TaxTMI Updates e-Newsletter
Oct 08,2020

Facilitation of filing Form GST TRAN-2 (Part-7A) electronically or manually - technical glitches in the GST portal and non-disadvantaging taxpayers - entitlement to input tax credit subject to filing of TRAN-1/TRAN-2 - judicial direction to executive authorities to examine and remedy filing difficulties

Facilitation of filing Form GST TRAN-2 (Part-7A) electronically or manually - technical glitches in the GST portal and non-disadvantaging taxpayers - entitlement to input tax credit subject to filing of TRAN-1/TRAN-2 - Direction issued to respondent authorities to enable the petitioner to submit Form GST TRAN-2 in relation to Part-7A either electronically or, if the portal is not functioning, by an appropriate manual mechanism so that the petitioner is not deprived of input tax credit. - HELD THAT: - The Court recorded that earlier proceedings had elicited a statement from the GST authorities that they would facilitate filing of Form GST TRAN-2 (Part-7A) electronically or provide a manual mechanism. The petitioner complained that despite that direction the authorities refused to accept TRAN-2 on the ground that the petitioner had not shown 'genuine difficulty' in uploading. The Court observed that where electronic filing is provided by statute or portal and technical glitches prevent timely upload, the taxpayer should not be put at a disadvantage. Having regard to the petitioner's assertion of repeated unsuccessful attempts to upload and the importance of preserving the petitioner's entitlement to input tax credit upon proper filing, the Court directed the respondents to ensure that the petitioner is enabled to submit TRAN-2 either electronically or manually as may be appropriate, consistent with the earlier undertaking given by the authorities.

Petition disposed directing respondents to enable filing of Form GST TRAN-2 (Part-7A) electronically or manually so as not to deprive the petitioner of the input tax credit due to it.

Judicial direction to executive authorities to examine and remedy filing difficulties - administrative reconsideration by the GST Council/Board - The GST Council (respondent No. 3) was directed to examine the petitioner's grievance regarding TRAN-1/TRAN-2 filing and to take appropriate steps to permit filing (electronically or manually) within a stipulated time-frame. - HELD THAT: - The Court noted that the Commissioner had forwarded the petitioner's grievance to higher authorities and that the Board had indicated concerns about reopening the portal or allowing manual declarations being consonant with the statutory framework. Balancing these administrative positions with the principle that technical failures should not prejudice taxpayers, the Court entrusted the GST Council to consider the petitioner's representation and to decide whether to permit amendment/re-filing or to arrange for manual filing, so that the petitioner can secure the input tax credit to which it claims entitlement. The Court prescribed that this exercise be completed within three weeks from receipt of a certified copy of the order.

GST Council to examine and decide the petitioner's grievance and to permit filing of TRAN-1/TRAN-2 (electronically or manually) within three weeks of receipt of certified copy of the order.

Final Conclusion: Writ petition disposed of by directing the respondents to facilitate submission of Form GST TRAN-2 (and to have the GST Council consider the petitioner's representation concerning TRAN-1/TRAN-2) so as to enable the petitioner to claim the input tax credit; the GST Council to complete the exercise within three weeks from receipt of a certified copy of the order.

Allowance of amendment - withdrawal of challenge to vires - effect of withdrawal on transfer application - vacation of interim relief deferred for final hearing - directions for filing pleadings

Allowance of amendment - Draft amendment dated 29th July 2020 was allowed and ordered to be incorporated by the office within three days. - HELD THAT: - The Court permitted the petitioner to amend the petition by accepting the draft amendment dated 29th July 2020 and directed the registry to incorporate the amendment within three days. This allowance was made orally and the registry was directed to give effect to the amendment within the stipulated short period.

Draft amendment dated 29th July 2020 allowed; incorporation to be carried out within three days.

Withdrawal of challenge to vires - effect of withdrawal on transfer application - Petitioner voluntarily withdrew the relief challenging the vires of Section 171 of the CGST Act, 2017, and on that basis the departmental transfer application to the Supreme Court would not be pressed in respect of this petition. - HELD THAT: - The petitioner, through senior counsel, expressly stated that it would not press the relief challenging the vires of Section 171 of the CGST Act, 2017, while reserving the right to raise such issues in a separate petition at an appropriate stage. The respondents confirmed that the transfer application before the Supreme Court, which sought transfer of matters challenging the vires, would not be pressed insofar as this petition is concerned once the vires challenge is not on record. The Court recorded this position and treated the departmental transfer application as inapplicable to the present petition on account of the withdrawal.

Withdrawal of challenge to vires recorded; consequent transfer application to the Supreme Court will not be pressed in respect of this petition.

Vacation of interim relief deferred for final hearing - The application for vacating the interim order dated 30th June 2020 (Civil Application No.3 of 2020) was not decided but directed to be finally heard along with the main petition. - HELD THAT: - Counsel for respondents sought vacation of the interim order. The Court observed that disposal of that application would require substantial time and that it would be appropriate to hear the main petition finally. Consequently, the Court declined to decide the application for vacating interim relief at this stage and instead directed that the main petition be listed for final disposal on the agreed date, thereby deferring consideration of vacation of interim relief to the final hearing.

Application for vacating the interim relief deferred; matter listed for final disposal on 12th October 2020.

Directions for filing pleadings - Timelines were fixed for filing respondent's reply and petitioner's rejoinder. - HELD THAT: - The Court granted the respondents three days to file their reply to the amended petition and allowed the petitioner five days thereafter to examine the reply and file a rejoinder, if necessary. These procedural timelines were directed in the context of preparing the matter for the final hearing fixed on the agreed date.

Respondents granted three days to file reply; petitioner granted five days thereafter to file rejoinder.

Final Conclusion: The amendment dated 29th July 2020 is allowed and to be incorporated within three days; the petitioner's withdrawal of the challenge to the vires of Section 171 CGST Act, 2017 is recorded and the departmental transfer application will not be pressed in respect of this petition; the application to vacate interim relief is deferred for final disposal of the main petition, which is listed on 12th October 2020, with specified timelines for filing reply and rejoinder.

Validity of show cause notice - Vagueness and insufficiency of reasons in administrative notice - Principle of natural justice - opportunity of hearing - Quashing of administrative order

Validity of show cause notice - Vagueness and insufficiency of reasons in administrative notice - The show cause notice dated 21.07.2020 is invalid and unsustainable as it is vague and does not disclose particular facts to enable a meaningful reply. - HELD THAT: - The Court examined the contents of the show cause notice (Form GST REG-17) and found it to be devoid of any particularised facts or reasons; it merely recited a conclusory allegation that registration "is liable to be cancelled" on account of fraud, willful misstatement or suppression of facts without specifying the material facts or information relied upon. Such vagueness prevents the noticee from formulating an effective reply or making meaningful representation. For these reasons the notice cannot be sustained and must be quashed. [Paras 2, 5, 6]

Show cause notice dated 21.07.2020 quashed as vague and insufficient.

Principle of natural justice - opportunity of hearing - Quashing of administrative order - The cancellation order dated 31.07.2020 cancelling the petitioner's registration is unsustainable because it proceeded from the invalid show cause notice and was passed without affording a proper opportunity to reply or be heard. - HELD THAT: - The Court noted that the cancellation order purportedly refers to a reply and personal hearing, but the petitioner's counsel stated, and the respondents did not dispute, that no reply was filed by the petitioner and no hearing was afforded. In view of the foundational defect in the show cause notice and the absence of a proper hearing, the cancellation order cannot stand. The Court did not adjudicate the merits of the alleged grounds for cancellation; its decision is limited to rectifying the procedural and notice defects by quashing the order. The Court declined to grant an express direction permitting fresh proceedings, observing only that respondents may proceed afresh if law permits. [Paras 3, 5, 6]

Cancellation order dated 31.07.2020 quashed; matter not decided on merits.

Final Conclusion: Writ petition allowed; the impugned show cause notice dated 21.07.2020 and the cancellation order dated 31.07.2020 are quashed. Parties are at liberty to take appropriate steps; respondents may, if legally permissible, proceed afresh in accordance with law.

Revision under Section 264 of the Act - reasoned order - opportunity of hearing - TDS Certificate

Revision under Section 264 of the Act - reasoned order - opportunity of hearing - TDS Certificate - Direction to decide the petitioner's pending revision application by a reasoned order after hearing within a specified time-frame - HELD THAT: - The Court recorded that the petitioner's revision application dated 14th July, 2020 under Section 264 of the Act remains pending before Respondent No.1. In view of that pendency the Court declined to adjudicate the substantive prayer for quashing of the impugned order dated 01st July, 2020 and instead directed that the revision application be decided. The respondent is directed to afford the petitioner an opportunity of hearing and to dispose of the revision application by a reasoned order in accordance with law within four weeks. All substantive rights and contentions of the parties are left open for determination by the authority on disposal of the revision application. [Paras 7]

The writ petition is disposed of by directing Respondent No.1 to decide the petitioner's revision application under Section 264 by a reasoned order after giving an opportunity of hearing within four weeks; substantive rights are reserved and the prayer for quashing was not examined.

Final Conclusion: Writ petition disposed with a direction to the assessing authority to decide the pending revision application under Section 264 by a reasoned order after hearing within four weeks; the Court did not adjudicate the substantive challenge to the impugned TDS certificate.

Deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961 - beneficial owner of shares - payment made on behalf of, or for the individual benefit of, a shareholder - exclusion for money lending business / non banking financial company - precedential effect of National Travel Services and Anikitech decisions

Deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961 - beneficial owner of shares - payment made on behalf of, or for the individual benefit of, a shareholder - deferred liability versus loan or advance - Whether the payments/loan were taxable as deemed dividend under Section 2(22)(e) in respect of AY 2013-14 - HELD THAT: - The Court affirmed the Tribunal's conclusion that Section 2(22)(e) applies when a company (not being one in which the public are substantially interested) makes an advance or loan to a shareholder who is the beneficial owner of shares, or makes a payment on behalf of or for the individual benefit of such a shareholder, to the extent of accumulated profits. On the facts, the impugned payment was made to a partnership firm which was not a shareholder; the material records indicated the transaction was a deferred liability and not a loan or advance to a shareholder or for the individual benefit of a beneficial owner of shares. Consequently the decisions relied upon by the Revenue (including National Travel Services and related authorities) were factually distinguishable and inapplicable to attract Section 2(22)(e) in this case. The Tribunal's reversal of the assessing officer's treatment was therefore upheld. [Paras 11, 12]

The payments/loan were not liable as deemed dividend under Section 2(22)(e) for AY 2013-14; the Tribunal and CIT(A)'s conclusions are confirmed.

Final Conclusion: The Revenue's appeal is dismissed; the impugned Tribunal order is confirmed and the substantial questions of law are answered against the Revenue.

Investment in modes other than specified in Section 11(5) - application of income - holding period under proviso (iia) to Section 13(1)(d) - audi alteram partem / opportunity to be heard

Investment in modes other than specified in Section 11(5) - application of income - holding period under proviso (iia) to Section 13(1)(d) - audi alteram partem / opportunity to be heard - The Tribunal's conclusion that the assessee's purchase of gold was an investment in gold bullion in violation of the modes prohibited by Section 11(5) was set aside and remitted for fresh consideration. - HELD THAT: - The Tribunal, while disagreeing with the CIT(A)'s acceptance of the assessee's case, recorded in paragraph 8 an opinion that the purchase of gold was not an application of income but an investment in gold bullion contravening Section 11(5). The High Court observed that this opinion was not recorded after giving the assessee an opportunity to deal with that specific finding and that the Tribunal did not consider the applicability of the proviso (iia) to Section 13(1)(d) which permits holding of an asset not being a specified mode for a limited period. Because the Tribunal's adverse conclusion was reached without affording the assessee a chance to place relevant contentions and evidence on the point (including the one-year holding exception relied upon by the assessee), the High Court found the assessee prejudiced. Accordingly the Court set aside the impugned finding and remitted the matter to the Tribunal to consider the question afresh and in accordance with law, giving the assessee an opportunity to be heard on the issue. [Paras 6, 7, 8]

Finding in paragraph 8 of the Tribunal's order is set aside and the matter is remanded to the Tribunal for fresh consideration in accordance with law after giving the assessee an opportunity to be heard.

Final Conclusion: The appeal is allowed to the extent indicated; the Tribunal's adverse finding that the purchase of gold amounted to investment in violation of Section 11(5) is set aside and the issue is remanded for fresh adjudication (including consideration of the proviso (iia) to Section 13(1)(d)) after affording the assessee an opportunity to be heard; the substantial question of law is left open.

Re-opening of assessment under Section 147 - Validity and service of notice under Section 143(2) - Section 292BB - curative effect for infirmities in service of notice - Limitation for reassessment under Section 153 - Permissibility of raising procedural defects for the first time in an appeal under Section 260A

Re-opening of assessment under Section 147 - Permissibility of raising procedural defects for the first time in an appeal under Section 260A - Whether the re-opening of the assessments was valid and whether the assessee could challenge procedural defects for the first time before this Court. - HELD THAT: - The Court held that the assessee had not raised the procedural objections at any earlier stage before the Assessing Officer, the CIT(A) or the Tribunal and that mere procedural defects, not shown to have caused prejudice, will not vitiate proceedings raised belatedly on appeal under Section 260A. On the facts the CIT(A)'s findings record issuance and service of notices and prior approval for re-opening; consequently the Court found statutory compliance in re-opening the assessments and declined to entertain the procedural challenge raised for the first time before it. [Paras 12, 14, 16]

Re-opening under Section 147 upheld; procedural objection raised for the first time before this Court not permitted and rejected on the merits.

Validity and service of notice under Section 143(2) - Section 292BB - curative effect for infirmities in service of notice - Whether reassessment was invalid for want of a notice under Section 143(2) and whether Section 292BB applied. - HELD THAT: - The Court examined the factual recital in the reassessment order and the CIT(A)'s findings that notices under Section 143(2) were issued and served and that the reassessments proceeded after submissions by the assessee's authorised representative. Given the factual finding of compliance, there was no occasion to invoke Section 292BB; that provision cures infirmities in manner of service but does not substitute for a complete absence of a departmental notice. On the facts the Court found statutory compliance with Section 143(2) and rejected the contention of non-issuance/non-service. [Paras 12, 14]

Notices under Section 143(2) were held to have been issued/served and the contention of invalidity for lack of such notice was rejected; Section 292BB was inapplicable on the facts.

Adjudication of additions for unaccounted bank credits - Whether the Tribunal erred in not adjudicating the correctness of the addition of purported credits into the assessee's bank account as his income. - HELD THAT: - The Court accepted the Tribunal's and CIT(A)'s treatment of the matter and found no infirmity in their approach. Having considered the factual and procedural record, the Court concluded that there was no ground to disturb the Tribunal's decision and that the assessee's contention on the correctness of the addition was rightly decided against him. [Paras 13]

Tribunal's dismissal of the appeals on the addition of bank credits affirmed; question answered against the assessee.

Final Conclusion: Appeals dismissed; all substantial questions of law answered against the assessee and the Tribunal's order affirmed. No costs.

Capital gain v. business income - distinction between investment and stock-in-trade - intention test and accounting treatment as corroborative factor - volume, frequency, continuity and regularity test - disallowance under Section 14A and Rule 8D - requirement of recorded satisfaction - CBDT instructions/Circulars on taxability of surplus on sale of shares and securities

Capital gain v. business income - distinction between investment and stock-in-trade - intention test and accounting treatment as corroborative factor - volume, frequency, continuity and regularity test - CBDT instructions/Circulars on taxability of surplus on sale of shares and securities - Surplus arising from sale of shares and securities is to be treated as capital gains and not business income. - HELD THAT: - The High Court upheld the concurrent findings of the CIT(A) and the Tribunal that the assessee consistently treated its share and securities dealings as investments in accounts and balance-sheet, valued investment at cost, added back provisions for diminution and did not route purchases/sales through P&L except for net gain/loss. The Court noted majority of the investments were in mutual funds, bonds and strategic holdings rather than active trading in shares of other companies, and that memorandum/articles of association did not make trading in shares a main object. The court held that accounting treatment, corporate authorisations, absence of borrowing for investments and dividend/interest income together were cogent corroborative factors of intention to invest; CBDT circulars (including Circulars No.4 of 2007 and No.6 of 2016) support deference to the assessee's consistent treatment of listed securities as capital assets where so declared. The Assessing Officer's reliance on volume/frequency was considered but found outweighed by the overall conduct, portfolio composition and documentary treatment; accordingly the AO could not recharacterise the surplus as business income. [Paras 23, 24, 27]

The Tribunal and CIT(A) were right to treat the surplus on sale of shares and securities as capital gains; the revenue's challenge is rejected.

Disallowance under Section 14A and Rule 8D - requirement of recorded satisfaction - mixed funds and apportionment under Rule 8D - direct nexus test for specific interest disallowance - Deletion of the disallowance under Section 14A in respect of interest was justified, except for a small amount confirmed on direct nexus; the Assessing Officer failed to record requisite satisfaction before applying apportionment formula. - HELD THAT: - The Court agreed with the Tribunal's reasoning that the assessee had sufficient interest free funds (share capital, reserves and surplus) exceeding the gross investment and had reduced borrowings; therefore the AO's formulaic apportionment was not warranted without recording dissatisfaction as required by Section 14A(2) and Rule 8D. The Tribunal had confirmed a limited disallowance where direct nexus with investment was discernible but deleted the bulk of the interest disallowance. The Court relied on Supreme Court and High Court precedents holding that before invoking Rule 8D apportionment the AO must record reasons for not accepting the assessee's position; mixed funds alone do not automatically trigger Rule 8D absent such recorded satisfaction. [Paras 28, 38]

The deletion of the Section 14A disallowance (except the limited amount confirmed on direct nexus) is upheld and the revenue's appeal on this point fails.

Final Conclusion: All tax appeals are dismissed. The High Court found no substantial question of law; the Tribunal's order treating surplus on sale of shares/securities as capital gains and largely deleting the Section 14A disallowance is affirmed.

Reopening of assessment and validity of notice under section 148 - sanction under section 151 and requirement of application of mind - mechanical approval / lack of independent satisfaction - quashing of reassessment proceedings - consequential invalidation of penalty imposed after invalid reassessment

Sanction under section 151 and requirement of application of mind - mechanical approval / lack of independent satisfaction - reopening of assessment and validity of notice under section 148 - Whether the reassessment proceedings initiated by issuance of notice under section 148 were valid in view of the approval recorded by the CIT under section 151. - HELD THAT: - The Tribunal examined the approval/recorded satisfaction placed on file which consisted only of the brief remark "I am satisfied with the reasons." The approval was held to be mechanical and lacking any indication of material, information or reasons actually considered by the CIT to reach satisfaction. Following precedent authority that requires the CIT to apply independent mind to the material placed before him, the Tribunal found that such perfunctory endorsement did not constitute valid sanction under section 151 and therefore the notice issued under section 148 and the consequent reassessment proceedings were invalid. Because the reassessment was quashed on this legal ground, the Tribunal did not adjudicate the merits of the additions made in the reassessment order. [Paras 5, 6]

The notice under section 148 and the reassessment proceedings are quashed for want of valid sanction; the appeal on this ground is allowed.

