TaxTMI Updates e-Newsletter
Oct 21,2024

Promissory estoppel - legitimate expectation - equitable estoppel against the State - withdrawal of a policy subject to periodic review - subsumption of one incentive scheme by another - denial of legitimate expectation vis-a -vis Article 14

Promissory estoppel - equitable estoppel against the State - Whether the petitioners are entitled to relief on the basis of promissory estoppel - HELD THAT: - The Court held that promissory estoppel is not attracted. The petitioners failed to establish a clear and unequivocal promise that was relied upon to their detriment. SRO 431 of 2018, while envisaging budgetary support until 31-03-2026, expressly provided for annual review by the Finance Department; therefore the representation was conditional and not an unqualified promise. There is no pleading or material showing that the petitioners altered their position in a manner constituting the requisite detriment relying on an unequivocal, irrevocable promise. Consequently, the equitable doctrine of promissory estoppel cannot be invoked to prevent withdrawal of SRO 431 in the circumstances disclosed. [Paras 11, 25, 26, 29]

Promissory estoppel not attracted and cannot sustain challenge to the withdrawal of SRO 431.

Legitimate expectation - denial of legitimate expectation vis-a -vis Article 14 - Whether the petitioners' claim of legitimate expectation was violated and whether such denial offended Article 14 - HELD THAT: - The Court applied the distinction between promissory estoppel and legitimate expectation as explained by higher courts: legitimate expectation rests on considerations of fairness and reasonableness and may engage Article 14 if denial is arbitrary or discriminatory. Here, there was no clear, consistent practice or conduct by the State creating an unqualified expectation that SRO 431 would remain extant irrespective of the expressly stipulated review mechanism. Even if a legitimate expectation were arguable, the replacement of one incentive mechanism by another that continues to provide incentives in different form (Turnover Incentive Scheme 2021) is a bona fide, non-arbitrary policy choice and does not amount to unfair or discriminatory denial attracting Article 14. [Paras 14, 16, 17, 32]

Legitimate expectation not established in a manner that infringes Article 14; withdrawal/replacement was not arbitrary.

Withdrawal of a policy subject to periodic review - subsumption of one incentive scheme by another - Whether SRO 431 could be lawfully withdrawn and whether the Turnover Incentive Scheme 2021 validly subsumed the Budgetary Support Scheme - HELD THAT: - The Court found that SRO 431 itself contained clause reserving review of the scheme's viability at the end of each financial year, making the benefit conditional. The IGST-based reimbursement scheme was promulgated as transitional support after adoption of GST; later the Government promulgated the Turnover Incentive Scheme 2021 which provided incentives calculated on gross turnover and necessarily covered interstate taxable turnover as well. There was overlap between the two schemes and they could not operate simultaneously; the Budgetary Support Scheme was subsumed into the Turnover Incentive Scheme. In that factual and legal matrix the issuance of SO 239 withdrawing SRO 431 with effect from 01-04-2021 was a legitimate exercise of executive power and not vitiated by arbitrariness. [Paras 22, 24, 28, 30, 31]

SRO 431 was lawfully withdrawn and its benefits subsumed under the Turnover Incentive Scheme 2021; impugned SO valid.

Final Conclusion: Writ petitions dismissed; the Court found no breach of promissory estoppel or legitimate expectation and held the withdrawal of the earlier budgetary support scheme and its replacement by the Turnover Incentive Scheme 2021 to be lawful and non-arbitrary.

Advance ruling binding - show cause notice under Section 74 - suppression as non-declaration in returns - non-cash consideration as part of value of supply - interim protection - opportunity of hearing and adjudication in accordance with law

Interim protection - advance ruling binding - Grant of limited interim relief to the petitioner in relation to the show cause notice - HELD THAT: - Having noted the Advance Ruling in favour of the petitioner and the pendency of the show cause issued under Section 74, the Court found a prima facie case for limited interim protection. The Court granted the petitioner liberty to file a response to the show cause within thirty days and directed that the matter be heard by the proper officer after providing opportunity of hearing. The Court recorded that, while the advance ruling is a relevant and binding consideration, the respondents contend statutory exceptions exist; nevertheless, interference at the interlocutory stage was limited to preserving the status quo and permitting adjudication in accordance with law. The Court emphasised that any order passed by the proper officer shall not be given effect without leave of the Court. [Paras 10, 11, 12, 13]

Liberty to file response within thirty days; proper officer to hear and decide the show cause after opportunity of hearing; any order shall not be given effect without leave of the Court.

Show cause notice under Section 74 - suppression as non-declaration in returns - non-cash consideration as part of value of supply - opportunity of hearing and adjudication in accordance with law - Adjudication of the merits of the show cause notice remitted to the proper officer for fresh decision - HELD THAT: - The Court refrained from finally deciding whether the facts alleged in the show cause constitute 'suppression' under Section 74 or whether the Department may decline to be bound by the Advance Ruling under the statutory exceptions. Instead, after allowing the petitioner to file a response, the Court directed that the proper officer shall hear and decide the show cause in accordance with law, affording the petitioner an opportunity of hearing. The order preserves the department's right to examine subsequent events and statutory exceptions while ensuring adjudication occurs with procedural fairness before final effect is given. [Paras 9, 11, 12, 13]

Show cause adjudication remitted to the proper officer for decision after hearing; final orders not to be given effect without Court's leave.

Final Conclusion: Petitioner granted limited interim protection: permitted to file response within thirty days; proper officer to adjudicate the show cause after hearing in accordance with law; any order passed shall not be given effect without leave of this Court; further pleadings to be exchanged as directed.

Liability to interest under Section 50 of the Central Goods and Services Tax Act, 2017 - Payment credited to the Electronic Cash Ledger/Electronic Cash Register - Recovery by issuance of FORM GST DRC-13 to the Bank - Opportunity of hearing / principles of natural justice - Fresh adjudication / remand for reconsideration

Liability to interest under Section 50 of the Central Goods and Services Tax Act, 2017 - Payment credited to the Electronic Cash Ledger/Electronic Cash Register - Opportunity of hearing / principles of natural justice - Recovery by issuance of FORM GST DRC-13 to the Bank - Respondents directed to reconsider and pass fresh order on the question of liability to interest, particularly in light of amounts credited to the petitioner's Electronic Cash Ledger/Electronic Cash Register, after affording opportunity of hearing. - HELD THAT: - The Court found that the impugned notices and consequential recovery raise the question whether interest is payable despite the petitioner having calculated tax and credited the amounts to its Electronic Cash Ledger/Electronic Cash Register and thereafter filed belated returns. Rather than decide the substantive question on merits in the writ proceedings, the Court directed that the respondents must pass a fresh adjudicatory order on the alleged demand of interest under Section 50 of the CGST Act, 2017, after issuing notice to the petitioner and giving an opportunity of being heard. The Court recorded that earlier proceedings had not afforded the required opportunity before passing orders affecting civil consequences and that reconsideration should be undertaken at the earliest with cooperation of the petitioner. The Court also observed that the amount already recovered towards interest will remain subject to the final outcome of the fresh adjudication.

Writ petition disposed by remanding the issue of liability to interest to the respondents for fresh adjudication within three months, after hearing the petitioner; recovered amount to remain subject to final outcome.

Final Conclusion: The writ petition is disposed by directing the respondents to reconsider and pass a fresh order on the question of interest liability (Section 50 CGST Act, 2017), within three months after issuing notice and hearing the petitioner; amounts recovered towards interest shall remain subject to the final adjudication. No costs.

Violation of principles of natural justice - Opportunity of personal hearing - Consideration of reply to show-cause notice - Setting aside administrative order for failure to consider representation - Rectification of order - Provisional attachment of bank account - Remand for fresh consideration

Violation of principles of natural justice - Consideration of reply to show-cause notice - Setting aside administrative order for failure to consider representation - Impugned orders dated 27.12.2023 and 12.03.2024 are liable to be set aside on account of non-consideration of the petitioner's reply and failure to accord a personal hearing. - HELD THAT: - The petitioner had filed a detailed reply on 05.09.2023 explaining that an inadvertent error occurred while filing GSTR-3B returns (input tax claimed in the RCM column instead of the appropriate column). The Court found that the 1st Respondent did not consider that reply and proceeded to pass the impugned orders without affording the petitioner a personal hearing despite issuance of notices. In these circumstances the Court concluded that the impugned orders could not stand and accordingly set them aside. The Court implicitly applied the principle that an administrative order impeaching tax/credit position must consider representations made by the affected party and afford an opportunity of hearing before final adverse action is taken.

Impugned orders dated 27.12.2023 and 12.03.2024 set aside.

