenvat reconciliation and refund with interest - Whether challans and tax payments made during investigation or via cenvat should be reconciled and credited against assessed liability and whether refund with interest is payable if excess is found. - HELD THAT: - The Tribunal held that Revenue cannot deny credit for challans deposited during the investigation period or payments made through cenvat account. The respondent was directed to reconcile challans with assistance of the appellant and to grant credit for each challan; if excess payment is found after recomputation, refund to be made with interest at 12% per annum from date of deposit to date of refund. [Paras 19, 20, 23]

Respondent to reconcile and give credit for all challans/cenvat payments; excess, if any, to be refunded with interest @12% p.a.

Extended period of limitation where returns are not filed - Whether invocation of extended period of limitation is justified where the assessee failed to file statutory returns for the relevant periods. - HELD THAT: - The Tribunal rejected the appellant's challenge to invocation of extended period, recording that there was admitted failure to file returns for the period October 2015 to March 2017. Non-filing of returns justified the invocation of extended limitation in the facts of the case. [Paras 21]

Challenge to extended period rejected; invocation of extended period sustained on account of non-filing of returns.

Penalty under procedural provisions: Section 76, Section 77(2) and Section 70 read with Rule 7C - Whether penalties imposed by the Commissioner under Section 76, Section 77(2) and Section 70 read with Rule 7C should be upheld, modified or set aside. - HELD THAT: - In light of the Tribunal's substantive conclusions setting aside substantial parts of the demand, the penalty under Section 76 was set aside. Penalty under Section 77(2) for non-filing of three returns was reduced to Rs. 5,000 per return (total Rs. 15,000). Penalty under Section 70 read with Rule 7C was reduced to Rs. 5,000. The Tribunal exercised appellate discretion to mitigate penalties consistent with findings on liability and partial relief granted to the appellant. [Paras 22, 23]

Section 76 penalty set aside; Section 77(2) penalty reduced to Rs.5,000 per return (total Rs.15,000); Section 70 read with Rule 7C penalty reduced to Rs.5,000.

Recomputation of tax liability in terms of appellate findings - Whether the adjudicating authority should recompute tax liability after giving effect to the Tribunal's findings. - HELD THAT: - The Tribunal directed the Adjudicating Authority to recompute the tax liability or verify the calculation submitted by the appellant in accordance with its directions: allow the specified exemptions, allow abatement for works contract, reconcile challans and cenvat credits, and apply the adjustments and reductions in penalties as indicated. [Paras 23]

Adjudicating Authority directed to recompute/verify tax liability and give consequential benefits to the appellant.

Final Conclusion: The appeal is allowed in part: substantial demands vacated or reduced-exemption allowed for certain receipts from Railways, sale of bricks held non-taxable, abatement on works contract allowed, laying of underground cables held exempt, credit for all challans/cenvat to be given (with refund and interest if excess), extended period upheld due to non-filing of returns, and penalties set aside or substantially reduced; adjudicating authority to recompute liability in accordance with this order.

Option to claim fixation of a special rate representing actual value addition - time limit for filing claim for fixation of special rate (30th September of the financial year) - constructive res judicata - consideration of late application on merits - effect of interim order and final decision of higher court on right to claim relief

Option to claim fixation of a special rate representing actual value addition - effect of interim order and final decision of higher court on right to claim relief - Manufacturers are entitled to the legal right under the notifications to apply for fixation of a special rate representing actual value addition and the petitioner's application dated 28.09.2020 seeking such fixation must be considered by the Principal Commissioner on its merits. - HELD THAT: - The Court examined the amended notification framework and held that irrespective of rates specified in the tables, a manufacturer is afforded a statutory option to seek fixation of a special rate reflecting actual value addition. The Court recognised that while earlier proceedings and the Supreme Court's interim order affected the practical operation of any such fixation during the pendency of appeals, the right to seek fixation subsists and became operative once the Supreme Court rendered its final decision. Given the peculiar facts-where the need to apply crystallised only after the Supreme Court's judgment and the petitioner's application was filed within five months thereafter-the Court concluded that the petitioner's application cannot be summarily rejected without consideration. Accordingly, the Principal Commissioner is directed to decide the application dated 28.09.2020 on merits. [Paras 15, 16, 18, 19, 21]

Application dated 28.09.2020 for fixation of a special rate to be considered and decided on merits by the Principal Commissioner, GST, Guwahati.

