TaxTMI Updates e-Newsletter
Oct 09,2020

Deposit of principal amount in installments - stay of interest - interim protection against coercive action - challenge to order of the National Anti-Profiteering Authority - constitutionality of Section 171 of the CGST Act and Rules 122, 126, 127 and 133 of the CGST Rules

Deposit of principal amount in installments - stay of interest - interim protection against coercive action - Interim directions as to payment of the principal profiteered amount and suspension of interest and coercive measures - HELD THAT: - The Court, having listed the petition for hearing and in view of earlier orders in related matters, directed that the petitioner shall deposit the principal profiteered amount determined by the National Anti-Profiteering Authority in six equated installments commencing 15th October, 2020. The Court stayed the payment of the interest component directed to be paid by the respondents until further orders. The order reflects grant of interim relief only; the Court recorded the deposit schedule while preserving substantive adjudication of the merits for further hearing.

Petitioner directed to deposit the principal profiteered amount in six equated installments beginning 15th October, 2020; interest stayed and coercive action restrained until further orders.

Challenge to order of the National Anti-Profiteering Authority - constitutionality of Section 171 of the CGST Act and Rules 122, 126, 127 and 133 of the CGST Rules - Proceedings on the challenge to the NAPA order and the constitutional challenge to statutory provisions left pending with directions for pleadings and listing - HELD THAT: - The writ petition challenges the final order of the National Anti-Profiteering Authority and raises a constitutional challenge to provisions of the CGST scheme. The Court issued notice, directed the respondents to file counter-affidavits within two weeks and permitted rejoinders before the next date of hearing. The matter was listed for final hearing along with connected matters. No adjudication on the merits of the challenge or on the constitutionality of the provisions was undertaken in the interim order.

Challenge to the NAPA order and the constitutional objections remain pending; parties directed to file affidavits and the matter listed for further hearing.

Final Conclusion: Interim relief granted: petitioner to deposit the principal profiteered amount in six equated installments commencing 15th October, 2020; payment of interest stayed and coercive steps restrained pending further orders. Substantive challenge to the NAPA order and the constitutional questions are pending and have been listed for further hearing with directions for pleadings.

Refund of income-tax - interest on delayed refund - rectification application - undertaking recorded as binding on respondent - disposal of writ petition on court-recorded undertaking

Refund of income-tax - interest on delayed refund - rectification application - undertaking recorded as binding on respondent - Respondents' undertaking to decide the rectification application within a stipulated time and to pay up-to-date interest was accepted and the writ petition was disposed of on that basis. - HELD THAT: - The Assessing Officer placed on record a refund order dated 10 September 2020 determining a refund for A.Y. 2017-18. The petitioner asserted non-payment of interest on the refund. Counsel for the respondents stated that a rectification application including a claim for up-to-date interest had been filed and undertook, on instructions of the Assessing Officer, that the rectification application would be decided within two weeks and that up-to-date interest would be paid in accordance with law. The Court accepted this statement/undertaking as binding on the respondents and recorded the same. In view of the accepted undertaking, the Court disposed of the writ petition, directing the undertaking to be honoured. [Paras 2, 4, 5, 6]

The respondents are bound by the recorded undertaking to decide the rectification application within two weeks and to pay up-to-date interest; the writ petition is disposed of.

Final Conclusion: The writ petition was disposed of on the respondents' recorded undertaking that the rectification application will be decided within two weeks and that up-to-date interest will be paid; the respondents are bound by that undertaking.

Reopening assessment as barred by limitation - proviso to Section 147 of the Income Tax Act - four year period for issuance of notice - invalidity of assessment order consequent to time barred reopening - treatment of guideline value in registration records versus declared sale consideration - inadmissibility of raising new grounds for assessment in counter affidavit

Reopening assessment as barred by limitation - proviso to Section 147 of the Income Tax Act - four year period for issuance of notice - Validity of notice under Section 148 dated 30.03.2016 to reopen assessment for Assessment Year 2009-10 - HELD THAT: - The notice under Section 148 issued on 30.03.2016 was examined against the proviso to Section 147 which prescribes the four year period for issuance of a notice to reopen an assessment. The court found that the four year period expired on 31.03.2014 and that the notice dated 30.03.2016 was therefore beyond the permissible period. Consequently the notice was held to be time barred and bad in law. [Paras 6]

The notice under Section 148 dated 30.03.2016 is barred by limitation and is invalid.

Invalidity of assessment order consequent to time barred reopening - Sustainability of the assessment order dated 30.12.2016 rendered following the time barred reopening - HELD THAT: - Because the reopening notice was held invalid for being barred by limitation, the consequential assessment completed under Section 143(3) on 30.12.2016 could not be sustained. The court quashed the impugned assessment order as it rested on an invalid notice. [Paras 6, 8]

The assessment order dated 30.12.2016 is quashed as it is consequential upon a time barred reopening.

Treatment of guideline value in registration records versus declared sale consideration - inadmissibility of raising new grounds for assessment in counter affidavit - Permissibility of reliance on Annexure 1 A (guideline value) and the department's contention that returns understated sale consideration - HELD THAT: - The court rejected the department's contention-raised for the first time in the counter affidavit-that Annexure 1 A showed the higher sale value and that the petitioner had adopted a lesser value in accounts. First, introducing this reasoning at the counter affidavit stage was impermissible since it was not the basis of the assessment order. Second, the court observed that the figure in Annexure 1 A is a guideline value recorded for registration purposes and cannot be equated with the actual sale consideration; accordingly the inference that the petitioner had under quoted the sale amount in the returns was not accepted. The court, however, expressly refrained from holding that the sale price in the sale deed would be conclusive evidence for determination. [Paras 7]

The department's reliance on Annexure 1 A as establishing understatement is unsustainable; the objection raised first in the counter affidavit is impermissible and the guideline value cannot be treated as actual sale consideration.

Final Conclusion: Writ petition allowed; the notice to reopen for Assessment Year 2009-10 was held time barred, the consequent assessment order dated 30.12.2016 is quashed, connected petition closed and no costs awarded.

Deduction under Section 80IB - Deduction under Section 80IC - Form 10CCB compliance - Opportunity to rectify procedural omission - Electricity-consumption to sales disparity as basis for disallowance - Concurrent findings of Commissioner (Appeals) and ITAT

Deduction under Section 80IB - Form 10CCB compliance - Opportunity to rectify procedural omission - Concurrent findings of Commissioner (Appeals) and ITAT - Assessee entitled to deduction under Section 80IB despite omission in Form 10CCB where material before AO showed eligibility and omission was rectifiable - HELD THAT: - The Assessing Officer denied deduction solely because Form 10CCB did not state number of workmen in each unit. The omission was of a technical nature and rectifiable. Material produced before assessment established that each unit employed more than ten workers, satisfying the condition for Section 80IB. The Commissioner (Appeals) and the ITAT accepted the evidence and granted the deduction. Applying the principle that mere default in furnishing Form 10CCB is a venial/technical omission (as held in Hindustan Steel Limited), the Court held that such omission cannot justify denial of the statutory deduction when eligibility is otherwise demonstrated and the AO ought to have afforded an opportunity to rectify the defect. [Paras 15, 16, 17]

Substantial question 'A' answered against the Revenue and in favour of the Assessee; deduction under Section 80IB directed to be allowed.

Deduction under Section 80IC - Electricity-consumption to sales disparity as basis for disallowance - Concurrent findings of Commissioner (Appeals) and ITAT - Disparity between electricity consumption and sales at one unit held insufficient sole basis to deny Section 80IC deduction where explained factors plausibly accounted for higher sales and profit - HELD THAT: - The AO relied on comparison of electricity consumption and sales across units to infer unreasonable inflation of profits at the Nalagarh Unit and denied Section 80IC deduction. The assessee furnished detailed explanations-differences in machinery age and technology, fully automatic high-output machines, product mix, excise exemption status, geographic market and power rates-which the Commissioner (Appeals) and the ITAT found supported by the record. The appellate authorities applied correct tests and recorded concurrent findings that multiple legitimate factors could explain the higher sales and profits, and that a simple disparity in electricity consumption alone does not justify disallowance. There was no perversity in those findings warranting interference. [Paras 20, 21, 22, 23, 24]

Substantial question 'B' answered against the Revenue and in favour of the Assessee; deduction under Section 80IC directed to be allowed.

Final Conclusion: Tax Appeal No.62/2014 (Assessment Year 2006-07) allowed in part: substantial questions 'A' and 'B' answered against the Revenue and in favour of the Assessee; Tax Appeal No.13/2015 disposed of as infructuous. No order as to costs.

Section 35E benefits - revenue expenditure vs capital expenditure - Section 68 unexplained credits - concurrent findings of fact - perversity standard - human probabilities

Section 35E benefits - revenue expenditure vs capital expenditure - concurrent findings of fact - perversity standard - Allowability under Section 35E of the payment of Rs. 5,00,00,000/- and whether that payment constituted revenue expenditure or acquisition of mining rights. - HELD THAT: - The Court examined the agreement between the parties and the nature of the payment, noting that the sum was made in the context of development works undertaken by the mining lessees and an arrangement to share extracted ore. Both the CIT(Appeals) and the ITAT independently considered the scope of the agreement and concluded that the provisions of Section 35E were attracted and that the benefit granted to the assessee was appropriate. Those concurrent factual findings as to the nature and purpose of the payment were held to be supported by the material on record and not vitiated by perversity. Consequently no substantial question of law arose for adjudication on this issue. [Paras 11, 12, 13]

The Tribunal was correct in allowing benefit under Section 35E; the concurrent findings that the payment qualified under Section 35E and did not amount to an impermissible capital acquisition are not perverse.

Section 68 unexplained credits - concurrent findings of fact - human probabilities - perversity standard - Deletion of the addition under Section 68 in respect of payments to M/s. Balaji Minerals and M/s. Matha Minerals and whether the Assessing Officer was justified in treating such payments as unexplained credits. - HELD THAT: - Section 68 applies where sums credited in the books are unexplained to the AO's satisfaction. The AO's dissatisfaction was based primarily on non-appearance of the payee entities, but both the CIT(Appeals) and the ITAT considered broader circumstances: payments made by cheque, acceptance by the department that purchases were effected from those entities, and the overall commercial plausibility including profits derived. Applying the principle that explanations must be assessed in light of human probabilities (as emphasised in Sumati Dayal), the authorities found the assessee's explanations satisfactorily probabilised. The High Court held these concurrent factual conclusions were not perverse and therefore did not give rise to a substantial question of law. [Paras 14, 15, 16, 17, 20]

The deletion of the addition under Section 68 was justified; the AO's singular focus on non-appearance was insufficient and the concurrent acceptance of the assessee's explanation stands.

Final Conclusion: The appeal is dismissed. The High Court found no substantial question of law: the Tribunal's allowance under Section 35E and deletion of the Section 68 addition rest on concurrent findings of fact which are not perverse, and the authorities properly applied the standard of human probabilities in assessing the assessee's explanations.

Application of Section 11 exemption to real income - income in commercial sense under Section 11 - deduction under Section 24(a) - interpretive weight of administrative circulars - quashing of appellate tribunal order and remand for fresh consideration

Application of Section 11 exemption to real income - income in commercial sense under Section 11 - deduction under Section 24(a) - interpretive weight of administrative circulars - Scope and meaning of 'income' for the purpose of Section 11 exemption and the legal yardstick by which the immunity is to be confined. - HELD THAT: - The Court held that the object of Section 11 is to grant immunity to the income of a charitable trust but that immunity is confined to the extent to which such income is actually applied to charitable purposes in India; the exclusion from immunity must be confined to the real income of the trust. The Court accepted the view, reflected in Circular No.5-P dated 19.05.1968 and followed by Calcutta and Gujarat High Courts, that the word 'income' in Section 11(1)(a) is to be understood in the commercial sense and that the real (commercial) income of the trust is the relevant base for determining application and exemption. The Court observed that statutory deductions and the computation of 'total income' under the Act are to be considered in context, and that a proper adjudication requires examination on this touchstone. The Court did not, however, finally decide the specific contention whether deduction under Section 24(a) must be allowed in the assessee's case on the present record, because the matter had not been examined by the authorities below on the stated legal principle.

The legal principle was affirmed that Section 11 exemption is confined to the real/commercial income actually applied for charitable purposes and that 'income' for Section 11 must be understood in the commercial sense; the specific factual application (including the claim under Section 24(a)) was not finally adjudicated.

Quashing of appellate tribunal order and remand for fresh consideration - remand for fresh consideration - Whether the orders of the Commissioner (Appeals) and the Tribunal had correctly applied the legal principle and whether the matter required fresh adjudication. - HELD THAT: - The Court found that neither the Commissioner of Income Tax (Appeals) nor the Tribunal had examined the assessee's case on the touchstone of the settled legal principle that 'income' for Section 11 is to be understood in the commercial sense and that exemption is confined to real income actually applied. In view of this omission, the Court quashed the Tribunal's order and remitted the matter to the Tribunal for fresh consideration in light of the observations made regarding the correct legal test. Because the matter is remitted, the substantial questions of law framed on admission were not answered by this Court.

Tribunal order quashed; matter remitted to the Tribunal for fresh consideration applying the legal principles identified by this Court.

Final Conclusion: The appeal is disposed of by quashing the Tribunal's order and remitting the matter to the Tribunal for fresh consideration of the assessee's claim in light of the Court's observation that 'income' under Section 11 must be understood in the commercial sense and the exemption confined to real income actually applied; the substantial questions of law admitted are left unanswered.

Deduction under Section 10B - 100% export-oriented undertaking - deemed export - receipt of export proceeds in convertible foreign exchange - pari materia relationship between Section 10A and Section 10B - EXIM policy - export through other exporters/STP units

Deduction under Section 10B - receipt of export proceeds in convertible foreign exchange - deemed export - Assessee entitled to deduction under Section 10B though export proceeds were received by a third party which exported the goods and realized convertible foreign exchange. - HELD THAT: - The Court examined Section 10B(3) together with the EXIM policy and authorities on Section 10A to determine whether exports effected through another exporter/STP unit, with export proceeds received by that third party in convertible foreign exchange, attract exemption. The Court held that Section 10B is pari materia with Section 10A and the EXIM policy (paragraph 6.19) contemplates that an EOU/STP unit may export goods through another exporter/STP unit and such supplies are to be treated as deemed export for the scheme. If goods manufactured by the assessee are exported out of India either by the assessee or through another STP unit and the foreign exchange is directly attributable to such export, the provisions of Section 10B apply. Applying this principle to the facts, where Toyota Tsusho India Pvt. Ltd. exported the goods and realized the foreign exchange, the assessee's supplies amounted to deemed export attributable to foreign exchange realizations and thus qualified for deduction under Section 10B. [Paras 6, 7, 8, 9]

Deduction under Section 10B upheld in favour of the assessee despite export proceeds being realized by a third party.

