TaxTMI Updates e-Newsletter
Oct 17,2024

Summary order. Issue notice, returnable in four weeks; Special Leave Petition listed on 14 August 2024.

Principles of natural justice - opportunity of hearing - failure to consider representation - remand for fresh consideration - costs as condition for relief

Principles of natural justice - failure to consider representation - opportunity of hearing - Whether the impugned order breached the principles of natural justice by failing to consider the petitioner's response and denying an opportunity of hearing. - HELD THAT: - The show cause notice required a response within 30 days and specified date, time and venue for personal hearing. The petitioner filed a response on 21 June 2023 (albeit belatedly) and the impugned order was digitally signed on 25 June 2023. By that date the petitioner's response was on record. Although the petitioner had delayed and the explanation regarding non-upload on its designated portal was not fully convincing, the Court found that the petitioner had filed a response before the order was signed. In the circumstances and to address the natural justice concern without unduly prejudicing revenue, the petitioner was granted an opportunity to file a detailed reply and be heard, subject to payment of costs. The Court therefore remedied the procedural defect by directing further adjudication after hearing the petitioner. [Paras 8, 9, 10]

Petition allowed to the extent of directing that the petitioner be granted an opportunity to file a reply and be heard; relief is subject to payment of costs.

Remand for fresh consideration - opportunity of hearing - Disposition of the show cause notice after receipt of the petitioner's reply and hearing. - HELD THAT: - The Court directed that upon filing the reply the 4th respondent must consider the reply, hear the petitioner and dispose of the show cause notice dated 10 April 2023. The disposal is to be completed as expeditiously as possible and in any event within eight weeks of receiving the reply. All contentions of the parties were left open for adjudication by the 4th respondent. [Paras 11]

Show cause notice remanded to the 4th respondent for fresh consideration and disposal within eight weeks after receipt of the petitioner's reply.

Constitutional validity - Constitutional validity of Section 16(2)(c) of the CGST/ MGST Act. - HELD THAT: - On instructions, the petitioner did not press the relief seeking determination of the constitutional validity of Section 16(2)(c). The Court accordingly left the question open for decision in an appropriate case and did not adjudicate the constitutional challenge in this petition. [Paras 3]

Question of constitutional validity of Section 16(2)(c) left open to be considered in an appropriate case.

Final Conclusion: The petition succeeds limitedly: the Court found procedural infirmity remedied by granting the petitioner a conditional opportunity to file a detailed reply and be heard (subject to payment of costs to the Prime Minister's Relief Fund), and remanded the show cause notice for fresh consideration and disposal within eight weeks of receipt of the reply; the constitutional challenge to Section 16(2)(c) was left undecided.

Natural justice - opportunity to be heard - personal hearing - remand on condition of deposit - setting aside impugned order - Input Tax Credit mismatch between GSTR-3B and auto-populated GSTR-2A - lifting of bank attachment

Natural justice - opportunity to be heard - Input Tax Credit mismatch between GSTR-3B and auto-populated GSTR-2A - Whether the petitioner was denied a reasonable opportunity to contest the tax demand based on alleged mismatch between GSTR-3B and auto-populated GSTR-2A and whether the assessment order should be set aside for fresh consideration. - HELD THAT: - The Court examined the record and noted that the tax proposal arose from a mismatch between the petitioner's GSTR-3B returns and the auto-populated GSTR-2A, and that the assessment was confirmed because objections to the show cause notice were not filed. Given the petitioner's plea that communications were uploaded under a portal tab and that the petitioner, using a part-time consultant, was unaware of the proceedings, the Court found that in the circumstances the interest of justice required affording the petitioner an opportunity to contest the demand on merits. The Court therefore set aside the impugned order and directed a fresh consideration of the tax proposal, subject to conditions designed to place the parties on terms. [Paras 4]

Impugned order set aside and remitted for fresh adjudication to permit the petitioner to submit a reply and be heard on the merits.

Remand on condition of deposit - personal hearing - setting aside impugned order - Terms and timetable for remand including conditional deposit, opportunity to file reply, requirement of personal hearing and time within which fresh order must be passed. - HELD THAT: - Acting on the petitioner's consent, the Court placed the petitioner on terms: the impugned order was set aside provided the petitioner remits 10% of the disputed tax demand within two weeks of receipt of the order and submits a reply to the show cause notice within that period. On receipt of the reply and satisfaction of the deposit condition, the respondent is directed to provide a reasonable opportunity, including a personal hearing, and to pass a fresh order within three months from receipt of the petitioner's reply. These directions balance the petitioner's claim for a hearing with the need to preserve the revenue's interest during re-adjudication. [Paras 5]

Remand granted on condition that the petitioner deposits 10% of the disputed tax demand within two weeks and files a reply; respondent to provide personal hearing and pass fresh order within three months thereafter.

Lifting of bank attachment - setting aside impugned order - Consequences of setting aside the assessment order on interim relief: whether bank attachment should be lifted. - HELD THAT: - Because the assessment order was set aside by the Court, the incidental coercive step of bank attachment was no longer sustainable pending fresh adjudication. The Court therefore directed that the bank attachment be raised in consequence of setting aside the assessment order, providing immediate relief to the petitioner while the matter is reconsidered on merits. [Paras 5]

Bank attachment directed to be lifted consequent to setting aside the assessment order.

Final Conclusion: The writ petition is allowed by setting aside the assessment order dated 23.12.2023; remand is ordered on the petitioner depositing 10% of the disputed tax demand and filing a reply within two weeks, after which the authority must grant a personal hearing and pass a fresh order within three months; bank attachment is lifted; no costs.

Pure agent - value of supply exclusion under Rule 33 (value of supply of services in case of pure agent) - authorization requirement for acting as pure agent - invoice disclosure requirement for pure agent disbursements - scope of supply - taxability of charges payable to Indian Railways - GST rate determination for specific railway charges - reverse charge mechanism (as applied by Indian Railways circular)

Taxability of charges payable to Indian Railways - scope of supply - Whether GST was required to be paid by the applicant on the charges paid to Indian Railways (and recovered from the operator). - HELD THAT: - The Agreement between the applicant (RTDC) and Indian Railways established that Indian Railways supplied various services to RTDC and some of those services are taxable. The applicant, as recipient of those services from Indian Railways, was liable to pay GST on the charges paid to Indian Railways. RTDC had sub delegated operational tasks to the operator, but under the contractual terms the operator was to reimburse RTDC; that contractual arrangement does not alter the fact that RTDC received the taxable services from Indian Railways and thus GST was exigible on those charges paid by RTDC. The Authority adopted the definitions of "supply", "supplier" and "recipient" and applied them to conclude that the applicant was the recipient of services from Indian Railways and liable for GST which it could recover from the operator under its agreement. [Paras 7, 12]

GST was required to be paid by the applicant on the charges paid to Indian Railways and recovered from the operator.

Pure agent - value of supply exclusion under Rule 33 (value of supply of services in case of pure agent) - authorization requirement for acting as pure agent - invoice disclosure requirement for pure agent disbursements - Whether the charges paid to Indian Railways on behalf of the operator fell within the scope of a "pure agent" and were excludable from the value of taxable supply under Rule 33. - HELD THAT: - Rule 33 requires satisfaction of all conditions to exclude expenditures incurred as a pure agent from the value of supply, including (i) the supplier acting as pure agent on authorization by the recipient, (ii) separate indication of such payments in the invoice, and (iii) that the supplies procured as pure agent are in addition to services supplied on the supplier's own account. The Authority found that RTDC did not satisfy these mandatory conditions: there was no contractual authorization from the recipient of the underlying supply (Indian Railways) authorizing RTDC to act as its pure agent; RTDC did not separately indicate the payments as pure agent disbursements in its invoices; and RTDC had not procured any additional supplies as a pure agent distinct from services it supplied on its own account. On these bases the conditions of Rule 33 were not met and the value exclusion could not be invoked. [Paras 9, 10, 11, 12]

The charges do not fall within the scope of a "pure agent" under Rule 33 and therefore cannot be excluded from the value of taxable supply.

GST rate determination for specific railway charges - taxability of charges payable to Indian Railways - reverse charge mechanism (as applied by Indian Railways circular) - If the charges paid to Indian Railways are taxable, what are the applicable GST classifications and rates for the respective charges? - HELD THAT: - Having held the charges taxable and not excludable as pure agent disbursements, the Authority applied the classifications reflected in the Railway Board circulars and the agreements to determine rates. The Authority identified the types of charges levied by Indian Railways (registration fee, haulage charges, right to use (RU) charges, stabling charges, station user fee, cancellation charges and security deposit treatment) and, following the circular and applicable SAC classifications, concluded the GST rates to be applied: registration fee at 18%; haulage charges at 5%; RU charges at 18%; stabling charges at 18%; station user fee at 5%; cancellation charges at 5%; and security deposit not leviable to GST unless adjusted against a taxable charge, in which case GST applies according to the nature of the charge against which it is adjusted. [Paras 14, 15]

The specified railway charges are taxable at the rates determined by the Authority: registration fee 18%, haulage charges 5%, RU charges 18%, stabling charges 18%, station user fee 5%, cancellation charges 5%; security deposit not taxable unless adjusted against a taxable charge.

Final Conclusion: Advance ruling: RTDC is liable to pay GST on the charges paid to Indian Railways which it recovered from the operator; those payments do not qualify as pure agent disbursements under Rule 33; and the respective GST classifications and rates are as determined by the Authority (registration fee 18%, haulage 5%, RU/stabling 18%, station user fee 5%, cancellation 5%, with security deposit taxable only upon adjustment).

Validity of reopening of assessment u/s 147 - assessee argued non application of mind in granting approval u/s 151 and that is evident from the approval itself - Delay of 201 days in filing the special leave petition - As decided by HC [2023 (11) TMI 343 - BOMBAY HIGH COURT] if only the PCIT had read the form for approval carefully with the order that was prepared by the AO under Section 148A(d) of the Act, the PCIT would not have come to the conclusion that there is any material to treat it as a fit case to issue notice under Section 148 or pass order under Section 148A(d) - Also there is default as Personal hearing not being granted - As in every case, before passing an order u/s 148A(d) of the Act, Respondents shall give a personal hearing if requested for by Petitioner.

HELD THAT:- There is a delay of 201 days in filing the special leave petition. The reasons assigned for seeking condonation of delay are neither satisfactory nor sufficient in law to condone the same. Hence, the application seeking condonation is dismissed.

Consequently, the Special Leave Petition is also dismissed.

Registration under section 12A/12AB of the Income tax Act - application of section 13(1)(b) at the stage of registration versus at the stage of grant of exemption - charitable trust whose objects partly benefit a particular religious community versus trust for public at large - grant of exemption under section 11

Application of section 13(1)(b) at the stage of registration versus at the stage of grant of exemption - registration under section 12A/12AB of the Income tax Act - Whether section 13(1)(b) can be invoked to deny grant of registration under section 12A/12AB or is it a provision to be considered only at the stage of granting exemption under section 11? - HELD THAT: - The Court endorsed the Tribunal's reading of the Supreme Court in Dawoodi Bohra Jamaat [2014 (3) TMI 652 - SUPREME COURT] that section 13(1)(b) is concerned with eligibility for exemption under section 11 and is not to be applied as a ground for refusal of registration under section 12A/12AB. The Tribunal found that a trust with charitable objects which also benefits a particular religious community may still qualify for registration, with the question of denial of exemption under section 13(1)(b) to be decided subsequently during assessment or at the time of claiming exemption. The High Court, relying on the Tribunal and the jurisdictional authority in CIT v. Bayath Kutchhi Dasa Oswal Jain Mahajan Trust [2016 (9) TMI 8 - GUJARAT HIGH COURT] held that no substantial question of law arises because the legal principle is settled that section 13(1)(b) operates at the exemption stage and not to deny registration. [Paras 7, 8]

The provisions of section 13(1)(b) are not a ground for refusing registration under section 12A/12AB; they are to be applied when determining entitlement to exemption under section 11.

Charitable trust whose objects partly benefit a particular religious community versus trust for public at large - registration under section 12A/12AB of the Income tax Act - Whether the objects of the assessee trust are predominantly charitable for the public at large or are wholly for the benefit of a particular religious community so as to justify denial of registration? - HELD THAT: - The Tribunal examined the trust objects as placed on record and noted that, although one object referred to scholarships to Muslim students, the majority of objects (educational institutions, medical aid, welfare and poverty relief, vocational training and other broadly charitable activities) were directed to general charitable purposes. On that factual and legal appraisal the Tribunal concluded, and the High Court accepted, that the objects were not wholly for the benefit of a particular religious community and therefore did not justify invocation of section 13(1)(b) to deny registration. Consequently the Tribunal set aside the CIT(Exemption)'s denial and directed grant of registration under section 12A. [Paras 7, 8]

The trust's objects are largely charitable in character for the public at large and do not warrant denial of registration under section 12A on the ground that they are exclusively for a particular religious community.

