TaxTMI Updates e-Newsletter
Oct 16,2024

Quashing of summary recovery order passed without issuance of show cause notice - Requirement of notice in Form DRC 01 and opportunity of hearing under Rule 142 of the GST Rules - Remand for de novo adjudication - No expression of opinion on merits pending fresh adjudication

Quashing of summary recovery order passed without issuance of show cause notice - Requirement of notice in Form DRC 01 and reasons in order - Impugned summary order in Form GST DRC 07 dated 11.01.2019, passed without issuance of notice in Form DRC 01 and without reasons, is invalid and liable to be quashed. - HELD THAT: - The impugned order was issued in summary form on the portal without any prior service of a show cause notice in Form DRC 01 as required by the GST Rules and without a speaking order containing reasons. The State itself has conceded by correspondence that the order was passed in summary form without issuing the statutorily mandated notice. In these circumstances, the summary order cannot stand because procedural safeguards of notice and opportunity of hearing, and a reasoned order, are essential preconditions to a valid recovery order under the GST scheme. The Court therefore sets aside the impugned Form GST DRC 07 dated 11.01.2019 without reaching the merits of the claimed demand. [Paras 18, 19, 20]

Impugned summary order in Form GST DRC 07 dated 11.01.2019 quashed and set aside for failure to comply with notice and reason requirements.

Remand for de novo adjudication - Opportunity of hearing before fresh order - No expression of opinion on merits - Matter remanded to respondents for fresh adjudication after issuance of notice and affording opportunity of hearing; court declines to express any view on merits. - HELD THAT: - Since the summary order has been quashed for procedural infirmity, the matter is remitted to the respondents to proceed afresh in accordance with law. The respondents are directed to issue any requisite notice (including in Form DRC 01) and to conduct de novo adjudication after giving the petitioner an opportunity of hearing and passing a reasoned order in accordance with the GST Rules. The fresh exercise is to be completed within twelve weeks from receipt of the High Court's order. The Court explicitly refrains from expressing any opinion on the substantive merits of the demand; all questions on merits remain open for the adjudicating authority. [Paras 21, 22]

Matter remanded for de novo adjudication after issuance of proper notice and hearing; no opinion expressed on merits.

Final Conclusion: Impugned summary recovery order dated 11.01.2019 in Form GST DRC 07 is quashed for failure to issue Form DRC 01 and to furnish reasons; the matter is remanded for fresh adjudication after giving the petitioner notice and opportunity of hearing, to be completed within twelve weeks, the Court expressing no view on merits.

Transfer of input tax credit on change of business under Section 18(3) and Rule 41 - Quashing of show cause notice as arbitrary and beyond jurisdiction - Excuse for impossibility of performance / Lex non cogit ad impossibilia - Permissibility of manual filing where department's electronic portal is non-functional - Obligation to consider manually filed forms and fresh adjudication on merits

Quashing of show cause notice as arbitrary and beyond jurisdiction - Excuse for impossibility of performance / Lex non cogit ad impossibilia - Impugned show cause notice dated 17.08.2023 quashed as arbitrary and beyond the jurisdiction of the respondent because electronic filing of Form GST ITC-02 was impossible during the relevant period. - HELD THAT: - The Court accepted the admitted factual position that the department's common portal did not permit electronic filing of Form GST ITC-02 during the relevant period and that the transferor had communicated this non-availability to the assessing authority. Relying on the legal maxim that law does not compel performance of an impossibility, the Court held that issuing a show cause notice solely on the ground that the prescribed form was not filed electronically-when electronic filing was rendered impossible by the department-amounts to an arbitrary exercise exceeding the respondent's jurisdiction. The Court further observed that the transferor and transferee had furnished the required particulars manually and that denying relief on account of a procedural requirement that could not be complied with by reason attributable to the department would be unjust. Having applied these principles to the admitted facts, the Court concluded that the impugned notice must be set aside. [Paras 25, 26, 27, 28, 29]

Impugned show cause notice dated 17.08.2023 quashed.

Permissibility of manual filing where department's electronic portal is non-functional - Obligation to consider manually filed forms and fresh adjudication on merits - Transfer of input tax credit on change of business under Section 18(3) and Rule 41 - Manually filed Form GST ITC-02 and related submissions must be considered afresh by the respondents; denial of ITC solely because electronic filing was not used is impermissible. - HELD THAT: - The Court directed that the respondents should, expeditiously and in accordance with law, consider the manually filed forms and accompanying documents submitted by the transferor and the transferee. The Court made clear that if, after due consideration and following principles of natural justice, the respondents conclude that the ITC was not due or was partly wrongly availed, they remain free to pass appropriate orders. However, respondents cannot deny the benefit of accrued ITC merely because the prescribed form was filed manually when electronic filing was impossible; manual submissions must be processed and adjudicated on merits. [Paras 41, 42]

Respondents directed to consider the manually filed forms and decide on entitlement to ITC after due consideration; fresh adjudication permitted if ITC found not to be due.

Final Conclusion: The petition is allowed: the show cause notice dated 17.08.2023 is quashed and the respondents are directed to consider, as expeditiously as possible and in accordance with law, the manually filed Form GST ITC-02 and related submissions; respondents remain free to pass appropriate orders thereafter observing natural justice.

Opportunity of hearing under Section 75(4) of the MGST Act - consideration of written reply not a substitute for statutory hearing - quashing of assessment and recovery orders for breach of audi alteram partem - remand for fresh assessment after granting hearing

Opportunity of hearing under Section 75(4) of the MGST Act - consideration of written reply not a substitute for statutory hearing - Whether the impugned assessment order was vitiated for being passed without granting the petitioner an opportunity of hearing as required by Section 75(4) of the MGST Act. - HELD THAT: - The Court found on the record that the petitioner had, in its written reply to the show cause notice, specifically requested an opportunity to be heard, and that the impugned order was framed without granting such hearing. The statutory provision mandates that an opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated. The mere alleged consideration of the petitioner's written reply by the authority does not substitute for the statutory right to be heard. Coordinate Benches in analogous cases were relied upon where non-compliance with Section 75(4) led to interference with the assessment orders. Applying that principle, the Court concluded that the impugned order was vitiated for non-compliance with the statutory audi requirement. [Paras 8, 10, 11]

Impugned order was set aside for breach of the statutory requirement to grant an opportunity of hearing under Section 75(4) of the MGST Act.

Quashing of assessment and recovery orders for breach of audi alteram partem - remand for fresh assessment after granting hearing - Consequences to follow upon setting aside the impugned order. - HELD THAT: - Having quashed the assessment order for failure to grant the statutory hearing, the Court also quashed the consequential recovery notice. The matter was remitted to the assessing authority with a clear direction that the petitioner be granted an opportunity of hearing before any fresh assessment order is passed. The authority was directed to complete the exercise expeditiously and in any event before the specified date, leaving other contentions open for consideration at the hearing by the authority. [Paras 12]

Impugned assessment order dated 17 January 2024 and the consequential recovery notice dated 6 September 2024 are quashed; matter remitted for fresh assessment after affording hearing, to be completed by 31 December 2024.

Final Conclusion: The assessment order for Financial Year 2017-2018 and its consequential recovery notice were quashed for failure to afford the petitioner the hearing mandated by Section 75(4) of the MGST Act; the matter is remitted to the assessing authority to grant the petitioner a hearing and pass a fresh assessment order in accordance with law within the time directed, other contentions remaining open.

Principles of natural justice - notice and opportunity of personal hearing - remand for fresh consideration - condition precedent of deposit for revival of order - discrepancy between GSTR-1 and GSTR-3B

Principles of natural justice - notice and opportunity of personal hearing - discrepancy between GSTR-1 and GSTR-3B - remand for fresh consideration - condition precedent of deposit for revival of order - Impugned order under Section 73 imposing tax, interest and penalty set aside and matter remanded for fresh consideration subject to conditions. - HELD THAT: - The petitioner contended that the show-cause/process leading to the order was communicated only through the portal and that he did not receive notice, thereby rendering the order contrary to the principles of natural justice. The impugned order imposed a total liability and proceeded on the basis of an alleged discrepancy between outward supplies declared in GSTR-1 and GSTR-3B. The Court found that the petitioner had presented material and documents to substantiate the defence that there was no such mismatch and that the petitioner did not receive the notice. In view of these facts and to ensure compliance with natural justice and fair opportunity, the Court set aside the impugned proceedings and remanded the matter to the respondent for fresh consideration. The remand was made conditional: the petitioner must deposit 10% of the total demand within four weeks, failing which the impugned order will stand revived; upon deposit, the petitioner is to file reply/objections with relevant documents within two weeks, after which the respondent must issue fresh notice, afford personal hearing and pass final orders within three months. [Paras 6, 9]

Impugned order set aside and matter remanded for fresh consideration on the stated conditional terms; directions issued for deposit, filing of reply, fresh notice, personal hearing and final disposal within a stipulated period.

Final Conclusion: Writ petition allowed; impugned order in Reference No. ZD330424200278R/2018-19 dated 25.4.2024 set aside and remitted to the respondent for fresh consideration on the specified conditional deposit, with directions to afford personal hearing and conclude proceedings within three months; connected WMPs closed; no costs.

Cancellation of GST registration for non-payment of tax - renewal/restoration of GST licence upon payment of tax and interest - filing of returns and payment of statutory dues as condition for restoration - constitutional remedy under Article 226

Cancellation of GST registration for non-payment of tax - renewal/restoration of GST licence upon payment of tax and interest - filing of returns and payment of statutory dues as condition for restoration - Direction to renew the petitioner's GST licence in view of filing of returns and payment of tax and interest, subject to communication and payment of any other dues. - HELD THAT: - The Assistant Commissioner cancelled the petitioner's GST licence on ground of non-payment of tax and the Appellate Authority rejected the appeal. The High Court, taking note of the petitioner's counsel's submission and instructions that the petitioner had filed returns and paid the tax and interest, directed the respondent authority to renew the GST licence. The Court required renewal to be completed within ten days from communication of the order and provided a mechanism for any remaining dues to be communicated to the petitioner, who is to pay such communicated dues within seven days. The direction is administrative and conditional upon payment and communication as recorded by the Court. [Paras 5, 6]

Respondent no. 3 directed to renew the GST licence within ten days; any other dues to be communicated and paid within seven days.

Final Conclusion: Writ petition disposed by directing renewal of GST licence on the basis that returns were filed and tax and interest paid; renewal to be effected within ten days and any additional dues to be communicated and paid within seven days.

Suppression of material facts - discretionary jurisdiction and materiality of suppression - condonation of delay under Section 5 of the Limitation Act - remand for fresh decision on merits

Condonation of delay under Section 5 of the Limitation Act - Delay in filing the appeal was condoned. - HELD THAT: - The application under Section 5 of the Limitation Act, supported by affidavit, was not contested by the respondents. For the reasons indicated in that application and affidavit, the Court allowed the condonation application and accordingly condoned the 40 days' delay in filing the appeal.

Application for condonation of delay allowed and delay in filing the appeal condoned.

Suppression of material facts - discretionary jurisdiction and materiality of suppression - remand for fresh decision on merits - Dismissal of the writ petition for alleged suppression of a fresh GST registration was not sustainable and the matter was remanded for decision on merits. - HELD THAT: - The Single Judge dismissed the writ petition on the ground that the appellant had suppressed the fact of obtaining a fresh GST registration after cancellation, treating that omission as a material suppression which had hoodwinked the Court and led to an unnecessary verification order. The High Court applied the principle that suppression must be of a material fact material to the determination of the lis or to the grant or denial of discretionary relief. While acknowledging that the fresh registration was relevant to the verification order, the Court found no indication in the impugned order that the fact would have affected maintainability or the determination of the lis between the parties. The Court observed that neither the respondents nor the Single Judge demonstrated how disclosure of the fresh registration would have changed the outcome on merits or the Court's jurisdiction to entertain the petition. Consequently, the dismissal for suppression of material facts did not meet the test required for refusing discretionary relief. The writ petition was therefore allowed, the dismissal set aside, and the matter remanded to the Single Judge to be decided on merits.

Writ petition allowed; order dismissing petition for suppression of material facts set aside; matter remanded to Single Judge for fresh decision on merits.

Final Conclusion: Condonation of delay granted; the High Court held that dismissal of the writ petition for alleged suppression of a fresh GST registration was not justified because the omission was not shown to be material to the determination of the lis, set aside the dismissal order, and remanded the matter to the Single Judge for decision on merits.

Quashing and remand for fresh adjudication - Condonation of delay and discretionary relief - Pre-deposit condition for adjudication - Treatment of impugned order as addendum to show cause notice - Opportunity of personal hearing before fresh order - Bank account de-freeze subject to deposit or recovery as pre-deposit

Quashing and remand for fresh adjudication - Treatment of impugned order as addendum to show cause notice - Opportunity of personal hearing before fresh order - Impugned assessment order quashed and matter remitted to the first respondent for fresh adjudication on merits. - HELD THAT: - The High Court found that, notwithstanding the prior notices and opportunity for hearing issued through statutory portals, the petitioner may have a case on merits. Exercising its discretionary jurisdiction, the Court set aside the impugned order and directed the assessing authority to treat that order as an addendum to the earlier show cause notices and to pass a fresh order on merits after affording the petitioner an opportunity to file a reply and to be heard. The fresh adjudication is to be carried out in accordance with law and expeditiously. [Paras 9, 10, 11]

Impugned order quashed; matter remitted for fresh adjudication and the impugned order to be treated as an addendum to the show cause notices; petitioner to be heard before a fresh order is passed.

Pre-deposit condition for adjudication - Bank account de-freeze subject to deposit or recovery as pre-deposit - Condonation of delay and discretionary relief - Relief granted conditionally upon deposit of 25% of the disputed tax and consequential directions regarding the petitioner's bank account. - HELD THAT: - The Court exercised its discretion to grant relief despite respondents' contention regarding limitation and laches, conditioning the quash and remand on the petitioner depositing 25% of the disputed tax into the respondent's electronic cash ledger within 30 days of receipt of the order. Subject to such deposit, the petitioner's bank account shall be de-freezed; alternatively, the specified amount may be recovered as a pre-deposit from the petitioner's bank account. The Court thereby balanced the equities and provided a mechanism to secure the revenue while enabling fresh consideration on merits. [Paras 9, 12]

Petitioner to deposit 25% of disputed tax within 30 days; bank account to be de-freezed subject to deposit or the amount to be recovered as pre-deposit.

Final Conclusion: Writ petition disposed of by quashing the impugned assessment order and remitting the matter to the assessing authority for fresh adjudication on merits; relief is conditional on payment of 25% of the disputed tax within 30 days, with directions on filing a reply, hearing, timeframe for fresh order and on de-freezing or recovering the deposit from the petitioner's bank account.

Procedural nature of filing audit report in Form No.10B - entitlement to exemption under Section 11 despite delayed filing of Form No.10B - acceptance of Form No.10B filed before appellate authority/assessment verification

Procedural nature of filing audit report in Form No.10B - entitlement to exemption under Section 11 despite delayed filing of Form No.10B - Filing of audit report in Form No.10B is a procedural requirement and late filing does not disentitle a registered charitable trust from claiming exemption under Section 11. - HELD THAT: - The Tribunal found, and this Court accepted, that the assessee had obtained the audit report in Form No.10B in advance and that the only basis for disallowance by CPC was non-filing of Form No.10B along with the return. Relying on the coordinate decisions of this High Court and Tribunals, the Tribunal held that the requirement to furnish Form No.10B with the return is procedural and that the assessee, having produced the Form 10B before the appellate authority and for verification, ought to be allowed the exemption under Section 11. The High Court, on scrutiny of the Tribunal's reasoning and authorities followed, concluded that no substantial question of law arises against the Tribunal's conclusion that the exemption could not be denied merely on the technicality of delayed filing of Form No.10B. [Paras 6, 7]

The claim for exemption under Section 11 must be considered and allowed notwithstanding the delayed filing of Form No.10B, since the filing was procedural and the Form was available for verification.

