TaxTMI Updates e-Newsletter
Oct 21,2023

Mandatory right to personal hearing under section 75(4) of the GST Act - quashing of order for failure to afford hearing - remand for fresh consideration after grant of opportunity of hearing - non-merger of original order where appeal is dismissed as time barred

Mandatory right to personal hearing under section 75(4) of the GST Act - quashing of order for failure to afford hearing - remand for fresh consideration after grant of opportunity of hearing - Order passed under section 74(9) was quashed for want of opportunity of personal hearing and the matter remanded for fresh decision after affording hearing. - HELD THAT: - The record shows that after an adjournment request a reminder specified a date for submission of reply but recorded 'NA' against date, time and venue for personal hearing, and the impugned order under section 74 indicates no opportunity of hearing was granted. Following the principle applied in an earlier decision (Writ Tax No.174 of 2023), the court held that where the statutory scheme mandates opportunity of hearing, absence of such hearing vitiates the order. Consequently the order under section 74(9) was set aside and the matter was remitted to the authority to pass a fresh order after affording the petitioner an opportunity of hearing in accordance with law. [Paras 5, 6, 7]

Impugned order under section 74(9) quashed; matter remanded to respondent for fresh decision after giving opportunity of hearing.

Non-merger of original order where appeal is dismissed as time barred - Dismissal of the appeal as beyond prescribed limitation does not result in merger of the original order with the appellate order. - HELD THAT: - The petitioner's appeal was dismissed as time barred; the court observed that an appellate dismissal on limitation grounds does not merge or validate the original order. Therefore setting aside the original order on account of procedural infirmity (lack of hearing) necessarily affects the efficacy of subsequent orders made in consequence of the original order. [Paras 3]

Appeal dismissal for delay does not merge the original order; consequent orders based on the original order lose efficacy where the original is quashed.

Final Conclusion: Writ petition allowed: the order passed under section 74(9) was quashed for failure to afford statutory opportunity of hearing, consequential order dated 26.12.2022 lost efficacy, and the matter is remitted to the authority to decide afresh after giving the petitioner an opportunity of hearing in accordance with law.

Input tax credit eligibility - conditions under Section 16 - burden of proof for availing ITC - actual physical movement of goods - genuineness of transaction - proceedings under Section 74

Input tax credit eligibility - conditions under Section 16 - burden of proof for availing ITC - actual physical movement of goods - genuineness of transaction - Entitlement to input tax credit where petitioner produced tax invoices, e-way bills, GR and bank payments but did not furnish additional particulars of physical movement and delivery. - HELD THAT: - The Court held that entitlement to input tax credit is subject to the conditions and restrictions set out in Section 16 of the U.P. GST Act and that a registered person claiming ITC must satisfy those conditions. Relying on the statutory scheme and the Apex Court's decision in Ecom Gill Coffee Trading Pvt. Ltd., the Court recorded that the burden of proof to establish the correctness of the ITC claim lies upon the purchasing dealer. Mere production of tax invoices, e-way bills, GR and evidence of payment is not sufficient; the purchaser must additionally prove actual physical movement and genuineness of transactions by furnishing particulars such as identity of the selling dealer, vehicle details, freight payments, acknowledgement of delivery and related corroborative material. On the facts, the petitioner did not produce such additional material and therefore failed to discharge the burden required for claiming ITC; accordingly the impugned denial was held to be justified. [Paras 12, 15, 16, 18, 19]

Benefit of input tax credit cannot be granted as the petitioner failed to discharge the burden to prove actual physical movement of goods and genuineness of transactions required under Section 16.

Proceedings under Section 74 - input tax credit wrongly availed - Validity of initiation and continuation of adjudication proceedings under Section 74 in respect of alleged wrongful availment of input tax credit. - HELD THAT: - The Court extracted and applied Section 74 which empowers initiation of proceedings where input tax credit has been wrongly availed by reason of fraud or wilful misstatement or suppression of facts, and noted the procedural safeguards therein. Having found that the petitioner had not produced the requisite evidence to substantiate the ITC claim, the Court held that initiation of proceedings under Section 74 and the assessment made by the authorities were in accordance with the statutory scheme and permissible in the circumstances of the case. [Paras 13, 14, 15]

Proceedings under Section 74 were properly initiated and adjudication was justified given the petitioner's failure to substantiate its ITC claim.

Final Conclusion: The writ petition is dismissed and the impugned orders upholding demand for wrongly availed input tax credit are affirmed, the Court finding that the petitioner failed to discharge the burden to prove physical movement and genuineness of transactions and that proceedings under Section 74 were validly initiated.

Recording of reasons - principles of natural justice - cancellation of GST registration without notice or opportunity to be heard - summary dismissal of appeal without reasons - remand for fresh consideration - reasoned and speaking order

Recording of reasons - principles of natural justice - summary dismissal of appeal without reasons - Impugned cancellation of GST registration and the summary dismissal of the appeal were unsustainable because the orders did not record reasons and thereby violated principles of natural justice. - HELD THAT: - The Court found on perusal of the impugned order that the GST registration of the petitioner no.3 was cancelled without recording cogent reasons and that the first appellate authority dismissed the appeal summarily without assigning any reason. Relying on the precedent reasoning reproduced from Namo Narayan Singh (paras 9-15 of that judgment), the Court reaffirmed that reasoned orders are an indispensable part of judicial and quasi-judicial decision-making; absence of reasons renders an order indefensible and violative of natural justice. Applying that settled principle to the facts, the impugned orders could not be sustained. [Paras 9]

Impugned cancellation and the summary dismissal of the appeal set aside for want of reasons; orders held violative of principles of natural justice.

Remand for fresh consideration - reasoned and speaking order - Remedial direction as to further course: matter remitted to the first appellate authority for fresh adjudication with reasons and opportunity of hearing. - HELD THAT: - Following the conclusion that the impugned orders lacked reasons, the Court remitted the matter to the first appellate authority for reconsideration. The appellate authority is directed to pass a fresh, reasoned and speaking order in accordance with law after affording reasonable opportunities of hearing to the parties. The Court prescribed an expediency measure - preferably within two months from production of a certified copy of this order - to ensure timely disposal while leaving the merits to be decided on fresh consideration. [Paras 12]

Matter remitted to the first appellate authority to decide afresh by a reasoned and speaking order after hearing the parties, preferably within two months from production of a certified copy of this order.

Final Conclusion: Writ petition allowed; impugned orders set aside and the matter remitted to the first appellate authority for fresh, reasoned and speaking adjudication after hearing, preferably within two months from production of a certified copy of this order.

Non-speaking order - violation of Article 14 - remand for fresh consideration - opportunity of hearing - consideration of material on record - appellate adjudication under the GST Act - order under Section 73 of the GST Act, 2017

Non-speaking order - violation of Article 14 - appellate adjudication under the GST Act - The appellate order dated 04.07.2023 was quashed on the ground that it is a non-speaking order violative of Article 14. - HELD THAT: - The High Court found that the appellate authority dismissed the appeal without considering the documents and material filed along with the memo of appeal and without applying its mind. Such absence of any reasoned consideration rendered the appellate order a non-speaking order. The court held that a non-speaking order, which fails to deal with the material on record and give reasons, is contrary to the requirement of reasoned decision-making and amounts to a violation of Article 14. Consequently, the appellate order was set aside on this limited ground. [Paras 7, 8]

Appellate order dated 04.07.2023 quashed for being a non-speaking order violative of Article 14.

Remand for fresh consideration - opportunity of hearing - consideration of material on record - The matter was remanded to the appellate authority for fresh adjudication after affording opportunity of hearing and consideration of the materials on record. - HELD THAT: - Noting that the petitioner had filed documents demonstrating that the transactions underlying the ITC claim were routed through banking channels and uploaded on the GST portal, the High Court directed that the appellate authority shall re-adjudicate the appeal. The court ordered that the appellate authority must give the parties an opportunity of hearing, apply its mind to the documents and submissions already on record, and pass a reasoned order in accordance with law. This remand was for fresh consideration of the appeal and not for quantification alone. [Paras 9]

Matter remitted to the appellate authority to decide the appeal afresh after hearing the parties and considering the material on record.

Final Conclusion: Writ petition disposed of by quashing the appellate order dated 04.07.2023 as non-speaking and remitting the appeal to the appellate authority for fresh consideration with an opportunity of hearing and reasoned decision in accordance with law.

Provisional attachment of property - Objection under Rule 159(5) of the CGST Rules - Release by order in Form GST DRC-23 - Opportunity of being heard before release of attached property - Bank guarantee for defreezing ITC credit ledger - Revenue cannot freeze overdraft accounts

Objection under Rule 159(5) of the CGST Rules - Provisional attachment of property - Opportunity of being heard before release of attached property - Petitioners permitted to file objection under sub rule (5) of Rule 159 of the CGST Rules and Respondent No.2 directed to decide the objection within a stipulated time. - HELD THAT: - The High Court held that, having considered the facts and the statutory scheme for provisional attachment, the appropriate course is for the petitioners to invoke the remedy provided by sub rule (5) of Rule 159 by filing Form GST DRC 22A. The Court directed the petitioners to submit the representation/objection to the Principal Additional Director General DGGI, Jaipur within one week from upload of the order and mandated that Respondent No.2 dispose of the objection expeditiously and in any event on or before 10th November 2023. The Court also clarified that the representation would be entertained without objection as to limitation, since the petitioners had been pursuing the writ petition bona fide. All contentions of the parties were expressly kept open for adjudication by the authority while deciding the representation, and the petition was disposed of accordingly.

Petition disposed permitting filing of objection under Rule 159(5); Respondent No.2 to decide the objection expeditiously and by 10th November 2023; all contentions kept open.

Final Conclusion: The writ petition is disposed of by directing the petitioners to file an objection under sub rule (5) of Rule 159 of the CGST Rules and by directing Respondent No.2 to decide the same expeditiously (by 10th November 2023); the petitioners' earlier interim benefit stands availed and all substantive contentions are left open; no costs.

Mandatory personal hearing under Section 75(4) of the U.P. GST Act, 2017 - opportunity of hearing - principles of natural justice - adverse assessment and requirement of audi alteram partem - remand for fresh hearing

Mandatory personal hearing under Section 75(4) of the U.P. GST Act, 2017 - opportunity of hearing - adverse assessment and requirement of audi alteram partem - Whether the Assessing Authority was obliged to grant an opportunity of personal hearing before passing an adverse assessment order against the petitioner for the tax period 2021-22, notwithstanding any indication by the assessee to the contrary on the notice form. - HELD THAT: - Section 75(4) requires that an opportunity of hearing be granted where an adverse decision is contemplated. The Court agreed with the coordinate bench decision in Bharat Mint & Allied Chemicals that the obligation to afford personal hearing is mandatory and does not depend upon a prior written request by the person chargeable with tax. Consequently, an assessee's purported signification of 'No' in the column relating to choice of personal hearing does not extinguish the statutory duty of the Assessing Authority to provide an opportunity of hearing before recording an adverse finding. In the context of an assessment creating substantial civil liability, affording a real and minimal opportunity of hearing is required by the principles of natural justice; it allows the authority to hear explanations, pass a reasoned order and facilitates proper appellate scrutiny if required. Having found that no personal hearing was afforded prior to issuing the impugned order dated 05.07.2023, the Court set aside that order and directed remand for fresh notice and hearing so that the assessee's explanations may be considered before any demand is finalized. [Paras 6, 7, 8, 9]

Impugned assessment order set aside; matter remitted to Deputy Commissioner to issue fresh notice and afford personal hearing, with proceedings to be completed expeditiously.

Final Conclusion: Writ petition allowed. The assessment order dated 05.07.2023 is quashed and the matter remitted for fresh notice and personal hearing; the petitioner to appear on the next date fixed and proceedings to be concluded expeditiously.

Detention and seizure under the State Goods and Service Tax regime - quashing of consequential order passed in Form GST MOV-09 - fresh adjudication under Section 129(1)(a) of the State Goods and Service Tax Act, 2017 - affording opportunity of hearing before passing order under statutory detention provisions

Quashing of consequential order passed in Form GST MOV-09 - detention and seizure under the State Goods and Service Tax regime - Validity of the order dated 4.10.2023 in Form GST MOV-09 impugned in the writ petition - HELD THAT: - The Court examined the impugned order passed in Form GST MOV-09 consequent to interception of a vehicle and alleged mismatch between the goods carried and the particulars in e-waybills/e-invoices. Having heard counsel for both parties, the Court found it appropriate to set aside the impugned order. The order dated 4.10.2023 is quashed in view of the defects in the impugned proceedings as challenged in the petition, and because the matter requires fresh consideration by the competent authority under the statutory detention framework.

Order dated 4.10.2023 in Form GST MOV-09 quashed.

Fresh adjudication under Section 129(1)(a) of the State Goods and Service Tax Act, 2017 - affording opportunity of hearing before passing order under statutory detention provisions - Procedure to be followed following quashing - remand for fresh adjudication and requirement of hearing and timeline - HELD THAT: - The Court remitted the matter to respondent no.2 for fresh adjudication under the statutory provision governing detention/seizure (Section 129(1)(a) of the State GST Act, 2017), directing that the authority pass orders afresh after giving the petitioner due opportunity of hearing. A limited and prompt timeline was imposed: fresh orders are to be passed within one week from receipt of the certified copy of this order. The remand contemplates a de novo exercise by the statutory authority, with procedural fairness ensured by an opportunity of hearing before any consequential order is recorded.

Matter remitted to respondent no.2 to pass fresh orders under Section 129(1)(a) after hearing the petitioner, within one week of receipt of certified copy of this order.

Final Conclusion: The writ petition is disposed of by quashing the impugned order dated 4.10.2023 and remitting the matter to respondent no.2 for fresh adjudication under the State GST detention provisions, after affording the petitioner an opportunity of hearing and within the one week timeline specified.

Reasoned order requirement - lack of application of mind - Article 14 of the Constitution of India - Article 19 - freedom to carry on business - opportunity of hearing - remand for fresh consideration

Reasoned order requirement - lack of application of mind - Article 14 of the Constitution of India - Article 19 - freedom to carry on business - Impugned cancellation order dated 23.12.2022 set aside for absence of reasons and want of application of mind, violative of Article 14 and affecting Article 19 rights. - HELD THAT: - The cancellation order recorded no reasons and simply noted "No Response" despite the statutory show-cause process. A quasi judicial order that adversely affects the right to carry on business must disclose application of mind and reasons; absence thereof renders the action unsustainable under Article 14. Having found the impugned order devoid of any considered reasons, the Court set aside the cancellation order dated 23.12.2022. [Paras 7]

Impugned order dated 23.12.2022 is set aside.

Opportunity of hearing - remand for fresh consideration - Matter remitted to the Adjudicating Authority for fresh consideration after opportunity to be given to the petitioner. - HELD THAT: - In view of setting aside the cancellation order, the petitioner is directed to file a reply to the show-cause notice within three weeks. The Adjudicating Authority (Superintendent, Lucknow Sector 20) must afford an opportunity of hearing and pass a fresh order after considering the defence raised. The Department remains free to proceed in accordance with law thereafter. [Paras 8, 9]

Petitioner to file reply within three weeks; adjudicating authority to hear and pass fresh order; Department may proceed as per law.

Final Conclusion: The petition is allowed; the cancellation order dated 23.12.2022 is set aside for lack of reasons and want of application of mind, and the matter is remitted for fresh adjudication after giving the petitioner an opportunity to reply and be heard.

Cancellation of GST registration - principles of natural justice - defective show cause notice failing to specify allegations - requirement of reasoned order - retrospective cancellation without opportunity to be heard

Defective show cause notice failing to specify allegations - principles of natural justice - Validity of the Show Cause Notice which merely stated that registration was obtained by fraud, wilful misstatement or suppression of facts without specifying particulars. - HELD THAT: - The Court held that the Show Cause Notice was legally deficient because it did not identify the specific fraud, misstatement or suppressed facts alleged against the petitioner and therefore could not elicit any meaningful response. A notice that only recites a generic ground of "fraud, wilful misstatement or suppression of facts" but omits particulars violates the principles of natural justice by depriving the recipient of an opportunity to meet the case against it. [Paras 8, 9]

The Show Cause Notice is set aside for being incapable of eliciting a meaningful reply and for breaching principles of natural justice.

Requirement of reasoned order - retrospective cancellation without opportunity to be heard - Validity of the impugned order cancelling GST registration with retrospective effect and whether it was supported by reasons or fair notice of retrospective effect. - HELD THAT: - The Court found the impugned order to be non-speaking and legally unobjectionable: it merely stated that the petitioner's reply was unsatisfactory without setting out the basis for that conclusion. Further, the Show Cause Notice did not propose retrospective cancellation from the date of grant, so the petitioner had no opportunity to contest cancellation with retrospective effect. An order cancelling registration retrospectively must be preceded by adequate notice and reasons; absence of both renders the order unsustainable. [Paras 10]

The impugned order cancelling registration with retrospective effect is set aside for lack of reasons and for failing to give the petitioner an opportunity to oppose retrospective cancellation.

Cancellation of GST registration - Relief to be afforded following finding of procedural infirmity in the Show Cause Notice and the impugned order. - HELD THAT: - Given the defects in the notice and the order, the Court set both aside. The Court clarified that its order does not preclude the authorities from initiating fresh proceedings in accordance with law, thereby permitting reconsideration if valid reasons exist but requiring the process to comply with statutory and constitutional safeguards. [Paras 11, 12, 13]

Both the Show Cause Notice and the impugned cancellation order are quashed; liberty granted to authorities to institute fresh proceedings in accordance with law.

Final Conclusion: The petition is allowed: the Show Cause Notice and the order cancelling the petitioner's GST registration (including retrospective cancellation from 12.12.2019) are set aside for breach of natural justice and for being non-reasoned; authorities may, if justified, initiate fresh proceedings in accordance with law.

Opportunity of personal hearing - principle of natural justice - show cause notice - adverse order requiring hearing before imposition of liability - obligation to afford hearing where adverse decision is contemplated under Section 75(4) of the U.P. GST Act - remand for fresh hearing and adjudication

Opportunity of personal hearing - adverse order requiring hearing before imposition of liability - principle of natural justice - Validity of the assessment order passed pursuant to a show-cause notice which omitted a specified date of personal hearing and where no oral hearing was afforded before raising GST liability under Section 74. - HELD THAT: - The Court applied the established principle that an assessing authority must afford an opportunity of personal hearing before passing an adverse assessment order, particularly where a decision creates a substantial civil liability. The obligation flows from the rule of natural justice and, as interpreted by a coordinate bench in Bharat Mint & Allied Chemicals, the authority cannot treat an assessee's ticking of 'No' for personal hearing as obviating its duty to provide a hearing when an adverse order is contemplated. In the present case the show-cause notice contained 'NA' in the column for date of hearing and no oral hearing was granted; consequently the impugned order could not be sustained. Having regard to the need to ensure real and effective opportunity to be heard and to enable appropriate and reasoned decision-making, the Court set aside the order and remitted the matter for issuance of a fresh notice specifying the date of hearing and for fresh adjudication in accordance with law.

Impugned order quashed; matter remitted to the assessing authority to issue fresh notice specifying date of hearing and to proceed afresh in accordance with law.

Final Conclusion: Writ petition allowed; the assessment order dated 04.02.2023 is quashed and the matter is remitted for fresh notice specifying the date of hearing and fresh adjudication, in line with the Court's earlier order in Writ Tax No.551 of 2023.

Quashing of ex-parte order - Service of notice - Intimation on GST portal - Fresh notice and opportunity of personal hearing

Quashing of ex-parte order - Intimation on GST portal - The impugned ex-parte order dated 22.07.2021 was quashed. - HELD THAT: - The Court found the facts of the petition to be similar to those in Writ Tax No.809 of 2023 (order dated 31.07.2023) where an ex-parte order had been quashed and the matter remitted for fresh consideration. On the record before it, and in light of the similarity conceded by counsel for the department, the Court disposed of the petition by quashing the impugned ex-parte order dated 22.07.2021 without expressing any opinion on the merits of the underlying tax liability or the correctness of notices previously issued via the GST portal.

Impugned ex-parte order dated 22.07.2021 quashed.

Service of notice - Fresh notice and opportunity of personal hearing - Proceedings were ordered to be reopened by issuance of a fresh notice and by affording an opportunity of personal hearing to the petitioner. - HELD THAT: - Adopting the relief granted in the earlier order dated 31.07.2023, the Court directed that the petitioner be issued a fresh notice within a short stipulated period and be permitted to file a reply within the time fixed by the authority. The authority was directed to consider the petitioner's reply, including the fact of closure and deregistration, and to afford personal hearing while deciding the matter. The Court made no substantive finding on whether notices previously sent (including those to an accountant's e-mail created prior to deregistration) constituted valid service, and limited its order to granting a fresh opportunity for consideration and hearing.

Matter remitted for issuance of fresh notice, filing of reply, and affording personal hearing as directed.

Final Conclusion: The petition was disposed of by quashing the impugned ex-parte order dated 22.07.2021 and directing that the authority issue a fresh notice, permit the petitioner to file a reply within the stipulated time and afford a personal hearing, without expressing any opinion on the merits of the underlying liability.

Refund of input tax credit - limitation under Section 54(1) of the CGST Act - "relevant date" for export refunds - computation of limitation using shipping bill/invoice dates - exclusion of period by Notification No. 13/2022 - Central Tax - proof of export by shipping bills and commercial invoices

Limitation under Section 54(1) of the CGST Act - "relevant date" for export refunds - computation of limitation using shipping bill/invoice dates - Whether the petitioner's refund claim for the period 01.06.2018 to 31.03.2019 was barred by limitation and whether the relevant date could be ascertained from the documents furnished - HELD THAT: - The Court held that Section 54(1) requires an application for refund to be filed within two years from the relevant date as defined in Explanation (2) to Section 54. Explanation (2)(a) identifies the relevant date for exported goods by reference to the date on which the ship or aircraft in which such goods are loaded leaves India (or the corresponding events for land or post). The petitioner had filed a tabular statement showing invoice dates, shipping bill dates and remittance dates and had sent the same to the Appellate Authority by e-mail. Given that the shipping bill and invoice dates were on record, there was no ambiguity in computing the period of limitation with reference to the relevant date. The Appellate Authority's reliance on absence of documentary evidence to deny the refund was unsustainable where such documentary details had been furnished and there was no specific denial of receipt by the respondents. The Court also noted that the Appellate Authority had accepted that the exclusion of the period from 1 March 2020 to 28 February 2022 under Notification No. 13/2022 applied for computing limitation, but nevertheless erred in refusing the claim for want of proof when relevant export documents were available. [Paras 5, 6, 8, 9]

The rejection of the refund claim on the ground of non-furnishing of documents and inability to ascertain the commencement date for limitation was set aside; the shipping bill and invoice dates were sufficient to compute the relevant date and limitation.

Refund of input tax credit - proof of export by shipping bills and commercial invoices - Relief to be granted following setting aside of the appellate order rejecting the refund appeal - HELD THAT: - Having found the appellate rejection unsustainable, the Court directed that the respondents process the petitioner's refund claim. The Court required the respondents to proceed with processing the refund claim and to include applicable interest, if any. The direction was given for a limited and prompt administrative action rather than remanding the matter for fresh adjudication on the same documentary issues which had already been placed on record. [Paras 10, 11, 12]

Respondents directed to process the petitioner's refund claim for the stated periods, with applicable interest, within two weeks.

Final Conclusion: The petition succeeds. The appellate order rejecting the refund claim for the period 01.06.2018 to 31.03.2019 is set aside; on the basis that shipping bill and invoice dates permit computation of the relevant date (and in view of the applicable exclusion notified by Notification No. 13/2022), the respondents are directed to process the petitioner's refund claim, with applicable interest, within two weeks.