100% export-oriented undertaking - supporting manufacturer - pari materia relationship between Section 10A and Section 10B - A manufacturing unit which is a 100% export-oriented undertaking is eligible for Section 10B deduction even if it supplies goods to a third party who effects the export. - HELD THAT: - The Tribunal had characterized the assessee as a supporting manufacturer and denied Section 10B relief. The Court, however, recorded that the assessee was admittedly a manufacturing unit and a 100% export-oriented unit (as found by the Tribunal itself). Relying on the reasoning applied under Section 10A and the EXIM policy, the Court held that it is not necessary for the undertaking personally to export the goods outside India; export through another STP/exporter does not defeat eligibility. Consequently, a supporting manufacturer who satisfies the conditions of an export-oriented undertaking and whose manufactured goods are exported (whether directly or through another unit) with foreign exchange directly attributable to such exports is entitled to the deduction under Section 10B. [Paras 3, 8, 9]

Assessee, being a 100% export-oriented manufacturing unit, is eligible for the benefit of Section 10B notwithstanding export through a third party.

Final Conclusion: The substantial questions of law are answered in favour of the assessee; the orders of the Assessing Officer, CIT(A) and the Tribunal insofar as they denied the benefit under Section 10B are quashed and the assessee is entitled to deduction under Section 10B for AY 2009-10.

Long term capital gains claimed as exempt - sham/paper/penny stock transactions - onus of the assessee to prove genuineness of transactions - opportunity to confront/cross examine statements of investigation wing - substantial question of law under Section 260A

Long term capital gains claimed as exempt - sham/paper/penny stock transactions - onus of the assessee to prove genuineness of transactions - Whether the addition of long term capital gain on the ground that the transactions were pre-arranged and carried out through bogus companies could be sustained. - HELD THAT: - The Tribunal recorded that the assessee had discharged the onus of proving that the transactions were genuine by furnishing relevant details, maintaining a Demat account with ICICI Securities Ltd., and by producing bank transaction details for purchase of shares; some shares remained in the assessee's account after the capital gain was earned. On this factual basis the Tribunal deleted the addition made by the assessing officer. The High Court took cognisance of these findings of fact and, applying the settled standard that appellate interference under Section 260A requires a substantial question of law, concluded that the question posed by the Revenue did not present such a legal question because the Tribunal's conclusions turned on appreciation of evidence and the assessee's discharge of onus. [Paras 3, 4]

Addition could not be sustained; Tribunal's deletion of the addition upheld.

Opportunity to confront/cross examine statements of investigation wing - fair procedure in tax adjudication - Whether failure to supply statements of the investigation wing and to grant opportunity for cross examination prejudiced the assessee's case. - HELD THAT: - The Tribunal noted that statements recorded by the investigation wing, which formed the basis of the allegation of bogus transactions, were not supplied to the assessee and no opportunity to cross examine the declarants was afforded by the assessing officer. The Tribunal relied on a coordinate Bench decision to the effect that opportunity to cross examine is required where adverse reliance is placed on such statements. The High Court recorded this factual and procedural finding and treated it as reinforcing the conclusion that the assessee had discharged his onus and that the addition could not be sustained. [Paras 2, 3, 4]

Failure to supply the investigation statements and to allow cross examination supported the Tribunal's conclusion in favour of the assessee.

Final Conclusion: The appeal by the Revenue is dismissed; the Tribunal's deletion of the addition of long term capital gain for A.Y. 2014-15 is upheld, the posed question not constituting a substantial question of law under Section 260A.

Taxation of royalties and fees for technical services under DTAA - substitution of statutory provision (repeal by substitution) - time of operation of treaty amendment and its retrospective application within a fiscal year - rates in force for withholding tax

Substitution of statutory provision (repeal by substitution) - taxation of royalties and fees for technical services under DTAA - The effect of the Notification of 18.07.2005 substituting paragraph 2 of Article 12 of the India-Singapore DTAA and whether the substituted provision (10% rate) governs taxation of royalties and fees for technical services. - HELD THAT: - The Court applied the settled rule that substitution of a provision results in repeal of the earlier provision and its replacement by the new provision, so that the old rule is deleted and the new rule becomes operative. The Notification of 18.07.2005 expressly deleted paragraph 2 of Article 12 (previously providing for a higher rate) and replaced it with a paragraph capping tax at 10% where the recipient is the beneficial owner. On this basis the Tribunal was correct in treating the substituted clause as operative and in determining the rate of tax under Article 12 as not exceeding 10%. [Paras 4, 5, 6]

The substituted provision in Article 12 of the DTAA (10% rate) is operative and governs the taxation of royalties and fees for technical services.

Time of operation of treaty amendment and its retrospective application within a fiscal year - rates in force for withholding tax - Whether the benefit of the Notification effective from 01.08.2005 applies to the whole previous year (fiscal year) for the Assessment Year 2006-07. - HELD THAT: - Having held that the provision was substituted and the new provision is operative, the Court accepted the Tribunal's conclusion that the substituted rate applies for the entire fiscal year as defined in the DTAA. The Court rejected the revenue's contention that the effective date limited the benefit, observing that substitution makes the new rule operative and the Tribunal rightly determined the rate for the relevant fiscal year accordingly. [Paras 6]

The Notification giving effect to the substituted Article applies for the entire fiscal year, and the 10% rate applies for the Assessment Year 2006-07.

Final Conclusion: Appeal dismissed; substantial questions answered in favour of the assessee - the Notification dated 18.07.2005 substituting paragraph 2 of Article 12 of the India-Singapore DTAA is operative and the capped 10% rate applies for the relevant fiscal year for Assessment Year 2006-07.

Penalty under section 271(1)(c) - benefit of doubt - absence of corroborative material - incidence of penalty not automatic - supporting bills and payment records as evidentiary material - substantial question of law

Penalty under section 271(1)(c) - incidence of penalty not automatic - benefit of doubt - absence of corroborative material - supporting bills and payment records as evidentiary material - Whether the Appellate Tribunal was justified in deleting the penalty imposed on the assessee in respect of alleged bogus long term capital gains. - HELD THAT: - The Tribunal found that the assessee had produced supporting bills and details of payments to substantiate the reported long term capital gains and that the addition (and penalty) was founded primarily on statements attributed to a third party (Mr. Mukesh Chokshi) which were not placed before the assessee. The Tribunal applied the principle that imposition of penalty under section 271(1)(c) is not automatic and, given the smallness of the sum involved, the absence of the third party's statement or any other substantive corroborative material, and the presence of supporting documents, it was appropriate to give the assessee the benefit of doubt. In the backdrop of these ambiguities the Tribunal concluded that the explanation of the assessee could not be held to be blatantly false and therefore exonerated the assessee from penalty while noting that its view would not operate as a precedent. [Paras 2, 3]

Tribunal's deletion of the penalty was upheld and the assessee was exonerated from penalty on the stated factual and evidentiary basis.

Substantial question of law - Whether the question of law proposed by the Revenue constituted a substantial question of law warranting interference by the High Court under Section 260A. - HELD THAT: - The High Court examined the question framed by the Revenue and concluded that, having regard to the Tribunal's reasons and the factual matrix relied upon by it, there was no good ground to entertain the appeal. The Court held that the question, as proposed, could not be termed a substantial question of law and therefore did not merit interference with the Tribunal's factual and discretionary conclusion to delete the penalty. [Paras 3, 4]

The proposed question was not a substantial question of law and the appeal was dismissed.

Final Conclusion: The High Court dismissed the revenue's appeal, upholding the Tribunal's deletion of the penalty under section 271(1)(c) on the stated evidentiary and mitigating grounds and holding that the question raised did not constitute a substantial question of law.

Deduction under Section 80P(2)(a)(i) - Primary Agricultural Credit Society - Inquiry into factual activities of a cooperative society - Registrar's classification not conclusive - Each assessment year to be examined separately - Remand for fresh examination

Deduction under Section 80P(2)(a)(i) - Primary Agricultural Credit Society - Inquiry into factual activities of a cooperative society - Registrar's classification not conclusive - Whether the Assessing Officer and the Commissioner (Appeals) were justified in denying the claim of deduction under Section 80P(2)(a)(i) by treating the appellants as carrying on the business of banking and not as Primary Agricultural Credit Societies. - HELD THAT: - The Assessing Officer disallowed the claim on the basis that the societies were essentially doing banking business and agricultural credit disbursements were only minuscule, relying on loan extracts in the statutory audit report. The Tribunal held that narration in loan extracts alone is not conclusive to determine the purpose of loans (for example, gold loans may or may not be for agricultural purposes) and the Assessing Officer ought to have examined the details of each loan disbursement to ascertain whether the loans were for agricultural purposes. The Full Bench decision of the Hon'ble Kerala High Court in The Mavilayi Service Co-operative Bank Ltd. v. CIT was held to be binding on the manner of inquiry: the Registrar's classification is not conclusive after the insertion of sub-section (4) of Section 80P and the Assessing Officer must conduct an enquiry into the factual activities of the society for each assessment year. Because such a detailed examination was not carried out in these assessments, the Tribunal concluded that the question of eligibility under Section 80P(2)(a)(i) could not be finally adjudicated on the record before it and required fresh consideration in light of the Full Bench dictum. [Paras 7]

The issue is remitted to the Assessing Officer to examine, for each assessment year, the nature and purpose of individual loan disbursements (listing instances of non-agricultural loans where applicable) and to decide the claim for deduction under Section 80P(2)(a)(i) in accordance with the Full Bench decision in The Mavilayi Service Co-operative Bank Ltd. v. CIT.

Final Conclusion: Appeals allowed for statistical purposes; the orders denying deduction under Section 80P(2)(a)(i) are set aside and the matters are remanded to the Assessing Officer for fresh factual examination of loan disbursements in accordance with the Full Bench ruling of the Kerala High Court; the stay applications are dismissed as infructuous.

Arm's length price - international transaction - notional interest on overdue receivables - recharacterisation of receivables as loan - working capital adjustment - benchmarking at LIBOR plus 300 basis points - commercial policy versus tax authority intervention

International transaction - notional interest on overdue receivables - arm's length price - Outstanding receivables unpaid beyond the agreed 15 days constituted a separate international transaction attracting an arm's-length benchmarking of notional interest. - HELD THAT: - The service agreement expressly provided payment within 15 days and stated that the service cost constituted full consideration; amounts outstanding beyond that period were therefore not part of the agreed consideration. The Assessing Officer and the CIT(A) treated such overdue amounts as an extended credit benefit provided to the associated enterprise, requiring compensation by way of interest. The Tribunal found no infirmity in that conclusion, noting that the outstanding sums beyond the contractually stipulated period were not factored into the service price and thus formed a distinct international transaction for which arm's-length adjustment was warranted.

The finding that overdue receivables beyond 15 days are a separate international transaction requiring interest adjustment is upheld.

Working capital adjustment - arm's length price - The working capital adjustment claimed by the assessee was not accepted and could not be used to negate the interest adjustment in the absence of reliable supporting data. - HELD THAT: - The assessee contended that a working capital adjustment demonstrated that its overall profitability already compensated for outstanding receivables. The authorities, and subsequently the Tribunal, noted that no reliable data or accepted working capital adjustment had been furnished or granted; therefore the arm's-length price determination did not factor in any such adjustment. On the facts of the case the absence of a substantiated working capital adjustment meant the interest benchmarking remained appropriate.

The claim that a working capital adjustment obviated the notional interest adjustment is rejected for want of reliable data; the adjustment stands.

Benchmarking at LIBOR plus 300 basis points - arm's length price - Benchmarking the notional interest on the overdue receivables at LIBOR plus 300 basis points was appropriate and was upheld. - HELD THAT: - The CIT(A) directed that LIBOR (appropriate to the currency of the receivable) plus a margin of 300 basis points be applied, substituting the SBI-based rate used by the TPO. The Tribunal accepted the CIT(A)'s approach that LIBOR was the correct reference given the receivable was in US dollars and found no error in directing LIBOR plus 300 bps as the benchmarking rate in the circumstances of this case.

The direction to benchmark interest at LIBOR plus 300 basis points is confirmed.

Recharacterisation of receivables as loan - commercial policy versus tax authority intervention - The authorities were entitled to treat prolonged outstanding receivables as effectively providing funds to the associated enterprise and to recharacterise the commercial consequence as attracting interest; the assessees' reliance on commercial policy or prior decisions with different facts was unavailing. - HELD THAT: - The assessee argued that outstanding receivables did not impact its profits/assets and that charging interest was a commercial/business policy decision into which tax authorities should not intrude. The Tribunal observed that where the contractual terms do not include compensation for delayed payment, the extension of credit confers a benefit on the recipient which can be the subject of transfer pricing adjustment. The Tribunal also examined the precedents cited by the assessee and found them distinguishable on facts (notably where working capital adjustments had been accepted or commercial reasons existed for non-charging of interest), thereby rejecting the contention that those decisions dictated deletion of the adjustment in this case.

Recharacterisation and interest adjustment are sustainable on the facts; reliance on cited decisions is rejected as distinguishable.

Final Conclusion: The orders of the lower authorities confirming a transfer pricing adjustment by treating receivables unpaid beyond 15 days as a separate international transaction and benchmarking notional interest at LIBOR plus 300 basis points are affirmed; the assessee's grounds of appeal are dismissed.

Penalty under Section 271(1)(c) - Addition based on unproved purchases / alleged bogus purchases - Distinction between unproved and disproved explanations - Burden on Revenue to disprove genuineness by clinching evidence - Estimation of disallowance insufficient to sustain penalty

Penalty under Section 271(1)(c) - Additions based on unproved purchases - Burden of proof on revenue to disprove genuineness - Estimation of disallowance - Whether penalty under Section 271(1)(c) could be sustained where purchases were held to be unproved/estimated but not disproved by clinching documentary evidence - HELD THAT: - The AO treated purchases aggregating to the stated amount as bogus and added them to income after notices to alleged suppliers returned unserved. The CIT(A) and subsequently the Tribunal reduced the quantum of disallowance by estimation (to 30% and then to 10%). The Tribunal found that the assessee had produced purchase bills, ledger accounts and bank statements which were not conclusively dislodged by the revenue. The Court held that an unproved claim which is not disproved to the hilt cannot attract penalty under Section 271(1)(c); where facts are equally consistent with the assessee's explanation and with concealment, penalty is not warranted. The imposition of penalty cannot rest solely on an estimate of disallowance in absence of clinching evidence establishing that the claim was false or represented concealment of income. Reliance was placed on the principle that mere non-acceptance of a claim by the revenue, without positive and irrefragable evidence to show falsity, does not justify penal consequences. Applying these principles to the facts, since the authenticity of purchases was not disproved by conclusive material and the disallowance ultimately rests on estimation, the penalty imposed by the AO cannot be sustained. [Paras 9, 10]

Penalty under Section 271(1)(c) vacated and appeal allowed.