Acceptance of Form No.10B filed before appellate authority/assessment verification - rectification of intimation under Section 143(1) where Form No.10B is subsequently furnished - The Tribunal was justified in setting aside the CIT(A)'s order and directing the AO/CPC to accept the Form No.10B filed before the appellate authority and to decide the Section 11 claim on merits. - HELD THAT: - The Tribunal recorded that the Form No.10B had been prepared before the due date and was filed before the Commissioner of Income Tax (Appeals). On that basis, it directed the Assessing Officer/CPC to verify the claim and grant the necessary deduction under Section 11, deleting the adjustment made in the intimation under Section 143(1). The High Court, having considered the Tribunal's reliance on binding coordinate bench decisions and the factual finding that the audit report was available for verification, found no infirmity in the Tribunal's exercise of directing acceptance of the subsequently filed Form No.10B and remitting the matter for merit consideration. [Paras 5, 6]

The Tribunal rightly set aside the appellate order and directed acceptance of the Form No.10B with a direction to the AO/CPC to decide the Section 11 claim on merits.

Final Conclusion: The Tax Appeal is dismissed; no substantial question of law arises from the Tribunal's order which held that delayed filing of Form No.10B is procedural and directed the Assessing Officer/CPC to accept the Form and decide the Section 11 exemption claim for AY 2021-2022 on merits.

Land restoration expenses treated as revenue expenditure - deduction under Section 24 for income from house property - stamp duty and share capital expenses as capital expenditure - taxability of reimbursement of service tax on accrual versus subsequent receipt

Land restoration expenses treated as revenue expenditure - Admission of the substantial question whether land restoration expenses of Rs.3,25,39,891/- are capital in nature and not allowable or properly to be treated as revenue expenditure. - HELD THAT: - The Court admitted this substantial question of law raised by the Revenue arising out of the Tribunal's order for A.Y.2010-11. The Tribunal had followed earlier years' decisions and deleted the addition after considering project-wise particulars and corresponding income recognition; the High Court confined its order to admitting question (a) for consideration and did not decide the substantive controversy on the merits in this order. [Paras 8, 17]

Question (a) admitted for adjudication; not finally decided in this order.

Deduction under Section 24 for income from house property - Assessability of rental income and entitlement to standard deduction under Section 24 where the assessee charged related expenses to profit and loss account. - HELD THAT: - The Assessing Officer disallowed deductions claimed against rent on the ground of lack of particulars and because a standard deduction under Section 24 would otherwise apply. The CIT(A) held, and the Tribunal upheld, that rent income was to be taxed under the head 'Income from House Property' and the standard deduction under Section 24 is allowable under that head rather than under business income; consequential adjustments were to be made accordingly. The High Court concurred with the reasoning of the CIT(A) and the Tribunal that the assessee was entitled to the Section 24 deduction when rent income is taxed as income from house property; accordingly no substantial question of law arises from the impugned order on this point. [Paras 11, 12]

Assessee entitled to Section 24 deduction where rent is taxed as income from house property; appeal dismissed on this ground.

Stamp duty and share capital expenses as capital expenditure - Whether the disallowance of stamp duty and share capital expenses as non-allowable (capital) expenditure gave rise to a substantial question of law. - HELD THAT: - The Assessing Officer made additions treating the stamp duty and share capital expenses as non-allowable; the CIT(A) deleted the additions following the Tribunal's decision in the preceding assessment year, and the Tribunal upheld deletion in the absence of distinguishing facts. The High Court found no substantial question of law arises from the impugned order given the consistent earlier treatment and absence of distinguishing material. [Paras 13, 14, 15]

No substantial question of law arises; appeal dismissed on this ground.

Taxability of reimbursement of service tax on accrual versus subsequent receipt - Whether deletion of addition relating to reimbursement of service tax received pursuant to an arbitration award (offered to tax in a subsequent year) raised a substantial question of law. - HELD THAT: - It was not in dispute that the reimbursement from GAIL pursuant to an arbitration award was offered to tax in a subsequent assessment year. The Tribunal's deletion of the addition having regard to that fact does not give rise to a substantial question of law for the High Court's interference in this proceeding. [Paras 16]

No substantial question of law arises; appeal dismissed on this ground.

Final Conclusion: The High Court admitted only the substantial question relating to the characterisation of land restoration expenses (question (a)) for adjudication; the remaining substantial questions (b), (c) and (d) were found not to raise any substantial question of law and the appeal was dismissed insofar as they concern those points.

Bogus purchases treated as unexplained expenditure - accommodation entries - reopening of assessment pursuant to search and information from DGIT(Inv.) - restriction of addition by way of estimated commission - onus on assessee to establish genuineness of transactions - precedential consistency and reliance on coordinate Bench decision

Bogus purchases treated as unexplained expenditure - restriction of addition by way of estimated commission - precedential consistency and reliance on coordinate Bench decision - onus on assessee to establish genuineness of transactions - Whether the Income Tax Appellate Tribunal was justified in restricting the addition for purchases held non-genuine to 6% of the aggregate purchases instead of making a 100% addition. - HELD THAT: - The Court noted that the ITAT, while acknowledging information from search proceedings identifying the entry providers, applied a consistent tribunal practice of restricting disallowance to an estimated commission percentage where the assessee was shown to have acted as a commission agent and earned commission on the stated purchases. The ITAT relied on the assessee's own treatment in the earlier year and on similar decisions including a coordinate Bench decision in Principal Commissioner of Income Tax 1, Surat v. M/s. Surya Impex, and other Tribunal orders, to increase the CIT(A)'s 0.50% estimate to 6%. The High Court found no error in the ITAT's approach given the factual finding that the assessee operated as a commission agent and that the tribunal followed a consistent view on similar facts. The Court concluded that, on the facts and the precedent relied upon by the ITAT, no substantial question of law survived for admission.

ITAT's restriction of the addition to 6% of the impugned purchases is upheld and the Revenue's appeal is dismissed.

Final Conclusion: The appeal is dismissed; the High Court finds no substantial question of law and upholds the ITAT's order restricting the addition on nongenuine purchases to 6% of the aggregate purchases for A.Y. 2008-09.

Dependent Agent Permanent Establishment - Fixed Place Permanent Establishment - Arm's length remuneration and attribution - Habitually securing and concluding contracts - Economic dependence

Dependent Agent Permanent Establishment - Habitually securing and concluding contracts - Economic dependence - Whether the Indian subsidiary (KIPL) constituted a Dependent Agent Permanent Establishment of the assessee - HELD THAT: - The Tribunal examined the contractual relationship and factual matrix and concluded that KIPL did not carry out manufacturing or processing using the assessee's intangibles, nor did it assume R&D or technical-obsolescence risks of the assessee (paras 18). Contracts for supply were negotiated, concluded and signed by the assessee directly with Indian customers; KIPL's role was limited to marketing referrals and coordinating delivery and payment for which it received commission (paras 19-20). The Tribunal applied the test of whether an enterprise habitually secures and concludes contracts on behalf of another and held that mere marketing activity or meeting customers does not satisfy that test absent authority or conduct giving purchasers a reasonable belief that the agent can bind the principal (paras 21-22). The Tribunal also noted that KIPL's commission income formed only a minority share of its revenue and thus KIPL was not economically dependent on the assessee (para 24), and that allegations regarding maintenance of inventory were founded on incorrect facts (para 25). On the totality of these findings the Tribunal held that KIPL was not a dependent agent PE of the assessee (para 32). The High Court confined the controversy to the DAPE issue because the Fixed Place PE question was not pursued before the Tribunal and no cross-objection was filed; having regard to the Tribunal's findings and the Assessing Officer's own factual findings, the Court found no substantial question of law warranting interference. [Paras 21, 22, 24, 25, 32]

KIPL did not constitute a Dependent Agent Permanent Establishment of the assessee; the Tribunal's finding on DAPE is sustained and the appeal fails on this issue.

Arm's length remuneration and attribution - Whether any further profit attribution to a PE was required despite KIPL having been remunerated on an arm's length basis - HELD THAT: - The Tribunal found that KIPL had been remunerated by the assessee for commission activities on an arm's length basis and, accordingly, no further attribution was required in the light of the principles applicable to attribution (para 32). The Assessing Officer's contrary view that KIPL performed functions beyond commission activity and therefore required additional attribution was considered and rejected by the Tribunal which relied on the contractual scope and the factual allocation of functions and risks. [Paras 32]

No further attribution to a PE was warranted since KIPL was remunerated at arm's length for its commission activities; the Tribunal's conclusion on absence of additional attribution is upheld.

Fixed Place Permanent Establishment - Question of existence of a Fixed Place PE - HELD THAT: - The High Court observed that although the Assessing Officer had examined and reached findings on Fixed Place PE, the Commissioner (Appeals) proceeded on the basis of DAPE and did not decide the Fixed Place PE question. The appellant did not pursue arguments on Fixed Place PE before the Tribunal nor file cross-objections, and therefore the question of Fixed Place PE did not arise from the Tribunal's order and was not considered by it.

The existence of a Fixed Place Permanent Establishment in India was not adjudicated by the Tribunal and is not decided in the present appeal.

Final Conclusion: The appeal is dismissed. The Tribunal's conclusion that the Indian subsidiary (KIPL) was not a Dependent Agent Permanent Establishment of the assessee and that no further attribution was required given arm's length remuneration is sustained; the question of a Fixed Place PE was not before the Tribunal and remains undecided.

Search and seizure - reason to believe - information in possession - satisfaction note - application of mind - confidentiality of reasons for search - return of seized property - powers under Section 132 of the Income Tax Act

Search and seizure - reason to believe - information in possession - satisfaction note - application of mind - powers under Section 132 of the Income Tax Act - Validity of the search and seizure conducted under Section 132 of the Act on the basis of the satisfaction note - HELD THAT: - The Court examined whether the authorised official had information in his possession, prior to forming the opinion, sufficient to constitute a reasonable belief under Section 132(1). Authorities including Vindhya Metal, Spacewood Furnishers and Laljibhai Mandalia require that information must be in possession before formation of opinion, there must be application of mind to relevant material, and reasons for belief (satisfaction note) may be placed before the Court for review though not required to be communicated to the assessee. The sealed satisfaction note was perused; it did not disclose any discrete enquiry or cogent incriminating material establishing that the petitioners would not disclose the money in due course. The note reflected suspicion rather than material upon which a reasonable belief could be founded. Thus, the formation of satisfaction was not supported by relevant information and represented non-application of mind, rendering the seizure unlawful. [Paras 21, 22, 23, 24, 25]

Search and seizure was invalid; the satisfaction recorded did not rest on cogent information and amounted to mere suspicion.

Return of seized property - search and seizure - confidentiality of reasons for search - Whether the cash seized must be returned to the petitioners - HELD THAT: - Having held the seizure to be invalid for lack of proper reasons to believe, the Court directed that the seized cash be returned forthwith. The Court noted that confidentiality of reasons does not preclude judicial scrutiny; notwithstanding that respondents may proceed in accordance with law, the immediate consequence of invalid seizure is restitution of the withheld amount. The petitioners had also sought to furnish bank guarantees, but the primary directive flowed from the finding that the seizure could not be countenanced. [Paras 23, 24, 25, 27]

Seized cash to be returned to the petitioners forthwith; seizure set aside.

Final Conclusion: Writ petition allowed: the search and seizure under Section 132 was set aside for being based on suspicion and inadequate information, and the seized cash was ordered to be returned forthwith; respondents remain free to proceed against the petitioners in accordance with law.

Disallowance under Section 14A read with Rule 8D where no exempt income is declared - deemed dividend under Section 2(22)(e) - loan vs current account/reimbursement - characterisation of intercompany transactions as revenue/current account transfers - public interest/closely held company test for applicability of Section 2(22)(e)

Disallowance under Section 14A read with Rule 8D where no exempt income is declared - application of CBDT guidance and precedents on Section 14A - Deletion of disallowance under Section 14A read with Rule 8D where the assessee had not declared any exempt income for the year. - HELD THAT: - The Tribunal accepted the assessee's contention that no exempt income was declared during the relevant year and noted that the matter is covered by binding and persuasive precedents including the jurisdictional High Court decision referred to in the order. Having regard to the absence of exempt income and the settled position in various decisions, the Tribunal agreed with the Commissioner (Appeals) and held that the disallowance under Section 14A read with Rule 8D could not be sustained. [Paras 2, 3, 4]

Disallowance under Section 14A read with Rule 8D deleted.

Deemed dividend under Section 2(22)(e) - loan vs current account/reimbursement - characterisation of intercompany transactions as revenue/current account transfers - test of whether advances constitute loans attracting deemed dividend - Whether amounts received from the wholly owned subsidiary should be treated as deemed dividend under Section 2(22)(e) or were currentaccount/reimbursement transactions not attractable as deemed dividend. - HELD THAT: - The Tribunal examined the ledger and transaction details and agreed with the Commissioner (Appeals) that the entries represented advances and reimbursements for expenses (travel, conveyance, imprest, taxes paid on behalf of the subsidiary, etc.) rather than loans. The Assessing Officer's conclusion treating the receipts as loans and invoking Section 2(22)(e) was rejected because the nature of transactions, as evidenced in the account particulars, showed recurring revenuetype/current account adjustments and not a loan credit balance that would qualify as deemed dividend. The Tribunal therefore upheld the appellate finding that the amounts were not taxable as deemed dividend. [Paras 5, 6, 8, 9, 10]

Addition as deemed dividend under Section 2(22)(e) deleted; transactions held to be current account/reimbursement in nature.

Final Conclusion: Both grounds of the Revenue's appeal were dismissed: the Section 14A/Rule 8D disallowance was deleted because no exempt income was declared, and the addition as deemed dividend under Section 2(22)(e) was deleted as the transactions were held to be currentaccount/reimbursement entries rather than loans.

Condonation of delay - Substantial justice over technicality - Addition under section 56(2)(vii)(b) of the Income Tax Act, 1961 - Principles of natural justice - Remand for de novo adjudication with opportunity of hearing - Power of Commissioner of Income Tax (Appeals) co-terminus with Assessing Officer

Condonation of delay - Substantial justice over technicality - Application for condonation of delay in filing the appeal - HELD THAT: - The Tribunal examined the reasons advanced for the delay and applied the well settled principle that rules of procedure are the handmaid of justice, citing the approach in Collector Land Acquisition, Anantnag v. MST Katiji. Finding that the delay was neither for the purpose of obtaining advantage nor due to negligence and that substantial justice required consideration on merits, the Tribunal held there was sufficient cause to condone the delay. The appeal was therefore admitted for adjudication on merits. [Paras 4]

Delay of 43 days condoned and the appeal admitted for hearing on merits.

Addition under section 56(2)(vii)(b) of the Income Tax Act, 1961 - Principles of natural justice - Remand for de novo adjudication with opportunity of hearing - Power of Commissioner of Income Tax (Appeals) co-terminus with Assessing Officer - Addition made under section 56(2)(vii)(b) and validity of the CIT(A)'s appellate disposal - HELD THAT: - The Tribunal noted that the Assessing Officer had made additions treating as income the difference between stamp duty valuation and sale consideration and the unpaid balance allegedly payable within two years. On appeal, the assessee filed detailed submissions and relied on an earlier agreement and confirmation deed, but the learned CIT(A) did not consider those submissions or the documents and disposed of the appeal in a summary manner without examining the contentions or calling for further information. Recognising that the powers of the CIT(A) are co terminus with the AO and that a fair adjudication requires examination of the evidence and submissions, the Tribunal concluded that the matter must be restored to the file of the learned CIT(A) for fresh adjudication. The CIT(A) was directed to examine all documents and submissions, call for any further information if necessary, afford the assessee and the AO reasonable and adequate opportunity of hearing, and pass a reasoned order. [Paras 9]

Impugned order set aside; issue remitted to the learned CIT(A) for de novo adjudication after examination of submissions and documents and after affording adequate opportunity of hearing to the parties.