Benefit of administrative circular - input tax credit reconciliation between GSTR-3B and FORM-2A - allowance of ITC subject to conditions of Section 16 - retrospective application of benevolent circular during pendency - remand for fresh adjudication

Benefit of administrative circular - input tax credit reconciliation between GSTR-3B and FORM-2A - allowance of ITC subject to conditions of Section 16 - Whether the petitioner is entitled to the benefit of the Circular dated 2.1.2023 in respect of ITC claimed in FORM GSTR-3B but not reflected in FORM-2A - HELD THAT: - The Court examined Circular dated 2.1.2023, particularly paragraph 3(d) and paragraph 4, which provide a procedure where a supplier has declared a recipient's wrong GSTIN in FORM GSTR-1 and the registered person has claimed ITC in FORM GSTR-3B not reflecting in FORM-2A. The circular requires the proper officer to seek details of invoices and ascertain fulfillment of the Section 16 conditions (possession of tax invoice/debit note, receipt of goods or services, and payment towards value and tax) before allowing ITC. The Court held that the circular is beneficial to the petitioner and, as a benevolent administrative instruction issued during the pendency of proceedings, its benefit cannot be denied; binding precedents of the Apex Court and this Court were applied to permit application of such circulars when they arise during litigation. The impugned order denied the benefit despite the circular and therefore could not stand. [Paras 11, 12, 13]

Impugned order set aside insofar as it denied benefit of the circular; petitioner entitled to have the circular considered in adjudication of claimed ITC.

Remand for fresh adjudication - retrospective application of benevolent circular during pendency - Remedial direction to the adjudicating authority for fresh decision in light of the circular and relied authorities - HELD THAT: - Applying the principle that a benevolent circular issued during the pendency of proceedings must be given effect, and having regard to the Division Bench decision relied upon, the Court remitted the matter to respondent no.2 for fresh adjudication. The remand is limited to decision afresh after taking into consideration Circular dated 2.1.2023 and any other material or judgments relied upon by the petitioner; the Court specified a time-bound direction for disposal to ensure finality. [Paras 15, 16]

Matter remitted to respondent no.2 to pass a fresh order within one month from production of certified copy of this order, considering the circular and authorities relied upon by the petitioner.

Final Conclusion: The writ petitions are allowed: the impugned order is set aside and the matters are remitted to the adjudicating authority for fresh decision within one month, after considering Circular dated 2.1.2023 and the judgments/materials relied upon by the petitioner.

Cross-empowerment under Section 6 of the GST enactments - prohibition on initiation of proceedings on the same subject matter - summons under Section 70 as power to summon witnesses in an inquiry - CBEC Circular dated 05.10.2018 on coordination of intelligence based enforcement action - distinction between inquiry under Chapter XIV and adjudicatory proceedings - territorial and all India jurisdiction of Central Tax Officers

Cross-empowerment under Section 6 of the GST enactments - prohibition on initiation of proceedings on the same subject matter - summons under Section 70 as power to summon witnesses in an inquiry - CBEC Circular dated 05.10.2018 on coordination of intelligence based enforcement action - distinction between inquiry under Chapter XIV and adjudicatory proceedings - Applicability of Section 6 and the CBEC Circular to bar simultaneous summons/inquiries by State and Central authorities where investigations relate to different assessees and the person summoned is only a witness. - HELD THAT: - The Court examined the cross empowerment scheme under Section 6 and the CBEC Circular giving practical effect to that provision, but accepted the reasoning that Section 6(2)(b) and the Circular are directed to avoiding overlapping adjudicatory proceedings on the same subject matter. Section 70 summons fall within Chapter XIV inquiries and empower officers to summon persons for evidence or production of documents; such inquiries precede or accompany adjudicatory proceedings under Sections 67, 73 and 74. Where separate investigations target different registered assessees in different States and a person is summoned merely as a witness to ascertain transactions between those assessees, the prohibition in Section 6(2)(b) and the Circular do not automatically bar issuance or continuation of such summons. The Court relied on the distinctions drawn in precedents that the bar in Section 6(2)(b) applies to initiation of proceedings on the same cause of action/subject matter requiring adjudication, not to routine inquiries or witness summonses issued in related but distinct investigations. [Paras 8, 9, 11, 13]

Section 6(2)(b) and the CBEC Circular do not preclude the issuing of Section 70 summons in the facts of this case; the petitioner must comply with the summonses issued by the respective tax authorities.

Summons under Section 70 as power to summon witnesses in an inquiry - CBEC Circular dated 05.10.2018 on coordination of intelligence based enforcement action - territorial and all India jurisdiction of Central Tax Officers - Procedural directions to avoid practical difficulties arising from production of documents before two investigating authorities. - HELD THAT: - While there is no prohibition on the issuance of separate summonses, the Court recognised the potential hardship and coordination problems in producing documents before two authorities. In the exercise of its supervisory jurisdiction it directed sequencing of appearances (Patna authority in November 2023 and Maharashtra authority in December 2023) and provided that where documents are requisitioned, the petitioner may first produce them to the authority which first requisitions them; that authority must enable authenticated copies to be furnished, at the petitioner's expense, for production before the other authority if required. This direction seeks to mitigate duplication and harassment while preserving the investigative powers of both authorities. [Paras 15]

The Court directed staggered notices for appearance and ordered that documents produced to the authority which first requisitions them be allowed to be furnished as authenticated copies to the other authority, at the petitioner's expense.

Final Conclusion: The writ petition is dismissed. The petitioner is directed to comply with the summonses issued under Section 70; staggered dates for appearance were directed and coordination as to production of documents was ordered to avoid duplication and harassment.

Export of services - place of supply of services - relevant date for limitation under Section 54(1) of the CGST Act - exclusion of period for computation of limitation by CBIC notification - payment receipt versus invoice date for relevant date - international inbound roaming services

Relevant date for limitation under Section 54(1) of the CGST Act - payment receipt versus invoice date for relevant date - exclusion of period for computation of limitation by CBIC notification - Whether the petitioner's refund claims were barred by limitation under Section 54(1) of the CGST Act. - HELD THAT: - The adjudicating authorities had rejected the refund claims mainly on the ground that certain payments were received prior to issuance of invoices, invoking Clause (c) of Explanation (2) to Section 54 and thus rendering claims time barred. The petitioner, however, maintained that payments were received after invoice issuance and produced a tabular reconciliation of invoices and receipts. The respondents did not point to any specific invoice where payment preceded invoicing. Crucially, subsequent to the impugned orders, the CBIC issued a notification excluding the period 01.03.2020 to 28.02.2022 for computation of limitation for refund claims under Section 54(1). In view of that notification, the controversy as to whether the claims were within two years from the relevant date ceased to be contentious and did not require further adjudication. [Paras 16, 17, 18, 19, 20]

Limitation objection rendered non contentious by CBIC notification; no bar to petitioner's refund claims on the ground of limitation.

Export of services - place of supply of services - international inbound roaming services - Whether the telecommunication services rendered by the petitioner to foreign telecom operators (for use by their inbound subscribers) qualify as export of services. - HELD THAT: - The petitioner provided International Inbound Roaming and International Long Distance services to foreign telecom operators (FTOs) who, in turn, made those services available to their subscribers visiting India. The respondents contended that the place of supply was India because the inbound roamers were physically present in India and consumed the services there. The court noted binding coordinate bench authority dealing with analogous factual and legal questions (including precedents under the Service Tax regime and subsequent tribunal decisions) which treat such supplies as export of services where the provider is located in India and the recipient is located outside India and the place of provision is outside India for the purposes of export treatment. Applying that reasoning to the present case, the court found the petitioner's services fall within the export of services concept and are entitled to refund of IGST paid. [Paras 21, 22, 23, 24, 25]

Services in question qualify as export of services; petitioner entitled to refund.

Final Conclusion: Petition allowed. Respondents directed to refund the amounts claimed by the petitioner for the specified periods; pending applications disposed of.

Doctrine of mutuality - common identity - non-profiteering - obedience to the mandate - fees for technical services - trading with members versus trading with itself

Doctrine of mutuality - common identity - non-profiteering - obedience to the mandate - fees for technical services - Receipts of the respondent/assessee from its members are not fees for technical services but are exempt under the doctrine of mutuality. - HELD THAT: - The Court examined the three-pronged test for applicability of the doctrine of mutuality - element of commonality (identity between contributors and participators), non-profiteering (absence of profit motive in actual working), and obedience to the mandate (reciprocal obligation to operate for members' convenience). It found no outsider contributed to the common fund and the Articles of the Verein establish that contributors (member firms) are the beneficiaries of any surplus, including detailed provisions for contributions, duties and distribution of surplus on dissolution. The Verein's Articles (including provisions limiting provision of services to clients, non-sharing of members' profits, and governance/obligation clauses) demonstrate the Verein was formed for non-commercial objectives to benefit its members and not for commercial exploitation. Consequently, the features relied upon by revenue - that members avail technological services, licenses and information which aid their earning capacity - do not convert the subscriptions into quid pro quo fees for technical services where there is complete identity of contributors and participators, operation without profiteering and adherence to the association's mandate. The Court distinguished authorities where mutuality failed because contributors did not participate in surplus or where funds were not obliged to be returnable. Applying these principles to the material in the Articles and regulations of the Verein, the Court concluded all three tests of mutuality were satisfied and therefore the receipts were not taxable as fees for technical services. [Paras 6, 7, 8, 9, 10]

All three tests of mutuality are satisfied and the receipts from members are exempt from tax under the doctrine of mutuality; the Tribunal's order is upheld.

Final Conclusion: The substantial question of law is answered in favour of the assessee: the receipts from member firms of the Swiss Verein are not fees for technical services but are exempt under the doctrine of mutuality; the Tribunal's order dated 11.04.2022 is upheld and the appeals are disposed of.

Mandatory draft assessment order under Section 144C(1) - Eligible assessee (foreign company) - Non-obstante clause and special procedure of Section 144C - Revision under Section 263 does not oust Section 144C - Remand assessment qualifying as fresh assessment under Section 143(3) - Invalidation of assessment for failure to comply with mandatory procedural requirement

Mandatory draft assessment order under Section 144C(1) - Eligible assessee (foreign company) - Invalidation of assessment for failure to comply with mandatory procedural requirement - Failure to issue the draft assessment order under Section 144C(1) before passing the impugned assessment dated 23rd June, 2022 rendered that assessment and the consequential demand and penalty notices void for want of jurisdiction. - HELD THAT: - Section 144C(1) mandates that where an Assessing Officer proposes to make variations prejudicial to an "eligible assessee" (which includes foreign companies), the AO must in the first instance forward a draft assessment order so that the assessee may file objections before the Dispute Resolution Panel. It is undisputed that no draft order was issued in this case. The Court held that the special procedure in Section 144C, which commences with a non obstante clause, is mandatory and not discretionary. Neither the fact that the AO acted pursuant to directions under Section 263 nor reliance on a schematic/teleological interpretation permits bypassing Section 144C(1). The impugned order, although passed on remand to implement the CIT's directions, qualified as a fresh assessment under Section 143(3) and was therefore subject to the Section 144C(1) requirement. The omission deprived the assessee of the statutory forum of the DRP and of the opportunity to place additional material before that forum. For these reasons the final assessment dated 23rd June, 2022 and the consequential notices under Sections 156 and 270A stand vitiated for want of jurisdiction. [Paras 6, 7, 8, 9, 11]

Impugned assessment dated 23rd June, 2022 and the consequent demand and penalty notices are quashed for failure to comply with Section 144C(1).

Remand assessment qualifying as fresh assessment under Section 143(3) - Remand to Assessing Officer - The matter is remanded to the Assessing Officer to proceed in accordance with the directions of the Commissioner dated 24th March, 2022, subject to compliance with applicable statutory procedure including Section 144C(1). - HELD THAT: - Having held that the impugned assessment and consequential notices are void for lack of jurisdiction, the Court directed that the matter be returned to the AO to give effect to the CIT's order of 24th March, 2022. The remand contemplates that the AO shall follow the statutory procedure prescribed for eligible assessees (including issuance of a draft assessment order under Section 144C(1) where applicable) and afford the assessee the opportunity to seek adjudication before the Dispute Resolution Panel as provided by law. [Paras 12]

Matter remanded to the AO to proceed in terms of the CIT's order dated 24th March, 2022, ensuring compliance with statutory procedure.

Final Conclusion: The petition is allowed; the assessment dated 23rd June, 2022 and the consequential demand and penalty notices are quashed for failure to issue the draft assessment order under Section 144C(1). The matter is remitted to the Assessing Officer to proceed in accordance with the CIT's directions dated 24th March, 2022, subject to compliance with the statutory procedure including the Dispute Resolution Panel mechanism.

Jurisdictional limit of Assessing Officer in limited scrutiny assessments - limited scrutiny under Section 143(2) and completion under Section 143(3) - conversion of limited scrutiny to complete scrutiny and requirement of reasons/approvals - CBDT instructions on scope expansion and maintenance of note sheets

Jurisdictional limit of Assessing Officer in limited scrutiny assessments - limited scrutiny under Section 143(2) and completion under Section 143(3) - conversion of limited scrutiny to complete scrutiny and requirement of reasons/approvals - CBDT instructions on scope expansion and maintenance of note sheets - Whether the Assessing Officer exceeded jurisdiction by making additions on issues not covered by the limited scrutiny selection and thereby lawfully disallowing carried forward losses. - HELD THAT: - The Tribunal's finding that the Assessing Officer adjudicated matters beyond the scope of the limited scrutiny selection was upheld. The Court accepted that a jurisdictional question as to scope can be raised at any stage and that the Tribunal was entitled to examine whether the issues decided by the Assessing Officer formed part of the limited scrutiny. The Tribunal's conclusion was reinforced by reference to CBDT instructions which require recorded reasons, proper approvals before converting limited scrutiny into complete scrutiny and scrupulous maintenance of note sheets; instances of non-compliance indicate expansion of scope beyond permissible limits. The Court noted earlier authority dealing with the statutory scheme of assessment under the provisions governing notice and assessment under Section 143, rejecting the notion that such procedural limits are merely directory where they define the scope of assessment. Having considered that the CIT(A) examined merits and granted relief on parts and that the Tribunal correctly found jurisdictional excess, no interference with the Tribunal's order was warranted.

The Tribunal's deletion of the disallowance was upheld; the revenue's appeal is dismissed.

Final Conclusion: The appeal is dismissed; the substantial questions of law are answered against the revenue, upholding the Tribunal's conclusion that the Assessing Officer exceeded jurisdiction in making additions beyond the limited scrutiny for AY 2015-16.

Revisionary jurisdiction under section 263 of the Income Tax Act, 1961 - deduction under section 35(2AB) for in house R&D expenditure - requirement and timing of Form 3CL/Form 3CM for claim of R&D deduction - assessment under section 143(3) read with 144C(3) - erroneous assessment prejudicial to the interest of Revenue

Revisionary jurisdiction under section 263 of the Income Tax Act, 1961 - deduction under section 35(2AB) for in house R&D expenditure - requirement and timing of Form 3CL/Form 3CM for claim of R&D deduction - erroneous assessment prejudicial to the interest of Revenue - Whether the Principal Commissioner of Income Tax was justified in invoking section 263 to quash the assessment on the ground that Form 3CL was not available before the assessment, thereby disallowing deduction under section 35(2AB). - HELD THAT: - The Tribunal found that during the assessment proceedings the assessee had filed the recognition of the in house R&D unit and had produced Form 3CM and the auditor's certificate in support of the computation of deduction under section 35(2AB). Although Form 3CL was issued by the prescribed authority only after the assessment order, the assessee had furnished the approval in Form 3CM during assessment and evidence of expenditure; the Assessing Officer had therefore made due inquiry into the claim. On that factual basis the Tribunal held that the assessment order was not erroneous or prejudicial to the Revenue and set aside the section 263 order. The High Court agreed with the Tribunal's appraisal of the material on record and its legal conclusion that mere absence of the Form 3CL issuance to the Department before completion of assessment, where Form 3CM and auditor certification were on record and the AO had inquired into the claim, did not render the assessment order erroneous or prejudicial so as to justify exercise of revisionary jurisdiction under section 263.

The Tribunal's quashing of the Principal Commissioner's order under section 263 is upheld; the exercise of revisionary jurisdiction was not justified on the facts, and the assessment is not shown to be erroneous and prejudicial to the Revenue.

Final Conclusion: The Tax Appeal is dismissed; no substantial question of law arises and the Tribunal's order setting aside the section 263 order is affirmed.

Principles of natural justice - Opportunity of hearing - Video conferencing as mode of hearing - Assessment under Section 143(3) read with Section 144B of the Income Tax Act, 1961 - Remand for fresh consideration

Principles of natural justice - Opportunity of hearing - Impugned assessment order was passed in violation of principles of natural justice by not considering the petitioner's uploaded reply and request for hearing. - HELD THAT: - The Court found prima facie that the petitioner's reply dated 19.09.2022 and the request for video conferencing submitted the same day were not considered before passing the assessment order on 21.09.2022. Given the proximity of the date of the reply and the date of the order, and the indication on the portal that a request for video conferencing was successfully sent, the procedure adopted by the respondent amounted to a denial of adequate opportunity to be heard. The learned Senior Standing Counsel's contentions as to prior correspondence and earlier replies were considered, but the Court's finding on non-consideration of the 19.09.2022 material is determinative of the violation of natural justice. [Paras 10, 11]

Impugned order set aside on ground of breach of principles of natural justice.

Remand for fresh consideration - Video conferencing as mode of hearing - Assessment under Section 143(3) read with Section 144B of the Income Tax Act, 1961 - Case remitted to the Assessing Officer for fresh adjudication on merits after providing opportunity of hearing through video conferencing and filing of the petitioner's reply. - HELD THAT: - In consequence of the finding that the petitioner was denied a fair hearing, the Court directed that the assessment be reconsidered on merits and in accordance with law. The respondent is required to pass a fresh order within eight weeks from receipt of this order, after giving the petitioner an opportunity to be heard through video conferencing. The petitioner must file a copy of the reply dated 19.09.2022 before the scheduled hearing. These directions are procedural and remedial to cure the identified breach of natural justice and to ensure adjudication on merits. [Paras 12]

Matter remitted for fresh order on merits within eight weeks, after hearing the petitioner through video conferencing; petitioner to file copy of reply.

Final Conclusion: Impugned assessment order under Section 143(3) read with Section 144B for Assessment Year 2020-2021 set aside for breach of natural justice; matter remitted for fresh consideration on merits with a video-conference hearing within eight weeks and with filing of the petitioner's 19.09.2022 reply.

Fair market value - Section 56(2)(viib) - Revaluation of assets - Conversion of agricultural land to non-agricultural/diverted land - District Valuation Officer determination - Government guideline multiple factor

Fair market value - Section 56(2)(viib) - Revaluation of assets - Addition under section 56(2)(viib) based on alleged excess share premium grounded on the company's land valuation - HELD THAT: - The Tribunal found that the addition made by the Assessing Officer-by adopting a lower FMV per share and invoking section 56(2)(viib)-rests fundamentally on the valuation of the assessee's land. The Assessing Officer had rejected the assessee's valuation report and recomputed the land value, which produced a reduced FMV of shares and resulted in the impugned addition. The Tribunal observed that the factual question whether the land had, by diversion, been converted from agricultural to non agricultural (industrial) use had not been properly verified by the AO and, in consequence, the valuation basis requires fresh consideration. The matter therefore could not be finally adjudicated by the Tribunal on the record before it. [Paras 13]

Set aside the orders of the lower authorities and remit the matter to the Assessing Officer for fresh adjudication on the question of land conversion and consequent determination of FMV with opportunity to the assessee to produce evidence.

Conversion of agricultural land to non-agricultural/diverted land - Government guideline multiple factor - District Valuation Officer determination - Methodology for determining the land value where diversion/converted status is alleged and the applicability of government guideline multipliers - HELD THAT: - The Tribunal directed the AO, on remand, to verify whether the land was in fact converted to diverted/non agricultural use by reference to the diversion letter and, if conversion is established, to determine the FMV by making reference to the District Valuation Officer. The Tribunal additionally noted that the question whether the government guideline (Rule 7) permits application of the stated multiple (2.5) for converted land must be examined by the lower authorities in the course of the fresh proceedings. [Paras 13]

Remitted to the AO to verify conversion, consult the DVO for FMV determination and consider application of the government guideline multiplier in arriving at land value.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes, set aside the orders below and remitted the matter to the Assessing Officer for fresh adjudication to verify the land's conversion status, determine the FMV (with reference to the DVO) and reconsider the addition under section 56(2)(viib) after affording the assessee opportunity of being heard.

Allowability of interest as business expense under Section 36(1)(iii) - capitalization of interest to inventory and treatment in computation of income - proviso to Section 36(1)(iii) excluding interest on borrowed capital for acquisition/extension of assets until put to use - deductibility on payment basis under Section 43B for interest paid to banks and financial institutions - application of Accounting Standard-7 (percentage of completion method) - consistency of treatment across assessment years and reliance on prior acceptances

Allowability of interest as business expense under Section 36(1)(iii) - proviso to Section 36(1)(iii) excluding interest where borrowed capital is used to acquire/extend assets until put to use - deductibility on payment basis under Section 43B for interest paid to banks and financial institutions - capitalization of interest to inventory and treatment in computation of income - consistency of treatment across assessment years - Whether the Assessing Officer was justified in disallowing interest of Rs. 28,98,09,649/- capitalized to inventory but claimed as deduction through computation for AY 2016-17. - HELD THAT: - The Tribunal affirmed the view of the CIT(A) that the disallowance was not justified. The assessee follows the percentage of completion method under AS-7 and has capitalized certain finance costs to inventory while claiming the balance interest as a period cost in the computation. The AO did not find that the borrowed funds were used for acquisition of a capital asset or for expansion/new unit that was not put to use; therefore the proviso to Section 36(1)(iii) (which denies deduction where capital is borrowed for acquisition/extension of assets until first put to use) was not attracted. There is no adverse finding in the assessment that amounts were not used for business purposes or that a double benefit was being taken; the record and working show that total deduction claimed did not exceed total interest paid. Further, interest paid to banks and financial institutions is allowable on payment basis under Section 43B, supporting allowability in the year of payment irrespective of book treatment. The Tribunal also noted consistent acceptance of the assessee's claim in earlier and later assessment years by the same AO, and that no material change of fact or explanation was placed on record to justify a different view for AY 2016-17. Applying these conclusions, the CIT(A)'s deletion of the addition was upheld. [Paras 15, 16, 18, 19, 21]

Addition disallowing interest of Rs. 28,98,09,649/- deleted; revenue appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s allowance of the interest claimed by the assessee for AY 2016-17, holding that the proviso to Section 36(1)(iii) did not apply, the AO had not shown misuse of borrowed capital for acquisition/extension of assets, interest payable to banks/financial institutions was allowable under Section 43B on payment, and there was no double benefit or change of facts warranting disallowance.

Transfer pricing adjustment - arm's length price - benchmarking of interest on foreign currency loans - application of domestic PLR to foreign currency loans - consistency and precedent in assessee's own case - disallowance of interest under Section 36(1)(iii) - disallowance under Section 14A read with Rule 8D in absence of exempt income - Doctrine of Election - Doctrine of Approbation and Reprobation

Transfer pricing adjustment - benchmarking of interest on foreign currency loans - application of domestic PLR to foreign currency loans - arm's length price - consistency and precedent in assessee's own case - Validity of transfer pricing adjustment made by the TPO on interest received by the assessee from overseas associated enterprises - HELD THAT: - The Tribunal affirmed the Commissioner (Appeals) in holding that loans advanced in foreign currency to overseas AEs must be benchmarked with reference to interest rates prevailing in the country of residence of the AEs (e.g. EURIBOR/LIBOR and applicable mark up) and that application of domestic Prime Lending Rate (PLR) by the TPO to such foreign currency loans is unsustainable. The Tribunal relied on its decision in the assessee's immediately preceding and identical assessment year where similar facts were considered and the CIT(A)'s deletion of the TP adjustment was upheld; having regard to identical facts for AY 2011-12 and delay in reopening the matter, it declined to remit the issue to the TPO for fresh benchmarking. [Paras 8]

Transfer pricing adjustment on interest received from AEs deleted; grounds (i) to (iii) of the Revenue dismissed.

Disallowance of interest under Section 36(1)(iii) - consistency and precedent in assessee's own case - Validity of disallowance of interest expense by the Assessing Officer in respect of interest paid to subsidiaries - HELD THAT: - The Tribunal followed its reasoning in the immediately preceding assessment year where, on identical facts, the co ordinate Bench deleted a similar disallowance after noting the commercial benefit and growth of the subsidiary and the principle of consistency when facts and law remain the same. Given the identical factual matrix for AY 2011-12 and reference by the AO to the earlier assessment year, the Tribunal upheld the CIT(A)'s deletion of the disallowance and declined to disturb that conclusion. [Paras 13]

Disallowance of interest paid to subsidiary deleted; ground (iv) of the Revenue dismissed.