Consequential invalidation of penalty imposed after invalid reassessment - quashing of reassessment proceedings - Whether the penalty sustained by the lower authority survives after the reassessment has been quashed. - HELD THAT: - Since the reassessment proceedings have been quashed as invalid, the penalty imposed consequential to that reassessment could not stand. The Tribunal therefore deleted the penalty in the penalty appeal as it no longer had a lawful basis following quashal of the assessment proceedings. [Paras 7]

The penalty is deleted as consequential to the quashed reassessment; the penalty appeal is allowed.

Final Conclusion: The reassessment initiated by notice dated 22.3.2013 was quashed for want of valid sanction by the CIT under section 151, the quantum appeal is allowed on that ground, and the related penalty is deleted as consequential; both appeals of the assessee are allowed.

Deductibility of interest as business expenditure under Section 36(1)(iii) - commercial expediency test for business expenditure - reassessment u/s 147 - validity of reopening - related party/section 40A(2) status in relation to interest payments - precedential application of coordinate-bench Tribunal decision

Deductibility of interest as business expenditure under Section 36(1)(iii) - commercial expediency test for business expenditure - related party/section 40A(2) status in relation to interest payments - precedential application of coordinate-bench Tribunal decision - Deletion of interest disallowance in assessment for AY 2002-03 was upheld and revenue's appeal dismissed. - HELD THAT: - The Tribunal found that borrowed funds had been utilized for procuring cinematographic and television programme rights which were sold in the ordinary course of the assessee's business, and therefore interest incurred was wholly and exclusively for business purposes entitling the assessee to deduction under Section 36(1)(iii). The Tribunal applied the commercial expediency test, holding that necessity of expenditure is to be judged from the businessman's viewpoint and not re-evaluated by revenue. The coordinate-bench decision in the assessee's own case for AYs 2005-06 & 2006-07, which had deleted a similar disallowance, was held applicable; there was no contrary material or change in facts to distinguish that precedent. The CIT(A)'s deletion of the disallowance (while upholding reopening) was therefore confirmed. [Paras 6, 7, 9]

Revenue's appeal for AY 2002-03 dismissed; interest disallowance deleted.

Reassessment u/s 147 - validity of reopening - deductibility of interest as business expenditure under Section 36(1)(iii) - precedential application of coordinate-bench Tribunal decision - Reopening for AY 2003-04 quashed by CIT(A); on merits the issue was covered by the Tribunal's decision for later years and assessee's cross-objection allowed. - HELD THAT: - For AY 2003-04 the CIT(A) found the reopening under Section 147 unsustainable because the original assessment had been made under section 143(3) with application of mind on the interest issue during scrutiny. Although the CIT(A) did not decide the merits, the Tribunal noted that the merits were squarely covered in the assessee's favor by the coordinate-bench decision for AYs 2005-06 & 2006-07; accordingly the assessee's cross-objection contesting the merits was allowed and the revenue's appeal rendered academic and dismissed. [Paras 10, 11]

Assessee's cross-objection allowed and revenue's appeal dismissed as infructuous for AY 2003-04.

Deductibility of interest as business expenditure under Section 36(1)(iii) - commercial expediency test for business expenditure - precedential application of coordinate-bench Tribunal decision - For AY 2004-05 the CIT(A)'s adjudication in favour of the assessee (deleting disallowance while upholding reopening) was applied and the revenue's appeal dismissed. - HELD THAT: - Facts for AY 2004-05 were pari materia with AY 2002-03 and the Tribunal applied the same reasoning. Relying on the coordinate-bench decision for AYs 2005-06 & 2006-07, the Tribunal held that interest paid on borrowed funds used for acquiring and selling programme rights constituted business expenditure deductible under Section 36(1)(iii); the commercial expediency test and the finding that the payee was not within the ambit of section 40A(2) supported deletion of the disallowance. Consequently, no disallowance survived for the year under consideration. [Paras 12, 13]

Revenue's appeal and assessee's cross-objection dismissed for AY 2004-05.

Final Conclusion: The Tribunal dismissed the revenue's appeals for AYs 2002-03 to 2004-05 and disposed the assessee's cross-objections accordingly (with the cross-objection for AY 2003-04 allowed); the deductibility of the interest payments was upheld on the grounds that the borrowed funds were applied to the assessee's business and the coordinate-bench precedent in the assessee's favour governed the outcome.

Revisionary jurisdiction under section 263 - limited scrutiny (CASS/AIR) and scope of enquiry - failure of Assessing Officer to make enquiries amounting to an order erroneous and prejudicial to revenue - conversion of limited scrutiny into complete scrutiny with administrative approval - reframing of assessment / fresh adjudication on remand

Revisionary jurisdiction under section 263 - limited scrutiny (CASS/AIR) and scope of enquiry - failure of Assessing Officer to make enquiries amounting to an order erroneous and prejudicial to revenue - Validity of the Pr.CIT's invocation of powers under section 263 to set aside the AO's limited scrutiny assessment. - HELD THAT: - The Tribunal examined whether a case selected for limited scrutiny restricts the Pr.CIT from invoking section 263 when the Assessing Officer has, in the Tribunal's view, not made necessary enquiries on matters which prima facie warranted further verification or when the AO has travelled beyond or outside the limited scope without adequate application of mind. Having considered CBDT instructions on limited scrutiny, the jurisprudence that the AO is both adjudicator and investigator, and the factual record, the Tribunal concluded that where circumstances indicate potential escapement of income or lack of adequate enquiry, the Commissioner may treat the assessment order as erroneous and prejudicial to the revenue and exercise revisionary powers. The Tribunal found that the Pr.CIT applied the statutory test under section 263, and that the AO had not made sufficient enquiries in respect of the matters identified by the Pr.CIT. The Tribunal also relied on coordinate decisions (including Baby Memorial Hospital Ltd. and Maa Tarini Industries Ltd.) holding that limited scrutiny can be converted to full scrutiny with prior administrative approval where potential escapement exceeds prescribed thresholds, and that failure to secure such approval or to make requisite enquiries can render an order open to revision under section 263. On the facts of this case, the Tribunal held there was no illegality in the Pr.CIT setting aside the assessment and directing fresh adjudication.

The invocation of section 263 by the Pr.CIT was valid; the impugned assessment order was set aside as erroneous and prejudicial to the interests of revenue and the appeal is dismissed on this ground.

Reframing of assessment / fresh adjudication on remand - service tax disallowance under section 43B - disallowance for failure to deduct TDS under section 40(a)(ia) - unexplained cash credit under section 68 - Whether the matters identified by the Pr.CIT (service tax liabilities, non-deduction of TDS on interest, and alleged unexplained credit) should be examined afresh by the AO. - HELD THAT: - The Tribunal recorded that the Pr.CIT had directed the AO to verify specific facts: (i) whether service tax liabilities relating to the year and earlier years were paid by the due date and, if not, to make additions under section 43B; (ii) whether tax was deductible at source in respect of interest paid to SREI Equipment Finance Pvt. Ltd. and, if not, to disallow under section 40(a)(ia); and (iii) whether amounts receivable from the assessee's proprietary concern represented unexplained cash credit and should be assessed under section 68. The Tribunal found that these issues were matters on which the AO had not made adequate enquiry earlier and that they required fresh examination. Accordingly, the Tribunal upheld the Pr.CIT's direction that the AO should reframe the assessment after conducting proper verification and after giving the assessee opportunity to be heard.

The issues identified by the Pr.CIT are remitted to the Assessing Officer for fresh adjudication and verification in accordance with law, as directed by the Pr.CIT.

Final Conclusion: The Tribunal upheld the Pr.CIT's exercise of jurisdiction under section 263, holding that the assessment for Assessment Year 2014-2015 was rendered erroneous and prejudicial to revenue by inadequate enquiry; the order setting aside the assessment and directing the AO to reframe the assessment on the specified issues was affirmed and the assessee's appeal dismissed.

Manufacturing activity - beneficiation process and production of chrome concentrate - exemption under section 10B for production of goods in an export-oriented unit - disallowance under section 40A(3) for cash payments - remand for factual reconsideration of intention to manufacture and export - precedent of a coordinate bench / statistical restoration

Manufacturing activity - beneficiation process and production of chrome concentrate - exemption under section 10B for production of goods in an export-oriented unit - remand for factual reconsideration of intention to manufacture and export - Whether the assessee was entitled to deduction under section 10B by treating beneficiation of chrome ore into chrome concentrate as manufacturing activity. - HELD THAT: - The Tribunal noted that the question of whether the beneficiation process amounts to manufacturing for the purpose of claiming exemption under section 10B had already been considered in the immediately preceding assessment year (A.Y.2008-2009), where the coordinate bench set aside the CIT(A)'s order and restored the issue to the Assessing Officer for fresh examination of factual matters, including the assessee's intention to manufacture for export and related excise records. Applying that precedent to the year under appeal, the Tribunal followed the coordinate-bench approach and observed that competing judicial decisions exist; consequently the factual matrix and records (including excise/production records and evidence of manufacturing and intention to export) must be re-examined by the Assessing Officer. The Tribunal therefore set aside the CIT(A)'s allowance of section 10B and remitted the matter to the Assessing Officer to decide afresh in the light of the observations made in the preceding year. [Paras 8, 9]

Order of the CIT(A) allowing deduction under section 10B set aside and the issue remitted to the file of the Assessing Officer for fresh adjudication.

Disallowance under section 40A(3) for cash payments - precedent of a coordinate bench / statistical restoration - Whether the Assessing Officer was justified in disallowing 10% of transport payments under section 40A(3). - HELD THAT: - The Tribunal recorded that the identical issue for the assessment year in question had already been decided in favour of the assessee by a coordinate bench (ITA No.214/CTK/2014, order dated 29.05.2015). Having regard to that decision, the Tribunal treated the assessee's grounds regarding transport expenses as rendered infructuous and dismissed the Revenue's challenge to the transport expense claim. [Paras 14]

Grounds challenging the transport expense claim under section 40A(3) dismissed; the cross-objection on transport expenses held infructuous.

Final Conclusion: The Revenue's appeal is partly allowed for statistical purposes by setting aside the CIT(A)'s allowance of deduction under section 10B and remitting that issue to the Assessing Officer for fresh consideration; the challenge to the transport-expense disallowance under section 40A(3) and related cross-objections are dismissed as settled by coordinate-bench decisions.

Disallowance of interest on borrowed funds utilised for investments in subsidiaries - application of presumption that investments from mixed funds are from interest free funds - remand for verification of availability of own/interest free funds - commercial expediency of investments in related concerns - disallowance under provisions dealing with expenditure relating to exempt income

Disallowance of interest on borrowed funds utilised for investments in subsidiaries - application of presumption that investments from mixed funds are from interest free funds - remand for verification of availability of own/interest free funds - Whether disallowance of interest paid on borrowed funds used for share application money in subsidiaries for AY.2010-11 should be upheld or whether the matter should be remitted for verification of availability of own/interest free funds. - HELD THAT: - The Tribunal noted that the AO had disallowed interest on borrowed funds used for investments in subsidiaries. The assessee asserted that its investments were made out of its own interest free funds and relied on precedents holding that where interest free and interest bearing funds are mixed, a presumption arises that investments are from interest free funds. The Tribunal found that the assessee had placed financial statements before the Tribunal indicating sufficiency of interest free funds but held that the factual question of whether own/interest free funds were sufficient required verification by the AO. Accordingly, the Tribunal remitted the matter to the AO for limited verification: if the AO finds own/interest free funds exceed the investments, no disallowance is to be made; if not, disallowance is to be limited to the shortfall over and above available own funds. [Paras 9, 10]

Remitted to the AO for limited verification of whether the assessee's own/interest free funds were sufficient to cover the investments; outcome to determine extent of disallowance for AY.2010-11.

Disallowance of interest on borrowed funds utilised for investments in subsidiaries - application of presumption that investments from mixed funds are from interest free funds - commercial expediency of investments in related concerns - Whether the disallowance made in assessment years AY.2011-12, AY.2012-13 and AY.2013-14 should be remitted for verification or finally disposed of. - HELD THAT: - The Tribunal observed that facts and issues in these years were similar to AY.2010-11. For AY.2011-12 and AY.2013-14 the tax effect in the Revenue's appeals was below the monetary threshold fixed by CBDT Circular No.17 of 2019 and the CIT(A) had found that interest free funds were sufficient to meet the investments; having regard to these findings and the limited tax effect, the Tribunal declined to remit those appeals and dismissed the Revenue's appeals. For AY.2012-13 the CIT(A) had similarly found that own funds exceeded the investments, and following the same approach the Tribunal dismissed the Revenue's appeal. On this basis the Tribunal treated all appeals filed by the assessee as allowed for statistical purposes and dismissed the Revenue's appeals for the stated years. [Paras 11, 12, 13, 14, 15]

Assessee's appeals for AY.2011-12, AY.2012-13 and AY.2013-14 treated as allowed for statistical purposes; Revenue's appeals dismissed.

Final Conclusion: The Tribunal remitted the AY.2010-11 appeal to the AO for limited verification of sufficiency of the assessee's own/interest free funds to meet investments; if sufficient, no interest disallowance; if not, disallowance limited to shortfall. For AY.2011-12, AY.2012-13 and AY.2013-14 the Tribunal, having regard to CIT(A)'s findings and tax effect limits, treated the assessee's appeals as allowed for statistical purposes and dismissed the Revenue's appeals.

Applicability of Section 144C to assessment year 2009-10 - Substantive effect of insertion of Section 144C and prospectivity - Time-bar under the third proviso to Section 153(1) - Validity of assessment order passed beyond statutory limitation - Non-binding character of subsequently issued CBDT clarification for altering retrospectivity

Applicability of Section 144C to assessment year 2009-10 - Substantive effect of insertion of Section 144C and prospectivity - Whether the provisions of Section 144C (as inserted by Finance (No.2) Act, 2009) applied to assessment year 2009-10 or only prospectively to later assessment years. - HELD THAT: - The Tribunal accepted the reasoning in M/s. Vedanta Ltd. that Section 144C introduces a new scheme of assessment (a distinct alternate dispute resolution mechanism) and is therefore substantive in character rather than a mere procedural change. Applying the settled principle that the law as amended on the first day of the assessment year governs that year's assessments, the Tribunal held that Section 144C could not be read into assessments for A.Y. 2009-10. The Board's later clarification/CBDT Circular could not be relied upon to alter the retrospective applicability where the substantive change had not been in force as on the first day of the relevant assessment year. [Paras 6, 7]

Section 144C does not apply to A.Y. 2009-10; its operation is prospective and cannot be invoked to alter the law applicable to that assessment year.

Time-bar under the third proviso to Section 153(1) - Validity of assessment order passed beyond statutory limitation - Whether the assessment order dated 13/05/2013 was time-barred under the third proviso to Section 153(1) as applicable to A.Y. 2009-10, and whether the order is therefore void. - HELD THAT: - The Tribunal noted that the TPO's order under Section 92CA(3) was dated 09/01/2013 and the AO's draft assessment was dated 27/03/2013. The third proviso to Section 153(1) (as applicable to the case) prescribed an outer time limit of three years from the end of the relevant assessment year for completion where a reference under Section 92CA(1) was made, thereby fixing 31/03/2013 as the cut-off for A.Y. 2009-10. Since Section 144C did not apply to A.Y. 2009-10, no extension of time could be derived from its scheme; the final order passed on 13/05/2013 was therefore beyond the statutory period and liable to be set aside. Relying on the legal conclusion that the applicable statutory time-limit governs completion of assessment, the Tribunal quashed the assessment as time-barred. [Paras 5, 8]

The assessment order dated 13/05/2013 was time-barred under the third proviso to Section 153(1) for A.Y. 2009-10 and is null and void.

Final Conclusion: The additional legal ground was allowed: Section 144C did not apply to A.Y. 2009-10 and, accordingly, the assessment completed on 13/05/2013 was beyond the statutory period prescribed by the third proviso to Section 153(1); the assessment order is quashed and the appeal is allowed.

Royalty versus business income - broadcast reproduction right versus copyright - definition of royalty under Section 9(1)(vi) - royalty under Article 12 of the India-USA DTAA - beneficial operation of Section 90(2) - retrospective amendment to domestic law cannot be read into a treaty - permanent establishment and attribution of profits - arm's length principle and attribution to PE - mutual agreement procedure / competent authority determination and consistency

Royalty versus business income - broadcast reproduction right versus copyright - definition of royalty under Section 9(1)(vi) - royalty under Article 12 of the India-USA DTAA - Distribution/subscription revenue derived by the non resident appellant is business income and not royalty. - HELD THAT: - On the facts of the distribution and advertising sales agreement the appellant retained exclusive ownership of copyrights and the sole right to determine and change content (Clause 5). The Indian distributor (TIIPL) was granted commercial distribution and advertising sales rights and did not receive any licence to copy, modify or exploit the copyrighted content. The tribunal applied the statutory distinction between copyright (Section 14) and broadcast reproduction rights (Section 37) and accepted precedents (Mumbai ITAT and Bombay High Court decisions) holding that payments for making a channel available to viewers constitute business income and not consideration for use of copyright within the meaning of Explanation 2 to Section 9(1)(vi) or Article 12(3) of the DTAA. The AO's characterisation as royalty was therefore not sustainable on the material before the tribunal. [Paras 41, 43, 54]

The distribution/subscription revenue is business income and not taxable as royalty; the additions made by the AO on the royalty characterisation are deleted.

Retrospective amendment to domestic law cannot be read into a treaty - beneficial operation of Section 90(2) - A retrospective or clarificatory amendment to domestic law (Explanation 6 to Section 9(1)(vi)) cannot be imported into the DTAA to alter treaty taxability. - HELD THAT: - The tribunal followed the principle that an amendment in domestic law cannot be used to change or override the meaning of an international treaty to which India is a party. In the absence of a corresponding change in the DTAA's definition of royalty, the domestic amendment could not be relied upon to convert the character of the appellant's receipts into royalty when the DTAA governs the taxability of a US resident under Section 90(2). The tribunal relied upon the Delhi High Court reasoning in New Skies to reject the AO's reliance on the domestic amendment for treaty purposes. [Paras 44]

The retrospective amendment to Section 9 cannot be read into the India-USA DTAA; it does not convert the distribution receipts into royalty.

Permanent establishment and attribution of profits - arm's length principle and attribution to PE - Article 7 DTAA - Even if a PE in India were to be held to exist, no further profits would be attributable to such PE where the transactions with the Indian concern have been accepted as at arm's length. - HELD THAT: - The tribunal applied the principle that Article 7 and the decisions of the Supreme Court require attribution to a PE only to the extent profits are attributable, and where an arm's length remuneration already accounts for the economic activities attributable to the PE, no additional profits should be taxed. The appellant's transactions with TIIPL had been accepted on arm's length basis in related orders and the tribunal held that, on that footing, no additional attribution is warranted. [Paras 37, 39]

No further profits are attributable to any alleged PE in India where the arm's length principle has been satisfied; therefore attribution does not change the tax treatment of the receipts.

Mutual agreement procedure / competent authority determination and consistency - The treatment accepted earlier pursuant to a competent authority (MAP) determination and adopted in prior assessments supports maintaining the same characterisation in the assessed years absent any material change of facts. - HELD THAT: - The tribunal noted that the competent authorities of India and the USA had earlier agreed that a percentage of the advertisement and subscription revenue was to be treated as business profit attributable to Indian operations, and that the appellant had filed returns and computations on that basis which were accepted in prior assessment years. Given the absence of any material change in facts or agreement terms, the tribunal applied the principle of consistency and declined to permit a different characterisation in the impugned years. [Paras 42]

The income as declared by the appellant in accordance with the MAP and accepted earlier is to be followed in the impugned years in the absence of material change.