Remand for fresh consideration - Opportunity of personal hearing - Consideration of reply to show-cause notice - Matter remanded to the 1st Respondent for fresh consideration on merits after permitting the petitioner to file reply/objection and after affording a personal hearing. - HELD THAT: - Having quashed the impugned orders for want of consideration and hearing, the Court directed that the petitioner shall file its reply/objection along with supporting documents within three weeks. Upon receipt, the 1st Respondent is required to issue a clear 14 days' notice fixing the date of personal hearing and thereafter decide the matter on merits and in accordance with law after hearing the petitioner, and do so expeditiously. The direction confines the remand to fresh adjudication on merits with a specified procedural timetable to ensure compliance with natural justice and expedition.

Matter remanded to the 1st Respondent for fresh consideration after filing of reply and after affording a 14 days' personal hearing; petitioner to file reply within three weeks.

Provisional attachment of bank account - Setting aside administrative order for failure to consider representation - Attachment on the petitioner's bank account is lifted and the bank is directed to release the attachment upon production of a copy of this order. - HELD THAT: - Because the impugned order that led to the attachment has been set aside, the Court held that the consequential attachment of the petitioner's bank account could not subsist. The Court therefore directed immediate lifting of the attachment by the 2nd Respondent upon production of this order, thereby restoring the petitioner's access to the attached funds pending fresh adjudication by the taxing authority.

Bank attachment lifted; 2nd Respondent directed to release the attachment immediately upon production of a copy of this order.

Final Conclusion: The writ petition is allowed by setting aside the impugned orders; the petitioner is permitted to file reply within three weeks, the 1st Respondent is directed to afford a 14 days' personal hearing and decide the matter afresh and expeditiously, and the attachment on the petitioner's bank account is ordered to be released immediately upon production of this order.

Pre-deposit under Section 107(6) of the CGST Act - sufficiency of deposit of the entire disputed amount - maintainability of appeal without additional 10% pre-deposit - hearing of appeal on merits despite procedural pre-deposit requirement

Pre-deposit under Section 107(6) of the CGST Act - sufficiency of deposit of the entire disputed amount - maintainability of appeal without additional 10% pre-deposit - Whether, where the assessee has deposited the entire amount in dispute, the requirement of further pre-deposit under Section 107(6)(a) or 107(6)(b) of the CGST Act is attracted and the appellate authority may refuse to entertain the appeal for non-payment of additional pre-deposit. - HELD THAT: - The Court held that neither the requirement in Section 107(6)(a) nor Section 107(6)(b) is attracted where the assessee has, though under protest, already deposited the entire disputed amount. In such circumstances the amount so deposited must be treated as sufficient for the purpose of entertaining and hearing the appeal, and the appellate authority cannot insist on an additional pre-deposit (including the further 10% contemplated by Section 107(6)(b)). The Court therefore concluded that the order refusing to admit the appeal for non-payment of pre-deposit could not stand and directed that the appeal be decided on merits without insisting on further pre-deposit. [Paras 3, 4]

Depositing the entire disputed amount suffices; Sections 107(6)(a) and (b) do not require further pre-deposit in such cases, and the appellate authority must hear the appeal on merits.

Final Conclusion: The impugned orders refusing to entertain the appeal for non-payment of pre-deposit are set aside; the respondents are directed to decide the appeal expeditiously on merits since the petitioner has deposited the entire disputed amount.

Separation of show cause notices - Amnesty scheme - extended period of limitation under Section 74 of the CGST Act - Deposit under protest - Refund waiver - Waiver of limitation defense - Classification of goods - Remand for fresh adjudication

Separation of show cause notices - Amnesty scheme - Impugned show cause notice issued as a single notice for multiple assessment years was set aside and directed to be split into separate show cause notices for each assessment year. - HELD THAT: - The Court, noting the petitioner's submission about industry confusion on classification and its intention to avail the proposed amnesty scheme, set aside the bundled show cause notice and directed the respondent to issue separate show cause notices in respect of the six assessment years. The order was made to enable the petitioner to avail the amnesty scheme proposed to commence in November 2024 and to address the procedural prejudice arising from bunching of years. The Court recorded the petitioner's undertaking that it would not raise the limitation defence if separate notices are issued. [Paras 10, 11]

Respondent directed to issue separate show cause notices regarding six assessment years within two weeks.

Deposit under protest - Refund waiver - The deposit already made by the petitioner under protest shall not be claimed as a refund. - HELD THAT: - The Court recorded the petitioner's express submission that the amount deposited as tax liability under protest (stated in the petition) shall not be claimed as a refund, and gave effect to that submission by directing that the petitioner shall not claim refund of the deposited amount. [Paras 11]

Petitioner shall not claim any refund of the amount already deposited.

Waiver of limitation defense - The petitioner agreed not to raise the limitation defence in respect of the period covered, provided separate show cause notices are issued. - HELD THAT: - The Court recorded the petitioner's undertaking that, if separate show cause notices are issued for each assessment year, the petitioner will not raise the issue of limitation and would proceed (including seeking amnesty). The Court made its directions contoured to that recorded undertaking. [Paras 9, 11]

Petitioner shall not raise limitation issues in respect of the reissued separate show cause notices.

Classification of goods - Remand for fresh adjudication - Merits of classification of two-wheeler seats (CTH 9401 v. CTH 8714) and the consequent tax liability were not adjudicated and are to be considered afresh upon issuance of separate notices. - HELD THAT: - Although the petitioner challenged the exercise of extended limitation under Section 74 and asserted that its goods are classifiable under CTH 9401, the Court did not decide the substantive question of classification or tax liability on merits. Instead, by setting aside the bundled notice and directing separate notices, the matter of classification and associated tax demand remains for adjudication by the respondent in the fresh proceedings. [Paras 8, 11]

Substantive classification and tax liability left open for fresh adjudication after issuance of separate show cause notices.

Final Conclusion: The writ petition is disposed of by setting aside the bundled show cause notice; the respondent is directed to issue separate show cause notices for the six assessment years within two weeks, the petitioner shall not claim refund of the amount already deposited and shall not raise limitation if separate notices are issued, while the substantive classification and tax liability remain to be adjudicated afresh.

Penalty under Section 122(2)(b) of the CGST Act - treatment of assessment order as show cause notice and rehearing - grant of opportunity to file objections and personal hearing - appropriation of tax payments against penalty

Penalty under Section 122(2)(b) of the CGST Act - appropriation of tax payments against penalty - Impugned order levying penalty set aside and remitted for fresh consideration - HELD THAT: - The Court found that the petitioner had remitted the entire tax liability along with interest before challenge, and that in view of the petitioner's bona fide belief and the peculiar facts (including absence of a permanent Commissioner at the Municipality during the relevant period which impeded filing of replies and attendance), it was appropriate to grant a final opportunity to the petitioner to raise objections. The impugned order dated 11.10.2023, which levied penalty under Section 122(2)(b) after appropriating amounts paid towards tax, is set aside and is to be treated as a show cause notice. If the petitioner files objections within the stipulated period, the respondent must consider them and pass appropriate orders in accordance with law after affording a reasonable opportunity of hearing. If no objections are filed within the stipulated period, the impugned assessment order shall revive. [Paras 6, 7]

Impugned order set aside, treated as a show cause notice and remitted for fresh consideration after permitting the petitioner to file objections and be heard; impugned order to revive if no objections filed within two weeks.

Final Conclusion: Writ petition disposed by setting aside the impugned order imposing penalty; the order is converted into a show cause notice and remitted for reconsideration after the petitioner is given two weeks to file objections and a reasonable opportunity of hearing; failure to file objections within two weeks will revive the impugned order.

Violation of principles of natural justice - opportunity of personal hearing - mismatch of input tax claim (GSTR-3B vs GSTR-1) - remand for fresh consideration - conditional revival of order on non-compliance - payment of percentage of disputed tax as condition for interim relief - defreezing of bank account pending adjudication

Violation of principles of natural justice - opportunity of personal hearing - mismatch of input tax claim (GSTR-3B vs GSTR-1) - remand for fresh consideration - Impugned demand order set aside and matter remanded for fresh consideration on account of absence of opportunity and existence of material to rebut alleged mismatch. - HELD THAT: - The Court found that notice had been issued but the petitioner's defence was handled by an accountant who did not attend the personal hearing and the petitioner was unaware of the demand order; there existed material/documents to substantiate that there was no mismatch between GSTR-3B and GSTR-1. In the interest of ensuring compliance with principles of natural justice and to afford the assessee an opportunity to place materials on record, the impugned order dated 09.11.2023 was set aside and the matter remanded to the respondent for fresh consideration. The remand is directed so that the adjudicating authority can re-examine the alleged mismatch after giving an opportunity of personal hearing and considering the petitioner's documents. [Paras 2, 8, 9]

Order dated 09.11.2023 set aside and matter remanded for fresh consideration with direction to afford personal hearing and decide afresh.