Final Conclusion: The appeal is dismissed: the High Court finds no substantial question of law, upholds the Tribunal's interpretation that section 13(1)(b) is to be applied at the exemption stage and affirms that the assessee trust's objects are predominantly charitable, directing grant of registration under section 12A.

Additional depreciation under clause (iia) of Section 32(1) - engaged in the business of manufacture or production of any article or thing - plant and machinery - electrical installations as integral part of plant and machinery - allowance of balance additional depreciation in the immediately succeeding year - substantial question of law

Additional depreciation under clause (iia) of Section 32(1) - engaged in the business of manufacture or production of any article or thing - Entitlement to additional depreciation on plant and machinery where the assessee is a milk processing society asserted not to be engaged in manufacture or production of any article or thing. - HELD THAT: - The Tribunal found on the facts that the assessee procures raw milk and, by use of detailed technical machinery, processes and manufactures distinct milk products - a transformation amounting to manufacture. The Tribunal relied on the assessee's manufacturing flow diagrams and certificates demonstrating dedicated manufacturing operations and concluded that the plant and machinery were used in manufacture and thus eligible for additional depreciation under the provision. The High Court held that these findings are factual and were rightly reached by the Tribunal, following earlier decisions recognizing processing that results in a new product as manufacturing for the purposes of additional depreciation. Consequently the question raised in the appeal does not amount to a substantial question of law arising out of the Tribunal's order. [Paras 11]

Tribunal's allowance of additional depreciation upheld; issue is factual and not a substantial question of law.

Allowance of balance additional depreciation in the immediately succeeding year - retrospective effect of amendment - Whether the proviso permitting allowance of the balance fifty per cent of additional depreciation in the immediately succeeding previous year operates retrospectively so as to permit the assessee's claim for the year under consideration. - HELD THAT: - The Tribunal interpreted the proviso (third proviso) as clarificatory and applied it to allow the remaining 10% additional depreciation in the succeeding year where fifty per cent was claimed in the year of acquisition. The High Court noted that the question is essentially factual and covered by precedents (including the consideration in Kalpataru Power Transmission Ltd.), and that the Tribunal's construction and application of the proviso to the facts of the case do not raise a substantial question of law warranting interference. [Paras 11]

Tribunal's view that the balance additional depreciation is allowable in the succeeding year affirmed; the contention does not constitute a substantial question of law.

Electrical installations as integral part of plant and machinery - plant and machinery - Whether electrical items (substation, DG set, transformers, exhaust and pedestal fans) claimed by the assessee form part of plant and machinery and are eligible for depreciation and additional depreciation. - HELD THAT: - The Tribunal examined the factual matrix, including a certificate from the assessee's engineering department and the location-specific need for independent power and cooling, and concluded that the electrical items were required for the manufacture of milk products and therefore formed part of the plant and machinery. The Tribunal also followed precedents (including this Court's decision in Starlight Silk Mills and coordinate Tribunal decisions) holding that electric installations and transformers can be integral to plant and machinery. The High Court found no error in the Tribunal's factual conclusion and reasoning and held that this does not give rise to a substantial question of law. [Paras 12, 14]

Tribunal's finding that the electrical items are integral to plant and machinery and eligible for depreciation and additional depreciation is upheld; the question is factual and not a substantial question of law.

Final Conclusion: The Tax Appeal is dismissed. The High Court affirms the Tribunal's factual findings allowing additional depreciation and treating the electrical installations as part of plant and machinery; the points raised do not arise as substantial questions of law from the Tribunal's order.

Notice under Section 148A(b) - Inquiry under Section 148A(a) - Opportunity of being heard under Section 148A(b) / show-cause - Re-opening of assessment under Section 148 - Quashing for procedural infirmity - Assessment accepted under Section 143(1)

Notice under Section 148A(b) - Inquiry under Section 148A(a) - Opportunity of being heard under Section 148A(b) / show-cause - Quashing for procedural infirmity - Re-opening of assessment under Section 148 - Validity of the notice dated 05.03.2024 issued under Section 148A(b), the order dated 24.03.2024 under Section 148A(d) and the consequential notice under Section 148 - HELD THAT: - The Court examined the impugned notice dated 05.03.2024 and found that it called for extensive particulars and documentary evidence regarding lenders, genuineness, creditworthiness and utilisation of long term borrowings, which is the character of an inquiry as contemplated by clause (a) of Section 148A rather than a show cause notice under clause (b). The statutory scheme requires that an enquiry under clause (a) (with prior approval where applicable) be conducted before issuing a show cause notice under clause (b). Because the Assessing Officer issued a notice labelled under Section 148A(b) without conducting the requisite inquiry, the notice did not fulfil the statutory requirement of informing the assessee of the information that allegedly suggests escapement of income and therefore was procedurally defective. The Court relied on the reasoning in Safal Constructions (as applied in identical facts) to conclude that issuance of a clause (b) notice which is in substance a clause (a) inquiry is a fundamental procedural infirmity. For the same reason the order under Section 148A(d) purporting to reject the petitioner's objection and the consequential notice under Section 148 were rendered unsustainable. The Court nevertheless clarified that the revenue is not precluded from re initiating proceedings in accordance with the statutory procedure. [Paras 7, 8, 9, 10, 11]

Impugned notice dated 05.03.2024 under Section 148A(b), the order dated 24.03.2024 under Section 148A(d) and the consequential notice under Section 148 are quashed and set aside for procedural infirmity; liberty granted to the respondent to initiate proceedings afresh in accordance with law.

Final Conclusion: The writ petition is allowed: the notice under Section 148A(b), the order under Section 148A(d) and the consequent Section 148 notice are quashed for being in substance an inquiry improperly issued as a show cause notice; the Assessing Officer remains at liberty to re commence proceedings in conformity with the statutory scheme.

Condonation of delay under Section 119(2)(b) of Income Tax Act - genuine hardship - refund of tax deducted at source - liberal approach to condonation to secure substantive justice

Condonation of delay under Section 119(2)(b) of Income Tax Act - genuine hardship - refund of tax deducted at source - Validity of the order dated 24.01.2024 rejecting the petitioner's application under Section 119(2)(b) for condonation of delay and consequent denial of the refund claimed for Assessment Year 2022-23. - HELD THAT: - The Court found that the petitioner had not filed the return within the time prescribed under sections 139(1) and 139(4), but it was undisputed that the petitioner was entitled to a refund on account of excess tax deducted at source. Citing precedent authority, the Court held that the power under Section 119(2)(b) is to be exercised to secure substantive justice and that the phrase "genuine hardship" must be construed liberally rather than with a technical, pedantic approach. The respondent erred in rejecting the application solely on the ground that no proof of hardship was furnished, without applying the liberal, justice-oriented standard endorsed by the authorities cited. Having regard to the facts on record showing entitlement to refund, the Court concluded that the impugned order was not in accordance with the proper legal approach and therefore liable to be set aside. [Paras 19, 20, 21, 22, 23]

Impugned order rejecting the application under Section 119(2)(b) is quashed and set aside; petitioner is permitted to seek belated filing so as to claim the refund.

Condonation of delay under Section 119(2)(b) of Income Tax Act - liberal approach to condonation to secure substantive justice - Scope and manner of reconsideration directed to the respondent under Section 119(2)(b). - HELD THAT: - The Court remitted the matter to the respondent for fresh exercise of jurisdiction under Section 119(2)(b) in accordance with law, applying the liberal, justice-oriented approach to condonation where the applicant would otherwise be deprived of a legitimate refund. The remit is procedural and confined to reconsideration of the condonation application in light of the legal principles stated, without deciding entitlement to interest or other ancillary consequences. [Paras 24]

Matter remanded to the respondent to pass an appropriate order under Section 119(2)(b) in accordance with law within 12 weeks from receipt of the judgment.

Final Conclusion: Writ petition allowed; impugned order dated 24.01.2024 set aside and the matter remitted to the respondent to reconsider the application under Section 119(2)(b) for Assessment Year 2022-23 in accordance with law (applying a liberal, justice-oriented approach) within 12 weeks.

Breach of principles of natural justice - opportunity of personal hearing - short time for response to show cause notice - show cause notice under the faceless assessment procedure - assessment under Section 147 read with Section 144B of the Act - remand for de novo assessment

Breach of principles of natural justice - opportunity of personal hearing - short time for response to show cause notice - show cause notice under the faceless assessment procedure - assessment under Section 147 read with Section 144B of the Act - Assessment order dated 29.03.2022 (and consequential demand and penalty notices) were vitiated for breach of principles of natural justice by failing to afford adequate opportunity of hearing. - HELD THAT: - The Court found that the final show cause notice dated 26.03.2022 afforded only two days for response up to 23:59 hours of 28.03.2022 (which fell over a Saturday and Sunday) yet the assessee filed a reply on 28.03.2022. The assessee sought a video-conferencing hearing on 29.03.2022 but no opportunity of hearing was provided. Applying the established principle that procedural non-compliance in the prescribed faceless assessment process which results in denial of opportunity to the assessee renders the assessment non est, the Court held that the procedure under Section 144B as applied in this case breached natural justice. The Court expressly did not decide the merits of the proposed additions and limited its decision to the procedural breach. [Paras 6, 7, 10]

Assessment order dated 29.03.2022 under Section 147 read with Section 144B for A.Y. 2013-2014 and the consequential demand and penalty notices dated 29.03.2022 are quashed and set aside for breach of natural justice.

Remand for de novo assessment - opportunity of personal hearing - time limit for completion of reassessment - Proceedings remitted to the Assessing Officer for fresh consideration after affording opportunity of hearing, with a timelimit for completion. - HELD THAT: - Having quashed the assessment on procedural grounds, the Court remanded the matter to the Assessing Officer from the stage of the draft assessment order. The AO is directed to afford the assessee an opportunity of hearing de novo and thereafter pass a fresh assessment order in accordance with law. The Court clarified that it has not gone into the merits of the assessment and left the AO free to decide on merits after providing the required hearing. A timeline of twelve weeks from receipt of the order has been prescribed for completion of the fresh assessment. [Paras 9, 10]

Matter remanded to the Assessing Officer for de novo assessment after giving opportunity of hearing; fresh assessment to be completed within twelve weeks from receipt of the order.

Final Conclusion: Writ petition allowed to the extent indicated: the assessment order dated 29.03.2022 under Section 147 read with Section 144B for A.Y. 2013-2014 and the consequential demand and penalty notices are quashed and set aside for breach of natural justice; matter remanded to the Assessing Officer for fresh assessment after affording opportunity of hearing, to be completed within twelve weeks.

Revision under section 264 of the Income Tax Act - entertainment of revision application despite no apparent error in intimation under section 143(1) - long term capital loss on extinguishment of shares - remand for de novo consideration - opportunity of hearing and submission of requisite documents

Revision under section 264 of the Income Tax Act - entertainment of revision application despite no apparent error in intimation under section 143(1) - Whether the Principal Commissioner was obliged to consider on merits the petitioner's application under section 264 though no error in the intimation under section 143(1) was alleged and the claim was omitted from the original return - HELD THAT: - The court found that the petitioner had filed the application under section 264 within the prescribed period and that the Commissioner, while exercising revisionary powers under section 264, is required to consider the merits of the application where the law permits relief. Reliance on precedents was noted for the proposition that the scope of section 264 enables the Commissioner to provide relief to an assessee and to take into account relevant material which may have come on record after the assessment. The Court held that the Principal Commissioner ought to have entertained and adjudicated the petitioner's claim on merits instead of rejecting the application merely on the ground that the intimation under section 143(1) did not contain an error. [Paras 20]

The impugned order was quashed to the extent that the Commissioner declined to consider the application on merits; the matter is remitted for fresh consideration of the section 264 application.

Long term capital loss on extinguishment of shares - remand for de novo consideration - opportunity of hearing and submission of requisite documents - Whether the claim of long term capital loss arising from extinguishment of shares should be reconsidered and, if so, on what terms - HELD THAT: - The Court directed that the petitioner's omitted claim of long term capital loss (arising from extinguishment of shares pursuant to the NCLT order) be considered on merits by the Principal Commissioner. The petitioner is to be given an opportunity of hearing and allowed to submit requisite documents in support of the claim. The Court mandated a reasoned de novo adjudication of the revision application and specified a time frame for completion of that exercise. [Paras 21]

Matter remanded to the Principal Commissioner (Surat-I) to decide the section 264 application on merits after giving personal hearing and allowing submission of documents; exercise to be completed within 12 weeks from receipt of the order.

Final Conclusion: Impugned order dated 30.03.2024 rejecting the petitioner's revision application under section 264 is quashed and set aside to the extent indicated; the Principal Commissioner is directed to reconsider the petitioner's omitted claim of long term capital loss on merits after giving opportunity of hearing and permitting submission of requisite documents, and to decide the application within 12 weeks.

