TaxTMI Updates e-Newsletter
Oct 07,2021

Cancellation of registration - revocation of cancellation of registration - Input Tax Credit claimed against fake invoices - Rule 21 of the OGST Rules - grounds for cancellation - buyer's liability for seller's fraud - requirement of knowledge or connivance for purchaser's culpability - preventive measure in the interest of revenue

Rule 21 of the OGST Rules - grounds for cancellation - cancellation of registration - Whether Rule 21 of the OGST Rules justified cancellation of the purchasing dealer's registration in the facts of the case. - HELD THAT: - The Court examined the three circumstances in Rule 21-(a) not conducting business from declared place, (b) issuing invoice without supply, and (c) violation of Section 171 or rules-and found none of them attracted in respect of the petitioner. The LPO's stated reason for cancellation was tersely recorded as "clarification submitted not satisfactory" without any discussion of the petitioner's explanation. In absence of findings that any clause of Rule 21 applied to the petitioner, Rule 21 could not be invoked to cancel the purchasing dealer's registration. [Paras 11, 15, 16]

Rule 21 could not be invoked to cancel the petitioner's registration and the cancellation lacked reasoned application of those grounds.

Buyer's liability for seller's fraud - requirement of knowledge or connivance for purchaser's culpability - Input Tax Credit claimed against fake invoices - Whether the Department established that the purchasing dealer acted with knowledge that the selling dealer was non-existent or in connivance to commit fraud, thus justifying cancellation. - HELD THAT: - The Court held that where purchases were made on dates when the supplier was a registered entity (the supplier's registration was cancelled subsequently), the Department must meet a high threshold to attribute fraud to the purchaser. That threshold requires proof that the purchaser acted with full knowledge that the seller was non-existent or was in connivance to defraud revenue. The Department's field visit evidence (premises occupied by others at a later date) did not satisfy this threshold as to transactions in April and August 2018, and no finding of deliberate availing of ITC with such knowledge was made. [Paras 13, 14, 18, 19]

Department failed to show that the petitioner knowingly or in connivance availed ITC from a non-existent supplier; the high threshold for purchaser culpability was not met.

Revocation of cancellation of registration - preventive measure in the interest of revenue - Whether the impugned orders rejecting revocation and the appellate order should be set aside and the petitioner's GST registration restored. - HELD THAT: - Given the absence of reasoned findings applying Rule 21 or proving knowledge/connivance, and that the appellate order merely characterized the cancellation as a "preventive measure" without discussing the petitioner's explanation, the Court found the LPO and appellate orders unsustainable. The Court directed restoration of the petitioner's registration forthwith and permitted the filing of returns that could not be filed due to cancellation. [Paras 11, 17, 20]

Impugned orders rejecting revocation and the appellate order are set aside; the petitioner's registration is to be restored and returns permitted.

Final Conclusion: The writ petition is allowed: the cancellation and rejection of revocation were set aside for lack of reasoned application of Rule 21 and failure to prove purchaser's knowledge or connivance; the Department is directed to restore the petitioner's registration forthwith and permit filing of pending returns.

Acceptance of undertaking - payment undertaking and instalment schedule - production of proof of payment by affidavit - determination of outstanding tax liability and interest - attachment and sale of immovable property for recovery

Acceptance of undertaking - payment undertaking and instalment schedule - attachment and sale of immovable property for recovery - Court accepted the undertaking given on behalf of the petitioner regarding payment of outstanding GST liability and interest as per the specified instalment schedule and held the petitioner bound by that undertaking. - HELD THAT: - The court recorded the representation made by the petitioner's senior counsel, accepting the undertaking given by the director of the petitioner company that the unpaid principal and interest would be paid according to the instalments and timelines stated in the order. The acceptance operates as a binding commitment by the petitioner for the specified payments. The order also preserves the respondents' entitlement, in the event of non-compliance with the timelines, to attach and proceed to sell the immovable properties referred to in the earlier order dated 03.03.2021.

Undertaking accepted and petitioner held bound; failure to adhere to timelines permits respondents to attach and sell immovable properties as earlier directed.

Production of proof of payment by affidavit - Petitioner directed to place on record proof of payment of Rs. 10 lacs together with an affidavit within two weeks. - HELD THAT: - Respondents disputed the petitioner's assertion that a payment of Rs. 10 lacs had been made on 13.09.2021. The court required the petitioner to file documentary proof of that payment and an affidavit verifying the same within the stipulated two-week period so that the record may be clarified before the next hearing.

Petitioner to file proof of payment and an affidavit within two weeks.

Determination of outstanding tax liability and interest - The correct outstanding principal amount and the interest payable thereon were not finally determined and are to be ascertained on the next date of hearing. - HELD THAT: - Counsel for the respondents stated a different outstanding principal amount than that asserted by the petitioner. The court declined to make a final adjudication on the precise outstanding sum and the interest liability at this stage, directing that the correct figures and interest be determined at the subsequent hearing after the parties have placed relevant material on record.

Outstanding principal and interest to be determined on the next date of hearing (matter remanded for verification).

Final Conclusion: The court accepted the petitioner's undertaking as binding, directed production of proof of a specific payment within two weeks, and remitted the question of the correct outstanding GST principal and interest for determination at the next hearing; list on 24th January, 2022.

Bail under Section 439 of the Code of Criminal Procedure - economic offences involving bogus Input Tax Credit (ITC) - gravity and magnitude of alleged economic offences - ongoing investigation as ground for refusing bail - custodial detention justified by risk of tampering with evidence

Bail under Section 439 of the Code of Criminal Procedure - economic offences involving bogus Input Tax Credit (ITC) - ongoing investigation as ground for refusing bail - custodial detention justified by risk of tampering with evidence - gravity and magnitude of alleged economic offences - Whether the petitioner should be released on bail in proceedings alleging large-scale bogus availment and passing of ITC and related economic offences. - HELD THAT: - The Court examined the complaint and attached documents which allege that the petitioner, as proprietor of a firm, availed and passed on substantial bogus ITC on the strength of fake and non existent firms and invoices, and that transactions were conducted out of account without tax compliance. The materials on record indicate alleged availment and passing of ITC aggregating to a large amount and the creation/operation of fictitious entities to effectuate the fraud. The investigation is ongoing and the prosecution asserts that further materials are still emerging; there is an apprehension that enlargement on bail may enable tampering with evidence or interference with the investigation. Given the gravity and magnitude of the alleged economic offences, the nature of the documentary scheme relied upon, and the continuing investigative activity, the Court concluded that custodial detention is warranted and that bail cannot be granted at this stage.

Bail application under Section 439 CrPC dismissed; petitioner to remain in custody.

Final Conclusion: The High Court refused bail, finding that the allegations of large scale bogus ITC, the gravity of the offences and the ongoing investigation with potential risk to evidence justify continued custodial detention.

Contempt of court - interim stay - willful violation - notice of demand - statutory appeal - rectification petition - penalty under section 271AAB

Contempt of court - interim stay - notice of demand - statutory appeal - Whether issuance of the notice of demand dated 23.03.2020 and the filing of an appeal before the Tribunal amounted to willful violation of the interim stay granted by this Court. - HELD THAT: - The Court examined whether the assessing authority's actions constituted a willful breach of the interim order. It noted the settled practice that contempt is made out only by a willful violation and that a vacate-stay application pending before the court ordinarily precedes contempt proceedings; here the vacate-stay petition was filed only after the contempt petition, justifying disposal of the contempt petition. The Court held that filing a statutory appeal and seeking condonation of delay before the Tribunal does not, by itself, amount to contempt or to breaching an interim stay. The authority's statutory right to file an appeal cannot be stifled by threat of contempt; any effect on the writ petition will be considered when that petition is finally heard. The Court further accepted the departmental affidavit explaining the basis of the demand (including penalties computed under the assessment process) and found the issuance of the demand notice to be unconnected with the interim order. [Paras 6, 7, 9, 10]

The contemnor did not commit contempt by issuing the notice of demand or by filing the appeal; the contempt plea on this ground is dismissed and the contemnor is discharged.

Rectification petition - interim stay - willful violation - Whether dismissal of rectification petitions (relating to assessment years 2016-17 and 2017-18) amounted to violation of the interim stay granted in respect of earlier assessment years. - HELD THAT: - The Court observed that the interim stay was in respect of assessment years 2013-14, 2014-15 and 2015-16, whereas the rectification petitions related to assessment years 2016-17 and 2017-18. Although the legal issue may overlap, the rectification proceedings did not concern the subject matter of the writ petition pending before the Court. An interim stay represents a prima facie view and does not operate as a final determination preventing the revenue from reiterating its stand in unrelated proceedings. Accordingly, dismissal of the rectification petitions could not be treated as contempt of the interim order. [Paras 8, 10]

Dismissal of the rectification petitions did not constitute contempt; no contempt is made out on this ground.

Final Conclusion: Contempt petition closed; the assessing authority is discharged of contempt. The petitioner remains free to challenge the notice of demand by available remedies; the order closing the contempt petition does not operate as a bar against the petitioner pursuing such challenges.

Application of Section 115JB and its Explanation for computing book profit - Scope and limits of revisional powers under Section 263 - Assessing Officer's application of mind and conclusiveness of adopting one of two possible views - Need to identify specific clause in Explanation A-K before exercising revisionary power

Assessing Officer's application of mind and conclusiveness of adopting one of two possible views - Assessing Officer had applied his mind in computing book profit under Section 115JB and in dropping rectification proceedings. - HELD THAT: - The Court accepted the factual finding that the Assessing Officer called for and considered the documents, issued a notice under Section 154, received detailed submissions, applied the computation method in the Explanation to Section 115JB(2) and concluded that the disputed items did not fall within any heads in the Explanation. Given that the Assessing Officer adopted one of two possible views after consideration of material, his view could not be treated as erroneous so as to justify exercise of revisionary powers under Section 263. The Assessing Officer's action in dropping rectification proceedings was thus evidence of application of mind rather than failure to apply mind. [Paras 4, 5]

Assessing Officer had applied his mind and his decision to exclude the disputed items from book profit was not erroneous.

Scope and limits of revisional powers under Section 263 - Need to identify specific clause in Explanation A-K before exercising revisionary power - CIT could not exercise revisionary power under Section 263 without identifying under which Explanation head (A-K) the disputed items fell. - HELD THAT: - The Court observed that the CIT's order set aside the assessment without specifying which head in the Explanation to Section 115JB(2) would cover the disputed amounts. Revision under Section 263 cannot be validly exercised where the issue is debatable and the Assessing Officer has taken a permissible view; the revisional authority must identify the specific error and the applicable category in the Explanation. Absent such identification, the exercise of revisionary jurisdiction was impermissible. [Paras 5]

CIT's exercise of revisional powers was invalid because it did not identify the appropriate category in the Explanation to Section 115JB(2).

Application of Section 115JB and its Explanation for computing book profit - The four disputed items (decommissioning levy and interest, interest on R&M fund, interest on R&D fund) do not fall within the list of items in the Explanation to Section 115JB and therefore should not be added to book profit. - HELD THAT: - Both the Assessing Officer and the Tribunal concluded, after considering the explanatory provisions under Section 115JB(2), that the disputed items were not includible within any of the specified heads A-K. The High Court found no perversity in this conclusion and accepted the ITAT's reasoning that the items were not part of the list in the Explanation, thus they could not be added to the book profit for MAT computation. [Paras 1, 4, 5]

The disputed items are not covered by the Explanation to Section 115JB and therefore are not to be included in book profit.