Payment of percentage of disputed tax as condition for interim relief - conditional revival of order on non-compliance - Interim relief conditioned on deposit of 10% of disputed tax and automatic revival of the impugned order on non-compliance. - HELD THAT: - To balance the parties' interests and as a condition for granting interim relief and remand, the Court imposed terms: the petitioner must pay 10% of the disputed tax amount within four weeks; upon compliance, the petitioner may file reply/objection with documents within two weeks, following which the respondent shall issue fresh notice and conclude proceedings within three months. The Court expressly provided that failure to comply with the deposit condition will cause the impugned order to stand automatically revived. [Paras 9]

Petitioner to deposit 10% of disputed tax within four weeks; on non-deposit the impugned order will stand revived; on deposit, parties to proceed as directed for fresh adjudication.

Defreezing of bank account pending adjudication - interim relief - Direction to defreeze the petitioner's bank account in consequence of granting the writ petition. - HELD THAT: - The Court observed that the petitioner's bank account had been frozen and, having allowed the writ petition subject to the conditions stated, directed the respondent to defreeze the bank account. This relief was granted as an ancillary measure consequential to setting aside the impugned order and remanding the matter for fresh consideration. [Paras 10]

Respondent directed to defreeze the petitioner's bank account.

Final Conclusion: Writ petition allowed: impugned demand order set aside and remanded for fresh consideration on terms (deposit of 10% within four weeks; filing of reply within two weeks on deposit; fresh notice, hearing and final order within three months); failure to deposit will revive the original order; petitioner's bank account to be defrozen. No costs.

Withholding of refund under Section 54(11) of the CGST Act - refund obligation under Section 54(12) of the CGST Act - transitional input tax credit under Section 140 of the CGST Act - interest on delayed refund as notified on the recommendations of the Council - requirement of a separate refund application

Withholding of refund under Section 54(11) of the CGST Act - refund obligation under Section 54(12) of the CGST Act - transitional input tax credit under Section 140 of the CGST Act - interest on delayed refund as notified on the recommendations of the Council - requirement of a separate refund application - Entitlement to release of the portion of a previously sanctioned refund withheld under sub-section (11) of Section 54 of the CGST Act after the transitional input tax credit claimed under Section 140 was allowed, and whether a fresh refund application was required. - HELD THAT: - The petitioner had been granted a refund by order Annexure-P/15, a substantial part of which was disbursed; an amount was withheld under sub-section (11) of Section 54 by reason of an asserted disallowance of transitional input tax credit claimed under Section 140. On remand the transitional credit was allowed. The Court held that where withholding under Section 54(11) was on account of a contested demand tied to the transitional credit, and that credit is subsequently allowed, the withheld amount relating to that claim must be paid out under sub-section (12) of Section 54. Interest is payable as notified on the recommendations of the Council. The State's contention that the petitioner must file a fresh refund application was rejected because the withheld sum formed part of an earlier sanctioned refund (Annexure-P/15) and the allowance of the transitional credit removes the basis for withholding; no separate refund application was necessary in the circumstances. The Court directed that the refund, with applicable interest, be disbursed within one month from uploading of the judgment. [Paras 4, 5, 6]

The portion of the refund withheld under Section 54(11) must be released pursuant to Section 54(12) with interest as notified; no fresh refund application required; payment to be made within one month from uploading of the judgment.

Final Conclusion: Writ petition disposed of directing release of the withheld refund amount (relating to allowed transitional credit) with interest as notified, to be paid within one month from uploading of the judgment; no fresh refund application required.

Cancellation of GST registration for address discrepancy - restoration of GST registration subject to conditions - requirement to file outstanding returns and pay tax with interest and fee - prohibition on adjustment of tax/penalty from unutilised Input Tax Credit - scrutiny and approval of Input Tax Credit by competent officer before utilisation - direction to instruct GSTN to modify GST portal architecture

Cancellation of GST registration for address discrepancy - restoration of GST registration subject to conditions - Validity of cancellation of the petitioner's GST registration on account of a mismatch in door number and whether the cancellation should be set aside. - HELD THAT: - The Court examined the material and the petitioner's explanation that the property numbered 67 was internally divided and that the petitioner's business occupied 67B, which led to the door number being recorded as 67B on the GST portal. The Court found the explanation bona fide and concluded that the respondent acted mechanically in cancelling the registration without adequately considering the petitioner's reply or seeking an affidavit to verify the discrepancy. In view of the accepted explanation and the potential adverse effect on revenue administration if bona fide cases are not dealt with fairly, the Court set aside the cancellation order dated 03.07.2024 and the rejection of the revocation application dated 16.08.2024, subject to specified conditions for restoration. [Paras 7, 8]

The cancellation and the rejection order are set aside and the GST registration is restored conditionally.

Direction to instruct GSTN to modify GST portal architecture - Whether the respondent should take administrative steps to enable the petitioner to file returns and pay tax through the GST portal following restoration. - HELD THAT: - The Court directed the respondent to take suitable steps by instructing GST Network, New Delhi to make necessary changes in the architecture of the GST web portal so that the petitioner can file returns and pay tax/penalty/fine. A time limit of four weeks from receipt of the order was fixed for these administrative steps to be taken, reflecting the Court's view that technical or portal limitations should not impede compliance by a restored registrant. [Paras 8]

Respondent directed to instruct GSTN to modify the portal within four weeks to enable filing and payment.

Requirement to file outstanding returns and pay tax with interest and fee - prohibition on adjustment of tax/penalty from unutilised Input Tax Credit - scrutiny and approval of Input Tax Credit by competent officer before utilisation - Conditions on restoration concerning filing of returns, payment of dues, and treatment of Input Tax Credit (ITC). - HELD THAT: - The Court imposed specific conditions as part of restoration: the petitioner must file all outstanding returns up to date and pay the tax dues with interest and the fee for belated filing within four weeks of restoration. The Court expressly prohibited making such payments or adjustments from any unutilised or unclaimed ITC; any ITC claimed must be scrutinised and approved by a competent officer before it can be utilised, and only approved ITC may be applied against future tax liabilities. Non-compliance with any of these conditions will cause the benefit granted by the order to cease automatically. [Paras 8]

Restoration is conditional on filing returns and payment of dues within the stipulated period; ITC cannot be used until scrutinised and approved; non-compliance will render the order inoperative.

Final Conclusion: The High Court set aside the cancellation of the petitioner's GST registration and the rejection of the revocation application, restoring the registration on specified conditions including portal amendment by GSTN, filing of outstanding returns with payment of tax, interest and fee within prescribed time, and restriction on utilisation of ITC until scrutiny and approval; failure to comply will terminate the benefit.

Judicial review under Article 226 of the Constitution - quashing of show-cause notice - show-cause notice issued in Form GST ASMT 10 - scrutiny of returns under Section 61 of the JGST Act - authority to consider representations in accordance with law

Quashing of show-cause notice - show-cause notice issued in Form GST ASMT 10 - judicial review under Article 226 of the Constitution - Relief seeking quashing of the second show-cause notice issued in Form GST ASMT 10 was not acceded to; petition disposed of with liberty to the petitioner to respond and seek consideration by the authority. - HELD THAT: - The petitioner sought quashing of a notice issued in Form GST ASMT 10 on the ground that its issuance was without jurisdiction and beyond the authority's power under Section 61 of the JGST Act. The High Court did not adjudicate the substantive challenge to the jurisdiction or validity of the notice on merits. Instead, the Court exercised supervisory jurisdiction under Article 226 to dispose of the petition by granting the petitioner a limited procedural remedy: an opportunity to explain the matters raised in the second show-cause notice. The Court directed that the petitioner may file its explanation within two weeks and that the concerned authority shall consider that explanation and take further action in accordance with law and in light of the mandate of Section 61 of the JGST Act. [Paras 4]

Petition disposed of by granting the petitioner two weeks' time to respond to the second show-cause notice; the authority to consider the response and take follow-up action in accordance with law and Section 61 of the JGST Act.

Final Conclusion: Writ petition under Article 226 disposed of by permitting the petitioner two weeks to file its explanation to the second show-cause notice; the authority directed to consider the explanation and proceed in accordance with law and Section 61 of the JGST Act.