Transfer pricing comparables selection - functional comparability (ITeS v. KPO) - FAR analysis - Rule 10B(2) relevance to comparability - license fee: revenue v. capital - end-user software license agreement - consistency of adjudicatory findings

Transfer pricing comparables selection - functional comparability (ITeS v. KPO) - FAR analysis - Rule 10B(2) relevance to comparability - Validity of Tribunal's exclusion of KPO and other suggested comparables for benchmarking ITeS services - HELD THAT: - The Tribunal recorded that the assessee provided IT enabled back-end card services to banks and was not a captive provider, and therefore its activities were to be benchmarked as ITeS. On the facts, the Tribunal excluded comparables engaged in Knowledge Process Outsourcing and other activities found functionally non-comparable. The High Court noted the Tribunal's factual finding of the nature of the assessee's services and the resultant exclusion of KPO comparables, and declined to interfere with that exercise of comparability. The Court found no substantial question of law arising from the Tribunal's application of comparability principles and its assessment of functional differences, and did not disturb the Tribunal's selection/rejection of comparables.

Tribunal's exclusion of the suggested KPO and other functionally non-comparable entities upheld; no interference.

License fee: revenue v. capital - end-user software license agreement - consistency of adjudicatory findings - Characterisation of payments under the end-user software license agreement as revenue expenditure (deductible) and finality of that view - HELD THAT: - The Tribunal had repeatedly held for the assessee that periodic payments under the end-user license agreement were license fees and revenue in nature, not consideration for acquisition of an intangible capital asset. The Tribunal relied on the terms of the agreement - limited, non-transferable, non-alienable rights; obligation to return or purge the software on termination; periodic payments subject to renewal - and on precedents distinguishing enduring benefit from mere licensed use. The High Court observed that the issue had been consistently decided in the assessee's favour for the cited assessment years, that the Revenue had not effectively reopened the question in earlier High Court proceedings, and that the Tribunal's adherence to its prior findings invoked the rule of consistency. On that basis the Court found no ground to disturb the Tribunal's conclusion that the payments were revenue expenditure deductible under the Act.

Tribunal's classification of the license fee as revenue expenditure upheld; the issue treated as finally decided in the assessee's favour.

Final Conclusion: The appeal is dismissed. The High Court declined to interfere with the Tribunal's exclusion of functionally non-comparable entities for transfer pricing benchmarking and affirmed the Tribunal's consistent view that the challenged license fee payments were revenue in nature; no substantial question of law warranted admission of the appeal.

Amalgamation and successor liability - Assessment passed against non existent company - nullity - Continuation of liabilities on transferee company - Principles of natural justice and service of notice - Remand for fresh assessment with opportunity to be heard

Amalgamation and successor liability - Assessment passed against non existent company - nullity - Continuation of liabilities on transferee company - Whether assessment orders passed in the name of the transferor company after its amalgamation w.e.f. 30.09.2001 are ipso facto nullities, and whether the liability in respect of such assessments survives in the transferee company. - HELD THAT: - The Court held that amalgamation destroys only the corporate shell of the transferor but does not extinguish the business or liabilities which continue enfolded within the transferee company. Relying on the principle that assets and liabilities devolve upon the transferee, the mere fact that an assessment order was passed after the effective date of amalgamation does not, by itself, render the order a nullity if the transferee can be identified and noticed. The Tribunal's conclusion that the assessment orders were invalid as having been passed against a non existent company ignored the transferee's continuing liability and the fact that appeals in respect of the assessment had been pursued by or on behalf of the transferee. The ITAT failed to consider whether proper notice and opportunity to be heard had been afforded to the transferee or whether defects could be cured under the relevant procedures, and thus reached an incomplete conclusion when quashing the assessments as nullities. [Paras 12, 13, 16]

Findings of the Tribunal that the assessment orders are nullities solely because the transferor had ceased to exist are set aside; the principle that liabilities survive and devolve on the transferee is affirmed and the assessments are not ipso facto void on that ground.

Principles of natural justice and service of notice - Remand for fresh assessment with opportunity to be heard - Whether the matter must be remitted to the Assessing Authority for fresh decision after giving proper notice to and hearing the transferee company. - HELD THAT: - The Court observed that the ITAT did not consider material aspects including the circumstance that notices had been issued to the transferee at its Chennai address and that the assessing proceedings had been conducted after remand for reasons including alleged default of appearance. Because the question of liability on merits (including rejection of the long term capital gain claim) and the adequacy of notice and opportunity were not examined by the ITAT, the matter requires fresh adjudication. The Court therefore set aside the orders of the ITAT, CIT(A) and the Assessing Authority to the extent they stand, and remitted the cases to the Assessing Authority with directions to give proper notice to the present transferee company and to decide the assessment after affording full opportunity to be heard. [Paras 15, 16, 18]

The matters are remitted to the Assessing Authority for reconsideration and fresh finalization of assessment after giving proper notice to and opportunity for hearing to the transferee company.

Final Conclusion: Questions of law are answered in favour of the Revenue; the ITAT's quashing of the assessment orders as nullities is set aside, and the assessments are remitted to the Assessing Authority to be redone after giving proper notice and full opportunity to the transferee company.

Notional interest on interest-free loans - diversion of own funds vis-a -vis borrowed funds - presumption as to source of funds where assessee has substantial surplus and borrowings - unexplained cash-credit and burden under section 68 - relevance of allotment versus realization of share capital and obligation under Companies Act not to allot before receipt of money - onus to prove identity and creditworthiness of shareholders - conditional remand for verification of subsequent-year allotment/realisation

Notional interest on interest-free loans - diversion of own funds vis-a -vis borrowed funds - presumption as to source of funds where assessee has substantial surplus and borrowings - Deletion of addition computed as notional interest on interest-free loans advanced by the assessee - HELD THAT: - Assessing Officer disallowed interest by treating advances to third parties as diversion of interest-bearing funds and determined notional interest. Tribunal accepted that the assessee simultaneously had borrowed funds and significant owned funds/surplus in the business (surplus shown in balance sheet). Applying the principle that where an assessee has large own funds as well as borrowings, it is permissible to presume that relatively small diversions for non business purposes are from own funds, the Tribunal held the disallowance to be uncalled for. Reliance placed on the principle as applied in the cited Reliance Utilities & Power Ltd. decision was found apposite. On that basis the addition was deleted. [Paras 5]

Addition of Rs. 3,72,000 as notional interest deleted; ground allowed.

Unexplained cash-credit and burden under section 68 - relevance of allotment versus realization of share capital and obligation under Companies Act not to allot before receipt of money - onus to prove identity and creditworthiness of shareholders - conditional remand for verification of subsequent-year allotment/realisation - Treatment of share capital receipts as unexplained cash-credit and genuineness/creditworthiness of subscribing shareholders; partial deletion in respect of one subscriber and conditional sustainment/remand for others - HELD THAT: - Assessing Officer made additions treating subscriptions from eight parties as unexplained cash-credit under section 68 on the ground that identity/creditworthiness of certain shareholders were not satisfactorily established during assessment. The Tribunal examined the evidence: ROC forms, confirmations, bank statements and audited financial statements. For the first subscriber (Omkareshwar Builders Pvt. Ltd.) the assessee corrected an inadvertent ROC filing, produced confirmations and bank evidence showing the investment flowed through proper banking channels, and ROC records reflected the allotment; therefore the Tribunal found no basis to sustain the addition qua that subscriber and deleted the addition. For the other seven subscribers the assessee argued that actual bank credits were realized in the subsequent year; the Tribunal rejected the contention that subsequent-year realisation could cure deficient proof where allotment was recorded as having occurred before year end, observing the relevance of allotment date and the obligation not to allot before receipt. The Tribunal noted that the documents produced showed identical and doubtful sources (application money received for allotment) for all these investors, and their financial statements reflected limited means, so capacity to make the investments had not been proved. However, rather than finally upholding the additions without further opportunity, the Tribunal granted a conditional direction: if the assessee produces evidence of allotment by the respective investors in the subsequent assessment year within three months, the Assessing Officer shall treat the transactions as genuine and accept the capacity; if not produced, the Assessing Officer may sustain the additions. The Tribunal therefore sustained the additions in respect of those subscribers subject to this conditional verification direction. [Paras 10, 13, 14]

Addition in respect of Omkareshwar Builders Pvt. Ltd. deleted; additions in respect of the other seven subscribers sustained subject to the Assessing Officer accepting subsequent year allotment/realisation evidence if furnished within three months, otherwise the additions may be sustained.

Final Conclusion: Appeal partly allowed: deletion of the notional interest disallowance; deletion of share-capital addition qua one subscriber (Omkareshwar Builders Pvt. Ltd.); additions in respect of the remaining contested subscribers sustained subject to conditional verification - if the assessee furnishes proof of subsequent year allotment/realisation within three months, the Assessing Officer shall treat those transactions as genuine, otherwise the additions may be sustained.

Disallowance under Explanation to Section 37(1) of the Income tax Act - Distinction between penal/penalty payments and regulatory/compensatory charges - Tax audit disclosure and its relevance to assessment under section 143(1)(a)(iv) - Payments to stock exchanges for breach of regulations not constituting an offence punishable by law

Disallowance under Explanation to Section 37(1) of the Income tax Act - Distinction between penal/penalty payments and regulatory/compensatory charges - Payments to stock exchanges for breach of regulations not constituting an offence punishable by law - Whether the payments of Rs. 1,12,984/- made to stock exchanges for violations of rules and short/non collection of margins are disallowable under the Explanation to Section 37(1) of the Income tax Act - HELD THAT: - The Tribunal examined the nature of the payments which were levied for delayed intimation of institutional trades, short collection of client margins and related breaches of exchange regulations. Relying on the ratio of the decisions of the Bombay High Court cited by the Tribunal, which hold that payments to stock exchanges for contravention of exchange regulations are not payments for an offence or conduct prohibited by law, the Tribunal concluded that the Explanation to Section 37(1) - which disallows expenditure incurred by way of fines or penalties for an offence or breach of law - is not attracted. The fact that these amounts were disclosed in the tax audit report did not alter the character of the payments; their regulatory/compensatory character places them outside the scope of disallowance under the Explanation. On that basis the Tribunal directed deletion of the addition of Rs. 1,12,984/-, allowing the assessee's grounds of appeal. [Paras 9, 10]

Deletion of the disallowance of Rs. 1,12,984/-, appeal allowed.

Final Conclusion: The Tribunal held that the payments made to the stock exchanges were regulatory/compensatory in nature and not fines for an offence within the scope of the Explanation to Section 37(1); the addition of Rs. 1,12,984/- under section 143(1)(a)(iv) was deleted and the appeal allowed.

Unexplained investment under Section 69B of the Income-tax Act - reopening of assessment and reason to believe under Section 147 - evidentiary value of unsigned, undated electronic/soft copy documents seized from third party - requirement of corroborative evidence before making additions based on documents found at third party premises - use of survey/133A material as a basis for reassessment

Unexplained investment under Section 69B of the Income-tax Act - evidentiary value of unsigned, undated electronic/soft copy documents seized from third party - requirement of corroborative evidence before making additions based on documents found at third party premises - Deletion of addition treating half of alleged undisclosed cash payment as unexplained investment - HELD THAT: - The Tribunal considered whether the Assessing Officer was justified in treating the difference between the consideration shown in a satakhat (soft copy) and the registered sale deed as unexplained investment and making an addition under Section 69B. The material relied upon was an unsigned, undated soft copy satakhat seized from the computer of a third party (an advocate) which, although matching certain specifications (measurement, location) of the registered sale deed, did not bear signatures, dates or direct corroboration from sellers. The Tribunal examined precedents of its own Division/SMC Benches and the Jurisdictional High Court which held that unsigned, undated and unstamped soft copies found at a third party have no independent evidentiary value to sustain additions where no corroborative evidence or direct admission of on money exists. The Tribunal also noted that the assessee had filed written submissions and that lower authorities had not produced corroborative evidence such as admission by sellers or independent verification linking the satakhat to actual cash payments. In view of consistent judicial treatment on similar facts and absence of corroboration, the Tribunal directed deletion of the addition. [Paras 11, 12, 13, 14, 15]

Addition treated as unexplained investment is deleted; ground allowing deletion is allowed.

Final Conclusion: The appeal is allowed by deleting the addition made under Section 69B based on unsigned, undated soft copy satakhat recovered from a third party; the question of validity of reopening under Section 147 was rendered academic by this result.

Treatment of amounts written off as bad debts vis-a -vis allowance as business expenditure under section 36(2) and section 37(1) - remand to appellate authority for verification and decision on merits - reasonableness of adhoc disallowance of cash expenses and limitation of disallowance - admission of additional grounds in appeal in the interest of justice

Treatment of amounts written off as bad debts vis-a -vis allowance as business expenditure under section 36(2) and section 37(1) - remand to appellate authority for verification and decision on merits - Whether amounts written off and claimed as bad debts should be examined as business expenditure or allowable loss and decided on merits by the appellate authority - HELD THAT: - The Tribunal found that the assessment record contained the particulars and documents necessary to verify the nature and genuineness of the amounts written off but that the Assessing Officer examined the claim solely under the statutory conditions for treating amounts as bad debts. The CIT(A) did not adjudicate the alternative plea that the amounts were business expenditure or business loss and thereby left the matter partly undecided, causing prejudice to the assessee. No allegations of non-genuineness were made by the authorities. In these circumstances the Tribunal held that the issue requires verification and a reasoned decision on merits by the CIT(A). The assessee is directed to place all relevant documents before the CIT(A), who must afford proper opportunity of hearing, verify whether the amounts were incurred for the purposes of business and, if so, allow the claim under the appropriate provision rather than sustaining the disallowance made as bad debts. [Paras 4]

Issue remanded to the CIT(A) for verification and a detailed decision on merits; ground no.1 is kept open.