Time limit for filing claim for fixation of special rate (30th September of the financial year) - constructive res judicata - consideration of late application on merits - Whether the application filed after 30th September of the relevant financial year is barred and whether the Principal Commissioner may reject the application on that ground was left for fresh decision; the Court directed fresh consideration and indicated that, in the peculiar facts, the respondent should not be permitted to rely on the time bar plea by way of constructive res judicata. - HELD THAT: - The Court noted the notifications prescribe 30th September as the cut off for filing claims to streamline the process but declined to categorically pronounce the requirement as mandatory or directory. Observing the factual matrix-intervening stay, interim refunds and the timing of the Supreme Court's final decision-the Court found that the necessity to claim fixation arose only after final adjudication. The Court further observed that when the earlier writ petition was disposed of by mutual acceptance, the department did not raise the time bar objection, and on the principle of constructive res judicata the respondents may be precluded from asserting that ground now. Consequently, the Court remitted the question of time bar and any related rejection to the Principal Commissioner for fresh adjudication in accordance with law, with directions to consider the petitioner's application on merits. [Paras 17, 18, 19, 20, 21]

Question of time bar and any consequent rejection is remitted to the Principal Commissioner for fresh consideration; respondent may not at present reject the application without adjudication on merits in view of the circumstances and constructive res judicata.

Final Conclusion: Writ petition allowed; Principal Commissioner, GST, Guwahati is directed to consider and decide the petitioner's application dated 28.09.2020 for fixation of a special rate representing actual value addition for the relevant financial years on merits, and the question of any time bar is remitted for fresh decision in accordance with law.

Recovery of duties under Section 11A of the Central Excise Act - Refund under area-based exemption notification - Challenge to refund orders by resort to appellate remedy under Section 35E - Cenvat credit non-refundability under exemption notification and reversal by utilisation - Prohibition of collateral proceedings to set aside refund orders

Recovery of duties under Section 11A of the Central Excise Act - Refund under area-based exemption notification - Prohibition of collateral proceedings to set aside refund orders - Whether Revenue could recover amounts by invoking Section 11A in respect of refunds made under the area-based exemption notification when those refund orders had not been challenged in appeal. - HELD THAT: - The Court held that the proceedings concern refunds purportedly granted under the exemption notification and not a case falling within the conditions precedent for exercise of powers under Section 11A. A plain reading of Section 11A shows it applies where duty has not been levied or paid or has been short-levied or erroneously refunded for specified reasons; it does not permit collateral proceedings to set aside a refund order which could have been challenged by the departmental appellate remedy. The Tribunal found that refund orders were passed in favour of the respondent and were not challenged by the Department during the period of refund; consequently Revenue's attempt to recover those amounts by invoking Section 11A was held to be not admissible. The decision of the Gauhati High Court in Commissioner of Central Excise, Shillong v. Jellalpore Tea Estate (as relied on by the Tribunal) was held to be squarely applicable. [Paras 10, 11]

Revenue cannot resort to Section 11A to recover amounts refunded under the exemption notification where the refund orders were not challenged by appeal; the invocation of Section 11A in the facts of the case was unsustainable.

Cenvat credit non-refundability under exemption notification and reversal by utilisation - Refund under area-based exemption notification - Whether the demand for alleged wrongfully availed Cenvat credit was sustainable when the exemption notification did not permit refund of Cenvat credit and utilization effectively reversed the Cenvat credit. - HELD THAT: - The Tribunal found, and this Court accepted, that the exemption notification did not allow refund of Cenvat credit. The respondent's act of utilising the Cenvat credit for payment of part of the excise duty on the subject goods effectively reversed the Cenvat credit to the extent utilised. On this basis the Tribunal held the demand of Rs. 53,05,582/- as wrongly availed Cenvat credit to be unsustainable, a view reinforced by reference to the Tribunal's own earlier order in Manaksia Ltd. & Spark Exports Ltd. Vs. CCE, Bolpur. [Paras 11]

The demand for alleged wrong Cenvat credit was unsustainable because the notification did not allow refund of Cenvat credit and its utilisation effected reversal.