Final Conclusion: All appeals are allowed: the distribution/subscription receipts are held to be business income (not royalty), the AO's additions are deleted, the domestic amendment cannot be read into the India-USA DTAA to change treaty characterisation, and no additional attribution to a PE arises where arm's length remuneration has been accepted.

Re-computation of interest attributable to specified investment - allowability of security charges as business expenditure - notional rental income assessed under income from house property - vacancy allowance under Section 23(1)(c) vis-a -vis annual value under Section 23(1)(a) - remand for factual verification and quantification

Re-computation of interest attributable to specified investment - remand for factual verification and quantification - Confirmation of direction to re-compute disallowance of interest attributable to Rs. 68,00,000 used for purchase of property at Grand Mall, Gurgaon. - HELD THAT: - The Tribunal noted that the CIT(A) had directed the Assessing Officer to restrict interest disallowance to the portion relatable to Rs. 68,00,000 and observed that identical directions were given in earlier assessment years (2008-09 and 2009-10) where the issue was restored for recomputation. The Tribunal found no error in the CIT(A)'s approach and upheld the direction that the Assessing Officer should re-compute the interest disallowance attributable to the specified amount, thereby affording the relief the assessee sought. [Paras 5]

Direction to Assessing Officer to re-compute the interest disallowance attributable to Rs. 68,00,000 is upheld and restored to the file of the Assessing Officer for determination.

Allowability of security charges as business expenditure - remand for factual verification and quantification - Sustainment of part of disallowance of security charges and restoration for fresh examination. - HELD THAT: - The authorised representative undertook to substantiate before the Assessing Officer that security charges were incurred for premises used for business and specifically identified an amount paid for business use of the basement at C-37, Hauz Khas. The Tribunal therefore restored the issue to the Assessing Officer for fresh examination after affording the assessee an opportunity to produce evidence to establish that the security charges related to business premises. [Paras 5]

Issue remanded to the Assessing Officer for re-examination and verification of security charges with opportunity to the assessee to substantiate its claim.

Notional rental income assessed under income from house property - vacancy allowance under Section 23(1)(c) vis-a -vis annual value under Section 23(1)(a) - remand for factual verification and quantification - Addition of notional rent for shop at DLF Grand Mall, Gurgaon upheld by lower authorities but remanded for factual enquiry whether the property was actually vacant or ever let out. - HELD THAT: - The Tribunal observed that the Assessing Officer and the CIT(A) relied on an earlier communication suggesting the property was let out, but did not consider the assessee's repeated assertions and evidence that the premises remained vacant. Given this factual dispute, the Tribunal directed restoration to the Assessing Officer to record a clear finding on whether the property was let out at any relevant time and to decide the notional rent claim in accordance with law, expressly advising the AO to consider the Tribunal's ratio in the cited Anil Kumar Gupta order. [Paras 5]

Matter remanded to the Assessing Officer for factual determination whether the property was let out and consequent adjudication on notional rental income.

Remand for factual verification and quantification - Effect of remands on the ancillary ground seeking telescoping of disallowances. - HELD THAT: - As Grounds 1-3 were restored to the Assessing Officer for fresh consideration, the Tribunal held that the ground seeking telescoping of disallowances has become infructuous and does not require adjudication at this stage. [Paras 5]

Ground alleging necessity of telescoping disallowances dismissed as infructuous.

Final Conclusion: The appeal is partly allowed for statistical purposes: issues relating to interest attributable to Rs. 68,00,000, security charges and notional rent for the Grand Mall property are remanded to the Assessing Officer for fresh adjudication after affording the assessee opportunity to produce evidence; the plea for telescoping is dismissed as infructuous.

Transfer pricing adjustment - arm's length price (ALP) - Comparable Uncontrolled Price (CUP) method - date of order acceptance vs average monthly price comparison - 5% tolerance range under proviso to section 92C(2) - benchmarking of interest on foreign currency loan using LIBOR - imputation of risk/transaction cost in interest benchmarking - benchmarking of guarantee fee - section 14A disallowance limited to exempt income - set off of prior period expenses against prior period income - credit for TDS/TCS under section 199 read with Rule 37BA(3)

Transfer pricing adjustment - arm's length price (ALP) - Deletion of transfer pricing adjustments (difference in interest on loan and corporate guarantee) upheld leading to dismissal of Revenue appeal for A.Y. 2007-08. - HELD THAT: - The Tribunal noted that TP adjustments in respect of difference in interest charged from the associated enterprise and adjustment relating to corporate guarantee were already deleted by the Tribunal in earlier related proceedings; with the foundational additions removed, there was no reason to interfere with the Commissioner (Appeals) order. The Revenue's appeal against deletion of penalty/adjustments was therefore dismissed. [Paras 5, 6, 7]

Revenue appeal dismissed; findings of lower authority deleting TP adjustments upheld.

Comparable Uncontrolled Price (CUP) method - date of order acceptance vs average monthly price comparison - 5% tolerance range under proviso to section 92C(2) - ALP adjustment in respect of export sales to associated enterprise remanded to TPO/AO for fresh adjudication to examine whether export transactions are interlinked and, if so, to compute ALP on aggregate basis; 5% tolerance to be considered where applicable. - HELD THAT: - The assessee benchmarked exports to related parties using CUP with monthly average prices because raw material (metal) prices fluctuate. The TPO had benchmarked on the basis of date of order acceptance and made an addition. The Tribunal, following its coordinate-bench precedents in the assessee's own earlier years, directed that if the assessee can substantiate that transactions are interlinked, ALP should be computed on aggregate basis and that the AO/TPO should consider the 5% tolerance where more than one price or relevant comparison permits. Consequently the matter was sent back for fresh computation and verification by the TPO/AO. [Paras 24, 25, 26, 28, 29]

TP adjustment set aside and remitted to TPO/AO for fresh adjudication on aggregate/interlinked transaction basis and for consideration of 5% tolerance where applicable.

Credit for TDS/TCS under section 199 read with Rule 37BA(3) - Credit for TDS/TCS denied by AO for having pertained to preceding years shall be allowed in accordance with law in the relevant earlier assessment years. - HELD THAT: - The Assessing Officer had denied TDS/TCS credit on the ground that the credits pertained to earlier assessment years. The Tribunal did not find error in the AO's reasoning as to timing but directed that the Revenue should not be unjustly benefitted and therefore directed the AO to allow the credit of TDS/TCS as per the provisions of law in the preceding assessment years. [Paras 30, 31, 32]

Assessee directed to be allowed TDS/TCS credit in accordance with law in the preceding assessment years.

Benchmarking of interest on foreign currency loan using LIBOR - imputation of risk/transaction cost in interest benchmarking - Addition made by TPO imputing a higher interest rate was deleted; interest charged at LIBOR + 200 basis points held to be at arm's length and adjustments for transaction costs/risk not sustainable. - HELD THAT: - The TPO had disregarded the assessee's CUP benchmarking (LIBOR + 200 bps) and adopted a higher rate based on CRISIL information and imposed additional markups for transaction cost/security. The Tribunal, following the jurisdictional High Court and its own coordinate-bench decisions in the assessee's earlier years, held that LIBOR is the appropriate benchmark for foreign currency loans repayable in foreign currency and that the additional imputation of transaction cost/risk premium was not justified where the tested party is the lender and the borrower is a wholly owned subsidiary. Accordingly the TPO/AO's higher imputed rate and risk adjustments were set aside. [Paras 41, 42, 43, 44, 45]

TPO/AO's interest rate adjustment deleted; LIBOR + 200 basis points accepted as ALP and risk/transaction cost imputation disallowed.

Benchmarking of guarantee fee - Adjustment in respect of guarantee commission deleted and assessee's benchmarking accepted in line with coordinate-bench findings. - HELD THAT: - The TPO had benchmarked guarantee commission using bank quotes and added further markups for risk/margins. The Tribunal, relying on its earlier decisions, held that the assessee's charged commission (supported by some bank quotes) was sustainable and applied the same reasoning regarding risk adjustments as in the interest-benchmarking issue to direct deletion of the adjustment. [Paras 44, 45]

Corporate guarantee-related TP adjustment deleted.

Section 14A disallowance limited to exempt income - Disallowance under section 14A r.w.r. Rule 8D shall be restricted to the amount of exempt income for the year; Assessing Officer directed to limit disallowance accordingly in the relevant years. - HELD THAT: - Where the assessee had small amounts of dividend income which were treated as exempt in assessment, the AO had computed disproportionate disallowances invoking section 14A and Rule 8D. The Tribunal, following the jurisdictional High Court authority, held that disallowance cannot exceed the exempt income and directed the AO to restrict the disallowance to the exempt dividend amounts (Rs. 2,37,000 for one year and Rs. 1,77,000 for another) rather than the larger figures previously computed. [Paras 48, 49, 68, 69, 70]

Disallowance under section 14A/Rule 8D restricted to the exempt dividend income; AO directed to recompute accordingly.

Set off of prior period expenses against prior period income - Prior period expenses which crystallised in the year under consideration are to be set off against prior period income of that year; AO directed to allow the set-off. - HELD THAT: - The AO disallowed prior period expenses and added them to income. The Tribunal, applying precedent authority, held that expenses pertaining to prior periods that crystallised in the assessment year are allowable in that year and should logically be netted against prior period income recognised in the same year. On the facts, the Tribunal directed the AO to allow the set off of prior period expenses against prior period income. [Paras 58, 60, 61, 63, 64]

Prior period expenses allowed to be set off against prior period income; appeal allowed in part on this ground.

Final Conclusion: The Tribunal disposed the cross appeals by upholding deletion of certain TP adjustments for A.Y. 2007-08, remitting specified TP issues (export pricing) for fresh adjudication with directions on aggregate/interlinked transactions and 5% tolerance, accepting LIBOR+200 bps as arm's length for foreign currency loans and disallowing risk/transaction cost imputations, deleting guarantee-fee adjustments, directing recomputation and limitation of section 14A disallowances to exempt dividend amounts, directing allowance of TDS/TCS credit as per law, and permitting set-off of crystallised prior period expenses against prior period income; outcomes for the specified assessment years are recorded accordingly.

Subsidy as capital receipt - subsidy as revenue receipt - object test for characterization of subsidy - subsidy granted for setting up or expansion of industrial unit - Package Scheme of Incentives - Octroi refund

Octroi refund - subsidy as capital receipt - subsidy as revenue receipt - object test for characterization of subsidy - subsidy granted for setting up or expansion of industrial unit - Package Scheme of Incentives - Whether the Octroi duty refund received under the Package Scheme of Incentives is a capital receipt not chargeable to tax or a revenue receipt taxable as income. - HELD THAT: - The Tribunal noted that the incentive under the Package Scheme of Incentives was granted to encourage setting up and expansion of industries in backward regions and to promote industrialisation and employment. Applying the object test articulated by higher authorities, the Tribunal held that where the object of the assistance is to industrialize the State and generate employment - i.e., to enable setting up or expansion of an industrial unit - the receipt is capital in nature irrespective of the form or timing of payment. The Tribunal placed reliance on the decision in Chaphalkar Brothers and the Supreme Court's exposition that subsidies granted to promote capital-intensive industrial activity are capital receipts. On the facts, the assessee had eligibility under the Scheme and had credited the refund to capital reserve; earlier departmental action treating a similar receipt for A.Y. 2013-14 as capital was upheld by the Tribunal. Applying those principles, the Octroi refund was held to be a capital receipt and not exigible to tax. [Paras 6, 7, 8]

Octroi refund received under the Package Scheme of Incentives is a capital receipt and not chargeable to tax; order of CIT(A) set aside and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the Octroi duty refund received under the Maharashtra Package Scheme of Incentives is a capital receipt (being granted to set up/expand industry and promote employment) and is not taxable; the CIT(A)'s order is set aside.

Provisional release of goods under Section 110A of the Customs Act, 1962 - bank guarantee for provisional release - enhancement of security directed by appellate court - judicial modification of High Court conditions on interim relief

Provisional release of goods under Section 110A of the Customs Act, 1962 - bank guarantee for provisional release - enhancement of security directed by appellate court - Modification of the High Court order directing provisional release by increasing the quantum of the bank guarantee - HELD THAT: - The Supreme Court considered the appeal against the Delhi High Court order which directed provisional release of goods subject to a bank guarantee quantified at Rs. 10 crores along with other conditions. After hearing the parties, the Court held that the quantum of the bank guarantee should be enhanced. Counsel for the respondent expressly stated on instructions that there was no objection to enhancement. The Court therefore modified the High Court's order by increasing the bank guarantee from Rs. 10 crores to Rs. 15 crores, while leaving the remaining conditions imposed by the High Court undisturbed. The Special Leave Petition was disposed of accordingly. [Paras 4]

The High Court order is modified to direct a bank guarantee of Rs. 15 crores for provisional release; other conditions of the High Court continue to govern.

Final Conclusion: The Special Leave Petition is disposed of by enhancing the bank guarantee directed by the High Court from Rs. 10 crores to Rs. 15 crores; all other conditions imposed by the High Court remain in force and pending applications are disposed of.

Applicability of Section 42 vis-A -vis Section 43 of the NDPS Act - public place under NDPS Act and its Explanation to Section 43 - representative sampling and standing instructions for sampling (Standing Order 1/1989) - homogeneity requirement for composite samples - chain of custody and preservation of seals in seizure cases - admissibility and probative value of confessional statements and panchnama

Applicability of Section 42 vis-A -vis Section 43 of the NDPS Act - public place under NDPS Act and its Explanation to Section 43 - Whether the search and seizure fell under Section 42 of the NDPS Act or was a seizure in a public place governed by Section 43 and thus exempt from the mandatory requirements of Section 42. - HELD THAT: - The Court held that the seizure occurred in an airport departure area which falls within the wide inclusive definition of a public place under the Explanation to Section 43. Prior decisions treating airport/customs areas as non-public were examined and distinguished as per incuriam where necessary. Since the place was a public place, the mandatory formalities of Section 42 (recording reasons for belief and taking down information in writing before search/seizure) were not applicable; Section 43 governs seizures in public places and does not require those formalities. Therefore non-compliance with procedural requirements of Section 42 is irrelevant where the search/seizure is in a public place. [Paras 48, 49, 51, 52, 53]

Section 42 was not applicable; the seizure was governed by Section 43 as it occurred in a public place (airport), so non-compliance with Section 42 did not vitiate the seizure.

Representative sampling and standing instructions for sampling (Standing Order 1/1989) - homogeneity requirement for composite samples - Whether the samples drawn by the seizing officers were representative of the recovered material and whether the sampling procedure adopted complied with the recognized sampling instructions, so as to establish that the recovered material was charas and quantify it. - HELD THAT: - The Court analysed the evidence concerning the manner of sampling. Although the IO initially asserted that contents of each packet were tested, his cross-examination, the panchnama and other record showed that only a very small quantity (tip of a matchstick) was tested, there was no clear evidence of testing each packet separately, and no reliable evidence of creating a homogeneous mixture of the contents before drawing three 45 g samples. The Court referred to the Standing Order 1/1989 and authorities emphasising that where multiple packages exist, samples should normally be drawn from each container or as per prescribed lotting procedure; the instructions aim to ensure samples are truly representative. Here the procedure was not followed; there is no clarity as to packet sizes, contents or that mixing (crushing to make homogeneous mass) occurred. Consequently the Court concluded the samples cannot be treated as representative of all four packets and prosecution failed to establish the recovered material as charas in respect of the entire seized quantity. [Paras 75, 76, 77, 78, 84]

The sampling procedure was irregular and the samples were not shown to be representative of all four packets; prosecution failed to establish that the entire recovered material was charas.

Chain of custody and preservation of seals in seizure cases - Whether the prosecution established an unbroken and reliable chain of custody and preservation of seals for the samples and remnant material so as to exclude tampering. - HELD THAT: - The Court found gaps and inconsistencies in the proof of custody. Although detention receipts and certain entries were produced, the record does not establish how the sample A-1 was withdrawn from safe custody for dispatch to the laboratory; relevant acknowledgments were not exhibited; test memos produced by the IO lacked the seal impression while the laboratory copy bore the seal, raising questions about timing of sealing; and the Delhi Duty Free bag described in panchnama was absent when the pullanda was opened in Court. The SDO(A) register contained no entry about withdrawal of the sample. These lacunae meant the prosecution failed to satisfactorily establish the chain of custody and to exclude the possibility of tampering or re-packing. [Paras 100, 101, 102, 103, 104]

Chain of custody was not satisfactorily established and doubts of tampering or improper handling of samples/case property remain.

Admissibility and probative value of confessional statements and panchnama - Whether the appellant's signatures on the panchnama and his statement under Section 67 of the NDPS Act obviated the prosecution's obligation to independently prove that the seized substance was charas. - HELD THAT: - The Court observed that the appellant contested voluntariness and contended lack of English proficiency; he also retracted the Section 67 statement and alleged coercion. The panchnama/signature could not be treated as an incontrovertible admission because the appellant asserted he did not understand what he signed and the defense had challenged the authenticity and voluntariness. Confessional statements are weak evidence and can only corroborate independent proof; they do not relieve the prosecution of its duty to establish the nature and origin of the seized material by independent evidence. Given the deficiencies in sampling and chain of custody, the panchnama and Section 67 statement could not substitute for the required proof. [Paras 86, 87, 88, 89, 90]

The appellant's signatures and Section 67 statement did not absolve the prosecution of its burden to prove by independent and reliable evidence that the material was charas; the confessional/panchnama could not cure the evidentiary defects.

Final Conclusion: For the reasons stated, the prosecution failed to establish that the entire seized quantity was charas (samples were not shown to be representative) and failed to prove an unbroken chain of custody; confessional material and panchnama could not cure these infirmities. The conviction was therefore set aside and the appellant acquitted.

Extension of period under Section 110(2) of the Customs Act - requirement of hearing before extension - reasons to be recorded in writing as basis for extension - service of information within the extended period - judicial review limited to illegality, irrationality or procedural defect - effect of invalid extension on seizure and confiscation proceedings

Requirement of hearing before extension - reasons to be recorded in writing as basis for extension - Whether the amended Proviso to Section 110(2) requires a hearing before an extension of the six month period is granted - HELD THAT: - The Court held that the 2018 amendment effected a material change to the Proviso by replacing the requirement of 'sufficient cause being shown' with a mandate that 'reasons be recorded in writing'. By necessary implication the amended Proviso excludes a pre decisional hearing before an extension is granted. The Court followed the Division Bench of the Rajasthan High Court in holding that the earlier line of decisions requiring a prior notice and hearing were premised on the pre amendment phraseology and that the amendment deliberately dispensed with the hearing requirement, leaving only the obligation to record reasons and to inform the person from whom goods were seized within the period specified in the extension order. [Paras 13, 14, 15]

A pre decisional hearing is not required under the amended Proviso to Section 110(2); recording of reasons in writing suffices.