Reasonableness of adhoc disallowance of cash expenses and limitation of disallowance - Whether the adhoc 20% disallowance of certain cash expenses was justified and the extent of permissible disallowance - HELD THAT: - The Tribunal observed that while many cash expenditures were supported only by self-made vouchers and lacked further corroboration, the AO's flat 20% disallowance lacked any articulated basis and was excessive. In exercise of its appellate powers the Tribunal reduced the rate of disallowance to 10% and directed the Assessing Officer to compute the disallowance accordingly, thereby moderating the adhoc deduction while leaving verification of particulars to the AO for computation. [Paras 5]

Adhoc disallowance reduced from 20% to 10%; appeal on this ground partly allowed.

Admission of additional grounds in appeal in the interest of justice - Whether the additional ground filed by the assessee seeking alternative relief should be admitted - HELD THAT: - The Tribunal, having noted that the matter raised in the additional ground had been earlier relied upon before the CIT(A) and that the necessary records were on file, found the additional ground to be an alternative plea inadvertently not pleaded earlier. Applying the principles of allowing additional grounds in the interest of justice and following precedents cited, the Tribunal admitted the additional ground for consideration. [Paras 2]

Additional ground admitted.

Final Conclusion: The appeal is partly allowed: the additional ground is admitted; ground no.1 (disallowance of amounts written off claimed as bad debts) is remanded to the CIT(A) for verification and a decision on merits; the adhoc 20% disallowance is reduced to 10% and to be computed by the Assessing Officer accordingly.

Taxation only on amounts legally imposable - disallowance under Section 37 for contingent liabilities - clerical error in tax audit report (Form 3CD) and its evidentiary effect - intimation under Section 143(1) vis a vis regular assessment under Section 143(3) - co terminus appellate power of Commissioner (Appeals) under Section 251 - mandatory procedure under Section 144B - show cause notice and draft assessment order

Disallowance under Section 37 for contingent liabilities - clerical error in tax audit report (Form 3CD) and its evidentiary effect - taxation only on amounts legally imposable - Deletion of the addition made in intimation under Section 143(1) (and carried into the computation under Section 143(3)) which arose from an auditor's erroneous entry of contingent liability in Form 3CD - HELD THAT: - The Tribunal found on the record that the amount was not debited to the assessee's profit and loss account and that the tax auditor had inadvertently recorded the contingent liability in Form 3CD. A signed clarification from the auditor and project wise details of contingent liabilities were placed on record. The Tribunal applied the settled principle that an assessee cannot be taxed on amounts which are not legally imposable and that a clerical mistake in the tax audit report cannot, without more, form the basis for taxation. In these circumstances the addition proposed on the basis of the Form 3CD entry was a mistake apparent on the record and not a legitimate disallowance under Section 37, and therefore the addition was to be deleted even though it had been reflected in the intimation under Section 143(1) and thereafter used in computation under Section 143(3). [Paras 18, 20, 22, 23]

The additions in respect of the alleged contingent liability are deleted and the taxable income is to be recomputed without that addition.

Intimation under Section 143(1) vis a vis regular assessment under Section 143(3) - co terminus appellate power of Commissioner (Appeals) under Section 251 - Whether the Commissioner (Appeals) was justified in dismissing the appeal on the technical ground that the assessee should have preferred an appeal against the intimation under Section 143(1) - HELD THAT: - The Tribunal held that the Commissioner (Appeals) failed to appreciate the material clarification and documents on record showing the auditor's mistake and that he has co terminus power to adjudicate the matter under the appellate jurisdiction. Given that the regular assessment under Section 143(3) adopted the computation based on the intimation and the assessee had placed on record the auditor's clarification, the CIT(A)'s dismissal on the sole technical ground that the assessee had not appealed the intimation was incorrect. The Tribunal exercised its appellate power to examine the real controversy and correct the error apparent on record. [Paras 19, 23]

The CIT(A)'s dismissal on procedural/technical grounds was set aside and the appeal allowed on the merits.

Mandatory procedure under Section 144B - show cause notice and draft assessment order - intimation under Section 143(1) vis a vis regular assessment under Section 143(3) - Effect of non compliance with the procedural requirements of Section 144B in relation to the processing of the intimation and subsequent assessment - HELD THAT: - The Tribunal observed that the intimation under Section 143(1) was processed without giving the assessee opportunity of representation and that the regular assessment under Section 143(3) followed shortly thereafter without separate verification or issuance of show cause/draft assessment as contemplated by Section 144B. This procedural sequence meant the assessee had no effective opportunity to correct the apparent mistake in the Form 3CD before the computation was adopted for the regular assessment. While the Tribunal did not annul the assessment on the sole ground of procedural lapse, it treated the non compliance as a factor militating in favour of remedial interference given the mistake was apparent on the record and the assessee had produced auditor's clarification. [Paras 21, 22, 23]

Non compliance with the procedure under Section 144B was noted and, in light of the circumstances, the Tribunal directed deletion of the addition rather than remitting the matter for procedural rectification.

Final Conclusion: The assessee's appeal is allowed: the addition made on account of the alleged contingent liability (recorded erroneously in Form 3CD and not debited to the profit and loss account) is deleted and the Assessing Officer is directed to recompute taxable income accordingly; the CIT(A)'s dismissal on the ground of non challenge to the intimation is set aside.

Taxability of bandwidth charges as royalty under section 9(1)(vi) of the Incometax Act - interpretation of Explanations 2, 5 and 6 to section 9(1)(vi) of the Incometax Act as to "use" or "right to use" and "process/secret formula" - applicability of Double Taxation Avoidance Agreements and effect of domestic amendments on treaty provisions - tax deduction at source liability under section 201 for nondeduction on crossborder payments - classification of Annual Maintenance Charges as Fees for Technical Services and the "make available" / MFN issue in DTAA protocols - remand for factual verification of the nature of services (technical v. nontechnical) - taxability of agency fee visavis presence/role of Indian branch (Permanent Establishment attribution)

Taxability of bandwidth charges as royalty under section 9(1)(vi) of the Incometax Act - interpretation of Explanations 2 and 6 to section 9(1)(vi) of the Incometax Act as to "use/right to use" and "process/secret formula" - applicability of DTAA provisions visavis domestic amendments - Bandwidth charges remitted to foreign telecom service providers are not taxable as royalty and no TDS was required to be deducted. - HELD THAT: - The Tribunal applied the binding decision of the jurisdictional High Court in CIT v. Telstra Singapore Pte. Ltd., which construed Explanations 2, 5 and 6 to section 9(1)(vi) and held that availing of telecom/bandwidth services does not confer a right over the payer's technology, equipment or intellectual property and does not amount to transfer or conferment of a right in a patent, invention or process. The High Court further held that amendments to domestic section 9 cannot be automatically read into treaty provisions without corresponding treaty changes. Applying that ratio, the Tribunal held that bandwidth charges are neither royalty under the DTAA nor royalty under section 9(1)(vi) of the Act, and accordingly the assessee had no obligation to deduct tax at source on such payments. [Paras 11]

Bandwidth charges not royalty; assessee not required to deduct TDS; grounds allowed.

Classification of Annual Maintenance Charges as Fees for Technical Services (FTS) - "make available" condition and MFN invocation in DTAA protocols - remand for factual verification of whether services are technical, managerial or consultancy in nature - Whether payments for Annual Maintenance Charges qualify as FTS was not finally decided and is remanded to the Assessing Officer for factual verification. - HELD THAT: - The Tribunal noted that at departmental stages the assessee had confined its defence to applicability of the "make available" condition (relying on MFN/DTAA protocols) and had not substantively contested that the services were technical in nature; consequently, the Assessing Officer and CIT(A) did not examine, on facts, whether the services were technical or merely repair/replacement. The assessee, abandoning the MFN argument before the Tribunal, for the first time asserted the services were nontechnical. Because the factual question of the nature of services was not examined earlier, the Tribunal restored the issue to the Assessing Officer to examine the specific facts, after affording the assessee a reasonable opportunity of hearing. [Paras 21]

Issue remanded to the Assessing Officer for factual verification whether the AMC payments constitute FTS; ground allowed for statistical purposes.

Tax deduction at source on agency fees and attribution to Indian branch/PE - role of Indian branch in arranging services and attribution of receipts - Demand for nondeduction of tax on agency fees paid to foreign banks was deleted; no TDS liability because Indian branches did not participate and no part of fee was attributable to them. - HELD THAT: - The CIT(A) found, on facts, that the Indian branches of the payee banks had not played any role in arranging the loan or reimbursement and therefore no part of the agency fee could be attributed to Indian branches even if they were treated as PE. The Revenue failed to place materials before the Tribunal to rebut this factual finding. The Tribunal found no reason to interfere with the appellate factual conclusion and dismissed the Revenue's ground. [Paras 26]

Revenue's ground dismissed; deletion of demand upheld.

Final Conclusion: Assessee's appeal is partly allowed: bandwidth charges held not to be royalty and no TDS required; AMCFTS issue remanded to the Assessing Officer for factual determination. Revenue's appeal dismissed insofar as deletion of demand on agency fees is concerned.

Drawback entitlement where export proceeds are realised within FEMA timeline - third party payments for export transactions - tripartite agreement as compliance with RBI Master Circular B.2(v) - AD bank's satisfaction and bona fides of transactions - e BRC issuance as bank verification of realisation - freezing and defreezing of bank accounts in recovery proceedings - drawback deemed never to have been allowed where proceeds not realised

Third party payments for export transactions - tripartite agreement as compliance with RBI Master Circular B.2(v) - AD bank's satisfaction and bona fides of transactions - e BRC issuance as bank verification of realisation - drawback entitlement where export proceeds are realised within FEMA timeline - Petitioner entitled to duty drawback despite receipt of export proceeds from third parties where conditions of RBI Master Circular B.2(v) and FEMA timelines are satisfied. - HELD THAT: - The Court examined Section 75 and the proviso that drawback is not allowable where sale proceeds are not received in India within the time allowed under FEMA, and the RBI Master Circular permitting third party payments subject to conditions set out in Rule B.2(v). The Tripartite Agreement dated 05.10.2014 expressly permitted third party payments and was supported by a firm irrevocable purchase order. Bank witnesses recorded under Section 108 stated that the exporter submitted documents (shipping bills, invoice, FIRC/SDF, bill of lading, third party letters, delay explanations) and that the bank was satisfied as to the bona fides of the transactions and processed payments through banking channels. DGFT e BRCs were issued after verification from the bank confirming receipt of payments. The Revisional Authority's conclusion that no documents supported third party payments overlooked the bank statements and witnesses' assurances and did not find the Tripartite Agreement to be forged. On the material before the Court the export proceeds were realised within the FEMA prescribed period and the conditions of the RBI Circular, as applied by the authorised dealer bank, were fulfilled; accordingly the petitioner was entitled to drawback. [Paras 13, 15, 17, 18, 20]

Duty drawback was rightly claimable as export proceeds were realised within FEMA time and third party remittances complied with RBI Circular conditions; the Revisional Authority's contrary conclusion was unsustainable.

Freezing and defreezing of bank accounts in recovery proceedings - drawback deemed never to have been allowed where proceeds not realised - Revisional order upholding recovery and penalty and consequent freezing of petitioner's bank account was set aside and the bank account ordered to be defrozen. - HELD THAT: - Having found that the prerequisites for permitting third party payments were met, that e BRCs were issued following bank verification, and that the Revisional Authority failed to base its adverse conclusion on proper appreciation of bank records and witness statements, the Court held there was no justification for maintaining the freeze on the petitioner's bank account. The revisional order therefore could not be sustained; in light of the determinations on realisation and compliance, the measure of freezing was unwarranted. [Paras 20, 21, 22]

Impugned revisional order dated 18.08.2022 set aside and respondents directed to defreeze the petitioner's bank account.

Final Conclusion: The writ petition is allowed: on findings that third party remittances complied with the RBI Master Circular and export proceeds were realised within FEMA timelines (supported by bank statements, tripartite agreement and e BRCs), the Court set aside the revisional order and directed defreezing of the petitioner's bank account; the petition stands disposed of.