Final Conclusion: Delay in filing the appeal is condoned and the appeal admitted; the Tribunal set aside the impugned appellate order and remitted the matter to the learned CIT(A) for fresh adjudication of the addition under section 56(2)(vii)(b) after considering the assessee's submissions and documents and after affording reasonable opportunity of hearing to both the assessee and the Assessing Officer; appeal allowed for statistical purposes.

Deletion of addition under section 68 - addition under section 69A - treatment of inventories and related additions - disallowance under section 14A - disallowance of expenses under section 37(1) - disallowance of rent and genuineness of expenditure - disallowance of depreciation for assets not used more than 180 days - addition on account of unsecured loans - remand proceedings and reliance on remand report - acceptance of remand findings by Assessing Officer and appellate authority

Deletion of addition under section 68 - remand proceedings and reliance on remand report - Deletion of addition made by the Assessing Officer under section 68 in respect of cash deposits during the demonetisation period. - HELD THAT: - The Tribunal recorded that in remand proceedings the Assessing Officer accepted the assessee's contentions and the ld. CIT(A) considered the AO's remand report and granted relief. No adverse comments were recorded by the AO in the remand report. Given the AO's acceptance in remand and the CIT(A)'s reliance on that report, the revenue had no substantive grievance to pursue; accordingly the ground challenging deletion of the addition under section 68 was dismissed. [Paras 3]

Ground dismissed; deletion of the addition under section 68 upheld.

Addition under section 69A - remand proceedings and reliance on remand report - Deletion of addition made under section 69A challenging the source of investment. - HELD THAT: - The ld. AO accepted the assessee's contentions during remand proceedings and the ld. CIT(A) adjudicated the issue after taking cognisance of the AO's remand report and granted relief. No adverse finding remained for the revenue to challenge. On this basis the Tribunal dismissed the revenue's ground. [Paras 3]

Ground dismissed; deletion of the addition under section 69A upheld.

Treatment of inventories and related additions - remand proceedings and reliance on remand report - Deletion of addition on account of inventories. - HELD THAT: - The AO had accepted the assessee's contentions in the remand proceedings and the ld. CIT(A) relied on the remand report to delete the addition. As there were no adverse comments in the remand report and the CIT(A) granted relief, the Tribunal found no sustainable grievance for the revenue and dismissed the ground. [Paras 3]

Ground dismissed; deletion of the inventory-related addition upheld.

Disallowance under section 14A - Validity of deletion of disallowance under section 14A where no exempt income was earned. - HELD THAT: - The Tribunal noted that the assessee did not derive any exempt income in the year under consideration; therefore section 14A has no application. The Tribunal followed the view of the Jurisdictional High Court in PCIT v. Era Infrastructure Ltd (as relied upon by the AT) and accordingly dismissed the revenue's challenge to the CIT(A)'s deletion of the section 14A disallowance. [Paras 4]

Ground dismissed; deletion of disallowance under section 14A upheld as inapplicable in absence of exempt income.

Disallowance of expenses under section 37(1) - disallowance of rent and genuineness of expenditure - disallowance of depreciation for assets not used more than 180 days - addition on account of unsecured loans - remand proceedings and reliance on remand report - Deletion by the CIT(A) of various disallowances and additions (other miscellaneous grounds raised by the revenue including section 37(1) disallowance, rent disallowance, depreciation, and unsecured loans). - HELD THAT: - For each of these grounds the Tribunal observed that the Assessing Officer had accepted the assessee's contentions in remand proceedings and the CIT(A) had granted relief after considering the AO's remand report. The absence of adverse comments in the remand report and the AO's acceptance left no substantive basis for the revenue's appeal. Consequently the Tribunal dismissed these grounds of appeal raised by the revenue. [Paras 3]

Grounds dismissed; deletions and reliefs granted by the CIT(A) on these miscellaneous additions and disallowances are sustained.

Final Conclusion: The revenue's appeal is dismissed in entirety; the deletions and reliefs granted by the CIT(A), including the ruling that section 14A is not applicable in the absence of exempt income, are upheld, the tribunal having relied on the Assessing Officer's remand report and the CIT(A)'s adjudication thereon.

Ex parte dismissal for want of prosecution - operation clean money and scrutiny of demonetisation-period cash deposits - burden of proof on assessee to explain cash deposits - unexplained money under section 69A - taxation under section 115BBE

Ex parte dismissal for want of prosecution - Validity of the CIT(A)'s ex parte dismissal of the assessee's appeal for want of prosecution without discussing merits - HELD THAT: - The Tribunal found that the first appellate authority issued multiple hearing notices but dismissed the appeal for want of prosecution and without discussing merits. On review of the record the Tribunal held that the assessee had explained the source of the cash deposits before the Assessing Officer and that the appeal concerned substantive disputes which required consideration on merits. In these circumstances the ex parte dismissal by the CIT(A) was set aside and the appellate order was quashed, the Tribunal concluding that the assessee was not denied a proper opportunity to have the merits examined. [Paras 7]

The ex parte order of the CIT(A) was set aside and quashed; the grounds of appeal raised by the assessee were allowed.

Burden of proof on assessee to explain cash deposits - unexplained money under section 69A - taxation under section 115BBE - operation clean money and scrutiny of demonetisation-period cash deposits - Whether the addition of Rs. 1,00,000 treated as unexplained cash and taxed as income was justified - HELD THAT: - The Tribunal recorded that the Assessing Officer's initial data indicated larger deposits but, on verification, only certain deposits pertained to the assessee and those deposits were satisfactorily explained as withdrawals and reinvestment/maturity proceeds of earlier fixed deposits. The sole addition related to Rs. 1,00,000 which the Assessing Officer treated as unexplained money on the basis of a later outward payment; however, the Tribunal found that the payment was in fact repayment of an advance originating in financial year 2009-10 and was made after the period under consideration, so it could not form the basis for treating cash deposited during the demonetisation period as unexplained. The Tribunal further noted that the assessed income of Rs. 1,00,000 was below the taxable threshold for the year and that the imposition of tax under the penal provision was consequently unwarranted. Applying these findings, the Tribunal held that the Assessing Officer erred in making the addition and in applying the penal tax provision. [Paras 7]

The addition of Rs. 1,00,000 treated as unexplained money and the consequential tax under the penal provision were deleted.

Final Conclusion: The Tribunal allowed the appeal, set aside the ex parte order of the CIT(A), deleted the addition of Rs. 1,00,000 treated as unexplained money and quashed the imposition of the penal tax; the appeal stands allowed.

Unexplained cash credit - onus under section 68 - principle of natural justice - creditworthiness of lender - reliance on third-party statement - remand and powers of CIT(A)

Principle of natural justice - reliance on third-party statement - Validity of assessment where addition was based on third party statements recorded in independent proceedings without opportunity of cross examination. - HELD THAT: - The Assessing Officer based the addition on statements recorded by DGIT(Inv.) that the lender entities were shell/paper companies, without conducting independent enquiries or affording the assessee an opportunity to cross examine those third party witnesses. The Tribunal held that borrowing such third party findings in independent proceedings and denying cross examination violates the principle of natural justice and renders the assessment order vitiated. Reliance on the Supreme Court principle that denial of opportunity to cross examine witnesses whose statements form the basis of demand is a serious flaw making the order nullity supports this conclusion. [Paras 5]

Assessment framed on the basis of third party statements without opportunity of cross examination is nullity and liable to be set aside.

Remand and powers of CIT(A) - onus under section 68 - Whether the Commissioner (Appeals) was competent to examine additional evidence and decide the claim when remand report from AO was not furnished. - HELD THAT: - The Tribunal observed that the CIT(A)'s powers are coterminous with those of the AO and where the AO failed to conclude remand proceedings or produce the remand report despite long delay and reminders, the CIT(A) was entitled to examine the additional evidence filed by the assessee and adjudicate the appeal. In the facts, more than six years elapsed without a remand report, and the CIT(A) properly proceeded to verify the documents and decide the claim. [Paras 4, 6]

CIT(A) was within jurisdiction to examine additional evidence and adjudicate the appeal in absence of remand report from AO.

Onus under section 68 - creditworthiness of lender - unexplained cash credit - Whether the loans from the two corporate entities constituted unexplained cash credit under section 68. - HELD THAT: - On merits, the assessee produced ledger confirmations, affidavits of lenders, income tax returns and balance sheets of the lenders showing identity and creditworthiness. The ledger entries and affidavits demonstrated that substantial portions of the loans were repaid within the relevant period and that some amounts were carried forward balances. Having discharged the initial burden under section 68, the onus shifted to the AO to rebut the documents; the AO adduced no contrary material. The Tribunal found the evidence sufficient to reject the addition and upheld the CIT(A)'s deletion of the unexplained cash credit and related estimated commission. [Paras 3, 7]

Assessee discharged onus under section 68; addition of the loan amounts as unexplained cash credit and the estimated commission is not sustainable.

Final Conclusion: Revenue's appeal dismissed; assessment set aside as vitiated by breach of natural justice and, on merits, additions under section 68 and related estimated commission deleted as the assessee discharged the statutory onus and CIT(A) rightly adjudicated the appeal in absence of remand report.

Deeming fiction under section 50C applicable to vendor for computation of full value of consideration - Deeming fiction of deemed gift under section 56(2)(vii) as applicable to purchaser - Tax treatment of purchaser (vendee) versus vendor (vendor) in transactions affected by stamp valuation - Addition as unexplained investment in the hands of purchaser

Deeming fiction under section 50C applicable to vendor for computation of full value of consideration - Addition as unexplained investment in the hands of purchaser - Deeming fiction of deemed gift under section 56(2)(vii) as applicable to purchaser - Sustainability of the addition of Rs. 42,39,000 made by the Assessing Officer treating the purchaser's share as deemed higher consideration on account of stamp duty valuation - HELD THAT: - The Assessing Officer invoked the stamp duty valuation to take the full value of consideration at the higher stamp authority figure and, by reference to section 50C, treated the purchaser's 25% share as unexplained investment. The Tribunal held that section 50C operates as a deeming provision for determining full value of consideration in the hands of the vendor and is not a mechanism to create an income/addition in the hands of the purchaser. The deeming fiction under section 56(2)(vii) that could operate to treat a purchaser as having received a deemed gift was introduced by the Finance Act, 2013 with effect from 1 April 2014 and therefore is not available for A.Y. 2012-13. Consequently, the Assessing Officer's inference applying section 50C to the purchaser for the relevant year was contrary to law. The Tribunal also noted that the assessee had disclosed the purchase consideration and that at least one-fourth of the declared consideration ought to have been taken into account when computing any purported addition. On these grounds the addition was held unsustainable and deleted.

Addition of Rs. 42,39,000 in the hands of the purchaser deleted; appeal allowed.

Final Conclusion: The Tribunal held that the higher stamp duty valuation and section 50C could not be invoked to make an addition in the hands of the purchaser for A.Y. 2012-13; the assessment addition was therefore unsustainable and deleted, and the assessee's appeal was allowed.

Eligibility for exemption under section 80P(2)(a)(i) of the Income-tax Act, 1961 - Attribution of interest on surplus investments to cooperative society's business - Conflict of judicial precedents on taxation of interest income of cooperative societies

Eligibility for exemption under section 80P(2)(a)(i) of the Income-tax Act, 1961 - Attribution of interest on surplus investments to cooperative society's business - Interest earned by the cooperative society on fixed deposits with nationalised banks is eligible for exemption under section 80P(2)(a)(i). - HELD THAT: - The Tribunal noted a divergence of judicial opinion among High Courts on whether interest arising from surplus invested in shortterm deposits is attributable to the activities of a cooperative society for the purpose of section 80P(2)(a)(i). After surveying decisions, including those holding the interest nonattributable and those holding it attributable, the Tribunal followed the view of the Hon'ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. and the coordinate Bench of this Tribunal which treated such interest as partaking the character of business income of the society. Applying that precedent, the Tribunal concluded that interest earned on fixed deposits with nationalised banks is attributable to the society's business and therefore qualifies for deduction under section 80P(2)(a)(i), and directed the Assessing Officer to allow the exemption. [Paras 8, 9]

Appeal allowed and exemption under section 80P(2)(a)(i) directed to be allowed in respect of interest on fixed deposits with nationalised banks.

Final Conclusion: The Tribunal allowed the appeal of the assessee cooperative society for AY 2017-18, holding that interest income on fixed deposits with nationalised banks is eligible for exemption under section 80P(2)(a)(i) of the Income-tax Act, 1961, and directed the Assessing Officer to allow the deduction.

Disallowance under section 14A - application of Rule 8D - assured rental as interest under section 2(28A) - allowability of interest/finance charges for property developers - complete contract method and matching principle under AS-7 - allowability of indirect/administrative and staff expenses as revenue expenditure - depreciation as a statutory allowance under section 32

Disallowance under section 14A - application of Rule 8D - Deletion of the small disallowance under section 14A and inapplicability of Rule 8D where no exempt income is shown - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that section 14A (and Rule 8D) could not be applied in the absence of any exempt income for the relevant year. The CIT(A) relied on jurisdictional and other High Court authorities holding that Section 14A applies only where exempt income is actually received or receivable in the relevant previous year and that the AO must examine the accounts and record satisfaction before making any disallowance. The Revenue produced no material to rebut the assessee's contention that no exempt income existed or that expenditure was incurred to earn exempt income; accordingly the deletion of the disallowance was affirmed. [Paras 11]

Deletion of the disallowance under section 14A affirmed; Rule 8D held not applicable in the facts.

Assured rental as interest under section 2(28A) - allowability of interest/finance charges for property developers - Whether payments made to prospective buyers as 'assured rental' constitute interest deductible as business expenditure - HELD THAT: - The Tribunal accepted the CIT(A)'s conclusion that amounts paid as assured return pursuant to MOUs with prospective buyers were in the nature of interest within the definition in section 2(28A) and were deductible as business expenditure. The finding was supported by precedent (including co-ordinate Bench decisions) and by facts that the receipts were by way of cheques, TDS under section 194A was deducted, and the funds were used for business purposes to complete the project. The AO's view that such payments must be deferred until booking of sale under the 'complete contract method' was not held to override the characterisation of the payments as interest and their allowability. [Paras 19]

Addition on account of assured returns disallowed; payments treated as interest and allowable as business expenditure.

Complete contract method and matching principle under AS-7 - allowability of indirect/administrative and staff expenses as revenue expenditure - Whether proportionate disallowance of indirect expenses is warranted where the assessee follows the complete contract method but treats administrative and staff costs as revenue expenditure - HELD THAT: - The Tribunal followed the CIT(A) and co ordinate Bench precedents holding that indirect expenses (office employees' salary, administrative and marketing expenses) which cannot be attributed to specific contract activity are excluded from contract costs under AS 7 and may be charged to profit & loss as revenue expenses. The AO's proportional disallowance based on the ratio of project costs to total inventories was held not to accord with the Act or accepted accounting principles; the Revenue offered no binding precedent to displace the co ordinate decisions relied upon. [Paras 25]

Proportionate disallowance of indirect/administrative expenses deleted.

Depreciation as a statutory allowance under section 32 - Validity of AO's percentage-based restriction of depreciation claimed on business assets - HELD THAT: - The Tribunal endorsed the CIT(A)'s finding that depreciation is a statutory allowance under section 32 and is to be allowed where assets are owned and used for business purposes. The AO's mechanical restriction by applying a percentage to the eligible depreciation was held to be unfounded; personal use does not negate statutory depreciation if the asset is used for business. The Revenue did not controvert the factual finding that the assets (computers, office equipment, vehicles) were used for business. [Paras 30]

Disallowance/restriction of depreciation deleted and full depreciation allowed as per statutory provisions.

Final Conclusion: All grounds raised by the Revenue are dismissed; the CIT(A)'s deletions of the additions and disallowances (section 14A/Rule 8D matter, assured rentals treated as interest and allowed, proportionate disallowance of indirect expenses, and restriction of depreciation) are affirmed and the Revenue's appeal is dismissed.