Final Conclusion: Appeal dismissed. The Assessing Officer's view that the four disputed items were not includible in book profit under the Explanation to Section 115JB was a permissible conclusion; CIT could not validly invoke revisionary jurisdiction under Section 263 without identifying the specific Explanation head, and the Tribunal's deletion of the addition was upheld.

Non-compete fee as an intangible asset - depreciation under Section 32(1)(ii) of the Income Tax Act, 1961 - any other business or commercial rights of similar nature - acquisition of enduring business benefit

Non-compete fee as an intangible asset - depreciation under Section 32(1)(ii) of the Income Tax Act, 1961 - any other business or commercial rights of similar nature - Payment of non-compete fee is an intangible asset falling within the expression 'any other business or commercial rights of similar nature' in Explanation 3 to section 32(1)(ii) and is eligible for depreciation. - HELD THAT: - The Court held that the question is no longer res integra in view of earlier Division Bench authority which construed Explanation 3 to section 32(1)(ii) broadly to include rights acquired by payment to prevent competition. The appellate authorities referred to by the Court (including precedents of other High Courts) recognise that where expenditure creates an enduring benefit - here the commercial right to prevent ex-employees/associates from competing and to protect the business - such rights fall within the category of intangible assets contemplated by section 32(1)(ii). Applying that principle to the facts, the Tribunal's conclusion that the assessee acquired an intangible asset in the nature of a business or commercial right and was therefore entitled to depreciation was not perverse or legally incorrect. The Court found no substantial question of law and accepted the Tribunal's direction to allow depreciation at the admissible rate on the non-compete fee. [Paras 3, 4, 5]

The tribunal's allowance of depreciation on the non-compete fee is upheld and the payment is held to be a depreciable intangible asset under section 32(1)(ii).

Final Conclusion: Revenue's appeal is dismissed; the Tribunal's order permitting depreciation on the non-compete fee is upheld with no order as to costs.

Reopening of assessment beyond four years - Failure to disclose material facts - Tangible material for reassessment - Change of opinion doctrine - Accrual of income - retention money - Consistency of accounting treatment / mercantile system - Book profits computation under Section 115-JB - Power to seek post-assessment clarifications

Reopening of assessment beyond four years - Failure to disclose material facts - Tangible material for reassessment - Change of opinion doctrine - Power to seek post-assessment clarifications - Validity of reassessment proceedings initiated under Section 147/148 where notice was issued beyond four years after completion of scrutiny assessment - HELD THAT: - The Court examined whether the Assessing Officer possessed tangible material showing that the assessee had failed to fully and truly disclose material facts at the time of the original scrutiny assessment, which is a prerequisite for valid reopening beyond four years. After completion of assessment under Section 143(3), the Assessing Officer sought clarifications and the assessee replied; however, no fresh tangible material was brought on record and there was no allegation of suppression or non-disclosure by the assessee. The Court observed that the Assessing Officer appeared to be re-examining the earlier decision of his predecessor on merits, amounting to impermissible change of opinion. The Court also noted the doubtful character of seeking post-assessment clarifications where no power under Section 154 or similar provision was shown to be invoked. In absence of tangible material or any failure to disclose, the prerequisites for exercise of power under Section 147 were not satisfied and the reopening was therefore held to be unlawful. [Paras 8, 9, 12, 13, 14]

Reopening under Section 147/148 was invalid and the reassessment proceedings were quashed.

Accrual of income - retention money - Consistency of accounting treatment / mercantile system - Book profits computation under Section 115-JB - Precedential treatment of retention money - taxable on receipt - Whether retention money deducted by customers but withheld until completion of defect liability period accrues as income in the year of deduction and is includible in the assessee's income (and book profits) for that year - HELD THAT: - The Court accepted the assessee's explanation that retention money becomes due only after completion of the project and expiry of the defect liability period, and therefore no right to receive the amount exists earlier; consequently income does not accrue or arise in the earlier year. The assessee consistently followed the same accounting treatment for decades and had offered such amounts to tax in subsequent years on receipt. The Court relied on the settled principle that income must have resulted to be taxable and that hypothetical or contingent entries which do not crystallise into income cannot be taxed. The Division Bench's earlier decisions, as referred to in the judgment, support the view that retention money retained by the client and payable only after satisfaction of contractual conditions does not accrue to the contractor in the earlier year and thus should be excluded for computing income/book profits for that year. [Paras 6, 7, 12, 15, 16]

Retention money did not accrue as income in the relevant assessment year and the assessee's accounting treatment was acceptable for tax purposes.

Final Conclusion: Writ Appeal allowed. The order of the High Court dated 26.04.2021 is set aside; the writ petition is allowed; the notice dated 29.03.2018 under Section 148 and consequential proceedings dated 18.12.2018 are quashed.

Rectification of mistake apparent on the record under Section 154 - estimation of profits as a percentage of turnover - allowability of depreciation against income determined on estimation - debatable question of law not amounting to a mistake apparent on record - rejection of books of account and its effect on permitting deductions - application and interpretation of KNR Constructions ratio - distinction between Indwell Constructions and depreciation issue - authority of Y. Ramachandra Reddy on depreciation where profit is estimated

Rectification of mistake apparent on the record under Section 154 - debatable question of law not amounting to a mistake apparent on record - Whether the Assessing Officer was justified in invoking rectification powers under Section 154 to add back depreciation after estimating income. - HELD THAT: - The Court applied the settled principle that a mistake apparent on the record is a palpable, glaring error and does not include issues of law that are debatable or require long-drawn reasoning. The Assessing Officer's action involved interpreting the correct application of the law on whether depreciation may be allowed where profit is estimated; that controversy is not a patent clerical or factual error but a debatable legal question. Consequently, treating the matter as a mistake apparent to justify exercise of Section 154 powers was impermissible.

Invocation of Section 154 to add back depreciation was not justified because the question involved was debatable and not a mistake apparent on the record.

Allowability of depreciation against income determined on estimation - authority of Y. Ramachandra Reddy on depreciation where profit is estimated - rejection of books of account and its effect on permitting deductions - distinction between Indwell Constructions and depreciation issue - Whether depreciation is allowable when income has been estimated as a percentage of contractual receipts after rejection of books of account. - HELD THAT: - The Court examined precedent and reasoning in Y. Ramachandra Reddy, which holds that deduction of depreciation (and interest) is not automatically disallowed merely because profit is estimated on a percentage basis; depreciation retains its legal character even where profit is so determined. The Bench further noted that Indwell Constructions dealt with a different factual situation concerning disbelief of material supporting particular deductions and did not address depreciation in the present context. Given these authorities, the question of allowing depreciation against estimated income is one of law and fact that is debatable rather than being foreclosed by the mere rejection of books.

Deduction of depreciation against income estimated at 12.5% of contractual receipts is a debatable issue and not precluded as a matter of law; it cannot be treated as a manifest error for rectification.

Application and interpretation of KNR Constructions ratio - debatable question of law not amounting to a mistake apparent on record - Whether the Assessing Officer incorrectly applied the ratio in KNR Constructions such that rectification was warranted. - HELD THAT: - The Court observed that the controversy concerned the proper interpretation and application of the KNR Constructions ratio in the circumstances of this case, specifically whether that ratio forbids allowing depreciation once books are rejected and profit is estimated. This interpretive exercise raises a debatable legal question. As that issue cannot be characterized as an obvious, palpable mistake on the face of the record, it did not justify rectification under Section 154.

Alleged misapplication of KNR Constructions involves interpretive controversy and is not a mistake apparent on record warranting rectification.

Final Conclusion: The petition for admission of the Department's appeal is dismissed. The Court held that allowing depreciation against income estimated at 12.5% of contractual receipts and the assessment of whether books rejection precludes such deduction are debatable questions of law; consequently, invoking Section 154 to rectify the assessment was not permissible.

Entertainment of claim not made in the original return - power of Assessing Officer to consider revised computation versus requirement of a revised return - power of the Income Tax Appellate Tribunal under Section 254 to entertain and decide claims - limitation of Goetze India Ltd. to the Assessing Officer's power - assesseefriendly approach of the department (CBDT Circular)

Power of Assessing Officer to consider revised computation versus requirement of a revised return - limitation of Goetze India Ltd. to the Assessing Officer's power - Whether the Assessing Officer was bound to refuse consideration of the assessee's revised computation of income (filed during scrutiny) on the ground that no revised return had been filed. - HELD THAT: - The Court accepted that Goetze India Ltd. establishes that a deduction not claimed in the original return cannot be entertained by the Assessing Officer except by filing a revised return. However, the Supreme Court's ruling in Goetze is limited to the Assessing Officer's power and does not negate the jurisdiction of appellate authorities. The Tribunal found on the facts that the additional expenditure claimed by the assessee in the computation filed during assessment was not a fresh claim but an omission evident from records, and therefore could be considered. Having accepted the Tribunal's factual conclusion that the claim was not a new claim and in view of the limited ambit of Goetze, the High Court held that the Tribunal was entitled to allow the claim and directed that the matter be remanded to the Assessing Officer for consideration on merits. The Court therefore declined to sustain the Assessing Officer's technical non entertainment based solely on absence of a revised return and required the AO to examine the claim after affording the assessee an opportunity of personal hearing. [Paras 5, 6, 8, 9, 13]

Assessing Officer's refusal to entertain the computation solely for want of a revised return cannot be upheld; matter remitted to the AO to examine the claim on merits after hearing the assessee.

Entertainment of claim not made in the original return - power of the Income Tax Appellate Tribunal under Section 254 to entertain and decide claims - assesseefriendly approach of the department (CBDT Circular) - Whether the Tribunal was correct in holding that the assessee's filing of a revised computation during assessment did not amount to a fresh claim for deduction and that the Tribunal could exercise its powers under Section 254 to allow the claim. - HELD THAT: - The Tribunal relied on authority recognising the appellate forum's jurisdiction to entertain claims not pressed before the Assessing Officer, and took note of departmental guidance that officers should assist taxpayers in securing entitled reliefs. On the facts the Tribunal concluded that the assessee sought only to claim expenditure previously omitted and not to assert a new deduction. The High Court found no fault with the Tribunal's exercise of power under Section 254 and its factual conclusion that the claim was not a fresh claim. Because the Tribunal allowed the appeal but did not issue consequential directions to the AO, the High Court answered the substantial questions against the Revenue and remanded the matter to the Assessing Officer for adjudication on merits consistent with the Tribunal's findings. [Paras 9, 10, 11, 12, 13]

Tribunal rightly treated the computation as not making a fresh claim and properly exercised its Section 254 powers; matter remitted to the Assessing Officer to decide the claim on merits.

Final Conclusion: The revenue appeal is dismissed; the substantial questions are answered against the Revenue. The matter is remanded to the Assessing Officer to consider the assessee's claim of expenditure for Assessment Year 2008-09 on merits and in accordance with law after affording the assessee a personal hearing. No costs.