Failure of principles of natural justice - opportunity to be heard / audi alteram partem - imposition of bond and bank guarantee as pre-condition for clearance - requirement of a speaking order - rule 6(4)(C) of the CAROTAR Rules 2020

Failure of principles of natural justice - imposition of bond and bank guarantee as pre-condition for clearance - opportunity to be heard / audi alteram partem - Validity of conditions dated 05 August 2024 and 06 August 2024 requiring a full bond and 100% bank guarantee for two bills of entry insofar as they were imposed without affording the petitioner notice of that proposal or an opportunity to be heard. - HELD THAT: - The Court examined the emails and notices sent to the petitioner and found that, although those communications sought certain documents, none referred to a proposal to require a full bond and a bank guarantee securing 100% of the differential duty, nor cited the provisions of Rule 6(4)(C) of the CAROTAR Rules 2020. The principles of natural justice require that the noticee have a fair idea of the case it must meet; absent any indication that the petitioner was put on notice about the specific proposal to demand the bond and bank guarantee, no opportunity was afforded to address that proposal. For these procedural defects the imposition of the impugned conditions cannot stand, irrespective of any merits-based consideration. [Paras 11, 12]

Impugned conditions dated 05 August 2024 and 06 August 2024 set aside on account of failure to comply with principles of natural justice.

Requirement of a speaking order - opportunity to be heard / audi alteram partem - Procedure to be followed on remand after setting aside the impugned conditions. - HELD THAT: - Having set aside the conditions for procedural non-compliance, the Court directed that the petitioner be given a further opportunity to file its response on the issue of furnishing a full bond and bank guarantee within one week. Thereafter the concerned officer must hear the petitioner or its representatives and decide the matter by passing an appropriate speaking order in accordance with law within two weeks of receipt of the petitioner's response. The Court expressly left all substantive contentions open and stated that it was interfering only with the decision-making process and not with the merits of the impugned conditions. [Paras 13, 14]

Petitioner to file response within one week; respondent to hear and pass a reasoned/speaking order within two weeks of that response; merits left open for fresh consideration.

Final Conclusion: The Court set aside the conditions requiring a full bond and 100% bank guarantee dated 05 and 06 August 2024 for the two bills of entry for failure to afford the petitioner notice of that proposal and an opportunity to be heard, directed the petitioner to file its response within one week and ordered the authority to hear the petitioner and pass a speaking order within two weeks, leaving substantive issues open.

Dismissing appeal as time barred - condonation of delay under Section 128 of the Customs Act - exercise of discretionary relief despite procedural bar - remand for verification and production of fresh Chartered Accountant's certificate - genuineness of refund claim and departmental examination

Dismissing appeal as time barred - condonation of delay under Section 128 of the Customs Act - exercise of discretionary relief despite procedural bar - Whether the orders dismissing the appeal as time barred could be set aside and the matter reopened in the peculiar facts of the case - HELD THAT: - The Court noted that under Section 128 of the Customs Act the maximum period for filing an appeal is sixty days with a condonable period of thirty days, so appeals beyond ninety days cannot ordinarily be entertained; accordingly, the orders of the Commissioner (Appeals) and the Tribunal in dismissing time barred appeals could not be faulted on a strict reading of the statute. However, having considered the facts - namely that a refund had been granted based on documents including a Chartered Accountant's certificate, the department later issued a show cause alleging the certificate was invalid because one partner had died, the relatively small amount involved, and the appellant's contention that the defect appears to be a mistake by the Chartered Accountant firm rather than fraud - the Court exercised its discretion to afford an appropriate remedy. In view of these peculiar circumstances and in order to enable the adjudicating authority to examine the substantive claim, the Court set aside the impugned orders and remanded the matter to the Refund Section for receipt, examination and verification of a fresh Chartered Accountant's certificate and for passing a fresh order in accordance with law.

Orders of the Tribunal, Commissioner (Appeals) and the adjudicating authority are set aside and the matter is remanded to the Refund Section to permit production and verification of a fresh Chartered Accountant's certificate and for a fresh decision in accordance with law.

Remand for verification and production of fresh Chartered Accountant's certificate - genuineness of refund claim and departmental examination - Direction to the adjudicating authority on remand regarding evidence and fresh adjudication - HELD THAT: - The Court directed that the appellant shall produce a fresh Chartered Accountant's certificate before the Refund Section of the Customs House. The Refund Section is to examine and verify the fresh certificate and the claim for refund and thereafter pass a fresh order in accordance with law. The Court treated the defect in the originally produced certificate as capable of rectification by permitting production of fresh evidence rather than treating the case as one of fraud or forgery, having regard to the departmental practice in similar cases and the limited revenue involved.

The adjudicating authority is directed to accept and verify a fresh Chartered Accountant's certificate and pass a fresh order in accordance with law on remand.

Final Conclusion: The appeal is allowed; the orders of the adjudicating authority, the Commissioner (Appeals) and the Tribunal are set aside and the matter is remanded to the Refund Section for receipt, verification of a fresh Chartered Accountant's certificate and fresh adjudication; the substantial questions of law are left open.

Obligation to verify identity and functioning of client under Regulation 10(n) of CBLR, 2018 - due diligence of a Customs Broker in KYC verification - no duty on Customs Broker to investigate or determine beneficial owner - cooperation with investigating authorities as mitigating factor - imposition of penalty under Customs Broker Licensing Regulations, 2018

Obligation to verify identity and functioning of client under Regulation 10(n) of CBLR, 2018 - due diligence of a Customs Broker in KYC verification - Whether the Customs Broker contravened Regulation 10(n) of CBLR, 2018 by failing to verify the identity/authorization of the person (Shri Ashok Kumar) who acted for the declared importer. - HELD THAT: - Regulation 10(n) requires a Customs Broker to verify the correctness of IEC, GSTIN and the identity and functioning of his client at the declared address by using reliable, independent, authentic documents or information. The record shows the Customs Broker obtained and produced KYC documents and authorisation for the declared importer, M/s. Aparna Overseas, verified the importer's address, contacted the importer and cooperated with investigations. The Court accepted that the obligation under Regulation 10(n) is confined to verification of the Broker's client (the importer) and does not extend to assuming the role of an investigating agency to ascertain the ultimate beneficial owner or to reconstruct behind-the-scenes commercial linkages. The Adjudicating Authority's emphasis on identifying the beneficial owner and requiring KYC of the person coordinating the clearance went beyond the regulatory mandate. Consequently, on the facts, the Broker complied with Regulation 10(n) and there was no contravention of that provision. [Paras 10, 11, 12, 14]

No contravention of Regulation 10(n) was established; the Customs Broker acted with due diligence in verifying the importer.

No duty on Customs Broker to investigate or determine beneficial owner - cooperation with investigating authorities as mitigating factor - imposition of penalty under Customs Broker Licensing Regulations, 2018 - Whether the penalty of Rs.50,000 imposed on the Customs Broker was justified in the circumstances. - HELD THAT: - The Tribunal noted that the Broker cooperated with the investigating authorities, provided information that assisted tracing the person who dealt with the clearance, and promptly informed officers when mis-declaration was discovered. Given the finding that the Broker had complied with the KYC obligations owed to its client, imposing punishment under the CBLR for failure to verify an alleged beneficial owner was unsustainable. The Adjudicating Authority had proceeded on an incorrect premise by requiring the Broker to verify the actual beneficial owner rather than the declared client. In light of compliance with Regulation 10(n) and the mitigating conduct, the penalty imposed was without justification. [Paras 11, 15]

Penalty set aside as unsustainable; appeal allowed.

Final Conclusion: The Tribunal held that the Customs Broker fulfilled its obligations under Regulation 10(n) of the CBLR, 2018 by verifying the declared importer and cooperating with investigations, and that there is no duty on the Broker to investigate or determine the ultimate beneficial owner; consequently the penalty imposed was set aside and the appeal was allowed.

Includability of royalty in transaction value under Rule 10(1)(c) of the Customs (Valuation) Rules, 2007 - condition of sale as determinative for adding royalties - arm's length nature of related party pricing - royalty for post importation activities not includible in assessable value

Includability of royalty in transaction value under Rule 10(1)(c) of the Customs (Valuation) Rules, 2007 - condition of sale as determinative for adding royalties - arm's length nature of related party pricing - Whether royalty paid to the foreign licensor must be added to the transaction value of imported goods under Rule 10(1)(c) when imports are from related parties - HELD THAT: - The Tribunal examined whether the royalty payments were a condition precedent to the supply of imported goods so as to be includible in the transaction value. It applied the decisional principle that royalties are includible only if they are relatable to the imported goods and constitute a condition of sale. The record showed that past determinations by the authorities had accepted the invoice value of imports as reflecting arm's length pricing and that the royalty was payable on net sales of the finished product and arose in the context of the license to manufacture. On the facts, the pricing was found to be at arm's length and the relationship had not influenced the price; the royalty was not shown to be a pre requisite condition of supply of the imported inputs. Applying the legal test as discussed in the precedents relied upon, the Tribunal held that there was no justification to load the royalty into the transaction value under Rule 10(1)(c). [Paras 4, 13, 14]

Royalty payments need not be added to the transaction value; the Commissioner (Appeals) decision to exclude royalty from assessable value is upheld.

Final Conclusion: The Revenue's appeal is dismissed; the impugned order of the Commissioner (Appeals) excluding the royalty from the transaction value is affirmed.

Classification of DLP data projectors - goods "solely or principally used" in an automatic data processing system - distinction between sub-heading 8528.61 and residual 8528.69 - entitlement to exemption under Notification No.24/2005-Cus. - precedential value of Tribunal and Supreme Court decisions

Classification of DLP data projectors - goods "solely or principally used" in an automatic data processing system - distinction between sub-heading 8528.61 and residual 8528.69 - entitlement to exemption under Notification No.24/2005-Cus. - Imported DLP data projectors are classifiable under CTH 8528 6100 (8528.61) and are entitled to exemption under Notification No.24/2005-Cus rather than being classifiable as "other projectors" under CTH 8528 6900. - HELD THAT: - The Tribunal held that projectors not incorporating television reception apparatus but which are solely or principally used for data projection when connected to computers fall within the sub-heading 8528.61. Incidental or additional video compatibility (Video Port, S Video Port, HDMI, etc.) does not alter the principal character of the goods so as to attract classification under the residual heading 8528.69. The decision follows a consistent line of Tribunal authority, including decisions affirmed by the Supreme Court, which have recognised that the sub heading covers both "sole use" and "principal use" for data projection and thereby attracts the exemption under Notification No.24/2005-Cus. Applying those precedents to the facts before it, the Tribunal found no basis to reclassify the imported DLP projectors as "other projectors" and therefore upheld the classification under CTH 8528 6100 and the claim to exemption. [Paras 3, 4, 5]

The appeals filed by the Revenue are dismissed and the impugned orders upholding classification under CTH 8528 6100 and entitlement to exemption under Notification No.24/2005-Cus are affirmed.

Final Conclusion: Consistent Tribunal and Supreme Court authorities establish that DLP data projectors principally used for data projection are classifiable under sub heading 8528.61 and qualify for exemption under Notification No.24/2005 Cus; the Revenue's appeals seeking reclassification to 8528.6900 are dismissed.

Timeliness of claim in CIRP - role and duties of the resolution professional in collating and publishing claims - information memorandum and disclosure of material litigation - clean slate principle - binding nature of an approved resolution plan - inadmissibility of belated claims after approval of resolution plan

Timeliness of claim in CIRP - role and duties of the resolution professional in collating and publishing claims - Whether the Income Tax Department filed a crystallised claim in time and whether the Resolution Professional erred in treating or reflecting that claim in the Information Memorandum. - HELD THAT: - The Court found that the Income Tax Department submitted a Form B on 08.11.2019 informing the RP of a likely heavy demand but did not indicate any determinative or crystallised amount. The RP published the list of creditors which included the Department, and consequently followed the prescribed procedure for collating claims. Because the Form B remained nebulous and indeterminate and no crystallised claim amount was submitted within the stipulated timeframe for claims, the claim could not be incorporated into the Information Memorandum. Reliance was placed on the Supreme Court's observation that adherence to CIRP timelines is fundamental and that a claim not made within the stipulated time cannot become part of the IM and thus will not be considered by resolution applicants. [Paras 10, 11, 12, 13]

The Income Tax Department did not file a crystallised claim within time; the RP did not err in failing to reflect an indeterminate claim in the Information Memorandum.

Information memorandum and disclosure of material litigation - timeliness of claim in CIRP - Whether the Adjudicating Authority erred in approving the resolution plan without awaiting completion of the Department's assessment proceedings. - HELD THAT: - The Adjudicating Authority had expressly permitted the Income Tax Department to carry out assessments for A.Y. 2013-14 to 2019-20 and directed that the Department file its claim with the RP within time, cautioning that assessments should not delay CIRP. The assessments for the relevant years were finalised after the CoC and Adjudicating Authority had approved the resolution plan. Given the statutory scheme which requires finality and time-bound resolution, and the Department's failure to crystallise and file its claim within the prescribed process and timeline, the Adjudicating Authority was not obliged to await post-hoc assessment outcomes before approving the plan. Allowing belated inclusion would frustrate CIRP timelines and the RP/CoC process. [Paras 16, 17, 18, 19, 29]

No error was committed by the Adjudicating Authority in approving the resolution plan without awaiting the outcome of belated assessment proceedings.