Extension of period under Section 110(2) of the Customs Act - service of information within the extended period - When the extension order must be made and when information of that extension must be served on the person from whom goods were seized - HELD THAT: - The Court held that the order of extension must be passed within the initial six month period (i.e., the order must be made before expiry of the original period). However, under the amended Proviso the information of the reasons for extension need only be served before the expiry of the extended period specified in the extension order. Thus the timing obligation is twofold: (i) the extension order itself must be made within the initial six months; and (ii) service of information (including the recorded reasons) need only occur within the extended period specified by the Commissioner. [Paras 15, 16]

Extension order must be made within the initial six months; service of information including reasons may be effected within the extended period.

Judicial review limited to illegality, irrationality or procedural defect - Whether the reasons recorded in Annexure R1(a) for extending the period were arbitrary or perverse so as to warrant interference on judicial review - HELD THAT: - The Court reviewed the reasons recorded by the Commissioner (including the modus operandi to evade duty, inadequacy of explanation by persons from whose custody goods were recovered, inter State accomplices, and disruption caused by the COVID 19 pandemic) and found them neither arbitrary nor perverse. The Court emphasised that review of an extension order is confined to conventional Wednesbury type or illegality grounds; unless reasons shock the conscience or are irrational, the Court will not interfere. The pandemic and related governmental measures were accepted as material and rational factors supporting the extension. [Paras 16, 17, 18, 21]

The recorded reasons for extension are rational and do not merit interference on judicial review.

Effect of invalid extension on seizure and confiscation proceedings - Whether an invalid extension vitiates the entire confiscation proceedings or only mandates restoration of goods - HELD THAT: - The Court reiterated the settled principle (as in Charan Das Malhotra) that the limited consequence of an expiry of the time for issuing notice under Section 110(2) is that the seized goods would have to be returned to the person from whose possession they were seized; the validity of confiscation proceedings is not ipso facto vitiated by a defective extension. Applying that principle, and having found the extension valid on the facts, the Court upheld continuation of confiscation proceedings and rejected the appellants' challenge seeking release of the gold on the ground of expiry of time. [Paras 6, 21]

Invalidity of an extension would only affect retention (entitling restoration of goods); it does not automatically foreclose confiscation proceedings. On the facts the extension was valid and proceedings may continue.

Final Conclusion: The Division Bench dismissed the appeal, upheld the Single Judge's refusal to interfere with the extension order under Section 110(2) as validly grounded and not vitiated by procedural defect, and refused to direct release of the seized goods; parties to bear their respective costs.

Re export of goods - judicial direction to administrative authority to decide representation in accordance with law - invalidity of administrative non decision or indefinite deferral - adjudication under the FSSAI Act and competence of adjudicating authority

Re export of goods - judicial direction to administrative authority to decide representation in accordance with law - invalidity of administrative non decision or indefinite deferral - adjudication under the FSSAI Act and competence of adjudicating authority - Impugned order dated 22.07.2020 which declined to decide the petitioner's request for re export and deferred consideration pending adjudication/report was unsuitable and a fresh decision was required. - HELD THAT: - The Court found that its earlier order dated 03.07.2020 directed the Commissioner to take a decision on the petitioner's representation seeking permission for re export of the goods in accordance with law. The impugned order merely recorded that one consign ment was subject to adjudication under the FSSAI Act and that another awaited a PQ report, and on that basis declined to grant re export, resulting in an effective indefinite deferral rather than a conclusive decision. Such a disposal did not comply with the Court's direction to decide the representation one way or the other. The Commissioner was therefore required to pass a fresh or consequential order on the petitioner's prayer for re export, taking a determinative decision in accordance with law while keeping in mind the observations made by the Court. [Paras 5, 6]

Impugned order set aside to the extent it amounted to an indefinite deferral; Commissioner directed to pass a fresh/consequential decision on the representation for re export within two weeks, in accordance with law.

Final Conclusion: Writ petition allowed in part. The order dated 22.07.2020 is quashed insofar as it deferred decision; the Commissioner is directed to decide the petitioner's representation for re export of the goods in accordance with law within two weeks and place the order before the Court on the next date.

Transaction value - judicial discipline and binding effect of appellate orders - provisional release under section 110 A - limitation for filing appeal under section 129 A - extension of limitation under Taxation and Other Laws (Relaxation) Ordinance, 2020

Judicial discipline and binding effect of appellate orders - provisional release under section 110 A - Respondents were not justified in refusing to release the imported watch in terms of the appellate order and in insisting on provisional release subject to conditions. - HELD THAT: - The appellate authority set aside the order in assessment and directed assessment at the invoice price. In absence of any stay or suspension of that appellate order, subordinate authorities are required to give effect to it; mere filing of an appeal by the department does not justify non compliance (relying on the Supreme Court decision in Kamlakshi Finance and consistent High Court authorities). Section 110 A applies only where goods have been seized under section 110 and proceedings are pending; here there was no seizure and assessment had been made (and subsequently set aside), hence section 110 A is inapplicable and cannot be invoked to impose provisional release conditions beyond the appellate order. Insistence on bond, bank guarantee and other conditions post the appellate order was therefore unlawful. The respondents' contention that the petitioners could choose provisional release does not excuse the department from complying with the appellate direction. [Paras 27, 29, 31, 32, 33]

Respondent Nos.2 and 3 must release the imported watch forthwith in terms of the order in appeal dated 29.11.2019.

Limitation for filing appeal under section 129 A - extension of limitation under Taxation and Other Laws (Relaxation) Ordinance, 2020 - The departmental appeal to CESTAT was time barred unless extended; the 2020 Ordinance did not extend limitation in this case because the three month period expired before the Ordinance's applicable window. - HELD THAT: - Limitation for filing an appeal under section 129 A runs from the date the order is communicated. The appellate order was communicated on 18.12.2019; three calendar months therefore expired on 18.03.2020. The Taxation and Other Laws (Relaxation) Ordinance, 2020 extends limitations only where the prescribed period expired during 20.03.2020 to 29.06.2020; since the limitation expired on 18.03.2020 the Ordinance does not assist the department. The department remains entitled to seek extension under sub section (5) of section 129 A by showing sufficient cause, but the Court noted lackadaisical conduct by the department in delaying its actions and observed that no stay had been obtained from CESTAT despite filing the appeal and stay application. [Paras 21, 23, 24, 25, 26]

The limitation to file appeal had expired on 18.03.2020; the 2020 Ordinance could not extend that limitation in the facts of this case, though the department could seek condonation under subsection (5) of section 129 A.

Transaction value - judicial discipline and binding effect of appellate orders - An order in original which has been set aside by an appellate authority loses its operative effect and cannot be relied upon to impose conditions or sustain actions. - HELD THAT: - The appellate order set aside the earlier order in assessment. When an order is set aside by a superior authority it becomes inoperative and ceases to have effect. Consequently the departmental order in assessment could not be used as a basis to demand provisional release conditions or to withhold release of the goods pending departmental measures, unless the appellate order itself is stayed or set aside. That legal consequence reinforces the obligation of subordinate authorities to implement the appellate direction absent a competent suspension. [Paras 29]

The order in assessment being set aside had lost its effectiveness; respondents could not rely on it to deny release in terms of the appellate order.

Final Conclusion: Writ petition allowed; respondents directed to release the imported watch forthwith in accordance with the appellate order dated 29.11.2019; no order as to costs.

Classification of marble vs other calcareous stone (technical/scientific test vs commercial parlance) - import licensing under SIL and relevance of date of shipment - confiscation under Section 111(d) and 111(m) of the Customs Act, 1962 - penalty under Section 112(a) of the Customs Act, 1962 - principle in Akbar Badruddin Jiwani that technical/scientific meaning governs classification - limitation on redemption fine and penalty to 20% and 5% of CIF value

Classification of marble vs other calcareous stone (technical/scientific test vs commercial parlance) - principle in Akbar Badruddin Jiwani that technical/scientific meaning governs classification - Imported consignments characterised as 'other calcareous stone' and not 'marble'. - HELD THAT: - Samples drawn from the consignments were tested by GSI, which opined that the material was a variety of limestone and did not show evidence of metamorphic recrystallisation and thus was not marble. The Commissioner relied on that report and on the Supreme Court principle in Akbar Badruddin Jiwani that, where both marble and calcareous stone appear in tariff entries, classification must be by technical/scientific meaning rather than commercial trade parlance. The appellants failed to produce evidence to substantiate the alternative claim that the material was commercially treated as marble, and cross-examination of the GSI officer affirmed the testing opinion. On these bases the Tribunal upheld the finding that the goods are calcareous stone other than marble. [Paras 11, 12, 13]

The consignments are 'other calcareous stone' and not 'marble'.

Import licensing under SIL and relevance of date of shipment - confiscation under Section 111(d) and 111(m) of the Customs Act, 1962 - penalty under Section 112(a) of the Customs Act, 1962 - Goods are liable to confiscation for import without required specific import licence and attract penalties. - HELD THAT: - At the relevant time calcareous stone other than marble required a specific import licence; import permission under SIL for such stones was granted only from 8.5.1999. The Tribunal agreed with the Commissioner that the date of shipment is the relevant date for testing validity of import permissions. Precedents of the Madras and Bombay High Courts and this Tribunal were followed to the effect that absence of a valid licence on the date of shipment renders the import impermissible. Given the classification as calcareous stone other than marble and the lack of the requisite licence at shipment, the goods were held liable to confiscation under Section 111(d) (import without licence) and Section 111(m) (mis-declaration) and penalty under the Customs law was sustained. [Paras 14, 15, 16]

Confiscation under Sections 111(d) and 111(m) sustained and penalties are imposable.

Limitation on redemption fine and penalty to 20% and 5% of CIF value - Quantum of redemption fine and penalty reduced to 20% and 5% of CIF respectively and matter remanded for computation. - HELD THAT: - While the Tribunal upheld liability to confiscation and penalty, it found the redemption fine and penalty imposed by the Commissioner excessive. Applying prior decisions of this Tribunal and the High Court (and those approved by the Supreme Court) the Tribunal held that justice would be met by restricting the redemption fine to 20% of CIF value and the penalty to 5% of CIF value. The appeals were therefore modified to that extent and remanded to the adjudicating authority to calculate the amounts accordingly. [Paras 18, 19]

Redemption fine reduced to 20% of CIF and penalty reduced to 5% of CIF; appeals remanded for calculation.

Final Conclusion: The Tribunal upheld the technical classification of the imports as calcareous stone other than marble, sustained confiscation and penalties for import without requisite licence (date of shipment being material), but moderated the redemption fine and penalty to 20% and 5% of CIF respectively and remanded the matters for computation.

Right to be heard - implementation of settlement subject to adjudicatory hearing - filing of terms of settlement by the Insolvency Resolution Professional - role of committee of creditors and allottees in settlement process - interim restraint on implementation pending judicial scrutiny

Right to be heard - role of committee of creditors and allottees in settlement process - Allottees and financial creditors must be heard by the NCLAT before any settlement or resolution plan placed by the IRP is finalised. - HELD THAT: - The Court held that irrespective of the Petitioner's status as an allottee or the IRP's issuance of notices, an allottee who applies to the NCLAT is entitled to be heard before finalisation of terms of settlement. The petition filed before the NCLAT under rule 11 of the NCLAT Rules ought to be taken up at an early date so that, before a resolution plan or settlement is approved, all allottees and financial creditors have an opportunity to make submissions and have their grievances addressed. The Court emphasised that the decision-making process concerning settlement must include hearing interested allottees and financial creditors, and that such hearing is a necessary antecedent to any finalisation of settlement or resolution plan. [Paras 8]

NCLAT shall hear the Petitioner and any other financial creditors and allottees who wish to make submissions before finalising any settlement or resolution plan.

Filing of terms of settlement by the Insolvency Resolution Professional - implementation of settlement subject to adjudicatory hearing - interim restraint on implementation pending judicial scrutiny - The IRP must file the terms of settlement before the NCLAT and shall not implement the terms of settlement or further course of action until NCLAT has heard interested parties and passed appropriate orders. - HELD THAT: - In line with the earlier order dated 13th March, 2020, the Court directed that the IRP shall file the terms of settlement before the NCLAT. The NCLAT is to hear all interested parties and address grievances in accordance with law; until such hearing and orders, neither the company nor the IRP shall implement the terms of settlement or take further action pursuant to those terms. The Court framed this as an interim restraint to ensure that the settlement process is subject to judicial scrutiny and that parties affected by the settlement are heard before implementation. [Paras 9, 10, 12]

IRP to file the terms of settlement before NCLAT; implementation of the terms and any further course of action is restrained until NCLAT hears interested parties and passes orders; applications to be listed before NCLAT on 12th October, 2020.

Implementation of settlement subject to adjudicatory hearing - This Court did not adjudicate the merits of the competing allegations between the parties and left merits to be considered by the NCLAT. - HELD THAT: - The Court expressly recorded that it has not examined the merits of the disputes between allottees, financial creditors and the IRP, noting that several allegations exist between the parties. Those merits shall be considered by the NCLAT and are not affected by observations in this order. The direction given is procedural and interlocutory, confined to ensuring hearing and restraint on implementation until NCLAT consideration. [Paras 11]

Merits of the dispute are left open for adjudication by the NCLAT and are not decided by this Court.

Final Conclusion: The petition is disposed of by directing the IRP to place the terms of settlement before the NCLAT, directing NCLAT to hear the petitioner and other interested allottees and financial creditors (listed on 12th October, 2020), restraining implementation of the settlement or further action by the company or IRP until NCLAT passes orders, and leaving the merits of the disputes to be decided by NCLAT.

Condonation of delay in submission of Expression of Interest - natural justice and opportunity to be heard in EoI processes - resolution framework and time bound corporate resolution principles - application of principles underlying Corporate Insolvency Resolution Process - Swiss Challenge Method and right to match in divestment process - approval of sale under an approved resolution framework

Condonation of delay in submission of Expression of Interest - natural justice and opportunity to be heard in EoI processes - Whether the delay in submission of the Applicant's EoI ought to be condoned and whether the Applicant was entitled to a further hearing so as to have its belated EoI considered. - HELD THAT: - The Tribunal found that the Applicant submitted its EoI well after the advertised deadline and failed to show sufficient cause for the delay. The invitation for EoI had been widely published and the Applicant had a Mumbai office, negating its contention of non receipt. The Tribunal applied the underlying objective of time bound resolution processes - to prevent asset value erosion and to preserve progress made in the interim - and held that permitting the belated EoI would frustrate those timelines and the steps already taken by the FTAs and the Board. The Tribunal also observed that rejection of an EoI on grounds of delay does not necessarily engage a duty to provide an oral hearing where the deadline condition was clear and widely publicized. On these findings the Tribunal declined to condone the delay and rejected the Applicant's challenge. [Paras 20]

Application seeking condonation of delay and consideration of the belated EoI is rejected.

Resolution framework and time bound corporate resolution principles - application of principles underlying Corporate Insolvency Resolution Process - Swiss Challenge Method and right to match in divestment process - approval of sale under an approved resolution framework - Whether the sale of IL&FS's 59.18% stake in CPG to the successful bidder was effected in accordance with the approved Resolution Framework and should be sanctioned by the Tribunal. - HELD THAT: - The Tribunal reviewed the process followed: appointment of valuers, determination of fair value, initiation of counter bid and public EoI, shortlisting, RFP stage, receipt of bids, application of the Swiss Challenge mechanism (including right to match subject to the 120% threshold), approval by the Committee of Creditors by requisite voting share, and the recommendation and approval by the supervisory authority (Hon'ble Justice D.K. Jain (Retd.)). Although the Code was not strictly applicable, the Tribunal treated its underlying time bound and value maximizing principles as relevant. Having perused the pleadings and documents and noting that the Union of India had no objection, the Tribunal was satisfied that the sale complied with the Resolution Framework and therefore warranted approval and recording by the Tribunal. [Paras 15, 21]

Application for sanction and implementation of the Share Purchase Agreement for sale of the 59.18% stake in CPG is allowed and the sale is approved in terms of the Resolution Framework.

Final Conclusion: The application by Sigma Outsourcing Services Private Limited seeking condonation of delay and consideration of its belated EoI is rejected; the application seeking sanction and implementation of the sale of IL&FS's 59.18% stake in CPG to the successful bidder is allowed and the sale is approved in accordance with the approved Resolution Framework.

Power to compromise or make arrangements with creditors and members - Dispensation of meetings of creditors by affidavit consent - Requirement to call meetings of members under Section 230 - Quorum and adjournment rules for meetings convened under Sections 230-232 - Service of notice and publication requirements for scheme meetings - Appointment of chairperson and scrutinizer for scheme meetings

Requirement to call meetings of members under Section 230 - Power to compromise or make arrangements with creditors and members - Whether meetings of shareholders/members of the applicant companies could be dispensed with. - HELD THAT: - The Tribunal held that Section 230 of the Companies Act, 2013 does not provide for dispensing with meetings of shareholders/members; the statutory scheme contemplates that meetings of members must be called and conducted in the manner prescribed. Consequently, the applicants' prayer for dispensation of members' meetings cannot be granted and meetings of the shareholders of both companies were directed to be convened in accordance with the Act and Rules. [Paras 8]

Dispensation of shareholders' meetings refused; meetings of members to be convened as directed.

Dispensation of meetings of creditors by affidavit consent - Power to compromise or make arrangements with creditors and members - Whether the meeting of Unsecured Creditors of Transferor/Applicant Company No.1 could be dispensed with on the basis of affidavits of consent. - HELD THAT: - The Tribunal accepted the representation that unsecured creditors holding 92% in value of the unsecured debt had given their consent by affidavit and that those affidavits were placed on record. In view of the statutory provision permitting dispensation of calling a meeting of a class of creditors where creditors holding at least ninety percent in value agree by affidavit, the Tribunal concluded that convening a meeting of the unsecured creditors of the Transferor Company was unnecessary and dispensed with that meeting.

Meeting of Unsecured Creditors of Transferor/Applicant Company No.1 dispensed with on the basis of affidavit consent.

Quorum and adjournment rules for meetings convened under Sections 230-232 - Service of notice and publication requirements for scheme meetings - Appointment of chairperson and scrutinizer for scheme meetings - Directions to be issued for calling, conducting and completing the meetings of specified classes of members and creditors in relation to the proposed scheme. - HELD THAT: - Having refused dispensation of members' meetings and having dispensed only the Transferor's unsecured creditors' meeting, the Tribunal issued detailed directions for calling and conducting the requisite meetings: specific dates, times and venues (with online option) were fixed for meetings of equity shareholders, preference shareholders (where applicable), secured creditors and unsecured creditors (where not dispensed); quorum requirements and adjournment procedure (adjourn by half an hour and then persons present to constitute quorum) were prescribed; appointment of a Chairperson, Alternate Chairperson and Scrutinizer was made; procedures for notice, sending of scheme documents, publication in newspapers, voting modes (in person, by proxy, postal ballot or electronic means), filing of affidavits of service and compliance, and service of copies to statutory authorities were directed to be strictly followed in accordance with the Companies Act and the Rules.

Meetings directed to be convened and conducted on specified terms; appointments and procedural requirements ordered; compliance to be in accordance with law.

Final Conclusion: The joint application under Sections 230-232 was allowed in part: dispensation of the Transferor Company's unsecured creditors' meeting was granted on affidavit consent, dispensation of shareholders' meetings was refused and meetings of the relevant classes were directed to be convened and conducted under the detailed directions issued by the Tribunal; all procedural requirements and service obligations are to be complied with strictly.