Cancellation of registration - appeal and condonation of delay under Section 107 of the Bihar Goods and Services Tax Act, 2017 - revocation of cancellation under Section 30 of the GST law - amnesty scheme for restoration of registration - delay, laches and non-availment of statutory remedy

Appeal and condonation of delay under Section 107 of the Bihar Goods and Services Tax Act, 2017 - delay, laches and non-availment of statutory remedy - Whether the petitioner could maintain writ jurisdiction to challenge the cancellation of registration after failing to avail the statutory appeal and condonation remedy within the prescribed period. - HELD THAT: - The Court noted that the order of cancellation dated 19.08.2022 carried a right of appeal under Section 107 of the BGST Act, which prescribed a three-month period for filing an appeal and allowed an application for condonation of delay for a further one month. The appellate time-frame therefore expired (appeal by 17.11.2022 and, if necessary, condonation by 17.12.2022), but the petitioner did not file an appeal or seek condonation within the statutory period. The Court held that in such circumstances the petitioner could not now invoke writ jurisdiction to seek relief which was available under the statutory appellate mechanism, observing that the law favours the diligent and not the indolent and that delay stood against the petitioner. [Paras 2, 3, 6]

Statutory appellate remedy under Section 107 was available but not availed within the prescribed period; writ petition cannot be maintained on that ground and delay defeats the petition.

Revocation of cancellation under Section 30 of the GST law - amnesty scheme for restoration of registration - delay, laches and non-availment of statutory remedy - Whether the petitioner could challenge cancellation when he had not sought revocation under Section 30 nor availed the Government's Amnesty Scheme for restoration of registration. - HELD THAT: - The Court observed that Section 30 of the GST law permits an application for revocation of cancellation within thirty days of the cancellation order. Separately, the Government issued Circular No. 3 of 2023 providing an Amnesty Scheme allowing cancelled registrants to restore registration on payment of dues between 31.03.2023 and 31.08.2023. The petitioner did not invoke the thirty-day revocation remedy nor avail himself of the Amnesty Scheme during the stipulated window. Given these unexercised statutory routes and the absence of monitoring or proof of intervening transactions, the Court treated the non-availment as further reason to refuse extraordinary writ relief. [Paras 4, 5, 6]

Petitioner failed to seek revocation under Section 30 and did not avail the Amnesty Scheme; non-exercise of these remedies is a valid ground for dismissal of the writ challenge to cancellation.

Final Conclusion: Writ petition dismissed for non-availment of statutory remedies (appeal and condonation under Section 107, revocation under Section 30 and the Amnesty Scheme), the delay and laches of the petitioner precluding grant of relief.

Natural justice - ex parte order - fake invoices and bill trading - invocation of Section 74 of the GST Act (fraudulent availment of input tax credit) - reversal of input tax credit - availability of efficacious alternative remedy under Section 107 of the GST Act

Natural justice - ex parte order - Whether the impugned ex parte order dated 15.02.2024 was passed in violation of the principles of natural justice for want of opportunity of personal hearing. - HELD THAT: - The Court found from the record that a show cause notice was issued on 08.08.2023 requiring explanation within 30 days and that reminder notices including one calling for personal hearing on 08.11.2023 and another on 05.02.2024 were issued. The petitioner did not submit any explanation nor avail the offered personal hearing. The High Court held that the petitioner's contention of non-provision of hearing was a misrepresentation to the Court and that, having been afforded opportunities, the respondent was entitled to proceed. Consequently, the impugned order cannot be faulted on grounds of denial of natural justice. [Paras 5, 6, 7]

The ex parte order is not vitiated for lack of hearing.

Fake invoices and bill trading - invocation of Section 74 of the GST Act (fraudulent availment of input tax credit) - reversal of input tax credit - Whether the respondent was justified in invoking Section 74 by treating the purchases as based on fake invoices and demanding reversal of input tax credit with interest and penalty. - HELD THAT: - The respondent's show cause alleged that the supplier engaged in bill trading and that the supplier's registration was suspended effective 26.05.2023, indicating absence of actual supply and fraudulent issuance of invoices. The impugned order recorded that the purchases were based on fake invoices and accordingly invoked Section 74 to demand tax liability, after taking into account payments made by the petitioner. The High Court, on review of the proceedings and the opportunity afforded, found no infirmity in the respondent's conclusion and the invocation of Section 74 in the circumstances recorded. [Paras 5, 7]

Invocation of Section 74 and demand for reversal of input tax credit was upheld as justified on the material before the respondent.

Availability of efficacious alternative remedy under Section 107 of the GST Act - Whether the writ petition was maintainable when an efficacious statutory remedy under Section 107 was available to the petitioner. - HELD THAT: - The Court noted that the petitioner had an appeal remedy under Section 107 of the Act against the impugned order. Observing that the statutory appellate remedy was efficacious and had not been exhausted before approaching the High Court by way of writ petition, the Court held that filing the writ without availing the prescribed appeal rendered the petition not maintainable on that ground as well. [Paras 7]

Writ petition is not maintainable in view of the available remedy under Section 107.

Final Conclusion: The writ petition is dismissed: the impugned order dated 15.02.2024 was not vitiated for want of hearing, the invocation of Section 74 on account of purchases based on fake invoices was upheld on the material before the respondent, and the petition was also held not maintainable because of the efficacious appeal remedy under Section 107.

Pre-deposit for filing appeal under GST - use of Electronic Credit Ledger for pre-deposit - use of Electronic Cash Ledger for pre-deposit - maintainability of appeal where pre-deposit paid from credit ledger - effect of Notification No. 53/2023 on mode of payment for delayed appeals - binding effect of coordinate bench decision and impact of Supreme Court stay

Pre-deposit for filing appeal under GST - use of Electronic Credit Ledger for pre-deposit - maintainability of appeal where pre-deposit paid from credit ledger - Whether the appeal is maintainable where the statutory ten per cent pre-deposit was paid from the Electronic Credit Ledger. - HELD THAT: - The petitioner had remitted the ten per cent pre-deposit from the Electronic Credit Ledger and the Appellate Authority rejected the appeal on the ground that the pre-deposit must be paid from the Electronic Cash Ledger. The Court noted that a Division Bench of this Court had taken a contrary view but that portions of that judgment were stayed by the Supreme Court. The Court also observed Notification No.53/2023, whereby the Central Government (on GST Council recommendation) required 12.5% for delayed appeals and expressly stipulated that at least 20% of the remaining 12.5% should be paid from the Electronic Cash Ledger, which indicates that payment from the Electronic Credit Ledger is recognised for the statutory pre-deposit. In light of these considerations, and given that the petitioner has already paid the ten per cent from the Electronic Credit Ledger, the Court held that the appeal is maintainable and directed the Appellate Authority to consider the appeal on merits. [Paras 3, 4, 5]

The appellate order rejecting the appeal for payment from the Electronic Credit Ledger was set aside; the appeal is maintainable because the ten per cent pre-deposit was paid from the Electronic Credit Ledger, and the Appellate Authority is directed to decide the appeal on merits.

Binding effect of coordinate bench decision and impact of Supreme Court stay - effect of Notification No. 53/2023 on mode of payment for delayed appeals - Whether the appeal should nonetheless be considered on merits pending the Supreme Court's stay of the Division Bench decision. - HELD THAT: - Although the Court observed that a Coordinate Bench decision binds it, the Court noted that the Supreme Court has stayed portions of that Division Bench judgment. Having regard to the stay and to the question before it being the consideration of the appeal on merits, the Court exercised its discretion to permit the appeal to be decided on merits by setting aside the appellate authority's order and directing fresh consideration. The Notification cited by the respondents further supported the conclusion that payment from the Electronic Credit Ledger does not render an appeal incapable of being entertained. [Paras 2, 4, 5]

Pending the Supreme Court's decision on the Division Bench judgment, the order rejecting the appeal is set aside and the appeal shall be considered on merits by the Appellate Authority.

Final Conclusion: Writ petition allowed: the appellate order dated 14.01.2023 is set aside and, since the petitioner has paid the statutory ten per cent from the Electronic Credit Ledger, the Appellate Authority is directed to admit and decide the appeal on merits notwithstanding the stay of portions of the Coordinate Bench's earlier judgment.

Writ petition - mandamus - certiorari - representation for payment - expeditious consideration - undisputed claim - rate contract - payment terms

Representation for payment - expeditious consideration - undisputed claim - Petitioner permitted to file a fresh representation and respondents directed to consider and decide it expeditiously and disburse the undisputed claim. - HELD THAT: - The petitioner supplied laboratory items pursuant to a supply order and alleges non-payment despite the rate contract providing for payment within 20 days of receipt. The Court, without adjudicating the merits of the claim, disposed of the writ petition by allowing the petitioner to submit a fresh representation to the concerned authorities. The Court directed respondents to consider and decide the representation in accordance with law and to disburse the undisputed portion of the claim. The direction mandates an expeditious decision, preferably within 45 days from receipt of the representation, leaving assessment of entitlement and quantification to the competent authority. [Paras 6]

Petitioner to file fresh representation; respondents to consider and decide it in accordance with law expeditiously, preferably within 45 days, and disburse the undisputed claim.