Clean slate principle - binding nature of an approved resolution plan - inadmissibility of belated claims after approval of resolution plan - Whether belated statutory claims (including tax demands crystallised after approval) can be admitted against the Successful Resolution Applicant after the resolution plan is approved. - HELD THAT: - The Court applied the 'clean slate' principle as expounded by the Supreme Court: once a resolution plan is approved by the Adjudicating Authority under Section 31, claims not part of the approved plan stand frozen or extinguished and cannot be enforced against the SRA. This legislative and judicial framework aims to provide finality and prevent surprise claims that would render a plan unworkable. Precedents cited establish that permitting belated claims post-approval would reopen the resolution, undermine the plan's viability and frustrate the time-bound objectives of the IBC. The Department's crystallisation of demands after plan approval therefore could not be allowed to upset the approved plan. [Paras 23, 24, 25, 26, 28]

Belated statutory claims crystallised after approval of the resolution plan cannot be admitted or enforced against the Successful Resolution Applicant; the approved plan is binding and affords a fresh slate.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority did not err in approving the resolution plan: the Income Tax Department failed to file a crystallised claim in time, the RP acted appropriately in collating claims, and belated tax assessments and demands finalised after approval cannot be admitted against the Successful Resolution Applicant in view of the 'clean slate' principle and the binding nature of an approved resolution plan.

Belated claims in Corporate Insolvency Resolution Process - moratorium under Section 14 of the Insolvency & Bankruptcy Code - treatment of statutory dues in a Resolution Plan - extinguishment/waiver of claims upon approval of a Resolution Plan - commercial wisdom of the Committee of Creditors - form and manner of filing claims in CIRP

Form and manner of filing claims in CIRP - belated claims in Corporate Insolvency Resolution Process - Whether filing the claim in Form 'F' (instead of Form 'B') or procedural irregularity in form warranted rejection of the Appellant's claim. - HELD THAT: - The Tribunal rejected the Respondent's contention that the claim's filing in Form 'F' instead of Form 'B' justified rejection. Relying on recent authority, the Tribunal held that filing in the wrong form cannot, by itself, be a ground for rejection of claims and therefore this argument of the Respondent is not sustainable. [Paras 49]

The objection based on wrong form of filing is rejected and does not invalidate the Appellant's claim.

Belated claims in Corporate Insolvency Resolution Process - commercial wisdom of the Committee of Creditors - Whether the Appellant's substantially delayed claim (filed long after the public announcement and after approval by CoC) ought to be entertained. - HELD THAT: - The Tribunal noted that time is of the essence in CIRP and recorded that the Appellant filed its claim long after the public announcement and after being informed; the Appellant failed to provide a plausible explanation for the inordinate delay. Having regard to the need for finality in the resolution process and the risk that late claims would indefinitely impede implementation, the Tribunal found no plausible reason to allow such belated claims. The Tribunal also relied on Supreme Court authorities cautioning against reopening approved plans to entertain late claims. [Paras 50, 51, 63, 67, 68]

The belated nature of the Appellant's claim, unexplained and filed well after the relevant dates, precluded its acceptance.

Treatment of statutory dues in a Resolution Plan - extinguishment/waiver of claims upon approval of a Resolution Plan - Whether the approved Resolution Plan dealt with the stamp duty liability and whether post-approval claims would be binding or extinguished. - HELD THAT: - The Tribunal examined the Resolution Plan and the approval order and found that stamp duty payments were expressly addressed in the Resolution Plan (including definitions and clauses dealing with payment, waiver and extinguishment). The Adjudicating Authority had considered the stamp authority's claim while approving the Plan and recorded that unpaid liabilities not filed before approval would stand extinguished. Consistent with Supreme Court precedents, the Tribunal held that once a plan is approved by CoC and sanctioning authority, claims frozen by the plan cannot thereafter be permitted to disrupt the clean slate on which the successful resolution applicant proceeds. [Paras 54, 55, 61, 64, 66]

The Resolution Plan dealt with the stamp duty liability and, upon approval, relevant unfiled or post-approval claims are to be treated in accordance with the Plan, including extinguishment where so provided.

Moratorium under Section 14 of the Insolvency & Bankruptcy Code - belated claims in Corporate Insolvency Resolution Process - Whether the moratorium under Section 14 is inapplicable to the Appellant's stamp duty claim which arose from events predating the insolvency process. - HELD THAT: - The Tribunal considered Section 14 and observed that the Code mandates declaration of moratorium on the insolvency commencement date, which restrains continuation of pending proceedings against the corporate debtor. The Tribunal held that the Appellant's contention that moratorium cannot apply because the demerger (and attendant stamp duty liability) predated insolvency is not sustainable: pending proceedings against the corporate debtor are barred by moratorium, and the impact of such pre-existing liabilities is to be dealt with within the CIRP and the Resolution Plan framework. [Paras 56, 57]

The plea that moratorium under Section 14 does not apply because the liability arose earlier is rejected.

Characterisation of statutory dues as secured or operational claims - treatment of statutory dues in a Resolution Plan - Whether the Appellant's contention that its demand constitutes a charge/security interest or falls within a particular definition under the Code altered its treatment in the CIRP. - HELD THAT: - The Tribunal observed that questions about classification under Sections 3(4)/3(6) or as secured interest were not determinative for the present controversy because the primary dispute was not non-consideration but that the claim was filed belatedly and the liability was addressed by the Resolution Plan. The Tribunal therefore found the characterisation arguments not relevant to the outcome, which turned on timing, finality of the approved plan and its provisions for stamp duty. [Paras 58]

The submission on classification under Sections 3(4)/3(6) is not germane to the adjudication; the claim's belated filing and the Plan's terms govern the outcome.

Final Conclusion: The appeal is dismissed for lack of merit: the objection based on wrong form of filing is rejected, the Appellant's belated claims (filed long after public announcement and approval processes) could not be entertained, the approved Resolution Plan had expressly dealt with stamp duty liabilities and provided for waiver/extinguishment as applicable, and the moratorium under Section 14 operates to bar continuation of pending proceedings; accordingly the Impugned Order is upheld. No costs.

Cancellation of lease prior to CIRP and effect on asset status - restoration application does not revive lease without authoritative decision - deemed possession or tenancy not to be presumed from inaction of lessor - duties and conduct of Resolution Professional during CIRP - application of moratorium under Section 14 of the IBC

Cancellation of lease prior to CIRP and effect on asset status - restoration application does not revive lease without authoritative decision - deemed possession or tenancy not to be presumed from inaction of lessor - application of moratorium under Section 14 of the IBC - Whether the lease of the subject plot having been cancelled before commencement of CIRP remained an asset of the Corporate Debtor and whether moratorium under Section 14 IBC applied. - HELD THAT: - The Tribunal found on the material on record that the Noida authority cancelled the lease of the subject plot on 13.08.2015, well before commencement of CIRP. There was no evidence of restoration of the lease by authoritative action; merely filing a belated restoration application could not be treated as reviving the lease. Absence of physical repossession or other follow-up action by the authority does not create a deemed subsisting lease or tenancy in favour of the Corporate Debtor. Consequently, the subject plot ceased to be an asset of the Corporate Debtor from the date of cancellation and therefore the moratorium under Section 14 of the IBC did not apply to that plot. [Paras 12, 13, 14]

Lease cancelled prior to CIRP was not an asset of the Corporate Debtor; restoration application did not revive the lease; moratorium under Section 14 IBC does not apply to that plot.

Duties and conduct of Resolution Professional during CIRP - deemed possession or tenancy not to be presumed from inaction of lessor - Whether the Resolution Professional acted appropriately in treating the cancelled plot as part of the Corporate Debtor's assets and in including it in the Information Memorandum and the resolution plan. - HELD THAT: - The Tribunal endorsed the Adjudicating Authority's conclusion that the RP was aware of the cancellation of the lease yet proceeded to prepare the Information Memorandum, invite EOIs and obtain COC approval as if the plot formed part of the Corporate Debtor's estate. Given the undisputed record of cancellation and the RP's own admissions, greater circumspection was required; continuing to project the cancelled plot as an asset and to advance a resolution plan premised on ownership of that land was improper. The Adjudicating Authority's observations on the RP's unbecoming and unfair conduct during CIRP were held to be justified. [Paras 15, 17, 18]

Observations of the Adjudicating Authority regarding the RP's improper conduct in treating the cancelled plot as part of the estate are affirmed; the RP should not have included the cancelled plot in the resolution process.

Final Conclusion: The Tribunal found no merit in the appeal; the impugned order's conclusions that the subject plot was not part of the Corporate Debtor's assets and the adverse observations on the RP's conduct are affirmed. Appeal dismissed; no order as to costs.

Section 436A CrPC - Section 45 PMLA - twin conditions for bail - right to speedy trial under Article 21 - long incarceration as ground for bail - non-bailable nature of PMLA offences - proviso to Section 436A - continued detention for reasons to be recorded - parity in grant of bail

Section 436A CrPC - Section 45 PMLA - twin conditions for bail - right to speedy trial under Article 21 - long incarceration as ground for bail - Entitlement to bail in PMLA offence on account of having undergone detention equivalent to one-half of the maximum sentence under Section 436A CrPC despite the non-bailable rigours of Section 45 of the PMLA. - HELD THAT: - The Court applied the principle that Section 436A CrPC, being a subsequent and beneficial statutory provision, operates in favour of an undertrial even in proceedings under the PMLA, subject to the court's discretion and the proviso permitting continued detention for reasons recorded in writing. The applicant was arrested in the PMLA offence on 5th March 2021 and has undergone detention of roughly 3 years and 7 months, which exceeds one-half of the maximum sentence (7 years) prescribed for the offence under Section 4 PMLA. The Court relied on the Supreme Court's decisions holding that Section 436A is available in PMLA cases and that, where delay in trial results in detention up to half the maximum sentence, Article 21 considerations and Section 436A may justify bail unless the accused is responsible for the delay or other circumstances disentitle him. There is no material showing the applicant caused delay; the charge-sheet is voluminous, trial has not commenced, many witnesses are to be examined and the trial is likely to be protracted. Although the offences are serious and prima facie material points to involvement, the statutory bail remedy under Section 436A was held to be available and appropriate in the facts, subject to conditions to secure attendance and prevent tampering with evidence. Accordingly, the Court exercised its discretion to grant bail on stringent conditions. [Paras 16, 20, 21, 22, 24]

Bail granted under Section 436A CrPC in the PMLA case on account of long incarceration, subject to specified conditions.

Final Conclusion: The Court granted bail to the applicant in the PMLA offence under Section 436A CrPC despite the non bailable rigours of Section 45 PMLA, concluding that the applicant had undergone detention exceeding one half of the maximum sentence, was not responsible for delay, and that bail could be accorded on conditions to safeguard the trial process.

Online Information and Database Access or Retrieval Service - Export of service - place of provision as location of recipient (Rule 3 of Place of Provision of Services Rules, 2012) - OIDAR / automated distance teaching vs interactive e learning - Project implementing agency under Centrally Sponsored Scheme - not a service provider - Approved vocational education / Modular Employable Skill (MES) - negative list coverage - Negative list of services (Section 66D(1))

Online Information and Database Access or Retrieval Service - Export of service - place of provision as location of recipient (Rule 3 of Place of Provision of Services Rules, 2012) - OIDAR / automated distance teaching vs interactive e learning - Whether the appellant's supply of e learning content to a US entity and provision of tutors for an online tutoring platform in UAE are 'Online Information and Database Access or Retrieval Service' and therefore not exports under Rule 6A read with Rule 9(b) of the POPS Rules, 2012. - HELD THAT: - The Tribunal examined the CBEC Education Guide and the characteristics of services classified as 'Online Information and Database Access or Retrieval Services', noting that such services are essentially delivered over the internet as automated services requiring minimal human intervention. The appellant developed bespoke e learning content (analysis, design, scripting, multimedia integration and testing) and supplied it to the foreign recipient, which hosted the content on its learning management system. Similarly, the appellant supplied tutors who interacted with students on a platform hosted and operated by the foreign recipient. These activities involve substantive human intervention and instructional interaction and are not automated data access services. The Tribunal relied on the reasoning in Dewsoft Overseas Pvt. Ltd. that interactive online teaching/training constitutes commercial training/coaching rather than mere access or retrieval of data. The Circular's reference to automated distance teaching (OIDAR Sl.16(5)) was read as limited to automated, minimal human intervention teaching, and therefore did not bring the appellant's interactive services within OIDAR. Applying Rule 3 of the POPS Rules, 2012 and Rule 6A of the Service Tax Rules, 1994, the place of provision is the location of the recipient and the services qualify as export of service. [Paras 8, 11, 13]

Services for supply of e learning content to the US entity and provision of tutors to the UAE entity are not 'Online Information and Database Access or Retrieval Service' and qualify as export of service; no service tax is leviable on these supplies.