Remission or cessation of liability under Section 41(1) - unexplained cash credit under Section 68 - assessee's primary onus to prove genuineness of creditors and transactions - acknowledgement of debt by showing liability in balance sheet - non-response to summons not conclusive where documentary evidence exists - planting of witnesses does not ipso facto render principal transactions between parties as bogus

Remission or cessation of liability under Section 41(1) - assessee's primary onus to prove genuineness of creditors and transactions - acknowledgement of debt by showing liability in balance sheet - planting of witnesses does not ipso facto render principal transactions bogus - Addition of Rs.3,89,21,998/- treated as cessation of liability under Section 41(1) was not sustainable. - HELD THAT: - The Tribunal examined ledger entries, scrutiny assessment orders of the creditors and other documentary material showing that purchases from the three disputed creditors in earlier years had been accepted as genuine, that the creditors were engaged in trading of Basmati rice, and that the outstanding balances reflected in the assessee's books were subsequently paid in the next assessment year and transactions with the same parties continued. These facts establish that the liabilities were acknowledged in the balance sheet and discharged later, and therefore cannot be treated as remission or cessation of liability within the meaning of Section 41(1). Although the Assessing Officer found that three persons produced as witnesses were employed elsewhere and concluded they were planted to support fabricated confirmations, that factual finding did not negate the documentary evidence showing the genuineness of the underlying parties and transactions. Once the assessee discharged its primary onus by placing confirmations, ledgers, audited financials and accepted scrutiny orders of the creditors on record, the provisions of Section 41(1) could not be invoked to treat the ledger balances as bogus liabilities. The Tribunal also relied on the principle that any discrepancy between confirmations and creditor records should be pursued against the creditors and not result in an adverse inference against the assessee where evidence supports the liability. [Paras 9, 10]

Grounds 3 to 5 allowed; addition under Section 41(1) deleted.

Unexplained cash credit under Section 68 - assessee's primary onus to prove identity, genuineness and creditworthiness - non-response to summons not conclusive where documentary proof exists - Addition of Rs.15 lakhs as unexplained cash credit under Section 68 was not sustainable. - HELD THAT: - The assessee produced confirmation of the lender, PAN, ledger entries and bank evidence showing receipt of monies through regular banking channels, thereby addressing the three ingredients of Section 68 (identity of the creditor, genuineness of the transaction and creditworthiness). The summons issued to the lender under Section 131 was served but not answered; the Tribunal held that mere non-response by the lender to the summons cannot override the documentary proof furnished by the assessee. Applying the settled principle that once the assessee places sufficient evidence to establish the three ingredients, no adverse inference can be drawn solely because the creditor did not respond, the addition under Section 68 could not be sustained (reference made to the judicial precedent relied upon by the Tribunal). [Paras 11, 12, 13]

Ground 6 allowed; addition under Section 68 deleted.

Final Conclusion: The appeal is allowed: the addition under Section 41(1) (grounds 3-5) and the addition under Section 68 (ground 6) are deleted and the Assessing Officer's and CIT(A)'s disallowances are set aside for AY 2015-16.

Disallowance under section 14A - Application of Rule 8D - Scope of computation limited to investments yielding exempt income - Cost of investments as per books versus net worth of merged/demerged entities - Retrospective effect of legislative amendment - TDS credit as per Form 26AS and requirement of substantiation

Disallowance under section 14A - Application of Rule 8D - Scope of computation limited to investments yielding exempt income - Cost of investments as per books versus net worth of merged/demerged entities - Retrospective effect of legislative amendment - Validity and quantum of disallowance under section 14A in respect of investments and the manner of computation under Rule 8D - HELD THAT: - The Tribunal upheld the approach adopted by the CIT(A) that disallowance under section 14A (as computed under Rule 8D) should be confined to those investments which actually yielded exempt income during the year and not to all investments indiscriminately. Reliance on the view of the Hon'ble Delhi High Court in Era Infrastructure India Ltd. led to the conclusion that the Explanation inserted by Finance Act, 2022 cannot be treated as having retrospective effect so as to alter the computation for the year under consideration; therefore the CIT(A)'s limitation of the disallowance to investments yielding exempt income was correct. The Tribunal directed the Assessing Officer to verify and adopt the correct cost of investments as recorded in the assessee's books (and not to substitute or treat the 'net worth' of demerged entities as cost), and to compute the disallowance accordingly. On these bases the revenue's grounds seeking broader disallowance were dismissed, and the assessee's ground was allowed to the extent that the cost of investments must be correctly adopted and only investments yielding exempt income be considered. [Paras 2]

Revenue appeal dismissed on the issue of section 14A disallowance; AO directed to recompute disallowance under Rule 8D considering only investments that yielded exempt income and adopting correct cost of investments as per books.

TDS credit as per Form 26AS and requirement of substantiation - Claim for TDS credit (Form 26AS) including additional credit related to demerged undertaking - HELD THAT: - The CIT(A) had directed the AO to allow TDS credit of Rs. 52.08 Lacs as reflected in Form 26AS after verification, but had not allowed an additional amount claimed by the assessee for want of supporting particulars regarding the portion relating to the demerged undertaking. The Tribunal accepted the assessee's submission that it could substantiate the remaining TDS credit and accordingly directed the AO to consider the additional claim subject to the assessee furnishing adequate evidence to substantiate entitlement to that TDS credit. [Paras 3]

Assessee's ground allowed for statistical purposes; AO directed to consider the additional TDS credit upon proper substantiation.

Final Conclusion: The revenue's appeal is dismissed. The assessee's appeal is partly allowed: disallowance under section 14A shall be recomputed by the AO in accordance with the order (limited to investments yielding exempt income and adopting correct cost of investments as per books), and the AO shall consider the balance TDS claim if the assessee substantiates it.

Transaction value - related parties - rejection of declared value - procedure under Rule 12 of the Customs Valuation Rules, 2007 - acceptance of transaction value under Rule 3(3)(a) of the Customs Valuation Rules, 2007 - reasoned recording of grounds for doubt - remand for redetermination of value

Transaction value - procedure under Rule 12 of the Customs Valuation Rules, 2007 - reasoned recording of grounds for doubt - Whether the impugned orders lawfully rejected the declared transaction value without applying the procedure and reasoned communication mandated by the Customs Valuation Rules, 2007. - HELD THAT: - The Tribunal noted that the earlier SVB order dated 11.09.2007 was issued under the Customs Valuation Rules, 1988 and had validity only up to 10.09.2010; the present disputes relate to 2013-2016 when the Customs Valuation Rules, 2007 governed valuation. Rule 3(1) of the 2007 Rules makes the transaction value the primary method "subject to Rule 12", and Rule 3(3)(a) provides that transaction value between related persons shall be accepted if examination indicates the relationship did not influence the price. Rule 12 prescribes the procedure where the proper officer has reasonable doubt, including furnishing grounds to the importer and providing opportunity to be heard. The Tribunal observed that the authorities below merely followed the earlier SVB order and mechanically loaded 10% without applying the procedural safeguards and reasoned recording/communication required under Rule 12 and Section 14(1) for rejection of the declared value. Reliance on an expired SVB order and failure to give cogent reasons in the context of the 2007 Rules was held to be contrary to the statutory scheme and binding precedents emphasising the mandatory nature of communicating grounds for doubt. [Paras 5, 6]

Impugned orders set aside insofar as they reject the declared transaction value without applying Rule 12/Rule 3(3)(a) of the Customs Valuation Rules, 2007 and without reasoned communication; matter remanded for fresh adjudication.

Related parties - acceptance of transaction value under Rule 3(3)(a) of the Customs Valuation Rules, 2007 - remand for redetermination of value - Whether, in the changed factual matrix, the authorities must re-examine whether the relationship influenced price and consider the appellant's submissions (change to 100% EOU status, nature of imports, and evidence of third party sales) before determining customs value. - HELD THAT: - The Tribunal recorded that the appellant's business structure and import profile have materially changed since the earlier SVB order: manufacturing converted to 100% EOU from 2009, a predominance of imports linked to EOU operations, and only a small proportion of finished goods imports; the appellant has also placed contemporaneous third party purchase evidence. Those changed circumstances directly bear upon whether the relationship with the foreign principal influenced the price and whether transaction value approximates substitute values as envisaged in Rule 3(3)(b). Given that the prior SVB order has expired and the 2007 Rules require an examination of circumstances and comparisons (including adjustments for commercial/quantity levels), the Tribunal directed that these factual contentions be considered afresh, with an opportunity of hearing and allowance to place all submissions on record. [Paras 5, 6, 7]

Matter remanded to the original authority to re-determine transaction value in light of the Customs Valuation Rules, 2007 and the appellant's changed factual case, after giving opportunity of hearing and considering all submissions and evidence.

Final Conclusion: The impugned orders upholding a mechanical 10% loading were set aside. The matter is remitted to the original authority for fresh adjudication and redetermination of the transaction value for 2013-2016 under the Customs Valuation Rules, 2007, with reasons, adherence to Rule 12 procedures and an opportunity of hearing to the appellant.

Fe content on wet metric ton basis - application of formula for conversion of DMT to WMT - export duty liability for iron ore based on Fe percentage - remand to adjudicating authority for recomputation

Fe content on wet metric ton basis - application of formula for conversion of DMT to WMT - remand to adjudicating authority for recomputation - Assessment remitted for recomputation of 'Fe' content on WMT basis and finalisation of export duty liability. - HELD THAT: - The Tribunal found that the core controversy-whether the 'Fe' content for exported iron ore must be determined on a wet metric ton (WMT) basis by applying the recognised conversion formula-had already been considered in the Bench's earlier Final Orders and that the present appeals raise an identical issue. The lower authorities finalised assessments on a dry metric ton (DMT) basis and treated the 'Fe' content accordingly, leading to the imposition of export duty. The appellants urged that the 'Fe' content at final assessment must be arrived at on WMT by applying the conversion formula as followed in prior decisions (including the approach in V.M. Salgaocar and the Bench's prior Final Orders). Having followed the ratio of the earlier Final Order Nos. indicated in the judgment, the Tribunal did not decide the quantification on merits itself but remitted the matters to the Adjudicating Authority with a direction to apply the formula to convert DMT figures to WMT, determine the correct 'Fe' percentage on WMT and thereafter finalise the assessments and consequent export duty liability.

Matters remitted to the Adjudicating Authority to apply the conversion formula to arrive at 'Fe' content on WMT and to finalise the assessment.

Final Conclusion: Appeals disposed by remanding the matters to the Adjudicating Authority to compute the 'Fe' content on WMT applying the recognised conversion formula and to finalise the export duty assessments for the exports made in 2007-08.

Classification of goods - parts of a router - populated printed circuit boards - reclassification - exemption under Notification dated 01.03.2005 - incapacity to operate independently / proprietary compatibility

Classification of goods - parts of a router - populated printed circuit boards - reclassification - Whether the Router Line Cards imported by the appellant were correctly reclassified by the Principal Commissioner under CTI 8517 62 90, or whether the classification claimed by the appellant should be maintained. - HELD THAT: - The Tribunal examined whether the Router Line Cards are to be regarded as parts of the main equipment or as populated printed circuit boards capable of independent classification. Reliance was placed on an earlier Division Bench decision in the appellant's own case which found that the line cards are parts that cannot function independently, derive intelligence and power from the router chassis, use proprietary interfaces and are not cross compatible; on that basis the Division Bench held they are classifiable under CTI 8517 70 90 by virtue of Note 2(b) of Section XVI, and alternatively as populated PCBs under CTI 8517 70 10 (paragraphs reproduced from that decision including paras. 24 and 34). Applying that precedent, the Tribunal concluded that the Principal Commissioner's reclassification to CTI 8517 62 90 is unsustainable and the classification claimed by the appellant must be maintained. The Tribunal therefore set aside the Principal Commissioner's order rejecting the appellant's classification and confirming duty demand, confiscation and penalty insofar as it rested on the reclassification. [Paras 10, 11]

The reclassification under CTI 8517 62 90 is set aside and the classification claimed by the appellant is maintained.

Final Conclusion: Order dated 24.02.2022 of the Principal Commissioner is set aside; appeal allowed and the appellant's classification of the Router Line Cards is maintained.

Rejection of declared transaction value under Valuation Rule 12 - Re-determination of customs value under Valuation Rules 3 and 9 using Valuation Rule 10(2) - Treatment of CIF versus FOB in re-determined transaction value - Confiscation liability under section 111(m) - Penalty for short-levy by reason of suppression under Section 114A - Penalty for use of false or incorrect material under Section 114AA - Penalty for improper importation under Section 112(a)(ii) - Invocation of extended limitation period for suppression of facts

Rejection of declared transaction value under Valuation Rule 12 - Re-determination of customs value under Valuation Rules 3 and 9 using Valuation Rule 10(2) - Treatment of CIF versus FOB in re-determined transaction value - Invocation of extended limitation period for suppression of facts - Validity of rejection of declared transaction value and correctness of re-determination of assessable value and differential duty - HELD THAT: - The Tribunal held that the Commissioner had reasonable doubt as to the truth and accuracy of declared values and was justified in rejecting the transaction value under Valuation Rule 12. The Commissioner excluded Rules 4-8 on the factual finding that identical or similar goods, deductive or computed methods were not feasible, and therefore proceeded under Rule 9. The Commissioner relied on parallel invoices (excel sheets) extracted and signed by the principal operator during investigation for three Bills of Entry and adopted those values for re-determination; for 16 other Bills of Entry he applied comparable valuation reasoning where the goods and pricing indicated the same modus operandi. However, the Tribunal found no evidence that the excel-sheet figures were FOB; in absence of such evidence the benefit of doubt goes to the importer and the figures must be treated as CIF. Consequently the addition of 20% freight and 1.125% insurance under Rule 10(2) was set aside and the assessable value, duty and related penalty under Section 114A must be recomputed treating the excel-sheet figures as CIF. The Tribunal also upheld invocation of the extended period of limitation under section 28(4) on the basis of suppression of true values demonstrated by the parallel invoices produced by the operator.

Rejection under Rule 12 and re-determination under Rule 9 upheld in principle; addition of freight and insurance under Rule 10(2) set aside and values to be treated as CIF; differential duty recoverable and to be recomputed accordingly.

Confiscation liability under section 111(m) - Whether the allegedly undervalued imported goods were correctly held liable to confiscation under section 111(m) - HELD THAT: - Having found that the declared values did not correspond to the true values in respect of certain items and that mis-declaration existed, the Tribunal agreed with the Commissioner that the goods were liable for confiscation under section 111(m). The Tribunal recorded that although liability for confiscation was correctly held, the goods were not actually confiscated and no redemption fine was imposed.

Goods held liable to confiscation under section 111(m); no redemption fine imposed as goods were not available for confiscation.

Penalty for short-levy by reason of suppression under Section 114A - Penalty for use of false or incorrect material under Section 114AA - Validity and quantum of penalties imposed on the partnership firm M/s KLM Overseas - HELD THAT: - Penalty under Section 114A (mandatory penalty equal to differential duty where duty is short-levied by reason of suppression) was in principle attracted; because the Tribunal set aside the addition of freight and insurance the differential duty must be recalculated and the Section 114A penalty recomputed accordingly. Penalty under Section 114AA for knowingly making false or incorrect declarations in transactions under the Act was found to be within the statute and applicable to imports; the Tribunal upheld the imposition of Section 114AA on KLM and found the amount imposed to be fair and proper in the circumstances of the case.

Penalty under Section 114A to be recalculated in accordance with the re-determined duty; Section 114AA penalty on KLM upheld.

Penalty for improper importation under Section 112(a)(ii) - Penalty for use of false or incorrect material under Section 114AA - Validity of penalties imposed on the individual partners (Nitin and Anshul) - HELD THAT: - The Tribunal upheld the penalty under Section 112(a)(ii) imposed on Nitin and on Anshul (taking account of Nitin's active role and Anshul's limited/non-active role respectively) as appropriate. However, the Tribunal set aside the separate Section 114AA penalties imposed on each partner because there was no independent mis-declaration by either partner apart from the mis-declarations in the Bills of Entry for which Section 114AA penalty was already imposed on the firm; therefore, separate Section 114AA penalties on the partners were not sustainable.