Final Conclusion: Writ petition disposed of by permitting fresh representation; respondents directed to decide the representation expeditiously (preferably within 45 days) and to disburse the undisputed claim, without the Court expressing any view on the merits.

Arm's length price - tested party - associated enterprise - treatment of purchase consideration as goodwill - goodwill as intangible asset - depreciation on intangible assets - allowability under Section 37(1) of the Income Tax Act, 1961

Tested party - associated enterprise - arm's length price - Revenue's challenge to the Tribunal's treatment of the Foreign associated enterprise as a tested party for ALP purposes does not arise - HELD THAT: - The Revenue's grievance was premised on the contention that the Foreign AE was impermissibly treated as a tested party because its financials and functions were more complex. The Court recorded that, on the facts, the Foreign AE was not included as a tested party for determining ALP - the assessee's proposal to include it was rejected by the Transfer Pricing Officer - and therefore the asserted error of treating the Foreign AE as a tested party did not occur. Consequently, the question framed by the Revenue does not arise on the material before the Court. [Paras 4, 5]

Question on treatment of the Foreign AE as a tested party dismissed as not arising.

Treatment of purchase consideration as goodwill - goodwill as intangible asset - depreciation on intangible assets - allowability under Section 37(1) of the Income Tax Act, 1961 - Whether the amount treated as goodwill (balance of purchase consideration over tangible asset value) written off by the assessee is taxable or eligible for depreciation - HELD THAT: - The undisputed facts show the assessee paid a total consideration for acquisition of assets; the tangible assets were valued and undisputed. The excess of the purchase price was treated as goodwill by the assessee and written off. The AO disallowed the write off under the banner that it was not wholly and exclusively for business, but there was no suggestion that the payment was for any other purpose. The CIT(A) treated the excess as an intangible (goodwill) attendant to the acquisition and allowed depreciation (25% as applied by the CIT(A)). The Tribunal upheld that approach, following the Supreme Court's ruling that goodwill may be an intangible asset eligible for depreciation. On these facts, the excess consideration is properly treated as an intangible asset attendant to the acquisition and eligible for depreciation rather than being disallowed as business expenditure under Section 37(1). [Paras 6, 7, 8, 9, 10]

Addition disallowing the amount treated as goodwill quashed; amount to be treated as intangible asset and depreciation allowed.

Final Conclusion: The appeal is disposed of: the Revenue's challenge regarding inclusion of the Foreign AE as a tested party is held not to arise; the disallowance of the amount treated as goodwill is set aside and the amount is held to be an intangible asset eligible for depreciation, in favour of the assessee.

Condonation of delay - exercise of power under Section 119(2)(b) in granting condonation of delay - genuine hardship - CBDT Circular No. 9/2015 - quashing of intimation issued after refusal to condone delay - jurisdiction to issue intimation where condonation of delay is refused

Condonation of delay - exercise of power under Section 119(2)(b) in granting condonation of delay - genuine hardship - CBDT Circular No. 9/2015 - Whether the delay of 2 hours 38 minutes and 26 seconds in filing the income-tax return for Assessment Year 2019-2020 should be condoned - HELD THAT: - The Court found that the first respondent adopted a hyper-technical approach in refusing condonation of the extremely short delay without appreciating the petitioner's contention of genuine hardship as contemplated by CBDT Circular No. 9/2015 and the scope of Section 119(2)(b). Having regard to the material on record and the nature of the delay, the Court held that the refusal was contrary to the applicable considerations and that the delay ought to be condoned. The determinative reasoning is that a very small, quantifiable delay coupled with the claim of genuine hardship falls within the circumstances in which the power under Section 119(2)(b) ought to be exercised to condone delay. [Paras 4]

Delay in filing the return for Assessment Year 2019-2020 of 2 hours 38 minutes and 26 seconds is condoned

Quashing of intimation issued after refusal to condone delay - jurisdiction to issue intimation where condonation of delay is refused - Whether the impugned intimation dated 19.08.2020 and the order dated 05.03.2024 refusing condonation should be quashed and whether the respondents had jurisdiction to issue the intimation after refusing condonation - HELD THAT: - The Court held that once the first respondent wrongly concluded that the petitioner was not entitled to condonation, the respondent did not have the jurisdiction or lawful authority to issue the impugned intimation that followed. On that basis the Court found both the order refusing condonation and the subsequent intimation to be unsustainable and liable to be quashed. The practical consequence identified by the Court is that quashing the impugned communications is necessary to enable lawful processing of the return. [Paras 4, 5]

Impugned order dated 05.03.2024 and intimation dated 19.08.2020 are quashed for lack of jurisdiction to issue the intimation after incorrectly refusing condonation

Condonation of delay - exercise of power under Section 119(2)(b) in granting condonation of delay - Whether respondents should be directed to process the income-tax returns after condonation of delay - HELD THAT: - Following the quashing of the impugned order and intimation and the condonation of delay, the Court directed the respondents to proceed to process the returns submitted by the petitioner and take further action in accordance with law. The direction flows from the conclusion that the return is to be treated as timely filed for all consequential purposes. [Paras 5]

Respondents directed to process the income-tax returns submitted by the petitioner and proceed further in accordance with law

Final Conclusion: Petition allowed; order dated 05.03.2024 and intimation dated 19.08.2020 quashed; the short delay in filing the return for Assessment Year 2019-2020 is condoned and respondents are directed to process the return in accordance with law.

Duty to adjudicate appeals on merits under section 250(6) of the Income Tax Act, 1961 - dismissal of appeal for non prosecution / ex parte disposal - right to hearing and principles of natural justice - restoration for de novo adjudication - reliance on jurisdictional High Court precedent in CIT v/s Premkumar Arjundas Luthra (HUF)

Duty to adjudicate appeals on merits under section 250(6) of the Income Tax Act, 1961 - dismissal of appeal for non prosecution / ex parte disposal - right to hearing and principles of natural justice - Validity of the learned CIT(A)'s ex parte dismissal of the appeal for non appearance/non compliance and whether the appeal required adjudication on merits - HELD THAT: - The Tribunal found that the learned CIT(A) had dismissed the appeal merely on the basis of non compliance/non appearance without adjudicating the grounds raised by the assessee on merits as contemplated by section 250(6). The Tribunal noted the jurisdictional High Court decision in CIT v/s Premkumar Arjundas Luthra (HUF) and held that a Commissioner (Appeals) cannot dismiss an appeal on account of non prosecution in the manner adopted. For these reasons the impugned ex parte order could not stand and the matter required reconsideration after affording a reasonable opportunity of hearing to the parties. [Paras 3]

Impugned order of the learned CIT(A) set aside; matter restored to the file of the learned CIT(A) for de novo adjudication with direction to afford reasonable opportunity of hearing.

Restoration for de novo adjudication - scope of remand - substantive grounds to be redecided - Disposition of the substantive grounds raised by the assessee (interest deduction, treatment of dividend) pending before the CIT(A) - HELD THAT: - Because the matter is restored for fresh adjudication on merits, the Tribunal did not decide the substantive contentions raised by the assessee regarding deduction of interest, classification of income as business or capital gain, or taxation of dividend income. Those grievances were not adjudicated and must be considered anew by the learned CIT(A) in the de novo proceedings. The Tribunal therefore allowed the grounds for statistical purposes only and directed that the assessee attend hearings fixed by the CIT(A). [Paras 3, 4]

Substantive grounds remitted to the learned CIT(A) for fresh consideration and adjudication on merits; grounds allowed for statistical purposes.

Final Conclusion: The ITAT set aside the ex parte order of the CIT(A), restored the appeal to the file of the learned CIT(A) for de novo adjudication after affording reasonable opportunity of hearing, and remitted all substantive issues raised by the assessee for fresh consideration; the appeal is allowed for statistical purposes.