Disallowance under Section 14A read with Rule 8D in absence of exempt income - Whether any disallowance under Section 14A read with Rule 8D is warranted where no exempt income was earned during the year - HELD THAT: - The Tribunal noted as an agreed factual position that the assessee did not earn any exempt income (dividend) in the assessment year. Relying on the jurisdictional High Court authority and the Tribunal's decision in the preceding assessment year, it held that in absence of any exempt income there can be no disallowance under Section 14A read with Rule 8D. The Tribunal therefore sustained the CIT(A)'s deletion of the Rule 8D based disallowance. [Paras 17]

Disallowance under Section 14A read with Rule 8D deleted; ground (v) of the Revenue dismissed.

Final Conclusion: Respectfully following the Tribunal's decisions in the assessee's immediately preceding assessment year and applicable precedent, the order of the CIT(A) is affirmed on all contested grounds and the Revenue's appeal for AY 2011-12 is dismissed.

Admission of additional grounds of appeal by the Tribunal - Draft assessment order under Section 144C(1) - Eligible assessee under Section 144C(15) - Limitation/time bar for completion of assessment where draft order was not legitimately issuable - Assessment under Section 143(3) read with Section 144C(13)

Admission of additional grounds of appeal by the Tribunal - National Thermal Power Co. Ltd. Vs. CIT - Additional grounds of appeal raising a purely legal question were permitted to be admitted before the Tribunal. - HELD THAT: - The Tribunal, applying the principle in National Thermal Power Co. Ltd. Vs. CIT and cognate authorities, exercised its discretion to admit the assessee's additional ground as it was purely legal and did not require fresh fact-finding. The Bench observed that where a new plea raises a question of law arising from facts on record and is necessary to render substantial justice, the Tribunal may allow the ground to be raised at the appellate stage. In both appeals the added ground challenged limitation of the assessment and thus qualified as a legal issue properly entertainable by the Tribunal. The additional grounds were therefore admitted for adjudication on merit. [Paras 3]

Additional grounds allowed to be raised before the Tribunal.

Draft assessment order under Section 144C(1) - Eligible assessee under Section 144C(15) - Limitation/time bar for completion of assessment where draft order was not legitimately issuable - S.A. Chitra Ventures Ltd. - IPF India Property Cyprus [No. 1] Ltd. - Whether the assessments for AY 2015-16 and AY 2016-17 are time barred because the Assessing Officer improperly invoked Section 144C to issue a draft order despite there being no variation prejudicial to the assessee. - HELD THAT: - On the admitted facts the Assessing Officer forwarded a draft order under Section 144C(1) though no variation in returned income prejudicial to the assessee was proposed. The Tribunal followed its co ordinate decisions in S.A. Chitra Ventures Ltd. and IPF India Property Cyprus [No. 1] Ltd. , holding that issuance of a draft order under Section 144C(1) is permissible only when the AO proposes a variation in returned income prejudicial to the assessee. Where that precondition is absent, the draft order could not lawfully be issued and therefore its issuance cannot extend the statutory time limit for completing assessment under Section 143(3). Applying that principle to the present cases, the Tribunal held that the last dates for completion expired prior to the impugned final orders; hence the assessments passed on 11.02.2019 and 20.02.2019 were barred by limitation. Consequentially, since the assessments were time barred, the Tribunal treated all consequential merits raised by Revenue as academic. [Paras 6, 7, 8]

Assessments for AY 2015-16 and AY 2016-17 are time barred; consequent substantive issues rendered academic.

Final Conclusion: Both appeals are allowed: the Tribunal admitted the additional legal grounds and, on the merits, held the assessment orders for AY 2015-16 and AY 2016-17 (passed under Section 143(3) read with Section 144C) to be barred by limitation, making other contested issues academic.

Colourable device - substance over form - capital loss disallowance - section 45(3) applicability via conversion to LLP - genuine transaction versus sham - penetration of veil to ascertain economic substance - registered instrument not necessary for capital contribution to LLP

Colourable device - capital loss disallowance - substance over form - Capital losses claimed by the assessee on transfer of agricultural land to Smilax Corporate Services LLP were artificial and correctly disallowed. - HELD THAT: - The Tribunal examined the timing and circumstances surrounding (a) realization of capital gains on sale of shares, (b) near-contemporaneous conversion of Smilax Corporate Services Pvt. Ltd. into an LLP, and (c) transfer of agricultural land to that LLP at a book value substantially below the assessee's cost. The authorities below relied on the common course of natural events and attendant circumstances to infer that the conversion and transfer served to bring the transaction within the scope of section 45(3) and to create a notional capital loss to offset the capital gain. The assessee's explanations (expectation of lifting of land-use restrictions and prospective development) were held vague and insufficient to dispel the combined weight of the surrounding facts. Viewing the transactions holistically rather than in isolation, the Tribunal concluded that the capital loss was notional and introduced artificially by a colourable device and therefore the disallowance by the lower authorities is sustainable. [Paras 24, 25]

Capital loss introduced by transfer to the LLP is not genuine; authorities correctly disallowed the loss and the appeal is dismissed on this ground.

Section 45(3) applicability via conversion to LLP - genuine transaction versus sham - Conversion of the company into an LLP immediately prior to the transfer was a relevant indicium demonstrating an intention to bring the transaction within section 45(3), supporting the finding of a colourable device. - HELD THAT: - The Tribunal observed that section 45(3) applies to firms and certain associations but excludes companies; the conversion of a company (largely owned by the assessee) into an LLP shortly before the transfer made the LLP the vehicle for the capital contribution. No independent, compelling commercial reason for the conversion and transfer proximate to the realization of substantial capital gains was demonstrated. The timing, sameness of stakeholders and unchanged economic resources before and after transfer pointed toward a deliberate structuring to obtain favourable tax treatment, which lent credence to the authorities' conclusion that the conversion facilitated a colourable device. [Paras 18, 19, 24]

The conversion and proximate transfer are admissible indicia of a scheme to bring the transaction within section 45(3) and support the conclusion that the loss was artificial.

Registered instrument not necessary for capital contribution to LLP - A registered instrument is not necessary to effect transfer of land to an LLP towards capital contribution. - HELD THAT: - The Tribunal expressly disapproved the CIT(A)'s observation that lack of registration negated the transfer, stating that the question is no longer res integra and that such registration is not a prerequisite to effect a capital contribution of land to an LLP. The Assessing Officer had not relied on want of registration as a ground in his reasoning; nonetheless, the Tribunal clarified this legal position. [Paras 20]

Absence of a registered instrument does not vitiate the capital contribution to the LLP; the CIT(A)'s contrary observation is disapproved.

Genuine transaction versus sham - penetration of veil to ascertain economic substance - Sunil Siddharthbhai principle - The tests laid down in Sunil Siddharthbhai permit the revenue to examine whether a transfer to a partnership/firm (or similar arrangement) is a device to evade tax; those indicia were applied and supported the authorities' conclusion that the transfer was a sham. - HELD THAT: - The Tribunal recalled the Supreme Court's guidance that tax authorities may probe behind the form of a transaction to determine whether a transfer to an entity in which the transferor has substantial interest is a real contribution or merely a device to convert the asset while retaining economic benefit. The Tribunal affirmed that the Assessing Officer and appellate authorities were entitled to consider the composition of stakeholders, lack of substantial business activity of the transferee, timing of transactions, absence of a real commercial need for the transfer, and subsequent behaviour of the entities as relevant indices of sham. Applying these considerations to the facts, the Tribunal found the authorities' scrutiny legitimate and their conclusions warranted. [Paras 21, 22, 23, 24]

Principles from Sunil Siddharthbhai were correctly invoked and applied; the enquiry into economic substance supports denial of the claimed loss.

Final Conclusion: The Tribunal upheld the disallowance of the capital loss claimed on transfer of agricultural land to Smilax Corporate Services LLP, finding the transfer and the preceding conversion to an LLP to be part of a colourable device to create notional losses; the observation that registration is unnecessary for such capital contribution to an LLP was clarified, and the appeal is dismissed.

Allowability of provisions as business expenditure - scientific method of accounting - revenue neutrality of provisions - application of section 40(a)(ia) - TDS liability dependent on identifiability of payees - remand for verification of identifiability of recipients - computation under section 115JB consequential on allowability - year of allowance of expenditure

Allowability of provisions as business expenditure - scientific method of accounting - revenue neutrality of provisions - Deletion of disallowance of provisions for expenses of Rs. 16,73,32,769/- claimed as revenue expenditure - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the provisions were created on a consistent and scientific basis and related to services availed during the year, that similar treatment had been accepted in earlier years, and that the assessing officer had accepted the book results. Relying on jurisprudence recognising that properly estimated provisions which meet the conditions for recognition may be deductible and that excess/short year adjustments are revenue neutral, the Tribunal agreed with the CIT(A) that the disallowance could not be sustained. The Tribunal therefore found no error in deleting the addition made by the Assessing Officer. [Paras 7, 9]

Disallowance of Rs. 16,73,32,769/- deleted; Department's Ground No.1 dismissed.

Application of section 40(a)(ia) - TDS liability dependent on identifiability of payees - remand for verification of identifiability of recipients - year of allowance of expenditure - Whether alternate disallowance under section 40(a)(ia) of Rs. 1,48,55,890/- is sustainable and whether earlier disallowance for A.Y. 2015-16 should reduce taxable income of A.Y. 2016-17 - HELD THAT: - The Tribunal noted conflicting positions: earlier ITAT decisions in the assessee's own case held TDS provisions inapplicable where recipients are not identifiable, but the assessee also consistently maintained that provisions were based on actual services availed and therefore payees were ascertainable. Given these facts, the Tribunal held it was not possible to accept wholesale that recipients were unidentifiable. The Tribunal restored the matter to the file of the Assessing Officer with a direction to verify which specific cases involve unascertainable payees or undeterminable amounts and to decide the issue afresh after giving the assessee an opportunity of being heard. [Paras 11, 14]

Matter remanded to Assessing Officer to verify identifiability of payees and determine applicability of section 40(a)(ia); Ground Nos.2 & 3 of Department's appeal dismissed and assessee's Ground No.3 allowed for statistical purposes.

Computation under section 115JB consequential on allowability - Whether the adjustment of Rs. 16,73,32,769/- should be made while computing income under section 115JB - HELD THAT: - Since the primary disallowance in respect of the provision was deleted, the consequential adjustment in computation under section 115JB was also held to fall away. The Tribunal treated the ground as consequential on its primary finding. [Paras 16]

Consequential adjustment under section 115JB deleted; Department's Ground No.4 dismissed.

Year of allowance of expenditure - Assessee's contention regarding alternate disallowance of provisions under section 40(a)(ia) and related grounds - HELD THAT: - Certain grounds raised by the assessee were not pressed (late deposit of ESIC/PF) or were general in nature and required no specific adjudication. One of the assessee's grounds (Ground No.3) was noted as allowed for statistical purposes in consequence of the remand on the TDS/identifiability issue. [Paras 18, 19, 20]

Assessee's appeal partly allowed for statistical purposes; unpressed and general grounds dismissed or not adjudicated.

Final Conclusion: The Tribunal dismissed the Revenue's appeal challenging deletion of the disallowance of provisions (primary addition deleted), remanded the question of applicability of section 40(a)(ia) in respect of particular provision items to the Assessing Officer for verification of identifiability of payees, and accordingly held the consequential computation adjustment under section 115JB to be without basis; the assessee's appeal was partly allowed for statistical purposes and the Revenue's appeal was dismissed.

Unexplained cash credit under section 68 of the Income Tax Act, 1961 - Genuineness of cash sales during demonetisation - Verification by books of account, VAT audit and debtor recovery - Effect of demonetisation on cash receipts and debtor behaviour

Unexplained cash credit under section 68 of the Income Tax Act, 1961 - Genuineness of cash sales during demonetisation - Verification by books of account, VAT audit and debtor recovery - Whether the cash sales of Rs. 65,31,286/- deposited during the demonetisation period constituted unexplained credit under section 68 and were liable to be added to the assessee's income - HELD THAT: - The Tribunal found that the assessee is a longstanding manufacturer with audited financial statements, registration under VAT/GST and statutory audit under section 44AB. The Assessing Officer accepted that the assessee conducts regular cash sales but challenged only receipts during the demonetisation window (08/11/2016 to 31/12/2016) because of an observed spike in bank deposits. The Tribunal accepted the assessee's documentary material - including bank statements, sample sale/purchase bills, VAT audit report, month-wise cash receipts and details supporting major purchases - and noted that purchases were not disputed. The Tribunal observed that outstanding debtors had materially decreased in the year under appeal despite increased sales, indicating accelerated recovery of debts concurrent with demonetisation. The Tribunal held that the spike in cash deposits was explicable by legitimate business reasons, including recovery from debtors and enhanced cash sales to clear stock in response to demonetisation, and that the Assessing Officer's inability to verify some customer addresses was insufficient to treat the credited sales as unexplained under section 68. On this basis the addition made by the Assessing Officer and confirmed by the CIT(A) was deleted. [Paras 6, 7, 8, 11]

Addition of Rs. 65,31,286/- treated as unexplained credit under section 68 is deleted and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the CIT(A)'s confirmation of the addition under section 68, and deleted the addition of Rs. 65,31,286/- on the grounds that the cash receipts during the demonetisation period were satisfactorily explained by documentary evidence and legitimate business circumstances.

Deduction under section 36(1)(viia) - Provision for bad and doubtful debts - Non-performing assets (NPA) - Standard assets and restructured debt excluded from NPA - Binding effect of Tribunal directions - Interest under section 234B - Excess refund under section 143(1) - Interest on refunds under section 244A - Rule 119A(b) - monthly computation of interest - Remand/verification to Assessing Officer

Deduction under section 36(1)(viia) - Provision for bad and doubtful debts - Binding effect of Tribunal directions - Non-performing assets (NPA) - Standard assets and restructured debt excluded from NPA - Allowability of deduction under section 36(1)(viia) to be determined by reference to provision for bad and doubtful debts available at year end and exclusion of provisions for standard assets and restructured debt where not pressed by assessee. - HELD THAT: - The Tribunal had earlier directed that allowance under section 36(1)(viia) should be examined in the remand proceedings in light of the Ahmedabad Bench decision in Sarvodaya Sahkari Bank Ltd, which treats the deduction as available to the extent of provision for bad and doubtful debts shown in the books of account irrespective of the year of creation. The Tribunal in a later order in the assessee's regular assessment allowed the claim because the assessee had sufficient provisions at year end (greater than the claim). Following that crystallised tribunal finding, the present Bench directed the Assessing Officer to allow the deduction to the extent of provision for bad and doubtful debts available at the year end. The assessee has, for the year under consideration, relinquished pressing the contention to treat standard assets and restructured debt as NPAs; the AO is directed to verify exclusion of such items when giving effect. Ground raising inclusion of standard assets/restructured debt was dismissed as not pressed.

Claim under section 36(1)(viia) allowed to the extent of provision for bad and doubtful debts available at year end; standard assets and restructured debt to be excluded as verified by AO; related ground dismissed as not pressed.

Interest under section 234B - Excess refund under section 143(1) - Remand/verification to Assessing Officer - Whether interest under section 234B is payable depends on verification if refund granted under section 143(1) exceeded refund due on regular assessment; matter remitted for verification. - HELD THAT: - Section 234B liability turns on whether the refund granted under section 143(1) exceeded the amount refundable on regular assessment. The Bench observed that no detailed material regarding refunds/amounts was placed before it, and therefore there was no infirmity in the CIT(A)'s direction to the Assessing Officer to verify and modify interest liability accordingly. The matter is left for factual verification and computation by the Assessing Officer in accordance with law.

Direction to AO to verify whether excess refund under section 143(1) exists and to compute/modify interest under section 234B accordingly; ground allowed for statistical purpose.

Interest on refunds under section 244A - Rule 119A(b) - monthly computation of interest - Interest under section 244A must be computed for every month or part of a month and Rule 119A(b) (treating any fraction of a month as a full month) applies; CIT(A)'s view that interest is to be calculated on annual basis under Rule 119A(a) was set aside. - HELD THAT: - Section 244A expressly provides that, in relevant cases, interest is to be calculated at the rate of one-half per cent for every month or part of a month comprised in the period. Rule 119A contains separate procedures: (a) for annual basis rounding where interest is annual, and (b) for monthly or part-month computation where fractions are treated as full months. The Tribunal held the CIT(A)'s conclusion that interest under section 244A is to be computed on an annual basis to be incorrect. The matter is restored to the Assessing Officer for recomputation of interest in accordance with section 244A read with Rule 119A(b).

CIT(A)'s finding set aside; interest to be recomputed by AO under section 244A applying Rule 119A(b) (fraction of month deemed full month); ground allowed for statistical purpose.

Deduction under section 36(1)(viia) - Recovery in respect of bad debts written off - Binding effect of Tribunal directions - Taxing of recovery in respect of bad debts written off for AY 2013-14 decided mutatis mutandis by reference to the decision on section 36(1)(viia) for AY 2009-10. - HELD THAT: - The ground in AY 2013-14 raising taxation of recoveries on previously written-off bad debts corresponds to the issue decided for AY 2009-10 regarding the allowability of provisions and related treatment. The Tribunal applied the same reasoning and outcome (mutatis mutandis) and directed that the decision on the section 36(1)(viia) issue govern the treatment of such recoveries for AY 2013-14.

Ground for AY 2013-14 decided mutatis mutandis in accordance with the Tribunal's ruling on the section 36(1)(viia) issue; appeal allowed partly for statistical purposes.

Final Conclusion: All three appeals by the assessee are allowed partly for statistical purposes: deduction under section 36(1)(viia) to be allowed to the extent of provision for bad and doubtful debts available at year end (with standard assets and restructured debt excluded as verified by AO); AO directed to verify excess refund for computation of interest under section 234B; interest on refunds under section 244A to be recomputed applying Rule 119A(b); corresponding relief for AY 2013-14 is granted mutatis mutandis.

Treatment of Debenture Redemption Reserve for computation of book profit under section 115JB (Explanation 1) - inclusion of amounts carried to reserves in book profit - remand for consideration of additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 - addition on account of cessation of liability under section 41

Treatment of Debenture Redemption Reserve for computation of book profit under section 115JB (Explanation 1) - inclusion of amounts carried to reserves in book profit - Whether the amount transferred to Debenture Redemption Reserve (DRR) during the year must be added back to book profit for computation under section 115JB - HELD THAT: - The Tribunal examined Explanation 1 to section 115JB which expressly increases book profit by "the amounts carried to any reserves, by whatever name called, other than a reserve specified under section 33AC." The statutory language is plain and unambiguous: all amounts carried to reserves (except those under section 33AC) are to be included in book profit. Reliance placed by the assessee on decisions concerning surtax and on companies law obligations (including the Companies Act provision and Ministry of Corporate Affairs circulars on adequacy of DRR) did not alter the statutory mandate under section 115JB. Authorities discussing when an appropriation constitutes a provision rather than a reserve (e.g., National Rayon, Vazir Sultan) were considered, but the Tribunal held that the legislature's clear wording in Explanation 1 prevails. Accordingly, the amount of Rs.100 crores transferred to DRR had to be added back to book profit for computation under section 115JB. [Paras 14, 15, 16, 17, 18]

The transfer to Debenture Redemption Reserve is to be added back to book profit under Explanation 1(b) to section 115JB and the claim to exclude the DRR is disallowed.

Remand for consideration of additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 - Whether the additional evidence filed by the assessee under Rule 29 should be considered by the Assessing Officer - HELD THAT: - The assessee sought to admit additional evidence under Rule 29 asserting that such evidence could not be produced before the lower authorities and was material. The Tribunal found the plea acceptable. Because the Revenue had not had the opportunity to consider those evidences, in the interest of justice the Tribunal remanded the matter to the file of the Assessing Officer for consideration of the additional evidence and for passing an order in accordance with the Income Tax Act. [Paras 5]

Matter remanded to the Assessing Officer to consider the additional evidence filed under Rule 29 and to pass appropriate orders.

Addition on account of cessation of liability under section 41 - Whether the amount claimed as sundry creditors, alleged to have been irrecoverably written off by another party, should be treated as ceased liability and added back under section 41 - HELD THAT: - The Assessing Officer acted on information that the creditor had irrecoverably written off the receivable; the assessee nonetheless continued to show the amount as sundry creditors in its books. The factual position established that the assessee had been absolved of the liability. On that basis the Tribunal found that the lower authorities were justified in treating the amount as ceased liability and confirming the addition made under section 41. [Paras 19]

The addition on account of cessation of liability is confirmed.

Final Conclusion: The Tribunal remanded the record to the Assessing Officer to consider additional evidence filed under Rule 29; held that amounts transferred to Debenture Redemption Reserve must be added back to book profit for computation under section 115JB; and confirmed the addition made on account of cessation of liability under section 41. Appeals are partly allowed for statistical purposes.

Deduction under section 80IA(4) - separate undertaking - commencement of operations and ten-year eligibility period - disallowance under section 14A - provision for post-closure care expenditure - advances treated as income and proportionate recognition - remand for fresh computation/verification to Assessing Officer - interest under section 234C to be charged on returned income

Deduction under section 80IA(4) - separate undertaking - Eligibility of Landfill-I and Landfill-II as separate undertakings for deduction under section 80IA(4). - HELD THAT: - The Tribunal examined allotments, separate agreements and commencement dates and followed earlier coordinate-bench decisions in the assessee's own cases holding that Landfill-II is a distinct and separate infrastructure facility from Landfill-I. The Co-ordinate Bench's findings (including that Landfill-II commenced in FY 2006-07 and is eligible from AY 2008-09) were applied; there was no contrary material warranting deviation. Consequently the claim for separate deductions in respect of the two landfills is sustained. [Paras 6, 15]

Deduction under section 80IA(4) allowed for Landfill-I and Landfill-II as separate undertakings (Landfill-II eligible from AY 2008-09).

Deduction under section 80IA(4) - separate undertaking - Eligibility of Incinerator-II as a separate undertaking for deduction under section 80IA(4). - HELD THAT: - The Tribunal considered the separate land allotment, distinct agreement, separate plant and machinery and commencement date for Incinerator-II, and noted that earlier findings in respect of Incinerator-I had attained finality. The CIT(A)'s rejection based on a predecessor's order was reversed in view of the documents showing Incinerator-II to be an independent project; accordingly Incinerator-II qualifies for deduction under section 80IA(4) beginning AY 2012-13. [Paras 7, 15]

Incinerator-II is a separate undertaking and eligible for deduction under section 80IA(4) from AY 2012-13.

Disallowance under section 14A - Validity of the AO's disallowance under section 14A read with Rule 8D where no exempt income was earned. - HELD THAT: - It is an admitted fact for the relevant year that the assessee did not earn any exempt income. The Tribunal applied settled principle that where no exempt income is earned, no disallowance under section 14A is warranted and accordingly deleted the disallowance both for normal computation and for book profit under section 115JB. [Paras 8, 20]

Disallowance under section 14A deleted.

Provision for post-closure care expenditure - Allowability of provision for post-closure care expenditure. - HELD THAT: - The Tribunal followed its consistent earlier decisions in the assessee's own appeals for preceding years where identical disallowances were deleted. No contrary material was placed on record to justify a departure. On that footing the Tribunal sustained the allowability of the provision and deleted the disallowance both for normal assessment and for computation under section 115JB. [Paras 9, 18]

Disallowance of post-closure care provision deleted; provision allowed.

Advances treated as income and proportionate recognition - remand for fresh computation/verification to Assessing Officer - Treatment of advances from customers for waste treatment as income of the assessee. - HELD THAT: - The Tribunal noted identical earlier decisions in the assessee's cases where non refundable advances were directed to be assessed on a proportionate basis and the matter was restored to the AO for application of a prorata computation formula. Facts being similar in the impugned years, the Tribunal restored the issue to the Assessing Officer for fresh consideration and computation along similar lines. [Paras 10, 19]

Issue restored to the Assessing Officer for proportionate computation and assessment (allowed for statistical purpose).