Final Conclusion: The penalty imposed under Section 271(1)(c) was set aside because the purchases, though unproved to the satisfaction of the revenue and estimated for disallowance, were not disproved by clinching evidence; estimation alone is insufficient to sustain penalty.

Deletion of addition - prior period expenditure - crystallization of liability - allowability under section 37(1) of the Act - bond issue expenditure treated as revenue expenditure - reliance on earlier orders in assessee's own case

Prior period expenditure - crystallization of liability - deletion of addition - reliance on earlier orders in assessee's own case - allowability under section 37(1) of the Act - Deletion of addition of prior period expenditure of Rs. 10,50,324/- - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the addition after noting that the CIT(A) had respectfully followed earlier orders in the assessee's own case (including an ITAT decision) where similar additions were struck down. The CIT(A) found that the nature of the expenses indicated they might pertain to earlier years but that the liability had crystallized in AY 2006-07 and that such expenses are allowable under the principles applied under allowability under section 37(1) of the Act. No contrary judicial decision was brought to the Tribunal's notice, and the Tribunal found the CIT(A)'s reliance on the assessee's prior favourable decisions to be justified in deleting the addition. [Paras 5, 6]

Ground dismissed - addition deleted in favour of the assessee.

Bond issue expenditure treated as revenue expenditure - reliance on earlier orders in assessee's own case - deletion of addition - Deletion of addition in respect of bond issue expenses - HELD THAT: - The Tribunal affirmed the CIT(A)'s deletion of the addition in respect of bond issue expenses by following the CIT(A)-XVI order in the assessee's own case for AY 2007-08, where similar bond-related recurring expenses (Trustee fees, rating agency fees, NSDL/CDSL fees, registrar and related charges) were held to be revenue in nature and allowed. The Tribunal observed that identical or similar expenses had been allowed by the Department for several assessment years and that no contrary decision was placed before it; accordingly the CIT(A)'s order deleting the addition was maintained. [Paras 7]

Ground dismissed - addition deleted in favour of the assessee.

Final Conclusion: The Revenue's appeal is dismissed and the deletions made by the CIT(A) in respect of prior period expenses and bond issue expenses are upheld.

Application of search-and-seizure material and post-search information to reopen completed assessments under section 153A - relevance of a statement recorded under section 132(4) when coupled with contemporaneous documents - incriminating material - remand for fresh consideration of seized documents

Incriminating material - application of search-and-seizure material and post-search information to reopen completed assessments under section 153A - Whether the deletion of additions by the CIT(A) on the ground that assessments stood completed and no incriminating material was found should be sustained. - HELD THAT: - The Tribunal examined the search panchnama, impounded material and statements and observed that the CIT(A) did not advert to bank statements produced at the time of recording the statement under section 132(4). While noting that a bare statement under section 132(4) without corroboration does not constitute incriminating material, the Tribunal found that where such statement is coupled with contemporaneous bank statements and documents for the relevant years, their effect on the existence of incriminating material requires specific consideration. The Tribunal held that the CIT(A) omitted to consider those bank statements and the appraisal documents placed on record and that this omission vitiated the deletion of additions. For these reasons the Tribunal set aside the CIT(A)'s order and remanded the matter for fresh consideration in accordance with law, directing the CIT(A) to afford the assessee an opportunity to be heard. [Paras 11, 12]

Impugned deletions set aside and matter remanded to the CIT(A) for reconsideration of the bank statements and seized documents with opportunity to the assessee.

Relevance of a statement recorded under section 132(4) when coupled with contemporaneous documents - remand for fresh consideration of seized documents - Whether the bank statements handed over during the search, when read with the statement recorded under section 132(4), constitute incriminating material warranting additions for the assessment years in question. - HELD THAT: - The Tribunal observed that the record before it included bank statements for the relevant assessment years which were not considered by the CIT(A). It recognised the legal position that a statement under section 132(4) alone may not be incriminating, but when corroborated by seized or furnished documents that pertain to the years under consideration, those materials may have bearing on the issue of undisclosed income. As the CIT(A) made no finding on the impact of the bank statements placed on record, the Tribunal concluded that this factual and legal question must be examined afresh by the CIT(A). The Tribunal therefore remanded this specific issue for fresh adjudication, with directions to consider the bank statements and allow the assessee to place submissions. [Paras 11, 12]

Issue remanded to the CIT(A) to examine whether the bank statements furnished at the time of search, together with the statement under section 132(4), amount to incriminating material justifying additions.

Final Conclusion: The Tribunal allowed the Revenue's appeals for statistical purposes, set aside the CIT(A)'s orders deleting the additions, and remanded the matters to the CIT(A) to consider the bank statements and seized documents (produced at the time of search/recording of statements) afresh, after affording the assessee an opportunity of being heard.

Treatment of bank credits as business turnover - presumptive taxation under section 44AD - invocation of section 145(3) for deeming income - burden of proof on assessee to explain unexplained deposits - rejection of explanation requires independent contrary material - application of net profit rate under presumptive scheme - limited scrutiny of cash deposits

Treatment of bank credits as business turnover - burden of proof on assessee to explain unexplained deposits - rejection of explanation requires independent contrary material - limited scrutiny of cash deposits - Addition by treating entire bank credits of Rs. 79,74,414/- as business turnover and enhancing income was unsustainable. - HELD THAT: - The assessee produced cash book, ledger, bank statements and transaction-wise narration showing that the bank credits comprised declared turnover, salary receipts, loans from relatives, inter-bank transfers and prior cash withdrawals. The AO had limited the scrutiny to cash deposits but treated the entire bank credits as turnover without conducting any enquiry from third parties or producing contrary material to displace the documentary reconciliation furnished by the assessee. The Tribunal found that where the assessee discharges the onus by producing reconciled records and the AO fails to bring independent evidence contradicting those records or to make minimal enquiries (for example, to verify claimed loans or inter-account transfers), treating all bank credits as business receipts is arbitrary. Consequently the addition made on that basis is not sustainable and is deleted. [Paras 5]

Addition deleted.

Presumptive taxation under section 44AD - application of net profit rate under presumptive scheme - Validity of applying net profit rate at 8% became infructuous once enhancement of turnover was set aside; no change in net profit rate was made by the AO. - HELD THAT: - The AO had applied the net profit rate of 8% (the same rate declared by the assessee). Since the Tribunal has held that the enhancement of turnover is unsustainable, the controversy regarding change of net profit rate does not survive. The Tribunal clarified that the AO had not enhanced the net profit rate and therefore there is no merit in the challenge on this point. [Paras 5]

Issue rendered infructuous; no change to net profit rate.

Final Conclusion: The assessee's appeal is allowed: the addition made by treating entire bank credits as business turnover is deleted; the dispute over the net profit rate is rendered infructuous as the AO had not altered the presumptive rate.

Classification by essential character (GIR 3(b)) - chemically pure sucrose as principal constituent - sugar confectionery and immediate consumption test (HSN Explanatory Notes) - classification of sugar preparations under Heading 17.01 versus Heading 17.04 - extended period of limitation - invocation where suppression or mis-declaration alleged

Classification by essential character (GIR 3(b)) - chemically pure sucrose as principal constituent - classification of sugar preparations under Heading 17.01 versus Heading 17.04 - Classification of imported 'Non-pareil seeds/Neutral Pellets/Sugar spheres (pharmaceutical grade)' between CTH 1701 (17019990) and CTH 1704 (17049090) was determined. - HELD THAT: - The Tribunal upheld the view that where a product is a mixture or preparation, Rule 3(b) of the General Rules for Interpretation applies and the constituent that imparts the essential character governs classification. The imported pellets consist predominantly of chemically pure sucrose (reported in the range of about 61% to over 90%), with starch as binder and water used in processing. The presence of starch and water did not alter the essential character provided by sucrose. The Board Circular and earlier tribunal authority treating sugar preparations as classifiable under heading 17.01 were held relevant. The HSN Explanatory Notes to Heading 17.04 show confectionery covers products generally suitable for immediate consumption; the pellets, being intended for pharmaceutical use (to be coated or infused with APIs) and not for direct consumption as sweets, do not fall within 17.04. Applying the essential-character test and the common-parlance/HSN tests, the Tribunal concluded the goods fall under CTH 17019990 (other within 1701). [Paras 12, 13, 14, 15, 16]

Imported sugar spheres/neutral pellets are classifiable under CTH 17019990 (Heading 17.01) and not under Heading 17.04.

Sugar confectionery and immediate consumption test (HSN Explanatory Notes) - classification of sugar preparations under Heading 17.01 versus Heading 17.04 - Whether the product is classifiable as sugar confectionery (Heading 17.04). - HELD THAT: - The Tribunal accepted the Commissioner's finding that Heading 17.04 principally covers sugar preparations generally suitable for immediate consumption. The imported neutral pellets are used as pharmaceutical carriers and are not products in common parlance consumed as sweets; therefore, the 17.04 heading is not applicable despite similar manufacturing forms used in confectionery in other markets. Reliance on foreign classifications was held not decisive for Indian tariff classification. [Paras 14, 15, 16]

The alternative classification under Heading 17.04 is rejected; the product is not sugar confectionery within the meaning of Heading 17.04.

Extended period of limitation - invocation where suppression or mis-declaration alleged - Whether demands for imports during March, 2012 to February, 2015 invoking the extended period were barred by limitation. - HELD THAT: - The Tribunal found that the appellant consistently declared the goods under Heading 1702 in Bills of Entry, provided full descriptions, and furnished literature and manufacturing details when called for; the Department was aware of the nature and classification of the goods during assessment. In such circumstances, the allegation of suppression or mis-declaration necessary to invoke the extended period under Section 28(4) could not be sustained. Applying the principle that change of departmental view does not automatically amount to suppression where full disclosure and assessments occurred, the Tribunal set aside the demand raised by invoking the extended period for the earlier period. [Paras 17, 18]

Demand for the period March, 2012 to February, 2015 raised by invoking the extended period is set aside as time-barred.

Penalty for classification issue - classification as question of law - Whether penalty should be levied for the mis-classification in respect of the goods imported October-December 2015. - HELD THAT: - The Tribunal noted that the classification dispute concerned interpretation of competing tariff headings - a question of law. While the duty and interest demand for the normal period (October to December 2015) was upheld, the Tribunal held that imposing penalty where the issue turns on interpretation between two competing headings is unwarranted. In view of the legal nature of the controversy, the imposition of penalty was set aside. [Paras 16]

Penalty imposed for the classification dispute is set aside.

Final Conclusion: The appeals were partly allowed: classification of the imported sugar spheres/neutral pellets was held under CTH 17019990 (Heading 17.01) and the duty and interest demand for October-December 2015 upheld; penalties relating to that classification were set aside. The demand raised for the period March 2012-February 2015 by invoking the extended period was quashed as time barred.

Confiscation for mis-declaration of export goods - mis-declaration of gold content in export shipping bill - penalty under Section 114(iii) of the Customs Act - penalty under Section 114AA of the Customs Act - personal liability of directors for acts of company - liability of customs house agent for verification of export documents - redemption fine

Confiscation for mis-declaration of export goods - mis-declaration of gold content in export shipping bill - Confiscation of the exported gold jewellery upheld - HELD THAT: - The Tribunal found that the declared gold content (13,633.730 gms) did not match the actual gold content established on re-examination (3,540 gms) and that the discrepancy was not disputed by the exporter. On the basis of the physical re-examination and the statements recorded (including the authorised signatory's account of outsourcing manufacture), the adjudicating authority was justified in directing confiscation of the goods under the Customs Act. The factual finding of shortfall in gold content provided the foundation for confiscation. [Paras 9, 11]

Confiscation directed by the Commissioner sustained.

Penalty under Section 114(iii) of the Customs Act - redemption fine - Redemption fine and penalty payable by the exporter M/s Savithri Jewellers Pvt. Ltd. reduced - HELD THAT: - Although confiscation was sustained, the Tribunal held that the quantum of the redemption fine and the penalty originally imposed by the Commissioner was excessive in the circumstances and on the evidence placed before the adjudicating authority. In exercise of appellate powers to meet the ends of justice, the Tribunal reduced the redemption fine and the penalty imposed on the exporter to lower amounts considered proportionate. [Paras 11]

Redemption fine and penalty on the exporter reduced.

Penalty under Section 114AA of the Customs Act - penalty under Section 114(iii) of the Customs Act - Penalty on Shri Roshan Vernekar modified: penalty under Section 114AA sustained but reduced, penalty under Section 114(iii) set aside - HELD THAT: - The Commissioner found omission on the part of Shri Roshan Vernekar in verifying the jewellery and export documents, justifying personal liability. The Tribunal did not disturb the finding of omission but regarded the combined penalties as disproportionate. Consequently, the Tribunal retained liability under Section 114AA as adequate remedial measure and reduced the amount under that provision while setting aside the separate penalty under Section 114(iii). [Paras 12]

Penalty under Section 114AA on Shri Roshan Vernekar reduced; penalty under Section 114(iii) set aside.

Personal liability of directors for acts of company - penalty under Section 114(iii) of the Customs Act - Penalties imposed on the directors Ms. Deepa S. Vernekar and Ms. Shilpa S. Vernekar set aside - HELD THAT: - The Tribunal found no evidence that the two directors were involved in, or had knowledge of, the handing over of gold to the karigar or of any mis-declaration. They were not examined and no witness implicated them. In absence of material connecting them to the acts or omissions that led to confiscation, imposition of penalty on them could not be sustained. [Paras 13]

Penalties on the two directors quashed.

Liability of customs house agent for verification of export documents - penalty under Section 114(iii) / Section 117 principles - Penalty on CHA M/s Protocol Logistics Pvt. Ltd. and Shri Vinay Shah set aside - HELD THAT: - The Commissioner relied on the fact that Shri Vinay Shah presented the goods and signed the shipping bill as the exporter's representative. The Tribunal observed that the Department failed to produce cogent evidence showing that the CHA or Shri Vinay Shah had knowledge that the jewellery did not contain the declared quantity of gold. Absent proof of such knowledge or complicity, the imposition of penalty on the CHA and the signatory could not be sustained. [Paras 14]

Penalties on the CHA and Shri Vinay Shah quashed.

Final Conclusion: The Tribunal upheld confiscation of the exported jewellery for mis-declaration of gold content but moderated the punitive measures: the exporter's redemption fine and penalty were reduced; personal penalty under Section 114AA on the authorised signatory was reduced while the Section 114(iii) penalty against him was set aside; penalties imposed on the two directors, the CHA and its signatory were quashed for lack of evidence of knowledge or involvement.