Scheme of Arrangement involving de-merger - dispensation of shareholder and creditor meetings on affidavited consent - convening separate meetings of secured and unsecured creditors with statutory notice and publication requirements - appointment and powers of chairman and scrutinizer for creditor meetings - voting by ballot/poll and proxy/authorized representative procedure - compliance with Section 230 read with Sections 231-232 and Companies (CAA) Rules for meeting notice, filing and reporting

Dispensation of shareholder and creditor meetings on affidavited consent - Meetings of the equity shareholders of both applicant companies and the meeting of unsecured creditors of the resulting company were dispensed with, and meeting of secured creditors of the resulting company was held unnecessary. - HELD THAT: - The Tribunal recorded that all equity shareholders of both applicant companies had executed affidavits consenting to the proposed Scheme and that the two unsecured creditors of the resulting company had given their consent by affidavit. On the basis of these consents and the certified lists from the chartered accountants, the Tribunal dispensed with convening the meetings of equity shareholders of both companies and dispensed with the meeting of unsecured creditors of the resulting company. The Tribunal also noted that the resulting company had no secured creditors and therefore a meeting of secured creditors of the resulting company was not necessary.

Meetings of equity shareholders of both companies and of unsecured creditors of the resulting company are dispensed with; meeting of secured creditors of the resulting company is unnecessary.

Convening separate meetings of secured and unsecured creditors with statutory notice and publication requirements - compliance with Section 230 read with Companies (CAA) Rules for notice, advertisement and filing - Separate meetings of secured creditors and unsecured creditors of the de merged company were directed to be convened on specified date(s) with detailed procedural directions for notice, advertisement, and reporting. - HELD THAT: - The Tribunal directed that separate meetings of secured and unsecured creditors of the de merged company be convened to consider the Scheme. It prescribed that notices in Form No. CAA 2 together with the Scheme, explanatory statement (as required under Section 102 read with Sections 230-232) and proxy form be sent at least one month prior to the meeting to creditors as on 31st March 2020 by Registered Post/Speed Post/Courier or e mail. The Tribunal further ordered publication of the convening advertisement once in the English and Gujarati daily specified, availability of the statement and proxy at the registered office and the advocate's office, and that representations by statutory authorities be invited in accordance with the statutory time frame. The Tribunal required the chairman to file an affidavit before the meetings evidencing compliance with issuance of notices and advertisement and to file the result of the meetings in Form CAA4 verified by affidavit within twenty days after conclusion, consistent with the Companies (CAA) Rules.

Separate creditor meetings of the de merged company are to be convened with the Tribunal directed notice, publication and filing requirements to ensure statutory compliance.

Appointment and powers of chairman and scrutinizer for creditor meetings - voting by ballot/poll and proxy/authorized representative procedure - Chairman and scrutinizer were appointed for the creditor meetings and procedural rules for quorum, voting, proxy and determination of vote value were prescribed. - HELD THAT: - The Tribunal appointed an independent practising chartered accountant (or failing him an independent practising company secretary) as Chairman for the meetings and named practising company secretaries as scrutinizer(s). It empowered the Chairman to issue notices and advertisements, to avail services of the applicant company or agencies for carrying out directions, and to exercise procedural powers under the articles and applicable rules, including determination of any procedural question, consideration of amendments, and ascertaining the decision by poll. The Tribunal prescribed quorum requirements for secured and unsecured creditor meetings, permitted voting by proxy or authorized representative subject to filing the prescribed authorization 48 hours before the meetings, provided that vote entitlement be determined by entries in the books of account and, where disputed, by the Chairman for the purposes of the meeting, and mandated voting at the venue by ballot/poll.

Chairman and scrutinizer appointed; procedures for quorum, proxy, vote valuation, and voting by ballot/poll at the meetings are directed and vested in the Chairman as specified.

Final Conclusion: The Tribunal granted procedural reliefs necessary to proceed with the proposed de merger Scheme: it dispensed with specified meetings where unanimous affidavited consents existed, found no need for secured creditor meeting of the resulting company, and issued detailed directions to convene and conduct separate secured and unsecured creditor meetings of the de merged company in compliance with statutory requirements, including appointment of chairman and scrutinizer, notice and publication protocols, voting procedures and reporting to the Tribunal.

Restoration of company name in register - striking off under Section 248 of the Companies Act, 2013 - service of notice and opportunity to be heard - statutory compliance in filing financial statements and annual returns - directors' disqualification and DIN reactivation

Restoration of company name in register - striking off under Section 248 of the Companies Act, 2013 - service of notice and opportunity to be heard - statutory compliance in filing financial statements and annual returns - directors' disqualification and DIN reactivation - The Tribunal directed restoration of the appellant company's name in the Register of Companies and imposed conditions for compliance while addressing the strike-off action under Section 248. - HELD THAT: - The Tribunal, after hearing the appellant and perusing the pleadings and documents, was satisfied with the reasons advanced in the appeal and considered it just and proper to restore the company's name on the Register. Although the Registrar of Companies contended that procedural requirements under Section 248 had been complied with and that the company had defaulted in filing statutory returns for relevant years, the Tribunal granted restoration subject to specified conditions. The company was directed to file all outstanding statutory documents with prescribed fees/additional fee/fine and to submit a declaration from the directors regarding deposits during the demonetisation period within thirty days of restoration. The appellant was ordered to pay costs to the Registrar and to ensure personal compliance through the company's representative. The Registrar was directed to publish the order in the official Gazette after compliance. The Tribunal clarified that if directors are disqualified their DINs shall not be reactivated, and that the order is confined to the violations that led to striking off and does not preclude the Registrar from taking other lawful actions for any other violations or offences. [Paras 11]

The appeal is allowed by restoring the company's name in the Register of Companies subject to filing outstanding statutory documents with prescribed fees/fines, submission of the declaration regarding demonetisation deposits, payment of costs, personal supervision of compliance by the company's representative, publication of the order by the Registrar, non-reactivation of DINs of disqualified directors, and without prejudice to the Registrar taking further lawful action for other violations.

Final Conclusion: The Tribunal allowed the company appeal and ordered restoration of the company's name on the Register of Companies subject to compliance with enumerated conditions, payment of costs and without prejudice to any further action that the Registrar may lawfully take in respect of other violations.

Restoration of company struck off - Fast Track Exit (FTE) and defunct company - material omission and false statements in FTE application - penal consequences for false statements in FTE application - duty to file statutory returns and annual accounts on restoration - obligation to discharge pending income-tax arrears for specified assessment years - conditions for reactivation of Director Identification Numbers (DIN) - publication of restoration order in the Official Gazette

Restoration of company struck off - Fast Track Exit (FTE) and defunct company - publication of restoration order in the Official Gazette - Whether the name of the Company struck off under FTE should be restored to the Register of Companies. - HELD THAT: - The Tribunal, after considering the appellant's explanation and the Registrar of Companies' report, observed that the ROC had no objection to restoration. The Tribunal found the reasons given in the appeal satisfactory and concluded that it would be just and proper to order restoration of the Company's name in the Register of Companies. The Tribunal prescribed consequential steps to be complied with following restoration, including filing of statutory documents and publication by the ROC in the Official Gazette. [Paras 11, 13]

The appeal is allowed insofar as the name of the Company is restored to the Register of Companies subject to the conditions and directions set out by the Tribunal.

Material omission and false statements in FTE application - penal consequences for false statements in FTE application - duty to file statutory returns and annual accounts on restoration - obligation to discharge pending income-tax arrears for specified assessment years - conditions for reactivation of Director Identification Numbers (DIN) - Validity of the FTE application in light of alleged concealment of assets and the conditions to be imposed on restoration including filing pending statutory documents and tax arrears. - HELD THAT: - The Tribunal recorded that the FTE application, on re-examination, disclosed concealment of the true state of affairs regarding assets and that affirmations in the application and affidavit that the company had no assets or liabilities amounted to material omissions/statements which were false and could attract penal consequences. Notwithstanding these findings, the Tribunal exercised its remedial jurisdiction to allow restoration subject to conditions: filing all pending annual returns and accounts along with prescribed fees/fines; submission of a declaration by directors regarding deposits during the demonetisation period; payment of specified costs to the ROC within the stipulated time; filing of pending income-tax arrears for the assessment years 2002-03 to 2008-09 within two months; and that DINs of disqualified directors shall not be reactivated and proposed reactivations should observe the restriction that such persons are not directors of any other company struck off under the Act. The Tribunal also cautioned that restoration is confined to the violations leading to striking off and does not preclude the ROC from taking further legal action for any other violations. [Paras 9, 12, 13]

The Tribunal found material omissions in the FTE application but ordered restoration subject to specified compliance conditions, payment of costs and reservation of ROC's right to take further action for other violations.

Final Conclusion: The Company Appeal is allowed and the Company's name is restored to the Register of Companies subject to conditions: filing of all pending statutory documents with fees/fines, submission of a directors' declaration regarding demonetisation-period deposits, payment of the prescribed cost to the ROC, filing of pending income-tax arrears for Assessment Years 2002-03 to 2008-09, compliance as to DIN reactivation rules, publication of the order in the Official Gazette, and without prejudice to the ROC's right to take further action for any other violations.

Commercial wisdom of the Committee of Creditors - feasibility and viability of a resolution plan - limited judicial review under Section 30(2) of the Code - manner of distribution among classes and subclasses of creditors having regard to order of priority and value of security interest - non justiciability of CoC's allocation of distribution where statutory parameters are satisfied

Commercial wisdom of the Committee of Creditors - feasibility and viability of a resolution plan - limited judicial review under Section 30(2) of the Code - manner of distribution among classes and subclasses of creditors having regard to order of priority and value of security interest - non justiciability of CoC's allocation of distribution where statutory parameters are satisfied - Validity of the CoC's decision to allocate 0.5% to second charge holders and whether that allocation is amenable to judicial interference - HELD THAT: - The Tribunal applied the principles laid down in the Supreme Court's Essar Steel decision and concluded that the commercial wisdom of the requisite majority of the Committee of Creditors governs acceptance of a resolution plan, including how funds are to be distributed among different classes and subclasses of creditors. The Tribunal observed that feasibility and viability of the resolution plan encompass the proposed manner of distribution and that judicial review under Section 30(2) is limited to ensuring statutory parameters (maximising asset value, going concern, and consideration of stakeholders' interests) have been considered. Given the liquidation value and the admitted claims, the CoC's decision to offer 0.5% to second charge holders was within its commercial domain and not vitiated by a failure to consider the statutory factors; therefore the allocation is not justiciable on the facts of this case. [Paras 7, 8]

The CoC's allocation of 0.5% to second charge holders cannot be questioned and is not justiciable.

Commercial wisdom of the Committee of Creditors - manner of distribution among classes and subclasses of creditors having regard to order of priority and value of security interest - non justiciability of CoC's allocation of distribution where statutory parameters are satisfied - Propriety of prayers seeking revision of the resolution plan, enhancement of the Applicant's settlement and interim restraint on the Resolution Professional from seeking approval of the plan - HELD THAT: - The Applicant sought revision of the plan to improve the settlement to second charge holders and interim relief restraining the Resolution Professional. The Tribunal noted that the Resolution Applicants had informed the CoC that changes to distribution were to be made by the CoC and that the plan had been approved by the requisite majority. In light of the limited scope of judicial review and the CoC having exercised its commercial wisdom (including consideration of security realisable value and liquidation value), the Tribunal found no basis to direct revision of the plan or to grant interim restraint. The allegations of manifest arbitrariness and comparative disadvantage to operational creditors did not demonstrate failure to consider statutory parameters. [Paras 1, 3, 7, 8]

The application seeking revision of the resolution plan, enhancement of the Applicant's settlement and interim restraint on the Resolution Professional is rejected.

Final Conclusion: The Tribunal dismissed the miscellaneous application and refused interim relief, holding that the Committee of Creditors' decision on distribution (including the 0.5% offer to second charge holders) fell within its commercial wisdom and was not amenable to judicial interference under the limited review permitted by Section 30(2) of the Code.

Initiation of liquidation where no resolution plan is received within CIRP period - effect of expiry of the CIRP period (270 days) on initiation of liquidation - requirement of requisite voting share of the Committee of Creditors for appointment of a liquidator - appointment and powers of the liquidator under Chapter III of the Code

Initiation of liquidation where no resolution plan is received within CIRP period - effect of expiry of the CIRP period (270 days) on initiation of liquidation - Liquidation of the corporate debtor was ordered because no resolution plan was received within the CIRP period. - HELD THAT: - The Tribunal found that the insolvency resolution process period had expired (270 days) and no resolution plan was received within that period. Relying on the mandate of the Code concerning initiation of liquidation where a resolution plan is not received before the expiry of the CIRP period, the Bench ordered liquidation of the corporate debtor in accordance with Chapter III. The Tribunal expressly refrained from resolving ancillary disputes about voting calculations of the Committee of Creditors before passing the liquidation order, holding that the statutory condition for initiation of liquidation under the cited provision was satisfied on the ground of non-receipt of any resolution plan within the CIRP period. [Paras 12]

Application under Section 33(1)(a) allowed and the corporate debtor ordered to be liquidated.

Requirement of requisite voting share of the Committee of Creditors for appointment of a liquidator - appointment and powers of the liquidator under Chapter III of the Code - Mr. Bhavesh Rathod was appointed as Liquidator and directed to perform duties and exercise powers under the Code. - HELD THAT: - The Tribunal recorded that the Committee of Creditors had passed a resolution to appoint a liquidator, but noted competing calculations and authorities on whether the requisite voting share threshold was met. Without adjudicating the contested question of the precise percentage computation or resolving the cited precedents on counting of votes, the Bench accepted the consent of Mr. Bhavesh Rathod to act as Liquidator and formally appointed him. The order directs the Liquidator to issue a public announcement, exercise the powers and perform duties under the relevant provisions of Chapter III, and take consequential steps including sending the order to the Registrar of Companies and the Insolvency and Bankruptcy Board of India. [Paras 13]

Mr. Bhavesh Rathod appointed as Liquidator; directed to carry out liquidation in accordance with the Code and applicable regulations.

Final Conclusion: The Tribunal allowed the application under Section 33(1)(a) and ordered liquidation of Ashapura Intimates Fashion Limited for non-receipt of any resolution plan within the CIRP period; Mr. Bhavesh Rathod was appointed as Liquidator and directed to proceed with liquidation in accordance with Chapter III of the Code.

Creditor's duty to file claim within CIRP period - resolution professional's duty to receive and collate claims - inherent powers of the Tribunal cannot be exercised to override express provisions of the Code - binding nature and finality of an approved resolution plan - admission of claims after approval of resolution plan impermissible

Creditor's duty to file claim within CIRP period - resolution professional's duty to receive and collate claims - Responsibility for filing proofs of claim during CIRP and whether the Resolution Professional was obliged to serve individual notices to creditors. - HELD THAT: - The Bench held that the statutory framework places the onus on creditors to submit claims after a public announcement by the Insolvency Professional and not on the Resolution Professional to individually notify creditors to file claims. Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 requires the Insolvency Professional to publish Form-A inviting claims, and claimants must file within the stipulated period. The Court rejected the submission that Section 18(1) duties of the IRP/RP impose a duty to send individual notices to creditors; those duties relate to collecting information and collating claims received, but do not relieve creditors of the responsibility to file timely claims. The applicant filed its claim after the completion of the CIRP and after approval of the resolution plan, and therefore the claim was filed belatedly. [Paras 9]

The creditor is responsible for filing its claim within the CIRP time-limit following the public announcement; the RP was not bound to individually notify the creditor to file the claim.

Inherent powers of the Tribunal cannot be exercised to override express provisions of the Code - Whether the Tribunal could invoke its inherent powers under Rule 11 of the NCLT Rules, 2016 to admit the belated claim despite statutory timelines. - HELD THAT: - The Bench accepted the principle that inherent powers cannot be used to contravene or override express statutory provisions. Citing the established rule that the inherent jurisdiction of a judicial forum cannot be invoked to cut across specific provisions of a statute, the Tribunal found that where the Code and the Regulations provide a comprehensive mechanism and timeline for filing and admitting claims, Rule 11 cannot be employed to admit claims filed after the stipulated period, particularly where doing so would be inconsistent with the Code's scheme. Reliance on earlier decisions permitting consideration of belated claims was distinguished on facts, especially where the resolution plan had already been approved in the present case. [Paras 10, 11, 12]

The Tribunal's inherent powers could not be invoked to admit the belated claim in contravention of the Code and Regulations.

Binding nature and finality of an approved resolution plan - admission of claims after approval of resolution plan impermissible - Whether claims filed after approval of the resolution plan can be admitted or considered where the resolution plan has been sanctioned. - HELD THAT: - The Bench observed that Section 31 and the object of the Code require finality of claims once a resolution plan is approved, so that a successful resolution applicant takes over the business on a 'fresh slate' without exposure to unforeseen liabilities. Allowing admission of claims after plan approval would undermine this finality and run counter to the statutory scheme. The Tribunal relied on the principle that claims must be submitted to and decided by the resolution professional within the CIRP, and held that admission of claims post-approval is impermissible. Earlier authorities permitting post hoc admission were distinguished because the resolution plan in this case had already been approved. [Paras 13, 14, 15, 16]

Claims filed after approval of the resolution plan cannot be admitted; the application to condone delay and admit the belated claim is not maintainable.

Final Conclusion: The application seeking condonation of delay and admission of the belated claim was rejected as not maintainable; the claim, filed after completion of the CIRP and after approval of the resolution plan, could not be admitted and the Tribunal refused to exercise inherent powers to override the Code.

Entitlement to termination payment under Article 15.7 of the contract - classification of claimed losses as consequential damages under Article 9 - verification of claims and duty to call for evidence under Section 39 of the Insolvency and Bankruptcy Code, 2016 - admission of claims in liquidation - contractual notice and termination in terms of Article 15.2

Entitlement to termination payment under Article 15.7 of the contract - classification of claimed losses as consequential damages under Article 9 - contractual notice and termination in terms of Article 15.2 - The liquidator's rejection of the claim for 'idle charges' was incorrect and such charges form part of the termination payment recoverable under Article 15.7 following termination under Article 15.2. - HELD THAT: - The Adjudicating Authority found that the contract was validly terminated by the applicant after serving contractual notices and pursuant to Article 15.2, and that upon such termination the contractor was entitled to termination payment as set out in Article 15.7. The Authority held that the claim for 'idle charges' represents costs occasioned by termination (costs of demobilization, costs that could not be avoided, or direct costs of termination) and is not a claim for consequential damages governed by Article 9. The respondent's contention that Article 9 applies was rejected on the basis that the applicant's claim is for costs incurred because of stoppage of work, non-payment and termination and thus falls within the scope of Article 15.7 rather than being an excluded consequential loss. The Authority also noted that during the period between the last PPC and CIRP admission the corporate debtor did not object to the claim or to the termination, supporting the applicant's entitlement to the termination components claimed. [Paras 5, 6, 7, 8, 10]

The claim for 'idle charges' is part of the termination payment recoverable under Article 15.7 and the liquidator's rejection on the ground that it was consequential damages under Article 9 was not sustained.