Challenge to refund orders by resort to appellate remedy under Section 35E - Prohibition of collateral proceedings to set aside refund orders - Whether the department was obliged to challenge the Assistant Commissioner's order granting refund by resort to Section 35E rather than initiating recovery proceedings under Section 11A. - HELD THAT: - The Tribunal recorded that the jurisdictional Assistant Commissioner had held the respondent eligible for refund and the order of refund was not challenged by the Revenue. The Court agreed with the Tribunal's reasoning that the proper remedy to impugn an order granting refund was by appeal under the statutory appellate provision (Section 35E), and that Revenue could not initiate collateral proceedings under Section 11A to set aside such refund orders. The cited authority (Jellalpore Tea Estate) was held to support this legal proposition. [Paras 11]

The departmental remedy to challenge the refund order was by appeal under Section 35E; Revenue's collateral use of Section 11A to recover the refunded amounts was inappropriate.

Final Conclusion: The High Court found no substantial question of law and dismissed the Revenue's appeal, upholding the Tribunal's conclusion that recovery under Section 11A was not permissible in the circumstances, that the Cenvat credit demand was unsustainable, and that the proper remedy to challenge refund orders was by appeal under Section 35E; the dismissal is without prejudice to any other lawful action the Revenue is entitled to take.

Entitlement to Cenvat credit on input services - input service used for removal of goods from the place of removal - Cenvat credit on courier service used for dispatch of business documents - Cenvat credit on services used for removal of excisable goods supplied on FOR basis - precedential reliance on tribunal and high court decisions

Cenvat credit on courier service used for dispatch of business documents - input service used for removal of goods from the place of removal - Cenvat credit is admissible for courier service used to dispatch documents relating to overall business activity. - HELD THAT: - The Tribunal examined the definition of input service and held that the exclusion applies only to services used for removal of goods from the place of removal. Courier service employed solely for dispatching documents does not fall within that exclusion and is therefore an admissible input service as it relates to the overall activity of the business. The Revenue's denial premised on the service being used beyond the place of removal was found not to be applicable to document dispatch. [Paras 4]

Credit on courier service used for dispatch of business documents is allowed.

Cenvat credit on services used for removal of excisable goods supplied on FOR basis - precedential reliance on tribunal and high court decisions - Cenvat credit is admissible for courier service used to dispatch manufacturing samples cleared on FOR basis where freight is borne by the assessee and excise duty was paid on the sale price inclusive of such charges. - HELD THAT: - The Tribunal accepted the appellant's case that manufacturing samples were cleared on payment of duty with sales invoices stating sale on FOR basis and that freight (including courier charges) was borne by the appellant and reflected in the sale price on which excise duty was paid. Applying the principle that services forming part of removal where the assessee bears freight under FOR terms are eligible for credit, the Tribunal allowed credit, relying on earlier tribunal authority in the case of Sanghi Industries Limited and Ultratech Cement Limited vs. CCE Kutch - 2019 (2) TMI 1487 - CESTAT Ahmedabad, the latter having been upheld by the High Court in the mentioned tax appeals. On that basis, courier charges for dispatch of samples were held admissible as input service. [Paras 4, 5]

Credit on courier service used for dispatch of manufacturing samples supplied on FOR basis is allowed.

Final Conclusion: The impugned order denying Cenvat credit on courier services is set aside; the appellant is entitled to Cenvat credit for courier services used for dispatch of business documents and for dispatch of excisable goods as samples supplied on FOR basis.

Penalty under Rule 26 of Central Excise Rules, 2002 - job work - procedure for sending goods for job work under Notification No. 214/86-CE - liability of supplier vis-a -vis job worker for excise duty - consequence of non-registration under Central Excise on procedural obligations - absence of mala fide/bona fide compliance and imposition of penalty

Penalty under Rule 26 of Central Excise Rules, 2002 - procedure for sending goods for job work under Notification No. 214/86-CE - consequence of non-registration under Central Excise on procedural obligations - liability of supplier vis-a -vis job worker for excise duty - Whether penalty under Rule 26 could be imposed on the appellant (a director of an unregistered supplier) for sending raw material to a job worker on a simple challan without following Notification No. 214/86-CE procedures. - HELD THAT: - The Tribunal found that the appellant's company was not registered with the Central Excise department and therefore was not obliged to follow the procedures prescribed by Notification No. 214/86-CE or other Central Excise Rules applicable to registered manufacturers. The responsibility to discharge excise duty, if any leviable on the job-work activity, rests on the job worker who is a registered entity. In these circumstances the supplier, being unregistered, supplied raw material under simple challan which the Tribunal treated as sufficient compliance for the transaction. The Tribunal relied on its earlier decision in Mathew Abraham v. CCE & ST (reported) in which penalty on an employee/supplier in identical facts was set aside, and on the principle that where the job worker has paid service tax (and prima facie acted bona fide), there is no proof of mala fide or intention to evade duty by the supplier. Consequently, penal liability under Rule 26 could not be fastened on the appellant merely because of any alleged default by the job worker.