Faceless Assessment - Section 144B - show-cause notice and draft assessment order - Variation prejudicial to interest of assessee - Reasonable opportunity to reply - Natural justice in faceless assessments - Assessment to be non est for non-compliance with statutory procedure

Section 144B - show-cause notice and draft assessment order - Variation prejudicial to interest of assessee - Assessment to be non est for non-compliance with statutory procedure - Reasonable opportunity to reply - Whether the assessment order dated 18th April, 2021 is void (non est) for failure to comply with the procedural requirements of Section 144B of the Income tax Act, 1961, specifically issuance of a show cause notice and furnishing of the draft assessment order where variations prejudicial to the assessee were proposed, and whether the impugned order should be quashed. - HELD THAT: - The Court examined Section 144B which makes faceless assessments subject to a statutory procedure that requires NaFAC to serve a show cause notice and furnish the draft assessment order where proposed variations are prejudicial to the assessee, to grant reasonable time and consider the assessee's replies and requests for personal hearing. In the present case, although the notice dated 9th April, 2021 required responses by 13th April, 2021 (a period affected by weekend and a public holiday) and the assessee filed partial replies on 13th April and additional submissions on 17th April, 2021, the assessing authority passed the final order on 18th April, 2021 without serving any show cause notice or the draft assessment order and without affording the procedural opportunities mandated by Section 144B. Sub section (9) of Section 144B expressly provides that an assessment made on or after 1st April, 2021 shall be non est if not made in accordance with the procedure laid down under that section. Given the presence of additions/disallowances in the final order (i.e., variations prejudicial to the assessee), the statutory safeguards were engaged and their non observance rendered the assessment non est. Reliance by the Revenue on earlier opportunities to file information did not cure the specific mandatory requirements of Section 144B once NaFAC proposed prejudicial variations and failed to issue the show cause/draft order and consider replies as required. In view of these findings, the Court quashed the impugned assessment and permitted the Revenue to initiate de novo proceedings in accordance with law and the prescribed procedure under Section 144B. [Paras 13, 14, 16]

Impugned assessment order dated 18th April, 2021 is non est for failure to comply with Section 144B and is quashed; respondents may proceed de novo in accordance with law.

Final Conclusion: The assessment order for Assessment Year 2018-19 dated 18th April, 2021 is quashed for non compliance with the mandatory procedure under Section 144B; the Revenue is permitted to undertake de novo proceedings strictly in accordance with law and the procedural safeguards in Section 144B.

Applicability of Section 179(1) of the Income Tax Act restricted to private companies - Joint and several liability of directors for recovery of company tax arrears - Recovery of tax arrears from directors of a public limited company - Effect of a compromise decree on Revenue's entitlement to received sums

Applicability of Section 179(1) of the Income Tax Act restricted to private companies - Recovery of tax arrears from directors of a public limited company - Impugned recovery proceedings under Section 179(1) taken against directors of a public limited company are not sustainable. - HELD THAT: - The Court examined the language of Section 179 and noted that the statutory scheme makes the provision operative in relation to a private company. There is no provision in the Income Tax Act analogous to Section 179 for the recovery of a company's tax arrears from directors where the company is a public limited company. Consequently, proceedings invoking Section 179(1) against directors of a public limited company are barred. Applying this legal principle to the facts before it, the Court held that the impugned notices issued to the directors of the said public limited company were not maintainable and warranted quashing. [Paras 12, 15]

Impugned proceedings under Section 179(1) issued against directors of the public limited company set aside.

Effect of a compromise decree on Revenue's entitlement to received sums - Proof of payment to the Income Tax Department under compromise - The contention that a compromise decree effected payment to the Income Tax Department was not established on the record. - HELD THAT: - The Court considered the Memorandum of Compromise and the decretal order placed before it and observed that neither document demonstrates that any monies were in fact paid to the Income Tax Department pursuant to the compromise. Although certain clauses in the compromise decree and memorandum contemplate obligations relating to tax, no evidence was produced to show actual payment to the Department. On this basis the Court treated the contention as unproven and therefore not a ground to sustain the impugned recovery proceedings. The Court, however, clarified that it did not preclude the Revenue from pursuing any other lawful mode of recovery in the future, and that if such proceedings are instituted the question of payments under the compromise decree may be raised and examined then. [Paras 13, 14, 16]

No finding of payment to the Income Tax Department under the compromise decree; contention failed on available record, but question left open for future proceedings if any.

Final Conclusion: Both writ petitions are allowed; the impugned recovery proceedings issued to the directors of the public limited company under Section 179(1) are quashed. No order as to costs; the question of any payment under the compromise decree is not established on the record and is left open if the Revenue pursues other recovery remedies.

Re-assessment under Section 147 - reason to believe - mere change of opinion - tangible material - survey under Section 133A

Re-assessment under Section 147 - reason to believe - mere change of opinion - tangible material - survey under Section 133A - Validity of re-opening the assessment for Assessment Year 2005-06 on the basis of material gathered in a survey and whether the reasons recorded disclose tangible material or merely amount to a change of opinion. - HELD THAT: - The Assessing Officer recorded reasons for reopening stating that a survey under Section 133A revealed payments described as sales commissions to foreign entities and that post-survey enquiries produced evasive answers and unsubstantiated documents; the AO therefore formed a reason to believe that income had escaped assessment (see reasons recorded). However, the Court found that the primary facts concerning the sales commission had been placed before the Assessing Officer during the original assessment and were available to him when the assessment under Section 143(3) was completed. The re-assessment thus proceeded on the same set of information already considered in the original assessment, and the inferences now drawn by the AO from those same facts do not constitute fresh or tangible material amounting to new information which would justify exercise of power under Section 147. The Court emphasised that mere largeness of expenditure or subsequent disallowance in another assessment year does not, by itself, convert earlier-available material into tangible material for reopening. Applying the principles in Kalyanji Mavji and the Full Bench in Dell India, the Court held that where no subsequent information or fresh facts emerge from a survey to displace the original conclusion, reopening based on change of opinion is impermissible. The tribunal's factual conclusion that there was no tangible material to justify reopening for AY 2005-06 was therefore sustainable and not perverse. [Paras 9, 10, 11]

Re-opening of the assessment for AY 2005-06 was invalid as the reasons recorded amounted to a mere change of opinion and did not disclose tangible material to form a 'reason to believe' under Section 147.

Final Conclusion: Substantial questions of law answered against the revenue and in favour of the assessee; the re-assessment for AY 2005-06 was held invalid and the appeal is dismissed.

Disallowance under section 14A read with Rule 8D - Taxation of life insurance business under section 44 read with First Schedule - Respondent's scope under Rule 27 of the ITAT Rules, 1963 - Limitation on relief by respondent without cross-appeal or cross-objection

Disallowance under section 14A read with Rule 8D - Taxation of life insurance business under section 44 read with First Schedule - Whether disallowance under section 14A read with Rule 8D is exigible in respect of expenses attributable to tax-exempt income of a life insurance business assessed under section 44 read with the First Schedule - HELD THAT: - The Tribunal accepted the assessee's position that profits of life insurance business are computed under section 44 read with the First Schedule by reference to actuarial surplus and are uninfluenced by actual expenditure. Because no expenditure attributable to tax-exempt income was allowed in computing the taxable surplus under that special mode of assessment, there was no scope for a section 14A disallowance. Coordinate bench precedents had taken the same view and the Departmental Representative did not dispute that position. For these reasons the Tribunal upheld the CIT(A)'s deletion of the disallowance computed under Rule 8D. [Paras 3]

Disallowance under section 14A read with Rule 8D was not exigible for the life insurance business assessed under section 44 and the First Schedule; the CIT(A)'s deletion of the disallowance is upheld.

Respondent's scope under Rule 27 of the ITAT Rules, 1963 - Limitation on relief by respondent without cross-appeal or cross-objection - Whether a petition under Rule 27 may result in quashing the reassessment so as to give the respondent relief exceeding what was granted by the CIT(A), including nullifying admitted liabilities not challenged before the CIT(A) - HELD THAT: - Rule 27 permits the respondent to support the impugned order on grounds decided against him but does not permit the respondent to obtain relief greater than that granted by the first appellate authority. The Tribunal analysed precedents of the jurisdictional High Court which hold that a respondent who has not filed a cross-appeal or cross-objection cannot seek a ground that would leave the appellant worse off than under the first appellate order. In the present case, quashing the reassessment entirely would nullify the admitted withdrawal of excess foreign tax credit which the assessee had not challenged before the CIT(A), thereby putting the Assessing Officer in a worse position. Since dismissal of the revenue's appeal sustains the position granted by the CIT(A), the petition under Rule 27 becomes academic and cannot be allowed to confer greater relief than the CIT(A) had given. [Paras 6, 7, 10]

The petition under Rule 27 is dismissed as infructuous; the respondent cannot, by way of Rule 27, obtain relief exceeding that granted by the CIT(A) or seek to make the appellant worse off in the absence of a cross-appeal or cross-objection.

Final Conclusion: The appeal is dismissed: the CIT(A)'s deletion of the section 14A disallowance stands, and the respondent's Rule 27 petition is dismissed as infructuous because Rule 27 cannot be used to obtain relief beyond that granted by the first appellate order.

Penalty under section 271(1)(c) - show cause notice under section 274 - concealment of income - furnishing inaccurate particulars of income - requirement of specifying limb in notice - principles of natural justice - deeming provisions in Explanation 1(B)

Penalty under section 271(1)(c) - show cause notice under section 274 - requirement of specifying limb in notice - principles of natural justice - Validity of penalty imposed under section 271(1)(c) where the show-cause notice under section 274 did not specify whether penalty was proposed for 'concealment of income' or for 'furnishing inaccurate particulars of income'. - HELD THAT: - The Tribunal held that a notice under section 274 must specifically state the ground under section 271(1)(c) on which penalty is proposed so that the assessee has a fair opportunity to meet that case; a generic printed form listing both limbs without striking out the inapplicable limb offends principles of natural justice. The bench applied the reasoning in Suvaprasanna Bhattacharya which relies on the decision in CIT & Another v. Manjunatha Cotton & Ginning Factory , and noted supporting authority from the Hon'ble Calcutta High Court in Principal CIT v. Bijoy Kr. Agarwal . The Tribunal recorded that initiating proceedings under one limb and ultimately imposing penalty under the other is impermissible; the existence of grounds for initiating penalty must be discernible and specifically notified to the assessee. Following these precedents and the jurisdictional High Court's view, the Tribunal found the notice defective and the consequential penalty unsustainable, and therefore cancelled the penalty imposed by the authorities below. The Tribunal expressly followed the cited jurisprudence and declined to entertain later justifications or materials to validate a notice that was vague at inception. [Paras 6, 7]

The penalty imposed under section 271(1)(c) is cancelled because the show-cause notice under section 274 failed to specify which limb of section 271(1)(c) was invoked, rendering the proceedings defective.

Final Conclusion: The appeal is allowed and the penalty under section 271(1)(c) imposed on the assessee is cancelled for want of a valid show-cause notice that specifies the limb of contravention; no remand was directed.

Unexplained cash credit under section 68 - onus of proof under section 68 - identity, creditworthiness and genuineness of shareholders - requirement to prove source of source not applicable prior to AY 2013-14 - taxability of share premium as capital receipt - addition as estimated commission under section 69C - reopening of assessment and burden to dislodge documentary evidence

Unexplained cash credit under section 68 - onus of proof under section 68 - identity, creditworthiness and genuineness of shareholders - requirement to prove source of source not applicable prior to AY 2013-14 - reopening of assessment and burden to dislodge documentary evidence - Whether the addition of share application money, share capital and share premium as unexplained cash credit was justified. - HELD THAT: - The Tribunal found that the assessee had furnished extensive documentary evidence for the share applicants - application forms, PAN, confirmations, bank statements, Income Tax returns and audited financial statements for corporate applicants - and a summarized net-worth chart demonstrating that the investors had sufficient own capital. The assessee's evidence showed receipt of application money through banking channels and explanations for sources of funds; being the first year of operation, it was improbable that the assessee itself generated and routed unaccounted funds. The proviso to section 68 requiring the investor to also explain source is effective only from AY 2013-14 and thus not applicable. Once the assessee discharged the initial onus, the burden shifted to the Assessing Officer to bring cogent material dislodging those documents; mere commonality of bank branch, family relations among investors, non-response to some summonses and conjectures by the AO did not constitute such cogent material. In absence of independent investigation or admissible evidence to demonstrate that the transactions were sham or accommodation entries, additions based on suspicion could not be sustained. Applying these principles to the facts for AY 2009-10 and, by admitted identity of facts, to AYs 2010-11 to 2012-13, the Tribunal concluded the additions under section 68 were unsustainable and liable to be deleted. [Paras 6]

The additions made as unexplained cash credit under section 68 were deleted for AY 2009-10 and, being identical on facts, for AYs 2010-11 to 2012-13.