Verification of claims and duty to call for evidence under Section 39 of the Insolvency and Bankruptcy Code, 2016 - admission of claims in liquidation - The liquidator failed to comply with the duty to verify claims and to provide the applicant an opportunity to substantiate the 'idle charges' before rejecting that part of the claim. - HELD THAT: - The Authority observed that Section 39 mandates the liquidator to verify claims and permits the liquidator to require production of documents or evidence necessary for verification. The liquidator classified the 'idle charges' as consequential damages and rejected them without affording the applicant an opportunity to produce documentary evidence to substantiate that the charges arose as part of termination payments under Article 15.7. The Authority further noted that invoices relate to work done and that contractual terms determine entitlement to interest and other costs; absence of a separate invoice for 'idle charges' did not justify outright rejection without verification. For these reasons the liquidator's approach was found to be procedurally improper. [Paras 11, 12, 13, 14]

The liquidator was directed to verify afresh and include the amounts claimed as 'idle charges' in the admitted claim, having afforded the applicant an opportunity to substantiate the claim.

Final Conclusion: The interlocutory application is allowed; the liquidator's rejection of the portion of the claim described as 'idle charges' was set aside and the liquidator is directed to include those amounts in the admitted claim after affording appropriate verification/opportunity as required under the Code.

Operational debt - Pre-existing dispute - Plausible contention test for pre-existing dispute - Admission of application under Section 9 of the Insolvency and Bankruptcy Code - Limitation and date of default - Jurisdiction of the Adjudicating Authority - Appointment of Interim Resolution Professional - Moratorium under the Code - Operational Creditor's interim deposit for IRP expenses

Pre-existing dispute - Plausible contention test for pre-existing dispute - Operational debt - Whether the defence of a pre-existing dispute raised by the corporate debtor barred admission of the Section 9 application. - HELD THAT: - The Tribunal found that the corporate debtor's assertions of defective, substandard, and delayed supply were unsupported by any documentary evidence or correspondence predating the Section 8 notice. The corporate debtor first raised these contentions only after receipt of the demand notice. The issuance of multiple cheques by the corporate debtor, which were subsequently dishonoured, amounted to an admission of liability and undermined the contention of a genuine pre-existing dispute. Applying the principle that the adjudicating authority need only determine whether a plausible contention of dispute exists (the mould of the plausible-contention test), the Tribunal concluded that the corporate debtor's defence was patently feeble and spurious and did not constitute a genuine pre-existing dispute to defeat the Section 9 application. [Paras 11, 12]

The plea of a pre-existing dispute is rejected as spurious and insufficient to bar admission of the Section 9 application.

Admission of application under Section 9 of the Insolvency and Bankruptcy Code - Operational debt - Whether the Section 9 application was complete and fit for admission on the material placed before the Tribunal. - HELD THAT: - The Tribunal examined the application, the invoices, Form V, the demand notice under Section 8 and the compliance affidavit required under the Rules. Finding that the operational debt was established on the records and that the corporate debtor's contrary assertions did not raise a plausible dispute, the Tribunal held that the application met the prescribed requirements and was otherwise complete. Consequently, the Tribunal admitted the application under the Code. [Paras 10, 15, 16]

The Section 9 application is complete and is admitted.

Limitation and date of default - Whether the application was barred by limitation. - HELD THAT: - The Tribunal noted the recorded date of default and compared it with the filing date of the application. Finding that the application was filed within the period of limitation from the date of default, the Tribunal concluded that there was no limitation bar to the maintainability of the petition. [Paras 13]

The application is within limitation and is not time-barred.

Jurisdiction of the Adjudicating Authority - Whether the Tribunal had jurisdiction to entertain the application. - HELD THAT: - Having regard to the location of the registered office of the corporate debtor being situated within the territorial limits of the Bench, the Tribunal held that it had jurisdiction to try and entertain the Section 9 application. [Paras 14]

The Tribunal has jurisdiction to entertain the application.

Appointment of Interim Resolution Professional - Who should be appointed as Interim Resolution Professional and related compliance. - HELD THAT: - As the applicant had not proposed an IRP, the Tribunal appointed a named registrant as Interim Resolution Professional, subject to the condition that no disciplinary proceedings were pending against him. The IRP was directed to file the requisite consent and disclosures within one week in terms of the applicable regulations. [Paras 17]

A specific IRP is appointed subject to compliance and disclosure requirements.

Moratorium under the Code - Whether moratorium provisions will operate upon admission of the application. - HELD THAT: - On admission of the Section 9 application, the Tribunal directed that the moratorium under the Code shall follow in relation to the corporate debtor, with the specified prohibitions coming into effect, and that other relevant provisions governing the moratorium period shall apply as contemplated by the Code. [Paras 18]

Moratorium shall follow upon admission and the Code's provisions relating to the moratorium period shall apply.

Operational Creditor's interim deposit for IRP expenses - Whether the Operational Creditor must make an interim deposit to enable the IRP to perform functions. - HELD THAT: - The Tribunal directed the Operational Creditor to deposit a specified sum with the Interim Resolution Professional to meet outgoings and enable performance of statutory functions as envisaged under the insolvency process regulations. The deposit was ordered to be furnished within a week and to be subject to adjustment by the Committee of Creditors, with any balance to be returned to the applicant as accounted by the IRP. [Paras 19]

The Operational Creditor is directed to make the interim deposit to the IRP within the stipulated time, subject to subsequent adjustment.

Final Conclusion: The Tribunal admitted the Section 9 application after rejecting the corporate debtor's defence of a pre-existing dispute as spurious, held the petition to be within limitation and within its jurisdiction, appointed an Interim Resolution Professional subject to compliance, ordered the moratorium to follow, directed an interim deposit by the Operational Creditor for IRP expenses and directed communication of the order to the parties, IBBI and ROC.

Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - implementation of arbitral award during moratorium - proceedings or awards purportedly arising after commencement of CIRP - interim undertaking by respondent

Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - implementation of arbitral award during moratorium - interim undertaking by respondent - Whether the interlocutory application seeking stay and setting aside of the arbitral award is maintainable in view of the respondent's undertaking not to implement the award during the moratorium. - HELD THAT: - The Adjudicating Authority recorded that the respondent (DGMAP) filed an affidavit undertaking that it would not implement or execute the award passed by the sole arbitrator until the end of the moratorium imposed under section 14 of the IBC by the admission order dated 25.02.2019. Having taken that undertaking on record, the Tribunal observed that the primary reliefs sought in IA No. 530 of 2019 (stay of execution and setting aside of the award) had become infructuous because the respondent had voluntarily refrained from implementing the award for the period of the moratorium. The application was therefore closed without adjudication on the merits of the award or the effect of the moratorium on the arbitral proceedings. [Paras 5, 6]

IA No. 530 of 2019 closed as infructuous in view of respondent's undertaking not to implement the award during the moratorium.

Final Conclusion: The Tribunal closed the interlocutory application as infructuous because the respondent undertook not to implement the arbitral award during the moratorium under section 14 of the IBC; no adjudication was made on the merits of the award.

Operational debt - default - no pre-existing dispute - within limitation - admission of Section 9 petition - moratorium - public announcement of initiation of corporate insolvency resolution process - interim resolution professional - continuation of supply of goods and essential services during moratorium - communication to Registrar of Companies to halt striking off

Operational debt - default - no pre-existing dispute - within limitation - The applicant proved the existence of an operational debt, occurrence of default, absence of any pre-existing dispute and that the claim was within limitation. - HELD THAT: - The Tribunal examined the documents filed by the operational creditor, including invoices, ledger and bank statements, demand notice and affidavits, and found that the material establishes the debt arising from supply of goods and the corporate debtor's failure to pay. The record contains no prior dispute raised by the corporate debtor either before or after issuance of the notice under the Code. The petition was filed within the prescribed period and the Tribunal was satisfied that the application was complete for adjudication. The Tribunal applied the test enunciated in Mobilox Innovative (as cited in the order) and found all three conditions for admission under a Section 9 application to be met. [Paras 9, 10, 11, 12, 14]

The claim qualifies as an operational debt, default is established, no pre-existing dispute exists, and the claim is within limitation.

Admission of Section 9 petition - moratorium - public announcement of initiation of corporate insolvency resolution process - The Tribunal admitted the Section 9 petition and ordered initiation of the corporate insolvency resolution process, including declaration of moratorium and directions for public announcement. - HELD THAT: - On the basis that the application was complete and default established, the Adjudicating Authority exercised its discretion under the Code to admit the petition and initiate the corporate insolvency resolution process. Consequential mandatory measures under the Code were directed: declaration of moratorium prohibiting institution or continuation of suits, transfer or disposition of assets, enforcement of security interests and recovery of property, and a direction that the Interim Resolution Professional make the statutory public announcement and call for claims. The moratorium's temporal extent was specified as effective from receipt of authenticated copy until completion or resolution or liquidation as per the Code. [Paras 15, 16, 17, 18, 19]

The petition is admitted under Section 9; moratorium is declared and the Interim Resolution Professional is directed to make the public announcement and call for claims.

Interim resolution professional - continuation of supply of goods and essential services during moratorium - communication to Registrar of Companies to halt striking off - Appointment of an Interim Resolution Professional was made and ancillary directions were given regarding continuity of supplies and notifying the Registrar of Companies. - HELD THAT: - Because the applicant did not nominate an IRP, the Tribunal appointed a named Insolvency Professional as Interim Resolution Professional under the Code. The Tribunal also directed that ongoing supply of goods and essential services to the corporate debtor shall not be terminated, suspended or interrupted during the moratorium, subject to any notifications by the Central Government. Additionally, the Registry was directed to inform the Registrar of Companies that the corporate debtor is under CIRP so that no striking off proceedings are initiated which would impede liquidation or asset realisation processes. [Paras 18, 19, 20, 22, 23]

CS Mr. Keyur J. Shah is appointed as Interim Resolution Professional; supplies and essential services must continue during moratorium; Registrar of Companies to be notified to suspend striking off proceedings.

Final Conclusion: The Tribunal admitted the Section 9 petition filed by the operational creditor, having found an operational debt and default, no pre-existing dispute and that the claim was within limitation; it declared moratorium, directed public announcement and claims submission, appointed an Interim Resolution Professional, preserved continuity of essential supplies during the moratorium and ordered communication to the Registrar of Companies to suspend any striking off action.

Liquidation under Section 33(2) of the Insolvency and Bankruptcy Code - Committee of Creditors' approval and voting requirement for liquidation - Appointment of Liquidator with written consent - Commencement of moratorium under Section 33(5) consequent to liquidation - Notice of discharge to officers, employees and workmen under Section 33(7) - Liquidator's duties: public announcement, investigation of avoidance transactions and submission of preliminary report - Obligations to communicate order to Registrar of Companies and Insolvency Board

Liquidation under Section 33(2) of the Insolvency and Bankruptcy Code - Committee of Creditors' approval and voting requirement for liquidation - Liquidation of the corporate debtor was ordered pursuant to the COC resolution under Section 33(2). - HELD THAT: - The Tribunal recorded that the Resolution Professional placed the proposal for liquidation before the Committee of Creditors in its 7th meeting and the COC passed a resolution approving initiation of liquidation. The resolution, recorded in the minutes, was passed with 100% voting power of the sole financial creditor. On that basis, and in the absence of any viable resolution plan, the Tribunal allowed the application and ordered liquidation in terms of Chapter III, Part II of the Code. [Paras 7, 8, 11]

Application allowed and liquidation of M/s. Pawan Buildwell Pvt. Ltd. ordered.

Appointment of Liquidator with written consent - Liquidator's duties: public announcement - Mr. Arun Chadha was appointed as Liquidator and directed to make the public announcement required under the liquidation regulations. - HELD THAT: - The Resolution Professional furnished written consent to act as Liquidator which formed part of the application. The Tribunal appointed Mr. Arun Chadha as Liquidator and directed him to make the public announcement that the corporate debtor is in liquidation in accordance with the liquidation regulations, thereby formalising the Liquidator's statutory duties to notify stakeholders and commence statutory processes. [Paras 9, 11]

Arun Chadha appointed as Liquidator and directed to issue the public announcement.

Commencement of moratorium under Section 33(5) consequent to liquidation - Notice of discharge to officers, employees and workmen under Section 33(7) - The earlier moratorium under Section 14 was held to cease and a fresh moratorium under Section 33(5) commenced; the order operates as a notice of discharge under Section 33(7). - HELD THAT: - The Tribunal expressly provided that the moratorium previously in force under Section 14 shall cease and that a fresh moratorium under Section 33(5) shall commence upon liquidation. The order was also held to be the statutory notice of discharge to the corporate debtor's officers, employees and workmen as contemplated by the Code, thereby fixing the legal status of stakeholders upon commencement of liquidation. [Paras 11]

Section 14 moratorium ceases; moratorium under Section 33(5) commences and order deemed notice of discharge under Section 33(7).

Liquidator's duties: investigation of avoidance transactions and submission of preliminary report - Obligations to communicate order to Registrar of Companies and Insolvency Board - Directions were issued as to the Liquidator's investigatory and reporting obligations and registry communications to ROC and IBBI. - HELD THAT: - The Tribunal directed the Liquidator to continue investigation into the corporate debtor's financial affairs to determine undervalued and preferential transactions, and to submit a preliminary report to the Adjudicating Authority within seventy-five days from commencement of liquidation as required by the liquidation regulations. The Registry was directed to communicate the order to the financial creditor, the corporate debtor, the Liquidator, the Registrar of Companies for updating master data, and to the Insolvency and Bankruptcy Board of India, with timelines for compliance and reporting back to the Tribunal. [Paras 11]

Liquidator directed to investigate and submit preliminary report; registry directed to notify ROC and IBBI and report compliance.

Final Conclusion: The Tribunal allowed the Resolution Professional's application and ordered liquidation of M/s. Pawan Buildwell Pvt. Ltd. in accordance with the Code, appointed the consenting Liquidator, commenced the statutory moratorium attendant to liquidation, treated the order as notice of discharge to employees, and issued ancillary directions for the Liquidator's investigations, reporting and communications to statutory authorities.

Initiation of corporate insolvency resolution process under Section 10 - Debt and default as threshold for admission - Completeness of application and prescribed form requirement - Ineligibility under Section 11 - Admission of application by adjudicating authority - Moratorium under Section 14 and its prohibitions - Appointment of Interim Resolution Professional and related duties

Initiation of corporate insolvency resolution process under Section 10 - Debt and default as threshold for admission - Completeness of application and prescribed form requirement - Ineligibility under Section 11 - Admission of application by adjudicating authority - Application under Section 10 was admissible and is admitted. - HELD THAT: - The Tribunal examined whether the corporate applicant satisfied the statutory prerequisites for admission under Section 10, namely existence of debt and occurrence of default, completeness of the application in the prescribed form and fee, and absence of disqualification under Section 11. Following the principles laid down in Innoventive Industries and the subsequent NCLAT exposition, the adjudicating authority's role is limited to verifying records/evidence that default has occurred and that the application is complete; disputes on default or collateral matters do not warrant rejection where the statutory requirements are met. The Tribunal found that supporting documents evidencing default were placed on record, the application complied with Form 6/Rule requirements and fee, and the corporate applicant was not ineligible under Section 11. On these bases the application is admitted and cannot be rejected on grounds extraneous to Section 10/Form 6 requirements. [Paras 9]

The petition under Section 10 is admitted as the Tribunal is satisfied that there is a debt and default, the application is complete and the corporate applicant is not ineligible under Section 11.

Moratorium under Section 14 and its prohibitions - Effect of admission on related proceedings and enforcement actions - Moratorium is declared with consequential prohibitions upon admission of the Section 10 application. - HELD THAT: - Upon admission of the application, the Tribunal declared the moratorium as contemplated by Section 14. The order restrains institution or continuation of suits or proceedings against the corporate debtor, execution of decrees or orders, transfer or disposal of assets, and actions to enforce security interests (including measures under SARFAESI), while preserving specified exceptions. The Tribunal recorded that such related proceedings cannot proceed in view of the moratorium and the statutory prohibitions attendant upon commencement of CIRP. [Paras 10]

Moratorium under Section 14 is imposed from the date of the order until completion of CIRP or earlier disposal as provided by the Code, with the stated consequential directions.

Appointment of Interim Resolution Professional and related duties - Public announcement and claims submission - Duty of cooperation to the Interim Resolution Professional - Interim Resolution Professional appointed and required actions directed. - HELD THAT: - The Tribunal appointed the proposed Interim Resolution Professional and directed immediate public announcement of the CIRP and calling for claims, in accordance with the Code. The IRP was directed to perform functions under the Code (including protection and preservation of the corporate debtor's assets) and was entitled to seek the Tribunal's assistance if necessary. The Tribunal also directed registry communication to the financial creditors and the corporate debtor and listed the matter for progress report. [Paras 10]

Mr. Arun Chadha is appointed as Interim Resolution Professional and directed to take steps for public announcement, claims solicitation and to discharge duties under the Code; registry to communicate the order and list for progress.

Final Conclusion: The Tribunal admitted the Section 10 application, having found debt and default and that the application was complete and not barred by Section 11; it declared the statutory moratorium with consequential prohibitions, appointed the Interim Resolution Professional and directed immediate steps for public announcement and claims submission.

Condonation of delay in liquidation claim - power of the liquidator to admit or reject claims - tribunal's authority to direct consideration of claims without directing admission - IBBI (Liquidation Process) Regulations, 2016 - time limit for submission of claims - equitable discretion to condone delay

Condonation of delay in liquidation claim - IBBI (Liquidation Process) Regulations, 2016 - time limit for submission of claims - equitable discretion to condone delay - Delay in filing the applicant's claim before the Liquidator is condoned and the claim is to be entertained despite being filed after the prescribed period. - HELD THAT: - The Tribunal observed that although the IBBI (Liquidation Process) Regulations, 2016 prescribe a 30-day period for receiving claims, the court has power in appropriate cases to condone delay so as to meet the ends of justice. The applicant had not submitted the claim on merits earlier and would suffer prejudice if the claim were not entertained at the threshold. The Tribunal held that condonation of delay would not adversely affect the ongoing liquidation process and, therefore, delay in filing the claim can be condoned to permit consideration on merits. [Paras 5]

Delay condoned; applicant's claim directed to be considered despite being filed after the prescribed period.

Power of the liquidator to admit or reject claims - tribunal's authority to direct consideration of claims without directing admission - The Tribunal may direct the Liquidator to examine a late claim on its merits but cannot direct the Liquidator to admit the claim. - HELD THAT: - The Tribunal recognised that the decision whether to admit or reject a claim lies within the Liquidator's statutory function and discretion. While the Tribunal can exercise its equitable jurisdiction to condone delay and require that the claim be entertained, it cannot usurp the Liquidator's role by directing admission of the claim. Accordingly, the Tribunal directed the Liquidator to consider the claim on merits and left the ultimate decision to admit or reject to the Liquidator. [Paras 5, 6]

Liquidator directed to examine the claim on merits; admission or rejection to be decided by the Liquidator.

Final Conclusion: Application allowed; delay in filing the claim is condoned and the Liquidator is directed to consider the claim on its merits, with the ultimate decision to admit or reject the claim left to the Liquidator.