Penalty imposed under Rule 26 on the appellant set aside and the appeal allowed.

Final Conclusion: The Tribunal allowed the appeal and set aside the penalty imposed under Rule 26 of the Central Excise Rules, 2002 on the ground that the appellant's unregistered supplier status relieved it of the Notification 214/86-CE procedural obligations and that liability to discharge any excise duty lay on the job worker; consequential relief, if any, to follow in accordance with law.

Cenvat credit - debit note as valid document for availing Cenvat credit - compliance with Rule 9(2) of the Cenvat Credit Rules, 2004 - receipt of goods and accounting in books as condition for credit

Debit note as valid document for availing Cenvat credit - compliance with Rule 9(2) of the Cenvat Credit Rules, 2004 - receipt of goods and accounting in books as condition for credit - Appellant entitled to Cenvat credit on the strength of a debit note where the debit note contains the particulars required by Rule 9(2) and the goods/services were received and accounted for in the appellant's books. - HELD THAT: - The tribunal examined whether a debit note, which is not expressly listed in Rule 9(1) as a prescribed document, can nevertheless serve as a valid document for availing Cenvat credit. It found that Rule 9(2) prescribes the requisite particulars that a document must contain (such as description, duty element, and registration/identifying particulars of the supplier) and that the debit note in the present case undisputedly bears those particulars. The importer was registered and issued a certificate bearing the IEC code; the bill of entry shows payment of CVD and the appellant produced supporting records evidencing receipt of goods and accounting in its books. The tribunal relied on prior decisions applying the same principle and held that where the debit note contains the details required by Rule 9(2) and the services/goods have been received and accounted for, the debit note is at par with documents prescribed under Rule 9(1) and entitles the recipient to claim Cenvat credit. Applying that reasoning to the facts, the tribunal set aside the orders denying credit and allowed the appeal.

Debit note containing the particulars required under Rule 9(2) is a valid document for taking Cenvat credit; appellant's claim allowed and impugned order disallowed to the extent of credit denied.

Final Conclusion: The appeal is allowed insofar as Cenvat credit claimed on the basis of the debit note is concerned; the impugned order denying credit is set aside and consequential reliefs, including cancellation of corresponding penalty and interest to the extent indicated, are granted in accordance with law.

Reasonable opportunity to show cause - personal hearing - alternate statutory remedy - application of alternate remedy rule in fiscal statutes - exceptions to alternative remedy (Whirlpool exceptions) - appeal under Section 51 of the Tamil Nadu Value Added Tax Act, 2006

Reasonable opportunity to show cause - personal hearing - Whether the assessee was afforded a reasonable opportunity of being heard and whether absence of an express record of personal hearing vitiates the impugned order. - HELD THAT: - The Court observed that the Assessing Authority issued a notice dated 28.06.2017 affording an opportunity of personal hearing, the petitioner responded seeking time and thereafter attended before the Authority and produced books of accounts. Although the impugned order did not expressly record those steps, the material shows that a personal hearing was in fact given. Reliance was placed on the distinction drawn in earlier precedents that the phrase 'reasonable opportunity to show cause' does not always mean a personal hearing; here the Authority chose to afford personal hearing and the record demonstrates that the petitioner availed that opportunity. Any alleged error in appreciation of the books of accounts by the assessing authority was held to be a ground for appeal and not a ground to strike down the order for want of opportunity. [Paras 7]

The Court held that the petitioner had been given reasonable opportunity (including personal hearing) and that any grievance about appreciation of records is a matter for appeal.