Addition as estimated commission under section 69C - reopening of assessment and burden to dislodge documentary evidence - Whether the consequential estimated addition on account of commission under section 69C was sustainable. - HELD THAT: - The AO made an estimated addition under section 69C on the premise that the assessee must have paid commission to obtain accommodation entries. The Tribunal held that the primary basis for that estimation collapsed once the addition under section 68 was deleted - the AO had not produced independent material to establish payment of commission or that entries were accommodation entries. In absence of cogent evidence displacing the assessee's documentary proofs and confirmations, the estimated addition under section 69C could not be sustained. [Paras 5, 6]

The estimated addition made under section 69C was deleted.

Final Conclusion: All appeals are allowed: additions made as unexplained cash credit under section 68 and the consequential estimated addition under section 69C are deleted for Assessment Years 2009-10 to 2012-13; the Assessing Officer to recompute income accordingly.

Charitable purpose - proviso to section 2(15) - advancement of any other object of general public utility - dominant object test - exemption under section 11

Charitable purpose - proviso to section 2(15) - dominant object test - exemption under section 11 - Whether the proviso to section 2(15) bars the appellant from claiming exemption under section 11 for AY 2009-10 - HELD THAT: - The Tribunal examined the appellant's objects, memorandum and articles (including clauses prohibiting distribution of income or surplus to members and transfer of surplus on winding up) and the nature of receipts (certificate of origin fees, secretarial fees, labour advisory fees, seminar/conference and training fees, advertisements and sale of in-house publications). Applying the dominant object test as explained in Supreme Court and High Court decisions and the contextual reading adopted by the Delhi High Court, the Tribunal held that the appellant's primary purpose is to promote and protect trade, commerce and manufacture for public utility and that the income streams were either incidental to that object or derived from services provided primarily to members. The Tribunal also relied on the Kolkata ITAT decision treating similar receipts as not attracting the proviso. On the facts, there was no finding that the appellant was driven primarily by profit-making; the receipts did not amount to carrying on activities as trade, commerce or business so as to bring the appellant within the exclusion in the proviso to section 2(15). Accordingly, the appellant's activities were held charitable within the amended definition and exemption under section 11 was allowed for AY 2009-10. [Paras 21, 23]

The proviso to section 2(15) does not apply to the appellant on the facts; the appellant's activities are charitable and exemption under section 11 is allowed for AY 2009-10.

Final Conclusion: The appeal is allowed: the Tribunal held that the appellant's objects and activities satisfy the dominant object test and are charitable; the proviso to section 2(15) does not deprive the appellant of exemption under section 11 for AY 2009-10.

Allowability of employee's contribution to provident fund and ESI where deposited before due date of filing return - interpretation of Section 36(1)(va) and Section 43B in relation to employee contributions - binding effect of jurisdictional High Court and coordinate Tribunal precedents

Allowability of employee's contribution to provident fund and ESI where deposited before due date of filing return - interpretation of Section 36(1)(va) and Section 43B in relation to employee contributions - Whether disallowance of amounts on account of delayed deposit of employee's provident fund and ESI is sustainable where the contributions were paid before the due date for filing the return for the relevant year. - HELD THAT: - The Tribunal found that the employee contributions to PF and ESI were deposited within the same financial year and before the extended due date for filing the return (the return having been filed on 26.10.2018 and the extended due date being 31.10.2018). Relying on decisions of coordinate Benches (Azamgarh Steel & Power Pvt. Ltd. and Indian Geotechnical Services) which considered the jurisdictional High Court authority, the Tribunal held that where employee contributions are paid before the due date for filing the return they are allowable as a deduction under Section 36(1)(va) despite delay in actual deposit to the authorities. The Tribunal noted the legislative amendments introduced by the Finance Act, 2021 (and their prospective application from 1 April 2021) which clarify the non-application of Section 43B for determining the "due date" under Section 36(1)(va), but observed those amendments were not applicable to the assessment year under consideration. Applying the binding view of the jurisdictional/coordinate authorities, the Tribunal directed deletion of the disallowance. [Paras 9, 10, 11, 12, 14]

The disallowance made by the Assessing Officer is deleted and the appeal is allowed.

Final Conclusion: Following binding coordinate decisions and observing that the 2021 statutory amendment is prospective, the Tribunal allowed the appeal for A.Y.2018-19 and directed deletion of the disallowance relating to late deposit of employee PF and ESI which were paid before the due date of filing the return.

Allowability of interest expenditure - deduction under Section 36(1)(iii) of the Act - diversion of interest bearing funds to related concerns - application of loan proceeds / reshuffling of loan portfolio - bank charges as deductible business expenditure

Allowability of interest expenditure - diversion of interest bearing funds to related concerns - application of loan proceeds / reshuffling of loan portfolio - deduction under Section 36(1)(iii) of the Act - Deletion of the addition/disallowance of interest expenditure claimed by the assessee - HELD THAT: - The Tribunal accepted the finding of the CIT(A) that the borrowings from Standard Chartered were utilised to repay prior borrowings (first to Coffee Day Hotels & Resorts Pvt. Ltd., and earlier to Yes Bank), reflecting a reshuffling of the assessee's loan liabilities rather than diversion of interest bearing funds for interest free advances to related parties. The CIT(A) observed that the asset side of the balance sheet contained only business assets and there was no trace of advances representing diversion of funds. On these facts the A.O.'s conclusion of diversion was not borne out and deletion of the disallowance was upheld. The Tribunal found no reason to interfere with the appellate authority's factual and legal conclusion that the interest was incurred for business purposes and allowable under the provision relied upon. [Paras 7, 8]

The disallowance of interest was deleted and the CIT(A)'s order in favour of the assessee is confirmed.

Bank charges as deductible business expenditure - allowability of expenses incidental to business - Allowability of bank charges debited by the bank for card transactions - HELD THAT: - The CIT(A) found that the bank charges were levied in the ordinary course of the resort's business (charges for acceptance of credit/debit cards) and thus were incurred in connection with business operations. On this factual basis the Tribunal agreed with the appellate authority that such bank charges are allowable as business expenditure and that the AO's disallowance of the bank charges was not justified. [Paras 7]

Bank charges were held to be allowable business expenditure and the disallowance was deleted.

Final Conclusion: The revenue's appeal is dismissed; the CIT(A)'s order deleting the disallowance of the interest and bank charges is confirmed for Assessment Year 2015-16.

Principles of Natural Justice - Re-assessment under Section 17 of Customs Act, 1962 - Personal Hearing in Faceless Assessment - Faceless Assessment Group procedure - Alternate remedy rule and exceptions

Principles of Natural Justice - Personal Hearing in Faceless Assessment - Re-assessment under Section 17 of Customs Act, 1962 - Impugned speaking orders were vitiated for failure to afford personal hearing to the importers who had sought it. - HELD THAT: - The Court examined Board circulars concerning faceless assessment and re-assessment and observed that the process of re-assessment must conform to sub-sections (4) and (5) of Section 17 of the Customs Act and to the principles of natural justice. The writ petitioners had specifically sought personal hearing. In the factual matrix of these petitions, denial of personal hearing in reassessment proceedings amounted to a breach of those principles. The Court therefore set aside the impugned speaking orders solely on that ground, without expressing any view on the merits of the underlying assessment. [Paras 11, 13]

Impugned speaking orders set aside solely because personal hearing was not granted to the importers who had sought it.

Faceless Assessment Group procedure - Personal Hearing in Faceless Assessment - Matter remitted for fresh consideration after affording personal hearing and passing speaking orders de novo within specified timeframes. - HELD THAT: - Having set aside the speaking orders for failure to afford the requested personal hearing, the Court directed the proper officer to afford personal hearing to the importers expeditiously and, specifically, within the fortnight prescribed by the Court. Thereafter the officer was directed to pass fresh speaking orders de novo within a further fortnight. The Court clarified that no opinion was expressed on the merits and limited the relief to procedural remediation consistent with the Board's instructions on reassessment and opportunity to be heard. [Paras 13]

Directed grant of personal hearing within a fortnight and issuance of fresh speaking orders de novo within a further fortnight.

Final Conclusion: Writ petitions challenging speaking orders were allowed to the extent that the impugned orders were set aside for failure to afford personal hearing; the authorities are directed to grant personal hearing and re-decide the reassessment by passing fresh speaking orders within the timeframes ordered; two related writ petitions were treated as infructuous and closed. No view expressed on merits; no costs.

Anticipatory bail - summons under Section 108 of the Customs Act - power to summon and record statement - magisterial intervention not contemplated - prematurity of anticipatory bail against Section 108 summons - prohibition on judicial direction to prevent arrest

Anticipatory bail - summons under Section 108 of the Customs Act - prematurity of anticipatory bail against Section 108 summons - Anticipatory bail application filed in respect of a summons issued under Section 108 of the Customs Act is premature and not maintainable. - HELD THAT: - The Court relied on the constitutional bench and subsequent dicta in Union of India v. Padam Narain Aggarwal holding that Section 108 empowers a Gazetted Officer to summon and record statements and does not contemplate magisterial intervention; a person summoned under Section 108 is not necessarily an accused and is bound to comply with the direction to give a statement. Applications for anticipatory bail at the stage of a mere summons under Section 108 are therefore premature. Further, High Courts cannot issue blanket directions that curtail the statutory authority of Customs officers to arrest in respect of any non-bailable offence or impose conditions (such as prior notice) on the exercise of that power. The Coordinate Bench's earlier rejection of a co-accused's anticipatory bail application as premature was noted. Applying these principles, the present anticipatory bail application against the summons was rejected as premature and contrary to the law laid down by the Apex Court. [Paras 6, 8, 9]

Application for anticipatory bail is rejected as premature; rule discharged and earlier interim relief vacated.

Final Conclusion: The application for anticipatory bail against the summons under Section 108 of the Customs Act is refused as premature in view of binding Supreme Court authority; the rule is discharged and previously granted interim protection is vacated.

Classification of imported goods as "ore" or "concentrate" - applicability of exemption of Countervailing Duty to ores - HSN Explanatory Notes on ores and concentrates - Chapter Note 4 deeming conversion of ores into concentrates as manufacture - CBEC/TRU instruction distinguishing beneficiation/special treatment from mere cleaning - Board Circular No. 09/2012-Cus. on admissibility of notification benefit to concentrates - role of chemical analysis / expert report as evidence to determine nature of imported material

Classification of imported goods as "ore" or "concentrate" - HSN Explanatory Notes on ores and concentrates - CBEC/TRU instruction distinguishing beneficiation/special treatment from mere cleaning - role of chemical analysis / expert report as evidence to determine nature of imported material - Imported Zircon sand is to be treated as "ore" and not "concentrate" for the purpose of exemption of Countervailing Duty. - HELD THAT: - The Tribunal applied the HSN Explanatory Notes and the TRU instructions which define "concentrates" as ores that have had part or all of the foreign matter removed by special treatments (beneficiation) and clarified that mere crushing, screening, washing or drying do not convert ores into concentrates. The Department failed to draw and have the present consignments analysed; absent an expert report to rebut the chemical analysis certificates furnished by the overseas supplier (showing ZrO2 content around 65%), there was no basis to conclude that the goods underwent the special treatments necessary to become "concentrate." Prior tribunal decisions treating similar ZrO2 percentages (circa 62-66%) as indicating ore rather than concentrate were noted. The Board Circular recognising ores and concentrates as distinct for notification benefit did not permit classification of the goods as concentrates merely on the basis of cleaning/washing. Applying these legal definitions and the available evidence, the Tribunal held that the imported material retained the character of ore and was eligible for the CVD exemption applicable to "ores." [Paras 11, 13, 14]

The imported goods are Zirconium ore and not concentrates; denial of CVD exemption was unsustainable and the impugned order is set aside.