Remand for fresh computation/verification to Assessing Officer - Alternate claims that flow from the treatment of advances (incremental advance recognition; allowance of estimated expenses) are to be considered. - HELD THAT: - Since the primary issue regarding advances has been remanded to the AO, the Tribunal also remanded the alternate prayers seeking recognition only of incremental advances and/or allowance of estimated incineration expenses against advances, leaving them for fresh adjudication by the Assessing Officer. [Paras 11]

Alternate claims remanded to the Assessing Officer for fresh consideration (allowed for statistical purpose).

Interest under section 234C to be charged on returned income - Validity of interest charged under section 234C. - HELD THAT: - The Tribunal observed that interest under section 234C is consequential and mandatory but directed the Assessing Officer to re-examine and compute interest under section 234C on the returned income in accordance with law. [Paras 12]

Interest under section 234C to be re computed by the AO on the returned income; ground allowed for statutory reconsideration.

Final Conclusion: The Tribunal partly allowed the assessee's appeal for AY.2012-13 and applied the same conclusions mutatis mutandis to AY.2015-16: Landfill-I/II and Incinerator-II were held to be separate undertakings eligible for deduction under section 80IA(4); disallowances under section 14A and for post-closure care provisions were deleted; the treatment of advances was remanded to the Assessing Officer for proportionate computation; alternate claims and re-computation of interest under section 234C were remitted to the AO for fresh consideration.

Grant of bail in economic offences - test for grant of bail balancing gravity of offence and completed investigation - disclosure by co-accused not by itself sufficient for conviction - completed investigation and non-necessity of custody for further investigation - conditions for grant of bail including cooperation and non-tampering - verification of criminal antecedents and power to cancel bail

Grant of bail in economic offences - test for grant of bail balancing gravity of offence and completed investigation - disclosure by co-accused not by itself sufficient for conviction - Whether the petitioner, accused in a Customs Act offence involving alleged smuggled gold, is entitled to be released on bail. - HELD THAT: - The Court considered the nature of the allegations, the materials on record and the stage of investigation. Although the offence is an economic one and grave in character, the Court observed that investigation has been completed and nothing incriminating was recovered from the conscious possession of the petitioner; his name surfaced primarily from disclosures made by the apprehended persons. Reliance was placed on settled principles that economic offences must be considered case-by-case and that disclosure by co-accused, without corroborative substantive evidence, is not by itself conclusive. Balancing the gravity of the offence against the fact that further custody was not necessary for investigation, and having regard to precedents emphasising that bail is the rule and refusal the exception, the Court granted bail subject to stringent conditions to allay prosecutorial apprehensions and to secure the petitioner's attendance at trial.

Petitioner released on bail on furnishing bond with conditions.

Conditions for grant of bail including cooperation and non-tampering - verification of criminal antecedents and power to cancel bail - What conditions should attach to the bail and what further steps the trial court must take. - HELD THAT: - The Court imposed conditions requiring the petitioner to cooperate in the trial, be properly represented and be physically present as directed by the trial court, with cancellation of bail if he absents without sufficient reason on two consecutive dates or tampers with evidence or witnesses. The Court directed the trial court to verify the petitioner's criminal antecedents and to proceed to cancel bail if any concealment is detected, while clarifying that acceptance of bail bonds should not be delayed on account of verification.

Bail granted subject to specified conditions and verification of antecedents by the trial court; prosecution permitted to move for cancellation on breach.

Final Conclusion: Bail granted to the petitioner in the Customs Act prosecution despite the economic nature of the alleged offence, on the basis that investigation is complete and incriminating material directly linking the petitioner to conscious possession was lacking; release is subject to conditions ensuring cooperation, non-tampering and verification of antecedents, with provision for cancellation if conditions are breached or concealment is discovered.

Time-bar and extension of limitation under Section 28(9) of the Customs Act, 1962 - effect of The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Ordinance/Act, 2020 on limitation - definition and proof of beneficial owner under Section 2(3A) and importer under Section 2(26) of the Customs Act, 1962 - principles of natural justice in adjudication under the Customs Act - remand for fresh adjudication and proportionality of penalty

Time-bar and extension of limitation under Section 28(9) of the Customs Act, 1962 - effect of The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Ordinance/Act, 2020 on limitation - Validity of passing the adjudication Order-in-Original dated 28.09.2020 after the one year period prescribed by Section 28(9)(b) of the Customs Act, 1962 and whether the Ordinance/Act 2020 saved the limitation. - HELD THAT: - The Court examined the chronology of the Show Cause Notice dated 18.06.2018 and the time-limits in Section 28(9) as amended. It accepted that the one year initial period and the further one year extension under the proviso could apply but considered the approval records and file-notes showing sanction by a senior officer for extension. The Court analysed the special saving mechanism created by Section 6 of The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Ordinance, 2020 (and its enactment as an Act and attendant Notification) which extended time limits falling between 20.03.2020 and the notified end date to 30.09.2020. The Court held that the impugned order of 28.09.2020 was passed within the period saved by the Ordinance/Act/Notification and that precedents on computation of limitation in other statutory contexts (e.g., Assam Urban Water Supply and Sagufa Ahmed) were not pari materia to the special dispensation under the Taxation Ordinance/Act. Consequently the plea that the proceedings had lapsed under the proviso to Section 28(9) was rejected. [Paras 80, 81, 82, 99, 100]

The adjudication dated 28.09.2020 is not time-barred; the extension and the Ordinance/Act/Notification operated to save the limitation and the preliminary challenge under Section 28(9) is rejected.

Definition and proof of beneficial owner under Section 2(3A) and importer under Section 2(26) of the Customs Act, 1962 - principles of natural justice in adjudication under the Customs Act - remand for fresh adjudication and proportionality of penalty - Whether the petitioner could be treated as the "beneficial owner" of the undeclared goods and whether the penalties and duty demand as imposed in the impugned order could be sustained. - HELD THAT: - On review of the Show Cause Notice and the impugned order, the Court found the Department had treated the petitioner as a "beneficial owner" because the record showed the importer and other alleged principals were untraceable. The Court emphasised that findings on disputed questions of fact are ordinarily for the adjudicating authority/tribunal; however, on the materials before it the Court concluded there were no records to infer that the petitioner exercised effective control over the smuggled goods. The petitioner's role was found to be that of a facilitator/conduit who filed the Bill of Entry and arranged clearance on lump-sum terms and who received payment for duty; there was no direct material to show he was the importer or exercised effective control so as to make him the beneficial owner. The Court held that imposing the full duty/anti dumping demand and heavy penalties on that basis was arbitrary and disproportionate to the petitioner's proved role. Although the Court did not hold that the petitioner was free of all culpability, it found the impugned order unsustainable insofar as it treats him as beneficial owner and imposes disproportionate penalties without adequate factual basis. In consequence the Court set aside the impugned order as regards its liability/penalty findings against the petitioner and remitted the matter to the respondent to re adjudicate the liability and to determine penalty proportionate to the petitioner's role within three months; the Department remains free to continue investigation and to prosecute or issue supplementary notices against other persons as and when traceable. [Paras 119, 120, 121, 125, 126]

The finding that the petitioner was the "beneficial owner" and the attendant duty and penalties as imposed are unsustainable; the impugned order is set aside to the extent it fastens those liabilities on the petitioner and the matter is remitted for fresh, proportionate adjudication within three months.

Final Conclusion: Writ petition allowed in part. The preliminary contention of time bar under Section 28(9) is rejected and the adjudication dated 28.09.2020 is held to be within the extended/saved time; however, the finding that the petitioner was the "beneficial owner" and the heavy duty/penalty impositions on that basis are set aside as unsustainable. The matter is remitted to the respondent for fresh adjudication to determine liability and penalty proportionate to the petitioner's role within three months; the Department may further investigate and proceed against other persons if and when traceable.

Show cause notice - pre-notice consultation - Section 124 of the Customs Act, 1962 - Section 75(1) of the Customs Act, 1962 - Rule 16A of the Customs, Central Excise & Service Tax Drawback Rules, 1995 - First Proviso to Section 28 (pre-notice consultation)

Show cause notice - pre-notice consultation - Section 124 of the Customs Act, 1962 - Rule 16A of the Customs, Central Excise & Service Tax Drawback Rules, 1995 - First Proviso to Section 28 (pre-notice consultation) - Validity of the SCN dated 03 February 2022 issued under Section 124 and Section 75(1) read with Rule 16A of the 1995 Rules insofar as it is alleged that a mandatory pre-notice consultation was not held. - HELD THAT: - The Court held that the alleged requirement of pre-notice consultation arises only from the First Proviso to sub-section (1) of Section 28 of the Customs Act. The SCN impugned in the petition proposes actions under Section 124 and the 1995 Rules (including Rule 16A) and under Section 75(1); those provisions do not incorporate or mirror the pre-notice consultation requirement contained in Section 28. Reliance on judgments and administrative circulars contended to import a mandatory pre-notice consultation does not alter the statutory scheme where the invoked provisions themselves do not provide for such consultation. Consequently, absence of pre-notice consultation did not vitiate the SCN issued under the provisions relied upon in the notice. [Paras 3, 4]

Challenge to the SCN on the ground of absence of pre-notice consultation is unsustainable; petition dismissed.

Final Conclusion: The petition challenging the SCN dated 03 February 2022 was dismissed: the Court found that the statutory pre-notice consultation requirement is confined to the First Proviso to Section 28 and does not apply to SCNs issued under Section 124 and the 1995 Rules; absence of such consultation therefore did not invalidate the SCN.

Summary order. Petition under Section 438 Cr.P.C. for anticipatory bail dismissed as withdrawn with liberty to approach the trial Court/Court of Sessions in accordance with law.

Classification of imported goods - Interpretation of Chapter Note defining "Denim" - Reliability and representativeness of laboratory test reports and sampling procedure - Reclassification demand under Section 28 of the Customs Act, 1962 - Confiscation, redemption fine and penalty under the Customs Act

Reliability and representativeness of laboratory test reports and sampling procedure - Whether there was procedural infirmity in drawing samples and in sending remnant samples for retesting at CRCL, New Delhi - HELD THAT: - The adjudicating authority found, and this Tribunal agreed, that samples were drawn in the presence of the importer's proprietor and the CHA's representative and that no objection was raised at the time of drawal. The Tribunal held that proper procedures were followed in drawing the samples and in sending remnant samples for retest as directed earlier, and therefore the objection that samples were not representative or that the appellant's representatives were not called for retesting at CRCL is not sustainable. [Paras 7]

No procedural infirmity in sampling or in sending remnant samples for retest; objection rejected.

Reclassification demand under Section 28 of the Customs Act, 1962 - Whether issuance of notice and demand for differential duty under Section 28 was unsustainable in the absence of a final assessment - HELD THAT: - The Tribunal observed that notices proposing reclassification of the four Bills of Entry were validly issued. It explained that when classification is disputed, original provisional assessments may be finally determined by the proper officer only after the classification dispute attains finality; meanwhile a notice proposing reclassification and demanding duty under Section 28 can appropriately be issued. Accordingly, there was no infirmity in the demand made under Section 28. [Paras 7]

Demand under Section 28 for reclassification was sustainable; objection rejected.

Classification of imported goods - Interpretation of Chapter Note defining "Denim" - Confiscation, redemption fine and penalty under the Customs Act - Whether the imported fabrics are "Denim" as per Chapter Note to Chapter 52 or are classifiable as Cotton-Polyester fabric under CTH 52113190, and the consequent validity of confiscation, redemption fine and penalty - HELD THAT: - The Tribunal compared the CRCL/Test reports with the Chapter Note definition of "Denim". The reports established that the fabric was a three-thread twill with dyed blue cotton yarn in the warp and undyed/white polyester (with elastomeric yarns) in the weft, composition being approximately 79.2% cotton, 16.8% polyester and the balance elastomeric. Although the fabric possessed certain characteristics of denim (three-thread twill and blue cotton warp), it failed to meet all requirements of the Chapter Note because the weft was undyed white polyester containing about 4% elastomeric material and thus was not "unbleached, bleached or dyed, grey or coloured a lighter shade of the colour of the warp yarns" in the sense required. The Tribunal held that having characteristics of denim is not equivalent to satisfying the Chapter Note definition; since the fabric did not fulfill all conditions, it could not be classified as Denim under that Chapter Note. Given the composition shown in the test report, the fabric fits within Cotton-Polyester fabric under CTH 52113190 as declared by the appellant. Consequentially, the differential duty demand based on reclassification was held unsustainable; there was no misclassification warranting confiscation, and the redemption fine and penalty imposed were also unsustainable. [Paras 10, 11, 12, 13, 14]

Fabric is not "Denim" under Chapter Note 52 but is classifiable as Cotton-Polyester under CTH 52113190; differential duty, confiscation, redemption fine and penalty set aside.

Final Conclusion: The appeal is allowed: the impugned order of reclassification, confiscation, redemption fine and penalty is set aside after holding that (i) sampling and retesting procedures were valid, (ii) notices under Section 28 were maintainable, and (iii) on substantive classification the fabrics are not "Denim" per Chapter Note 52 but are classifiable as Cotton-Polyester under CTH 52113190, with the consequential reliefs granted.

Refund of Special Additional Duty (SAD) - entitlement to refund where goods are exempt from Sales Tax/VAT - doctrine that adjudication cannot travel beyond the allegations in the show cause notice - limitation under Section 128 of the Customs Act, 1962 - condonation of delay under Section 28 of the Customs Act, 1962

Limitation under Section 128 of the Customs Act, 1962 - condonation of delay under Section 28 of the Customs Act, 1962 - whether the appeal against the adjudication order was time-barred - HELD THAT: - The Tribunal examined dispatch/receipt dates as recorded by the department and the appellant's affidavit asserting receipt of the adjudication order on 09.06.2014. The Commissioner(Appeals) had held dispatch as 02.04.2014 and relied on a departmental RTI reply that the order was received by a third person on 01.04.2014. The Tribunal found these records to be contradictory and noted the appellant's sworn statement that the person noted in the RTI reply was neither an employee nor authorised to collect the order. On the balance of evidence the benefit of doubt was given to the appellant; the appeal filed on 19.08.2014 fell within the condonable period under the Customs Act and therefore could not be rejected as time-barred under Section 128. [Paras 11]

Appeal not time-barred; appellant granted benefit of doubt and appeal held within condonable period.

Refund of Special Additional Duty (SAD) - entitlement to refund where goods are exempt from Sales Tax/VAT - doctrine that adjudication cannot travel beyond the allegations in the show cause notice - whether the refund claims could be rejected on merits as time-barred when no such plea was raised in the show cause notice - HELD THAT: - The earlier show cause notice issued after filing of refund claims alleged only non-payment of Sales Tax/VAT and did not contend that the refund claims were time-barred. On merits this Tribunal had already held that where Sales Tax/VAT is exempt on the imported goods, the element of CVD/SAD is in lieu of Sales Tax/VAT and a refund is admissible. The adjudicating authority and the Commissioner(Appeals) went beyond the allegations contained in the show cause notice by rejecting the refund on the ground of limitation. The Tribunal held that it is impermissible for adjudication to travel beyond the charges in the show cause notice; accordingly the refund could not be rejected on the limitation ground which was not pleaded in the show cause notice. [Paras 9, 12, 13]

Refund claims cannot be rejected as time-barred where limitation was not alleged in the show cause notice; on merits prior findings favour the appellant.

Final Conclusion: Impugned orders set aside; appeals allowed and refund claims to be considered accordingly with consequential relief.

Extinguishment of pre-insolvency government dues under approved resolution plan - effect of NCLT-approved resolution plan on tax, interest and penalty liabilities - appeal rendered infructuous by insolvency resolution - confiscation under Section 111(m) of the Customs Act - redemption fine and penalty under Section 112(a) of the Customs Act

Extinguishment of pre-insolvency government dues under approved resolution plan - appeal rendered infructuous by insolvency resolution - effect of NCLT-approved resolution plan on tax, interest and penalty liabilities - Whether the appeal against confiscation and imposition of redemption fine and penalty is maintainable in view of the NCLT approved resolution plan which extinguished pre effective date government dues. - HELD THAT: - The Tribunal found that the adjudication and appeals relate to liabilities incurred by Essar Steel India Ltd prior to the effective date of takeover. A resolution plan submitted by ArcelorMittal India Private Limited was approved by the NCLT on 08.03.2019 and that approval, as upheld by the Apex Court, provides that all claims including tax, interest and penalty relating to the period prior to the effective date stand extinguished. The Tribunal relied on the terms of the approved resolution plan and on its earlier decision in the appellants' own case observing that government dues as on the date of the NCLT order are extinguished. In consequence, the present proceedings challenging confiscation and the imposition of redemption fine and penalty have been rendered infructuous and there is no longer any live controversy for adjudication.

The appeal is dismissed as infructuous and disposed of on the ground that the NCLT approved resolution plan extinguished the pre effective date government dues to which the present challenge related.

Final Conclusion: The appeal against confiscation and imposition of redemption fine and penalty was disposed of as infructuous because the NCLT approved resolution plan extinguished the pre effective date government dues, leaving no subsisting claim to be adjudicated.

Revocation of customs broker licence and forfeiture of security deposit under the Customs Brokers Licensing Regulations - liability of customs broker for importer's breach of post import conditions - limited role of customs broker in filing bills of entry and absence of authority to decide admissibility of exemption notifications - due diligence and knowledge requirement for establishing broker's culpability - vicarious liability for acts of employee - authority of Proper Officer under Section 143 of the Customs Act, 1962 in conditional assessments - alleged violation of Regulations 11(d), 11(f) and 11(m) of CBLR, 2013

Limited role of customs broker in filing bills of entry and absence of authority to decide admissibility of exemption notifications - authority of Proper Officer under Section 143 of the Customs Act, 1962 in conditional assessments - Whether the customs broker can be held responsible for admissibility of exemption claims and for post import conditions of exemption notifications. - HELD THAT: - The Tribunal accepted that the customs broker's role is limited to filing bills of entry as per the importer's instructions and that the authority to decide admissibility of exemption notifications and to accept bonds or bank guarantees under conditional assessment lies with the Assistant/Deputy Commissioner as the Proper Officer under Section 143 of the Customs Act, 1962. Consequently, invocation of bond conditions and enforcement for breach of post import conditions is the responsibility of the departmental officer and cannot be shifted to the customs broker. On this basis the Tribunal held that the appellant could not be held responsible for any violation by the importer of the terms of the re export bond or exemption notifications. [Paras 9]

Appellant cannot be held liable for the importer's violation of post import conditions; liability to invoke bond terms rests with the Proper Officer.

Due diligence and knowledge requirement for establishing broker's culpability - alleged violation of Regulations 11(d), 11(f) and 11(m) of CBLR, 2013 - Whether allegations of breach of Regulations 11(d), 11(f) and 11(m) of CBLR, 2013 against the broker are sustainable in absence of evidence that the broker had knowledge of or connived in the importer's mis declaration. - HELD THAT: - Relying on Tribunal precedents, the Tribunal held that a customs broker is required to exercise due diligence and warn a client only if the broker is aware of the client's motive to misdeclare. Where there is no evidence that the broker had knowledge of, or connived in, any mis declaration or intent to divert goods, allegations under the cited regulations are unsustainable. The Tribunal further observed that mere acquaintance of an employee with the overseas supplier or introductions made by the employee do not establish abetment or mala fide conduct by the broker. [Paras 10]

Allegations under Regulations 11(d), 11(f) and 11(m) are factually and legally unsustainable in the absence of evidence of the broker's knowledge or connivance.

Vicarious liability for acts of employee - revocation of customs broker licence and forfeiture of security deposit under the Customs Brokers Licensing Regulations - Whether the broker is vicariously liable for the illegal acts of its employee and whether the order revoking the licence and forfeiting the security deposit was sustainable. - HELD THAT: - The Tribunal applied authorities holding that illegal acts of an employee cannot be attributed to the principal as pre concerted, knowing or conniving conduct in the absence of other violations by the principal. Noting there was no finding that the broker itself had committed wrongdoing or was aware of any intent to misdeclare, the Tribunal concluded that the impugned order of revocation and forfeiture was not sustainable. Accordingly, the order under Regulation 18 of the Customs Brokers Licensing Regulations, 2013 revoking the licence and forfeiting the security deposit was set aside. [Paras 11, 12]

Revocation of the appellant's licence and forfeiture of the security deposit set aside; broker not vicariously liable for employee's acts absent evidence of knowledge or connivance.

Final Conclusion: The Tribunal allowed the appeal, set aside the order revoking the customs broker licence and forfeiting the security deposit, and held that in the absence of evidence that the broker had knowledge of or connived in the importer's diversion of goods, the broker could not be held liable for the importer's breach or for acts of its employee; responsibility to invoke bond conditions and decide admissibility of exemptions lies with the Proper Officer.

Recall of judgment - limitation under Section 421 of the Companies Act, 2013 - computation of limitation from receipt of certified copy/free certified copy - effect of filing subsequent application showing awareness of order on limitation - grounds for recall as laid down by a Five Member Bench

Limitation under Section 421 of the Companies Act, 2013 - effect of filing subsequent application showing awareness of order on limitation - Appeals were barred by limitation under Section 421 and dismissal on that ground was justified. - HELD THAT: - The appellants themselves filed IA Nos. 4977-4978 of 2022 seeking payment under the Resolution Plan and the IA was disposed of by this Tribunal on 14.02.2023. Having invoked the process under the very order they now challenge, the appellants cannot contend non-receipt or lack of notice of the order for the purpose of delaying the commencement of limitation. On the facts, the Appeals filed against the order dated 02.02.2021 were time barred under Section 421 and the dismissal on the ground of delay was warranted. [Paras 6, 8]

Appeals dismissed as barred by limitation.

Computation of limitation from receipt of certified copy/free certified copy - application for certified copy effects on limitation - Reliance on the Supreme Court decisions concerning computation of limitation from receipt of a free certified copy did not assist the appellants on the facts of this case. - HELD THAT: - The Tribunal considered the Supreme Court's discussion in V. Nagarajan and Sagufa Ahmed concerning when limitation under Section 421(3) commences - namely that a party may compute limitation from receipt of a statutorily mandated free certified copy unless the party has itself applied for and received a certified copy, in which case limitation runs from that receipt. Here, the appellants' own conduct in filing the IA and engaging with the Resolution Plan removed the benefit of awaiting a free copy; the cited authorities therefore do not alter the conclusion that the appeals are time barred on the present facts. [Paras 9, 10]

Authorities relied upon do not avail the appellants; limitation runs against them on the facts.

Recall of judgment - grounds for recall as laid down by a Five Member Bench - No ground existed to recall the Tribunal's order; the recall application was rejected. - HELD THAT: - The Tribunal examined the settled principles governing recall of its orders as articulated by a Five Member Bench and found that the present application does not fall within recognised grounds for recall. The original order was passed after hearing counsel and the factual and legal position raised in the recall application do not satisfy the criteria for recalling a judgment. Accordingly, the recall application could not be entertained. [Paras 11, 12]

Application for recall rejected.

Final Conclusion: The applications for recall are dismissed; the Appeals were held to be time barred under Section 421 of the Companies Act, 2013 and the recall application did not disclose any ground warranting interference.

Interim relief / stay of implementation of resolutions - entrenched articles - prima facie case - balance of convenience - maintainability of company petition - limited scope of appellate interference in interim applications

Interim relief / stay of implementation of resolutions - prima facie case - balance of convenience - Whether appellants were entitled to interim relief restraining implementation of resolutions passed in the EGM dated 03.05.2019 - HELD THAT: - The Tribunal confined its adjudication to the prayers in MA No.1449/2019 and did not decide merits of CP No.47/2016. On the pleaded material the Bench found that appellants had raised serious prima facie doubts about the transfer of shares and the alleged Board meeting of 31.03.2016 which formed the basis for the voting strength at the EGM. The Tribunal also observed that amendment and deletion of Articles 59 and 60 would, if acted upon, likely change the composition of authorised representatives and cause irreparable prejudice to the appellant who then occupied the AR position in FCL. Having regard to the appellants' prima facie case, the balance of convenience and the risk of irreparable injury, the Tribunal held that NCLT had failed to appreciate facts relevant to MA No.1449/2019 and was incorrect in refusing interim protection. The Tribunal therefore concluded that the resolutions passed in the EGM dated 03.05.2019 should not be acted upon till CP No.47/2016 is finally decided. [Paras 98, 100, 101, 102, 106]

Set aside the impugned order dated 31.12.2019 insofar as it declined interim protection; directed that resolutions passed in the EGM dated 03.05.2019 shall not be acted upon till final disposal of CP No.47/2016.