Levy of anti-dumping duty on imported stainless steel cold-rolled coils below prescribed width - confiscation of imported goods for mis-declaration - imposition of penalty on importer and director for customs violations - scope of show-cause notice and principle against adjudicating beyond notice - refund of duty paid on re-exported goods and applicability of Section 27

Levy of anti-dumping duty on imported stainless steel cold-rolled coils below prescribed width - Leviability of anti-dumping duty on the imported Stainless Steel CR coils having width less than 1280 mm. - HELD THAT: - The Tribunal held that the question of levy of anti-dumping duty on stainless steel CR coils below the specified width is no longer open as the Supreme Court in Mascot International has settled the law in favour of revenue. Consequently the coils in question (54.298 MT) having width less than 1280 mm are liable to anti-dumping duty and the confirmation of the duty by the authorities below was upheld. The appellant did not dispute this point before the Tribunal. [Paras 8]

Anti-dumping duty is leviable on the subject coils and the duty confirmed by the authorities is sustained.

Confiscation of imported goods for mis-declaration - scope of show-cause notice and principle against adjudicating beyond notice - Validity of confiscation of the seized imported goods and related redemption/penalty orders. - HELD THAT: - The Tribunal found that the adjudicating authority had directed confiscation under Sections 111(d) and 111(o) on account of non-declaration/mis-declaration leading to levy of anti-dumping duty; however the Commissioner (Appeals) sustained confiscation under Section 111(m) although that provision had neither been invoked in the show-cause notice nor in the adjudication order. The Commissioner (Appeals) thereby travelled beyond the scope of the notice without giving opportunity to the appellant, which is impermissible. Further, the impugned anti-dumping notifications do not create a post-import conditional exemption attracting Section 111(o). Applying these principles, the Tribunal held that confirmation of confiscation under Section 111(m) could not be sustained and confiscation under Section 111(o) was also inapplicable. In view of these conclusions the confiscation and consequential penalties could not be upheld. [Paras 10, 11, 13, 14]

Confiscation directed by the authorities (as sustained under Section 111(m) and under Section 111(o) by the Commissioner (Appeals)) cannot be sustained; confiscation and consequential penalties set aside.

Imposition of penalty on importer and director for customs violations - Sustainability of penalties imposed on the appellant company and on Shri Ketan R. Jain as director. - HELD THAT: - Because confiscation and the legal basis for it could not be sustained for the reasons identified, consequential penalties premised on that confiscation also could not be sustained. Separately, on the question of personal penalty against Shri Ketan R. Jain, the Tribunal found no evidence of his active personal involvement in the mis-declaration or an intention to evade duty; his signature on import documents in the ordinary course was not held to be sufficient to fasten personal liability. Accordingly, imposition of penalty on him was set aside. [Paras 14, 15]

Penalties consequential to the unsustainable confiscation are set aside; personal penalty on Shri Ketan R. Jain is vacated for lack of evidence of personal involvement.

Refund of duty paid on re-exported goods and applicability of Section 27 - Entitlement to refund of anti-dumping duty paid during investigation when goods were subsequently re-exported, and the procedural requirement to file a refund claim. - HELD THAT: - The Tribunal agreed with the Commissioner (Appeals) that refund of the anti-dumping duty paid is governed by Section 27 and not Section 26A where the adjudication of the show-cause notice was pending at an earlier point. The Commissioner (Appeals) directed filing of a fresh refund claim; the appellants thereafter filed a claim which was scrutinized and sanctioned by the Assistant Commissioner on examination including unjust enrichment considerations. The Tribunal found no infirmity in the departmental approach and rejected the appeal challenging the denial of the earlier-filed claim, noting that the refund became due after the appellate order and was rightly processed upon the later claim. [Paras 16, 17]

Appeal against denial of refund is rejected; refund was properly processed and sanctioned following a subsequently filed claim under Section 27.

Final Conclusion: The levy of anti-dumping duty on the subject coils below 1280 mm is affirmed; however the confiscation and consequential penalties imposed by the authorities cannot be sustained because the Commissioner (Appeals) adjudicated under a provision (Section 111(m)) not pleaded in the notice and Section 111(o) is inapplicable - those orders and personal penalty on the director are set aside. The appellant's challenge to the refund process is rejected as the later refund claim was validly filed and sanctioned.

Reassessment of duty on valuation - Kaccha Bill of Entry procedure - Natural justice and requirement of speaking order under Section 17(5) - Less charge demand under Section 28(1)(b)(ii) - Rejection of declared value and Customs Valuation Rules - Remand for de-novo adjudication

Reassessment of duty on valuation - Rejection of declared value and Customs Valuation Rules - Whether the observations in paragraph 10 of the Commissioner (Appeal)'s order, upholding the departmental valuation and rejecting the declared value, could stand alongside a remand for fresh adjudication. - HELD THAT: - The Tribunal found that the Commissioner (Appeal) had remanded the matters for de-novo consideration to enable the original authority to pass a speaking order under the principles of natural justice (para 11 of the impugned order). At the same time the Commissioner (Appeal) made substantive observations in paragraph 10 justifying rejection of the declared value under the Customs Valuation Rules. The Tribunal held that such substantive findings were inconsistent with and prejudicial to an open remand because they effectively decide the merits and constrain the adjudicating authority. Consequently paragraph 10 was held to be uncalled for and contrary to the remand direction, and therefore was ordered to be obliterated from the impugned order so that the original authority may consider valuation afresh without being influenced by those observations. [Paras 16, 17]

Paragraph 10 of the Commissioner (Appeal)'s order is obliterated; the substantive observations upholding the departmental valuation are set aside so as not to prejudice the remand.

Kaccha Bill of Entry procedure - Natural justice and requirement of speaking order under Section 17(5) - Remand for de-novo adjudication - Less charge demand under Section 28(1)(b)(ii) - Whether the matter should be remanded to the original adjudicating authority for fresh decision and what procedural steps are required. - HELD THAT: - The Tribunal accepted that the consignments were cleared under the Kaccha Bill of Entry dispensation and that differential duty was paid pursuant to less charge demands. Noting the statutory requirement that an assessing officer issue a speaking order when amending an importer's assessment, the Tribunal agreed with the Commissioner (Appeal)'s remand on grounds of natural justice because no order under Section 17(5) was passed by the original authority. The Tribunal directed that in the remand proceedings the original authority must adjudicate the matters afresh, apply the relevant valuation rules if necessary, and afford the importer an opportunity of hearing without reference to the deleted observations. [Paras 15, 17]

Matters remanded to the original authority for de-novo adjudication; original authority to pass speaking orders and afford opportunity of hearing in accordance with law, uninfluenced by the deleted paragraph.

Final Conclusion: All nineteen appeals are disposed of by obliterating paragraph 10 of the Commissioner (Appeal)'s order; the matters are remanded to the original authority for fresh adjudication in accordance with principles of natural justice and applicable valuation rules, and the original authority must not be influenced by the deleted observations.

Quashing of summoning order - non-application of judicial mind - requirement of specifying accused and parentage in summons - requirement of specifying the exact penal provision when summoning - direction to re-pass a judicial order - administrative communication to prevent sketchy orders

Quashing of summoning order - requirement of specifying accused and parentage in summons - requirement of specifying the exact penal provision when summoning - non-application of judicial mind - Impugned summoning order dated 27.2.2019 was quashed for being sketchy and showing non-application of judicial mind. - HELD THAT: - The summoning order recorded only that accused were summoned under "section 129 of Companies Act" without naming the accused, without stating parentage, and without specifying the precise penal provision (the complaint sought action under section 129(7)). The order was cursory and did not disclose application of judicial mind or reference to the specific penal clause under which punishment was sought. For a valid summoning order the Magistrate must identify the accused and indicate the specific offence/penal provision being invoked so that the accused and the court understand the charge sought to be tried. The court found the impugned order to be sketchy and lacking judicial consideration, thereby vitiating the summoning process.

Impugned summoning order dated 27.2.2019 quashed.

Direction to re-pass a judicial order - administrative communication to prevent sketchy orders - The matter was remitted for fresh judicial consideration and a direction issued to the District & Sessions Judge to ensure magistrates pass reasoned judicial orders. - HELD THAT: - Having quashed the impugned order, the court directed the Special Chief Judicial Magistrate, Agra, to pass a judicial order in the matter-i.e., to re-examine the complaint and, if appropriate, issue a fresh summons containing the necessary particulars and specifying the exact penal provision. Additionally the court ordered communication of this decision to the District & Sessions Judge, Agra, to ensure magistrates refrain from issuing sketchy or non-judicial orders in future and that judicial magistrates apply their mind when passing summoning orders.

Proceedings remitted for fresh judicial order by the Special C.J.M., Agra; District & Sessions Judge to be informed to prevent recurrence of sketchy orders.

Final Conclusion: The impugned summoning order was quashed as sketchy and showing non-application of judicial mind; the Special C.J.M., Agra, was directed to pass a fresh, reasoned judicial order and the District & Sessions Judge, Agra, was to be informed to ensure magistrates do not pass similar non-judicial orders.

Restoration of company name under Section 252(3) - Strike off under Section 248 and procedural compliance for removal from register - Requirement to file statutory returns and consequences of default - Directors' disqualification under Section 164 not revived by restoration - Conditions and consequential directions on restoration

Restoration of company name under Section 252(3) - Requirement to file statutory returns and consequences of default - Restoration of the appellant company's name to the register of companies - HELD THAT: - The Tribunal examined the plea for restoration under Section 252(3) and the ROC's report regarding procedural compliance under Section 248. The Tribunal noted that the appellant company had been carrying on business since incorporation, had filed certain earlier returns and audited accounts up to 31.03.1999, and produced recent financial statements and an Income Tax Return acknowledgment. Although the ROC established that the company had defaulted in filing financial statements and annual returns for multiple years and followed the prescribed strike off procedure, the Tribunal was satisfied that it would be just and equitable to restore the company's name. Restoration was therefore ordered subject to specified consequential directions and compliance, including filing of all statutory documents with prescribed fees/additional fees and fines within the stipulated period after restoration. [Paras 10, 11, 12]

The Registrar of Companies is directed to restore the company's name to the register and take consequential actions, subject to compliance with directions including filing of pending statutory documents and payment of prescribed fees.

Strike off under Section 248 and procedural compliance for removal from register - Validity of ROC's strike off action and procedural regularity - HELD THAT: - The ROC's report documented issuance of notices, publication in Gazette and newspapers, and strike off under Section 248(5) with publication in Form STK-7. The Tribunal accepted that the strike off was effected in accordance with the prescribed procedure and that the strike off arose from persistent defaults in statutory filings by the company's officers. While accepting procedural regularity, the Tribunal nonetheless exercised its power under Section 252(3) to restore the company in view of facts establishing that the company was in operation and on equitable considerations. [Paras 8, 9, 12]

The strike off was procedurally in order, but the Tribunal ordered restoration on equitable grounds while noting the ROC's authority to take action for defaults.

Directors' disqualification under Section 164 not revived by restoration - Conditions and consequential directions on restoration - Effect of restoration on directors' disqualification and ancillary directions imposed on restoration - HELD THAT: - The Tribunal clarified that restoration of the company's name does not automatically reinstate any director who has been disqualified under the provisions of Section 164; restoration of directorship, if permissible, must follow law. The Tribunal also imposed ancillary conditions as part of the restoration order: allowing appointment of minimum required directors, directing filing of all statutory documents within 30 days of restoration together with prescribed and additional fees/fines, requiring a shareholders' undertaking regarding non use of company accounts for tainted transactions during demonetisation, ordering payment of costs to the Central Government within three weeks (failure of which will cause the order to lapse), prohibiting alienation of valuable assets until compliances are complete, and directing publication of the restoration order in the Official Gazette. The Tribunal further observed that the order does not circumscribe the ROC's power to proceed against the company or its directors for alleged late filing or other defaults. [Paras 12]

Restoration is subject to specified conditions and compliances; directors disqualified under Section 164 are not automatically reinstated and ROC retains power to proceed for defaults.

Final Conclusion: The Tribunal allowed the appeal and directed restoration of the appellant company's name to the register as if it had not been struck off, while upholding that the strike off procedure had been regularly followed; restoration is granted on equitable grounds subject to conditions including filing of pending documents with prescribed fees, payment of costs to the Central Government, submission of an undertaking by shareholders, restrictions on alienation of assets until compliance and the continued applicability of disqualification and ROC's enforcement powers.

Sanction of scheme of amalgamation under Sections 230-232 of the Companies Act, 2013 - vesting of assets and liabilities by operation of law pursuant to Section 232(3) - treatment of employees on amalgamation - filing of amended Memorandum and Articles of Association and payment of differential fee for enhanced authorised capital - duties of Registrar of Companies on sanction and dissolution of transferor companies - official liquidator's report and payment of auditor's fees

Sanction of scheme of amalgamation under Sections 230-232 of the Companies Act, 2013 - vesting of assets and liabilities by operation of law pursuant to Section 232(3) - Sanction of the Composite Scheme of Arrangement and consequential vesting of properties, rights and liabilities of Transferor Companies 5 and 6 in the Transferee Company. - HELD THAT: - Having considered the compliance with directions for convening/dispensing with meetings, service of statutory and public notices, the reports of the Regional Director and Official Liquidator, the affidavit of the statutory auditor regarding accounting standards, and absence of objections from statutory authorities, the Tribunal found that requisite statutory compliances under the Act and Rules have been satisfied. The Tribunal therefore sanctioned the Composite Scheme and ordered that, pursuant to Section 232(3), all properties, rights and interests of Transferor Companies 5 and 6 shall, without further act or deed, stand transferred and vested in the Transferee Company, and that all liabilities, engagements and duties of the Transferor Companies shall become liabilities and duties of the Transferee Company. The Tribunal also directed that proceedings pending by or against the Transferor Companies shall continue by or against the Transferee Company, and fixed the appointed date as specified in the Scheme. [Paras 16, 18, 19]

The Composite Scheme is sanctioned and the assets, liabilities and pending proceedings of Transferor Companies 5 and 6 stand vested in the Transferee Company pursuant to Section 232(3).

Filing of amended Memorandum and Articles of Association and payment of differential fee for enhanced authorised capital - Direction that the Transferee Company shall file the revised Memorandum and Articles of Association and make requisite payment of any differential fee for enhancement of authorised capital after setting off fees paid by the Transferor Companies. - HELD THAT: - The Regional Director observed that clause of the Scheme which stated the Transferee Company would not be required to pay fee or stamp duty for increase in authorised capital was contrary to the obligation under Section 232(3)(i) to pay fees for enhanced authorised capital after setting off amounts paid by transferor companies. Petitioner companies acknowledged the observation and undertook compliance. The Tribunal incorporated the obligation into its sanction order and directed the Transferee Company to file amended MOA/AOA with the RoC, Chennai and make requisite payment of differential filing fee, after setting off fees already paid by the Transferor Companies, in accordance with law. [Paras 6, 7, 18]

The Transferee Company is directed to file amended constitutional documents and make payment of any differential fee for enhanced authorised capital after appropriate set-off, as part of the sanction.