Final Conclusion: Appeal allowed; the imported consignments held to be "ore" (not "concentrate") and entitled to the Countervailing Duty exemption under the relevant notification; impugned order set aside with consequential reliefs as per law.

Validity of show cause notice issued by the Directorate of Revenue Intelligence under the Customs Act, 1962 - DRI's authority to issue show cause notices under Section 28 of the Customs Act, 1962 - show cause notice held non est in law following precedent - interim stay of statutory notice

Validity of show cause notice issued by the Directorate of Revenue Intelligence under the Customs Act, 1962 - DRI's authority to issue show cause notices under Section 28 of the Customs Act, 1962 - show cause notice held non est in law following precedent - Impugned show cause notice issued by the DRI under Section 28 of the Customs Act, 1962 is prima facie non est in law and liable to be stayed pending further orders. - HELD THAT: - The High Court, relying on the Supreme Court's decision in M/s. Canon India Private Limited (paragraphs 18-23 of that judgment), observed that the DRI lacks authority under the Customs Act to issue a show cause notice under Section 28. Applying that precedent, the court found a prima facie case that the impugned notice is not maintainable in law. The court did not decide the substantive merits of other contentions raised by the petitioner, but granted an interim remedy in light of the binding precedent and the prima facie conclusion reached.

Impugned show cause notice stayed until 3rd January, 2022 or until further orders.

Procedural disposition of parties - Respondent No.2 is deleted from the present proceedings. - HELD THAT: - As a procedural measure, and after hearing, the court directed deletion of Respondent No.2 from the writ petition. This direction is independent of the court's prima facie view on the validity of the show cause notice and does not adjudicate any substantive rights of the deleted respondent.

Respondent No.2 deleted from the proceeding.

Final Conclusion: The court granted an interim stay of the DRI's show cause notice following the Supreme Court's precedent that the DRI lacks authority to issue such notices under Section 28, directed deletion of Respondent No.2 from the proceedings, and issued limited procedural directions for further pleadings.

Authorization to sue on behalf of a company - maintainability of a writ petition filed by a company or its office-bearer - jurisdiction of the National Company Law Tribunal - application under Section 241 and Section 242 for relief in cases of oppression and mismanagement - Section 430 - bar on civil courts in matters triable by the Tribunal

Authorization to sue on behalf of a company - maintainability of a writ petition filed by a company or its office-bearer - Writ petition W.P.(C) No.23128 of 2021 is not maintainable for want of board authorization by the Company to the person who instituted the petition. - HELD THAT: - The Court examined whether the petitioner (purporting to act for the company) produced any board resolution or other valid authorization to institute the writ on behalf of the Company. Relying on the established principle that a company must act through duly authorized organs, and having regard to the decisions cited (including State Bank of Travancore and Eimco Elecon (India) Ltd.), the Court found no resolution or corporate authorization on the record to empower the named petitioner to sue on behalf of the Company. In the absence of such authorization, the petition could not be maintained as an institutional litigation and therefore had to be dismissed. The Court applied the principle that letters or instruments not supported by a board resolution will not suffice to vest locus in a person to represent the company in litigation. [Paras 10, 11, 12]

W.P.(C) No.23128 of 2021 is dismissed as not maintainable for want of requisite authorization from the Board of the Company.

Jurisdiction of the National Company Law Tribunal - Section 241 and Section 242 - reliefs for oppression and mismanagement - Section 430 - bar on civil courts in matters triable by the Tribunal - Writ petition W.P.(C) No.12645 of 2021 is not maintainable insofar as it seeks to quash C.P. No.11/CB/2021 because the subject-matter falls within the jurisdiction of the NCLT under Sections 241-242 and is barred from civil court adjudication by Section 430 of the Companies Act, 2013. - HELD THAT: - On reading the company petition and its averments, the Court found that the allegations and reliefs (including complaints about amendment of the Articles of Association, validity of elections, restrictions upon directors, alleged mala fides in removal/suspension and denial of access to records) involve issues that Section 241 entitles a member to bring and that Section 242 confers broad remedial powers on the Tribunal, including regulation of conduct of company affairs and removal or modification of agreements. The Court relied on the wide bar contained in Section 430, which deprives civil courts of jurisdiction over matters entrusted to the Tribunal. Having regard to the decision in Shashi Prakash Khemka v. NEPC Micon, the Court held that relegation of such disputes to the NCLT is appropriate and that interference by the High Court at this stage would encroach upon the Tribunal's jurisdiction. The Court therefore declined to adjudicate the merits of the company petition and left the parties to pursue their remedies before the NCLT. [Paras 13, 14, 15]

W.P.(C) No.12645 of 2021 is dismissed as devoid of merit insofar as it challenges the maintainability of C.P. No.11/CTB/2021; the matters raised therein are within the jurisdiction of the NCLT and barred in the civil forum by Section 430.

Final Conclusion: The petition filed purportedly on behalf of the Company (W.P.(C) No.23128/2021) is dismissed for want of board authorisation; the writ petition filed by elected executive members (W.P.(C) No.12645/2021) is dismissed insofar as it challenges the maintainability of the Company Petition, since the disputed matters fall within the Tribunal's jurisdiction under Sections 241-242 and are barred from civil adjudication by Section 430 of the Companies Act, 2013. No costs.

Restoration of company name - Strike off and dissolution - application under section 252(1) and restoration powers under section 252(3) of the Companies Act, 2013 - Failure to file annual returns and financial statements - Maintainability of restoration petition by promoters/shareholders - Limitation for restoration petition - Conditional restoration subject to compliance and payment of costs - Independence of tax department's claim from restoration order

Maintainability of restoration petition by promoters/shareholders - Limitation for restoration petition - Petition under section 252(1) for restoration of the struck-off company is maintainable and was filed within the limitation period. - HELD THAT: - The Tribunal found that the appellants, being promoters, ex-directors and shareholders, are eligible to file the petition for restoration of the company's name and that the appeal was filed within the prescribed limitation period. The record shows the company's name was struck off on 04.11.2019 and the present petition was filed on 03.04.2021; accordingly the petition is maintainable and within time. [Paras 26, 27, 28]

Maintainable and within limitation.

Failure to file annual returns and financial statements - Restoration of company name - application under section 252(1) and restoration powers under section 252(3) of the Companies Act, 2013 - On merits it is just and equitable to restore the company's name despite non-filing of statutory documents, subject to conditions. - HELD THAT: - The Tribunal examined the materials including audited financial statements, bank records and the submissions that non-filing of annual returns and financial statements was unintentional. Having considered the record and the report filed by the Income Tax Officer, the Tribunal concluded that revival of the company's name in the register is just and equitable and that restoration should be granted under the Tribunal's powers. The Tribunal nevertheless confined its order to the ground of non-filing which led to striking off and did not preclude future action for any other violations. [Paras 29, 30, 31, 32, 33]

Name restored as just and equitable, subject to specified compliance.

Conditional restoration subject to compliance and payment of costs - Restoration granted conditionally with directions to file pending statutory documents, pay prescribed fees/additional fees, pay specified cost, deliver certified copy of order and for ROC to publish Gazette notification. - HELD THAT: - In exercise of powers under section 252(3), the Tribunal allowed restoration subject to conditions: filing all pending statutory documents including annual accounts and returns for Financial Years 2015-16 to 2019-20 with prescribed fees/additional fee/fine as decided by the ROC; payment of the cost specified by the Tribunal through online payment on MCA portal; delivery of certified copy of the order to the ROC within thirty days; and publication of the order by the ROC in the Official Gazette. The Tribunal clarified that its order is confined to violations leading to striking off and does not bar ROC from taking lawful action for any other offences. [Paras 32]

Restoration subject to the Tribunal's prescribed conditions and compliance directions.

Independence of tax department's claim from restoration order - No adjudication on the Income Tax Department's outstanding demand; the dispute is independent of the restoration order. - HELD THAT: - The Tribunal recorded the Income Tax Officer's submissions about outstanding tax demand for Assessment Year 2017-18 and other tax-related observations, but expressly disclaimed any opinion on that claim. The Tribunal left the tax department's claim to be dealt with independently between the parties and made clear that settlement or non-settlement of that dispute does not affect the restoration order. [Paras 25, 32]

Income tax claim left open and independent of restoration.

Final Conclusion: The Tribunal partly and conditionally allowed the petition under section 252(1)/252(3) of the Companies Act, 2013, directing the Registrar of Companies, Guwahati to restore Dihingia Motors Private Limited to the register as 'Active', subject to prescribed compliance: filing pending annual accounts and returns for Financial Years 2015-16 to 2019-20 with applicable fees/fines, payment of the specified cost, delivery of a certified copy of the order to the ROC and publication in the Official Gazette; the Tribunal did not adjudicate the Income Tax Department's outstanding claim which remains independent.

Restoration of name to Register of Companies - Strike off under Section 248(1) of the Companies Act, 2013 - Discretion to restore under Section 252(1) of the Companies Act, 2013 - Operational status of company / carrying on business - Filing of pending statutory documents and payment of late fees - Conditional restoration subject to compliance and payment to Prime Minister's Relief Fund

Restoration of name to Register of Companies - Operational status of company / carrying on business - Discretion to restore under Section 252(1) of the Companies Act, 2013 - Whether the company's name struck off by the Registrar of Companies ought to be restored on the ground that the company was carrying on business and it is just to restore the name. - HELD THAT: - The Tribunal examined the materials placed by the appellant demonstrating that the company was in operation prior to and at the time of striking off, including audited financial statements, lease deed, supply/installation evidence, bank statements, income-tax returns and GST registration. The Registrar of Companies raised no objection to restoration so long as statutory filings and fees are completed. Applying Section 252(1), which vests the Tribunal with discretion to restore a struck-off company where it is just to do so or the company was carrying on business, the Tribunal found the appellant had adduced sufficient evidence to show it was not defunct and that restoration was justified. The Tribunal therefore exercised its discretion in favour of restoration while making compliance with statutory filing requirements, payment of requisite late filing and additional fees, and specified conditions a prerequisite to restoration. [Paras 10, 11, 12]

The Tribunal allowed the appeal, declared the public notice striking off the company's name illegal and ordered restoration of the company's name to the Register of Companies subject to filing all outstanding documents with statutory and additional fees, completion of formalities and payment to the Prime Minister's Relief Fund.

Filing of pending statutory documents and payment of late fees - Conditional restoration subject to compliance and payment to Prime Minister's Relief Fund - What conditions should be imposed as pre-conditions to restoration of the company's name to the register. - HELD THAT: - While restoring the company's name, the Tribunal imposed compliance conditions reflecting the Registrar's concerns and statutory requirements. The restoration is conditional upon the appellant filing all outstanding statutory documents with the Registrar of Companies up to date, payment of the prescribed late filing fees and any other charges leviable for late filing, payment of additional fees as required by law and payment of Rs. 25,000 to the Prime Minister's Relief Fund. Only upon completion of these formalities will the company's name be treated as having never been struck off. [Paras 8, 12]

Restoration ordered subject to filing of all outstanding documents with proper fees and payment of specified charges including the payment to the Prime Minister's Relief Fund.