Disallowance under Section 14A of the Income-tax Act - Rule 8D of the Income-tax Rules - Mixed funds appropriation - Presumption of appropriation of interest-free funds where such funds are sufficient - Nexus requirement between expenditure and exempt income

Disallowance under Section 14A of the Income-tax Act - Rule 8D of the Income-tax Rules - Presumption of appropriation of interest-free funds where such funds are sufficient - Whether disallowance under Section 14A read with Rule 8D is sustainable where the assessee had sufficient interest free own funds to meet the investments yielding exempt/dividend income - HELD THAT: - The Tribunal applied the principle laid down by the Hon'ble Supreme Court in South Indian Bank Ltd. (paras 17-20, 28-30 reproduced) that where an assessee has mixed funds (partly interest free and partly interest bearing) and interest free funds available are sufficient to meet the investments, there is a presumption that the investments were made out of interest free funds and disallowance under Section 14A is legally impermissible. The assessee placed on record the schedule of investments and the quantum of own funds as at 31.03.2017 showing interest free funds far in excess of the investment in NTPL. Applying the Supreme Court ratio, the Tribunal held that the interest free funds were sufficiently available to meet the investment and, consequently, the AO could not fairly estimate a proportionate disallowance under Rule 8D in the face of that presumption. On that basis the Tribunal deleted the part of the disallowance made by the AO and directed recomputation of income accordingly. [Paras 2, 7, 8, 9, 10]

Disallowance under Section 14A read with Rule 8D deleted; assessee's appeals allowed and AO directed to recompute income

Final Conclusion: The Tribunal allowed the assessee's appeals (lead ITA No. 270/Chny/2024 and the related appeal) and deleted the disallowance under Section 14A read with Rule 8D, holding that available interest free funds were sufficient to meet the investments and applying the Supreme Court's presumption in favour of the assessee; the AO was directed to recompute income.

Reopening of assessment - requirement of tangible information / 'information' under new regime - validity of notice under section 148 - issuance by jurisdictional AO versus faceless AO - requirement of prior approval / sanction for reopening under section 151 - deemed consideration and reference to District Valuation Officer under section 50C / section 56(2)(viia) - obligation to obtain fresh DVO valuation where assessee objects - deduction for post-sale improvements and application of tolerance band - application of Supreme Court precedent in Rajeev Bansal

Deemed consideration and reference to District Valuation Officer under section 50C / section 56(2)(viia) - obligation to obtain fresh DVO valuation where assessee objects - deduction for post-sale improvements and application of tolerance band - Deletion of addition made under section 56(2)(viia) by taking difference between stamp duty valuation and agreed consideration. - HELD THAT: - The Tribunal found that the assessing officer relied on the DVO valuation made in the case of the seller and on the stamp duty value to make the addition in the hands of the buyer. Where an assessee objects to adoption of the stamp duty value as deemed consideration, the AO is dutybound to obtain a valuation qua the assessee; a valuation made in proceedings concerning the seller cannot be mechanically applied to the buyer because the perspectives and factual representations before the DVO may differ. The record showed that the DVO had adopted a value based on an inspection that incorporated fittings and finishes which the buyer had alleged were subsequent improvements; the buyer produced bank evidence and invoices of payments for structural works and furnishing which ought to have been adjusted. The Tribunal further held that the comparable sale instances and auction evidence produced by the assessee, together with allowance for the asserted obstruction of view and the statutory 10% tolerance band, removed any basis for the impugned addition. On these combined factual and legal grounds the addition was directed to be deleted. [Paras 49, 50, 51, 52, 53]

Addition of the claimed amount under section 56(2)(viia) is deleted and grounds 3-9 of the appeal are allowed.

Reopening of assessment - requirement of tangible information / 'information' under new regime - validity of notice under section 148 - issuance by jurisdictional AO versus faceless AO - requirement of prior approval / sanction for reopening under section 151 - application of Supreme Court precedent in Rajeev Bansal - Validity of reassessment proceedings initiated by notice(s) under section 148 and related procedural challenges. - HELD THAT: - The Tribunal considered multiple challenges to the reopening. Applying the Supreme Court's decision in Union of India v. Rajeev Bansal, the Tribunal held that the assessing officer had tangible material (a discrepancy between stamp duty valuation and agreed consideration) sufficient to sustain reopening; accordingly challenges premised on absence of 'information' under the new regime were dismissed. The Tribunal, however, found the notice under section 148 to have been issued by the jurisdictional assessing officer (JAO) instead of through the faceless assessing officer (FAO) and relied on recent Bombay High Court rulings addressing compliance with the faceless procedure to quash the reopening on that ground. The Tribunal further examined the issue of sanction under section 151: although a contention was raised that incorrect authority had granted approval, the Tribunal observed that the Bombay High Court view favouring the assessee on sanction was displaced by the Supreme Court in Rajeev Bansal, and therefore that specific ground was dismissed. Grounds challenging limitation and conversion from old to new regime were also dismissed in view of Rajeev Bansal. Thus the reassessment was quashed only to the extent the notice/issue was procedurally defective for having been issued by the JAO rather than in faceless mode; other substantive and limitation challenges were rejected. [Paras 55, 56, 57, 58]

Reopening proceedings quashed insofar as notice under section 148 was issued by the JAO instead of the faceless authority; other challenges to reopening (including absence of information, sanction authority and limitation-related contentions) are dismissed in view of Rajeev Bansal.

Final Conclusion: Appeal is partly allowed: the addition under section 56(2)(viia) is deleted; reassessment proceedings are quashed to the extent the notice under section 148 was issued by the jurisdictional AO rather than through the faceless procedure, while other procedural and substantive challenges to reopening are dismissed.

Arm's length price - Mutual Agreement Procedure (MAP) - Advance Pricing Agreement (APA) - application of MAP/APA to non-covered years - remand for fresh determination - consistency in transfer pricing treatment - infructuous grounds

Mutual Agreement Procedure (MAP) - withdrawal of grounds - Grounds 2 and 3 relating to royalty payments and MAP proceedings - HELD THAT: - The assessee had entered into MAP in respect of transactions with UK entities for prior years and raised grounds seeking application of MAP outcomes. The Tribunal records that the issues in Grounds 2 and 3 pertain to royalty and MAP and notes the assessee's position. The Tribunal dismissed Grounds 2 and 3 as withdrawn, relieving the authorities and parties from further adjudication of those specific grounds in the present appeal. [Paras 5]

Grounds 2 and 3 dismissed as withdrawn

Arm's length price - application of MAP/APA to non-covered years - remand for fresh determination - consistency in transfer pricing treatment - Determination of arm's length price of royalty paid to non-UK related parties for assessment year 2017-18 - HELD THAT: - The Tribunal examined the contention that rates/resolutions reached under MAP or terms of an APA (covering later AYs) should be applied to royalty transactions with non-UK associated enterprises for AY 2017-18 which is not covered by the APA. Noting that the year under appeal is not within the APA period and that MAP/APA outcomes for UK entities may not be replicable for non-UK transactions where the rights and agreements differ, the Tribunal relied on earlier coordinate-bench reasoning and precedent authority emphasising that parameters agreed with respect to UK entities cannot automatically determine ALP for non-UK AEs. Applying a consistent judicial approach, the Tribunal did not decide the ALP on merits but directed that the matter be remitted to the AO/TPO to determine the arm's length price of the royalty transactions with non-UK entities afresh, granting the authorities opportunity to consider facts, comparables and law. [Paras 7, 8, 9]

Issue remitted to AO/TPO for fresh determination of arm's length price for royalty paid to non-UK entities

Infructuous grounds - statutory assessment order - Disposition of remaining grounds pleaded by the assessee following remand/withdrawal - HELD THAT: - Having dismissed Grounds 2 and 3 as withdrawn and remitted the royalty issue in respect of non-UK entities to the AO/TPO, the Tribunal observed that the other grounds become academic or are rendered without practical consequence by the remand. The Tribunal therefore treated the remaining grounds as infructuous and dismissed them accordingly. The order of remand is intended to enable fresh consideration by the fact-finding and transfer-pricing authorities in accordance with law. [Paras 9, 10]

Other grounds rendered infructuous and dismissed; appeal partly allowed for statistical purposes

Final Conclusion: The Tribunal dismissed Grounds 2 and 3 as withdrawn, remitted the dispute on arm's length royalty with non-UK associated enterprises for assessment year 2017-18 to the file of the AO/TPO for fresh determination, and treated the remaining grounds as infructuous and dismissed; the appeal is partly allowed for statistical purposes and the stay petition is dismissed as infructuous.