Official liquidator's report and payment of auditor's fees - Direction that Transferor Companies 5 and 6 shall jointly pay the Official Liquidator a specified sum for remuneration of the auditor who investigated the affairs of the Transferor Companies. - HELD THAT: - The Official Liquidator took on record the Chartered Accountant's report on verification of accounts and records and sought fixation of remuneration payable to the auditor who conducted the investigation. Having considered the report and request, the Tribunal directed Transferor Companies 5 and 6 jointly to pay the Official Liquidator the remuneration for the auditor's fees. [Paras 9, 10]

Transferor Companies 5 and 6 are directed to jointly pay the prescribed remuneration to the Official Liquidator for the auditor who investigated their affairs.

Treatment of employees on amalgamation - Employees of Transferor Companies 5 and 6 in service immediately preceding the effective date shall become employees of the Transferee Company without break. - HELD THAT: - The Scheme provided for protection of employees' interests. The Tribunal, after noting the Regional Director's reference to employee protection in the Scheme and the overall compliance, ordered that all employees of Transferor Companies 5 and 6 in service on the date immediately preceding the date on which the Scheme takes effect shall become employees of the Transferee Company without any break or interruption in their service. [Paras 6, 18]

Employees of the Transferor Companies shall, as on the relevant date, become employees of the Transferee Company without any break or interruption.

Final Conclusion: The Tribunal, having recorded statutory compliance, reports and absence of objections, allowed the Company Petitions and sanctioned the Composite Scheme of Arrangement on the terms set out in the order, while making express provisions for vesting of assets and liabilities, employee protection, filing amended constitutional documents and payment of any differential fees, and preserving rights of authorities to take action for any statutory deficiencies.

Oppression and mismanagement under Sections 241 and 242 of the Companies Act, 2013 - interplay between company law remedies and arbitration - appointment of independent forensic auditor - constitution of audit committee for statutory verification - cost allocation for forensic audit

Interplay between company law remedies and arbitration - oppression and mismanagement under Sections 241 and 242 of the Companies Act, 2013 - Whether the reliefs sought under the company petition filed under Sections 241 and 242 can be excluded from adjudication before this Tribunal in favour of resolution under the Arbitration and Conciliation Act, 1996. - HELD THAT: - After considering the pleadings, the interim counter and the Advocate Commissioner's report, the Bench held that the reliefs claimed under Sections 241 and 242 of the Companies Act are statutory corporate remedies cognisable by the Tribunal and cannot be displaced by resort to the Arbitration and Conciliation Act. The Tribunal recorded that the remedies and reliefs available under the Companies Act must be adjudicated under that Act and cannot be subsumed into or determined solely by an arbitration process under Section 8 of the Arbitration and Conciliation Act. On that basis the Tribunal proceeded to deal with interim measures in the company petition rather than deferring to arbitration. [Paras 19]

Relief under Sections 241 and 242 are to be adjudicated under the Companies Act and cannot be granted under the Arbitration Act; the Tribunal proceeded to pass interim directions under the company petition.

Appointment of independent forensic auditor - inspection and authentication of statutory records - Whether an independent forensic auditor should be appointed and the terms governing such appointment as an interim measure. - HELD THAT: - Having found a prima facie concern that statutory records might be tampered with and mindful of the Advocate Commissioner's report and the parties' contentions, the Tribunal directed the appointment of an Independent Forensic Auditor to complete the auditing work. The Tribunal fixed a limited time-frame for completion, required the parties to propose names for appointment, and provided that the auditor shall complete the work within the period specified by the Bench. The order responds to the petitioners' apprehension of possible destruction or falsification of records and balances that concern by directing an impartial forensic audit under the Tribunal's supervision. [Paras 19]

Appointment of an Independent Forensic Auditor is allowed and directed to complete the audit within 60 days from appointment; parties to suggest names by the date indicated by the Tribunal.

Constitution of audit committee for statutory verification - cost allocation for forensic audit - Whether an audit committee should be constituted to assist the forensic audit and how its composition and costs should be regulated. - HELD THAT: - To assist and facilitate the independent audit, the Tribunal directed constitution of an audit committee comprising two directors nominated by the petitioners and two nominated by the respondents, expressly excluding Respondent No. 2 from membership. The Tribunal also apportioned the cost of the forensic auditor equally between the parties and directed both sides to suggest proposed auditors within the time stipulated, thereby providing procedural machinery to effect the audit while securing parity between the parties. [Paras 19]

An audit committee of two directors from each side (excluding Respondent No. 2) is to be constituted; costs of the forensic auditor to be borne equally by both parties; parties to suggest auditors by the specified date.

Final Conclusion: The Tribunal held that the statutory remedies under Sections 241 and 242 must be adjudicated under the Companies Act and, as interim reliefs, directed the appointment of an Independent Forensic Auditor to complete the audit within 60 days, ordered constitution of a four member audit committee excluding Respondent No.2, and apportioned the auditor's costs equally between the parties; parties were directed to suggest names of auditors by the date specified and the petition listed accordingly.

Suspension of powers of directors upon appointment of the Interim Resolution Professional under Section 17 of the Insolvency and Bankruptcy Code, 2018 - moratorium and protection of corporate assets under Section 14 of the Insolvency and Bankruptcy Code, 2018 - misappropriation / siphoning of corporate funds in breach of the insolvency moratorium - duties of the Interim Resolution Professional to safeguard assets and inform the adjudicating authority and creditors - obligation of a financial creditor to take action on fraudulent diversion of corporate funds

Suspension of powers of directors upon appointment of the Interim Resolution Professional under Section 17 of the Insolvency and Bankruptcy Code, 2018 - misappropriation / siphoning of corporate funds in breach of the insolvency moratorium - Findings on conduct of the suspended directors in activating a dormant bank account and effecting transfers during the moratorium period. - HELD THAT: - The Court recorded evidence from the bank that an account which had not been operated since 2014 was re activated on 4th June, 2019 and receipts and onward transfers were made after the petition admitting the corporate insolvency process and after the moratorium under the IBC had been imposed. The Court observed that upon appointment of the Interim Resolution Professional the powers of the directors stand suspended and such powers are to be exercised by the Interim Resolution Professional. The Court found that the suspended directors arranged transfers out of the re activated account and thereby acted contrary to the suspension of their powers and against the interest of the creditors. The Court further noted that the Interim Resolution Professional had not written to the NCLT/NCLAT about this conduct and had informed only certain officials of the financial creditor, and that no action had been taken by the financial creditor despite knowledge of the transfers. [Paras 6, 7]

The Court recorded that the suspended directors had siphoned funds in violation of the suspension of their powers under the IBC and that appropriate notice had not been taken earlier by the Interim Resolution Professional or the financial creditor.

Duties of the Interim Resolution Professional to safeguard assets and inform the adjudicating authority and creditors - obligation of a financial creditor to take action on fraudulent diversion of corporate funds - Directions to the financial creditor and registry to ensure immediate forensic enquiry and accountability for the diverted funds. - HELD THAT: - Having recorded the apparent breach of the moratorium and the failure of the Interim Resolution Professional and the financial creditor to take formal action, the Court directed the Chief Legal Head of the financial creditor (Bank of India) to appear before the Court after consulting concerned officers who, according to the Interim Resolution Professional, had condoned the suspended directors' conduct. The Court also directed the Prothonotary and Senior Master to forthwith email a copy of the order to the Chief Legal Head and to inform him telephonically of his required attendance by video conferencing. The Court required that the order be acted upon on production of a digitally signed copy. [Paras 8, 9, 10]

The Court directed the Chief Legal Head of the financial creditor to be present before the Court at the specified time and directed the registry to communicate the order immediately and facilitate compliance.

Final Conclusion: The Court, while entertaining the writ petition challenging the acceptance letter and work order, has recorded that the suspended directors effected transfers from a re activated account in breach of the suspension of their powers under the IBC and observed inaction by the Interim Resolution Professional and the financial creditor; the Court has directed the Chief Legal Head of the financial creditor to appear for explanation and directed the registry to communicate the order forthwith for compliance.

Oppression and mismanagement - Notice of meeting and voting rights of shareholder - Validity of board resolutions where meeting convened without notice - Constructive res judicata - Status quo pending adjudication

Notice of meeting and voting rights of shareholder - Validity of board resolutions where meeting convened without notice - Constructive res judicata - Whether the petitioner is a shareholder of the company and entitled to invoke sections 241/244 of the Companies Act, 2013 or whether that question is finally foreclosed by prior adjudication. - HELD THAT: - The Tribunal found that the determinative question - whether the petitioner holds the disputed shares - cannot be resolved on the materials before it in the virtual hearing and requires a fuller evidentiary inquiry. The earlier NCLT/NCLAT proceedings set aside the board meeting of 18.02.2014 and declared the allotment to one respondent void; the operative part of those orders, however, is silent as to the allotment to the petitioner and the parties interpret that silence differently. The Tribunal held that clarification of the operative part of the earlier judgment or further evidence is necessary because (a) if the entire board meeting is void for want of notice, the entire allotment would ordinarily fail, and (b) constructive res judicata considerations arise if the same question is again adjudicated without addressing the ambiguity in the prior order. Accordingly the Tribunal left the shareholding question open for elaborate hearing with production of records and evidence rather than deciding it on the papers or by summary ruling. [Paras 15, 16, 17]

The question of the petitioner's shareholding and consequent maintainability under sections 241/244 is left open for full hearing; parties must seek clarification of the operative part of the earlier judgment or adduce evidence, and the issue will be decided after further hearing.

Status quo pending adjudication - Oppression and mismanagement - Whether interim relief in the form of status quo should be granted over the company's landed property pending final determination of the maintainability and merits. - HELD THAT: - Having left the central question of shareholding undecided and noting the risk to the sole significant asset of the company, the Tribunal exercised its discretion to preserve the asset until the petition is finally heard. The order recognises that, although maintainability cannot be finally determined until clarification and evidence are produced, equitable protection of the company's property is warranted to prevent irreversible action during pendency of proceedings. The Tribunal also prescribed a timetable for pleadings and permitted parties to list the petition after lockdown, with directions for service and email circulation of the order. [Paras 17, 18]

Status quo directed with respect to the company's landed property until final hearing; parties directed to file affidavits within stipulated timelines and permitted to seek listing after lifting of lockdown, with the registry to email the order to the parties.

Final Conclusion: The Tribunal declined to finally determine whether the petitioner is a shareholder entitled to seek relief for oppression and mismanagement, leaving that issue for full hearing and possible clarification of earlier orders; meanwhile it granted interim protection by directing status quo in respect of the company's landed property and issued procedural directions for further contestation.

Operational debt - financial debt - default - Corporate Insolvency Resolution Process - interest not part of operational debt for triggering Section 9

Operational debt - interest not part of operational debt for triggering Section 9 - Whether interest forms part of operational debt so as to constitute a default for triggering Section 9 of the IBC. - HELD THAT: - The Tribunal compared the statutory definitions of financial debt and operational debt, noting that the former expressly includes interest while the latter does not. Applying the presumption that each word in a statute has purpose (citing the Supreme Court principle that legislative provisions should not be rendered redundant), the Tribunal held that omission of the word "interest" from the definition of operational debt indicates legislative intent to exclude interest when determining default for the purpose of Section 9. Reliance by the Operational Creditor on precedents permitting claims for interest was examined; the Tribunal observed those authorities did not engage with the specific omission in Section 5(21) and, therefore, were distinguishable. The determinative legal ratio is that for an operational debt, only the principal amount is to be treated as defaulted for triggering Section 9, and interest cannot be included in the default amount for that purpose. [Paras 13, 14, 15, 20, 21]

Interest is not includible in operational debt for the purpose of establishing a default under Section 9; only the principal amount is relevant.

Default - Corporate Insolvency Resolution Process - Whether there was a continuing default by the Corporate Debtor so as to admit the Section 9 petition when the principal amount had been deposited with the Registrar. - HELD THAT: - The Tribunal recorded that the Corporate Debtor deposited the principal amount claimed by the Operational Creditor with the Registrar, NCLT, and filed an affidavit of compliance. Since, in the context of operational debt, only the principal amount constitutes the default for triggering Section 9, the deposit of the principal extinguished the default. Consequently, there was no subsisting default at the time of the order and the statutory prerequisite for initiation of CIRP under Section 9 was absent. The Tribunal therefore could not entertain the petition under Section 9. [Paras 22, 23, 24]

Deposit of the principal amount by the Corporate Debtor extinguished the default; therefore Section 9 could not be triggered and the petition was dismissed.

Operational debt - dispute raised in reply to demand notice - Whether the quality dispute raised in the Corporate Debtor's reply to the demand notice affected the application. - HELD THAT: - The Tribunal noted that although the Corporate Debtor had not filed a formal reply to the Section 9 petition, its reply to the demand notice specifically raised a quality grievance and asserted an agreed demurrage deduction. The Operational Creditor's main application did not address or rebut that contention. The Tribunal treated the existence of the quality dispute as a pleaded contention in the record, but its ultimate decision turned on the deposit of the principal amount which removed the default required to maintain the Section 9 petition. [Paras 10, 11, 12]

A quality dispute was raised in response to the demand notice and is on record, but the petition was dismissed because the principal was deposited and no default subsisted.

Final Conclusion: The Section 9 petition was dismissed. The Tribunal held that interest is not part of operational debt for the purpose of establishing default under Section 9 of the IBC, only the principal amount is relevant; the Corporate Debtor having deposited the principal amount with the Registrar, no default subsisted and CIRP could not be initiated. The Operational Creditor remains free to pursue interest by appropriate suit and to collect the deposited amount from the Registrar.

Extension of implementation schedule of resolution plan - jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code - exclusion of lockdown period from CIRP timelines - effect of COVID-19 pandemic on performance of resolution plan

Extension of implementation schedule of resolution plan - jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code - exclusion of lockdown period from CIRP timelines - effect of COVID-19 pandemic on performance of resolution plan - Whether the successful Resolution Applicant could seek, and whether the Tribunal could grant, an extension of time for implementation of an approved resolution plan in view of delays attributable to COVID-19 and related lockdowns. - HELD THAT: - The Tribunal noted that an application under Section 60(5) is principally concerned with applications or questions arising out of or in relation to the insolvency resolution or liquidation proceedings. Although the present application was not a conventional proceeding against the corporate debtor, the Tribunal held that it related to the execution of the approved resolution plan and thus fell within the ambit of matters that could be entertained. The Court considered binding and persuasive orders of the Supreme Court, the NCLAT and coordinate NCLT Benches holding that the lockdown period caused by COVID-19 should not be counted for timelines connected with CIRP activities and noted the regulatory insertion of Regulation 40C to the IBBI Regulations. While observing that delays caused by litigation with third parties ordinarily lie between the Resolution Applicant and those third parties and do not attract IBC relief, the Tribunal accepted that the pandemic and resultant lockdown constituted a genuine contributory cause impeding performance of the implementation schedule. In light of these special circumstances, and notwithstanding initial doubts about invocation of Section 60(5), the Tribunal exercised its jurisdiction to grant relief by extending the implementation timeline. The Tribunal therefore ordered relief limited to a six month extension of the implementation schedule, disposed of the interim application and directed service of the order by e-mail without any order as to costs. [Paras 9, 10, 11, 14]

Implementation schedule of the approved resolution plan extended by six months from 24.05.2020 to 24.11.2020; the unnumbered IA disposed of; no order as to costs; registry to serve copies by e-mail.