Final Conclusion: The appeal is allowed; the Registrar's public notice striking off the company's name is set aside and the company's name is ordered to be restored to the Register of Companies, subject to the appellant completing statutory filings, paying all requisite fees and charges and making the directed payment to the Prime Minister's Relief Fund.

Interim moratorium - appointment of resolution professional - examination and report by resolution professional - maintainability of insolvency application at threshold - right to hearing before adjudicating authority under section 100 - time lines in insolvency process

Maintainability of insolvency application at threshold - appointment of resolution professional - Objection to the maintainability of a creditor's application under section 95 cannot be entertained by the adjudicating authority at the threshold before the resolution professional examines the application and files his report. - HELD THAT: - The Tribunal declined the petitioners' contention that a jurisdictional fact (assignment of loan) must be adjudicated before appointing a resolution professional. On construction of sections 95 to 100, the scheme contemplates appointment and examination by the resolution professional prior to the adjudicating authority deciding admission or rejection. Accordingly, objections as to maintainability raised at the stage of appointment of the resolution professional are not maintainable and may be considered after the resolution professional files his report. [Paras 6, 9]

Objection to maintainability at the threshold is not maintainable; the Tribunal was justified in appointing a resolution professional and declining to adjudicate the maintainability objection at that stage.

Examination and report by resolution professional - right to hearing before adjudicating authority under section 100 - Parties are entitled to be heard by the adjudicating authority before it passes an order admitting or rejecting the application under section 100 after receipt of the resolution professional's report. - HELD THAT: - While section 99(10) requires that a copy of the resolution professional's report be provided to the debtor or creditor, the adjudicating authority must also afford the parties an opportunity of hearing before taking a decision under section 100(1). The Court recognised that the statutory scheme implies the need for hearing after the report is furnished and before admission or rejection, to give effect to principles of natural justice. [Paras 16]

Adjudicating authority must give parties a hearing before deciding under section 100 upon receipt of the resolution professional's report.

Time lines in insolvency process - examination and report by resolution professional - The resolution professional must submit his report within a definite, expeditious time-frame to limit the duration of the interim moratorium; the Court directed timelines in the particular matter. - HELD THAT: - Although sections 95 to 100 prescribe timelines for nomination and subsequent decision-making, no express period is fixed for submission of the resolution professional's report. Because the interim moratorium under section 96 operates from the date of application until admission or rejection, the Court held that the report should be expedited. Exercise of equitable supervision warranted fixing a reasonable deadline in the present case to prevent indefinite moratorium while preserving the resolution professional's duty to examine the application under section 99. [Paras 17, 18]

Resolution professional to submit report within six weeks from receipt of the order; Tribunal to decide the application within 14 days thereafter after affording hearing to the parties.

Final Conclusion: Writ petitions disposed. The Tribunal's appointment of the resolution professional was upheld; the resolution professional to file his report within six weeks from receipt of this order and the Tribunal shall decide the application within 14 days thereafter after giving the parties an opportunity of hearing; all contentions remain open.

Operational debt - verification and collation of claims - duties of the Resolution Professional - best estimate of claim - priority under Section 53(1)(c) - jurisdiction under Section 60(5)

Operational debt - verification and collation of claims - duties of the Resolution Professional - best estimate of claim - priority under Section 53(1)(c) - Admissibility of the applicant's claim as an operational creditor and propriety of the Resolution Professional's partial admission of the claim. - HELD THAT: - The Tribunal considered whether the RP was obliged to admit the entire claimed salary arrears or was entitled to scrutinise and admit only such amount supported by the company records. The Bench observed that the claimed amount was not reflected in the books of account or in the audited financial statements prepared and signed by the applicant himself, except to the extent of the sum admitted by the RP. The balance sheets were treated as sacrosanct documents and the RP was found bound to scrutinise claims in light of the audited statements. Applying Regulation 13 and Regulation 14 principles, the RP made a verification and, relying on available information (including audited financial statements), estimated and admitted the amount shown in those statements. The Tribunal also noted the operation of the distribution priority under Section 53(1)(c), which restricts unpaid dues to employees other than workmen to wages and unpaid dues for twelve months preceding liquidation commencement date, and observed the CIRP was at an advanced stage. The claimant was given opportunities to produce credible evidence but failed to substantiate the unadmitted portion which was not recorded in the accounts; accordingly the RP's action in not admitting the entire claimed sum was held not to be illegal or irregular. [Paras 23, 24]

The application is dismissed; the RP did not commit illegality or irregularity in partially admitting the claim and is directed to proceed with the CIRP to find a viable resolution plan.

Final Conclusion: IA dismissed. The Resolution Professional's partial admission of the operational creditor's claim, made after verification against audited financial statements and in view of the Section 53(1)(c) priority and the advanced stage of CIRP, was upheld; RP directed to complete the CIRP without delay.

Corporate Insolvency Resolution Process initiation under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Operational debt and occurrence of default - Effect of settlement recorded before Mediation Centre and fresh date of default - Res judicata and maintainability of subsequent Section 9 application - Service, limitation and jurisdiction for Section 9 application - Appointment of Interim Resolution Professional and security for expenses - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016

Operational debt and occurrence of default - Corporate Insolvency Resolution Process initiation under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Default by the corporate debtor has occurred and the Section 9 application is maintainable and admitted. - HELD THAT: - On the materials on record the corporate debtor received goods, invoices were raised and an admitted liability remained outstanding. The Tribunal noted that the corporate debtor had accepted the debt before various fora and that a settlement recorded before the Mediation Centre admitted the liability but was not complied with. In view of the admitted non-payment and the fresh date of default alleged in the petition, the Tribunal found that default had occurred and therefore the application under Section 9 of the Code was liable to be admitted. [Paras 4, 6, 7, 8, 18]

Section 9 application admitted as default is established.

Effect of settlement recorded before Mediation Centre and fresh date of default - Res judicata and maintainability of Section 9 application - The defence based on prior dismissal and the settlement does not bar the Section 9 application where the settlement was not complied with and a fresh default has arisen. - HELD THAT: - The Tribunal observed that the earlier Bench's dismissal did not constitute an expression on merits and expressly preserved the applicant's rights. The settlement recorded on 16.09.2016 before the Mediation Centre, though admitting liability, was not complied with by the corporate debtor. Consequently, the cause of action with a fresh date of default arose and the plea of res judicata or of being barred by the settlement was not maintainable. [Paras 9, 18]

Objections based on res judicata and the unperformed settlement rejected; fresh default gives rise to maintainable claim.

Service, limitation and jurisdiction for Section 9 application - The application was filed within limitation, service was effected and the Tribunal has jurisdiction to entertain the petition. - HELD THAT: - The Tribunal accepted the averment that the date of default was 01.07.2019 and the Section 9 application filed on 23.10.2019 fell within the limitation period. The registered office of the corporate debtor being in Delhi vested jurisdiction in this Bench. The record also shows attempts at service by speed post, email and by hand with supporting affidavits. [Paras 11, 14, 15, 16]

Application not barred by limitation; service and jurisdiction established.

Appointment of Interim Resolution Professional and security for expenses - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - An Interim Resolution Professional is appointed and operational creditor directed to deposit funds; moratorium under Section 14 operates on admission. - HELD THAT: - Having admitted the application, the Tribunal appointed Mr. Kamal Ahuja as Interim Resolution Professional subject to statutory compliances and required the applicant to deposit a specified sum for meeting the IRP's functions, subject to adjustment by the Committee of Creditors. The Tribunal further directed that consequence of admission be communicated and that the moratorium under Section 14(1) shall operate in accordance with the Code, with applicable provisions of Sections 14(2)-14(4) coming into force during the moratorium. [Paras 19, 20, 21, 22]

IRP appointed; deposit directed; moratorium declared as consequence of admission.

Final Conclusion: The Tribunal admitted the Section 9 petition on finding an established default and non-compliance of a recorded settlement giving rise to a fresh cause of action; objections of res judicata and settlement-bar were rejected; the petition was held within limitation and jurisdiction; an IRP was appointed, a deposit for expenses directed and moratorium imposed in terms of the Code.

Provisional attachment under Section 5(1) of the PMLA - cessation of attachment after 180 days under Section 5(3) of the PMLA - confirmation/extension by Adjudicating Authority under Section 8(3) of the PMLA - deemed or automatic extension by invoking Supreme Court's limitation extension orders - functus officio of adjudicating authority on expiry of statutory period without confirmation - right of the account-holder to operate bank/postal accounts after lapse of provisional attachment

Deemed or automatic extension by invoking Supreme Court's limitation extension orders - confirmation/extension by Adjudicating Authority under Section 8(3) of the PMLA - provisional attachment under Section 5(1) of the PMLA - Adjudicating Authority/Enforcement Authorities cannot treat themselves as litigants or beneficiaries of the Supreme Court's Suo Motu limitation-extension order so as to avoid passing a formal order under Section 8(3) to extend or confirm a provisional attachment after the 180-day period. - HELD THAT: - The court followed S. Kasi (supra) in construing the scope of the Supreme Court's order in Suo Motu Writ Petition (Civil) No.3 of 2020 and held that that order was directed to protect litigants and lawyers from physical inability to file proceedings during the pandemic and does not empower an adjudicating authority to treat itself as a litigant/advocate or a beneficiary for the purpose of deeming extension of a statutory order. The Adjudicating Authority was functus officio if it failed to pass an order under Section 8(3) on or before expiry of the 180-day validity prescribed by Section 5(3). The court noted that the Adjudicating Authority had been functioning and had conducted hearings by video-conference while the Supreme Court order subsisted, and therefore could not justify non-action by claiming protection of the limitation-extension order. Consequently, the stand that the provisional attachment was automatically extended by virtue of the Supreme Court order was held legally unsustainable.

The Adjudicating Authority cannot claim the benefit of the Supreme Court's limitation-extension order to obviate the statutory requirement of passing a formal order under Section 8(3); failure to do so renders the provisional attachment ineffective after 180 days.

Cessation of attachment after 180 days under Section 5(3) of the PMLA - right of the account-holder to operate bank/postal accounts after lapse of provisional attachment - functus officio of adjudicating authority on expiry of statutory period without confirmation - The provisional attachment dated 11th December, 2020 ceased to have effect after expiry of 180 days on 9th June, 2021 for want of any order under Section 8(3), and continuing to prevent the petitioner from operating his bank and postal accounts was arbitrary and illegal. - HELD THAT: - Applying the statutory scheme of Sections 5(1) and 5(3) of the PMLA and following the reasoning that the Supreme Court's limitation-extension order could not be used to avoid the mandatory step of confirmation/extension under Section 8(3), the court held that the provisional attachment lost effect on expiry of the 180-day period. The Enforcement Directorate's continued refusal to allow operation of the petitioner's accounts after that date was therefore unlawful. The court, however, clarified that this declaration does not preclude the Enforcement/Adjudicating authorities from finally adjudicating the pending proceedings in accordance with law and from taking consequential legal steps thereafter.

The provisional attachment of the petitioner's bank and postal accounts ceased to have effect after 9th June, 2021 and the petitioner must be allowed to operate those accounts; the authorities remain free to conclude adjudication in accordance with law.

Final Conclusion: Writ petition allowed: the provisional attachment dated 11th December, 2020 ceased to have effect upon expiry of 180 days on 9th June, 2021 for want of any order under Section 8(3) of the PMLA; respondent authorities and banks/postal authorities must permit the petitioner to operate the relevant accounts, subject to any future lawful adjudication.