Mandatory invocation of assessment machinery under section 153A where incriminating material is found during search - jurisdictional exclusivity of search-triggered assessment provisions overriding ordinary reassessment provisions - invalidity of reassessment under section 148/147 when assessment is based on documents recovered in search - distinction between statements recorded under section 132(4) and section 133A for triggering section 153A - non-availability of section 292B as a cure for jurisdictional defects in assessment notices - effect of the non-obstante clause in section 153A

Mandatory invocation of assessment machinery under section 153A where incriminating material is found during search - invalidity of reassessment under section 148/147 when assessment is based on documents recovered in search - distinction between statements recorded under section 132(4) and section 133A for triggering section 153A - Validity of notice issued under section 148 and consequent assessment u/s 143(3) r.w.s.147 where assessment was reopened on the basis of material/documents found during search and statement recorded u/s 132(4). - HELD THAT: - The Tribunal found on the facts that the reasons for reopening and the additions made by the AO were based upon documents and materials seized during the search carried out on 26.07.2017 and upon a statement recorded under section 132(4). The AO himself recorded that share transfer documents were found during the search and that the additions represented excess amounts paid from unaccounted income. Given these facts, the Tribunal held that the statutory scheme envisages a separate and exclusive assessment mechanism for years covered by search-triggered proceedings which must be invoked under section 153A. Reliance was placed on the non-obstante character and purposive interpretation of the search-triggered provisions and on binding and persuasive precedents holding that notices under section 148/147 cannot be issued in respect of assessment years falling within the ambit of section 153A when the assessment is founded on search-recovered material. The Tribunal distinguished PCIT v. Meeta Gutgutia on facts, observing that in that case statements were recorded under section 133A and no incriminating material was found for the years in question, whereas in the present case the statement was under section 132(4) and documents were seized corroborating the additions. The Tribunal further noted that section 292B cannot be invoked to cure a fundamental jurisdictional defect where the wrong section has been invoked for reopening. Applying these principles to the material on record, the Tribunal concluded that the AO should have proceeded under section 153A and that issuance of notice under section 148 and completion of assessment under section 143(3) r.w.s.147 was without jurisdiction and therefore a nullity. [Paras 7]

Notice issued under section 148 and assessment completed under section 143(3) r.w.s.147 are quashed as the proper course was initiation of proceedings under section 153A; the CIT(A)'s order annulling the assessment is affirmed.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal affirms the CIT(A)'s order quashing the reassessment made under section 148/147 for AY 2011-12 on the ground that assessment was required to be initiated under section 153A in view of materials seized and statement recorded during search.

Penalty under section 271FA - Statement of Financial Transactions (SFT) under section 285BA - Reasonable cause under section 273B - Bona fide ignorance / venial breach as defence to penalty - Technical portal issues as a ground for excusing delay

Penalty under section 271FA - Statement of Financial Transactions (SFT) under section 285BA - Bona fide ignorance / venial breach as defence to penalty - Technical portal issues as a ground for excusing delay - Reasonable cause under section 273B - Validity of penalty under section 271FA for delayed/non-filing of SFT where assessee pleaded bona fide ignorance and technical difficulties in filing - HELD THAT: - The Tribunal examined the assessee's explanation that it was unaware of the obligation to file the SFT and that attempts to file online were frustrated by portal errors, culminating in a manual filing which reported only one transaction. The Tribunal noted and respectfully followed co-ordinate bench findings that where the breach is technical or venial and flows from bona fide ignorance, with no suggestion of mala fides, penalty under section 271FA is not warranted. Having regard to the facts that the assessee had only a single transaction to report, that it ultimately furnished the return on 09.08.2019, and that the defence of lack of knowledge and portal malfunction was bona fide, the Tribunal found that the assessee had made out a reasonable explanation within the meaning of section 273B and that the imposition of penalty could not be sustained. The Tribunal therefore deleted the penalty which had been imposed by the AO and confirmed by the CIT(A). [Paras 6, 7]

Penalty levied under section 271FA for non/late filing of SFT deleted and appeal allowed.

Final Conclusion: The appeal is allowed; the penalty of Rs. 81,500 under section 271FA for non-filing/delay in filing the SFT for Assessment Year 2018-19 is deleted.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - concealment of particulars of income - mens rea in imposition of penalty - withdrawal of claim during appellate/quantum proceedings

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - concealment of particulars of income - withdrawal of claim during appellate/quantum proceedings - mens rea in imposition of penalty - Whether the penalty under section 271(1)(c) was correctly deleted by the CIT(A) where short term capital gain was disallowed by the AO and the assessee withdrew the claim during appellate/quantum proceedings. - HELD THAT: - The Tribunal examined whether the facts amounted to concealment or furnishing of inaccurate particulars of income. It noted that the penal provision targets failure to disclose material particulars necessary for correct computation of income and that concealment requires hiding material facts. The Assessing Officer disallowed the short-term capital gain as the claim was not included in the return/computation and initiated penalty proceedings after the assessee withdrew the claim in the appellate quantum proceedings. The CIT(A) found that all relevant details to verify the claim were on record and that the withdrawal resulted from the claim being unsustainable in law rather than an attempt to hide particulars. The Tribunal agreed that the AO's reliance on the Supreme Court decision concerning mens rea in civil penalties was not apposite to the facts here. Applying the established principle that penalty under section 271(1)(c) requires failure to disclose material particulars or knowingly furnishing inaccurate particulars, the Tribunal held that there was no concealment where the necessary facts were available and the claim was withdrawn as unsustainable. [Paras 2]

Penalty deleted by the CIT(A) was upheld and the revenue's appeal dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s deletion of penalty under section 271(1)(c) for AY 2007-08, concluding that there was no concealment or furnishing of inaccurate particulars as all material facts were on record and the claim was withdrawn as unsustainable rather than concealed.

Notice under section 148 issued on deceased assessee - nullity of reopening proceedings - consequential orders set aside - failure to bring legal representatives on record under section 159

Notice under section 148 issued on deceased assessee - nullity of reopening proceedings - failure to bring legal representatives on record under section 159 - Notice dated 18.02.2020 issued under section 148 in the name of the deceased assessee is nullity and all consequential proceedings are liable to be set aside. - HELD THAT: - The Tribunal found on the record that the assessee, sole proprietor of M/s New Jewel Palace, died on 27.07.2016 and that the fact of death had been conveyed to the revenue during the survey under section 133A dated 17.11.2016. Despite such knowledge, a digital notice under section 148 was issued on 18.02.2020 in the name of the deceased person and the revenue did not take steps under section 159 to bring the legal representatives on record. Applying the principle established by the High Court decisions cited, the Tribunal held that a reopening notice issued in the name of a deceased person after the department has been informed of the death is illegal. For these reasons the notice was declared a nullity and all consequential orders and proceedings arising from that notice were set aside. [Paras 4, 5, 6]

Notice dated 18.02.2020 under section 148 is nullity; consequential proceedings and orders set aside; appeal allowed.

Final Conclusion: The appeal by the legal representative is allowed: the reopening notice issued in the name of the deceased assessee is quashed as a nullity and all consequential proceedings for Assessment Year 2017-18 are set aside.

Incriminating material found in the course of search - Scope of assessments under section 153A in unabated assessments - Reliance on statements recorded under section 132(4) as sole basis for additions - Requirement of corroboration for confessional statements - Application and consequence of prior protective assessments under section 153C - Estimation of income and rejection of books of account without independent enquiry - Relevance of confessional statements to periods subsequent to the date of search

Incriminating material found in the course of search - Scope of assessments under section 153A in unabated assessments - Reliance on statements recorded under section 132(4) as sole basis for additions - Requirement of corroboration for confessional statements - Additions made under section 153A for assessment years 2012-13 to 2015-16 (unabated assessments) based solely on statements recorded under section 132(4), without any incriminating material seized during the search, are sustainable in law. - HELD THAT: - The Tribunal found that no demonstrable incriminating material was discovered in the course of the June 2017 search in the assessee's case. The Assessing Officer framed additions in section 153A proceedings by adopting confessional material emanating from an earlier search (statement of the director recorded on 01.10.2013) and statements of the accountant recorded in the 2017 search. Relying on precedent, including the decision in Pr. CIT v. Abhisar Builwell Pvt. Ltd. and High Court authorities, the Tribunal held that a bare statement recorded under section 132(4), without corroborative incriminating material found during the search, cannot constitute the legal foundation for making additions in unabated assessments under section 153A. Consequently, additions founded solely on such statements and without independent enquiry are unsustainable and were struck down. [Paras 9, 10]

Additions under section 153A for A.Y. 2012-13 to 2015-16 based solely on uncorroborated statements are disallowed.

Relevance of confessional statements to periods subsequent to the date of search - Estimation of income and rejection of books of account without independent enquiry - Reliance on statements recorded under section 132(4) as sole basis for additions - Additions in assessment years 2016-17 to 2018-19 (assessments abated at the time of search) based on extrapolation of prior statements and without corroborative incriminating material are permissible. - HELD THAT: - The Tribunal rejected the Revenue's approach of extrapolating statements obtained in relation to earlier periods to post-search years. A deponent can disclose only past transactions; such statements cannot be interpolated to subsequent years to justify rejection of books and estimation of income. In the absence of any incriminating material discovered during the search and lacking independent enquiries or cross-examination to corroborate the statements, the AO's estimation and additions for the abated years were held to be without foundation. Accordingly, the Tribunal allowed the appeals for A.Y. 2016-17 to 2018-19. [Paras 11, 12, 13, 14]

Additions for A.Y. 2016-17 to 2018-19 based on uncorroborated and extrapolated statements are disallowed.