Penalties under Section 112(a)(ii) against Nitin and Anshul upheld; Section 114AA penalties imposed on Nitin and Anshul set aside.

Final Conclusion: Appeals partly allowed. The Commissioner was right to reject declared values under Valuation Rule 12 and to re-determine value under Rule 9, and goods were liable to confiscation; however the Tribunal set aside the addition of freight and insurance and directed that the excel-sheet values be treated as CIF, directed recomputation of assessable value, differential duty and the Section 114A penalty, upheld Section 114AA penalty on the firm but set aside Section 114AA penalties on the individual partners while upholding the Section 112 penalties as modified; matter remanded to Commissioner for recomputation and consequential relief.

Appellate jurisdiction under Section 129A of the Customs Act, 1962 - appeals in respect of goods imported as baggage barred by proviso (a) to Section 129A - lack of subject matter jurisdiction renders an order a nullity - litigation policy/monetary threshold for filing appeals before the Tribunal - remand by High Court for fresh consideration

Appeals in respect of goods imported as baggage barred by proviso (a) to Section 129A - appellate jurisdiction under Section 129A of the Customs Act, 1962 - lack of subject matter jurisdiction renders an order a nullity - Maintainability of the revenue's appeal before the Appellate Tribunal in respect of gold seized from passenger baggage. - HELD THAT: - The Tribunal held that a plain reading of Section 129A (including the first proviso) shows that the Appellate Tribunal is not assigned jurisdiction to decide appeals where the order relates to goods imported as baggage. Reliance on the reasoning in Sans Frontier (as cited) supports the proposition that absence of subject matter jurisdiction makes any order a nullity and cannot be cured by consent, waiver or prior conduct. Although the High Court had earlier remanded the matter to the Tribunal and permitted all objections to be raised afresh (including issues of monetary limits and litigation policy), the Tribunal proceeded to examine maintainability and concluded that the specific bar in Section 129A applies to the present controversy concerning gold seized from personal baggage. Consequently, the appeal is not maintainable before the Tribunal despite earlier proceedings or remand directions. [Paras 5]

Appeal dismissed as not maintainable for lack of jurisdiction of the Appellate Tribunal to entertain appeals in respect of goods imported as baggage.

Final Conclusion: The Tribunal dismissed the Revenue's appeal as not maintainable under the proviso to Section 129A (appeals relating to goods imported as baggage), and disposed of the Miscellaneous Application accordingly.

Principles of natural justice - non-cooperation with regulatory authority - professional misconduct - doctrine of proportionality - judicial review of administrative discretion

Principles of natural justice - non-cooperation with regulatory authority - professional misconduct - Validity of NFRA's disciplinary proceedings and impugned order in light of alleged non-receipt of communications and claimed denial of opportunity to be heard - HELD THAT: - The Tribunal found that NFRA received a referral from SEBI and thereafter made multiple, documented attempts to obtain audit records and explanations from the appellant by letters, e-mails, telephone calls and a show-cause notice, warning that non-response would amount to non-cooperation. The appellant did not furnish any records or reply to NFRA despite repeated communications and reminders. The appellant's contention that he could not receive communications because he had relocated to Nepal and lacked access to e-mail and telephone was internally inconsistent (he also claimed to have communicated with SEBI) and was rejected as not credible. In these circumstances NFRA followed the prescribed procedure, observed the requirements of natural justice by issuing show-cause proceedings and considering material on record, and was entitled to reach conclusions on professional misconduct based on available material and SEBI's findings. The Tribunal accepted NFRA's account of steps taken and found no illegality in the impugned order arising from violation of natural justice or failure of procedure. [Paras 21, 24, 25, 28, 29]

NFRA's proceedings and the impugned order are valid; the appellant's plea of denial of natural justice and non-receipt of communications is rejected.

Doctrine of proportionality - judicial review of administrative discretion - Challenge to quantum of penalty and debarment on grounds of disproportionality - HELD THAT: - The Tribunal acknowledged that proportionality is a relevant principle when judicially reviewing penalties imposed by a statutory authority. However, the Tribunal emphasised that assessment of type and quantum of punishment lies primarily within the statutory authority's discretion and judicial interference requires genuine grounds. Given the appellant's deliberate non-cooperation, absence of any records to rebut NFRA's findings and SEBI's adverse observations about the auditor's conduct, the Tribunal found no reasonable basis to interfere with NFRA's exercise of discretion in imposing the maximum penalty and debarment. The Tribunal thus refrained from substituting its view for NFRA's in the absence of material demonstrating arbitrariness or perversity. [Paras 22, 23, 25, 27, 28]

No interference with the quantum of penalty or debarment; challenge on proportionality grounds is dismissed.

Final Conclusion: The appeal is dismissed; the impugned NFRA Order dated 5th January, 2024 imposing penalty and debarment is upheld.

Entitlement of workmen to full provident fund and gratuity - interpretation and overriding effect of clarificatory note incorporated into a resolution plan - allocation of additional employee liabilities from total financial outlay and surplus/funds earmarked for financial creditors - commercial wisdom of the committee of creditors and binding effect of approved resolution plan

Entitlement of workmen to full provident fund and gratuity - Workmen and employees are entitled to payment of full provident fund and gratuity up to the insolvency commencement date. - HELD THAT: - The Tribunal records that the parties and the Resolution Professional were ad idem on the legal entitlement of workmen to receive full provident fund and gratuity. Reliance is placed on the legal position crystallized by this Tribunal in Jet Airways that workmen are entitled to full payment of provident fund and gratuity until the insolvency commencement date. The appellate decision declares that entitlement and upholds that principle in the context of the present appeal, thereby affirming that such amounts fall within the obligations to be satisfied upon approval of a resolution plan. [Paras 8, 22, 30]

Workmen and employees are entitled to payment of full provident fund and gratuity up to the insolvency commencement date.

Interpretation and overriding effect of clarificatory note incorporated into a resolution plan - allocation of additional employee liabilities from total financial outlay and surplus/funds earmarked for financial creditors - commercial wisdom of the committee of creditors and binding effect of approved resolution plan - Clause 1(vii) of the Clarificatory Note, which was integrated into and given overriding effect over the Resolution Plan, covers provident fund and gratuity dues and prescribes their payment from the Total Financial Outlay in the order of priority stated therein. - HELD THAT: - The Tribunal examined Clause 4.5 of the Resolution Plan and Clause 1(vii) and Clause 6 of the Clarificatory Note. Clause 1(vii) was held to be wide enough to include any additional amount payable to workmen or employees by operation of law or by order of a court or tribunal, whether admitted/ crystallised/ known or unknown. Clause 6 gives the Clarificatory Note overriding effect over the Resolution Plan where inconsistent. The CoC had considered and approved the Resolution Plan read with the Clarificatory Note (Agenda Item 1 voted with 88%); the Tribunal therefore gave effect to the commercial decision of the CoC and the express terms of the Clarificatory Note rather than confining Clause 1(vii) to CIRP costs alone. Consequently, provident fund and gratuity liabilities admitted by the RP fall to be met as per the priority and funding mechanism in Clause 1(vii) (first from surplus in excess of Rs.9.37 crore and then from funds earmarked for settlement of Financial Creditors on a proportionate basis). The Tribunal rejected the CoC's submission that such liabilities must be borne solely by the Successful Resolution Applicant outside the Plan. [Paras 12, 13, 16, 18, 24]

Clause 1(vii) of the Clarificatory Note is part of the Resolution Plan and covers provident fund and gratuity dues, to be paid from the Total Financial Outlay in the priority set out in Clause 1(vii).

Assessment and inclusion of CIRP cost and wages during CIRP - The appellants' claim for unpaid salaries for the period alleged (May/June to November 2020) is not accepted and no further direction for payment is issued. - HELD THAT: - The Tribunal accepted the Resolution Professional's account that certain wages for May-June 2020 were included in the CIRP cost and that the RP is the competent authority to determine and compute CIRP costs and wages payable during the CIRP. The minutes of the 26th CoC meeting and the CIRP cost schedule were noted. The Tribunal found no material basis to direct additional payment for the period July-November 2020 as claimed by the appellants, observing that salary slips alone did not establish that employees actually worked or that unpaid salaries beyond those included in CIRP cost were due. [Paras 26, 28, 29]

Claim for unpaid salaries from July to November 2020 by the appellants is not accepted and no direction for payment is made.

Final Conclusion: The NCLAT upholds the Adjudicating Authority's approval of the Resolution Plan subject to declaration that workmen and employees are entitled to full provident fund and gratuity; the provident fund and gratuity liabilities admitted by the Resolution Professional for the Shree Gopal Unit (as quantified by the RP) shall be paid in accordance with Clause 1(vii) of the Clarificatory Note incorporated into the Resolution Plan; the appellants' separate claim for additional salary for the asserted period is rejected and no other relief is granted.

Restoration of company petition - admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 - effect of settlement and memo of withdrawal with liberty to revive - pre-existing dispute - forfeiture of right to file reply - operational debt arising from settlement breach

Restoration of company petition - effect of settlement and memo of withdrawal with liberty to revive - Restoration of the Company Petition was validly allowed and remained unchallenged. - HELD THAT: - The Tribunal had earlier dismissed C.P.(IB) No. 373/MB-IV/2021 as not pressed pursuant to a memo of withdrawal recorded on 03.01.2023 which referred to a settlement agreement dated 13.12.2022 and expressly reserved liberty to revive the petition in the event of default. The Operational Creditor applied to restore the petition when the Corporate Debtor defaulted on the payment schedule, and the Adjudicating Authority allowed restoration on 06.02.2024. That restoration order was not appealed by the Corporate Debtor and became final. The Appellate Tribunal therefore treated the restoration as properly made and binding on the parties. [Paras 6, 12]

Restoration allowed by the Tribunal was valid and unchallenged.

Admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 - forfeiture of right to file reply - pre-existing dispute - Admission of the Section 9 application and appointment of the Interim Resolution Professional were justified. - HELD THAT: - After restoration, the Corporate Debtor did not file a reply and the Tribunal forfeited its right to do so. The Adjudicating Authority found that pursuant to the settlement deed the Corporate Debtor had admitted liability and had made only part payment; the outstanding liability exceeded the statutory threshold under Section 4 of the Code and there was no pre-existing dispute between the parties. On these findings the Tribunal admitted the Section 9 application, appointed an IRP and imposed the moratorium. The Appellate Tribunal held that, on the record of admitted debt, partial payment and continued default, admission was proper. [Paras 7, 12]

The Section 9 application was rightly admitted and an IRP appointed.

Operational debt arising from settlement breach - effect of settlement and memo of withdrawal with liberty to revive - A settlement followed by breach does not bar the Operational Creditor from pursuing insolvency proceedings for the unpaid operational debt. - HELD THAT: - The Corporate Debtor's contention that the settlement amount could not be claimed was rejected. The Tribunal and the Appellate Bench noted that where a settlement is entered into and the Corporate Debtor defaults in payment, the Operational Creditor remains entitled to revive and prosecute the claim for the unpaid operational debt. The Court cited precedent and observed that allowing a Corporate Debtor to escape liability after making partial payments and then defaulting would encourage abuse; hence the plea that settlement bars the claim was held to be without merit. [Paras 12, 13]

Breach of a settlement does not preclude the Operational Creditor from claiming the unpaid operational debt and seeking insolvency proceedings.

Final Conclusion: The appeal is dismissed for lack of merit; the Tribunal's restoration of the petition, admission under Section 9, appointment of the IRP and the conclusion that no pre existing dispute existed were upheld, and the challenge that the settlement barred the claim was rejected.

Admission of claim in CIRP - provisional vs final admission of creditors' claims - calculation of voting share under Regulation 16A(7) of the IBBI Regulations, 2016 - admission of employee claims (salary and leave encashment) - duty of Resolution Professional to communicate final admission

Admission of claim in CIRP - provisional vs final admission of creditors' claims - calculation of voting share under Regulation 16A(7) of the IBBI Regulations, 2016 - Whether the appellant's monetary claims were finally admitted in the CIRP and whether the appeal warrants interference - HELD THAT: - The Tribunal noted the Resolution Professional's stand in Para (V)(1) of the reply that the appellant's claim filed under Form CA for principal and interest was received and that the entire principal amount of Rs.50,00,000/- has been admitted, with interest for the purpose of calculation of voting shares admitted at 8% as per Regulation 16A(7) of the IBBI Regulations, 2016. The Adjudicating Authority's order had recorded provisional admission figures, but the Resolution Professional's subsequent statement confirmed final admission of the principal and the admitted interest-rate treatment for voting. Given that a substantial part of the appellant's claim has been admitted in the CIRP and in view of the Resolution Professional's declaration of admission, the Tribunal found no reason to interfere with the impugned order and dismissed the challenge to the admission of the monetary claim.

The appeal is not entertained on merits as the principal claim of Rs.50,00,000/- and interest for voting share calculation at 8% have been treated as admitted by the Resolution Professional; no interference is warranted.

Admission of employee claims (salary and leave encashment) - admission of claim in CIRP - Whether the appellant's claim as an employee for salary and leave encashment was admitted - HELD THAT: - The Tribunal recorded that the Resolution Professional admitted an amount of Rs.10,72,556/- towards salary based on the documents submitted by the appellant and the limited information available to the Resolution Professional. The Adjudicating Authority had noted admitted amounts; the Tribunal observed that the admitted employee claim formed part of the admitted claims in the CIRP and, on that basis, found no justification to disturb the admission.

The admitted employee claim of Rs.10,72,556/- towards salary stands affirmed and is not disturbed.

Duty of Resolution Professional to communicate final admission - Whether the Resolution Professional should communicate the final admission to the appellant - HELD THAT: - Although the Resolution Professional had recorded admission of amounts in its reply, the Tribunal observed that the appellant ought to be formally informed of the final admission. For transparency and procedural propriety in the CIRP process, the Tribunal directed the Resolution Professional to send communication to the appellant regarding the final admission of the claim amounts.

The Resolution Professional is directed to communicate to the appellant the final admission of the claim.

Final Conclusion: The appeal is disposed of by recording the Resolution Professional's admission of the principal amount and interest for voting purposes and the admitted employee salary claim; the Tribunal declines to interfere with the Adjudicating Authority's order and directs the Resolution Professional to communicate the final admission to the appellant.

Condonation of delay - computation of limitation from date of pronouncement of order, not date of knowledge/uploading - sufficient cause for extension of time - exclusion of time spent in obtaining certified copy under Section 12 of the Limitation Act, 1963 - maintainability of appeal under Section 61(1) of the Insolvency and Bankruptcy Code, 2016

Computation of limitation from date of pronouncement of order, not date of knowledge/uploading - condonation of delay - sufficient cause for extension of time - Whether the delay in filing the appeal could be condoned and the period of limitation computed from the date the impugned order was uploaded or otherwise excluded - HELD THAT: - The Tribunal recorded that the impugned order was pronounced in open court on 02.03.2022 and that the appellant was present when the operative order was pronounced. In view of the Supreme Court's decision in V. Nagarajan, limitation runs from the date of pronouncement of the order and not from the date of knowledge or uploading; the appellant's primary plea that limitation should be computed from the date of uploading (14.03.2022) therefore failed. The appellant subsequently sought to invoke exclusion under Section 12 of the Limitation Act by alleging that a certified copy was applied for and obtained but misdelivered and misplaced; the Tribunal found this explanation to be a belated and fabricated account, noting that had such facts existed they ought to have been pleaded in the original application. Applying the requirement that delay be shown to arise from a sufficient cause (and not merely on equitable grounds) as indicated by the Tribunal's reliance on Lingeswaran, the appellant's explanations were held not to constitute sufficient cause. Accordingly, the application for condonation of delay was dismissed as devoid of merit. [Paras 13, 14, 15, 16]

Application for condonation of delay dismissed for want of sufficient cause; limitation to be reckoned from date of pronouncement of the order.