Section 45 of the Prevention of Money Laundering Act - conditions for grant of bail - presumption regarding proceeds of crime under the PMLA and burden of proof - overriding effect of the PMLA over inconsistent provisions of the Code of Criminal Procedure - right to speedy trial and enlargement on bail where trial is unlikely to be completed within reasonable time

Section 45 of the Prevention of Money Laundering Act - conditions for grant of bail - presumption regarding proceeds of crime under the PMLA and burden of proof - right to speedy trial and enlargement on bail where trial is unlikely to be completed within reasonable time - Application for bail under Section 439 Cr.P.C. read with Section 45 of the PMLA was considered and refused. - HELD THAT: - The Court recorded that the petitioner's period of custody in the present PMLA proceedings is to be counted from his production before the Special Judge on 16th October, 2017. Section 45 of the PMLA imposes mandatory conditions for grant of bail, including the requirement that the court be satisfied there are reasonable grounds for believing the accused is not guilty and is not likely to commit an offence while on bail; the statutory framework also carries the presumption that proceeds of crime are involved unless the contrary is proved, and the PMLA has an overriding effect over inconsistent Cr.P.C. provisions. The Court distinguished authorities relied upon by the petitioner (including decisions concerning other special enactments) and followed the settled position in Gouttam Kundu and related decisions that the stringent conditions of Section 45 must be complied with. Having regard to the statutory scheme, the nature of allegations against the petitioner, and the large amount involved in the alleged offence, the Court was not satisfied that the mandatory conditions for bail under Section 45 were met and therefore refused bail. The Court nevertheless directed the trial court to take expeditious steps for early completion of the trial. [Paras 6, 7, 9, 10, 12]

Bail petition rejected; trial court directed to expedite trial.

Final Conclusion: The petition for bail in Crl. Misc. (PMLA) Case No.34 of 2016 is refused as the court was not satisfied that the mandatory conditions of Section 45 of the PMLA were fulfilled; the Special Judge is directed to take expeditious steps for early completion of the trial.

Settlement of tax liability by Settlement Commission - full and true disclosure - reverse charge mechanism and prevention of double taxation - admissibility of photocopies and requirement for originals - immunity under Section 32K of the Central Excise Act, 1944 - remand for fresh consideration - supervisory jurisdiction of the High Court

Full and true disclosure - penalty and punitive proceedings - settlement of tax liability by Settlement Commission - Whether the Settlement Commission ought to have treated the assessee's disclosure as a full and true disclosure and dropped or moderated punitive consequences. - HELD THAT: - The High Court found force in the assessee's contention that a full and true disclosure had been made (as reflected by the Commission's own reference to paragraph No.6.18 of the impugned order) and observed that the settlement machinery is intended to afford reprieve to taxpayers who make voluntary, true disclosures. Having noted these considerations and the payment already made by the assessee, the Court did not decide the question finally on merits but quashed the impugned part of the order and remitted the issue to the Settlement Commission for fresh consideration in accordance with law and after notice to stakeholders. The Court kept all contentions open for the Commission to examine afresh.

Impugned part quashed; issue remitted to the Settlement Commission for fresh consideration and decision in accordance with law.

Reverse charge mechanism and prevention of double taxation - settlement of tax liability by Settlement Commission - immunity under Section 32K of the Central Excise Act, 1944 - Whether the assessee could be required to pay tax again once the tax due had been discharged to the Exchequer under the reverse charge mechanism. - HELD THAT: - The Court noted the statutory provisions and amendments affecting liability under reverse charge (including the changed allocation ratios over relevant periods) and the CBEC circular that reverse charge should not result in double taxation. The High Court observed that insofar as the tax liability had in substance reached the Exchequer regardless of which party discharged it, the assessee's grievance against being called upon to pay again had prima facie force. Rather than finally determining the entitlement, the Court remitted the matter to the Settlement Commission to examine and decide, in accordance with law and after hearing stakeholders, whether any further liability should be imposed.

Issue remitted to the Settlement Commission for fresh consideration whether tax already discharged under reverse charge precludes further demand.

Admissibility of photocopies and requirement for originals - evidentiary proof of receipt of services - Whether the Settlement Commission could refuse to admit photostat copies of documents when receipt and genuineness were not in dispute, and whether the petitioners should be permitted to produce originals for verification. - HELD THAT: - Relying on the position in several High Court decisions and the factual stance that receipt and genuineness were not disputed, the Court found that the Commission's refusal to admit photocopies was not sustainable on the present record. The petitioners indicated readiness to produce originals. The Court therefore remitted this aspect for fresh consideration by the Settlement Commission, with liberty to the parties to produce originals and to the Commission to decide admissibility and probative value in accordance with law.

Matter remitted to the Settlement Commission to admit and verify documents (photocopies and originals) and to reconsider relevant findings afresh.

Final Conclusion: Writ petition allowed in part; the impugned part of the Settlement Commission's order is quashed and the disputed aspects are remitted to the Settlement Commission for fresh consideration in accordance with law after notice to stakeholders; all other contentions are kept open; costs made easy.

Taxable service - consideration - services received from outside India - place of provision of service - legal fiction of demutualization of branches - reverse charge mechanism - negative list regime

Taxable service - consideration - services received from outside India - place of provision of service - legal fiction of demutualization of branches - negative list regime - reverse charge mechanism - Whether remittances made by the principal office in India to its overseas branches for meeting establishment and operational costs constitute 'consideration' for a 'taxable service' received in India and are therefore liable to service tax under the charging provisions and relevant Rules. - HELD THAT: - The Tribunal applied earlier precedents including Torrent Pharmaceuticals and Milind Kulkarni to hold that the levy applies only when a service, within the statutory description, is provided or received in India. The legal fiction treating a foreign branch as a separate establishment is intended to determine place of provision and to prevent tax escapement where services intended to be consumed in India are routed through branches; it is not intended to tax routine intra-group transfers that merely fund the existence of dependent branches. The Place of Provision of Service Rules, 2012 and the charging provisions under the post 2012 'negative list' regime require a factual ascertainment that the relevant services were provided or received in the taxable territory; mere flow of funds without identification of a service received in India is insufficient. For an exporter operating through dependent overseas branches, taxing transfers made for establishment and operational upkeep - where activities relate to export and the services are not shown to be received in India - would be irrational, especially given availability of Cenvat credit and refund mechanisms. The impugned adjudication did not identify or find, on the material, any specific taxable service received in India nor apply the Place of Provision Rules to establish receipt in the taxable territory; accordingly the demand based solely on the financial flows was contrary to the legal scheme and binding Tribunal authority. On that basis the impugned order was set aside and the appeal allowed.

The demand for service tax (and consequential interest and penalties) founded on the remittances to overseas branches for 2014-15 is unsustainable and the impugned order is set aside; the appeal is allowed.

Final Conclusion: The CESTAT allowed the appeal and set aside the impugned adjudication for 2014-15, holding that remittances to dependent overseas branches for establishment and upkeep, without identification of any taxable service received in India and without application of the Place of Provision Rules, cannot be treated as 'consideration' for a taxable service under the Finance Act, 1994.

Tariff classification between Chapter 84 and Chapter 90 - Rule 3(a) - specific description prevails over general description - Rule 3(c) - last numerical heading where headings equally merit consideration - Harmonized System of Nomenclature explanatory notes as interpretative aid - Proviso to Section 11A - extended period for fraud, collusion, wilful mis-statement or suppression - Section 11AC - penalty for non levy/short levy by reason of fraud, collusion, wilful mis statement or suppression - Rule 173B declaration

Tariff classification between Chapter 84 and Chapter 90 - Rule 3(a) - specific description prevails over general description - Harmonized System of Nomenclature explanatory notes as interpretative aid - Autoclave, Glass Bead Sterilizer, Steam Clave and Hot Air Sterilizer are classifiable under Heading 8419 and not under Heading 9018. - HELD THAT: - The Tribunal held that the Central Excise Tariff is framed on the lines of the HSN and that HSN explanatory notes specifically include sterilisers (including autoclaves and hot air sterilisers) within heading 84.19. The Rules of Interpretation (including Rule 3(a) and 3(c)) do not favour the appellant: the dispute is resolved by reference to the HSN notes which demonstrate that sterilising equipment, even when used in medical/dental establishments, are covered by 8419. The Section note relied on by the appellant (note 1(m) to Section XVI) cannot avail the appellant because the core question is whether the goods fall within Chapter 90 at all; since that is disputed, the exclusion note does not apply. On merits, the goods are sterilising equipment and properly classifiable under 8419. [Paras 17, 19]

Goods are classifiable under Heading 8419 and not under Heading 9018.

Proviso to Section 11A - extended period for fraud, collusion, wilful mis-statement or suppression - Rule 173B declaration - The extended period of limitation under the proviso to Section 11A is not invocable in respect of the assessed period. - HELD THAT: - The show cause notice alleged suppression of manufacture and clearance as the basis for invoking the extended period. The Tribunal found that the appellant had filed the declaration required under Rule 173B (acknowledged by the department) and had furnished invoices and returns in the prescribed format. The allegation of non declaration was therefore factually incorrect and the other elements required for invoking the proviso (fraud, collusion, wilful mis statement) were neither established nor pleaded. It is the departmental officer's duty to call for further details where returns do not disclose requisite particulars; absence of such inquiry does not make the appellant guilty of suppression. Consequently, the extended five year period could not be invoked and demands are restricted to the normal period of limitation. [Paras 21, 22]

Extended period under the proviso to Section 11A is not invocable; demand limited to the normal period of limitation.

Section 11AC - penalty for non levy/short levy by reason of fraud, collusion, wilful mis statement or suppression - Penalty imposed under Section 11AC is set aside. - HELD THAT: - Section 11AC requires the same elemental proof (fraud, collusion, wilful mis statement or suppression with intent to evade duty) as is needed to invoke the extended limitation under the proviso to Section 11A. Since those elements were not established and the allegation of suppression was found to be unfounded, the imposition of penalty under Section 11AC cannot be sustained. The Tribunal accordingly set aside the penalty. [Paras 23, 24]

Penalty under Section 11AC read with the Rules is set aside.

Final Conclusion: Appeal partly allowed: classification of the four sterilising machines under Heading 8419 affirmed; invocation of extended period of limitation under the proviso to Section 11A rejected and related demand disallowed beyond the normal limitation period; penalty under Section 11AC set aside; demand and interest, if any, sustained only to the extent applicable within the normal period with consequential relief to the appellant.

Re-computation following reversal by higher court - binding effect of Supreme Court precedent (Article 141) - finality of orders granting refund - limitation for re-opening assessments / time-bar on re-computation - interest payable only from date of clarification by higher court

Re-computation following reversal by higher court - binding effect of Supreme Court precedent (Article 141) - Validity of departmental re-computation orders issued after the Supreme Court reversed this Court's earlier judgment in which the petitioner was a party. - HELD THAT: - The Court distinguished two categories of cases: (i) where assessees were not parties to the challenge in the Supreme Court and earlier refund orders had become final, and (ii) where the Department had challenged this Court's judgment and the assessee was a party to the Supreme Court litigation. The petitioner falls in the second category because the judgment of this Court (common to the petitioner and Bajaj Auto Ltd.) was challenged before the Supreme Court and reversed by it. The Supreme Court's declaration of law is binding under Article 141 and thus the Department was entitled to issue re-computation orders to give effect to the Supreme Court's decision. The Court applied the reasoning in its earlier order in Bajaj Auto (HC-2) and held that re-computation in such circumstances could not be termed illegal. [Paras 17, 18, 19, 20]

Impugned re-computation orders are upheld insofar as they give effect to the Supreme Court's judgment reversing this Court's earlier decision; the petitioner's challenge on this ground is dismissed.