Alternate statutory remedy - application of alternate remedy rule in fiscal statutes - exceptions to alternative remedy (Whirlpool exceptions) - appeal under Section 51 of the Tamil Nadu Value Added Tax Act, 2006 - Whether the writ petition is maintainable in view of the availability of an alternative remedy under the TNVAT and whether any exception to the alternate remedy rule applies. - HELD THAT: - The Court applied settled Supreme Court principles that writ jurisdiction is discretionary and that availability of an effective alternate statutory remedy ordinarily disentitles a petitioner to relief under Article 226, especially in fiscal matters. The Court noted the well known exceptions (breach of fundamental rights, violation of natural justice, excess of jurisdiction, or challenge to vires) (the 'Whirlpool exceptions') but found that none of these exceptions applied on the facts. Given the availability of an appeal under Section 51 of the TNVAT Act and the absence of any established exception, the Court concluded that the petitioner should pursue the alternate remedy before the statutory appellate forum. The Court therefore declined to exercise writ jurisdiction and relegated the petitioner to the statutory appeal route. [Paras 15, 17]

Writ petition dismissed on the ground that an effective alternate statutory remedy under Section 51 is available and no exception to the alternate remedy rule is made out; petitioner entitled to prefer the statutory appeal.

Final Conclusion: The writ petition is dismissed on the ground that the petitioner was given reasonable opportunity to be heard and, in any event, an effective alternate statutory remedy under Section 51 of the TNVAT Act is available; the petitioner is relegated to pursue the statutory appeal. Consequential miscellaneous petition dismissed; no order as to costs.

Payment of tax at compounded rates - option to pay tax under compounding scheme - deemed exercise of option by filing return and paying compounded rate - remand for reassessment - power under Article 226 of the Constitution - rule of alternate remedy and its exceptions

Payment of tax at compounded rates - option to pay tax under compounding scheme - deemed exercise of option by filing return and paying compounded rate - Filing return in Form L and paying lumpsum tax at 2% constitutes exercise of option under Section 6(1) of the TNVAT Act in the absence of any prescribed separate form or procedure. - HELD THAT: - Section 6 permits a dealer to pay tax at a compounded rate and sub section (2) requires the dealer to apply to the assessing authority along with the first monthly return and furnish such return in the manner prescribed. The TNVAT Act and Rules do not prescribe a separate format or a distinct procedure for exercising the option. Applying the principle in the Division Bench's decision in Commissioner of Income-tax v. M/s. Kikani Exports P. Ltd. and the decision in K. Ramasamy (where filing a return and paying the compounded rate was held to amount to exercising the option under analogous provisions), the Court held that where no separate form or method is prescribed, the act of filing the statutory return in Form L and remitting tax at the compounded rate is a valid exercise of the option under Section 6(1). The Assessing Officer's conclusion that absence of a separate option letter precluded the option was therefore erroneous and unsustainable. [Paras 6, 7, 8, 10]

The returns filed in Form L with payment of tax at 2% are to be treated as exercise of the option under Section 6(1).

Power under Article 226 of the Constitution - rule of alternate remedy and its exceptions - Writ petitions challenging the assessment orders were maintainable despite an alternative statutory remedy because the case falls within established exceptions to the rule of alternate remedy. - HELD THAT: - The Court examined the discretionary nature of writ jurisdiction under Article 226 and the principle that an effective alternate remedy ordinarily bars writ relief. Citing the Supreme Court's exposition (including Radha Krishan Industries and Whirlpool), the Court reiterated exceptions where writ jurisdiction may be exercised despite alternative remedies: enforcement of fundamental rights, violation of natural justice, proceedings wholly without jurisdiction, or challenge to the vires of legislation. The present challenge was to the jurisdictional correctness of treating the statutory return as not amounting to exercise of option under Section 6(1) - a pure legal question which the Court found falls within the exception relating to proceedings wholly without jurisdiction and where statutory rights and procedure are in issue. Given that the matter involved a legal question unsuitable for resolution merely by appeal and the writ petitions had been pending since 2018, the Court permitted exercise of writ jurisdiction. [Paras 11, 12, 13]

The writ petitions were maintainable and the High Court properly exercised its discretion to entertain them.