Maintainability of appeal under Section 61(1) of the Insolvency and Bankruptcy Code, 2016 - appeal not duly constituted - Whether the appeal could proceed after dismissal of the condonation application - HELD THAT: - The Tribunal observed that because the application for condonation of delay was dismissed, the appeal was not filed within the prescribed time and hence was not duly constituted. No separate merit determination of the appeal was undertaken because maintainability was defeated by the rejected condonation plea.

Appeal dismissed as not duly constituted.

Final Conclusion: The application for condonation of delay was dismissed for failure to show sufficient cause and, consequently, the appeal was dismissed as not duly constituted.

Excess payment of service tax against alleged short payment - Service tax on advances for taxable service - Taxability of reimbursable expenses

Excess payment of service tax against alleged short payment - Reconciliation of tax liability - The demand raised on the ground of short payment of service tax was sustainable despite the reconciliation showing excess payment by the assessee. - HELD THAT: - The Tribunal found from the reconciliation statement produced by the assessee that, as against the alleged short payment, the assessee had in fact paid service tax in excess. Since the excess payment covered the amount demanded, the basis for sustaining the short-payment demand did not survive. On that footing, the demand was held to be not payable and the penalty linked to that demand was also held to be unsustainable. [Paras 5, 8]

The demand on account of alleged short payment was set aside and no penalty was imposable on the assessee.

Service tax on advances for taxable service - Taxability of reimbursable expenses - The Revenue's challenge to dropping the demand on advances received for Customs House Agent service and on reimbursable expenses was sustainable. - HELD THAT: - The Tribunal held that the assessee had subsequently discharged service tax on the advances received for Customs House Agent service. It further held that service tax was not payable on reimbursable expenses, following Union of India Vs Intercontinental Consultants & Technocrats Private Limited . On these findings, the order dropping those demands called for no interference. [Paras 6, 7]

The Revenue's appeal was dismissed.

Final Conclusion: The assessee's appeal was allowed as the alleged short-payment demand was neutralised by excess payment shown in the reconciliation, and the related penalty was also set aside. The Revenue's appeal was dismissed since tax on advances had already been paid and reimbursable expenses were held not taxable.

Business Support Services - service tax on cinema owners' share of Net Box Office collections - unincorporated joint venture - criteria for emergence of a joint venture - principal-to-principal arrangement

Business Support Services - service tax on cinema owners' share of Net Box Office collections - unincorporated joint venture - principal-to-principal arrangement - Demand of service tax under the category of Business Support Services qua the assessee's share of Net Box Office collections is not exigible; the allegation of an unincorporated joint venture between the assessee and film distributors is unfounded. - HELD THAT: - The Tribunal's earlier detailed analysis, accepted by the Appellate Tribunal, establishes that the agreements between the cinema owner (assessee) and distributors are licences/assignments of copyright to exhibit films and not agreements to form a joint venture. Applying cumulative indicators of a joint venture, the records show absence of joint ownership or control of the theatre, absence of shared responsibility for losses, absence of mutual accountability in management, and no intention to create a new enterprise. The distributor merely grants a licence to screen and receives a share of collections as consideration; it does not control screening, bear operational risks, or share business liabilities. Recognition of gross ticket receipts and booking of amounts paid to distributors as film hire expense in the assessee's accounts further support that the transaction is on a principal-to-principal basis. In light of authoritative precedents relied upon by the Tribunal and the absence of any contrary binding decision, no service tax can be levied on the cinema owner's share of Net Box Office collections and the demand under Business Support Services is unsustainable. [Paras 4]

Order-in-Appeal dated 11.10.2019 upheld; Revenue's appeal dismissed and demand under Business Support Services set aside insofar as it relates to the assessee's share of Net Box Office collections.

Final Conclusion: The Appellate Tribunal affirms the view that the arrangement between the cinema owner and distributors does not create an unincorporated joint venture and that the cinema owner's share of Net Box Office collections is not exigible to service tax; the Revenue's appeal is dismissed.

Requirement of corroborative evidence for sustaining demand based on confessional statements/computer printouts - confessional statement not being conclusive and not to be sole basis for adjudication - application of ratio from clandestine removal jurisprudence to establish need for tangible corroboration - service tax liability not to be confirmed without ascertainment of nature of miscellaneous income - exemption on room rent where declared tariff is below the notified threshold - invocation of extended period and penalty for suppression by maintaining two sets of accounts

Requirement of corroborative evidence for sustaining demand based on confessional statements/computer printouts - confessional statement not being conclusive and not to be sole basis for adjudication - Whether the demand of Service Tax against the respondent could be sustained solely on the basis of computer printouts and statements of the accountant without independent corroborative evidence - HELD THAT: - The Tribunal upheld the Appellate Authority's finding that the demand founded on tally data and the accountant's statement lacked independent corroboration linking the figures in the separate set of accounts to taxable services provided by the respondent. The appellate authority had applied established precedent that, while admissions or confessional statements may initiate investigations, they are not conclusive and cannot alone sustain a demand in the absence of tangible, corroborative evidence (such as parallel invoices, party-wise ledgers, confirmation from service recipients, payment trails or other independent material). The Tribunal observed that the Commissioner (Appeals) correctly applied this ratio and there was no perversity shown in his appreciation of the records. Consequently the demand premised solely upon the retrieved computer printouts and the accountant's statement could not be confirmed. [Paras 4]

Demand could not be sustained because there was no corroborative evidence independent of the accountant's statement and computer printouts.

Application of ratio from clandestine removal jurisprudence to establish need for tangible corroboration - Whether the ratio of cases concerning clandestine manufacture/clearance of excisable goods was appropriately applied by the Commissioner (Appeals) in evaluating the sufficiency of evidence in a service-tax assessment - HELD THAT: - The Tribunal found that the Commissioner (Appeals) relied on the legal principle from clandestine removal cases that allegations supported only by confessional material must be buttressed by affirmative, direct and tangible evidence before a demand can be sustained. The Tribunal held that this is a principle of evidentiary assessment - that an admission or statement is a starting point but not conclusive - and that its adoption was legitimate despite the original cases addressing goods. The Appellate Authority's focus on absence of corroboration was therefore a valid application of the ratio decidendi, and the Revenue did not demonstrate that the Commissioner (Appeals) erred in law or fact in applying that principle here. [Paras 4]

The ratio from clandestine removal jurisprudence was properly applied to require tangible corroboration and its application was justified.

Service tax liability not to be confirmed without ascertainment of nature of miscellaneous income - exemption on room rent where declared tariff is below the notified threshold - Whether the adjudicating authority properly confirmed service-tax demand on miscellaneous income and on room rents and related heads without ascertaining the nature of the income or giving regard to available exemptions and VAT payment - HELD THAT: - The Commissioner (Appeals) held that the adjudicating authority confirmed demands in respect of miscellaneous income and certain heads (room rent, catering/food/bar/wine sales) without first ascertaining whether those receipts represented taxable services or were covered by exemptions or subject to VAT. The Tribunal agreed that the adjudicating authority had not examined whether the miscellaneous receipts constituted taxable services, had not taken into account that VAT had been paid on certain sales (with the consequence that Service Tax cannot be levied on the same portion), nor had it considered abatement where composite supply required it. In consequence, the Tribunal found the confirmed demands unsupported by credible and sustainable evidence or analysis of the legal position on exemptions/VAT. [Paras 4]

Demands on miscellaneous income and on certain sales/room rents were not sustainable because the nature of income and applicable exemptions/abatements or VAT treatment were not properly ascertained.

Final Conclusion: Revenue's appeal is dismissed. The Appellate Authority correctly set aside the original demand where it lacked independent corroboration beyond accountant statements and computer printouts, and where the adjudicating authority failed to ascertain the nature of receipts and consider applicable exemptions and VAT treatment.

Transitional refund under Section 142(3) of the CGST Act, 2017 - repeal and savings protection of accrued rights under Section 174(2) of the CGST Act, 2017 - entitlement to refund of CENVAT/service tax credit paid under Reverse Charge Mechanism - voluntariness of tax payment as not barring refund

Transitional refund under Section 142(3) of the CGST Act, 2017 - repeal and savings protection of accrued rights under Section 174(2) of the CGST Act, 2017 - entitlement to refund of CENVAT/service tax credit paid under Reverse Charge Mechanism - Refund claim of service tax/CENVAT credit paid under RCM for June 2017 is admissible and payable in cash under transitional provisions despite migration to GST and non-availability as input tax credit under GST. - HELD THAT: - The Tribunal found that the Appellant had paid service tax under reverse charge for services of June 2017 albeit the payments were made after 1.7.2017. Section 174(2) preserves rights and liabilities accrued under the repealed enactments, and Section 142(3) requires refund claims of amounts paid under the existing law to be disposed of under the erstwhile law and any amount eventually accruing to be paid in cash. The adjudicating authority's reliance on non-availability of credit under GST does not negate the vested right to refund of CENVAT/service tax credit accrued under the earlier law. As there was no allegation that the credit itself was ineligible, the claim fell squarely within the transitional mechanism and was required to be refunded in cash. [Paras 5, 8, 10, 11, 12]

Claim for refund of the service tax/CENVAT credit paid in respect of June, 2017 is allowable and must be processed under Section 142(3) and paid in cash.

Voluntariness of tax payment as not barring refund - protection of accrued substantive rights against procedural impediments - Voluntary and delayed payment of service tax by the assessee does not disentitle the assessee from claiming refund of the corresponding credit under the transitional provisions. - HELD THAT: - The Tribunal noted that the Appellant had voluntarily paid the service tax (with interest) under self-assessment and there was acceptance of liability by the Department. The adjudicating authority's view that voluntary payment precludes refund was found to be unfair and unsupported. Reliance on authorities recognizing that transitional credit is a vested right that cannot be defeated on procedural or technical grounds reinforces that voluntariness of payment does not bar refund where the substantive right to credit exists and the claim falls under Section 142(3). [Paras 7, 8, 13]

Rejection of refund on the ground of voluntariness of payment is unsustainable; refund claim cannot be denied for that reason.

Final Conclusion: The impugned order rejecting the refund claim is set aside; the appeal is allowed and the refund of service tax/CENVAT credit paid for June, 2017 under RCM is to be processed under Section 142(3) of the CGST Act, 2017 and paid in cash, with consequential relief.

Interest free maintenance security / sinking fund - Taxability of security deposits - Management, maintenance and repair services - Service tax on sale of flats during construction - Precedential value of Tribunal decisions - Interest and penalty

Interest free maintenance security / sinking fund - Taxability of security deposits - Management, maintenance and repair services - Precedential value of Tribunal decisions - Collection described as sinking fund/interest free maintenance security from flat purchasers is not liable to service tax as consideration for management, maintenance or repair services. - HELD THAT: - The Tribunal applied its consistent precedent holding that one time deposits collected as security for future maintenance (IFMS / sinking fund) are refundable under the contractual terms and constitute security deposits rather than consideration for provision of management, maintenance or repair services. Reliance was placed on the Tribunal decision in Kumar Beheray Rathi v. CCE (affirmed by the High Court) and subsequent decisions of this Bench including KDP Infrastructure (Pvt.) Ltd., which held that such amounts are not taxable. The Bench found those precedents controlling and, in absence of any statutory requirement under the UP law compelling the appellant to collect such sums on behalf of an RWA, there was no reason to adopt a different view. Accordingly the demand framed in the impugned notices in respect of the sinking fund/IFMS was set aside. [Paras 6]

Demand of Rs.2,78,015/- in respect of sinking fund/IFMS set aside.

Interest and penalty - Precedential value of Tribunal decisions - Corresponding interest and penalty attached to the set aside demand are also set aside. - HELD THAT: - Because the substantive demands in respect of the sinking fund/IFMS were set aside on merits by reference to binding Tribunal precedent, the Tribunal also annulled the consequential interest and penalty imposed by the lower authorities. The Bench declined to decide limitation issues since the demands were disposed of on merits. [Paras 7]

Interest and penalty corresponding to the set aside demands are set aside; aspect of limitation not adjudicated.

Final Conclusion: The appeal is allowed: demands confirmed by the lower authorities for sinking fund/IFMS for the specified periods are quashed and the related interest and penalty are set aside, with consequential relief.

CENVAT credit on goods transport agency services - place of removal - FOR (Freight on Road) contracts - assessable value inclusion of freight and insurance - input service - scheme of CENVAT credit and anti-cascading principle

CENVAT credit on goods transport agency services - assessable value inclusion of freight and insurance - place of removal - scheme of CENVAT credit and anti-cascading principle - Entitlement to CENVAT credit of tax paid on transportation services for delivery to buyer's premises when freight and insurance were not included in assessable value for central excise duty. - HELD THAT: - The Court noted that where a contract is on FOR basis the place of removal may, in appropriate factual circumstances, be the buyer's premises and, if transportation costs are included in assessable value, the amounts paid to goods transport agencies could be regarded as relating to an input service eligible for CENVAT credit. However, in the present case it is admitted that the appellant did not include freight and insurance in the assessable value for payment of Central Excise duty. Given that factual position, the Court held that the appellant cannot claim CENVAT credit for transportation services availed beyond the place of removal. Allowing such credit despite non-inclusion would be contrary to the scheme of CENVAT credit, which is intended to prevent cascading of tax and ultimate burden on the consumer. The Tribunal's conclusion rejecting the appellant's claim was therefore sustained.

Claim for CENVAT credit on goods transport agency services denied because freight and insurance were not included in assessable value; Tribunal's order upheld.

Final Conclusion: Appeals dismissed; Tribunal's rejection of the appellant's claim for CENVAT credit on transportation services upheld because the appellant did not include freight and insurance in the assessable value for central excise duty.

Clandestine removal of excisable goods - retracted confessional statements - requirement of corroborative evidence for clandestine clearance - cross-examination under Section 9D - admissibility of computer-generated records under Section 36B - joint and several liability of separately registered excise units

Clandestine removal of excisable goods - requirement of corroborative evidence for clandestine clearance - Adjudged demand for clandestine clearance of branded tobacco was not sustained for lack of corroborative documentary evidence. - HELD THAT: - Tribunal found that the department's case rested largely on confessional statements which had been subsequently retracted and on computer-generated worksheets and Lorry Receipts that did not specifically describe the goods as the branded product. In absence of independent documentary proof of procurement of printed packing material or incontrovertible source documents linking removals to the branded product, the reliance on uncorroborated confessions and data-entry worksheets was insufficient to sustain a charge of clandestine removal. The adjudication cannot travel beyond the allegations and material in the SCN; inconclusive or uninvestigated allegations of diversion could not support the heavy duty demand. [Paras 10]

Demand for clandestine clearance set aside for want of corroborative evidence.

Retracted confessional statements - cross-examination under Section 9D - Statements recorded during investigation lost evidentiary value where cross-examination under Section 9D was not afforded and several statements were validly retracted. - HELD THAT: - The Tribunal held that where witnesses whose statements were relied upon were not afforded the opportunity of cross-examination as mandated, those statements cannot be allowed to form the sole basis for confirming demands. Several recorded statements had been retracted; in particular three retraction affidavits made immediately after recording of statements were accepted as genuine and, taken together with other retractions, amounted to retraction of the confessional narrative. Stand alone confessional statements, uncorroborated by independent evidence, cannot sustain the allegation of clandestine removals. [Paras 10]

Statements refused evidential weight; failure to allow cross-examination rendered them inadmissible as sole basis for demand.

Admissibility of computer-generated records under Section 36B - Computer-generated worksheets and printouts supplied by municipal authorities were not admissible evidence in absence of compliance with Section 36B. - HELD THAT: - The Tribunal observed that the department relied on tabular worksheets provided by municipal authorities to identify removals into municipal limits, but did not produce the source octroi slips nor comply with the statutory certification procedure prescribed by Section 36B. Reliance on such printouts, without the required certificate and without original source documents, could not constitute reliable evidence of clandestine clearance of the branded product. [Paras 10]

Worksheets/printouts not admissible; could not support the confirmed demand.