Finality of orders granting refund - limitation for re-opening assessments / time-bar on re-computation - Whether the departmental re-computation was time-barred or barred by finality of earlier refund orders. - HELD THAT: - The Court rejected the submission that prior refund orders granted to the petitioner had attained such finality as to preclude re-computation where the petitioner was a party to the Supreme Court challenge that reversed the legal foundation of those orders. As to limitation, the Court noted that the Supreme Court rendered its decision on 28th October 2016 and re-computation orders were passed shortly thereafter; in the absence of a specific statutory period limiting re-computation, the orders could not be held to be time-barred. The Court relied on its reasoning in Bajaj Auto (HC-2) in rejecting the limitation plea. [Paras 21]

Re-computation orders are not time-barred and not precluded by finality where the petitioner was party to the Supreme Court proceedings that reversed the earlier legal basis.

Interest payable only from date of clarification by higher court - Extent of interest payable on the differential surcharge after re-computation. - HELD THAT: - Relying on prior reasoning in Bajaj Auto (HC-2) and on the principle that the legal position was clarified only upon the Supreme Court's decision, the Court held that interest on the differential amount is payable only for the period subsequent to the Supreme Court judgment (28th October 2016) until the date of payment. The Court modified the impugned demands accordingly and directed the DCST to issue fresh re-computation orders reflecting this limitation on interest. [Paras 24, 25]

Interest on the differential surcharge is payable only from 28th October 2016 till payment; re-computation orders to be modified accordingly.

Final Conclusion: Writ petitions dismissed insofar as re-computation orders are upheld to give effect to the Supreme Court's reversal of this Court's earlier decision; modification granted only to restrict interest on the differential surcharge to the period from 28th October 2016 until payment; DCST directed to issue fresh re-computation orders in conformity with these directions by 1st November 2021.

Power of arbitral tribunal to award pre-award and pendente lite interest - parties' agreement excluding interest under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 - validity of contractual clause barring payment of interest vis-a -vis Section 28 of the Indian Contract Act, 1872 - contracting out of interest permitted by the Interest Act, 1978 - inapplicability of decisions under the Arbitration Act, 1940 to disputes governed by the Arbitration and Conciliation Act, 1996

Power of arbitral tribunal to award pre-award and pendente lite interest - parties' agreement excluding interest under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 - inapplicability of decisions under the Arbitration Act, 1940 to disputes governed by the Arbitration and Conciliation Act, 1996 - Whether the arbitrator could award pendente lite interest despite a contractual clause expressly barring payment of interest. - HELD THAT: - The Court held that the 1996 Act accords paramountcy to the agreement of the parties and, by virtue of Section 31(7)(a), an arbitral tribunal cannot award pre-award interest (which includes pendente lite interest) where the parties have agreed otherwise. Clause 17 of the contract, which barred payment of interest on "any moneys due to the contractor", was held to be clear and wide enough to include amounts awarded by the arbitrator. Prior decisions under the 1996 Act were applied to support this view and the Court distinguished decisions rendered under the Arbitration Act, 1940 as inapplicable to disputes governed by the 1996 Act. Consequently the arbitrator's award of pendente lite interest was set aside and the High Court's rejection of the claim was upheld. [Paras 14, 15, 16, 17, 18]

Award of pendente lite interest was barred by the contractual clause and was rightly set aside.

Validity of contractual clause barring payment of interest vis-a -vis Section 28 of the Indian Contract Act, 1872 - contracting out of interest permitted by the Interest Act, 1978 - Exception 1 to Section 28 - arbitration clause preserving recovery limited to award - Whether Clause 17 (barring interest) was ultra vires Section 28 of the Indian Contract Act, 1872. - HELD THAT: - The Court analysed Section 28 and its Exception 1, observing that a lawful agreement to refer disputes to arbitration and to make only the arbitration award recoverable does not contravene Section 28. The Interest Act, 1978 was noted to define "Court" to include an arbitrator and to permit parties to contract out of interest (Section 3(3)), thereby recognising express agreements barring interest. In the absence of any vitiation of consent, Clause 17 was held not to extinguish rights unlawfully and therefore not ultra vires Section 28. [Paras 19, 20, 21, 22]

Clause 17 is not ultra vires Section 28 of the Indian Contract Act, 1872 and validly bars award of pendente lite interest.

Final Conclusion: The appeal is dismissed; the High Court correctly set aside the arbitrator's grant of pendente lite interest on the ground of an express contractual bar, and Clause 17 is not ultravires; parties to bear their own costs.

Plaint discloses cause of action - rejection of plaint under Order VII Rule 11 CPC - power to terminate a civil action is drastic and to be strictly exercised - partners are entitled only to profits and have no right to firm assets while business continues - dissolution of firm can be sought only by partners - contractual provision excluding automatic dissolution on death of a partner

Plaint discloses cause of action - rejection of plaint under Order VII Rule 11 CPC - partners are entitled only to profits and have no right to firm assets while business continues - dissolution of firm can be sought only by partners - contractual provision excluding automatic dissolution on death of a partner - Whether the plaint, read as a whole, discloses a cause of action and whether the reliefs sought therein can be granted such that the plaint should be rejected under Order VII Rule 11 CPC. - HELD THAT: - The Court examined the plaint and the clauses of the 1943 Partnership Deed together with the relevant provisions of the Indian Partnership Act (notably the provisions dealing with dissolution and rights of partners). The Division Bench of the High Court had found, and this Court agreed, that on a meaningful reading of the averments the plaintiffs (who are non partners claiming as heirs) cannot be said to have any right to the assets of the firm while the firm continues in business, since partners have rights only to profits and, upon dissolution, to surplus after liabilities. Clauses of the partnership deed expressly provide that the partnership does not automatically dissolve on the death of a partner and contemplate admission of legal representatives only by mutual consent; the deed also bars resort to court for dissolution in certain circumstances. Further, statutory scheme permits dissolution or a court ordered dissolution only in the hands of partners (or as provided by contract). Given these legal constraints, the reliefs claimed (declaration of co ownership of firm assets, representation of the firm, injunctions and dissolution/winding up) cannot be granted as a matter of law on the averments pleaded. In this factual legal setting, permitting the suit to proceed would be futile and an unnecessary drain on judicial and private resources. The Court applied the settled principle that the power under Order VII Rule 11 is drastic and must be exercised only after strict scrutiny of the plaint and the documents relied upon, but that where a meaningful reading shows that none of the reliefs can be granted in law the plaint should be rejected at threshold. [Paras 18, 21]

The plaint does not disclose a cause of action entitling the plaintiffs to the reliefs claimed; the Division Bench correctly rejected the plaint under Order VII Rule 11 CPC and the appeals are dismissed.

Final Conclusion: The appeals are dismissed. The High Court correctly concluded on scrutiny of the plaint, the partnership deed and the statutory provisions that the plaintiffs (non partners claiming as heirs) are not entitled to the reliefs sought and that the plaint is liable to be rejected under Order VII Rule 11 CPC; no interference with the impugned order is called for.

Game of mere skill - predominant element of skill - gaming as gambling on a game of chance - Section 14 exemption - Section 14A exemption power - per incuriam

Game of mere skill - predominant element of skill - Section 14 exemption - Rummy is a game of mere skill. - HELD THAT: - Relying on the binding decisions in Satyanarayana and K.R. Lakshmanan and on the statutory scheme of the Kerala Gaming Act (notably Sections 3 and 14), the court holds that rummy involves a substantial or preponderant element of skill (memorising falls, holding and discarding cards, building runs) and therefore falls within the protection of Section 14 as a 'game of mere skill'. The presence of an element of chance in card distribution does not displace the predominance of skill. [Paras 16, 18, 33]

Rummy is a game of mere skill and is covered by Section 14.

Section 14 exemption - Section 14A exemption power - Rummy does not require a notification under Section 14A to be excluded from the Act. - HELD THAT: - Section 14 by its plain language excludes games of mere skill from the Act; where the Supreme Court has already held rummy to be mainly and preponderantly a game of skill, that exclusion operates without any need for a Section 14A notification. A 14A notification is therefore unnecessary to take rummy out of the Act's provisions and is largely superfluous for games already governed by Section 14. [Paras 33]

Rummy remains excluded under Section 14 even in the absence of a Section 14A notification.

Gaming as gambling on a game of chance - predominant element of skill - Playing rummy for stakes does not alter its character as a game of skill. - HELD THAT: - The court explains that whether a game is of skill or chance depends on the dominant element of the game and not on the presence of stakes. Stakes do not transform a game preponderantly of skill into a game of chance; hence playing rummy (including online rummy) for stakes does not remove it from the protection of Section 14. [Paras 33]

Inclusion of stakes does not change rummy into a game of chance.

Game of mere skill - predominant element of skill - Online Rummy is a game of skill. - HELD THAT: - Applying the same legal standard and reasoning used by the Supreme Court for physical rummy, the court holds that Online Rummy involves the same skill components (strategy, memory, decision-making) and is therefore to be treated as a game of skill rather than a game of chance. [Paras 33]

Online Rummy is a game of skill.

Predominant element of skill - gaming as gambling on a game of chance - Inclusion of stakes in Online Rummy does not affect the nature of the game as one of skill. - HELD THAT: - The court reiterates that the test is the predominance of skill over chance and not the monetary stake involved. Therefore Online Rummy, whether played with or without stakes, remains a game of skill for the purposes of the Act. [Paras 33]

Stakes do not alter Online Rummy's character as a game of skill.

Section 14A exemption power - Section 14 exemption - Power under Section 14A cannot be used to override or re-characterise a game already covered by Section 14. - HELD THAT: - Once a game falls within Section 14 as a game of mere skill, a subsequent notification under Section 14A purporting to exempt or restrict that game is superfluous and cannot change the statutory exemption already operative. The court finds that Section 14A cannot be employed to invalidate the effect of Section 14 in relation to games such as rummy. [Paras 33]

Section 14A cannot negate or reclassify a game already exempt under Section 14.

Per incuriam - The Division Bench decision in Ramachandran was rendered per incuriam and is not followed. - HELD THAT: - The court concludes that the earlier Division Bench decision failed to apply or consider pertinent statutory provisions (Sections 3 and 14) and binding Supreme Court precedent (Satyanarayana and K.R. Lakshmanan), and therefore its conclusions are demonstrably incorrect and rendered per incuriam. Consequently, that decision is not treated as binding. [Paras 25]

Ramachandran is per incuriam and not a binding precedent for the present issues.

Arbitrariness - Article 14 - Article 19(1)(g) - Ext.P6 notification is arbitrary, illegal and violative of Articles 14 and 19(1)(g). - HELD THAT: - Because rummy (including Online Rummy) already stands exempt under Section 14 as a game of mere skill, the impugned Ext.P6 notification singling out 'Online Rummy when played for stakes' is arbitrary and amounts to an impermissible prohibition of a lawful business activity. The notification is therefore unlawful and violates equality and the petitioners' right to carry on business under Article 19(1)(g). [Paras 33, 34]

Ext.P6 is declared arbitrary, illegal and violative of Articles 14 and 19(1)(g).

Final Conclusion: Ext.P6 notification (which seeks to include "Online Rummy when played for stakes" within the Kerala Gaming Act) is declared arbitrary, illegal and violative of Articles 14 and 19(1)(g); Online Rummy (with or without stakes) is a game of skill and excluded from the Act under Section 14, and the writ petitions are allowed.