Entrenched articles - maintainability of company petition - Whether Articles 59 and 60 are to be treated as 'entrenched articles' for the purpose of interim adjudication - HELD THAT: - The Tribunal examined Articles 59 and 60 and the statutory scheme under section 5(3)-(5) of the Companies Act, 2013. Noting that the articles in question had been approved/re approved after the commencement of the 2013 Act, and that they prima facie exhibited the characteristics of entrenchment (including the requirement that, for a private company, amendments require agreement by all members), the Tribunal held prima facie that Articles 59 and 60 were of an entrenched nature. Because the appellant did not agree to the amendment/deletion at the EGM, the Tribunal concluded that the statutory requirement of unanimity under section 5(4) for a private company was not satisfied on the face of the record, which supported interference by way of interim protection. [Paras 76, 77, 78, 79, 85]

Held in prima facie view that Articles 59 and 60 are entrenched articles and that the amendments/deletion carried out at the EGM dated 03.05.2019 did not, on the material before the Tribunal, satisfy the unanimity requirement for a private company under section 5(4).

Limited scope of appellate interference in interim applications - Scope of the Tribunal's order with regard to collateral disputes (gift deed, trust deed, validity of share transfer, and existence of Board meeting of 31.03.2016) - HELD THAT: - The Tribunal expressly confined its judgment to MA No.1449/2019 and stated that it was not deciding the substantive disputes in CP No.47/2016. The existence, authenticity or legality of the gift deed, securities transfer form, Trust Deed, MoU and whether the Board meeting of 31.03.2016 actually took place were left open for adjudication by the NCLT in the main petition. The Tribunal noted those matters were 'under a cloud of suspicion' for purposes of establishing a prima facie case, but did not finally determine them and remitted those factual and legal controversies to the NCLT for decision in CP No.47/2016. [Paras 59, 73, 90, 97]

Remitted issues concerning authenticity and legality of the gift deed, securities transfer form, Trust Deed, MoU and the question whether the Board meeting of 31.03.2016 was held to the NCLT for adjudication in CP No.47/2016; these matters were not decided on merits in this appeal.

Final Conclusion: The NCLT order dated 31.12.2019 (impugned order) is set aside insofar as it refused interim relief in MA No.1449/2019. The Tribunal directed that the resolutions passed in the EGM held on 03.05.2019 shall not be acted upon until CP No.47/2016 is finally decided; questions as to the legality/authenticity of the gift deed, securities transfer, Trust Deed, the existence of the Board meeting of 31.03.2016 and related factual issues remain open and are to be adjudicated by the NCLT in the main petition. No order as to costs.

Application under Section 7 IBC - financial debt and financial creditor - recovery certificate as a deemed decree under Section 19(22A) of the Recovery of Debts Act - limitation governed by Article 137 of the Limitation Act - acknowledgement in writing under Section 18 of the Limitation Act - promise to pay under Section 25(3) of the Contract Act - moratorium under Section 14 IBC - doctrine of election

Application under Section 7 IBC - financial debt and financial creditor - moratorium under Section 14 IBC - Validity of the Section 7 admission and declaration of moratorium insofar as the composite application based on recovery certificates was concerned. - HELD THAT: - The NCLT admitted the Section 7 application and declared moratorium; the Appellate Tribunal upheld that admission. The Court found no material irregularity or patent illegality in admitting the application on the basis of recovery certificates which established debt and default, and recognised that a holder of a recovery certificate is a financial creditor entitled to initiate CIRP. Consequently, the admission and the declaration of moratorium were sustained. [Paras 3, 15, 16]

Admission under Section 7 and declaration of moratorium were upheld in respect of the claims based on the recovery certificates that were found to establish financial debt and default.

Limitation governed by Article 137 of the Limitation Act - recovery certificate as a deemed decree under Section 19(22A) of the Recovery of Debts Act - Whether the Section 7 application was time barred in respect of the recovery certificates relied upon by the financial creditor. - HELD THAT: - This Court applied Kotak Mahindra I: a recovery certificate gives rise to a fresh cause of action and a holder may initiate CIRP within three years from issuance of the recovery certificate. Two recovery certificates dated 2017 fell within that three year period and thus those parts of the composite application were maintainable. The 2015 recovery certificate raised a distinct question because a recovery certificate is also a deemed decree and a decree has a twelve year life under Article 136; the Appellate Tribunal had not considered whether the 2015 certificate, as a deemed decree, attracted the longer period. That discrete legal question was therefore left to be examined afresh by the Appellate Tribunal. [Paras 5, 12, 13, 14, 15]

Claims based on the 2017 recovery certificates are within the limitation period and maintainable; the question whether the 2015 recovery certificate must be treated as a deemed decree attracting a twelve year limitation was remitted to the Appellate Tribunal for determination.

Acknowledgement in writing under Section 18 of the Limitation Act - promise to pay under Section 25(3) of the Contract Act - Legal effect of the corporate debtor's letter dated 29.01.2020 on limitation and whether it revived or extended the limitation period for the Section 7 application. - HELD THAT: - The letter of 29.01.2020 was construed as a request for one time settlement and not a clear, unconditional promise to pay within the meaning of Section 25(3); more importantly, it was executed after the Section 7 proceedings had already been instituted. An acknowledgement under Section 18 can only revive limitation if made before the prescribed period expires and must be specifically pleaded. Since the purported acknowledgement occurred post institution and was not pleaded as averment to extend limitation, it could not be relied upon to cure any limitation defect in the Section 7 application; it could, at best, constitute an independent cause of action. [Paras 6, 8, 9]

The 29.01.2020 letter did not revive or extend limitation for the Section 7 application and could not be used to compute limitation in the present proceedings.

Doctrine of election - Whether the banks' prior pursuit of recovery before the DRT barred them by the doctrine of election from initiating CIRP under the IBC. - HELD THAT: - The doctrine of election does not preclude a decreeholder from initiating CIRP after a recovery certificate has been issued. The IBC provides a different remedy and, following Kotak Mahindra I, a recovery certificate generates a fresh cause of action permitting the financial creditor to choose the insolvency route. The reliefs under the recovery regime and the IBC are distinct, and a creditor may opt to enforce dues by initiating CIRP even after pursuing remedies under the Recovery of Debts Act or SARFAESI. [Paras 11]

Doctrine of election did not bar the financial creditors from approaching the NCLT to initiate CIRP on the strength of recovery certificates.

Recovery certificate as a deemed decree under Section 19(22A) of the Recovery of Debts Act - limitation governed by Article 136 of the Limitation Act - Remand for consideration whether the 2015 recovery certificate, being a deemed decree, is governed by the twelve year period for execution and thus affects maintainability of the composite Section 7 application. - HELD THAT: - The Court observed that subsection (22A) treats a recovery certificate as a deemed decree for purposes including initiation of winding up and, as construed in Kotak Mahindra I, may be used to lodge a claim under the IBC. Given that a decree's life for enforcement is twelve years under Article 136, the legal character of the 2015 recovery certificate as a deemed decree and the consequent applicable limitation period was not examined by the NCLT or the Appellate Tribunal. The Court therefore directed that the Appellate Tribunal consider this question; if the Appellate Tribunal concludes CIRP cannot lie as to the 2015 certificate, that claim may be segregated from the composite petition and treated as a part of claims in the public announcement. [Paras 12, 13, 14, 15]

The question whether the 2015 recovery certificate attracts the twelve year period as a deemed decree is remanded to the Appellate Tribunal for fresh consideration; if CIRP cannot be maintained on that certificate, the claim should be segregated and processed in the insolvency claims procedure.

Final Conclusion: The appeal is dismissed. The admission of the Section 7 application and declaration of moratorium were upheld insofar as claims based on the 2017 recovery certificates are concerned; the corporate debtor's post filing letter of 29.01.2020 does not revive limitation; the doctrine of election does not bar initiation of CIRP on recovery certificates; and the discrete question whether the 2015 recovery certificate is a deemed decree attracting a twelve year limitation is remitted to the Appellate Tribunal for determination, with directions for segregation of that claim if CIRP cannot be sustained in respect thereof.

Extension of corporate insolvency resolution process - mandatory outer time-limit under Section 12 - non-obstante power under Section 60(5) - exceptional extension beyond 330 days after Committee of Creditors of Essar Steel - jurisdictional scope of NCLT in granting time extensions

Mandatory outer time-limit under Section 12 - non-obstante power under Section 60(5) - jurisdictional scope of NCLT in granting time extensions - Validity of NCLT's power to grant an extension of the CIRP period in the face of the time-limits stipulated in Section 12 of the IBC, and whether Section 60(5) can be used to override those limits. - HELD THAT: - The Court affirmed the Single Judge's view that the powers under Section 60(5) do not operate so as to override the time limits prescribed by Section 12 of the Code. The Supreme Court's decision in Committee of Creditors of Essar Steel India Limited struck down the word "mandatorily" in the second proviso to Section 12(3) and recognised a narrow, exceptional jurisdiction to extend time beyond the outer limit of 330 days, but only where the adjudicating authority is satisfied that the CIRP is on the verge of being settled and that a short additional period would enable putting the corporate debtor back on its feet. That decision does not dilute the statutory mandate that, as a general rule, 330 days is the outer limit; any extension beyond that is available only in exceptional cases meeting the specific parameters laid down by the Supreme Court. Consequently, Section 60(5) cannot be read as a general licence to circumvent the time limits in Section 12. [Paras 19, 21]

Section 60(5) does not empower the NCLT to override the outer time limit under Section 12; extensions beyond 330 days are permissible only in the exceptional circumstances identified by the Supreme Court in Essar Steel.

Extension of corporate insolvency resolution process - exceptional extension beyond 330 days after Committee of Creditors of Essar Steel - jurisdictional scope of NCLT in granting time extensions - Whether the NCLT's order dated 25.08.2022 granting a further 30 day extension was sustainable on the material before it and consistent with the exceptional case standard post Essar Steel. - HELD THAT: - The Court examined the NCLT order and the materials placed before it and found no indication that the extension was granted because the CIRP was on the verge of being settled or that a short further period would likely produce a resolution plan capable of putting the corporate debtor back on its feet. The NCLT's order simply recorded the percentage voting in the CoC and allowed the extension without articulating reasons or meeting the exceptional case threshold identified by the Supreme Court. Such grant, rendered without showing that the statutory exceptional parameters were satisfied, amounted to a failure to apply the correct legal standard. [Paras 22, 23]

The NCLT order dated 25.08.2022 was unsustainable for lack of requisite reasons and failure to meet the exceptional case standard; the Single Judge's order setting aside that NCLT order is affirmed.

Final Conclusion: The Division Bench dismissed the intra Court appeal and affirmed the Single Judge's order setting aside the NCLT's extension dated 25.08.2022: Section 60(5) cannot be used to bypass the time limits in Section 12, and extensions beyond the 330 day outer limit are permissible only in the narrow, exceptional circumstances indicated by the Supreme Court in Essar Steel, which were not made out in this case.

Limitation under Article 137 and Section 18 of the Limitation Act - Acknowledgement of debt in balance sheet as extension of limitation - Doctrine of relation back in amendment of pleadings - Maintainability of Section 7 application under the I&B Code - Authority of bank officer to sign pleadings under Regulations 76 & 77 of SBI General Regulations - Meaning of 'default' under Section 3(12) and its relation to NPA declaration

Acknowledgement of debt in balance sheet as extension of limitation - Limitation under Article 137 and Section 18 of the Limitation Act - The Section 7 application was not time-barred because acknowledgements in the corporate debtor's balance sheets extended the period of limitation. - HELD THAT: - The Tribunal held that the account being declared NPA on 30.04.2013 did not fix the commencement of limitation for all purposes because the parties executed restructuring arrangements and the corporate debtor repeatedly acknowledged the debt in its balance sheets for the years ended 2014, 2015 and 2016. Each such acknowledgment in writing attracted Section 18 of the Limitation Act and gave rise to a fresh period of limitation. On the material on record (balance sheets signed 16.08.2014, 27.08.2015 and 27.08.2016) and having regard to authorities recognising entries in balance sheets as acknowledgements in writing, the Tribunal concluded there was no bar of limitation as on 2016 and the claim in the Section 7 petition (filed September 2018) was within time. [Paras 90, 92, 93, 96, 108]

Acknowledgements in the balance sheets extended limitation; the Section 7 petition was not time-barred.

Doctrine of relation back in amendment of pleadings - Doctrine of relation back in amendment of pleadings - The amendment permitting reliance on balance-sheet acknowledgements relates back to the date of filing of the original Section 7 application. - HELD THAT: - The Tribunal applied the ordinary rule that an amendment, once allowed, relates back to the date of filing of the plaint/petition unless the court permitting amendment directs otherwise. The Supreme Court had permitted the bank to seek amendment without imposing conditions, and this Tribunal allowed IA No.87/2022 on 11.01.2022 without any fetter. Consequently the amendment filed pursuant to that liberty was held to relate back to the original petition dated 06.09.2018 (filed 12.09.2018), so the amended case based on balance-sheet acknowledgements was treated as having been before the Adjudicating Authority from the original filing date. [Paras 85, 86, 87, 89, 96]

Amendment relates back to the date of filing of the original Section 7 petition.

Authority of bank officer to sign pleadings under Regulations 76 & 77 of SBI General Regulations - The amended Section 7 application was validly signed and filed by the Assistant General Manager on behalf of the bank. - HELD THAT: - Examining Regulations 76 and 77 of the State Bank of India General Regulations and precedent recognising branch/managerial authority to institute proceedings for the bank, the Tribunal found that Mr. Vijay Kumar, Assistant General Manager, derived authority to verify and sign the amended application. IA No.87/2022 had been allowed and attained finality; the objection to want of specific authorization was rejected. [Paras 59, 94]

The amended petition was filed with proper authorization and the signature of the Assistant General Manager was valid.

Meaning of 'default' under Section 3(12) and its relation to NPA declaration - Maintainability of Section 7 application under the I&B Code - The date of NPA declaration is not invariably the date of default for limitation purposes; what matters is when a default giving rise to a non-time-barred cause of action is alleged, and Section 7 is maintainable if debt and default are established within limitation. - HELD THAT: - The Tribunal reiterated that 'default' under Section 3(12) means non-payment when whole or any part of the debt is due. While NPA declaration is often used to mark the date of default, restructuring arrangements and subsequent acknowledgements can alter the computation of limitation. The Adjudicating Authority need not treat NPA date as conclusively determining limitation; where acknowledgements exist and the petition pleads default within three years of filing, the Section 7 application is maintainable and should not be rejected on mere technical grounds. [Paras 91, 98, 111]

NPA date is not invariably the operative date of default; Section 7 application is maintainable if debt and default are shown within the applicable period.

Acknowledgement of debt in balance sheet as extension of limitation - It is not necessary that the amount shown in the balance sheet be identical to the amount claimed by the financial creditor for the acknowledgment to extend limitation. - HELD THAT: - The Tribunal observed that entries in a company's balance sheet acknowledging a liability are sufficient in principle to constitute an acknowledgment in writing under Section 18, and the creditor carries the burden of proving the acknowledgment. The bank's reliance on balance-sheet entries was held permissible even though the exact sums might differ, given the threshold and the clear entries of liability in the financial statements and accompanying notes. [Paras 55, 102, 108]

Balance-sheet entries acknowledging liability can extend limitation even if the exact amounts differ from the creditor's claim.

Final Conclusion: The appeal is dismissed. The admission order in CP (IB) No.645/7/HDB/2018 under Section 7 is upheld as not vitiated by limitation or want of authorization; the interim order is vacated and connected interlocutory applications are closed.

Approval of Resolution Plan - Operational Creditor's entitlement under Section 30(2) of the Insolvency and Bankruptcy Code - Representation of Operational Creditors in Committee of Creditors meetings - Non-joinder of necessary parties - Implementation and finality of a Resolution Plan - Payment of unpaid Provident Fund and Gratuity to employees pursuant to resolution - Effect of absence of challenge before the Supreme Court on finality of Tribunal's order

Approval of Resolution Plan - Operational Creditor's entitlement under Section 30(2) of the Insolvency and Bankruptcy Code - Challenge by Operational Creditors that the Resolution Plan was violative of Section 30(2) IBC because it provided only 16% of claimed dues. - HELD THAT: - The Tribunal found no material irregularity in the Adjudicating Authority's approval of the Resolution Plan and rejected the contention that the Plan contravened Section 30(2). The Tribunal relied on its earlier reasoning in the companion judgment (paragraph 29 of the cited lead matter) and observed absence of evidence supporting allegations of undervaluation or other material infirmities in the approval process. Accordingly the complaint that only 16% was allowed did not merit interference with the approval of the Plan. [Paras 2, 5, 6, 7, 12]

The challenge to the Resolution Plan on the ground that it violated Section 30(2) by paying only 16% to Operational Creditors is dismissed for lack of merit.

Representation of Operational Creditors in Committee of Creditors meetings - Allegation that Operational Creditors were not invited to represent themselves in CoC meetings and thereby were denied representation. - HELD THAT: - The Tribunal recorded that the allegations concerning lack of invitation or representation of Operational Creditors were unsupported by evidence. This deficiency in proof led the Tribunal to decline to interfere with the approval of the Resolution Plan on this ground. [Paras 2, 7, 12]

The contention of denial of representation in CoC meetings is rejected for want of evidence and does not vitiate the approved Resolution Plan.

Non-joinder of necessary parties - Implementation and finality of a Resolution Plan - Effect of absence of challenge before the Supreme Court on finality of Tribunal's order - Payment of unpaid Provident Fund and Gratuity to employees pursuant to resolution - Contentions relating to non-joinder of the Successful Resolution Applicant/Resolution Professional and the effect of implementation and earlier Tribunal directions. - HELD THAT: - Although non-joinder of the SRA and RP was pleaded, the Tribunal noted that the Resolution Plan had been implemented and the plan amount paid by the Successful Resolution Applicant. The Tribunal referred to its earlier decisions dismissing similar challenges and to the fact that the order approving the Plan has attained finality in the absence of a substantive challenge before the Supreme Court (the only directions previously upheld related to payment of unpaid PF and gratuity to employees). Given implementation and prior adjudications, the present appeals lacked merit. [Paras 8, 9, 10, 11, 12]

The pleas based on non-joinder and related objections are unavailing; the Plan's implementation and the finality of earlier orders warrant dismissal of the appeals. The Appeals are dismissed and connected IAs closed.

Final Conclusion: The Appeals are dismissed. The Tribunal upheld the Adjudicating Authority's approval of the Resolution Plan (subject to the limited employee-related direction in the earlier interlocutory decision), found no material irregularity or evidence to upset the Plan, noted the Plan's implementation and absence of a substantive Supreme Court challenge, ordered no costs, and closed the connected IAs.

Suspension of certificate - utilisation of foreign contribution in custody - prior approval of the Central Government - extent of unspent amount utilisable during suspension - fixed deposits and government bonds as part of unutilised foreign contribution

Utilisation of foreign contribution in custody - fixed deposits and government bonds as part of unutilised foreign contribution - extent of unspent amount utilisable during suspension - Whether the phrase "foreign contribution in his custody" under Section 13(2)(b) of the FCRA is limited to amounts in current accounts or includes unutilised foreign contribution held in fixed deposits, government bonds and similar instruments, and whether the petitioner may be permitted to utilise 25% of the total FCRA funds held by it pending consideration of cancellation under Section 14. - HELD THAT: - The Court construed Section 13(2)(b) as permitting utilisation of foreign contribution "in his custody" without restricting custody to amounts held only in current accounts. Rule 14 permits utilisation of up to twenty-five per cent of the unutilised amount with prior approval of the Central Government. The material on record showed that the petitioner held unutilised foreign contributions in fixed deposits and government bonds in addition to current account balances. There is no textual basis in Section 13(2) or Rule 14 to confine the concept of custody to current accounts alone. Accordingly, amounts held in fixed deposits, government bonds and similar instruments constitute unutilised foreign contribution in the custody of the registered person and fall within the pool from which the permitted 25% may be calculated and disbursed. The Court emphasised that outward disbursements under this permission are restricted to meeting day-to-day activities and surviving expenses pending the enquiry under Section 14, and directed periodic furnishing of a complete statement of the petitioner's FCRA account and deposits (including fixed deposits and government bonds) together with expenses incurred since suspension. [Paras 15, 17, 18, 19]

The petitioner is permitted to utilise 25% of the total unutilised FCRA funds held in its custody, including amounts in fixed deposits and government bonds, for day-to-day activities pending consideration of cancellation, subject to periodic submission of account statements to the Respondent.

Final Conclusion: Application allowed; petitioner permitted to utilise 25% of the total unutilised foreign contribution held in its custody (including fixed deposits and government bonds) for day-to-day activities pending consideration under Section 14, with periodic reporting to the Central Government.

Maintainability of writ petition against summons/ECIR - Availability of anticipatory bail under Section 438 Cr.P.C. despite absence of formal accusation - Distinction between powers under Section 50 and Section 19 of the PMLA (summons and production powers vis-a -vis power of arrest) - Right to copy of ECIR and its non-mandatory disclosure

Maintainability of writ petition against summons/ECIR - Right to copy of ECIR - Whether the writ petition seeking quashing of the ECIR and stay of proceedings emanating from a summons issued under Section 50 PMLA is maintainable at this stage - HELD THAT: - The Court held that a writ petition seeking quashing of an ECIR or interference with a summons issued under Section 50 PMLA is generally premature unless the ECIR or the summons is shown to be wholly without jurisdiction or falls within exceptional categories warranting interference. The judgment observes that an ECIR is an internal document and the ED is not obliged to furnish a copy to a person merely summonsed; absence of the ECIR on record precludes the Court from evaluating the grounds for quashing. Authorities caution that superior courts should not ordinarily interdict investigative processes by quashing show-cause/investigative documents unless there is absolute lack of jurisdiction or other recognized extraordinary grounds. Applying these principles, and noting that the petitioner is not named as an accused in the ECIR or the predicate FIR/complaint, the Court declined to entertain quashing of the ECIR or grant of interim protection against coercive action arising from the summons. [Paras 19, 20, 21, 43, 46]

Petition seeking quashing of the ECIR and stay of proceedings arising from the summons is premature and not entertained; petition dismissed.

Availability of anticipatory bail under Section 438 Cr.P.C. despite absence of formal accusation - Interaction of Section 438 Cr.P.C. with PMLA regime - Whether the petitioner, though not named as an accused in the ECIR or prosecution complaint, may seek anticipatory bail under Section 438 Cr.P.C. if he apprehends arrest under the PMLA - HELD THAT: - The Court held that Section 438 Cr.P.C. does not require a formal accusation or registration of an FIR as a precondition for seeking anticipatory bail; the provisions permit ex ante relief where a person has reason to believe he may be arrested for a non-bailable offence. The Constitution Bench precedents in Gurbaksh Singh Sibbia and the subsequent guidance in Sushila Aggarwal were applied to reject the submission that anticipatory bail is unavailable simply because the petitioner is not yet formally accused under PMLA proceedings. While recognising that PMLA contains special provisions (including the twin conditions in Section 45) and non-obstante language, the Court found nothing in the PMLA that ousts the jurisdiction to grant anticipatory bail; however, where PMLA imposes additional conditions these would have to be satisfied in appropriate proceedings. Consequently, the Court held that the appropriate and efficacious remedy for the petitioner is to apply for anticipatory bail under Section 438 Cr.P.C. [Paras 33, 37, 38, 39, 44]

Application for anticipatory bail under Section 438 Cr.P.C. is available to the petitioner notwithstanding absence of a formal accusation; petitioner should pursue that remedy and the writ is premature.