Project implementing agency under Centrally Sponsored Scheme - not a service provider - Approved vocational education / Modular Employable Skill (MES) - negative list coverage - Negative list of services (Section 66D(1)) - Whether the appellant's implementation of the 'Sant Shiromani Ravidas High Skill Development' programme for the State of Gujarat is liable to service tax. - HELD THAT: - The Tribunal noted that the programme is implemented under the State's Skill Development Initiative and that the courses are Modular Employable Skill (MES) courses approved by the National Council for Vocational Training (NCVT). The appellant acted as the project implementation agency for the State under a centrally sponsored scheme. The Tribunal found the adjudicating authority's requirement of separate registration with the Directorate General of Training to deny negative list treatment unsustained in the record and observed that the programme's connection with NCVT/MES is apparent from government publications and certificates. In view of the scheme's nature and the status of the training as approved vocational education, the activity falls within the negative list entry and the CBEC clarification that implementing agencies under such centrally sponsored schemes are not in the nature of service providers supports non levy. [Paras 14, 15, 16]

Training provided under the Sant Shiromani Ravidas High Skill Development programme (MES/NCVT approved) by the appellant as project implementing agency is not liable to service tax.

Sale of goods vs provision of service - burden of proof - Evidence of trading activity - invoices and CA certificate - Whether amounts reflected as 'other receipts' in the appellant's accounts (sale of fabrics) are chargeable to service tax as consideration for services. - HELD THAT: - The appellant consistently recorded and disclosed that the receipts related to trading in fabrics; this was supported by the Finance Manager's statement, purchase and sales invoices and a Chartered Accountant's certificate placed before the adjudicating authority. The Tribunal found that the Department did not undertake further investigation to contradict these documents and that the Commissioner erred in rejecting the evidence on the ground of non filing of VAT returns, particularly where VAT applicability was disputed. In absence of evidence from the Department proving that the receipts were consideration for services or identifying service recipients, the demand could not be sustained. [Paras 16]

Amounts shown as 'other receipts' relating to sale of fabrics do not attract service tax on the record before the Tribunal; the demand insofar as it pertains to these receipts is set aside.

Final Conclusion: The Tribunal set aside the impugned adjudication: the e learning content export and online tutoring supplies were held to be exports of service (not OIDAR) and not taxable; the training under the Sant Shiromani Ravidas programme as implemented by the appellant is not liable to service tax; and the claimed 'other receipts' from sale of fabrics were not shown to be consideration for taxable services and the demand in respect thereof was set aside. The appeal is allowed on merits with consequential relief as per law.

Payment of tax under protest - limitation for refund claim - principle of mutuality - non-applicability of doctrine of unjust enrichment - refund of service tax with interest

Payment of tax under protest - limitation for refund claim - Validity of the letter of protest and whether the refund claim is barred by limitation - HELD THAT: - The Tribunal found that the respondent submitted an express letter asserting payment under protest. The fact that the letter was filed with the Superintendent (and not a different divisional office) does not defeat the objective of paying under protest; what is material is expression of intention to pay under protest. Consequently, the refund claim cannot be held time-barred on the ground that payment was not made under protest.

The payment under protest is valid and the refund claim is not hit by limitation.

Principle of mutuality - Whether amounts collected by the club from its members for club services are liable to service tax - HELD THAT: - Relying on the Supreme Court's pronouncement in State of West Bengal v. Calcutta Club Limited and consistent High Court and Tribunal reasoning, the Tribunal held that transactions between a club/association and its members fall within the principle of mutuality. On that principle there is no contract of service between two distinct parties; therefore, the amount collected from members for such mutual transactions does not attract service tax.

Services rendered by the club to its members are not taxable on the principle of mutuality; the department's reliance on other club decisions pending before the Supreme Court was not a ground to deny relief.

Non-applicability of doctrine of unjust enrichment - Applicability of the doctrine of unjust enrichment to refund claims by the club on behalf of members - HELD THAT: - The Tribunal agreed with the Commissioner (Appeals) and earlier Tribunal findings in the appellant's own case that unjust enrichment arises only where two distinct parties exist. Given the mutuality between club and members (no separate service provider and recipient), any tax paid between members and the club is an internal transfer within the same entity and cannot amount to passing on of tax or unjust enrichment. Therefore, the doctrine of unjust enrichment does not defeat the club's refund claim.

Doctrine of unjust enrichment is not applicable; the refund claim is not liable to be refused on that ground.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals) order, held the payment under protest valid and the refund claim not time-barred, found services to members non-taxable on the principle of mutuality and that unjust enrichment does not apply; Revenue's appeal is dismissed and the respondent is entitled to refund of service tax paid for April 2014 to September 2014 with interest in accordance with law.

Classification of input as plastic waste - benefit of exemption notification - predominance of inputs - rectification of mistake - error apparent on record - limitation and scope of demand

Rectification of mistake - error apparent on record - points not raised before adjudicating authority - Application for rectification of mistake in the Tribunal's final order rejected. - HELD THAT: - The Tribunal held that the submissions now advanced in the rectification application were not part of the reply to the show cause notice nor raised before the Adjudicating Authority and therefore fell outside the scope of the appeal which challenged the order in original dated 12.10.2021. The final order dated 05.03.2024 had considered the matter on merits and on limitation; absent any demonstrable apparent error on the face of the record, the appellant could not use a rectification application to raise new grounds or re-open the appeal. The Tribunal treated the application as an impermissible attempt to re-litigate matters already decided and found no error apparent on record warranting rectification.

Rectification application dismissed for lack of merit; no error apparent on record.

Classification of input as plastic waste - benefit of exemption notification - predominance of inputs - On merits, goods ('Popcorn') manufactured from yarn/textile waste do not qualify as manufactured from plastic waste/scrap for the purpose of the exemption notification; benefit of the notification denied. - HELD THAT: - The Adjudicating Authority found, and the Tribunal affirmed, that the appellant used textile yarn waste (classified under Chapter 55) in manufacture of 'Popcorn' and subsequently PSF. The Tribunal endorsed the view that the exemption notification permits only plastic waste and scrap (with PET bottles as an exceptional inclusion) as inputs; use of inputs that do not fall within that description precludes claim of the notification. The argument that predominance of plastic inputs could import the notification where textile waste was also used was rejected because allowing mixed or indeterminate inputs would defeat the specific scope of the notification. The Tribunal therefore affirmed the merits finding against the appellant.

Benefit of the exemption notification denied; product manufactured from yarn/textile waste does not qualify as made from plastic waste/scrap.

Limitation and scope of demand - Monthly ER-1 Returns - Demand of duty confined to the period Jan. 2017 to June, 2017. - HELD THAT: - While the Tribunal upheld the adverse merits finding, it also recorded that the issue of limitation had been decided against the Revenue so that the duty demand was confined to the stated period. The show cause notice and inquiry were framed on the basis of Monthly ER-1 Returns covering 11.07.2014 to 30.06.2017, but the Tribunal limited confirmation of demand to Jan. 2017-June 2017. The rectification application could not be used to revisit this limitation decision.

Demand confirmed only for Jan. 2017 to June, 2017; limitation decision left intact.

Final Conclusion: The application for rectification was dismissed; on merits the Tribunal affirmed that goods manufactured from yarn/textile waste do not qualify for the exemption applicable to plastic waste/scrap (with PET bottles as an exception), and the duty demand was confirmed limited to the period Jan. 2017 to June, 2017.

Cenvat credit on capital goods - bar on Cenvat credit where capital goods used exclusively for manufacture of exempted goods for two years - substituted Rule 6(4) of the Cenvat Credit Rules - computation of two year period from commencement of commercial production or installation - retrospective applicability of substituted Rule 6(4) - use of capital goods not continuous for two years breaks exclusivity - parallel invocation of Notification No. 29/2004-CE and Notification No. 30/2004-CE

Cenvat credit on capital goods - substituted Rule 6(4) of the Cenvat Credit Rules - computation of two year period from commencement of commercial production or installation - use of capital goods not continuous for two years breaks exclusivity - parallel invocation of Notification No. 29/2004-CE and Notification No. 30/2004-CE - Entitlement to Cenvat credit on imported capital goods which were initially used while the assessee availed exemption under Notification No. 30/2004-CE but were put to use for dutiable clearances under Notification No. 29/2004-CE before completion of two years. - HELD THAT: - The Tribunal examined the substituted Rule 6(4) which provides that denial of Cenvat credit on capital goods applies only where such goods are used exclusively in manufacture of exempted goods for a period of two years from commencement of commercial production or, where received later, from date of installation. Applying that substituted rule, the Tribunal found that the capital goods in question were installed in November 2014 but, prior to completion of two years, the assessee began clearing the manufactured goods on payment of duty under Notification No. 29/2004-CE from August 2016. Consequently the capital goods were not used continuously and exclusively for exempted manufacture for the two year period. The Tribunal further treated the substitution of Rule 6(4) as applicable retrospectively and relied on earlier authority and the appellant's own earlier final order (A/11732/2019 dated 30.07.2019) where identical facts led to allowance of Cenvat credit. On that basis the Tribunal concluded that the bar in Rule 6(4) did not apply and Cenvat credit was admissible. [Paras 4, 5]

Impugned order set aside and appeal allowed; Cenvat credit on the capital goods held admissible.

Final Conclusion: The Tribunal allowed the appeal and held that substituted Rule 6(4) restricts denial of Cenvat credit only where capital goods are used exclusively for exempted manufacture for two years from commencement/installation; as the assessee began dutiable clearances before completion of two years, Cenvat credit on the imported capital goods is admissible.

Concessional rate of duty under Notification No. 23/2003-CE - similar goods - by-products included in LoP - EOU DTA sales entitlement under Para 6.8(a) and (g) of Foreign Trade Policy - extended period of limitation under Section 11A - penalty under Rule 26 of Central Excise Rules, 2002

Concessional rate of duty under Notification No. 23/2003-CE - similar goods - by-products included in LoP - EOU DTA sales entitlement under Para 6.8(a) and (g) of Foreign Trade Policy - Entitlement of the appellants to concessional Central Excise duty on clearances of by-products Ammonium Carbonate Liquor and Ammonium Sulphate into DTA - HELD THAT: - The Tribunal examined the LoP issued by the Development Commissioner which explicitly included the by-products, the provisions of Para 6.8(a) and (g) of the Foreign Trade Policy permitting DTA sales of by-products within overall entitlement, and the conditions of Notification No. 23/2003-CE. The appellants had fulfilled export obligations, achieved positive NFE, and filed returns disclosing DTA clearances. The Tribunal applied the principle that DTA clearances of by-products covered by a broad/unbanded LoP and falling within the EOU entitlement qualify for concessional duty even if not identical to exported items, so long as they are products permitted under the LoP and satisfy the notification's conditions (including similarity in the broad sense and overall value cap). Reliance was placed on earlier Tribunal decisions interpreting 'similar goods' and the FTP provisions to allow by-product clearances at concessional duty where permission is generic and export obligations/NFE are satisfied. On these grounds the Tribunal held that the appellants rightly availed the benefit of Notification No. 23/2003-CE for the impugned clearances. [Paras 5]

Benefit of concessional rate under Notification No. 23/2003-CE is available to the appellants for clearances of the by-products into DTA.

Extended period of limitation under Section 11A - disclosure in ER-2 returns / correspondence - Validity of invoking extended limitation (Section 11A) for the first show cause notice covering June 2009 to May 2014 - HELD THAT: - The Tribunal considered whether the extended time proviso under Section 11A could be invoked where the assessee had disclosed required particulars in statutory returns and correspondence. The record showed periodic ER-2 returns and an express letter (dated 26.09.2013) informing authorities about the by-products and their DTA clearances. There was no finding of fraud, misrepresentation or suppression with intent to evade duty. In the absence of concealment or dishonest conduct, the extended limitation could not be legally invoked. Consequently the demand based on the extended period was held to be time-barred. [Paras 6]

First show cause notice invoking extended limitation under Section 11A is barred by limitation and cannot be sustained.

Penalty under Rule 26 of Central Excise Rules, 2002 - Sustainability of penalty imposed on Shri A.K. Nayak under Rule 26 - HELD THAT: - Having allowed the appeals on merits and having concluded that there was no evidence of fraud, misrepresentation or intent to evade duty by the appellant or its officer, the Tribunal found no basis for imposing penalty on the officer. The adjudicatory authorities had not demonstrated personal culpability or conscious wrongdoing by Shri A.K. Nayak that would justify penalty under Rule 26. [Paras 7]

Penalty imposed on Shri A.K. Nayak is set aside.

Final Conclusion: Impugned orders confirming demands and penalties are set aside; appeals allowed - appellants entitled to concessional duty on by-product DTA clearances and the demand based on extended limitation is time-barred; penalty on the officer is vacated.