Remand for reassessment - Whether the assessment orders should be set aside and the matter remanded to the Assessing Officer for fresh consideration treating the returns as option under Section 6(1). - HELD THAT: - Having held that the returns filed and tax paid at the compounded rate constituted a valid option under Section 6(1), the Court concluded that the assessments founded on the contrary view were vitiated. In the exercise of its discretion the Court set aside the impugned assessment orders and remanded the matters to the Assessing Officer with a direction to treat the returns as having exercised the option under Section 6(1) and to complete the assessment in accordance with law, thereby leaving factual and consequential computations to the statutory authority. [Paras 14]

Assessment orders set aside and matter remitted to the Assessing Officer to proceed treating the returns as option under Section 6(1).

Final Conclusion: Writ appeals allowed; the High Court held that, in the absence of any prescribed separate form or procedure, filing the statutory return in Form L and remitting tax at the 2% compounded rate amounts to exercising the option under Section 6(1) of the TNVAT Act, the writ petitions were maintainable under Article 226 as an exception to the rule of alternate remedy, the impugned assessment orders are set aside and the matters are remanded to the Assessing Officer to proceed in accordance with law.

Maintainability of writ petition despite alternative statutory remedy - exceptional circumstances test for entertaining Article 226 despite alternative remedy (breach of fundamental rights, violation of natural justice, excess of jurisdiction, challenge to vires) - election and preclusion where party invoked statutory determination under Section 59

Maintainability of writ petition despite alternative statutory remedy - exceptional circumstances test for entertaining Article 226 despite alternative remedy (breach of fundamental rights, violation of natural justice, excess of jurisdiction, challenge to vires) - Whether the writ petition under Article 226 is maintainable despite the availability of a statutory appeal under Section 55 of the Uttar Pradesh VAT Act, 2008. - HELD THAT: - The Court applied the principle that existence of an alternative statutory remedy is not an absolute bar to maintainability of a writ petition but such petitions are entertainable only in exceptional circumstances as delineated by the Supreme Court (breach of fundamental rights, violation of principles of natural justice, excess of jurisdiction, or challenge to the vires of the statute). Having examined the facts and authorities relied upon by the petitioner and respondent, the Court found that none of the exceptional circumstances were established. Reliance on earlier interim orders of other High Courts or on precedents where different facts obtained did not warrant departure from the settled test. In these circumstances the Court concluded that the proper forum to challenge the assessment is the statutory appellate remedy and declined to exercise extraordinary writ jurisdiction. [Paras 3, 6, 16, 17, 18]

Writ petition not maintainable on merits in view of availability of statutory remedy; petitioner relegated to statutory appeal.

Election and preclusion where party invoked statutory determination under Section 59 - Whether the petitioner can challenge the impugned assessment by writ when it had earlier invoked Section 59 of the Act and been held liable for VAT by order dated 14.12.2015, which is itself under challenge before the Tribunal. - HELD THAT: - The Court noted that the petitioner had previously sought a determination under Section 59 and an order was passed holding the petitioner liable to VAT; that order is presently the subject of an appeal before the Tribunal. Given that the petitioner itself had raised and obtained a statutory determination, the Court held that the petitioner cannot now be permitted to 'resile' from that position and seek relief by writ against the subsequent assessment. The prior invocation of the statutory route and the pending statutory proceedings weigh against entertaining extraordinary writ relief. [Paras 8, 11, 13, 17]

Petitioner precluded from seeking writ relief in respect of the assessment having previously invoked and obtained a Section 59 determination; petition dismissed on this ground.

Final Conclusion: Writ petition dismissed; no exceptional circumstances shown to supplant the statutory remedy and, having earlier invoked a Section 59 determination, the petitioner is relegated to the appropriate statutory appellate remedy against the impugned assessment.

Summons under Section 138 of the Negotiable Instruments Act - liability under Section 141(1) of the Negotiable Instruments Act - liability under Section 141(2) of the Negotiable Instruments Act - requirement of being "in-charge" and "responsible to the company" - vicarious liability of company officers