Provisional order of attachment under the Prevention of Money Laundering Act, 2002 - statutory appeal against provisional attachment - condonation of delay in statutory appeal - priority hearing and expeditious disposal by the appellate Tribunal

Statutory appeal against provisional attachment - condonation of delay in statutory appeal - priority hearing and expeditious disposal by the appellate Tribunal - Direction to the appellate Tribunal to accord priority and dispose of the statutory appeal and connected petitions within a fixed time-frame. - HELD THAT: - The petitioners challenged a provisional order of attachment made under the Prevention of Money Laundering Act, 2002 and had filed the statutory appeal along with applications for condonation of delay, stay and related reliefs before the appellate Tribunal. The High Court, noting the limited scope of the petitioners' prayer and the reasons placed on record for earlier non-disposal (misplacement of an affidavit, disruption caused by the COVID-19 pandemic and vacancies in the Tribunal), declined to decide the merits but directed the appellate Tribunal to take up the appeal and connected applications on priority. The Court fixed an outer limit of three months from receipt of the order for the Tribunal to dispose of FPA-PMLA-3219/CHN/2019 and the connected petitions M.P.-PMLA-6424/CHN/2019, M.P.-PMLA-6425/CHN/2019, M.P.-PMLA-6426/CHN/2019 and M.P.-PMLA-6427/CHN/2019 in accordance with law, thereby balancing the petitioners' interest in timely adjudication with the Tribunal's adjudicatory competence. [Paras 11, 13, 14]

The High Court directed the appellate Tribunal to accord priority and dispose of the statutory appeal and connected petitions within three months from receipt of this order; the writ petition is disposed of with no costs.

Final Conclusion: The High Court did not adjudicate the merits of the attachment but ordered the appellate Tribunal to give priority and conclude the statutory appeal and connected applications within three months; the writ petition is disposed of accordingly.

Bail in economic offences - Disproportionate assets - Misuse of official position - Factors guiding consideration of bail - Prevention of Money Laundering Act - Prevention of Corruption Act - Custodial interrogation unnecessary - Vicarious implication of relatives

Bail in economic offences - Disproportionate assets - Misuse of official position - Factors guiding consideration of bail - Prevention of Money Laundering Act - Prayer for grant of bail by the principal accused (Manoj Kumar @ Manoj Kumar Singh) was rejected. - HELD THAT: - The court found that the core allegations are directed against the principal accused who, while holding public office as private secretary to senior legislators, is alleged to have amassed wealth substantially disproportionate to his known sources of income. The prosecution materials and investigative findings cast doubt on the explanations furnished by the accused, including adverse inferences as to valuation and sale invoices and contradictions in claimed agricultural receipts. Applying the well established factors governing bail-nature and seriousness of the accusation, likelihood of tampering with evidence or witnesses, and the character and role of the accused-the court concluded that the magnitude of the alleged economic offence and the accused's role in misusing official position, together with failure to satisfactorily explain the disproportionate assets, weighed against release. Although custodial interrogation was not considered necessary at the present stage, these considerations led to refusal of bail to the principal accused under the Prevention of Money Laundering Act.

Bail refused to the petitioner Manoj Kumar @ Manoj Kumar Singh; prayer for bail rejected.

Vicarious implication of relatives - Bail in economic offences - Factors guiding consideration of bail - Custodial interrogation unnecessary - Prayer for grant of bail by the petitioners who are brothers of the principal accused was allowed. - HELD THAT: - The court observed that the petitioners in the second batch of applications were implicated primarily by virtue of their relationship to the principal accused and that no specific allegations or witness statements implicating them directly had been shown. Having regard to the absence of particularised material against them, the fact that custodial interrogation was not necessary at this stage, and the settled principle that bail decisions must be made on individual merits by balancing personal liberty against public interest, the court was satisfied that release on bail was appropriate for these petitioners despite the gravity of the underlying economic allegations against the principal accused.

Petitioners (brothers of the principal accused) granted bail on furnishing a bail bond of Rs. 10,000 with two sureties of like amount each to the satisfaction of the learned Additional Judicial Commissioner I cum Special Judge, PMLA, Ranchi, in connection with ECIR/02/PAT/11/AD.

Final Conclusion: Bail refused to the principal accused due to serious allegations of disproportionate assets and unsatisfactory explanations; bail granted to his brothers who lacked specific inculpatory material, subject to the bail terms directed by the court.

Port Services - stevedoring - authorization by the port - classification as 'port service' for pre-amendment period - evidentiary consequence of non-response to show cause notice - penalty under Section 76 of the Finance Act, 1994 - Major Port Trusts Act, 1963 - membership/licence as indicium of authorisation

Port Services - stevedoring - authorization by the port - classification as 'port service' for pre-amendment period - evidentiary consequence of non-response to show cause notice - Whether the stevedoring services rendered by the petitioner during 16.07.2001 - 15.08.2002 fell within the definition of Port Services and attracted service tax. - HELD THAT: - The Court held that the question whether the petitioner was authorised by the port is essentially a question of fact and observed that the petitioner did not file any written reply to the show cause notice and did not take the specific stand at the personal hearing that it was not authorised by the port. The Court treated the petitioner's failure to contest the factual allegation as material. Reliance was placed on the Larger Bench decision in Western Agencies which, interpreting the pre-amendment definition, held that stevedoring in a port amounts to a 'port service' and that ancillary cargo-handling operations within the port area are classifiable as port services. In view of the petitioner's inaction before the adjudicating authority and the Larger Bench pronouncement, the demand for service tax was sustained. [Paras 9, 10, 12]

Demand for service tax in respect of stevedoring services for the period 16.07.2001 - 15.08.2002 is sustained.

Penalty under Section 76 of the Finance Act, 1994 - evidentiary consequence of non-response to show cause notice - pending higher forum consideration - Whether the penalty imposed on the petitioner under Section 76 should be sustained. - HELD THAT: - Although the adjudicating authority had imposed penalty under Section 76, the Court exercised its discretion to interfere with the penalty. The Court noted that a question of law arising from similar facts was pending before the Principal Seat and observed that, in fairness, imposing penalty on the petitioner when the legal position was under consideration at a higher forum would be inappropriate. Consequently, the Court set aside the penalty while upholding the substantive tax demand. [Paras 12]

The penalty imposed under Section 76 is set aside; the rest of the order is sustained.

Final Conclusion: Writ petition partly allowed: service tax demand for 16.07.2001 - 15.08.2002 upheld; penalty under Section 76 set aside; no costs.

Cenvat credit - service tax liability - interest under Section 75 of the Finance Act, 1994 - penalty under Section 77(2) of the Finance Act, 1994 - procedural irregularity versus statutory violation - Rule 6 of the Service Tax Rules, 1994

Cenvat credit - service tax liability - interest under Section 75 of the Finance Act, 1994 - Rule 6 of the Service Tax Rules, 1994 - procedural irregularity versus statutory violation - Whether debiting the Cenvat register monthly but recording the corresponding journal entry in books of account only bi annually constitutes delay in payment attracting interest under Section 75. - HELD THAT: - The Tribunal found that the appellant duly debited its Cenvat register every month in accordance with Rule 6 of the Service Tax Rules, 1994, and at all times maintained sufficient credit balance to discharge its monthly service tax liability. The cumulative journal entry recorded in the books of account once every six months was held to be a manner of internal accounting and, in the absence of any breach of the statutory requirement to debit the Cenvat register or of any shortfall in credit, amounted to a procedural irregularity rather than a statutory violation. The appellant also filed statutory returns timely and disclosed monthly liabilities therein. On these facts, there was no deliberate delay in payment of service tax that would attract interest under Section 75.

Demand of interest under Section 75 imposed for the alleged delayed payment was not sustained and the appeal in respect thereof was allowed.

Penalty under Section 77(2) of the Finance Act, 1994 - procedural irregularity versus statutory violation - Whether imposition of penalty under Section 77(2) for the same alleged delayed payment was justified. - HELD THAT: - Since the Tribunal concluded that the conduct complained of was at best an accounting or procedural irregularity and that there was no statutory default in debiting the Cenvat register or in discharge of the monthly liability, the foundational basis for imposing penalty under Section 77(2) did not survive. The absence of intention to evade payment, presence of sufficient Cenvat balance and timely filing of returns negated the justification for the penalty.

Penalty confirmed by the adjudicating authority was set aside and the appeal in respect of the penalty was allowed.

Final Conclusion: The appeal was allowed: the demand of interest under Section 75 and the penalty under Section 77(2) were set aside, the Tribunal treating the bi annual journalisation in the books as a procedural irregularity and finding no statutory default or intention to evade service tax.

Proportionate reversal of Cenvat credit - Rule 6(3A) of the Cenvat Credit Rules, 2004 - non availment of credit on inputs used for exempted services - procedural lapse not disentitling assessee from credit - demand under Rule 14 of the Cenvat Credit Rules read with Section 73(1) of the Finance Act, 1994 - penalty under Rule 15 read with Section 78 of the Finance Act, 1994

Proportionate reversal of Cenvat credit - Rule 6(3A) of the Cenvat Credit Rules, 2004 - non availment of credit on inputs used for exempted services - Whether reversal of proportionate Cenvat credit under Rule 6(3A) satisfies the requirement of non availment of credit for inputs used in exempted services and bars demand based on value of exempted services. - HELD THAT: - The Tribunal found on record that the appellant regularly reversed the proportionate amount of Cenvat credit attributable to common input services used for exempted output services in terms of Rule 6(3A). The reversal recorded in the Cenvat credit register for the relevant period indicates that credit relating to exempted services was not retained for use against taxable services. Relying on settled precedent and the principle that proportionate reversal operates as non availment of credit, the Tribunal held that once the appropriate reversal under Rule 6(3A) has been made, the assessee cannot be treated as having availed the credit on inputs used for exempted services and a demand calculated on the basis of the value of exempted services is not sustainable. The Tribunal therefore set aside the demand founded on such calculation. [Paras 8, 9, 11]

Demand based on value of exempted services is unsustainable where proportionate reversal under Rule 6(3A) has been made; the order in original is set aside on this ground.

Procedural lapse not disentitling assessee from credit - demand under Rule 14 of the Cenvat Credit Rules read with Section 73(1) of the Finance Act, 1994 - penalty under Rule 15 read with Section 78 of the Finance Act, 1994 - Whether minor procedural omissions (such as failure to declare turnover of exempted services in periodic returns) or alleged non compliance justify invocation of extended limitation or imposition of penalty. - HELD THAT: - The Tribunal observed that the Department did not contest the proportionality or adequacy of the reversals made by the appellant. The shortcoming in declaration of exempted turnover in periodic returns was treated as a minor procedural lapse. In the absence of any finding that the reversed amounts were not proportionate or that there was wilful suppression, the invocation of extended period under Section 73(1) and imposition of penalty under Rule 15 read with Section 78 was not justified. The Tribunal held that procedural infractions of a minor character cannot defeat the substantive entitlement arising from correct proportionate reversal. [Paras 8, 9]

Minor procedural lapses do not disentitle the appellant from credit where proportionate reversal has been made; extended period and penalty were not attracted and the impugned order is set aside.

Final Conclusion: Appeal allowed; the order in original confirming the demand and imposing penalty is set aside on the grounds that proportionate reversal under Rule 6(3A) satisfied the non availment requirement and that procedural lapses did not justify extended limitation or penalty.

Erroneous refund - power of recovery under section 11A(1) of the Central Excise Act, 1944 - refund of education cess and higher education cess - effect of subsequent judicial pronouncement on past refunds - binding precedent and effect of coordinate-bench versus larger bench decisions

Refund of education cess and higher education cess - effect of subsequent judicial pronouncement on past refunds - erroneous refund - Interim protection against recovery proceedings in respect of previously sanctioned refunds of education cess and higher education cess. - HELD THAT: - The petitioner received refunds of education cess and secondary and higher education cess pursuant to an earlier order which applied the principle laid down in SRD Nutrients Pvt. Ltd. Subsequently, the Supreme Court in Unicorn Industries held that exemption of one kind of duty does not automatically exempt other cesses and that such refunds may not have been legally sustainable. The petitioner contends that at the time the refunds were granted the law as stated in SRD Nutrients governed and therefore the refunds were not "erroneous" within the meaning of the recovery provision. Having considered the competing positions and the intervening Supreme Court authority, the High Court has not adjudicated the ultimate question whether the refunds are legally "erroneous"; instead, the court has granted interim relief by staying the operation of the demand cum show-cause notice dated 06.08.2020, thereby restraining recovery pending further proceedings.

Stay of operation of the demand cum show-cause notice dated 06.08.2020 granted until further orders.

Power of recovery under section 11A(1) of the Central Excise Act, 1944 - binding precedent and effect of coordinate-bench versus larger bench decisions - Continuation and adjudication of the respondent's claim that earlier refunds have become refundable as erroneous in the light of subsequent Supreme Court decisions held open for determination. - HELD THAT: - The petition challenges the invocation of section 11A(1) on the ground that the condition precedent - that the refund was "erroneous" - is not satisfied because the refunds were given in conformity with the law as it stood when they were granted. The High Court has directed the respondents to file an affidavit-in-opposition within two weeks and permitted the petitioner to file a reply thereafter. The court has not decided the substantive question whether the later Supreme Court ruling renders the earlier refunds recoverable; that substantive controversy remains to be adjudicated after filing of affidavits and submissions.

Substantive determination whether the earlier refunds are recoverable as "erroneous" under section 11A(1) is left open for adjudication after pleadings; respondents directed to file affidavit-in-opposition and parties to be heard.

Final Conclusion: Interim stay granted on the demand cum show-cause notice dated 06.08.2020; respondents directed to file affidavit-in-opposition within two weeks and the substantive question whether earlier refunds are "erroneous" in law is left pending for determination after further pleadings and hearing.

Sabka Vishwas (Legacy Dispute Resolution) Scheme - SVLDRS-1 Form - rejection of declaration as incorrect - inadvertent mistake in disclosure - permitting correction and fresh consideration - reasoned speaking order

SVLDRS-1 Form - rejection of declaration as incorrect - inadvertent mistake in disclosure - permitting correction and fresh consideration - reasoned speaking order - Petitioner permitted to file a corrected SVLDRS-1 declaration and respondent authorities directed to reconsider the matter and pass a reasoned order afresh. - HELD THAT: - The petition challenged the Designated Committee's rejection of the SVLDRS-1 declaration on the ground that the disclosed amount of dues was incorrect. The court accepted that the incorrect disclosure arose from inadvertence and that the petitioner sought opportunity to correct the information. Respondent counsel raised no objection to permitting correction and fresh consideration. In light of the Scheme's automated filing regime and the absence of any contention that the error caused loss to the revenue, the court directed that the petitioner may submit an application for correction together with a certified copy of the order, and that upon receipt the authorities shall pass a reasoned, speaking order on the corrected declaration. The court also clarified that an earlier observation as to benefit under a specific provision shall not limit the petitioner from claiming any other entitlement under the Scheme.

Petitioner to file corrected SVLDRS-1 declaration and respondents to decide afresh by a reasoned order within the prescribed timeframe.

Final Conclusion: Writ petition disposed of by allowing the petitioner to submit a corrected SVLDRS-1 declaration; the Designated Committee's order dated 29.12.2019 is set aside and the respondents are directed to pass fresh, reasoned orders on the corrected submission within two months of receipt of the certified copy of this order.

Doctrine of Merger - binding effect of Supreme Court judgments - preclusion of reopening decided issues - refund of pre-deposit and entitlement to interest

Doctrine of Merger - binding effect of Supreme Court judgments - preclusion of reopening decided issues - The dismissal of the Revenue's appeal by the Supreme Court merged the earlier favourable order of the Tribunal and prevented Quasi Judicial authorities from reopening the merits of the case. - HELD THAT: - The Court held that the CESTAT's order in favour of the petitioner merged with the Supreme Court's dismissal of the Revenue's appeal, because the Supreme Court expressly found the matters to be covered "against the Revenue". Under the Doctrine of Merger and by reason of the binding effect of the Supreme Court's decision, subordinate adjudicating authorities had no jurisdiction to reopen or re examine the merits which the Revenue had unsuccessfully pursued to the highest court. The Court criticised the attempt by departmental authorities to distinguish or reinterpret the Supreme Court's order and treated such conduct as contrary to the required judicial discipline in giving effect to binding precedents. [Paras 6, 7, 8]

The Tribunal's order merged with the Supreme Court's dismissal; the Revenue could not reopen the decided issues and the authorities' action in attempting to revive the claim was impermissible.

Refund of pre-deposit and entitlement to interest - preclusion of reopening decided issues - The petitioner was entitled to the belated refund of the pre-deposit with interest and that the departmental set off against a separate demand, made after the Supreme Court's dismissal, could not be sustained. - HELD THAT: - The Court noted that the petitioner had obtained refund of the belated pre-deposit and interest from the original authority and the Appellate Commissioner, and that the CESTAT had rejected Revenue's further attempt to challenge that position on the merits after the Supreme Court's dismissal. Given the merger of the Tribunal's favourable order with the Supreme Court's dismissal, the Revenue's later act of setting off the refunded interest against another demand was contrary to the finality established by the higher court's decision. The Court therefore concluded that the impugned orders effecting or upholding such set off were liable to be quashed. [Paras 3, 7]

The petitioner was entitled to the refund and interest; the departmental set off against another demand after the Supreme Court's dismissal could not be maintained.

Final Conclusion: Both impugned orders dated 27.10.2017 and 16.05.2017 were quashed: the Supreme Court's dismissal merged the Tribunal's favourable order, precluding reopening of the decided issues, and the petitioner's refund with interest could not be lawfully set off by the department.

Withdrawal of appeal - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - condition precedent of unconditional withdrawal of appeals to avail settlement scheme - refund as per Rules

Withdrawal of appeal - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - condition precedent of unconditional withdrawal of appeals to avail settlement scheme - Whether the appellant may be permitted to withdraw the pending appeal so as to enable availing benefits under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. - HELD THAT: - The appellant had applied under the Scheme and, according to the appellant, the application was accepted and dues paid; however, final order under the Scheme had not been passed solely because the appeal remained pending. One of the Scheme's conditions requires unconditional withdrawal of any appeal pending before the High Court or the Supreme Court as a precondition to the grant of Scheme benefits. In view of these facts and the appellant's expressed desire to avail the statutory settlement, the Court allowed the appellant to withdraw the appeal to enable completion of the Scheme process. The Court recorded that there shall be no order as to costs and directed that refund, if any, shall be made in accordance with the applicable Rules. [Paras 8]

Appeal permitted to be withdrawn; no order as to costs; refund to be made as per Rules.

Final Conclusion: The appeal is allowed to be withdrawn to enable the appellant to obtain the benefits of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019; there shall be no order as to costs and any refund shall be made in accordance with the Rules.

Separate declaration for each case under Rule 3(2) of the SVLDRS Rules - definition of "case" in the SVLDRS Rules - consolidation of show cause notices and consequent single appeal - interpretation principle: singular includes plural (Section 13(2), General Clauses Act, 1897) - rejection of SVLDRS declaration on hyper technical ground

Separate declaration for each case under Rule 3(2) of the SVLDRS Rules - definition of "case" in the SVLDRS Rules - consolidation of show cause notices and consequent single appeal - Whether the Petitioner's single declaration in form SVLDRS 1 was permissible when four earlier show cause notices had been adjudicated by a consolidated order and only one appeal was pending as on 30th June, 2019. - HELD THAT: - The Court examined Rule 3(2) of the SVLDRS Rules and the Explanation thereto which defines a "case" as, inter alia, a show cause notice or one or more appeals arising out of such notice pending as on 30th June, 2019. In the present facts the four show cause notices had been adjudicated by a consolidated order and a consolidated appellate order resulted in a single appeal pending before the CESTAT as on the cutoff date. Consequently, the four earlier SCNs did not amount to four separate "cases" for the purpose of Rule 3(2) so as to mandate four separate declarations; rather the existence of one consolidated pending appeal entitled the Petitioner to file a single declaration in relation to that single pending appeal. The Court rejected the respondents' reliance on a formalistic reading requiring separate filings in respect of the original notices when those notices had been merged into a single adjudication and a single pending appeal. [Paras 8, 9]

The Petitioner's single declaration in form SVLDRS 1 was permissible in view of the consolidated adjudication and a single pending appeal; the rejection on the ground that four separate declarations were not filed was unsustainable.