Joint and several liability of separately registered excise units - Demand confirmed jointly and severally against four separately registered units could not be sustained where the charge related to goods allegedly manufactured by a particular unit and documentary proof was lacking. - HELD THAT: - The Tribunal noted that the four units had separate registrations, filed separate returns and were separately audited. Duty can be demanded only in respect of goods manufactured by a particular manufacturer/unit. The adjudication cannot expand the case beyond the SCN or treat distinct registered manufacturers as jointly and severally liable in absence of material showing culpable involvement of each unit. Consequently, confirmation of a collective demand against all units was unsustainable once the foundational allegation of clandestine clearance failed. [Paras 7, 10]

Collective confirmation of demand against separately registered units set aside.

Requirement of corroborative evidence for clandestine clearance - Penalties and consequential orders founded on the unsustained clandestine clearance finding were liable to be set aside. - HELD THAT: - Because the principal finding of clandestine clearance could not be upheld for want of corroboration and admissible evidence, all consequential demands, interest and penalties imposed on the appellants that flowed from that finding could not stand. The Tribunal therefore quashed the confirmed demands and the penalties imposed in the impugned order. [Paras 10, 11]

Confirmed duty demand, interest and penalties set aside; appeals allowed.

Final Conclusion: On the facts and materials before it the Tribunal held that the department failed to establish clandestine clearance of the branded tobacco by admissible and corroborative evidence; retracted confessional statements and un certified computer printouts could not sustain the demand; cross examination requests were not afforded and those statements thus lost evidentiary value; consequently the adjudged demand, interest and penalties were set aside and the appeals allowed for the period covered by the SCN (June, 2008 to August, 2012).

Eligibility of Cenvat Credit on inputs - eligibility of Cenvat Credit on input services - definition of 'input' and 'input service' under CENVAT Credit Rules, 2004 - exclusion of construction, laying of foundation and making of structures for support of capital goods from input/input services - one-to-one invoice-wise correlation not required for claiming Cenvat credit - penalty under Section 11AC(1)(c) read with Rule 15(2) of the Cenvat Credit Rules

Eligibility of Cenvat Credit on inputs - definition of 'input' under CENVAT Credit Rules, 2004 - exclusion of construction, laying of foundation and making of structures for support of capital goods from input - Denial of Cenvat credit on inputs used for laying foundations or making support structures for capital goods - HELD THAT: - The Tribunal upheld the Commissioner's disallowance of credit on inputs where the materials were used for laying foundations or making support structures for capital goods, because the revised definitions of 'input' and 'capital goods' in the CENVAT Credit Rules, 2004 expressly exclude goods used for construction or laying of foundation or making of structures for support of capital goods. The assessee's contention that such goods were directly or indirectly used in manufacture was rejected insofar as those goods fall within the express exclusion in the definition of 'input'. [Paras 4]

Denial of Cenvat credit on such inputs upheld.

Eligibility of Cenvat Credit on input services - definition of 'input service' under CENVAT Credit Rules, 2004 - exclusion of construction, laying of foundation and making of structures for support of capital goods from input services - Denial of Cenvat credit for Earth Excavation Works and similar civil works characterised as construction/laying of foundation - HELD THAT: - Invoices described as 'Earth Work' and other civil works were held to be in the nature of construction and laying of foundation, which are specifically excluded from the definition of 'input service' for the relevant period (post 01.04.2011). The Tribunal found the Commissioner was correct in denying credit on those invoices because the exclusion in the 'input service' definition applies to services used for construction or laying foundations or making structures for support of capital goods. [Paras 4]

Denial of Cenvat credit on Earth Excavation and similar civil works upheld.

Eligibility of Cenvat Credit on input services - erection and commissioning/fabrication services - exclusion of services for laying foundation or making support structures from input services - Denial of Cenvat credit for portions of erection, commissioning and fabrication services relating to foundations/support structures - HELD THAT: - The Commissioner denied a specified amount attributable to erection/commissioning and fabrication where the services related to laying foundations or making support structures for capital goods. The Tribunal accepted that services of fabrication and erection which amount to laying foundation or making support structures are excluded from 'input service' and therefore not eligible. Amounts not disputed by the assessee were also noted as accepted and paid. [Paras 4]

Denial of Cenvat credit for the excluded portion of erection/installation/fabrication services upheld.

Eligibility of Cenvat Credit on input services - painting and road works as construction-related services - exclusion of construction services from input services - Denial of Cenvat credit for painting of structures and road works carried out as part of civil construction - HELD THAT: - Since painting charges related to structural/civil works and road works inside the factory are connected to construction of civil structures, they fall within the exclusion of 'input services' post 01.04.2011. The Board's clarifications were considered but did not alter the application of the exclusion to payments connected to construction or civil works. [Paras 4]

Denial of Cenvat credit on painting and road works upheld.

Eligibility of Cenvat Credit on inputs - Board Circular No. 943/4/2011-CX - goods used in office within factory as inputs - Allowance of Cenvat credit on office furniture used in an office within the factory - HELD THAT: - Relying on the Board's Circular No. 943/4/2011-CX, which clarifies that goods used in an office within the factory are goods used in relation to the manufacturing business and credit is allowed unless specifically denied, the Tribunal allowed credit for office furniture used within the factory premises. The Commissioner's denial on this item was reversed. [Paras 4, 5]

Cenvat credit on office furniture allowed.

One-to-one invoice-wise correlation not required for claiming Cenvat credit - eligibility of Cenvat Credit on structural steel used in plant - Allowance of Cenvat credit on structural steel and related items as held by the Commissioner; Department's appeal dismissed - HELD THAT: - The Commissioner had verified records, relied on Chartered Engineer certificates and on-site verification to conclude that a substantial quantity of structural steel was used within the factory for manufacturing plant and technological structures, satisfying the definition of 'input'. The Range Officer's observation that invoice-wise one-to-one correlation was not possible did not invalidate the finding because the Cenvat Credit Rules do not require strict invoice-wise correlation; it suffices that the goods/services are shown to be used in the factory and satisfy the definitions. The Tribunal found the Commissioner's factual findings credible and not displaced by the department's objections. [Paras 6]

Cenvat credit as allowed by the Commissioner on structural steel and related items upheld; Revenue's appeal dismissed.

Penalty under Section 11AC(1)(c) read with Rule 15(2) of the Cenvat Credit Rules - timely payment and penalty sustainability - Sustainability of penalty imposed under Section 11AC(1)(c) read with Rule 15(2) where amount, interest and 25% penalty were paid within 30 days - HELD THAT: - The Tribunal noted that the assessee had paid the entire disallowed amount with interest and 25% of the demand as penalty within 30 days of the order. Applying Maruti Suzuki Ltd. (as relied upon) and principles relevant to condonation of extended period and penalty imposition, the Tribunal held that the penalty under Section 11AC could not be sustained where the prescribed payment was made within the stipulated 30-day period, and therefore set aside the penalty to the extent indicated. [Paras 4, 5]

Penalty under Section 11AC(1)(c)/Rule 15(2) not sustainable and set aside insofar as payment was made within 30 days.

Final Conclusion: For the period August 2010 to March 2015 the Tribunal upheld the Commissioner's denial of Cenvat credit for inputs and input services that fall within the express exclusions for construction, laying of foundations and support structures, allowed credit for office furniture relied on Board Circular No.943/4/2011-CX, sustained the Commissioner's allowance of credit on structural steel and related items after verification (dismissing the Revenue's appeal), and held the penalty under Section 11AC(1)(c) read with Rule 15(2) unsustainable where the disallowed amount, interest and 25% penalty were paid within 30 days.

Computation of limitation from date of information under Section 11A(3) - invocation of extended period of limitation under Section 11A(4) - availability of CENVAT credit on strength of photocopy of bill of entry - technical procedural lapse versus substantive loss to Revenue - penalty liability of the assessee and authorised signatory under Central Excise/CENVAT rules

Computation of limitation from date of information under Section 11A(3) - invocation of extended period of limitation under Section 11A(4) - Whether the demand for amounts already reversed/deposited and reported to authorities is barred by limitation and not maintainable by invoking the extended period. - HELD THAT: - The Tribunal held that where the assessee had reversed/deposited amounts and informed the Central Excise Officer in terms of sub-section (2), the one year period for issuing a notice under sub-section (3) is to be computed from receipt of that information. Consequently, amounts reported earlier could not be subjected to demand by invoking the extended period under sub-section (4). The impugned order's invocation of the extended period in respect of the amounts already deposited and communicated was therefore without merit and had to be set aside. [Paras 4]

Demand in respect of amounts deposited and informed to authorities is barred by limitation and set aside.

Availability of CENVAT credit on strength of photocopy of bill of entry - technical procedural lapse versus substantive loss to Revenue - Whether denial of CENVAT credit on the ground that originals of bill of entries were not produced (only photocopies produced) justified invocation of the extended period and sustained demand. - HELD THAT: - The Tribunal observed that the denial rested on a procedural default - non production of original bills of entry - which the impugned order itself characterised as a technical lapse. Applying precedent that credit cannot be denied on mere procedural grounds where no loss to revenue is shown, the Tribunal found that such a technical lapse did not attract the extended period under Section 11A(4). Accordingly, the demand relating to the balance amount on this ground was set aside. [Paras 4]

Demand based on non production of original bills (photocopy produced) is not sustainble by extended limitation and is set aside.

Penalty liability of the assessee and authorised signatory under Central Excise/CENVAT rules - Whether penalties imposed on the company and on the authorised signatory survive once the underlying demands are set aside. - HELD THAT: - Since the Tribunal set aside the demands-partly because amounts had been deposited and reported and partly because the irregularity was a technical lapse not attracting extended limitation-the consequential penalties imposed on the assessee and the authorised signatory were also set aside. The impugned order imposing penalties therefore lacked grounding once the demand was quashed. [Paras 4]

Penalties on the company and authorised signatory set aside.

Final Conclusion: Both appeals allowed; the Tribunal set aside the demand insofar as it was time barred or rested on a mere technical non production of originals, and consequently quashed the penalties imposed on the company and its authorised signatory.

Personal penalty - Co-noticee liability - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) - Preclusive effect of settlement - Settlement effect on connected appeals - Reliance on Tribunal precedents

Personal penalty - Co-noticee liability - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) - Preclusive effect of settlement - Penalty imposed on a co-noticee arising out of the same Order-in-Original cannot be sustained where the main noticee's liability under that order has been settled under SVLDRS, 2019. - HELD THAT: - The Tribunal held that once the main appeal arising out of an Order-in-Original is settled under the SVLDRS, 2019, appeals by co-noticees challenging only the personal penalty arising from the same order cannot be maintained. The bench relied on earlier Tribunal decisions treating settlement under SVLDRS as having a preclusive effect on connected proceedings, including the Tribunal's own orders in related matters such as Shri S. Bharat Reddy, MD, M/s. British Nutritions Pvt. Ltd. and the decisions following JPFL Films Private Limited & Others Vs. CCE, Ludhiana [2023(12) TMI 304 CESTAT CHANDIGARH], and Shri Raghavendra , which established that where the principal liability has been resolved under SVLDRS the incidental personal penalties arising from the same adjudication cannot survive. The Revenue's authorised representative conceded that the issue is covered by those decisions. Applying that precedent, the Tribunal found the appeal against the personal penalty unsustainable and allowed the appeal. [Paras 6, 7]

Appeal allowed; the personal penalty on the co-noticee set aside because the main noticee's liability under the same Order-in-Original has been settled under SVLDRS, 2019.

Final Conclusion: The Tribunal allowed the appeal and set aside the personal penalty imposed on the co-noticee, holding that where the main noticee's liability under the same adjudication has been settled under SVLDRS, 2019, connected appeals against personal penalties are unsustainable.

CENVAT credit reversal on removal of capital goods - transaction value as basis for duty on sale of used capital goods - application and interpretation of Rule 3(5A) of the Cenvat Credit Rules, 2004 - verification of eligibility of CENVAT credit on capital goods

Transaction value as basis for duty on sale of used capital goods - application and interpretation of Rule 3(5A) of the Cenvat Credit Rules, 2004 - Whether the expression "transaction value" in Rule 3(5A) applies to sales of used capital goods even if the seller did not manufacture those goods - HELD THAT: - The Tribunal found that the Commissioner (Appeals) misread Rule 3(5A). A plain reading shows that "transaction value" denotes the price paid by one person to another for goods sold; therefore a transaction value exists where the respondent sold used capital goods, regardless of whether the respondent was the original manufacturer. The Commissioner (Appeals) erred in equating "transaction value" with "assessable value" only for goods manufactured by the seller and in holding that the concept did not apply where the respondent had not manufactured the goods. The Tribunal accordingly held that Rule 3(5A) contemplates use of the transaction value when the calculated amount after depreciation is less than duty leviable on transaction value, and that a transaction value is available upon sale of the used capital goods. [Paras 7]

The Commissioner (Appeals)'s conclusion that "transaction value" did not apply to goods not manufactured by the respondent is rejected.

CENVAT credit reversal on removal of capital goods - verification of eligibility of CENVAT credit on capital goods - Whether the demand under Rule 3(5A) is sustainable in respect of the goods actually on which the respondent had taken CENVAT credit - HELD THAT: - The Tribunal accepted the respondent's contention that some goods sold may not have attracted capital goods CENVAT credit during the relevant period. Where no CENVAT credit was taken on particular goods, Rule 3(5A) cannot operate to demand reversal for those goods. Given this factual and legal overlap, the Tribunal found it appropriate to remit the matter to the Commissioner (Appeals) to examine, for the relevant period, (a) the correct application of Rule 3(5A) as it stood during the dates of clearance, and (b) which of the capital goods sold were actually subject to CENVAT credit and the correct value for such goods for the purposes of computation under Rule 3(5A). The remand is for fresh adjudication taking into account the respondent's submissions and the legal provisions applicable during the relevant period. [Paras 8, 9, 10]

The matter is remanded to the Commissioner (Appeals) for fresh consideration of applicability of Rule 3(5A) during the relevant period and verification of which sold goods had CENVAT credit and their value.

Final Conclusion: The Revenue appeal is allowed; the impugned order is set aside and the matter is remanded to the Commissioner (Appeals) to decide afresh the applicability and computation under Rule 3(5A) for the relevant period and to verify which capital goods attracted CENVAT credit, after considering the respondent's submissions.

Cenvat credit on Goods Transport Agency (GTA) services - definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 - place of removal - outward transportation upto the place of removal - FOR destination/Free on Road sales - transfer of ownership, risk and freight as part of price - Board Circular No.1065/4/2018-CX - exception permitting credit in FOR cases

Cenvat credit on Goods Transport Agency (GTA) services - definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 - place of removal - FOR destination/Free on Road sales - transfer of ownership, risk and freight as part of price - Board Circular No.1065/4/2018-CX - exception permitting credit in FOR cases - Admissibility of Cenvat credit on GTA services paid for outward transportation of goods to customers' premises in FOR sales for the period 2012-13 to 2016-17 (upto Aug, 2016). - HELD THAT: - The Tribunal examined the Commissioner's denial which relied on the Supreme Court decision in Commissioner of Central Excise & S.T. v. Ultratech Cement Ltd. that, after amendment of Rule 2(l) effective 01.03.2008, input service for transport is confined only "upto the place of removal" and outward transportation beyond that point is not admissible as input. However, the Board by Circular No.1065/4/2018-CX dated 08.06.2018 clarified exceptions to that principle and expressly recognised that where supplies are on FOR (destination) terms with facts identical to Emco Ltd. and Roofit Industries (i.e., ownership and risk remain with the seller till delivery and freight is integral to price), Cenvat credit on GTA services may be admissible. The Tribunal noted the undisputed fact that the appellant's supplies were made on FOR basis and the duty valuation reflected that position. Applying the Board clarification to the facts, the Tribunal held the denial untenable and allowed the appeal, setting aside the impugned denial of credit. [Paras 4, 5, 49, 50, 51]

Cenvat credit on GTA services availed for transportation to customers' premises in respect of FOR sales was admissible for the stated period; the impugned Order in Original denying such credit is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that in view of Board Circular No.1065/4/2018-CX (08.06.2018) and the supplies being on FOR basis, Cenvat credit on GTA services for transportation to customers' premises is admissible for the period 2012-13 to 2016-17 (upto Aug, 2016), and the impugned order denying that credit is quashed.