Liability under Section 141(1) of the Negotiable Instruments Act - requirement of being "in-charge" and "responsible to the company" - liability under Section 141(2) of the Negotiable Instruments Act - vicarious liability of company officers - Whether the complaint insofar as it summoned petitioner no.11 (Company Secretary) as an accused was maintainable under Section 141(1) or Section 141(2) of the Negotiable Instruments Act. - HELD THAT: - The Court examined the averments in the complaint to determine if petitioner no.11 satisfied the dual requirement for vicarious liability under Section 141(1): being a person "responsible to the company for the conduct of the business" and also being "in-charge of" the business. The complaint alleged that accused nos.2 to 13, including the Company Secretary, were "looking after and responsible for the day-to-day affairs, conduct and management" of the company, but did not aver that petitioner no.11 was "in charge" of the company's business. Applying the principle in K.K. Ahuja, the Court held that mere averments of being "looking after" or "responsible for" day-to-day affairs do not satisfy the factual requirement of being "in-charge" necessary for liability under Section 141(1). The Court then considered Section 141(2): whether the complaint particularised that the offence was committed with the consent or connivance of, or attributable to the negligence of, petitioner no.11. The averments were found to be vague and general, lacking specific allegations as to petitioner no.11's role in relation to the facility agreement or the dishonour of the cheque, and did not disclose consent, connivance or negligence. Consequently, petitioner no.11 could not be fastened with liability under Section 141(2). [Paras 12, 14, 15]

The complaint insofar as it summoned petitioner no.11 cannot be maintained under Section 141(1) or Section 141(2) of the Negotiable Instruments Act; the proceedings against petitioner no.11 are quashed.

Final Conclusion: The petitions are allowed; the criminal proceedings in the two complaints are quashed insofar as they relate to petitioner no.11 (the Company Secretary).

Return of seized property - custody and disposal of produced property under Section 451 Cr.P.C. - restoration to original owner where necessity to retain ceases - control of the Court over police custody of seized property - Sunderbhai Ambalal Desai guidelines on return of seized articles - evidentiary significance of Income Tax investigation for ownership

Return of seized property - evidentiary significance of Income Tax investigation for ownership - Sunderbhai Ambalal Desai guidelines on return of seized articles - custody and disposal of produced property under Section 451 Cr.P.C. - Whether the application for return of the seized cash should have been allowed and to whom the cash ought to be delivered. - HELD THAT: - The learned Magistrate correctly rejected the petitioner's application for return of the seized cash to the petitioner himself. The Court, however, placed weight on the report filed by the Income Tax Department pursuant to its inquiry under Section 131 of the Income Tax Act which showed that the cash had been withdrawn from the bank account of the political party unit and was reflected in the party's cash book. Applying the principles in Sunderbhai Ambalal Desai that seized property ought not be retained longer than necessary and that the Court controls disposal of property produced in a criminal proceeding, the High Court held that retention in police custody was unnecessary in the light of the Income Tax findings. Exercising the power under Section 451 Cr.P.C. for proper custody and disposal of property produced before the Court, the High Court directed that the seized cash be deposited into the bank account of the political party unit after completion of detailed panchnama, photographic documentation and on provision of proper security.

Petition for return to the petitioner rejected; seized cash to be deposited to the political party's account after panchnama, photographs and proper security, in accordance with the Income Tax report and Sunderbhai Desai principles.

Final Conclusion: Revisional application disposed of by rejecting the petitioner's claim to the cash while directing deposit of the seized amount into the political party's account after prescribed formalities, in view of the Income Tax Department's investigative findings and the Court's duty under Section 451 Cr.P.C. and established guidelines.

Return of seized property - seizure of cash - production of departmental report - preliminary recordal of evidence from Income Tax Department

Production of departmental report - preliminary recordal of evidence from Income Tax Department - The report of the Income Tax Department received by e-mail was placed on record and the Income Tax Department was directed to file the report by way of an affidavit within a week and serve copies on the parties. - HELD THAT: - The petitioner sought return of cash seized from his possession on the basis that he was acting on verbal instructions of party officials. The Income Tax Department furnished a report by e-mail indicating entries in the cash book and withdrawals corresponding to the seized amount. The High Court recorded receipt of that report and, in the interest of formalisation and fairness to the parties, directed the Income Tax Department to reduce the report to affidavit and to serve the same on the parties so that the matter may proceed on a proper evidentiary footing. No final adjudication on the petitioner's claim for return of the seized cash was undertaken in this order.

The e-mail report was kept on record; the Income Tax Department ordered to file the report as an affidavit within a week and serve it on the parties.

Final Conclusion: The court recorded the Income Tax Department's e-mail report on the cash transactions, directed the Department to file the report by affidavit and serve it on the parties, and listed the matter for further hearing on 13.08.2021; no final decision was rendered on the prayer for return of the seized cash.