Final Conclusion: The Tribunal allowed the application in the special circumstances of the COVID-19 pandemic, treating the lockdown as a genuine impediment to performance of the resolution plan, and extended the implementation schedule by six months while disposing of the application and directing service of the order by e-mail.

Prerogative of Committee of Creditors to appoint or replace Resolution Professional subject to prescribed prerequisites - Non-justiciability of Committee of Creditors' commercial wisdom - Requirement of compliance with prerequisites for appointment under Section 22 of the Insolvency and Bankruptcy Code, 2016 - No obligation on Committee of Creditors to record reasons for replacement of IRP

Prerogative of Committee of Creditors to appoint or replace Resolution Professional subject to prescribed prerequisites - Non-justiciability of Committee of Creditors' commercial wisdom - No obligation on Committee of Creditors to record reasons for replacement of IRP - Validity of the Committee of Creditors' decision to appoint Mr. Sumit Binani as Resolution Professional and to replace the Interim Resolution Professional (Mr. Mukesh/Mahender Khandelwal) - HELD THAT: - The Tribunal found that the power to replace an IRP with a Resolution Professional vests in the Committee of Creditors (CoC) and constitutes the commercial decision of the CoC, which is not ordinarily subject to judicial interference unless shown to be perverse or beyond jurisdiction. On a plain reading of the statutory scheme the CoC need not record reasons for replacement; the statutory prerequisites for replacement are the CoC resolution by requisite majority, written consent of the proposed RP (Form AA), filing of an application before the Adjudicating Authority, and confirmation by the IBBI. The CoC approved the appointment of Mr. Sumit Binani with 89.6% votes and his written consent was produced; the CoC filed the application through PFC. The Tribunal held that a mere procedural/regulatory objection regarding authorization of PFC to file on behalf of CoC is a technicality which does not vitiate the CoC's decision where the CoC resolution in favour of change exists and no member is prejudiced. The Tribunal therefore found no infirmity in the CoC decision and rejected the IRP's challenge to continue as RP. [Paras 21, 22, 23, 24, 25]

CoC's appointment of Mr. Sumit Binani as Resolution Professional is valid; IA No. 235/2020 filed by the IRP is rejected.

Requirement of compliance with prerequisites for appointment under Section 22 of the Insolvency and Bankruptcy Code, 2016 - Administrative direction for confirmation by Insolvency and Bankruptcy Board of India - Further administrative steps required to give effect to the CoC's appointment - HELD THAT: - Although the CoC's resolution and the written consent of the proposed RP were on record, the appointment under the statutory scheme requires confirmation by the IBBI and consequent appointment by the Adjudicating Authority. The Tribunal directed the Registry to forward the proposed RP's name to the IBBI for confirmation and directed the applicant to obtain and file the Authorization for Assignment (AoA) of the proposed RP before the next date of hearing. The matter was listed for confirmation from the IBBI on the directed date. [Paras 23, 26, 27, 28]

Registry to forward the proposed RP's name to the IBBI for confirmation; applicant to obtain Authorization for Assignment and file memo; matter listed for IBBI confirmation.

Final Conclusion: The Tribunal upheld the CoC's decision (89.6% vote) appointing Mr. Sumit Binani as Resolution Professional and rejected the IRP's challenge; the Registry was directed to forward the proposed RP's name to the IBBI for confirmation and the applicant was ordered to procure and file the Authorization for Assignment before the next listing.

Moratorium under section 14(1) of the Insolvency and Bankruptcy Code, 2016 - prohibition on transfer or alienation of assets during CIRP - preferential payment to a class of creditors during CIRP - distribution of cash flows among secured creditors on pro-rata basis as part of resolution

Moratorium under section 14(1) of the Insolvency and Bankruptcy Code, 2016 - preferential payment to a class of creditors during CIRP - prohibition on transfer or alienation of assets during CIRP - Whether, after initiation of CIRP and the invocation of moratorium, the Corporate Debtor can repay the debts of one financial creditor in preference to other financial creditors - HELD THAT: - The Code's objectives include maximisation of asset value and balancing stakeholders' interests, and the moratorium under section 14(1) is intended to provide a calm period during which the corporate debtor's assets are preserved for collective resolution. Clause (b) of section 14(1) prohibits transfer, encumbrance or alienation of the corporate debtor's assets or legal rights; cash in hand and bank balances are liquid assets that fall within this prohibition. Any preferential payment to a creditor from the corporate debtor's funds during CIRP would amount to transfer/alienation of assets and would therefore be barred by the moratorium. Reliance on the earlier NCLAT decision that once moratorium is declared no person may recover or appropriate amounts from the corporate debtor's accounts supports this construction. The Committee of Creditors' decision that operational cash flows be distributed among secured creditors on a pro-rata basis as part of the resolution process further underscores that ad hoc repayment to a single creditor is impermissible. The Resolution Professional's admission of the applicant's claim and the decision-making by the CoC mean that the applicant's claim will be addressed through the CIRP process and no prejudice arises from refusal to allow preferential repayment during moratorium. [Paras 5, 9, 11, 12]

It is not permissible for the Corporate Debtor to repay the debts of one financial creditor in preference to other financial creditors after initiation of CIRP and invocation of moratorium under section 14; the application seeking such direction is rejected.

Final Conclusion: The application seeking direction to the Resolution Professional to permit repayment to the Applicant during CIRP is rejected; preferential repayment during the moratorium is barred and the Applicant's admitted claim will be addressed through the CIRP process.

Exclusion of period from CIRP time-limit - grounds for exclusion of CIRP period - unforeseen circumstances - suspension of CIRP due to disputed CoC voting rights - extension of CIRP period - compulsory liquidation on failure to complete CIRP

Exclusion of period from CIRP time-limit - unforeseen circumstances - suspension of CIRP due to disputed CoC voting rights - grounds for exclusion of CIRP period - Exclusion of a specified period from computation of the CIRP time-limit under the circumstances of a dispute affecting CoC voting rights. - HELD THAT: - The Resolution Professional sought exclusion of 103 days (01.11.2019 to 11.02.2020) from the CIRP period on the ground that IA No. 967/2019, challenging admission of claims and revising voting rights among CoC members, was pending before the Adjudicating Authority and had the effect of restraining CoC from voting on a ready Resolution Plan. Relying on the principles in Quinn Logistics (parameter (vi)), which recognises that periods may be excluded for "other circumstances" or unforeseen events that impede the CIRP, the Tribunal held that a dispute over voting share which prevents the CoC from considering a Resolution Plan constitutes such an unforeseen circumstance justifying exclusion. Applying this reasoning to the facts, the Tribunal accepted that the pending adjudication on voting rights had adversely impacted the CIRP and, in the interest of stakeholders and to avoid driving the corporate debtor to liquidation, allowed an exclusion of 102 days from the computation of the CIRP period. The Tribunal directed the RP to complete the CIRP within the newly computed mandatory period, failing which liquidation would commence. [Paras 7, 8]

Exclusion of 102 days from computation of the CIRP period allowed; RP directed to complete CIRP within the resultant mandatory period or face commencement of liquidation.

Final Conclusion: The application to exclude an intervening period from the CIRP timeline was allowed in part: 102 days are excluded from computation of the CIRP period and the RP is directed to complete the CIRP within the resultant mandatory period, failing which liquidation will follow.

Offences under the Insolvency and Bankruptcy Code - Trial by Special Court constituted under the Companies Act - Cognizance of offences under the Code only on complaint under Section 236(2) - Tribunal's lack of jurisdiction to adjudicate criminal allegations - Direction for administrative assistance to Resolution Professional

Offences under the Insolvency and Bankruptcy Code - Trial by Special Court constituted under the Companies Act - Tribunal's lack of jurisdiction to adjudicate criminal allegations - Whether the Tribunal can entertain and adjudicate allegations of offences under the Code and grant directions in respect thereof. - HELD THAT: - The allegations in the application relate to offences punishable under the Insolvency and Bankruptcy Code which, by statutory scheme, are triable by a Special Court constituted under the Companies Act. Section 236(2) confines cognizance of such offences to complaints made by the Board (IBBI), the Central Government or a person authorised by the Central Government. Given that the prosecution and cognizance regime is thus specially prescribed, the Tribunal is not the appropriate forum to make findings or grant criminal investigatory directions on those allegations. Consequently the Authority refrained from commenting on or adjudicating the alleged offences and rejected the application insofar as it sought such reliefs. [Paras 4]

Application rejected to the extent it sought adjudication or criminal investigatory directions on alleged offences under the Code; Tribunal declined to make any findings on those allegations.

Cognizance of offences under the Code only on complaint under Section 236(2) - Direction for administrative assistance to Resolution Professional - Whether the Tribunal may direct police (DIG West Godavari) to conduct search and seizure or otherwise cooperate in absence of specific particulars. - HELD THAT: - The prayer seeking a general direction to the DIG for search and seizure or appointment of an Advocate Commissioner lacked the requisite specific particulars and fell within matters concerning investigation and prosecution reserved to competent criminal fora and authorities. The Tribunal therefore declined to issue the general coercive/directional relief sought. However, the Tribunal directed the Resolution Professional to pursue appropriate remedies under the Code, Regulations and Rules, and observed that police authorities may provide assistance to the Resolution Professional when approached with specific requests in connection with the CIRP. [Paras 4]

No general direction to police for search/seizure granted; applicant directed to take appropriate statutory steps and police to assist if approached with specific requests.

Final Conclusion: The Application is rejected; the Resolution Professional is directed to pursue the alleged offences and required reliefs through the appropriate authorities under the Code and related rules, and police authorities were directed to render assistance when specifically approached in connection with the CIRP.

Liquidation - commercial wisdom of the Committee of Creditors - moratorium under Section 14 of the Insolvency and Bankruptcy Code - powers and duties of the Liquidator - notice of discharge to officers, employees and workmen - public announcement of liquidation - restriction on suits and legal proceedings subject to Section 52

Liquidation - commercial wisdom of the Committee of Creditors - The Committee of Creditors' unanimous resolution for liquidation was accepted and the Adjudicating Authority declined to interfere with the commercial wisdom of the CoC; the application for liquidation under Section 33(1) and 33(2) of the Code was allowed. - HELD THAT: - The Tribunal recorded that the resolution for liquidation was passed in the 9th meeting of the Committee of Creditors on 29.01.2020 in the presence of all members and the Suspended Management, and that no objection or representation was filed by the Suspended Management despite opportunity and time afforded. The Tribunal observed that it lacked jurisdiction to overturn the commercial judgment of the CoC, following the principle in K. Sasidhar and the Supreme Court's articulation in the Essar Steel matter that the Adjudicating Authority must not interfere with the commercial wisdom exercised by the CoC. On this basis the unanimous resolution for liquidation was accepted and the liquidation application under Section 33(1) and 33(2) was allowed.

Application under Section 33(1) and 33(2) allowed and liquidation directed to proceed.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - public announcement of liquidation - notice of discharge to officers, employees and workmen - powers and duties of the Liquidator - restriction on suits and legal proceedings subject to Section 52 - Consequential directions on the effect of the liquidation order, duties of the Liquidator, and procedural steps to be taken were issued and made operative. - HELD THAT: - The Tribunal ordered that the moratorium under Section 14 shall cease to have effect from the date of the liquidation order and directed the Liquidator to issue a public announcement that the Corporate Debtor is in liquidation. The Liquidator was directed to send a certified copy of the order to the authority with which the Corporate Debtor is registered, and the Registry was directed to communicate the order to the Registrar of Companies, the registered office and the Company Liquidator. The order was declared to operate as a notice of discharge to officers, employees and workmen except where the business is continued by the Liquidator. All powers of the Board, KMP and partners were held to cease and vest in the Liquidator, who shall exercise powers and duties as provided under the Code and the Liquidation Regulations. Subject to Section 52, no suit or proceedings shall be instituted by or against the Corporate Debtor except that the Liquidator may institute suits with prior approval of the Authority; transactions notified by the Central Government in consultation with regulators are excluded from this restriction.

Specified consequential directions issued and to be complied with by the Liquidator, Registry and relevant authorities.

Final Conclusion: The application under Section 33(1) and 33(2) was allowed; the Committee of Creditors' unanimous resolution for liquidation was accepted, the moratorium is terminated from the liquidation order, and consequential directions were given to the Liquidator and Registry to effect and publicise the liquidation and to take statutory steps in accordance with the Code.

Verification of claims by the resolution professional - duty to give reasons for rejection of claims - admission of claims in CIRP - time-limits for submission of expression of interest and resolution plans - eligibility criteria for submission of resolution plans - Committee of Creditors' authority to approve a resolution plan - compliance with timelines under the IBC and CIRP Regulations

Verification of claims by the resolution professional - duty to give reasons for rejection of claims - admission of claims in CIRP - Resolution Professional must either admit a claim or give reasons for non-admission where part of a claim is kept under verification. - HELD THAT: - An application by a creditor (Larsen and Turbo Limited) sought direction that the RP either admit the balance of its claim or state reasons for non-admission where only part of the claim had been allowed and the remainder kept under verification. The Bench held that it is the RP's bounden duty to give reasons when a claim, or part thereof, is not admitted. In the absence of any written proof that the RP furnished reasons to the applicant, the RP was directed to either admit the claim or to give reasons as to why the balance part is not admissible within three days. The order enforces the requirement of reasoned communication by the RP when rejecting or not admitting claims during CIRP.

Application allowed; RP directed within three days either to admit the claim or to give reasons for non-admission of the balance part.