Distinction between powers under Section 50 and Section 19 of the PMLA (summons and production powers vis-a -vis power of arrest) - Limits and safeguards on arrest under Section 19 PMLA - Whether issuance of summons under Section 50 PMLA can be treated as tantamount to or restrained on apprehension that it may lead to arrest under Section 19 PMLA - HELD THAT: - The Court emphasised the statutory distinction: Section 50 confers powers analogous to a civil court-summoning persons, compelling production of documents and recording statements-and does not empower arrest, whereas Section 19 separately authorises arrest subject to a threefold requirement (reasonable belief recorded in writing, reasons based on material in possession, and informing the arrested person of grounds) and other procedural safeguards. The exercise of powers under Section 50 cannot be enjoined merely on speculative apprehension that it may later result in arrest under Section 19, as that would emasculate the investigative scheme. The Court also noted statutory and judicial safeguards that vitiate arrests made in breach of Section 19 requirements. [Paras 26, 27, 28, 31, 41]

Summons under Section 50 cannot be equated with power to arrest; apprehension of arrest standing alone is insufficient to restrain investigative powers under Section 50.

Final Conclusion: The petition seeking quashing of the ECIR and stay of proceedings is premature and dismissed; the petitioner is not precluded from seeking anticipatory bail under Section 438 Cr.P.C., and summons under Section 50 PMLA cannot be restrained merely on apprehension of future arrest under Section 19.

Saving of pre-repeal investigations, inquiries, verifications and audits under Section 174(2)(e) of the CGST Act, 2017 - Repeal of Section 72A of the Finance Act, 1994 by Section 173 of the CGST Act, 2017 - Applicability of Chapter XIII (audit and special audit) of the CGST Act, 2017 to audits concerning periods prior to 01.07.2017 - Validity of audit initiated after commencement of the CGST Act in respect of pre GST period - Power to issue demand cum show cause notice under Section 73 of the Finance Act, 1994 as saved by Section 174(2)(e) of the CGST Act, 2017

Saving of pre-repeal investigations, inquiries, verifications and audits under Section 174(2)(e) of the CGST Act, 2017 - Validity of audit initiated after commencement of the CGST Act in respect of pre GST period - Power to issue demand cum show cause notice under Section 73 of the Finance Act, 1994 as saved by Section 174(2)(e) of the CGST Act, 2017 - The respondent authorities were entitled to carry out the audit commenced by communication dated 17.08.2017 and to issue the demand cum show cause notice dated 07.05.2019 in respect of the pre GST period. - HELD THAT: - The Court held that Section 174(2)(e) of the CGST Act, 2017 saves investigations, enquiries, verifications (including scrutiny and audit), assessment proceedings and other legal proceedings in respect of duties and taxes for periods when the earlier law was in force. Consequently, powers to undertake verification and to issue show cause notices under Section 73 of the Finance Act, 1994 survive for the relevant pre GST periods. The petitioner's participation in the audit and the subsequent issuance of the demand cum show cause notice were therefore not vitiated for lack of jurisdiction. The Court applied the principle that saved powers must be given a workable effect so that investigations and recoveries in respect of pre repeal periods can be instituted or continued as if the earlier enactment had not been repealed. [Paras 20, 21, 22, 24]

Writ petition dismissed insofar as it challenged the competence of the authorities to conduct the audit and to issue the demand cum show cause notice for the pre GST period.

Repeal of Section 72A of the Finance Act, 1994 by Section 173 of the CGST Act, 2017 - Applicability of Chapter XIII (audit and special audit) of the CGST Act, 2017 to audits concerning periods prior to 01.07.2017 - Procedure for conducting audits in respect of pre GST periods does not remain governed by the repealed Section 72A of the Finance Act, 1994; such audits must be conducted in accordance with Chapter XIII of the CGST Act, 2017. - HELD THAT: - The Court recognised that Section 72A (special audit) of the Finance Act, 1994 prescribed the prior procedure for special audits but was omitted by Section 173 of the CGST Act, 2017. While Section 174(2)(e) saves the substantive powers to investigate and recover in respect of pre repeal periods, the procedural modality by which audits are to be conducted is not saved if the specific provision has been repealed. Therefore, audits carried out after 01.07.2017 in relation to earlier periods must follow the procedure set out in Chapter XIII (notably Sections 65 and 66) of the CGST Act, 2017, so as to render the statutory scheme workable and avoid absurdity. The Court thus treated Section 72A as not surviving repeal and held that the manner of audit is governed by the CGST Act's provisions. [Paras 19, 21, 23]

Section 72A of the Finance Act, 1994 did not survive repeal; audits for pre GST periods must be conducted in accordance with Chapter XIII of the CGST Act, 2017.

Final Conclusion: The writ petition challenging the audit conducted pursuant to the 17.08.2017 communication and the demand cum show cause notice dated 07.05.2019 is dismissed: substantive powers to investigate and recover for the pre GST periods are saved by Section 174(2)(e) of the CGST Act, 2017, but the procedure for audits after commencement of the CGST Act must follow Chapter XIII (Sections 65-66) of the CGST Act, 2017 rather than the repealed Section 72A of the Finance Act, 1994.

Interest on delayed refund under Section 11BB - Date of receipt of refund application as commencement point for interest - Deeming explanation for appellate orders under Section 11B(2) - Limitations of tribunal's power to award interest beyond statutory provision

Interest on delayed refund under Section 11BB - Date of receipt of refund application as commencement point for interest - Deeming explanation for appellate orders under Section 11B(2) - Whether interest under Section 11BB is payable from the expiry of three months from the date of the original refund application filed by the claimant or from three months after the date of the appellate order which finally allowed the refund claim. - HELD THAT: - The Tribunal held that Section 11BB applies where duty ordered to be refunded under Section 11B(2) is not refunded within three months from the date of receipt of the application under Section 11B(1). The statutory text, the Explanation to Section 11BB and authoritative decisions (including Ranbaxy Laboratories Ltd. and other High Court and Tribunal precedents) establish that the liability to pay interest commences on expiry of three months from the date of receipt of the refund application and not from three months after an appellate order. The Explanation merely deems an appellate or court order to be an order under Section 11B(2) for purposes of the section and does not postpone the commencement date for interest. Where a refund application was initially filed (even though contested and adjudicated against and later allowed on appeal), the date of that first filing governs the computation of interest under Section 11BB. Consequently, the department was incorrect to treat a later letter seeking release of refund as the date of application for reckoning interest. [Paras 4, 5]

Interest on delayed refund payable from the expiry of three months from the date of the original refund application as first filed, and not from three months after the appellate order.

Limitations of tribunal's power to award interest beyond statutory provision - Interest from date of deposit of tax - Whether the Tribunal may award interest from the date of deposit of the tax (i.e., date of payment) in addition to interest under Section 11BB from expiry of three months after filing of refund application. - HELD THAT: - The Tribunal observed that although submissions were made that interest should run from the date of payment because the tax was not leviable, the Tribunal is a creature of the statute and may award interest only in terms of Section 11BB. While High Courts and the Supreme Court in writ jurisdiction may grant interest from date of deposit under their inherent powers, the Tribunal cannot extend statutory interest beyond Section 11BB; claimants seeking interest from date of deposit have liberty to approach the High Court for relief beyond the statutory scheme. [Paras 4]

Tribunal limited to awarding interest in terms of Section 11BB; cannot order interest from date of deposit of tax beyond the statutory provision.

Final Conclusion: The impugned orders are set aside. Appeals are allowed to the extent of directing interest under Section 11BB to be calculated from the expiry of three months from the date of the original refund applications filed by the appellant; the Tribunal declined to award interest from the date of deposit of tax beyond the statutory ambit, leaving the appellant free to pursue such relief before the High Court.

Renting of immovable property - Assignment / sale of leasehold rights - Premium (salami) versus periodic rent - Service tax exigibility on one time premium - Privity of estate and assignment versus sub lease - Limitation and extended period - suppression requirement - Effect of Finance Act amendments (w.e.f. 01.07.2010 and 01.07.2012) on definition of renting

Assignment / sale of leasehold rights - Renting of immovable property - Privity of estate and assignment versus sub lease - Effect of Finance Act amendments (w.e.f. 01.07.2010 and 01.07.2012) on definition of renting - Whether the Deeds of Assignment executed by the appellant constitute taxable 'renting of immovable property' or are transfers amounting to sale/assignment of leasehold rights not exigible to service tax. - HELD THAT: - The Tribunal examined the terms of the Deeds of Assignment and the DLLRO's permission and clarifications which showed (i) full rights and title in respect of the assigned plots were transferred to the assignees and the lands were mutated in their names, (ii) the assignees are to be treated as lessees vis a vis the State and are responsible for renewal and payment of rent to the DLLRO, and (iii) the assignor retained only limited obligations (short term maintenance/management of common areas) arising from the original lease with the State. These features establish absence of any reversionary control by the assignor and show transfer of substantive leasehold interest to the assignees. Applying the legal distinction between assignment and sub lease (including privity of estate concepts) and the statutory definitions introduced by the Finance Acts, the Tribunal held that the transactions are transfers of leasehold rights (sale/assignment) and not leases/sub leases attracting the 'renting of immovable property' levy. The Tribunal further held that the one time consideration received by the appellant was a premium/salami paid for transfer of interest, not periodic rent payable for continued enjoyment, and therefore not exigible to service tax under the relevant scheme and consistent Tribunal and court authorities relied upon. [Paras 22, 23, 28, 33]

The Deeds of Assignment are to be treated as sale/assignment of leasehold rights and not as taxable renting/lease; the one time premium received is not exigible to service tax.

Premium (salami) versus periodic rent - Service tax exigibility on one time premium - Whether the one time premium (salami) paid to the appellant is taxable as renting of immovable property. - HELD THAT: - Relying on the distinction in Section 105 of the Transfer of Property Act and judicial authorities, the Tribunal noted that premium/salami is the price for transfer of the right to enjoy the property (capital receipt) whereas rent denotes periodical payments for continuous enjoyment (revenue receipt). In the present transactions the appellant received a single lump sum premium on transfer of its leasehold interest while periodic rent is payable directly by assignees to the DLLRO. Consequently, the premium cannot be equated with rent and is not exigible to service tax; the Tribunal also relied on precedent holding that premium in long term leases is not chargeable to service tax. [Paras 29, 30, 31, 33]

The one time premium (salami) is not taxable as 'renting of immovable property' and thus not leviable to service tax.

Limitation and extended period - suppression requirement - Whether the demand raised by the department is barred by limitation because no suppression was occasioned by the appellant. - HELD THAT: - The Tribunal recorded that the appellant had been registered for 'renting of immovable property', filed ST 3 returns and had disclosed the receipts in its profit and loss account. The department initiated enquiries on 13.08.2013 and the appellant supplied the Deeds of Assignment on 26.08.2013. The show cause notice was issued on 11.06.2015, more than two years after the information was furnished to the department. On these facts the Tribunal found no suppression warranting invocation of extended period and concluded that the demand was time barred. [Paras 34]

The demand is barred by limitation; extended period cannot be invoked as there was no suppression.

Final Conclusion: The appeal is allowed: the Tribunal set aside the order in original confirming service tax, interest and penalty. The impugned demand (for FY 2010 11 to 2012 13) is held unsustainable both on the merits (transactions are assignments of leasehold rights and the premium is not rent) and on limitation grounds; the Revenue's cross objection is disposed of.

Declared services - Deemed sale (Article 366(29-A)(f)) - Service Tax on supply of food and beverages - Abatement and valuation under Rule 2C of the Service Tax (Determination of Value) Rules, 2006 - Double taxation principle - Limitation, suppression and bona fide belief - Jurisdiction to issue subsequent show cause notice under Section 73(1A) of the Finance Act, 1994 - Imposition and validity of penalties under Sections 75, 76, 77 and 78 - Constitutional validity of taxation provisions vis a vis Article 366(29 A)(f)

Declared services - Deemed sale (Article 366(29-A)(f)) - Service Tax on supply of food and beverages - Abatement and valuation under Rule 2C of the Service Tax (Determination of Value) Rules, 2006 - Constitutional validity of taxation provisions vis a vis Article 366(29 A)(f) - Levy of Service Tax on supply of food and beverages in the appellant's air conditioned multiplex premises is sustainable on the service component determined under the abatement scheme. - HELD THAT: - The Tribunal examined the interplay between Section 66E(i) of the Finance Act, 1994 (declaring the service portion in activities where food or drink is supplied as a declared service) and Article 366(29 A)(f) (the deeming provision treating supply of food or drink as a deemed sale). Noting the legislative history and judicial pronouncements, the Tribunal observed that although Article 366(29 A)(f) treats supply of food and drink as a deemed sale for State taxation, Section 66E(i) read with Rule 2C and applicable notifications treats the service portion as taxable by the Union. Applying the factual findings that the appellants provided centrally air conditioned premises, facilities for consumption inside the theatre, and attendant services (heating/cooling on demand, serving on plates, cleaning), the Tribunal upheld the Commissioner's conclusion that the activity fell within the scope of a restaurant/eating joint ambience excluded from the mega exemption and therefore the service component is taxable under Service Tax valuation (abatement) rules. The Tribunal also noted that precedents addressing distinct factual situations (e.g., take away/packaged sales) were not comparable.

Service Tax leviable on the service component of supply of food/beverages in the appellants' air conditioned multiplex; duty and interest confirmed for the normal period.

Double taxation principle - Payment of VAT on the entire transaction does not absolve the appellants from Service Tax liability where the service component is held taxable; voluntary VAT payment does not negate liability to Service Tax determined under the law. - HELD THAT: - The Tribunal agreed with the legal principle that VAT and Service Tax are mutually exclusive and double taxation is impermissible when both taxes are lawfully leviable on the same component. However, on the facts the appellants had voluntarily paid VAT on the whole value, possibly under a mistaken belief. Because the Tribunal affirmed the legal position that the service component is taxable under Service Tax law, voluntary payment of VAT does not extinguish the subsequent Service Tax liability attributable to the service portion determined through the abatement procedure.

Appellants remain liable to Service Tax on the service component despite prior payment of VAT on the entire sale value.

Limitation, suppression and bona fide belief - Imposition and validity of penalties under Sections 75, 76, 77 and 78 - Charge of suppression with intent to evade tax and penalties against the company and its CFO are not sustainable on the record; penalties set aside and suppression not established. - HELD THAT: - The Tribunal examined the appellants' conduct and records, including that the entire turnover had been disclosed in VAT returns and that the appellants had sought clarification from CBEC on applicability of Service Tax before receiving showcause notices. In view of the representation made to CBEC and the absence of material showing deliberate suppression or intent to evade, the Tribunal held that penalties under the cited provisions could not be sustained. With respect to the personal penalty on the CFO, the Tribunal found no specific averments or material in the adjudication order establishing his personal knowledge or involvement sufficient to attract penalty. Consequently, penalties under Sections 75, 76, 77 and 78 and the personal penalty on the CFO were set aside.

Penalties under Sections 75, 76, 77 and 78 set aside in part; personal penalty on the CFO set aside.

Jurisdiction to issue subsequent show cause notice under Section 73(1A) of the Finance Act, 1994 - The Tribunal refrained from deciding the challenge to the validity of subsequent show cause notices issued relying on an earlier DGCI notice and the interpretation of Section 73(1A); no final finding on jurisdiction was recorded. - HELD THAT: - Counsel challenged the issuance of later showcause notices under Section 73(1A) on the ground that the subsequent notices purportedly relied on an earlier DGCI notice and that Section 73(1A) presupposes issuance by the same Central Excise Officer. The Tribunal noted authorities cited but observed that the appellants had not established that the proceedings were vitiated or that jurisdictional defect warranted setting aside the adjudication; the Tribunal therefore refrained from pronouncing a conclusive finding on the correctness of issuance under Section 73(1A) and did not decide the question finally.

No adjudication on the jurisdictional challenge under Section 73(1A); the Tribunal refrained from giving a final finding on this issue.

Limitation, suppression and bona fide belief - Extended period and allegation of suppression for purpose of invoking extended period are not sustained; appellant's bona fide belief and prior representation preclude penalty for suppression. - HELD THAT: - Considering the factual matrix that the appellants had made representations to CBEC seeking clarification and had disclosed turnover in statutory returns, the Tribunal concluded there was no material to show deliberate suppression or fraudulent intent. The appellants' conduct indicated a bona fide belief regarding taxability and a pending clarification; accordingly the charge of suppression to justify invocation of extended period could not be sustained and penalties predicated on suppression were not tenable.

Allegation of suppression and invocation of extended period not established; penalties on that basis set aside.

Final Conclusion: Appeals allowed in part: Commissioner's orders modified to confirm duty and interest for the normal period while setting aside specified penalties; personal penalty on the CFO set aside; Service Tax held leviable on the service component of supply of food/beverages in the appellants' air conditioned multiplex premises; the challenge to jurisdiction under Section 73(1A) was not finally decided by the Tribunal. Consequential relief to follow.

Service tax liability on warranty services - reimbursement of warranty expenditure - set aside and remand - remand for de novo adjudication - jurisdictional issue

Service tax liability on warranty services - reimbursement of warranty expenditure - remand for de novo adjudication - jurisdictional issue - Order-in-Original dated 28.03.2018 confirming demand for warranty services for the period 2014 to 2015 set aside and matter remanded for fresh adjudication including jurisdictional consideration. - HELD THAT: - The Tribunal recorded that earlier show-cause notices for earlier periods had been adjudicated and remanded by this Tribunal by order A/85016-85018/2019 dated 08.01.2019 for redetermination and quantification. The Assessee challenged that remand before the Bombay High Court which upheld the remand but directed that the matter be decided on merits including the jurisdictional issue (Hon'ble Bombay High Court order dated 20.07.2023). In the present proceedings the demand related to reimbursement of expenditure on warranty obligations where the appellant had not charged customers and treated warranty as free service. Having regard to the ongoing de novo adjudication in respect of the earlier remand and with consent and concurrence of the parties, the Tribunal considered it appropriate to set aside the impugned Order-in-Original and remit the matter to the Commissioner for fresh adjudication in terms of the Bombay High Court's directions, requiring determination on the merits including jurisdictional questions. [Paras 3, 4]

Appeal allowed by remand; Order-in-Original No. 44/SKV-44/THCGST/2017-18 dated 28.03.2018 set aside and the matter remanded to the Commissioner for re-adjudication in accordance with the Bombay High Court order dated 20.07.2023.

Final Conclusion: The Tribunal allowed the appeal by setting aside the impugned Order-in-Original for the period 2014 to 2015 and remanded the matter to the Commissioner for de novo adjudication, requiring decision on the merits including the jurisdictional issue as directed by the Bombay High Court.

Limitation and extended period of limitation - SSI exemption for small service providers - classification of services for service tax - imposition of penalties under Sections 76 and 77 of the Finance Act, 1994

Limitation and extended period of limitation - suppression for invoking extended limitation - Whether invocation of the extended period of limitation to sustain the service-tax demand was justified - HELD THAT: - The Tribunal found that invoking the extended period solely because the appellant had not paid tax, obtained registration, or filed returns was not justified. Reliance was placed on earlier authorities (as noted in the order) holding that mere non-payment or non-filing does not constitute 'suppression'. The adjudicating authorities had also accepted facts indicating receipt of charges declared in income-tax returns and there was confusion in the law then about applicability of business-auxiliary provisions to individuals. On these bases the Tribunal concluded that the extended limitation could not be invoked. [Paras 6, 7]

Extended period of limitation was wrongly invoked; entire demand is barred by limitation.

SSI exemption for small service providers - eligibility for exemption under Notification No. 06/2005-ST - Whether the appellant was entitled to SSI exemption for the financial year 2005-2006 - HELD THAT: - The Tribunal noted the agreement showing services commenced on 01.09.2005 and accepted documentary material, including income-tax returns, indicating turnover below the threshold. Applying Notification No. 06/2005-ST dated 01.03.2005, the Tribunal held that the appellant's receipts in the relevant financial year fell below the limit for SSI exemption. The Tribunal also referred to the Tribunal decision in Commissioner of Central Excise, Chandigarh v. Loan Zone (cited in the order) on analogous facts where exemption was allowed when services were to a brand-owner. [Paras 6, 7]

Appellant entitled to SSI exemption for 2005-2006; demand for that period unsustainable.

Classification of services for service tax - Whether the demand for the period 1st April 2003 to March 2005 could be sustained given the commencement date of services - HELD THAT: - The Tribunal observed that the appellant's agreement to render services was dated 01.09.2005 and the order-in-original itself had accepted production of that agreement. Consequently, a demand for service tax for the period from 1st April 2003 to March 2005 was prima facie incorrect because services had not been rendered during that earlier period. The Tribunal therefore held the demand for those years to be without foundation. [Paras 6, 7]

Demand for the period 1st April 2003 to March 2005 is prima facie wrong and cannot be sustained.

Imposition of penalties under Sections 76 and 77 of the Finance Act, 1994 - Whether penalties under Sections 76 and 77 could be sustained - HELD THAT: - The Tribunal held that imposition of penalties under Sections 76 and 77 was untenable in the facts of the case. It relied on the view in the Punjab & Haryana decision cited in the order that the penalties as levied were not sustainable. The Tribunal also found that the adjudicating authorities had acted mechanically and had not properly considered the appellant's explanations and documentary evidence. [Paras 6, 7]

Penalties imposed under Sections 76 and 77 are bad in law and cannot be sustained.

Final Conclusion: The impugned order is set aside and the appeal is allowed: the service-tax demand (including for the period 1st April 2003 to March 2005) is barred by limitation or otherwise unsustainable and the appellant is entitled to SSI exemption for 2005-2006; penalties imposed are set aside, with consequential relief as per law.

Simultaneous availing of abatement and Cenvat Credit - classification of services as completion and finishing services vis-a -vis commercial construction service - verification of contract-wise bifurcation of services and credits - principles of natural justice and right to be heard - remand for factual verification and fresh adjudication

Simultaneous availing of abatement and Cenvat Credit - verification of contract-wise bifurcation of services and credits - Whether the Appellant had simultaneously availed abatement and Cenvat credit and whether the statements and contract-wise bifurcation submitted by the Appellant require verification before sustaining the demand. - HELD THAT: - The Tribunal observed that the Appellant had filed two distinct statements and sample contracts: one showing 'pure service contracts' where abatement was not availed but Cenvat credit was claimed (Annexure A), and another showing 'composite contracts' where abatement was availed but Cenvat credit was not claimed (Annexure B). The Adjudicating Authority made no express finding that it had verified these statements. Given the factual nature of the controversy - whether particular contracts fall within the category where abatement was legitimately availed or where Cenvat credit was legitimately claimed - the Tribunal concluded that these contract-wise details must be examined and verified by the Adjudicating Authority. The matter therefore could not be finally adjudicated on the record before the Tribunal without such verification. The Tribunal directed the Adjudicating Authority to verify the statements and relevant contracts and to pass a detailed order after such verification. [Paras 5, 6, 10]

Remanded to the Adjudicating Authority for verification of the contract-wise statements and sample contracts and for passing a detailed order after such verification.

Classification of services as completion and finishing services vis-a -vis commercial construction service - principles of natural justice and right to be heard - Whether the Adjudicating Authority's conclusion that the services fell under 'completion and finishing services' (thereby denying notification benefit) could be sustained without giving the Appellant specific notice and opportunity to meet that contention. - HELD THAT: - The Adjudicating Authority held that the nature of services provided by the Appellant amounted to 'completion and finishing services' and therefore denied benefit of the relevant notification. The Tribunal noted that this particular contention was not the subject of specific notice to the Appellant in the show cause proceedings, and the Appellant did not have an opportunity to address this point in its reply. Because classification depends on the actual terms and scope of the individual contracts, the Tribunal directed that the Appellate Authority must permit the Appellant to file documentary evidence regarding the nature of the services and then determine, on the basis of the actual contracts, whether the contracts constitute construction services or only finishing services. The Tribunal emphasised that principles of natural justice must be observed before any adverse conclusion on this ground is recorded. [Paras 7, 8, 11]

Adjudicating Authority to afford the Appellant an opportunity to produce documentary evidence on the nature of the services and to reassess the classification issue in accordance with principles of natural justice.