Admissibility of computer printouts as evidence - requirement of statutory certificate for electronic records - compliance with Section 36B of the Central Excise Act - primary versus secondary electronic evidence - reliance on panchnama for electronic evidence

Admissibility of computer printouts as evidence - compliance with Section 36B of the Central Excise Act - primary versus secondary electronic evidence - Admissibility of computer printouts taken from seized hard disk and pen drive without production of the required statutory certificate under section 36B. - HELD THAT: - The Tribunal examined the statutory scheme under section 36B of the Central Excise Act and the parallel jurisprudence under sections 65A/65B of the Evidence Act (Anvar P.V. and Arjun Panditrao Khotkar). The court held that secondary evidence in electronic form (computer printouts) is admissible only upon satisfaction of the conditions in the statute and the production of the certificate described in subsection (4). The printouts relied upon by the department were derived from a hard disk and pen drive which were not produced as the original electronic device in proceedings and no certificate under section 36B(4) was furnished. The adjudicating authority could not substitute its own oral findings for the statutory certificate requirement. In these circumstances the printouts could not be treated as admissible evidence to prove clandestine clearances and quantify duty. [Paras 15, 20, 21, 22, 32]

Printouts taken from the recovered hard disk and pen drive without the mandatory certificate under section 36B are not admissible; reliance on them is impermissible.

Reliance on panchnama for electronic evidence - requirement of statutory certificate for electronic records - Whether the panchnama or the adjudicating authority's own examination can substitute for the certificate required by section 36B(4). - HELD THAT: - The Tribunal considered the panchnamas dated 04.07.2013 and 15.07.2013 and the circumstances of seizure and printing. Although panchnamas recorded recovery and subsequent printouts and contained signatures of witnesses and an employee, the statutory framework mandates a certificate by a responsible official dealing with the operation of the device or management of activities producing the electronic record. The adjudicating authority's independent oral examination of the matters that the statute requires to be encompassed in a certificate cannot supplant the formal statutory certificate. Consequently, panchnama entries and the adjudicating authority's findings cannot cure the absence of the prescribed certificate. [Paras 11, 32, 33, 34]

Panchnama or the adjudicating authority's own findings cannot replace the mandatory certificate under section 36B; therefore panchnama does not render the printouts admissible in the absence of that certificate.

Reliance on electronic records to quantify duty - admissibility of evidence as precondition to demand confirmation - Whether the adjudicating authority could sustain the confirmed demand of duty and ancillary penalties/confiscation based solely on the impugned electronic printouts. - HELD THAT: - The adjudicating authority's demand, interest and penalty were founded on the quantification derived from the computer printouts. As the printouts were not admissible for want of the mandatory certificate and the original devices were not produced as primary evidence, the foundational material for the demand is legally infirm. The Tribunal found that the confirmation of demand rested on inadmissible electronic secondary evidence and that the absence of compliance with section 36B vitiated the adjudicating authority's conclusions. [Paras 9, 32, 35]

The demand, interest and penalty confirmed by the adjudicating authority cannot be sustained where quantification is based solely on inadmissible electronic printouts.

Final Conclusion: Impugned order dated 30.06.2021 is set aside insofar as the appellant is concerned and the appeal is allowed, because the department failed to produce the mandatory certificate under section 36B for the electronic records on which the demand was founded; panchnama entries and the adjudicating authority's own examination could not cure that defect.

Right of a third party to seek redelivery under Order XXI Rule 99 CPC - pendente lite transferee as a 'stranger' entitled to raise independent title - doctrine of lis pendens and protection of subsequent transferees - Order XXI Rule 101 CPC mandating determination of right, title or interest in execution proceedings - commencement of limitation for execution of a partition decree - engrossment of decree on stamp paper and relation back to date of decree

Right of a third party to seek redelivery under Order XXI Rule 99 CPC - pendente lite transferee as a 'stranger' entitled to raise independent title - Order XXI Rule 101 CPC mandating determination of right, title or interest in execution proceedings - A person not party to the suit who is dispossessed in execution may file an application under Order XXI Rule 99 CPC to challenge dispossession and claim independent right, title and interest; a pendente lite transferee falls within the term 'any person' or 'stranger' and may be heard. - HELD THAT: - The Court held that Order XXI Rule 99 expressly enables a person other than the judgment-debtor who has been dispossessed in execution to complain to the Court. A third party dispossessed under execution proceedings is therefore entitled to seek redelivery and adjudicate his claim. The term 'stranger' in this context includes a pendente lite transferee who was not impleaded in the original suit. Where such a transferee exists and claims to have been transferred the property before the final decree, the decree-holder resisting delivery should have impleaded him under Order XXI Rule 97; failing that, the transferee has the right to defend his possession and title through Rule 99. Further, once an application under Rule 99 is filed, the executing court is obliged under Order XXI Rule 101 to decide the disputes as to right, title or interest in the execution proceedings itself, thereby barring a separate suit. [Paras 14, 15, 16]

The predecessor of the respondents, though a pendente lite transferee, could maintain an application under Order XXI Rule 99 and have his rival claims adjudicated by the executing court under Rule 101.

Commencement of limitation for execution of a partition decree - engrossment of decree on stamp paper and relation back to date of decree - The period of limitation for executing a partition decree begins from the date of the final decree and does not wait until the decree is engrossed on stamp paper. - HELD THAT: - Relying on Chiranji Lal v. Hari Das, the Court reiterated that a partition decree creates rights from the date it is passed and the subsequent engrossment on stamp paper relates back to the date of the decree. There is no rule requiring furnish ing of stamp paper before limitation runs; to allow the decree-holder to postpone engrossment and thereby toll limitation would permit dilatory tactics. Consequently, the filing of an execution petition only after a prolonged delay measured from the date of the final decree may be time-barred, irrespective of when the decree was engrossed on stamp paper. [Paras 17, 18, 19]

Limitation for execution of the partition decree began on the date of the final decree and did not await engrossment on stamp paper.

Order XXI Rule 99 CPC - remand for fresh consideration of rival claims in execution proceedings - The High Court correctly set aside the executing court's order and remanded the matter to the trial court for fresh consideration of all issues, including the respondents' claim to independent right, title and interest and the question of limitation. - HELD THAT: - Having held that a dispossessed third party may raise his independent title under Rule 99 and that the limitation for execution runs from the date of the final decree, the High Court remanded the matter for the executing court to consider these rival contentions afresh under the framework of Order XXI (including Rule 101). The Supreme Court found no infirmity in the High Court's decision to remand for comprehensive adjudication of the competing claims rather than permitting summary disposal. [Paras 7, 19]

The High Court's order remanding the matter to the trial court for fresh consideration was upheld.

Final Conclusion: The appeals are dismissed. The High Court correctly held that a dispossessed third party (including a pendente lite transferee) can seek redelivery under Order XXI Rule 99 and that limitation for execution of a partition decree begins from the date of the final decree; the matter is rightly remanded to the trial court to adjudicate all rival claims, including limitation and independent title, under Order XXI.

Doctrine of lis pendens - bona fide purchaser pendente lite - specific performance - requirement of cross-objection to challenge part of a decree on appeal - application of Section 52 of the Transfer of Property Act

Requirement of cross-objection to challenge part of a decree on appeal - Whether the First Appellate Court could adjudicate and record a finding of collusion between the plaintiff and defendant No.1 in respect of the agreement when the defendants did not file any cross-appeal or cross objections against the part of the Trial Court's decree. - HELD THAT: - The Court held that the defendants, having not filed any cross-appeal or cross-objection against the Trial Court's partial decree (which granted refund of the earnest money and contained a finding on issue No.5), were not entitled to have that adverse finding reopened by the First Appellate Court. Reliance was placed on the principles explained in Banarsi v. Ram Phal that while a respondent may file cross-objections to attack parts of a decree adverse to him, absent such cross-objections the respondent cannot seek to overturn findings against him. The defendants had allowed the partial decree to stand and therefore conceded the finding; the First Appellate Court could not permissibly record a contrary finding of collusion without a cross appeal or cross objection. [Paras 9, 10, 11]

The First Appellate Court erred in recording a finding of collusion in the absence of any cross-appeal or cross-objection; the defendants had conceded the part of the decree not challenged.

Doctrine of lis pendens - bona fide purchaser pendente lite - application of Section 52 of the Transfer of Property Act - specific performance - Whether the sale deed executed by defendant No.1 in favour of defendant No.2 during the pendency of the suit was hit by the doctrine of lis pendens and whether defendant No.2 could claim protection as a bona fide purchaser. - HELD THAT: - The Court affirmed the High Court's conclusion that the subsequent sale executed on 08.01.1993, after the suit was filed on 24.12.1992, was governed by the doctrine of lis pendens embodied in Section 52 of the Transfer of Property Act. Authorities were cited to establish that an alienation pendente lite is ineffective to defeat the rights of the plaintiff and operates as constructive notice to subsequent transferees; no plea of good faith or want of notice avails the transferee against the statutory principle. The Trial Court had found the agreement proved and had directed refund of earnest money; since the subsequent sale occurred during the pendency of the suit and the defendants did not properly challenge the relevant findings, the High Court rightly held that the sale was hit by lis pendens and that defendant No.2's defence as a bona fide purchaser pendente lite was not available. Consequently, the High Court was justified in decreeing specific performance. [Paras 11, 12, 13, 15]

The sale to defendant No.2 during the pendency of the suit was voidable under the doctrine of lis pendens; defendant No.2 could not claim protection as a bona fide purchaser pendente lite, and the High Court rightly directed specific performance.

Final Conclusion: The appeal is dismissed. The High Court's judgment setting aside the concurrent findings of the subordinate courts and decreeing specific performance (on the basis that the sale to defendant No.2 was hit by lis pendens and that no valid cross-objection had been filed to challenge earlier findings) is affirmed.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Rebuttable presumption and probable defence - Cheque issued as security - High Court revisional jurisdiction under Section 397 CrPC - Concurrent findings of fact - Proof of service of legal notice

Offence under Section 138 of the Negotiable Instruments Act - Proof of service of legal notice - Presumption under Section 139 of the Negotiable Instruments Act - Conviction under Section 138 of the Negotiable Instruments Act was maintainable and the concurrent convictions of the Courts below are upheld. - HELD THAT: - The High Court found that the complainant proved issuance and dishonour of the cheque and service of the statutory legal notice, and that the accused did not make payment within the statutory period. The accused did not successfully controvert the presumption under Section 139 which operates in favour of the cheque-holder when issuance and dishonour are proved. On the material on record and evidence led by the parties, the Court observed that all basic ingredients of Section 138 were established and there was no illegality in the findings of the trial and appellate Courts. [Paras 7, 13, 17, 18]

Convictions and sentences recorded by the Courts below under Section 138 are sustained and the revision petition is dismissed.

Rebuttable presumption and probable defence - Presumption under Section 139 of the Negotiable Instruments Act - The accused failed to rebut the statutory presumption under Section 139 by establishing a probable defence or by adducing cogent evidence to show extinguishment of the liability. - HELD THAT: - The accused admitted issuing the cheque and relied on a receipt (Mark DX1) and his own testimony claiming prior payments. The receipt did not mention the cheque in question and forensic examination did not yield a conclusive opinion on signatures. The Court held that mere assertion of prior payment, unsupported by documentary evidence linking the cheque to the alleged settlement, was insufficient to displace the presumption; to rebut Section 139 the accused must raise a probable defence on the preponderance of probabilities supported by materials on record. [Paras 8, 10]

The plea of prior payment and related documents did not successfully rebut the presumption under Section 139.

Cheque issued as security - Offence under Section 138 of the Negotiable Instruments Act - A cheque pleaded to have been issued as 'security' does not by itself preclude presentation and prosecution under Section 138 if the underlying debt is not repaid. - HELD THAT: - The Court noted that the term 'security cheque' is not statutorily defined and must be inferred from pleadings and evidence. Even if the cheque was issued as security, where the loan is not repaid as agreed and there is no subsisting arrangement to defer payment, the cheque may be presented and its dishonour can attract Section 138 consequences. The Courts below rightly held that absence of credible evidence establishing an enforceable extinguishment of the debt meant that the security plea did not absolve the accused. [Paras 11, 12, 13]

The claim that the cheque was issued as security does not avert liability under Section 138 in the circumstances of the case.

High Court revisional jurisdiction under Section 397 CrPC - Concurrent findings of fact - The High Court will not ordinarily re-appreciate evidence in revision in the face of concurrent findings of fact by the trial and appellate Courts unless a glaring illegality or miscarriage of justice is shown. - HELD THAT: - Relying on precedent, the Court observed that revisional power under Section 397 CrPC is supervisory and not appellate; it should not be used to reassess evidence where both Magistrate and Sessions Judge have considered the matter, absent a demonstrable gross miscarriage of justice. The petitioner failed to point out any material irregularity or illegality in the reasoning of the Courts below that would warrant interference in revision. [Paras 14, 15]

No interference in revisional jurisdiction; concurrent findings are entitled to respect and the revision petition is dismissed.

Final Conclusion: The criminal revision petition is dismissed; the convictions under Section 138 of the Negotiable Instruments Act as upheld by the Courts below are maintained, the petitioner is directed to surrender to serve the sentence if not already served, bail bonds are cancelled, and interim directions and pending applications stand vacated or disposed of.