Time-limits for submission of expression of interest and resolution plans - eligibility criteria for submission of resolution plans - Committee of Creditors' authority to approve a resolution plan - compliance with timelines under the IBC and CIRP Regulations - A prospective applicant who failed to meet eligibility and timelines for Expression of Interest cannot, after expiry and after CoC approval, seek to be allowed to submit a resolution plan. - HELD THAT: - The applicant (M/s. Singla Builders and Promoters Ltd.) sought access to RFRP documents and permission to submit a resolution plan after the prescribed timelines had expired and after the CoC had already approved a plan unanimously. The Bench examined the invitation for EoI, the timelines under Regulation 36A and the legislative and judicial emphasis on adherence to timelines. Because the applicant had not met the eligibility criteria within the stipulated period, and the CoC had approved a resolution plan (with 100% votes) within the prescribed process, the applicant's belated attempt to submit a plan and seek RFRP documents was held to be contrary to the spirit and object of the Code. The Bench observed that while maximization of value is a factor for CoC, it does not permit reopening the process after timelines have expired and a compliant plan has been approved. Accordingly the application was dismissed as misconceived.

Application dismissed as misconceived; late filing and belated request for RFRP documents not permitted where eligibility/timelines were not met and CoC has approved a plan.

Eligibility criteria for submission of resolution plans - withdrawal of applications - Application for substitution of consortium partner was dismissed on withdrawal by the applicant. - HELD THAT: - Following dismissal of the substantive application seeking to be allowed to submit a resolution plan, the applicant filed a subsequent application for replacement of its consortium partner. After the earlier application was dismissed, the applicant sought withdrawal of the replacement application. The Bench recorded the withdrawal and dismissed the application as withdrawn.

Application dismissed as withdrawn.

Final Conclusion: The Tribunal directed the Resolution Professional to either admit or give reasons for non-admission of the balance part of a claimed creditor's claim within three days; dismissed as misconceived a belated application to submit a resolution plan where eligibility and timelines were not met and the CoC had approved a plan; and recorded dismissal as withdrawn of an application seeking replacement of a consortium partner.

Liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - commercial wisdom of the Committee of Creditors - appointment of liquidator - cessation of moratorium - public announcement of liquidation - communication to registrar/registered authority - prohibition on suits subject to Section 52 - vesting of management and powers in the liquidator

Liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - commercial wisdom of the Committee of Creditors - appointment of liquidator - Application under Section 33(2) of the IB Code seeking liquidation of the Corporate Debtor and appointment of the Resolution Professional as Liquidator was allowed. - HELD THAT: - The Adjudicating Authority found that five claims had been received and admitted and that the Corporate Debtor had no fixed assets and no ongoing business. The Committee of Creditors, in its fourth meeting, resolved that the resolution process should not be pursued and resolved to liquidate the Corporate Debtor. The Authority held that it had no jurisdiction to interfere with the commercial wisdom exercised by the CoC, relying on the established principle that neither the Adjudicating Authority nor the Appellate Authority may reverse the commercial decision of the CoC. In view of the CoC's resolution and the factual position regarding admitted claims and absence of assets/business, the application for liquidation under Section 33(2) was allowed and the then Resolution Professional, Mr. Narayan Gajanan Vidvans, was appointed as Liquidator.

IA 71 of 2020 in CP(IB) 398 of 2019 is allowed; liquidation of Special Prints Limited ordered and the RP appointed as Liquidator.

Cessation of moratorium - public announcement of liquidation - communication to registrar/registered authority - prohibition on suits subject to Section 52 - vesting of management and powers in the liquidator - Incidental directions consequential to the liquidation order were issued, including cessation of moratorium, public announcement, communication to the registrar, restriction on suits, discharge notice to employees, and vesting of management/powers in the Liquidator. - HELD THAT: - On ordering liquidation, the Authority directed that the moratorium declared under Section 14 shall cease from the date of the liquidation order and directed the Liquidator to issue a public announcement declaring the Corporate Debtor in liquidation. The Liquidator was directed to send a certified copy of the order to the authority with which the Corporate Debtor is registered and the Registry was directed to communicate the order to the Registrar of Companies, the registered office and the Liquidator. The order clarified that, subject to Section 52 of the IB Code, no suit or other proceedings shall be instituted by or against the Corporate Debtor, except that the Liquidator may institute proceedings on behalf of the Corporate Debtor with prior approval of the Authority; certain statutory exemptions notified by the Central Government remain unaffected. The order further stipulated that officers, employees and workmen are deemed discharged except where the Liquidator continues the business, and that all powers of the board, KMP and partners shall cease and vest in the Liquidator who shall exercise powers as provided under the Code and regulations.

Consequential directions for the conduct of liquidation were issued and are to be complied with by the Liquidator and registry authorities.

Final Conclusion: The application for liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 was allowed on the basis of the CoC's resolution and the factual position of no assets or business; the RP was appointed Liquidator and consequential directions for the liquidation process were issued.

Exclusion of time from Corporate Insolvency Resolution Process - powers to exclude period under section 12(2) of the Insolvency & Bankruptcy Code, 2016 - effect of interim orders and stays on CIRP timeline - non-cooperation of the corporate debtor as ground for exclusion of CIRP period - special audit and extension of timelines by the committee of creditors - judicial discretion to exclude time in unforeseen circumstances

Exclusion of time from Corporate Insolvency Resolution Process - powers to exclude period under section 12(2) of the Insolvency & Bankruptcy Code, 2016 - effect of interim orders and stays on CIRP timeline - Application seeking exclusion of 60 days from the CIRP period (w.e.f. 02.02.2020) to complete the CIRP was allowed. - HELD THAT: - The Tribunal examined whether, in view of delays caused by intervening litigation, stay orders and non-cooperation of the corporate debtor, a portion of the time lost in the CIRP could be excluded under the Code. The Tribunal relied on the principle that the Adjudicating Authority may exclude periods from the CIRP where facts and circumstances justify such exclusion, including where proceedings are stayed or where unforeseen events impede the Resolution Professional from complying with timelines. The Resolution Professional demonstrated that 79 days were lost in the CIRP on account of pending interlocutory applications, a stay affecting constitution of the Committee of Creditors, the need for re-convening the CoC and confirmation of the RP, and extension of the special audit and the EoI receipt date. Finding these grounds justifiable and noting that the CoC had extended deadlines (including the special audit and EoI timelines), the Tribunal concluded that some period should be excluded to enable proper completion of CIRP tasks. Consequently the Tribunal exercised its discretion to exclude 60 days from the CIRP period and granted that period to the Resolution Professional and CoC to complete the process, subject to the RP continuing to discharge his functions during that time. [Paras 11, 12, 13, 14]

Sixty days excluded from the CIRP period and allowed to the Resolution Professional/CoC with effect from 02.02.2020 to complete the CIRP; RP to continue discharge of functions during the extended period.

Final Conclusion: Application under section 12(2) of the Code allowed; 60 days excluded from the CIRP period (effective 02.02.2020) to enable completion of outstanding CIRP tasks, with the Resolution Professional to continue performing his duties during the extended period.

Provisional Attachment - jurisdiction of the Enforcement Directorate to attach property of a corporate debtor undergoing CIRP/liquidation - Corporate Insolvency Resolution Process and liquidation - maintaining the corporate debtor as a going concern - effect of Section 32A on actions against property of a corporate debtor

Provisional Attachment - maintaining the corporate debtor as a going concern - Whether the Tribunal should interfere with the Provisional Attachment Order and whether interim relief should be granted to permit operation of bank accounts to keep the corporate debtor as a going concern. - HELD THAT: - The Tribunal noted that the corporate debtor is a going concern and that preventing operation of its bank accounts would result in its closure, contrary to the object of the Code. Although the impugned provisional attachment order issued by the Directorate of Enforcement was not interfered with at this stage, the Tribunal exercised its powers to grant limited and pragmatic relief to the liquidator. The relief is conditional: the liquidator is permitted to open and operate a new account in State Bank of India for the purpose of maintaining the corporate debtor as a going concern and must justify transactions by filing monthly reports before the Tribunal. The order balances the existence of the provisional attachment with the Code's objective of asset maximization and continuation of the corporate debtor where feasible. [Paras 10, 11]

The provisional attachment order is not interfered with at this stage, but the liquidator is permitted to open and operate a new bank account for maintaining the corporate debtor as a going concern subject to monthly reporting to the Tribunal.

Jurisdiction of the Enforcement Directorate to attach property of a corporate debtor undergoing CIRP/liquidation - effect of Section 32A on actions against property of a corporate debtor - pending decisions of the NCLAT and the Supreme Court - Whether the question of the Enforcement Directorate's jurisdiction to attach properties of a corporate debtor undergoing CIRP and the applicability of the newly inserted Section 32A are finally determined by this Tribunal. - HELD THAT: - The Tribunal recorded that the legal questions concerning the Enforcement Directorate's jurisdiction to attach property of a corporate debtor undergoing CIRP and the applicability/effect of Section 32A on actions against such property are pending before the Hon'ble NCLAT and the Hon'ble Supreme Court. The Tribunal observed existing interim orders in identical matters granted by higher forums and noted competing authorities, including a Delhi High Court decision, but did not undertake final adjudication of these legal questions. Consequently, the Tribunal declined to decide these substantive jurisdictional and statutory questions and proceeded on a limited interim welfare-focused basis. [Paras 5, 8, 9]

These substantive questions are not finally decided by this Tribunal and remain pending before the NCLAT and the Supreme Court; the Tribunal refrained from adjudicating them and proceeded only to grant limited interim operational relief.

Final Conclusion: Interim relief granted: without setting aside the provisional attachment, the liquidator may open and operate a new bank account in State Bank of India to maintain the corporate debtor as a going concern subject to monthly transaction reports; substantive questions on the Enforcement Directorate's jurisdiction and the effect of Section 32A are left undecided and remain pending before higher fora.

Financial debt - Section 5(8)(f) explanation - allottee - commercial effect of a borrowing - decree - status quo in WP (Civil)-26/2020

Financial debt - Section 5(8)(f) explanation - allottee - commercial effect of a borrowing - Whether the applicant falls within the explanation to Section 5(8)(f) of the IBC or only within the general definition of Section 5(8). - HELD THAT: - The Tribunal examined the applicant's own averments and the law laid down in the decision relied upon by the applicant concerning the meaning of "financial debt" and the scope of sub-clause (f) of Section 5(8). The Court observed that the applicant paid instalments as an allottee under the real estate project and relied upon the principle that amounts raised from allottees that have the commercial effect of a borrowing fall within the explanation to Section 5(8)(f). On the material placed before it, the Tribunal held that the amount claimed by the applicant constituted instalments paid under the real estate project and therefore attracted the operation of the explanation to Section 5(8)(f), rather than being outside that explanation and only a debt under the general heads of Section 5(8).

Applicant is an allottee falling within the explanation to Section 5(8)(f) and not merely under the general description of Section 5(8) alone.

Decree - Whether the letter dated 25.01.2019 constitutes a decree or a compromise decree capable of being treated as a decree. - HELD THAT: - The Tribunal referred to the statutory definition of "decree" under the Code of Civil Procedure and contrasted it with the letter dated 25.01.2019 relied upon by the applicant. The Bench noted that the coordinate NCLT Allahabad view treating a compromise as a decree did not contain a discussion of the definition of decree. The applicant conceded that the letter did not fall within the definition of a decree. On the material before it, the Tribunal concluded that the letter of 25.01.2019 could not be treated as a decree.

Letter dated 25.01.2019 is not a decree and cannot be treated as a compromise decree.

Status quo in WP (Civil)-26/2020 - Whether this adjudicating authority can proceed to decide the merits of the applicant's claim while WP (Civil)-26/2020 is pending before the Hon'ble Supreme Court which has directed maintenance of status quo. - HELD THAT: - The Tribunal took cognisance of the writ pending before the Hon'ble Supreme Court in WP (Civil)-26/2020 and the direction recorded therein that the status quo shall be maintained with respect to pending applications. In view of that interlocutory position before the Apex Court, the Bench refrained from adjudicating the merits or making any final factual or legal determinations on the application. The Tribunal recorded that the merits and facts in the application would be considered after disposal of the writ petition in the Supreme Court and listed the matter accordingly.

Proceedings on the merits are restrained; the matter is to be considered after disposal of WP (Civil)-26/2020.

Final Conclusion: The Tribunal held that on the material before it the applicant is an allottee covered by the explanation to Section 5(8)(f) and that the letter dated 25.01.2019 is not a decree; however, in view of the status quo direction in WP (Civil)-26/2020, the Tribunal refrained from deciding the merits and adjourned consideration until the writ petition is disposed of.

Business Support Service: prospective operation of expanded definition w.e.f. 01.05.2011 - Online Information and Database Access or Retrieval (OIDAR) v. Telecommunication Service - Telecommunication Service versus OIDAR classification - Employer-employee relationship and absence of manpower supply service - Extended period, suppression of facts and validity of subsequent show cause notice - Revenue neutrality and entitlement to refund under Rule 5 of the Cenvat Credit Rules, 2004

Business Support Service: prospective operation of expanded definition w.e.f. 01.05.2011 - Whether services from M/s Hewitt Associates and M/s Communication Services fall within Business Support Service for periods prior to 01.05.2011. - HELD THAT: - The Tribunal accepted that the words "operational or administrative assistance in any manner" were inserted into the definition of support services w.e.f. 01.05.2011. That amendment is prospective; therefore services characterised as routine administrative or operational assistance cannot be classified as Business Support Service for periods prior to 01.05.2011. Reliance on the Tribunal decision in Reliance ADA Group Pvt. Ltd. was applied to hold that the appellants' routine administrative services received from Hewitt and Communication Services cannot be taxed under Business Support Service before 01.05.2011. [Paras 12]

Services from Hewitt Associates and Communication Services are not taxable as Business Support Service for periods before 01.05.2011.

Online Information and Database Access or Retrieval (OIDAR) v. Telecommunication Service - Telecommunication Service versus OIDAR classification - Whether networking/telecommunication services provided by overseas group entities qualify as Online Information & Database Service (Computer Network Service/OIDAR). - HELD THAT: - The Tribunal examined the invoices, the nature of services and relevant authorities. It noted that mere provision of global connectivity/network (IPLC/WAN) and related telecommunication functionality does not necessarily amount to provision of online information or database access. Where the consideration relates to networking/telecommunication connectivity and the invoices did not specifically evidence charges for provision of online information/data retrieval to the appellant, the service cannot be treated as OIDAR. The Tribunal distinguished authorities relied upon by Revenue, observed factual divergence from cases where access to retrievable online data was established, and accepted that the transactions were not exigible to service tax as OIADR (Computer Network Service). [Paras 13]

The networking/telecommunication services supplied by overseas group entities are not exigible to service tax as Online Information & Database Access or Retrieval for the periods in dispute.

Employer-employee relationship and absence of manpower supply service - Whether payments relating to seconded personnel attract tax as Manpower Recruitment & Supply Agency Service. - HELD THAT: - On facts and contractual terms, the Tribunal found an employer-employee relationship between the appellant and the seconded personnel during secondment; salary payments and control/supervision by the appellant established no supply of manpower by the overseas entity. The Tribunal relied on precedent affirming that method of disbursement of salary does not alter the nature of the transaction and held there was no taxable manpower supply. [Paras 14]

Payments relating to seconded personnel do not constitute Manpower Recruitment & Supply Agency Service; no service tax is leviable on that ground.