Interpretation principle: singular includes plural (Section 13(2), General Clauses Act, 1897) - rejection of SVLDRS declaration on hyper technical ground - Whether the Court could invoke the interpretive rule that words in the singular include the plural (and vice versa) to uphold the Petitioner's single declaration where respondents contended for multiple filings. - HELD THAT: - The Court accepted the Petitioner's submission that Section 13(2) of the General Clauses Act, 1897, which provides that words in the singular shall include the plural and vice versa, is applicable to the present statutory and regulatory scheme. Applying this interpretive principle, the Court found that a strict, hyper technical insistence on separate filings when a single consolidated order and single pending appeal existed would defeat the Scheme's purpose and impose an avoidable burden on the assessee. The invocation of Section 13(2) supports a purposive construction permitting the single declaration in the circumstances of this case. [Paras 11, 12]

The interpretive rule in Section 13(2) of the General Clauses Act supports allowing the single declaration; the respondents' hyper technical objection cannot sustain rejection.

Remand for fresh decision of SVLDRS declaration - right to avail remedies in accordance with law - Whether the impugned order rejecting the SVLDRS declaration should be set aside and the matter remitted for fresh consideration. - HELD THAT: - Having held that the rejection on the ground of a single declaration was unsustainable and that a purposive construction permits the filing made by the Petitioner, the Court set aside the impugned order. The Court directed the respondents to decide the Petitioner's declaration/application in form SVLDRS 1 afresh within eight weeks and to communicate the decision within one week thereafter. The Court further noted that, if dissatisfied with the outcome of the fresh decision, the Petitioner remains at liberty to pursue appropriate remedies under law. [Paras 12, 13, 14]

Impugned order dated 21st February, 2020 is set aside and the respondents are directed to decide the SVLDRS declaration afresh within the stipulated time; the Petitioner may challenge the fresh decision by available legal remedies.

Final Conclusion: The writ petition succeeds; the order rejecting the Petitioner's SVLDRS declaration for having filed a single declaration (and not four) is set aside. The respondents are directed to re decide the declaration/application in form SVLDRS 1 afresh within eight weeks and communicate the decision within one week thereafter, subject to the Petitioner's right to pursue remedies in law if aggrieved by that decision.

Withdrawal of appeal - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - condition to withdraw pending appeals to avail settlement scheme - refund as per Rules

Withdrawal of appeal - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - condition to withdraw pending appeals to avail settlement scheme - Appeal allowed to be withdrawn so that the appellant may avail benefit of the Scheme. - HELD THAT: - The appellant had applied under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and, according to the appellant, the application was accepted and dues paid, but no final order was being passed solely because this appeal remained pending. One of the Scheme's conditions requires unconditional withdrawal of any appeal pending before the High Court or the Supreme Court to avail its benefits. In the circumstances recorded, the Court permitted the appellant to withdraw the appeal to enable compliance with that condition of the Scheme. The Court made no order as to costs and directed that refund (where applicable) be made in accordance with the applicable Rules. [Paras 8]

Appeal permitted to be withdrawn; no order as to costs; refund as per Rules.

Final Conclusion: The High Court allowed the appellant to withdraw the appeal to enable availing of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, directed no order as to costs and ordered refund in accordance with the Rules.

Rectification of order - finding of fraud or mis-statement - rejection of rectification application with costs - limited adjudication where tax liability settled under amnesty scheme - issuance of notice in writ petition

Rectification of order - finding of fraud or mis-statement - rejection of rectification application with costs - limited adjudication where tax liability settled under amnesty scheme - Writ petition entertained only on the limited question of the correctness of CESTAT's finding that the petitioner played fraud/made a mis-statement and the rejection of the petitioner's rectification application. - HELD THAT: - The High Court declined to examine the ultimate decision on tax liability because the petitioner has settled its tax liability under an amnesty scheme; consequently the Court restricted its consideration to whether the CESTAT was justified in recording that Ex.A, B and C constituted a mis-statement or fraud and in refusing the petitioner's application for rectification (the impugned order dated 28th August, 2019). On that limited issue the Court issued notice to the respondents, directed service and filing of affidavit of service, and listed the matter for further hearing. No adjudication on the merits of CESTAT's finding or on the rectification application was undertaken at this stage. [Paras 5, 6, 7, 8]

Notice issued returnable within six weeks on the limited question challenging CESTAT's finding of fraud and its rejection of the rectification application; petitioner to serve respondents and file affidavit of service; matter listed on 3rd November, 2020.

Final Conclusion: Interim order limiting adjudication to the correctness of CESTAT's finding that the petitioner played fraud and to the rejection of the rectification application; notice issued and matter posted for further hearing.

Revision of return - issuance of statutory forms under Central Sales Tax (Form F) - power to allow amendment of VAT return - interim orders by the Supreme Court - suspension of directions pending appeal

Revision of return - issuance of statutory forms under Central Sales Tax (Form F) - suspension of directions pending appeal - Whether the petitioner should be permitted to amend the return for the first quarter of Year 2017-18 and be granted the relevant statutory form under Central Sales Tax, and whether any such direction should operate immediately. - HELD THAT: - The Court found that the petitioner omitted details of inter-State branch transfers in the Form 2A for the first quarter of Year 2017-18 and had sought permission to revise the return and obtain the requisite form. In view of the pendency of civil appeals before the Supreme Court and existing interim orders in related matters, the Court directed that the respondent allow the amendment sought in the return for the first quarter of Financial Year 2017-18. However, recognising the existence of prior orders and pending Civil Appeals before the Supreme Court which bear on the same legal controversy, the Court expressly suspended the operation of its direction until those Civil Appeals are finally decided, and stated that the direction shall abide by the decision rendered by the Supreme Court. [Paras 11, 12]

Amendment of the petitioner's return for the first quarter of Year 2017-18 shall be permitted by respondent no.2, but the direction is suspended and will not operate until the Civil Appeals pending before the Supreme Court are decided; the petition is disposed of accordingly.

Final Conclusion: The High Court directed respondent no.2 to allow the petitioner to amend its return for the first quarter of Year 2017-18 and to grant the requisite statutory form, but suspended the operation of this direction pending the outcome of Civil Appeals before the Supreme Court; the writ petition is disposed of.

Violation of principles of natural justice - Requirement of reasoned order - Service of statutory notices and modes of service - Exemption under Section 7 of the Central Sales Tax Act read with Entry 47(b) of Schedule I - Limitation under Sub Rule 5 A of Rule 14 A of the CST Rules

Violation of principles of natural justice - Requirement of reasoned order - Assessment order dated 27.03.2020 is vitiated for want of reasons and for violation of principles of natural justice. - HELD THAT: - The impugned assessment order contains no reasons for levying Central Sales Tax; it records only non appearance and non response by the petitioner without dealing with the substantive legal contention that the goods sold (beedies) are exempt under the CST Act. The Court found that the assessing authority passed the order hurriedly, apparently apprehending expiry of the limitation period, and thereby failed to afford the petitioner an adequate opportunity to defend itself. These defects amount to breach of principles of natural justice and necessitate setting aside the order.

The assessment order is set aside for want of reasons and for violation of natural justice.

Service of statutory notices and modes of service - Requirement of reasoned order - Notices alleged to have been sent by the assessing authority via e mail were not validly served where the Rules contain no provision for service by e mail and service was not proved in the manner prescribed under the Act and Rules. - HELD THAT: - The respondents did not dispute that the Rules framed under the CST do not provide for service of notices by e mail, nor did they contend that the reminder and final notices were served in the manner required by the Rules. Absence of valid service undermines the recording in the order that the petitioner failed to respond or avail personal hearing. The lack of proved service is therefore a material defect affecting the validity of the assessment proceedings.

The purported service by e mail cannot be taken to cure the failure to afford proper notice; the assessing authority must ensure service in the manner prescribed by law before proceeding.

Exemption under Section 7 of the Central Sales Tax Act read with Entry 47(b) of Schedule I - Limitation under Sub Rule 5 A of Rule 14 A of the CST Rules - The assessing authority did not consider the petitioner's plea of exemption under Section 7 read with Entry 47(b) and appears to have acted under apprehension of limitation prescribed by Sub Rule 5 A of Rule 14 A; the matter is remitted for fresh consideration. - HELD THAT: - The petitioner had specifically contended that the commodity dealt in (beedies) is exempt under the CST provisions and that no statutory forms were required to claim the exemption. The assessment order is silent on this legal contention. The Court also noted that the order appears to have been passed at the fag end of limitation, prompting a hasty decision without addressing the exemption plea. Given these lacunae, the Court directed that the matter be reconsidered afresh so that the exemption claim and other contentions are addressed on merits.

The matter is remitted to the assessing authority for fresh consideration of the exemption claim and other contentions, with directions to comply with the limitation provisions while issuing a reasoned order.

Requirement of reasoned order - Service of statutory notices and modes of service - Directions for procedural cure on remand: petitioner to be given four weeks to file objections with supporting material and an opportunity of personal hearing; then a reasoned order to be passed and communicated. - HELD THAT: - In view of the defects found-absence of proved service in the prescribed manner, no consideration of the exemption plea, and want of reasons-the Court provided specific directions to ensure fairness on remand. The petitioner is granted a limited period to file objections and supporting documents; the assessing authority must afford personal hearing and thereafter pass a reasoned order in accordance with law and communicate it to the petitioner.

Remand with directions: four weeks to the petitioner to file objections; personal hearing to be provided; thereafter pass and communicate a reasoned order.

Final Conclusion: Writ petition allowed: the assessment order dated 27.03.2020 for 2015 16 is set aside for lack of reasons and breach of natural justice, and for deficiency in valid service; the matter is remitted to the assessing authority for fresh consideration in accordance with the directions given, including an opportunity to file objections, a personal hearing, and issuance of a reasoned order.

Classification of goods under Entry 40(iv) of the First Schedule to the TNGST Act - scope of 'printed materials' including folders and file covers - residuary entry vis-a -vis specific entry - lex specialis in taxing goods - reassessment after quashing departmental clarification

Classification of goods under Entry 40(iv) of the First Schedule to the TNGST Act - scope of 'printed materials' including folders and file covers - residuary entry vis-a -vis specific entry - lex specialis in taxing goods - Lever files made of cardboards with any print on them fall under Entry 40(iv) (printed materials) of the First Schedule to the TNGST Act and are not to be taxed under the residuary Entry 40 Part B. - HELD THAT: - The court construed Entry 40(iv) as intended to cover all printed materials including items expressly listed such as folders and file covers. The ordinary dictionary meanings of 'file' and 'folder' show substantial overlap, and lever files made of cardboards which carry printing therefore fall within the category of printed materials described in Entry 40(iv). The respondents' contention that minimal printing would exclude such items from Entry 40(iv) was rejected because the entry does not prescribe a quantitative threshold for printing and the legislature's inclusion of folders and file covers indicates an intention to cover analogous items. Accordingly, classification under the specific entry (Entry 40(iv)) prevails over treatment under the residuary entry. [Paras 6, 7, 8, 9]

Lever files made of cardboards with any print on them are classifiable under Entry 40(iv) and not under the residuary Entry 40 Part B.

Reassessment after quashing departmental clarification - Impugned departmental clarification No.73/2006 dated 17.05.2006 quashed and matter remanded for reassessment for Assessment Year 2004-05 in accordance with the court's findings. - HELD THAT: - Having held that lever files with printing fall under Entry 40(iv), the court set aside the departmental clarification to that extent and directed the assessing authority to reassess the petitioner's firm for the specified assessment year. The reassessment is to be undertaken taking into account the court's classification, with affording the petitioner opportunity for personal hearing and passing orders expeditiously. The remand is for fresh assessment in conformity with the legal conclusion reached and not for re-deciding the classification question. [Paras 9]

Clarification No.73/2006 quashed; reassessment for Assessment Year 2004-05 ordered in accordance with the court's findings, with opportunity of personal hearing to the petitioner.

Final Conclusion: The writ petition is allowed: lever files made of cardboards bearing any print are classifiable as printed materials under Entry 40(iv) of the First Schedule to the TNGST Act; the departmental clarification to the contrary is quashed and the matter is remanded for reassessment for Assessment Year 2004-05, giving the petitioner an opportunity of personal hearing.

Writ jurisdiction under Article 226 - Availability of alternative remedy - Exercise of discretion by writ court to refuse relief where efficacious alternative exists - Relegation to appellate authority - Principles of natural justice - Amendment/rectification of auditor's certificate (Form WW)

Writ jurisdiction under Article 226 - Availability of alternative remedy - Exercise of discretion by writ court to refuse relief where efficacious alternative exists - Validity of the Single Judge's refusal to entertain writ petitions against appealable assessment orders and relegation of the assessee to the appellate authority. - HELD THAT: - The High Court held that although alternative remedy is not an absolute bar to exercise of writ jurisdiction under Article 226, it is a discretionary ground on which a writ court may decline relief. The Court found no exceptional circumstances (such as want of jurisdiction, denial of personal hearing, or that the alternate remedy is ineffective or ineffectual) that would justify entertaining the writ petitions. The learned Single Judge's conclusion that the matters should be raised before the appellate authority was a proper exercise of discretion and did not require interference. All questions on merits, including alleged breach of principles of natural justice, were left open for determination by the appellate forum. [Paras 6, 7, 8]

The intra-court appeals are dismissed; the Single Judge's order relegating the assessee to the appellate authority is upheld and not interfered with.

Amendment/rectification of auditor's certificate (Form WW) - Relegation to appellate authority - Principles of natural justice - Direction regarding the corrigendum/rectification of Form WW and the pending rectification application before the Assessing Officer. - HELD THAT: - The Court declined to express any view on the interpretation of Section 63A or on the merits of the rate of tax applicable to the product (UPS), observing that those are questions of fact and law that may prejudice the parties if decided prematurely. The Court endorsed the Single Judge's approach that the Appellate Authority may consider the corrigendum to Form WW and permit the assessee to file supporting documents. Separately, the Court directed that the rectification application filed by the assessee before the Assessing Officer on 02.03.2020 be decided in accordance with law expeditiously, leaving merits to the authorities below. [Paras 8, 11, 12, 17]

Appellate Authority to consider corrigendum/amendment to Form WW and allow supporting documents; Assessing Officer to decide the pending rectification application expeditiously; no opinion expressed on merits.

Final Conclusion: The High Court dismissed the intra-court appeals and declined to interfere with the Single Judge's order that relegated the assessee to the appellate authority; the Appellate Authority is permitted to examine the corrigendum to Form WW on production of supporting documents and the Assessing Officer is directed to decide the rectification application expeditiously, with all merits left open.

Inter-State sale - local sale - assessment under Central Sales Tax - assessment under TNGST Act - E1 sales - Section 3(a) of the CST Act - C form

Inter-State sale - local sale - assessment under Central Sales Tax - assessment under TNGST Act - C form - Whether the sales made by the assessee were assessable under the CST Act as inter-State sales or under the TNGST Act as local sales. - HELD THAT: - The Court held that the transactions were inter-State sales assessable under the Central Sales Tax regime and were not taxable as local sales under the TNGST Act. The finding is grounded on the admitted factual matrix that the goods were supplied under a pre-existing contract ultimately destined for Pondicherry, the consignee was shown as the Pondicherry purchaser in invoices and purchase orders, the goods were transited to the Pondicherry consignee and freight was borne by the assessee, and the purchaser had issued C forms to the seller. In these circumstances there was interstate movement occasioned by the contract and the transactions could not be recharacterised as local sales taxable under the TNGST Act. The Tribunal's contrary conclusion - that the presence of two dealers in Tamil Nadu precluded interstate sales - was rejected as contrary to law and precedent.

Sales were inter-State and assessable under the Central Sales Tax Act, not as local sales under the TNGST Act.

E1 sales - Section 3(a) of the CST Act - Whether the transactions satisfied the conditions for E1 sales and fell within Section 3(a) of the CST Act. - HELD THAT: - The Court accepted that the conditions for treating the transactions as E1 sales were satisfied: the first leg of the transactions involved movement occasioned by the contract to an out-of-State consignee (Pondicherry), supporting application of Section 3(a) of the CST Act. Reliance was placed on the Division Bench precedent recognising that inter-State sale may be effected even when seller and buyer are situated in the same State if the contract contemplates delivery outside the State. The Tribunal's interpretation that absence of differently situated contracting parties automatically negated E1 character was held to be erroneous.

Transactions qualified as E1 sales and fell within Section 3(a) of the CST Act.

Final Conclusion: The Tax Case is allowed: the Tribunal's order is set aside and the sales are held to be inter-State (E1) sales assessable under the CST Act for Assessment Year 2004-05; no order as to costs.

Liability of directors of a private company under the MVAT Act - construction of the expression "subject to" in a statute - distinction between private company and public company under the Companies Act, 2013 - inapplicability of director's joint and several liability to directors of a public company - attachment and unfreezing of bank account - Section 44(6) of the Maharashtra Value Added Tax Act, 2002 as read with the Companies Act, 2013

Section 44(6) of the Maharashtra Value Added Tax Act, 2002 as read with the Companies Act, 2013 - liability of directors of a private company under the MVAT Act - distinction between private company and public company under the Companies Act, 2013 - inapplicability of director's joint and several liability to directors of a public company - attachment and unfreezing of bank account - Whether Section 44(6) of the MVAT Act could be invoked to fasten joint and several liability on the petitioner, a director of a public company, and thereby justify attachment of his bank account. - HELD THAT: - Section 44(6) of the MVAT Act is expressly made "subject to the provisions of the Companies Act, 2013" and applies to tax recovery from a "private company" and persons who were directors of such private company during the relevant period. The ordinary statutory meaning of "subject to" indicates that the provision yields to and is governed by the Companies Act, 2013 where there is any conflict or where definitions under the Companies Act are applicable. The Companies Act, 2013 contains specific and distinct definitions of "private company" and "public company" and prescribes how each is constituted. Consequently, the reference to a private company in Section 44(6) of the MVAT Act must be read with the Companies Act, 2013; the liability created by Section 44(6) attaches only in relation to directors of a private company as defined by the Companies Act. The petitioner was a director of M/s. Birla Electricals Limited, which is an admitted public company; therefore Section 44(6) could not be lawfully applied to fasten joint and several liability on him for the company's dues. On that basis the departmental attachment of the petitioner's bank account lacked legal sanction. [Paras 13, 14, 15, 16, 17]

Section 44(6) of the MVAT Act is inapplicable to the petitioner as he was a director of a public company; the attachment of his bank account is unjustified and must be lifted.

Final Conclusion: Writ petition allowed; respondents directed to unfreeze the petitioner's bank account forthwith; no order as to costs.