Final Conclusion: The Tribunal remanded the matter to the Adjudicating Authority for factual verification of the contract-wise statements and sample contracts and for fresh, detailed adjudication on whether abatement and Cenvat credit were simultaneously availed and whether the services fall within 'completion and finishing' or constitute construction services; the Adjudicating Authority was directed to afford the Appellant an opportunity to file evidence and to complete proceedings within four months.

Business Auxiliary Service as Category III service under Export of Services Rules - interpretation of "used outside India" for Category III services - export of services where recipient located outside India and consideration received in convertible foreign exchange - benefit accrues outside India (accrual of benefit test) - no penalty where there is no suppression and department had knowledge of the transaction

Business Auxiliary Service as Category III service under Export of Services Rules - interpretation of "used outside India" for Category III services - benefit accrues outside India (accrual of benefit test) - export of services where recipient located outside India and consideration received in convertible foreign exchange - Whether the appellant's commission-earning agency services constitute export of services and are not liable to service tax - HELD THAT: - The services rendered by the appellant fall within Category (iii) of Rule 3(1)(iii) (Business Auxiliary Services). The Board's Circular No.111/5/2009-ST clarifies that for Category (iii) services the relevant factor is the location of the service recipient and whether the benefit of the service accrues outside India; place of performance is not decisive. Applying this principle, the appellant procured orders in India for the foreign principal (Wacker, Germany), forwarded requisitions to the principal and earned commission in convertible foreign exchange; the primary benefit of the promotional/agency activity accrued to the principal outside India. The Tribunal followed the reasoning in Verizon Communication India Pvt Ltd. and Arcelor Mittal Stainless Pvt. Ltd. which endorse the accrual-of-benefit test for Category (iii) services. Consequently the services qualify as export of services and are not exigible to service tax for the period in question. [Paras 8, 9]

The demand of service tax and interest is not sustainable as the services qualify as export of services.

No penalty where there is no suppression and department had knowledge of the transaction - Whether penalty is imposable on the appellant for non-payment of service tax - HELD THAT: - The Tribunal found no suppression of facts: the department was aware of the appellant receiving commission from the foreign principal as evidenced by contemporaneous records (spot memo and agency agreement). The appellant acted on bona fide belief that the receipts were exempt as export of services. In these circumstances, imposition of penalty was not warranted. [Paras 9, 10]

Penalty imposed in the impugned order is set aside for lack of suppression and departmental knowledge.

Final Conclusion: The impugned adjudication is set aside: the appellant's agency/commission services are held to be export of services and not liable to service tax for 2007-08 to 2009-10; interest demand and penalty are quashed and the appeal is allowed.

Pre-deposit - amount paid under protest - refund under section 11B - time bar/limitation for refund - relevant date for refund under appellate order - interest on refund - Mafatlal Industries principle

Pre-deposit - amount paid under protest - Mafatlal Industries principle - Characterisation of amounts deposited pending adjudication - whether the impugned deposits qualify as pre-deposit under section 35F of the Central Excise Act, 1944 or otherwise as amounts paid under protest. - HELD THAT: - Applying the principle in Mafatlal Industries, the Tribunal held that amounts deposited by the appellant during the pendency of adjudication acquired the character of payments made under protest akin to pre-deposit. However, the Tribunal found that such deposits could not be equated with amounts specifically deposited under section 35F of the Central Excise Act, 1944; accordingly the scheme and consequence of section 35FF (refund under section 35F) did not apply to the impugned deposits. The Tribunal noted that a separate amount had in fact been deposited under section 35F and already refunded, and that the impugned sums, though protest deposits, were not formal section 35F pre-deposits. [Paras 9, 10]

The deposits are payments made under protest akin to pre-deposit but are not deposits under section 35F; refund cannot be governed by section 35FF.

Refund under section 11B - time bar/limitation for refund - relevant date for refund under appellate order - interest on refund - Entitlement to refund under section 11B of the Central Excise Act, 1944 and applicability of the one year limitation period: determination of the relevant date and interest. - HELD THAT: - Since the impugned deposits were held not to be under section 35F, the Tribunal proceeded to treat the refund claim as one arising under section 11B. Sub clause (5) of clause (ec) of section 11B prescribes that where duty becomes refundable as a consequence of an appellate order, the relevant date is the date of that order. The Tribunal held that the Order in Original dated 23.10.2020, which re determined the duty liability for the normal period (October 2012 to March 2013), was the relevant date. The refund application filed on 03.09.2021 therefore fell within the one year period prescribed by section 11B and was not time barred. Consequently the balance amount deposited (after appropriation towards the confirmed demand) was held refundable with interest at 6% from 23.10.2020 until payment. [Paras 11, 12]

The refund claim falls under section 11B, the relevant date is 23.10.2020, the claim filed on 03.09.2021 is within one year and the balance deposited is refundable with interest.

Final Conclusion: The impugned order rejecting the refund is set aside; the balance of amounts deposited for April,2009 to September,2012 (after appropriating the confirmed demand for October,2012 to March,2013) is refundable with interest at 6% from 23.10.2020 until payment, and the appeal is allowed with consequential relief.

Limitation for issuance of show cause notice - appropriation of deposit against confirmed demand - penalty under section 76 of the Finance Act, 1994

Limitation for issuance of show cause notice - relevant date for computation of limitation - No part of the demand was time-barred for the period July 2012 to September 2013. - HELD THAT: - The Tribunal examined the filing dates and the relevant dates for computation of the normal period of limitation (18 months) applicable at the time. The show cause notice dated 24.09.2014 was issued within 18 months from the relevant dates for each quarter covered (July 2012 to September 2013). A typographical error in the impugned order regarding the period of the return filed was noted and corrected (the return of 15.04.2013 related to July-December 2012). On these facts the Tribunal found that the SCN did not extend beyond the normal limitation period and therefore no portion of the demand was barred by limitation. The Tribunal accordingly rejected the appellant's plea for reduction of demand and the related contention for proportional reduction of penalty. [Paras 15]

Demand confirmed for the period July 2012 to September 2013 is not time-barred; plea for reduction on limitation grounds rejected.

Appropriation of deposit against confirmed demand - treatment of interim deposit made during investigation - The amount of Rs. 1,50,00,000/- deposited by the appellant during investigation is to be appropriated against the confirmed demand. - HELD THAT: - The Tribunal noted that the show cause notice itself proposed appropriation of the amount deposited during investigation. Although the impugned order confirming the demand did not appropriate the deposited amount, the records show the deposit and the proposal for appropriation in the SCN. The Tribunal held that the deposited amount should have been appropriated in the impugned order and directed that the sum deposited by the appellant stand appropriated against the confirmed demand, while upholding the remaining portions of the impugned order. [Paras 16, 17]

Appropriate Rs. 1,50,00,000/- deposited by the appellant against the confirmed demand; balance of the order upheld.

Final Conclusion: Appeal partly allowed to the extent of directing appropriation of the deposit of Rs. 1,50,00,000/- against the confirmed demand; remaining aspects of the impugned order, including the demands and penalties (not reduced on limitation grounds), are upheld.

Presumption under Section 12B of the Central Excise Act - unjust enrichment - onus of proof for rebutting presumption of passing on duty - refund of excess excise duty

Presumption under Section 12B of the Central Excise Act - unjust enrichment - onus of proof for rebutting presumption of passing on duty - refund of excess excise duty - Claim for refund of excess excise duty was barred by unjust enrichment because the assessee failed to rebut the statutory presumption that the incidence of duty was passed on to buyers. - HELD THAT: - Section 12B creates a statutory presumption that a person who has paid excise duty is deemed to have passed the full incidence of such duty to the buyer unless the contrary is proved. The assessee filed a refund claim for the periods January 1999 to March 1999 and September 1999 to 28/10/1999. The material placed by the assessee included a Chartered Accountant's certificate showing duty components in invoices and the duty amount reflected as receivables in the balance-sheet. However, no contemporaneous evidence or certificates from customers for the relevant period were produced to prove that the duty element shown in invoices was not in fact recovered from buyers. The lower authorities and the Tribunal found that the duty incidence had been passed on and that the record did not rebut the presumption under Section 12B. The Tribunal also relied on earlier decisions holding that where duty was invoiced to buyers and remains shown as recoverable, the bar of unjust enrichment applies. In the absence of concrete proof to the contrary, the concurrent finding that refund was barred by unjust enrichment was upheld.

Refund claim of the assessee for the specified periods was rejected on the ground of unjust enrichment and the presumption under Section 12B was not rebutted.

Final Conclusion: The substantial question of law is answered affirmatively in favour of the revenue; the appeal is dismissed and the refund claim for the stated periods is refused on the ground of unjust enrichment.

Cenvat credit entitlement where input supplier paid duty - manufacture versus non-manufacture in respect of cutting/slitting and pickling/oiling - acceptance of duty by Department and estoppel against denial of credit to purchaser - recovery under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A(1) of the Central Excise Act, 1944

Cenvat credit entitlement where input supplier paid duty - acceptance of duty by Department and estoppel against denial of credit to purchaser - manufacture versus non-manufacture in respect of cutting/slitting and pickling/oiling - Whether the recipient (assessee) is entitled to avail Cenvat credit of duty paid by the input supplier where the supplier's activity may be held not to be manufacture - HELD THAT: - The Court accepted the Tribunal's conclusion that where inputs purchased by the assessee were invoiced as duty-paid and the Department had accepted the declaration and duty, the purchaser who otherwise satisfies the conditions of the Cenvat Credit Rules is entitled to take credit of that duty. The decision relied on the settled position in the Division Bench judgment of the Delhi High Court in Faridabad Iron & Steel Traders Association (cited in the judgment) which held that certain processes of cutting/slitting did not amount to manufacture and that the earlier circular treating them as manufacture had been quashed; that circular was thereafter withdrawn. The Court noted subsequent clarificatory circulars and consistent judicial authority including the Gujarat High Court in Commissioner of C. Ex., Ahmedabad-III v. Nahar Granites Ltd. and the Division Bench of this Court in Commissioner of C. Ex., Delhi-III v. Neel Metal Products Ltd., which recognise that Rules 3 and 4 permit availment of credit by the purchaser where the inputs were duty-paid and the Department had accepted the payment even if duty ought not to have been payable. Applying those principles, the Tribunal correctly set aside the recoveries sought under Rule 14 read with Section 11A(1) and allowed the assessee's appeal, since denial of credit to the purchaser would be impermissible where the payment was accepted and the purchaser otherwise met statutory conditions for credit. [Paras 10, 11, 12]

Tribunal's order allowing the assessee's appeal and setting aside the recovery of alleged inadmissible Cenvat credit was upheld; no substantial question of law arises and the revenue's appeal is dismissed.

Final Conclusion: The High Court upheld the Tribunal's order allowing the assessee to retain Cenvat credit of duty paid by the input supplier for the period December, 2004 to March, 2012 and dismissed the revenue's appeal, holding that where the Department accepted the duty payment and the purchaser fulfilled statutory conditions, credit could not be denied; no substantial question of law arises.

Interpretation of the term 'drug' to include 'bulk drug' - entitlement to choose the more favourable exemption clause - unconditional exemption under Sl. No. 47A of Notification No. 4/2006-CE - conditional exemption under Sl. No. 47B of Notification No. 4/2006-CE - reversal of CENVAT credit under Rule 6(3) of CENVAT Credit Rules, 2004 - judicial discipline to follow tribunal precedents construing undefined terms by reference to specialised statutes

Interpretation of the term 'drug' to include 'bulk drug' - unconditional exemption under Sl. No. 47A of Notification No. 4/2006-CE - conditional exemption under Sl. No. 47B of Notification No. 4/2006-CE - judicial discipline to follow tribunal precedents construing undefined terms by reference to specialised statutes - Product 'Danazol', a bulk drug, falls within the term 'drug' and is eligible for unconditional exemption under Sl. No. 47A of Notification No. 4/2006-CE dated 1.3.2006. - HELD THAT: - The Tribunal applied earlier decisions of this Tribunal which held that the Notification does not define 'drug' or 'bulk drug' and that the definition in the Drugs (Price Control) Order, 1995 treats 'drug' as including 'bulk drug' and formulations. Treating 'drug' as the superset and 'bulk drug' as a subset, the Court held that a manufacturer may avail the exemption provision most favourable to it. By following the binding ratio of those precedents, the Tribunal concluded that Danazol, being a bulk drug, is covered by the term 'drug' and hence entitled to the unconditional exemption under Sl. No. 47A rather than the conditional scheme under Sl. No. 47B. [Paras 9]

Appellant entitled to benefit of Sl. No. 47A of Notification No. 4/2006-CE for Danazol.

Reversal of CENVAT credit under Rule 6(3) of CENVAT Credit Rules, 2004 - verification of reversal claimed by department - opportunity of explanation before demand - CENVAT credit reversal claimed by the appellant in relation to exempted clearances is subject to verification by the department under Rule 6(3) and any excess reversal or short reversal may be adjusted after verification with opportunity to the appellant. - HELD THAT: - Having held that the goods are unconditionally exempt under Sl. No. 47A, the Tribunal observed that the appellant stated before the Commissioner (Appeals) that they had reversed the CENVAT credit as required. The Tribunal recognised the department's prior inconsistent positions but accepted that the exemption stands and that the mathematical accuracy of the reversal may be verified. The department is permitted to demand any excess credit taken or refund any excess reversal after verification, and, in case of a demand, the appellant must be given an opportunity to explain the reversal of credit. [Paras 10, 11]

Reversal of credit by the appellant under Rule 6(3) is accepted subject to departmental verification; adjustments or demands to follow with opportunity to explain.

Final Conclusion: The impugned order is set aside; the appellant is allowed the benefit of Sl. No. 47A of Notification No. 4/2006-CE dated 1.3.2006 for Danazol. The reversal of CENVAT credit claimed by the appellant under Rule 6(3) of CENVAT Credit Rules, 2004 is subject to verification by the department, which may demand any excess credit taken or refund any excess reversal after giving the appellant an opportunity to explain. Appeals disposed accordingly.

Reversal of CENVAT credit under Rule 6 - exempted goods versus non-excisable goods - Explanation 1 to Rule 6 (inclusion of non-excisable goods cleared for consideration) - bagasse and pressmud not being manufactured final products - invalidity of departmental Circular No. 1027/15/2016-CX to the extent it treats bagasse as non-excisable goods requiring reversal

Reversal of CENVAT credit under Rule 6 - exempted goods versus non-excisable goods - bagasse and pressmud not being manufactured final products - Liability to pay 6% of the value of bagasse/pressmud as reversal of CENVAT credit for the period in dispute - HELD THAT: - The Tribunal examined whether Rule 6 of the CENVAT Credit Rules attracts reversal of credit in respect of bagasse/pressmud cleared for consideration. The Explanation 1 inserted with effect from 01.03.2015 treats non-excisable goods cleared for consideration as included within the definition of exempted goods for the purposes of Rule 6. However, the Tribunal followed the decision of the Hon'ble Allahabad High Court which held that bagasse is not a manufactured final product and that Rule 6 applies only where an exempted good is manufactured by the assessee. The High Court had quashed the Board's Circular No. 1027/15/2016-CX insofar as it treated bagasse as a non-excisable good attracting reversal. Having applied that ratio and earlier authority holding bagasse not to be a manufactured product, the Tribunal concluded that the obligation to reverse CENVAT credit under Rule 6(1) is not attracted in respect of bagasse/pressmud for the period under consideration, and accordingly the departmental demand cannot be sustained. [Paras 11, 12, 13, 14, 15]

Demand for payment of 6% of the value of bagasse/pressmud as reversal of CENVAT credit is set aside and the appeal is allowed.

Final Conclusion: The Tribunal set aside the impugned order and allowed the appeal, holding that Rule 6 reversal of CENVAT credit does not apply to bagasse/pressmud for the period in dispute and therefore the demand cannot be sustained; consequential reliefs, if any, to follow.

Liquidated damages as part of transaction value/price - transaction value under Section 4(1) of the Central Excise Act, 1944 - Central Excise (Determination of Price of Excisable Goods) Rules, 2000 - Rule 6 - Central Excise (Determination of Price of Excisable Goods) Rules, 2000 - Rule 11 - re-determination of value not permissible without recourse to the valuation rules

Liquidated damages as part of transaction value/price - transaction value under Section 4(1) of the Central Excise Act, 1944 - Whether the adjudicating authority could treat amounts recovered as 'liquidated damages' as additional consideration forming part of the transaction value and sustain a demand of duty thereon without following the valuation Rules - HELD THAT: - The Tribunal noted that the adjudicating authority's conclusion treating the liquidated damages as part of the price was effectively a re-determination of the transaction value. Section 4 and the Central Excise (Determination of Price of Excisable Goods) Rules, 2000 prescribe the manner in which transaction value and any additional consideration must be treated. Where the invoice value is rejected as the transaction value, recourse to the valuation Rules - in particular Rule 6 which deals with aggregation of additional consideration and, alternatively, Rule 11 for determination by reasonable means - is mandatory. The Tribunal relied on its earlier decision dealing with identical facts and recorded that neither the show cause notice nor the impugned order invoked or applied Rule 6 (or the Rules generally) before enhancing value. In the absence of any finding or application of the statutory valuation mechanism, the adjudicated demand, interest and penalties could not be sustained.

Impugned order set aside because the adjudicating authority re-determined transaction value without recourse to the Central Excise (Determination of Price of Excisable Goods) Rules, 2000; consequence is that the demand, interest and penalties based on that re-determination cannot stand.

Final Conclusion: Appeal allowed; impugned order dated 08.10.2013 set aside for failure to follow the prescribed valuation rules (notably Rule 6) before enhancing the transaction value on account of amounts described as liquidated damages for the period 2009-10 to 2011-12.

Clandestine removal / clandestine manufacture and clearance - requirement of cogent corroborative evidence to prove clandestine removal - reliance on third party seized records (handwritten diaries, pen drive) as evidence - burden on Revenue to prove evasion by preponderance of probability - principle of natural justice and right to cross examination - mandatory rigour of Section 9D (opportunity to cross examine makers of statements)

Clandestine removal / clandestine manufacture and clearance - burden on Revenue to prove evasion by preponderance of probability - The department has not proved clandestine manufacture and clearance by the appellants for the periods under dispute. - HELD THAT: - The Tribunal found that the department's case rested on documents and entries recovered from third parties and on statements of third parties, without independent, tangible corroboration such as evidence of procurement of raw material, manufacture, transportation of finished goods or flow back of money. The adjudicating authority relied on alleged entries and statements of buyers and the purported author of diaries, but the evidence did not establish clandestine clearances by the appellants on the preponderance of probability. Given the absence of cogent corroborative material, the Tribunal held that the Revenue failed to discharge the burden of proof required to sustain the duty demand and penalties. [Paras 2, 9, 11, 13]

Allegations of clandestine manufacture and clearance were not substantiated and cannot sustain the confirmed duty demands.

Reliance on third party seized records (handwritten diaries, pen drive) as evidence - requirement of cogent corroborative evidence to prove clandestine removal - Documents/data recovered from third parties (handwritten diaries and a pen drive) without independent corroboration are insufficient to prove clandestine removals. - HELD THAT: - The Tribunal observed that the diaries allegedly recovered from a third party and the data retrieved from a pen drive seized from a broker's associate were the primary bases for the show cause notices. Mere recovery of private records from third parties, without corroborative evidence connecting those records to the appellants (such as records of raw material procurement, manufacturing or despatches, or financial flow), cannot be treated as conclusive proof of clandestine clearances. In these facts the diaries/pen drive entries lacked the necessary corroboration and therefore could not sustain the adjudication. [Paras 4, 9, 10, 11, 13]

Seized third party records alone did not constitute sufficient evidence of clandestine removal.

Principle of natural justice and right to cross examination - mandatory rigour of Section 9D (opportunity to cross examine makers of statements) - Denial of opportunity to cross examine makers of statements relied upon by the Revenue violated the principles of natural justice and the mandatory requirement of Section 9D, rendering the adjudication vitiated. - HELD THAT: - The Tribunal held that where statements recorded during investigation and authors of seized documents are made the basis of adjudication, the assessee is entitled to seek cross examination of those persons so that voluntariness, personal knowledge and veracity can be tested. Several witnesses whose statements or whose entries were relied upon were not produced for cross examination, and in one instance the department itself failed to produce the person whose cross examination had been allowed. The Tribunal relied on precedent recognizing that refusal to permit cross examination in such circumstances is a serious flaw and vitiates the order. Because sufficient corroborative evidence was not otherwise present, denial of cross examination rendered the reliance on those statements impermissible. [Paras 9, 11, 12]

Refusal to permit cross examination of authors/makers of relied upon material violated natural justice and vitiates the adjudication.

Final Conclusion: The appeals are allowed: the Tribunal set aside the impugned orders confirming duty, interest and penalties, holding that the Revenue failed to prove clandestine manufacture and clearance by cogent corroborative evidence and that denial of cross examination of makers of the relied upon material violated natural justice and Section 9D.

Definition of "manufacture" under Section 2(f)(iii) - packing, repacking and relabelling as deemed manufacture - scope of Serial No.100 of the Third Schedule - meaning of "automobile" in common parlance - prospective effect of amendment inserting Serial No.100A w.e.f. 29.04.2010 - invocation of extended period of limitation in view of retrospective amendment

Scope of Serial No.100 of the Third Schedule - meaning of "automobile" in common parlance - definition of "manufacture" under Section 2(f)(iii) - Whether repacking and relabelling of spare parts of Dumpers, Water Sprinklers and Motor Graders during January 2008 to February 2010 amounted to "manufacture" liable to excise duty under Sl. No.100 of the Third Schedule. - HELD THAT: - Applying the Larger Bench's determination that the word 'automobile' must be understood in ordinary/common parlance and that earth moving machines are not 'automobiles', the Tribunal held that Sl. No.100, as it stood for the period up to 26.02.2010, did not extend to parts and spares of Dumpers. The activities of repacking and relabelling carried out by the appellant for that period therefore did not fall within Section 2(f)(iii) or under clauses (i) or (ii) of Section 2(f) and hence were not 'manufacture' liable to excise duty for January 2008 to February 2010. The Tribunal followed the Larger Bench reasoning that the dictionary/common sense meaning governs where the statute is silent and applied that principle to exclude earth moving machines from the entry. [Paras 5]

Repacking and relabelling of the specified spare parts for January 2008 to February 2010 did not amount to manufacture and are not leviable to excise duty under Sl. No.100.

Packing, repacking and relabelling as deemed manufacture - prospective effect of amendment inserting Serial No.100A w.e.f. 29.04.2010 - Whether the appellant's repacking and relabelling activities for March 2010 to March 2011 fall within the amended entry at Sl. No.100 and therefore amount to deemed manufacture. - HELD THAT: - The Tribunal observed that, following the amendments to the Third Schedule effected by the Finance Act (with the insertion of relevant entries effective from 29.04.2010), the activities of repacking and relabelling for the period from March 2010 to March 2011 are covered by the amended entry and hence constitute 'deemed manufacture' under Section 2(f)(iii). The judgment distinguishes the pre amendment period (when Dumpers were excluded) from the post amendment coverage and confines liability accordingly. [Paras 5]

For March 2010 to March 2011, the repacking and relabelling activities are covered by the amended Sl. No.100 and constitute deemed manufacture.

Invocation of extended period of limitation in view of retrospective amendment - prospective effect of amendment inserting Serial No.100A w.e.f. 29.04.2010 - Whether extended period of limitation could be invoked to demand duty for the disputed activities and whether penalties and personal liabilities imposed on the appellants are sustainable. - HELD THAT: - Relying on the Tribunal's earlier decision in the appellant's own case and the Supreme Court principle in J.K. Spinning and Weaving Mills, the Tribunal held that invoking the extended period of limitation to give retrospective effect to the amended levy (for the relevant portion of the dispute) was not sustainable. The Tribunal noted that the amendment inserting Serial No.100A is prospective in effect and that the show cause notice in April 2013 could not justify invocation of extended limitation for the earlier period. Consequentially, the imposition of penalties and personal penalties in the facts and circumstances of the case was held to be unwarranted and set aside. [Paras 5]

Extended period of limitation cannot be invoked; demand confined to normal limitation period and penalties/personal penalties are set aside.