Extended period, suppression of facts and validity of subsequent show cause notice - Whether the second show cause notice (Oct 2007 to Dec 2012) invoking extended period is valid given prior knowledge and alleged suppression. - HELD THAT: - The Tribunal accepted the appellants' submission that the department was aware of the material facts when the first show cause notice (May 2006 to Sep 2007) was issued and that there was no suppression of facts with intent to evade tax. On that basis the Tribunal set aside the subsequent show cause notice ab initio. Having found for the appellants on merits for the disputed services, the Tribunal did not address extended period further. [Paras 15]

The subsequent show cause notice (covering Oct 2007 to Dec 2012) is set aside ab initio; extended period contention does not survive in the facts of this case.

Revenue neutrality and entitlement to refund under Rule 5 of the Cenvat Credit Rules, 2004 - Whether penalties and further demands should be sustained having regard to revenue neutrality and merit decision in favour of appellants. - HELD THAT: - The appellants contended the exercise was revenue neutral because, as an STPI unit, they would have been eligible to claim refund of service tax paid on input services under Rule 5 of the Cenvat Credit Rules, 2004. The Tribunal found the revenue-neutrality contention had force. Since the substantive issues were decided in favour of the appellants, the Tribunal found no reason to examine or uphold penalties and therefore did not sustain the impugned penalties. [Paras 15, 16]

Penalties and consequential demands were not sustained given the decision on merits in favour of the appellants.

Final Conclusion: Appeals allowed. Service tax demands challenged in respect of the periods May 2006 to Sep 2007 and Oct 2007 to Dec 2012 are not sustained: (i) routine administrative services from Hewitt and Communication Services are not taxable as Business Support Service prior to 01.05.2011; (ii) networking/telecommunication payments to overseas group entities are not exigible as Online Information & Database Access or Retrieval; (iii) payments for seconded personnel do not amount to manpower supply; the subsequent show cause notice was set aside ab initio and penalties were not upheld.

Levy of service tax on renting of immovable property - Retrospective amendment and effect of Finance Act, 2010 - Effect of interim stay by the Hon'ble Supreme Court - Liability of service provider versus service receiver - Penalty under Section 76, Section 77 and Section 78 - Section 80 - reasonable cause and non-imposition of penalty

Levy of service tax on renting of immovable property - Effect of interim stay by the Hon'ble Supreme Court - Liability of service provider versus service receiver - Validity of reducing the assessee's service tax demand by amounts paid by tenants/Members of the Retailers Association of India and dropping part of the demand in view of judicial orders. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals)'s decision to drop the demand amounting to the sums stayed by the Supreme Court. The Commissioner had recorded that levy of service tax on renting of immovable property was the subject of litigation, that the Delhi High Court had earlier quashed the levy but that a retrospective amendment was introduced by the Finance Act, 2010 and that the matter was the subject of an interim order of the Hon'ble Supreme Court. In view of the interim order directing partial payment by service receivers and stay as to the balance, and having found no deliberate default by the assessee in depositing tax, the Commissioner (Appeals) appropriately reduced the demand to give effect to the stay directions and to the position of the service receivers who had paid under the stay. The Tribunal found these reasons cogent and upheld the dropping of the demand in respect of amounts covered by the stay.

Demand reduced/dropped to the extent covered by the Supreme Court's interim stay; appeal on this point dismissed.

Penalty under Section 76, Section 77 and Section 78 - Section 80 - reasonable cause and non-imposition of penalty - Whether penalties under Sections 76, 77 and 78 should be imposed for the failure to pay service tax in the circumstances of pending litigation and interim orders. - HELD THAT: - The Tribunal accepted the Commissioner (Appeals)'s finding that there was no deliberate default by the assessee. Section 80 provides that where failure to pay tax is for a reasonable cause, penalties under Sections 76, 77 and 78 shall not be imposed; sub section (2) of Section 80 (introduced by Finance Act, 2012) also offers a window for deposit of tax with interest. Having regard to the litigation challenging the levy, the stay and interim orders of courts and the absence of deliberate default, the Commissioner (Appeals) exercised the discretion to not impose penalty under Section 78 and to relieve the assessee of penalty under Section 76; the Tribunal found this exercise justified and set aside the penalties.

Penalties under Sections 76, 77 and 78 set aside on the ground of reasonable cause; appeal on penalty dismissed.

Final Conclusion: The Revenue's appeal is dismissed. The Commissioner (Appeals)'s orders dropping the portion of the demand covered by the Supreme Court's interim stay and refraining from imposing penalties under Sections 76, 77 and 78 (in view of reasonable cause under Section 80) are upheld; the assessee is entitled to consequential benefits in accordance with law.

Taxability of intermediary services - Place of Provision of Service Rules, 2012 - rule 9(c) deeming provider location - export of service - conformity with rule 6A of Service Tax Rules, 1994 - negative list regime and definition of service under section 65B(44) - CENVAT credit and refund entitlement linked to export of services

Taxability of intermediary services - Place of Provision of Service Rules, 2012 - rule 9(c) deeming provider location - Whether the commission received by the assessee for marketing and promotion of CRS is taxable as consideration for an 'intermediary' service and therefore liable to service tax in India. - HELD THAT: - The Tribunal examined the commercial architecture of the transactions and the legal framework created by the negative list regime and the Place of Provision of Service Rules, 2012. It held that where the activity is subordinate to a 'main service' and the consideration received by the provider is constrained within the consideration flowing from the ultimate consumer, the activity falls within the definition of an 'intermediary'. Applying the factual matrix - licencing/marketing arrangement with the overseas licencee, per transaction commission flows, lack of autonomy to negotiate independent consideration, and the channeling of payments through the licencee - the Tribunal concluded that the appellant's activity is an intermediary service. Under rule 9(c), the place of provision is deemed to be the location of the provider for such intermediary services, thereby attracting tax in India. The Tribunal accordingly found that the assessee failed to discharge tax liability on the commission as intermediary and upheld the adjudicating authority's confirmation of tax liability on that stream, while observing that the confirmed tax liability requires re computation. [Paras 21, 22, 23, 27, 28]

Commission received as per transaction consideration for marketing CRS is taxable as 'intermediary' service and taxable in India under rule 9(c); liability is upheld but requires re computation.

Marketing service fee - characterization and place of provision - taxability of receipts beyond commission - Whether the fixed 'marketing service fee' received by the assessee is taxable and if so, whether it is taxable as intermediary service or otherwise. - HELD THAT: - The Tribunal found the nature of the marketing service fee unclear on the record. The adjudicating authority had not adequately examined its computation or contractual basis; invoices suggested a standard amount and netting was recorded but particulars were insufficient to determine whether the fee corresponds to intermediary activity or a different taxable service. Consequently, the Tribunal declined to decide the taxability of the marketing service fee on the present record and directed that this aspect be adjudicated afresh by the original authority by reference to the agreement and relevant details. [Paras 25, 26, 27, 28]

Taxability of the marketing service fee is not finally decided and is remanded to the original authorities for determination after examination of the agreement and details.

CENVAT credit and refund entitlement linked to export of services - export of service - conformity with rule 6A of Service Tax Rules, 1994 - Whether the refund claims (CENVAT credit claimed as attributable to export of services) are maintainable and to what extent they survive in view of the finding on commission being taxable in India. - HELD THAT: - The Tribunal held that the finding that commission is taxable in India impacts entitlement to refund of accumulated credit. Refund claims that were rejected in original orders require fresh consideration in light of the Tribunal's finding on taxability of commission and in respect of the marketing service fee once its nature is adjudicated. The Tribunal noted that some invoices had been held time barred by earlier authorities and that other rejections for non conformity with rule 6A may require reassessment. The claims relating to marketing service fee and those disallowed for nexus or limitation were remitted to the refund sanctioning authority for fresh adjudication consistent with the legal principles laid down and relevant judicial decisions. [Paras 3, 25, 26, 27, 28]

Refund claims are partly affected by the finding on commission and otherwise remanded for fresh adjudication; availability of CENVAT credit for discharge of tax liability to be ascertained by the original authorities.

Limitation, penalty and section 80 waiver - penalty under section 78 - sufficiency of evidence - Whether penalties, limitation bars and prayer for waiver under section 80 should be dealt with in light of the Tribunal's findings. - HELD THAT: - The Tribunal observed that contentions on limitation, the plea for waiver of penalty under section 80, and the sufficiency of evidence to sustain invoking of section 78 require fresh consideration in view of the Tribunal's conclusion that commission is not export proceeds but taxable in India. The Tribunal directed that the assessee is at liberty to raise these contentions before the adjudicating authorities and remitted these issues accordingly. [Paras 26, 28]

Issues of limitation, penalty (including section 80) and sufficiency of evidence are remanded to the original authorities for fresh consideration.

Final Conclusion: The Tribunal upheld the adjudicating authority's finding that the per booking commission is taxable in India as consideration for an 'intermediary' service under rule 9(c) of the Place of Provision of Service Rules, 2012, and confirmed tax liability thereon subject to re computation; all other matters - including taxability of the marketing service fee, refund/CENVAT credit claims, and issues of limitation and penalty - were remanded to the respective original authorities for fresh adjudication in accordance with the law and the directions recorded by the Tribunal.

CENVAT credit - input service - service tax on deposit insurance premium - Deposit Insurance and Credit Guarantee Corporation - larger Bench reference - remand for conformity with larger bench decision

CENVAT credit - input service - service tax on deposit insurance premium - The insurance service provided by the Deposit Insurance and Credit Guarantee Corporation is to be treated as an input service and banks are entitled to avail CENVAT credit of the service tax paid thereon. - HELD THAT: - The Court recorded that a larger Bench of the CESTAT considered divergent views of co ordinate benches and held that the service by the Deposit Insurance and Credit Guarantee Corporation to banks for insuring deposits is an "input service" and that CENVAT credit of service tax paid for that service can be availed by banks for rendering output services. Having noted and recorded the larger Bench's authoritative conclusion, the Court accepted that view as the correct legal position applicable to the present appeals.

The characterization of the Deposit Insurance Corporation's service as an input service and the attendant entitlement to CENVAT credit is accepted.

Larger Bench reference - remand for conformity with larger bench decision - The impugned CESTAT order dated 12.02.2019 is set aside and the matters are remanded to the CESTAT for fresh decision in conformity with the larger Bench's decision. - HELD THAT: - In view of the larger Bench's ruling in favour of the banks, the High Court concluded that the impugned Tribunal order cannot be sustained. The Court therefore quashed the impugned order and directed that the individual appeals be placed before the CESTAT to be decided in accordance with the larger Bench's holding.

Impugned order set aside; appeals remanded to CESTAT for fresh decision in conformity with the larger Bench.

Final Conclusion: Appeals allowed; impugned CESTAT order dated 12.02.2019 set aside and matters remanded to the CESTAT for decision in conformity with the larger Bench's finding that the Deposit Insurance Corporation's service is an input service and CENVAT credit is admissible; no order as to costs.

Eligibility of Cenvat credit on outdoor catering service - nexus between input service and manufacturing - applicability of amended definition of "input service" w.e.f. 01.04.2011 - binding precedent of High Court over Tribunal Larger Bench

Applicability of amended definition of "input service" w.e.f. 01.04.2011 - eligibility of Cenvat credit on outdoor catering service - nexus between input service and manufacturing - Cenvat credit on outdoor catering service availed by the appellant for the period February 2014 to March 2015 is eligible. - HELD THAT: - The amended definition of 'input service' w.e.f. 01.04.2011 applies to the period in dispute. Notwithstanding the specific exclusion relied upon by the Revenue, the Tribunal found on the facts that the outdoor catering service had a direct impact on the manufacturing process and the cost of the final product because its absence would cause loss of manhours as employees would have to leave the factory premises for refreshments. That connection to manufacture and delivery brought the service within the scope of input services for the purposes of Cenvat credit in the facts of this case. The Tribunal therefore set aside the demand, interest and penalty confirmed by the lower authorities and allowed the appeal. [Paras 5, 6, 8]

The Cenvat credit availed on outdoor catering service for February 2014 to March 2015 is held eligible and the appeal is allowed.

Binding precedent of High Court over Tribunal Larger Bench - The decision of the Hon'ble Rajasthan High Court in CCE Udaipur v. Mangalam Cement Ltd. is binding and governs the present dispute despite the Tribunal's Larger Bench decision in Wipro Ltd. - HELD THAT: - The Tribunal observed that the Rajasthan High Court had considered the identical issue for the post-amendment period and held that outdoor catering services were required for the process of manufacture and delivery. The Revenue's appeal to the Supreme Court against that High Court judgment was dismissed. The Rajasthan High Court judgment was not placed before the Tribunal's Larger Bench in Wipro Ltd., and the Tribunal held that the High Court's decision has binding precedence over the Larger Bench decision of the Tribunal for the issue in question. Reliance on the High Court ruling therefore led to allowing the appellant's appeal. [Paras 7, 8]

The Rajasthan High Court judgment is followed and prevails over the Larger Bench decision for the issue, supporting allowance of the appeal.

Final Conclusion: The appeal is allowed: the Cenvat credit taken on outdoor catering service for February 2014 to March 2015 is held admissible in view of the nexus with manufacture and the binding Rajasthan High Court decision; the demand, interest and penalty confirmed by the lower authorities are set aside.

Condonation of delay - sufficient cause - substantial justice - remittal for consideration on merits

Condonation of delay - sufficient cause - substantial justice - Whether the delay in filing the second appeals before the tribunal for the stated assessment years constituted sufficient cause to be condoned - HELD THAT: - The delay in filing the second appeals was 329 days. The assessee explained that the copy of the impugned order had been served to the junior staff of the senior advocate for further course of action, the file was thereafter misplaced and was traced only later, following which the second appeals were filed. The affidavit supporting this explanation was not disbelieved by the High Court. The Court noted that the assessee is a joint stock company engaged in diverse activities and, on the material placed, the explanation could not be rejected as not constituting sufficient cause. The Court further relied on the established principle that delay should not be allowed to defeat substantial justice between the parties. Applying these considerations, the High Court concluded that the explanation amounted to sufficient cause to condone the delay and that the delay was not of such magnitude as to disentitle the assessee to relief. Consequently, the impugned tribunal order refusing condonation was set aside and the appeals were directed to be admitted for adjudication on merits. [Paras 6, 7, 8, 10]

Application for condonation of delay in filing the second appeals is allowed and the appeals are remitted to the tribunal for consideration on merits in accordance with law.

Final Conclusion: The High Court allowed the revisions, condoned the delay in filing the second appeals for Assessment Years 2009-10 and 2011-12, set aside the tribunal's order refusing condonation, and remitted the matters to the tribunal for adjudication on merits.