Refund of accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - no requirement of establishing nexus between input services and exported output services after amendment of Rule 5 - inadmissibility of reopening credit admissibility in refund proceedings instead of recovery under Rule 14 - incomplete or deficient invoices not to be a ground for denial of refund where nature of service and tax paid are ascertainable (Circular No.120/01/2010 ST) - centralized registration and utilisation of input credit for multiple premises - credit of service tax paid under reverse charge mechanism claimed belatedly is not barred for refund - remand for redetermination of refundable amounts under Rule 5

Incomplete or deficient invoices not to be a ground for denial of refund where nature of service and tax paid are ascertainable (Circular No.120/01/2010 ST) - Refund cannot be denied or modified solely because invoices lack certain details (such as address) if the nature of the service, tax paid and other particulars required under rule 4(a) are ascertainable. - HELD THAT: - The Tribunal relied upon Board's Circular No.120/01/2010 ST to hold that incomplete invoices by themselves do not justify denial of refund under Rule 5. The Court emphasised that where the nature of the input service can be ascertained, tax paid is clearly mentioned and other requisite particulars are present, a liberal view must be taken and refund should be allowed. The adjudicating authority cannot reject refund claims merely for missing invoice details when the substance of the claim is clear. [Paras 4]

Findings denying/ modifying refund on account of missing invoice details are unsustainable.

Centralized registration and utilisation of input credit for multiple premises - Credit taken against invoices addressed to premises other than the place of centralized registration is permissible where the assessee has centralized registration and the credit is reflected in the common Cenvat account. - HELD THAT: - The Tribunal noted that the appellant had centralized registration at Noida with multiple business premises (Pune, Chennai) recorded in Form ST 2. Input credit accruing from services received at other premises but reflected in the central Cenvat account at Noida and in ST 3 returns filed at Noida does not contravene the Cenvat Credit Rules. Consequently, denial of credit merely because invoices were addressed to Pune or Chennai is not justified. [Paras 4]

Credit/refund could not be denied on the ground that invoices were addressed to premises other than centralized registration.

Invoices issued in unregistered premises - Refund/credit cannot be denied solely because invoices were issued in the name of an unregistered premises; precedent supports allowance. - HELD THAT: - The Tribunal referred to earlier decisions of various Benches which have held that invoices addressed to unregistered premises do not per se disentitle a claimant from Cenvat credit or refund. On that basis the impugned modifications/denials grounded only on the invoices being in the name of unregistered premises were held to be incorrect. [Paras 4]

Denial/modification of refund on account of invoices being in the name of unregistered premises is unsustainable.

No requirement of establishing nexus between input services and exported output services after amendment of Rule 5 - inadmissibility of reopening credit admissibility in refund proceedings instead of recovery under Rule 14 - Under the amended Rule 5 the refund is to be determined by the prescribed ratio and does not require establishing nexus between input services and exported output services; alleged ineligibility of input services should be addressed by proceedings under Rule 14 and not in refund adjudication. - HELD THAT: - The Tribunal reiterated that since the 2011/2012 amendments and associated TRU/Board clarifications the refund scheme under Rule 5 is simplified and does not mandate correlation between input services and exports. The adjudicating authority is not permitted to re examine the availability of Cenvat credit during refund proceedings; if the quantum of credit is disputed, appropriate recovery proceedings under Rule 14 (and section 73 procedure) must be initiated. Consequently, the Commissioner(Appeals)'s exercise of denying or varying credit while adjudicating Rule 5 refund claims was held to be a misdirection. [Paras 4]

Refund must be determined by the Rule 5 formula; objections to credit admissibility require separate proceedings under Rule 14.

Credit of service tax paid under reverse charge mechanism claimed belatedly is not barred for refund - Service tax paid under reverse charge mechanism (even if paid in a later month) can be included for purposes of refund under Rule 5 and such credit is not barred merely because the payment pertained to an earlier period. - HELD THAT: - Relying on Benches' decisions and the TRU directive/Circular No.120/01/2010 ST, the Tribunal held that the scheme contemplates refund of accumulated credit as at the relevant quarter and is not confined to credit taken only during that quarter. The retrospective amendments and clarifications removed the illustrative restriction and permit inclusion of earlier availed credits in the refund computation. Further, belated payment under RCM pursuant to Section 73(4A) does not ipso facto attract the bar in Rule 9(1)(bb) unless fraud/suppression is shown. [Paras 4]

Denial of refund on account of belated RCM payment is unsustainable; such credit can be considered in refund computation.

Admissibility of credit for hospitality, management, maintenance and repair services and other disputed services as input services - Cenvat credit in respect of various challenged services including hospitality, management, maintenance and repair services is admissible; denials made by the adjudicating authority are not sustainable. - HELD THAT: - On consideration of precedent (including Ultratech, Castrol, Heubach and multiple Tribunal decisions) the Tribunal found no merit in denying credit for hospitality (to the extent not withdrawn) and for management, maintenance and repair services. It also observed that many disputed services across the appeals were correctly held admissible by Commissioner(Appeals) and the impugned orders were non speaking and failed to analyse the service wise disputes. [Paras 4]

Denials of credit for the said services are set aside and the credits are held admissible for refund purposes.

Remand for redetermination of refundable amounts under Rule 5 - Matters remanded to the original authority to redetermine amounts to be refunded under Rule 5 on the basis that disputed credits are held admissible, with direction to decide within 90 days. - HELD THAT: - Having held that the disputed credits are admissible for the purposes of refund under Rule 5 and that the impugned adjudications were flawed, the Tribunal set aside the impugned orders and remanded the refund claims to the original authority for fresh computation/redetermination of refundable amounts in terms of Rule 5. The Tribunal directed a time bound disposal (90 days) given the age of the issue. [Paras 4, 5]

Refund matters remanded to original authority for recomputation and sanction under Rule 5; decision to be taken within 90 days.

Final Conclusion: Appeals allowed; impugned orders set aside to the extent indicated, disputed Cenvat credits held admissible for the purposes of refund under Rule 5 and matters remanded to the original authority for redetermination of refundable amounts in terms of Rule 5 of the CENVAT Credit Rules, 2004, to be decided within 90 days.

Extinguishment of claims on approval of resolution plan - binding effect of approved resolution plan on State and other creditors - frozenness of claims upon approval under Section 31 of the Insolvency and Bankruptcy Code - pre-approval statutory dues not enforceable if not part of the resolution plan

Extinguishment of claims on approval of resolution plan - binding effect of approved resolution plan on State and other creditors - approval under Section 31 of the Insolvency and Bankruptcy Code - Validity of demand notice dated 16.07.2020 for alleged VAT dues in light of an approved resolution plan. - HELD THAT: - The petition challenged a demand notice issued after the NCLT had approved a resolution plan in CP(IB) No.172 of 2018. The State had lodged and had its claim admitted during CIRP for dues relating to assessment years 2006-07, 2009-10, 2010-11 and 2011-12. The court noted the decision in Ghanashyam Mishra and Sons Pvt Ltd which holds that once a resolution plan is approved by the adjudicating authority under Section 31, claims as not provided in the plan stand frozen and extinguished and the approved plan is binding on the corporate debtor, its creditors and including State authorities. The record showed the State was a part of the CIRP and its claim was admitted, and no objection to the plan was filed by the State before the NCLT. Applying the cited precedent and the principle that statutory dues not included in an approved plan are extinguished, the court concluded the subsequent demand notice could not be sustained. [Paras 4, 7, 8, 9]

Demand notice dated 16.07.2020 is quashed and set aside as the claims for the specified assessment years stand extinguished upon approval of the resolution plan.

Final Conclusion: The writ petition is allowed and the demand notice dated 16.07.2020 issued by the State Tax Officer is quashed and set aside on the ground that claims not provided for in the approved resolution plan stand extinguished and are not enforceable against the corporate debtor.

Section 138 of the Negotiable Instruments Act, 1881 - dishonour of cheque for insufficiency of funds - Legally enforceable debt or other liability (Explanation to Section 138) - Bengal Money Lenders Act, 1940 - licensing and regulatory scheme - Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption - Doctrine of harmonious construction

Section 138 of the Negotiable Instruments Act, 1881 - dishonour of cheque for insufficiency of funds - Bengal Money Lenders Act, 1940 - licensing and regulatory scheme - Legally enforceable debt or other liability (Explanation to Section 138) - Doctrine of harmonious construction - Whether a complainant who carries on money lending without a licence under the Bengal Money Lenders Act, 1940 is thereby debarred from instituting and prosecuting a complaint under Section 138 of the Negotiable Instruments Act, 1881. - HELD THAT: - The Court held that the Bengal Money Lenders Act, 1940 is a regulatory statute and does not, by its scheme, operate to bar a complainant from instituting criminal proceedings under Section 138 of the Negotiable Instruments Act. The two enactments serve different objects: the Bengal Act regulates money lending and prescribes licensing consequences in civil recovery proceedings, whereas Chapter XVII of the Negotiable Instruments Act penalises issuance and dishonour of cheques to protect the credibility of negotiable instruments. Applying the Doctrine of Harmonious Construction, both statutes must be given full effect in their respective spheres; there is no apparent conflict requiring displacement of Section 138. The presumption in favour of the holder under Section 139 is rebuttable, but the fact of lack of a money lending licence does not, by itself and at the pre trial stage, negate the complainant's ability to prosecute a Section 138 complaint. The Court relied on earlier decisions of several High Courts that accepted this position and observed that questions as to the legality of the underlying transaction or licence status are matters for trial and evidence, not for summary quashing of criminal proceedings. [Paras 20, 31]

The absence of a money lending licence under the Bengal Money Lenders Act, 1940 does not, per se, bar institution or continuation of proceedings under Section 138 of the Negotiable Instruments Act, 1881.

Section 138 of the Negotiable Instruments Act, 1881 - dishonour of cheque for insufficiency of funds - Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption - Whether the criminal proceedings under Section 138 could be quashed at the pre trial stage on the ground that the complainant allegedly conducted money lending without licence or that the transaction was not a loan. - HELD THAT: - The Court found no sufficient basis to quash the complaint at the pre trial stage. The determination whether the transaction was a loan, whether interest charged was usurious or otherwise irregular, and whether the presumptions under Sections 138/139 are rebutted, require evidence and cannot be decided on the limited materials placed before the Court in a revisional petition. Reliance on decisions holding that an unlicensed money lender cannot recover in civil suits under the Bombay Money Lenders Act, 1946 was held inapplicable to the facts governed by the Bengal Act; in any event, those principles do not justify summary disposal of a Section 138 prosecution. The accused has the remedy of leading evidence and raising defenses at trial, including rebuttal of statutory presumptions. [Paras 29, 33]

Quashing of the Section 138 proceedings at the pre trial stage on the ground of alleged unlicensed money lending or disputed nature of the transaction is not warranted; such contentions are to be examined in trial.

Final Conclusion: Criminal Revision C.R.R. 1897 of 2021 dismissed; the petition for quashing proceedings under Section 138 of the Negotiable Instruments Act, 1881 was rejected and the trial court proceedings shall continue.

Rejection of plaint under Order VII Rule 11 CPC - frustration of prosecution under Section 138 of the Negotiable Instruments Act - declaratory relief framed to bar remedies available under the N.I. Act - claim that cheque was handed over only as security cannot, on its face, oust criminal remedy

Rejection of plaint under Order VII Rule 11 CPC - declaratory relief framed to bar remedies available under the N.I. Act - Whether the plaint is liable to be rejected as it seeks reliefs which are barred by law and would frustrate the defendant's remedy arising from dishonour of cheque. - HELD THAT: - The Court examined the plaint and the reliefs sought and applied the principle that a plaintiff cannot obtain declaratory or injunctive reliefs which would have the effect of frustrating the right of the defendant to initiate prosecution or other remedies under the Negotiable Instruments Act arising from cheque dishonour. The petitioner placed on record a prior reasoned decree in Commercial OS.No.7 of 2022 establishing the respondents' loan liability and that partial repayment had been made, which undermines the plaint's attempt to characterise the cheques as having been forcibly obtained without any legally enforceable liability. The Apex Court decision in M/s. Frost International Limited v. M/s. Milan Developers and Builders (P) Ltd. was held squarely applicable: a declaration that a cheque was delivered only as security, when relied upon to restrain initiation of proceedings under Section 138, is ex facie barred and cannot be granted. Applying that principle, the Court concluded that the reliefs claimed in the plaint are barred by law and therefore the plaint must be rejected under Order VII Rule 11 CPC. [Paras 11, 12, 13]

The plaint is rejected as the reliefs sought are barred by law and would frustrate remedies available under the Negotiable Instruments Act.

Final Conclusion: Civil Revision Petition allowed; the plaint in O.S.No.1746 of 2019 is rejected under Order VII Rule 11 CPC, without prejudice to the plaintiffs' right to seek appropriate reliefs in a competent forum.

Section 41 CrPC - Section 41A CrPC - anticipatory bail under Section 438 CrPC - necessity for arrest-prevent tampering/ensure investigation - compliance with Satender Kumar and Arnesh Kumar

Section 41A CrPC - Section 41 CrPC - compliance with Satender Kumar and Arnesh Kumar - Whether issuance of notice under Section 41A CrPC is mandatory before arrest in the facts of this case. - HELD THAT: - The Court examined Section 41 and Section 41A CrPC and the principles laid down in Arnesh Kumar and reiterated in Satender Kumar. Those decisions require a police officer to consider and record whether arrest is necessary to prevent further offences, secure proper investigation, prevent disappearance or tampering with evidence, or ensure presence in court, and to record reasons when arrest is made or avoided. The Court held that Section 41A is not compulsorily required in every case covered by Section 41; a notice under Section 41A need not be issued where the investigating officer is satisfied that arrest is necessary as contemplated by Section 41. Applying these principles to the material on record, the Court found that the investigation disclosed a specific modus operandi, involvement of police personnel and use of government vehicles, identification of the applicant as a participant, visits to his residence where he was not found, and other material showing nexus with the offence. On these facts the Court agreed with the prosecution that there are reasons to believe arrest is necessary for proper investigation and to prevent tampering or disappearance of evidence, and therefore dispensed with issuance of notice under Section 41A in this case. [Paras 13, 14]

Notice under Section 41A CrPC is not essential in this case and may be dispensed with as the investigating officer is satisfied that arrest is necessary under Section 41 CrPC.

Anticipatory bail under Section 438 CrPC - necessity for arrest-prevent tampering/ensure investigation - Whether the applicant is entitled to pre-arrest (anticipatory) bail under Section 438 CrPC. - HELD THAT: - The Court applied the statutory tests and the authoritative guidance that arrest may be declined only where arrest is not necessary for the purposes enumerated in Section 41(1). Considering the nature and gravity of the offences, the alleged organised modus operandi operating across State borders, involvement of police vehicles and personnel, the charge-sheet indicating the applicant as absconding and other material suggesting his nexus with the crime, the Court found that arrest is necessary for proper investigation and to prevent prejudice to the investigation. The applicants' reliance on the need for notice under Section 41A and precedents was considered but rejected on facts: those precedents do not mandate notice where the investigating officer reaches the satisfaction that arrest is required. In those circumstances the Court concluded that it is not fit to exercise discretion in favour of anticipatory bail. [Paras 14, 15]

Application for anticipatory bail under Section 438 CrPC is refused and dismissed.

Final Conclusion: The Court held that Section 41A CrPC need not be followed where the investigating officer is satisfied that arrest is necessary under Section 41 CrPC; on the facts disclosed, arrest of the applicant is justified and the application for anticipatory bail under Section 438 CrPC is dismissed.