Final Conclusion: Appeal partly allowed: (i) repacking and relabelling of spare parts of Dumpers and similar earth moving machines for January 2008 to February 2010 held not to be manufacture and not leviable to excise; (ii) for March 2010 to March 2011 such activities fall within the amended entry and are deemed manufacture; (iii) invocation of extended limitation rejected and penalties/personal penalties set aside; appeals disposed accordingly.

Manufacture - exemption under Notification No. 67/1995 - CE - CENVAT credit - duty payable at normal tariff rate with CENVAT - captively consumed coal

Exemption under Notification No. 67/1995 - CE - captively consumed coal - manufacture - CENVAT credit - duty payable at normal tariff rate with CENVAT - Whether coal captively consumed within the mines to generate steam for lifting coal is eligible for exemption under Notification No. 67/1995 - CE where the assessee had paid duty at the normal tariff rate with CENVAT credit. - HELD THAT: - The Tribunal noted that the appellant had opted to pay Central Excise duty at the normal tariff rate of 5% and availed CENVAT credit, a facility available where the activity is treated as manufacture. The department treated the mining activity as amounting to manufacture for levy and for permitting CENVAT, yet denied the exemption under Notification No. 67/1995 on the ground that coal is "produced" and not "manufactured." The Tribunal found this stance inconsistent: having accepted CENVAT (and levied duty at the normal rate applicable with CENVAT), the authorities could not simultaneously deny that the activity amounts to manufacture for purposes of the Notification. The Tribunal further observed that relevant clarifications and earlier decisions distinguish the context of the Coal Mines statute from central excise law and that coal mining activity is within the ambit of manufacture for central excise purposes. Applying this determinative reasoning, the Tribunal held that the coal captively consumed to generate steam for lifting coal within the mines falls within the exemption under Notification No. 67/1995 and that the demand, interest and penalty founded on denial of that exemption are unsustainable. [Paras 12, 13, 14]

The impugned demand is set aside; the appellant is eligible for the benefit of Notification No. 67/1995 for the coal captively consumed and therefore the demand, interest and penalty are not sustainable.

Final Conclusion: Appeal allowed: Tribunal set aside the impugned order and held that coal captively consumed within the mines to generate steam for lifting coal is eligible for exemption under Notification No. 67/1995 where the assessee had paid duty at the normal rate with CENVAT credit; corresponding demand, interest and penalty quashed.

Applicability of Rule 8 of the Central Excise Valuation Rules - Inter unit transfer valuation - Captive consumption versus independent sales - Preference for Rule 4 over Rule 8 where both considered - Revenue neutrality and input credit in inter unit transfers

Applicability of Rule 8 of the Central Excise Valuation Rules - Inter unit transfer valuation - Captive consumption versus independent sales - Preference for Rule 4 over Rule 8 where both considered - Revenue neutrality and input credit in inter unit transfers - Whether Rule 8 applies to valuation of MS Ingots and structurals transferred to another unit when identical goods are also sold to unrelated buyers from the assessee's depots/stockyards, and whether the depot sale price adopted for inter unit transfers is sustainable. - HELD THAT: - The Tribunal applied the principle established in Ispat Industries Ltd. that Rule 8 is confined to situations where the excisable goods are not sold and are entirely consumed (captively consumed) or exclusively transferred for consumption in manufacture on behalf of the transferring factory. Where part of the production is sold to independent buyers from the factory gate or depot, Rule 8 is not attracted. In such circumstances the value adopted under the general valuation scheme (including Rule 4) is to be preferred. The appellant had independent sale prices available from its CMO price circulars reflecting sales to unrelated buyers from depots; applying those independent sale prices to the transfers to the Durgapur unit was proper. Further, the Tribunal noted the revenue neutral character of inter unit transfers when the receiving unit can take credit, diminishing the basis for imposing duty and attendant penalties. On these grounds the demand founded on Rule 8 was held unsustainable and the consequential interest and penalty fell away. [Paras 10, 11, 12, 13]

Rule 8 of the Valuation Rules does not apply where some part of the production is sold to independent buyers; the depot sale value adopted for inter unit transfers is acceptable, the duty demand under Rule 8 is set aside and interest and penalty do not survive.

Final Conclusion: The appeal is allowed: the demand based on Rule 8 is quashed for the period in question, the valuation adopted by the appellant for transfers to its Durgapur unit is sustained, and the consequential interest and penalty are set aside.

Eligibility for Cenvat Credit on inputs used in fabrication of capital goods - credit for inputs used as support structures for capital equipment - clerical error in invoice does not vitiate Cenvat Credit - GTA services and reverse charge - absence of transporter's Service Tax registration not a bar to credit

Eligibility for Cenvat Credit on inputs used in fabrication of capital goods - credit for inputs used as support structures for capital equipment - Cenvat Credit on MS Angles, MS Beam and other MS items used in fabrication of capital goods and support structures, and on inputs used for fabrication of High Mast Tower, is admissible. - HELD THAT: - The Tribunal examined the Chartered Engineer's certificate which confirmed that the MS items were used within the factory premises for completion of the EPC project and went into capital goods used in the manufacturing process. Applying earlier Tribunal decisions which held that MS items and components used in fabrication of support structures and parts/components of capital equipment are eligible for credit, the Tribunal held that such inputs qualify for Cenvat Credit. The same principle was applied to the inputs used in fabrication of the High Mast Tower, allowing credit on that account as well. [Paras 6, 10]

Allowed Cenvat Credit of Rs.62,82,025/- on MS items and Rs.26,201/- on inputs for High Mast Tower.

Clerical error in invoice does not vitiate Cenvat Credit - Credit claimed where an invoice mistakenly names the assessee's head office is maintainable if there is no dispute about actual usage by the claimant. - HELD THAT: - The Tribunal found that the invoice for Service Tax of Rs.10,146/- was issued in the name of the assessee's head office due to a clerical mistake. Since there was no dispute regarding actual usage of the service by the appellant, the misnaming in the invoice was held to be a clerical error which does not prevent entitlement to Cenvat Credit. [Paras 11]

Allowed Cenvat Credit relating to the invoice despite the clerical error in the name.

GTA services and reverse charge - absence of transporter's Service Tax registration not a bar to credit - Credit on GTA/transport services is allowable even if the transporter's Service Tax Registration Number is not mentioned in invoices, where Service Tax is payable on reverse charge by the recipient. - HELD THAT: - The Tribunal observed that for Goods Transport Agency services the Service Tax liability is on the recipient under reverse charge. Therefore, there is no obligation on the transporter to state a Service Tax Registration Number in the invoice and the absence of such number does not disentitle the recipient from taking Cenvat Credit. Applying this principle, the Tribunal allowed the credit claimed for transportation services. [Paras 12]

Allowed Cenvat Credit of Rs.33,900/- claimed for transportation services.

Final Conclusion: The Tribunal set aside the impugned order confirming demands, interest and penalties, allowed the appeal by permitting the Cenvat Credits contested (including MS items, High Mast Tower inputs, the invoice affected by a clerical error, and GTA service credit) and granted consequential relief as per law.

Appropriation of refund of pre-deposit - stay granted by Tribunal - automatic vacation of stay after 180 days read down - right of Revenue to seek vacation on proof of assessee's default

Appropriation of refund of pre-deposit - stay granted by Tribunal - Appropriateness of the Department's appropriation of the refund of pre-deposit sanctioned to the respondent against a demand which was subject to a Tribunal stay. - HELD THAT: - The Tribunal held that appropriation of the refund sanctioned to the respondent was not permissible because the demand against which the refund was appropriated related to an appeal (E/218/2009) in respect of which a stay had been granted by the CESTAT Kolkata and which was ultimately decided in favour of the respondent. Having regard to the final disposal of that appeal in favour of the respondent (Final Order No. FO/A/75171/2019 dated 11.01.2019), there remained no subsisting arrears against the respondent to justify appropriation. Consequently the departmental appeal challenging the Commissioner (Appeals) order setting aside the original order-in-original was rendered infructuous and was dismissed. [Paras 4, 5]

Appropriation was not justified and the departmental appeal is dismissed as infructuous.

Automatic vacation of stay after 180 days read down - right of Revenue to seek vacation on proof of assessee's default - Validity of the condition of automatic vacation of Tribunal stay after 180 days and the legal standard for vacation of such stay. - HELD THAT: - Relying on the decision of the Punjab and Haryana High Court in PML Industries Ltd. and its affirmation by the Supreme Court in Commissioner v. PML Industries Ltd., the Tribunal observed that the proviso permitting automatic vacation of stay after 180 days cannot be applied so as to penalise the assessee for delays beyond the Tribunal's control. The proviso has been read down to mean that after 180 days the Revenue may seek vacation of stay only on proof that the assessee is responsible for delaying the disposal of the appeal or has defaulted. The Tribunal applied this settled principle to conclude that mere expiry of 180 days did not validate appropriation where no proof was shown of the respondent's default and the appeal was later decided in the respondent's favour. [Paras 3, 4]

The condition of automatic vacation after 180 days is read down; Revenue must prove assessee's default to obtain vacation of stay.

Final Conclusion: The departmental appeal is dismissed as infructuous: appropriation of the refund was not justified where the demand was subject to a Tribunal stay ultimately decided in favour of the respondent, and the principle that stay does not automatically lapse after 180 days without proof of the assessee's default is applied.

Reversal of Cenvat credit on removal of capital goods - Applicability of Rule 3(5) of the Cenvat Credit Rules, 2004 - Meaning of "as such" in relation to removal of capital goods - Burden of proof to establish availment of Cenvat credit - Admissibility and characterisation of purchase invoices vis-a -vis sales invoices - Time bar and extended period of limitation for issuance of show cause notice

Applicability of Rule 3(5) of the Cenvat Credit Rules, 2004 - Meaning of "as such" in relation to removal of capital goods - Whether Rule 3(5) CCR, 2004 is attracted to the removals alleged by the Department. - HELD THAT: - The Tribunal examined Rule 3(5) and held that the rule applies only where (i) Cenvat credit had in fact been taken on the inputs or capital goods and (ii) such inputs or capital goods are removed "as such". The expression "as such" must be understood in the sense of removal in original form, and is not limited to new or unused goods; however, applicability still presupposes that credit was availed. In the present case the goods sold were used capital goods, but the record lacked any proof that Cenvat credit had been availed on those capital goods. Accordingly, although the legal test in Rule 3(5) was identified, its applicability was not established on the material placed before the authorities. [Paras 8, 9]

Rule 3(5) is conceptually applicable only where Cenvat credit was availed and goods were removed "as such", but on facts the condition of availment of credit was not proved; thus Rule 3(5) could not be invoked against the appellant.

Burden of proof to establish availment of Cenvat credit - Admissibility and characterisation of purchase invoices vis-a -vis sales invoices - Whether the Department discharged the burden of proving that the appellant had availed Cenvat credit and that purchase documents were in fact sales invoices. - HELD THAT: - The Tribunal held that the initial presumption drawn from balance sheet entries required proof by the Department that Cenvat credit had been availed on the capital goods. The appellant produced purchase invoices on record which did not show any element of excise duty and which were inconsistent with being sales invoices for the years in question. The adjudicating authority's finding that only sales invoices were produced (and that purchase invoices were not produced) was contrary to the record. The Department produced no RG 23 register, no specific documentary evidence or any particularised allegation quantifying credit availed; consequently the Department failed to discharge its burden and the presumption remained unsubstantiated. [Paras 10, 11, 12]

The Department failed to prove availment of Cenvat credit or to demonstrate that the documents were sales invoices; hence the demand based on presumed availment of credit cannot be sustained.

Time bar and extended period of limitation for issuance of show cause notice - Whether the Show Cause Notice was issued within the period of limitation or, if beyond normal period, whether grounds for invoking extended period existed. - HELD THAT: - The Show Cause Notice was issued in December 2019 for removals alleged to have occurred in financial years 2014 15 to 2016 17. The notice is silent on any allegation of suppression, fraud, or wilful mis statement justifying invocation of the extended period of limitation. In absence of any material or allegation to invoke the extended period, the issuance of the Show Cause Notice beyond the normal time limit was held to be barred by limitation. [Paras 13]

The Show Cause Notice was time barred as no basis for invoking the extended period of limitation was shown.

Final Conclusion: The impugned order confirming demand under Rule 3(5) was set aside: the Department did not prove that Cenvat credit had been availed on the capital goods (and mischaracterised purchase invoices as sales invoices), and the Show Cause Notice was time barred; appeal allowed.

Priority to secured creditors - overriding effect of the SARFAESI Act - rights of a bonafide auction purchaser - non-disclosure of encumbrances in sale notice under Rule 8(7)(a) - registration of attachment orders with the Central Registry under Section 26 B(4) - liability of transferee only where ownership of business transfers as a going concern

Rights of a bonafide auction purchaser - priority to secured creditors - overriding effect of the SARFAESI Act - Validity of fastening on the petitioner, as auction purchaser, the state tax liability that accrued and was solely attributable to the business of the original lessee - HELD THAT: - The Court held that once the sale certificate issued under the SARFAESI Act and the purchaser complied with payment terms, the auction purchaser acquired rights, title and interest in the immovable secured asset which cannot be extinguished except for fraud or collusion. Section 26E and the non obstante effect of the SARFAESI Act give secured creditors priority over other debts and taxes; consequently the State cannot, by a post sale condition, extinguish or curtail the rights of an auction purchaser in the secured immovable property. The petitioner purchased the immovable plots and not the business; there was no covenant in the lease deeds making the transferee liable for business liabilities of the original lessee. The respondents' attempt to fasten business tax liability on the petitioner therefore failed both on statutory scheme and settled precedent. (See paras 6(vi), 7(i)-(iv), 8(i)-(iv), 9, 10(iii)-(iv), 10(x)) [Paras 6, 7, 9, 10]

The petitioner, being a bonafide auction purchaser of the immovable secured assets, cannot be fastened with the original lessee's business tax liabilities; the attempt to do so is impermissible and inoperative.

Non-disclosure of encumbrances in sale notice under Rule 8(7)(a) - registration of attachment orders with the Central Registry under Section 26 B(4) - rights of a bonafide auction purchaser - Whether Condition No. 7, imposed after issuance of the sale certificate because the bank had not disclosed known tax encumbrances in the sale notice and the State had not registered attachment orders with CERSAI, was legally sustainable - HELD THAT: - The Court found that the Bank, having represented in the sale notice that no encumbrances were known, could not later allow the State to impose a post sale condition curtailing purchaser's rights. Rule 8(7)(a) required disclosure of encumbrances known to the secured creditor; omission to disclose these matters in the sale notice (despite prior communications) cannot be remedied by later imposition of adverse conditions. Further, Section 26 B(4) (w.e.f. 24.1.2020) required authorities to file attachment orders with the Central Registry; there was no record that the State had registered its claims or obtained attachment orders with CERSAI before the sale certificate. The respondents cannot be permitted to prejudice the auction purchaser for the State's own inaction or the Bank's non disclosure; consequently a condition inserted after issuance of the sale certificate to saddle the purchaser with such liabilities is arbitrary and unlawful. (See paras 6(i)-(ii), 10(ii), 10(vi)-(vii), 11(i)-(ii)) [Paras 6, 10, 11]

Condition No. 7, imposed post sale where the secured creditor did not disclose known encumbrances and the State did not register attachment orders with the Central Registry, is quashed as arbitrary and unsustainable.

Liability of transferee only where ownership of business transfers as a going concern - remedies under the VAT Act for recovery of tax - registration of attachment orders with the Central Registry under Section 26 B(4) - Whether the adverse condition could be enforced against the petitioner when the State had other remedies under the HP VAT Act and had not invoked or completed those remedies - HELD THAT: - The Court observed that the HP VAT Act provides specific modes of recovery (including recovery as arrears of land revenue, special mode under Section 27, and liability of directors under Section 53) and that liability can be imposed on a transferee only if ownership of the business transfers as a going concern. Here, the petitioner did not purchase the business; the State had not pursued its statutory remedies nor registered attachment orders with CERSAI. The State's failure to invoke the VAT Act remedies or to prosecute the company/directors cannot be turned into a ground to penalize the auction purchaser by imposing Condition No. 7 after confirmation of sale. Accordingly, the condition cannot be enforced against the petitioner. (See paras 10(v), 10(vi)-(vii), 12(i)-(iii)) [Paras 10, 12]

The adverse condition cannot be enforced against the petitioner where the State failed to pursue its statutory remedies and had not registered its claim; the condition is quashed insofar as it affects the petitioner.

Final Conclusion: The writ petition is allowed: Condition No. 7 in the impugned communications is quashed insofar as it adversely affects the petitioner; the State is directed to transfer the leasehold rights of the industrial plots to the petitioner as reflected in the sale certificate and to record entries in the revenue records; the State remains free to pursue recovery of any dues from the original lessee or its directors by law, but it cannot fasten those business liabilities on the petitioner or defeat the petitioner's auction rights.

Search of person - Section 50 of the NDPS Act - personal search versus search of baggage/vehicle - inextricably linked to the person - obligation to inform of right to be searched before Gazetted Officer or Magistrate - waiver of right to be searched - requirement of written waiver (prospective) - inadmissibility of contraband recovered in violation of Section 50 when recovered from person

Section 50 of the NDPS Act - personal search versus search of baggage/vehicle - Whether Section 50 of the NDPS Act applies to a recovery made from a bag carried by the accused - HELD THAT: - The Court held that the expression "to search any person" in Section 50 must be read to mean the search of the body or articles on the body of a natural person and does not extend to a bag, container or vehicle as such. Relying on the Constitution Bench jurisprudence and the larger Bench in Pawan Kumar, the Court emphasised that Section 50 is engaged only in cases of personal search and not for searches of premises, conveyances or containers. Practical difficulties and statutory text support a strict construction: external articles carried by a person are not part of the person's body and do not ordinarily require the safeguards of Section 50. Applying these principles to the record, the Court proceeded on the basis that the recovery in the present case was from the bag carried by the appellant and therefore Section 50 was not attracted. [Paras 31, 36, 64, 65, 125]

Section 50 is inapplicable to the recovery made from the bag carried by the accused; therefore its procedural safeguards were not required to be followed in this case.

Obligation to inform of right to be searched before Gazetted Officer or Magistrate - Section 50 of the NDPS Act - Whether the requirements of Section 50 were complied with at the scene - HELD THAT: - The Court recorded that the police gave the appellant three options (search by ASI/police, by a Gazetted Officer or by a Magistrate), which amounted to offering an unlawful third alternative and thus violated the strict parameters of Section 50. The Trial Court had found that Section 50 was not complied with and that independent witnesses did not support the consent memo. The Supreme Court agreed that a third option given by the police is impermissible and that, on the evidence, Section 50 was not complied with; however, having found Section 50 inapplicable to a recovery from a bag, that non-compliance did not in this case render the proved recovery inadmissible for the reason that Section 50 did not apply to the bag-search. [Paras 25, 27, 29, 30, 121]

Section 50 was not complied with in the manner recorded, but because Section 50 does not apply to recovery from the bag in this case, the non-compliance did not invalidate the conviction based on the proved recovery from the bag.

Inextricably linked to the person - search of person - Whether the presence of a contemporaneous personal search would have attracted Section 50 even if the contraband was recovered from the bag - HELD THAT: - The Court surveyed conflicting precedents and noted that some decisions apply Section 50 where a bag is "inextricably linked" to the person and where both the person and the bag are searched. But the Court adhered to the Constitution Bench and larger Bench rulings that the word "person" is to be construed strictly and that extension to baggage risks impractical results. The Court observed that where there is clear evidence of a contemporaneous personal search of the suspect, Section 50 may become engaged; however, on the facts here there was no reliable evidence that a personal search of the appellant produced the contraband, so the narrower rule governs. [Paras 30, 31, 64, 119, 120]

If a true personal search of the accused is undertaken, Section 50 may be attracted even if the contraband is found in baggage; but on present facts there was no proved personal search yielding the contraband, so Section 50 does not apply.

Waiver of right to be searched - requirement of written waiver (prospective) - obligation to inform of right to be searched before Gazetted Officer or Magistrate - What procedural safeguard should be observed when the suspect declines the right under Section 50 - HELD THAT: - The Court held that when a suspect, after being informed of the Section 50 right, elects to be searched by the empowered officer (i.e. waives the right), such waiver should be recorded in writing, signed by the suspect and the searching officers and other squad members. While the statute permits oral communication of the right, a written, signed waiver would lend authenticity and transparency; the Court specified that this requirement will apply prospectively. [Paras 62, 63, 64]

If the suspect declines the Section 50 protection and opts to be searched by the empowered officer, the waiver should be reduced to writing and signed by the suspect and officers; this requirement is laid down prospectively.

Conviction under Section 20 of the NDPS Act - Whether the High Court erred in reversing the Trial Court's acquittal and convicting the appellant under Section 20 of the NDPS Act - HELD THAT: - Having reviewed the evidence and the applicable law, and having determined that the recovery was from the bag and that Section 50 did not apply to that recovery, the Supreme Court found no legal error in the High Court's decision to set aside the acquittal. The Court emphasised adherence to the Constitution Bench and larger Bench precedents constraining the application of Section 50 and held that the High Court was justified in convicting the appellant on the proved recovery from the bag. [Paras 17, 121, 125, 126]

The High Court did not commit an error of law in convicting the appellant; the appeals are dismissed and the conviction under Section 20 is upheld.

Final Conclusion: The appeals are dismissed. The Supreme Court upheld the High Court's conviction under Section 20 NDPS Act, ruled that Section 50 applies to personal searches and not to recoveries from a bag carried by an accused (on the facts of this case), found that Section 50 had not been complied with but was inapplicable to the proved bag recovery, and directed prospectively that any waiver of the right under Section 50 must be recorded in writing, signed by the suspect and officers.

Quashment of criminal complaint under the Negotiable Instruments Act, 1881 - Illegality of contingent fees claimed by advocates - Legal Practitioners' Fees Rules, 1973 - control on advocates' fees - Presumption of liability under section 138 and factual burden of discharge - Abuse of process by legal practitioner

Quashment of criminal complaint under the Negotiable Instruments Act, 1881 - Illegality of contingent fees claimed by advocates - Legal Practitioners' Fees Rules, 1973 - control on advocates' fees - Maintainability of a complaint under section 138 of the Negotiable Instruments Act where a cheque was issued in purported discharge of an alleged consolidated/contingent legal fee claimed by an advocate - HELD THAT: - The Court found that the claim pressed in the complaint was not founded upon a contractual obligation evidenced by any document showing an agreement for a consolidated or contingent fee. The practice of claiming contingent fees by advocates has been deprecated by the Supreme Court and the Legal Practitioners' Fees Rules, 1973 do not recognise such contingent or illegal fee arrangements. In the absence of any primary document or contractual terms to support the asserted liability, the claimed contingent fee is prima facie illegal and cannot create a legal liability capable of sustaining a prosecution under section 138. Continuation of criminal proceedings in such circumstances would amount to an abuse of the process of the court. Applying these principles, the petition seeking quashment of the complaint was allowed and the proceedings were quashed. [Paras 10, 13, 14, 16]

Complaint under section 138 is not maintainable in the facts where the cheque was alleged to discharge an illegal/contingent fee; proceedings quashed as amounting to abuse of process.

Presumption of liability under section 138 and factual burden of discharge - Effect of mere issuance of cheque and operation of statutory presumption where mode of discharge is contested - HELD THAT: - The Court acknowledged that the statutory presumption under section 138 would ordinarily arise from issuance of a cheque which is not denied. However, the mode of discharge of that presumption is a question of fact and could not be explored in the petition to the extent of deciding evidentiary disputes. Here, because there was no contractual documentation and the claim itself was prima facie illegal under the Legal Practitioners' Fees Rules, the mere issuance of the cheque in the particular factual matrix did not suffice to sustain the criminal complaint. The Court therefore rejected the respondent's contention that the cheque alone established liability. [Paras 11, 12]

While the presumption under section 138 may arise from issuance of the cheque, the factual question of discharge cannot be resolved in the petition; on the material before the Court the cheque did not establish a legal liability in view of absence of contract and alleged illegality.

Final Conclusion: The petition challenging STC No.122 of 2016 was allowed and the criminal proceedings under section 138 of the Negotiable Instruments Act were quashed on the ground that the claimed consolidated/contingent legal fee was prima facie illegal and unsupported by any contractual document, rendering continuation of the prosecution an abuse of process.