Application and consequence of prior protective assessments under section 153C - Incriminating material found in the course of search - Effect of the earlier Tribunal decision confirming substantive additions in the third party and deleting protective additions in the assessee's earlier section 153C proceedings on the present section 153A assessments. - HELD THAT: - The Tribunal noted that protective assessments were earlier framed under section 153C in the assessee's case while substantive additions were affirmed in the hands of the third party (the director) by the Tribunal. The co ordinate Bench had observed that once substantive additions are upheld in the hands of the third party, parallel protective additions in the hands of the third person become unsustainable. The present section 153A assessments merely reiterated those protective additions without fresh incriminating material. The earlier adjudication thus undermines the foundation of the present additions and corroborates that they cannot be sustained in absence of search seized material implicating the assessee. [Paras 7, 9]

Protective additions previously disallowed by the Tribunal, and substantive affirmations in the third party, render the reiterated additions in the present section 153A proceedings unsustainable.

Reliance on statements recorded under section 132(4) as sole basis for additions - Requirement of corroboration for confessional statements - Whether a bare statement recorded during search constitutes 'incriminating material' sufficient to justify additions under section 153A and rejection of books. - HELD THAT: - The Tribunal held, following authoritative High Court and Supreme Court pronouncements applied by co ordinate Benches, that a solitary or uncorroborated statement recorded under section 132(4) cannot be equated with incriminating material found during the search. In absence of any other material discovered in the search to corroborate such statements, additions made on the basis of those statements alone are legally untenable. The absence of independent enquiries, confrontation or cross verification further weakens the reliance on such statements for estimating income or rejecting books. [Paras 9, 16]

A bare statement under section 132(4), without corroborative incriminating material, does not suffice to sustain additions under section 153A or to justify rejection of books.

Final Conclusion: All appeals filed by Olive Overseas Pvt. Ltd. and Nakshatra Business Pvt. Ltd. for A.Ys. 2012-13 to 2018-19 are allowed; additions made under section 153A/related proceedings that rest solely on uncorroborated statements recorded during search, or on extrapolation of earlier statements to subsequent years, are set aside for lack of incriminating material and independent enquiry.

Violation of section 13 by diversion of trust funds for benefit of trustees - advances/loans between charitable trusts having common trustees - security deposit paid to trustees and comparability for benefit test - advances/loans to trustees and taxation at maximum marginal rate for diverted income - imputation of notional interest versus charging diverted amount at maximum marginal rate - restoration of registration and recognition under section 12AA and section 10(23C)(vi) - computation of peak outstanding balance for taxation of diverted funds

Advances/loans between charitable trusts having common trustees - violation of section 13 by diversion of trust funds for benefit of trustees - Advance of Rs. 3.35 crores to M/s Samarth Vivdhlaxi Seva Trust does not, merely by reason of common trustees, constitute a violation of Sections 11-13. - HELD THAT: - The Tribunal applied precedents and the facts to hold that a temporary interest free advance by one educational trust to another trust having similar objects and common trustees does not ipso facto attract Sections 11(5) or 13(1)(d) unless it is shown that any income or property is applied for the direct or indirect benefit of persons covered by subsection (3). The bench noted that both institutions are non profit, the advance was made under a Memorandum of Understanding for development of infrastructure and that provisions such as Section 13(3)(e) are inapplicable unless profit sharing rights exist. The Tribunal further observed that, even if a contravention were to be made out, the correct tax treatment would be to tax the diverted amount at the maximum marginal rate rather than by imputing notional interest; accordingly the addition of notional interest on this advance was held unsustainable and deleted. The appellate orders restoring registration/recognition under section 12AA and section 10(23C)(vi) were treated as relevant subsequent developments that informed the CIT(A)'s decision which the Tribunal upheld on this issue. [Paras 21]

Addition in respect of the advance to the other trust deleted; no violation of Sections 11-13 established on these facts.

Security deposit paid to trustees and comparability for benefit test - violation of section 13 by diversion of trust funds for benefit of trustees - Whether large security deposits paid to trustees (and resulting allegation of benefit to trustees) violate Section 13 was not finally adjudicated and is remanded for fresh enquiry into comparable transactions. - HELD THAT: - The Tribunal found that the Coordinate Bench's conclusion (that the security deposits paid to trustees were neither unreasonable nor excessive) was rendered on a record that did not include certain internal comparables and other material available before the Assessing Officer. Given the distinguishing facts (notably that the assessee itself had entered into a comparable lease without a security deposit), the Tribunal held that the Coordinate Bench's decision was not binding on the present Bench on this specific point. The Tribunal therefore restored the issue to the file of the AO and directed the assessee to furnish comparable cases and documentation so that the AO can determine whether any benefit accrued to the trustees; if benefit is found, the amount subject to denial of exemption must be taxed at the maximum marginal rate. [Paras 26, 29, 30]

Issue remanded to the Assessing Officer for fresh consideration on comparability and benefit to trustees; AO to decide afresh whether security deposits attract taxation at maximum marginal rate.

Advances/loans to trustees and taxation at maximum marginal rate for diverted income - computation of peak outstanding balance for taxation of diverted funds - imputation of notional interest versus charging diverted amount at maximum marginal rate - Advances/loans to individual trustees (Mr. Manish Vyas and Smt. Asha Vyas) involve diversion of trust funds under Section 13(1)(c); notional interest addition was incorrect and the matter is remanded for quantification of the peak outstanding to be taxed at the maximum marginal rate. - HELD THAT: - On examination of the ledger and transactions, the Tribunal found that the account with the trustee did not represent a bona fide imprest arrangement but showed repeated debit and credit transactions indicative of funds being made available to the trustee. The Tribunal concluded that such transactions fall within the mischief of Section 13(1)(c) where part of the income or property of the trust is used for the benefit of persons referred to in subsection (3). It rejected the AO's mode of taxing notional interest, holding that the correct treatment where diversion is established is to charge the diverted amount as income of the trust taxable at the maximum marginal rate. Because the AO had only considered opening and closing balances, the Tribunal directed the assessee to place complete ledger accounts with running balances so that the AO can compute the peak amount outstanding in each year for taxation. [Paras 37, 38, 39, 40, 42]

Finding of diversion to trustees affirmed in principle; matter remanded to AO for computation of peak outstanding and taxation of that amount at the maximum marginal rate (not by imputing notional interest).

Imputation of notional interest versus charging diverted amount at maximum marginal rate - Addition computed as notional interest on sums alleged to be misapplied was incorrect and is to be deleted; correct legal consequence is taxation of the diverted amount itself at the maximum marginal rate. - HELD THAT: - The Tribunal explained that where income or property has been applied for the benefit of a person covered by Section 13, the diverted amount (not imputed interest thereon) is to be treated as income of the trust and taxed at the maximum marginal rate. The AO's approach of charging 12% notional interest and taxing that sum was therefore legally incorrect. The Tribunal observed inconsistencies in the AO's computation and deleted the notional interest additions while directing correct treatment on remand where diversion is found. [Paras 40, 49]

Notional interest additions deleted; tax consequence must be determined by taxing diverted amounts at maximum marginal rate where diversion is established.

Restoration of registration and recognition under section 12AA and section 10(23C)(vi) - Restoration of registration/recognition by Coordinate Bench under section 12AA and section 10(23C)(vi) was noted and applied for purposes of assessing entitlement to exemptions; these appellate developments supported the CIT(A)'s approach on certain issues. - HELD THAT: - The Tribunal recorded that subsequent Coordinate Bench orders had restored the assessee's recognition under section 10(23C)(vi) and registration under section 12AA, and that those orders were considered by the CIT(A). Where the Coordinate Bench's factual and legal findings applied, the Tribunal followed them (subject to distinguishing facts on deposit comparables). These restorations informed the Tribunal's view that the assessee retained entitlement to exemptions except to the extent of amounts proved to be diverted. [Paras 16, 17, 18]

Coordinate Bench orders restoring recognition/registration accepted and applied; assessee remains entitled to exemptions except in respect of amounts found on merits to be diverted.

Final Conclusion: The appeals are partly allowed. The Tribunal upheld deletion of the addition in respect of the advance to another educational trust but remanded the issues relating to large security deposits to trustees and advances to individual trustees for fresh enquiry and quantification by the Assessing Officer (with directions on comparables and computation of peak outstanding). Notional interest additions were held unsustainable; where diversion is established the diverted amount must be taxed at the maximum marginal rate.

Valuation by DVO - cost of acquisition as on 01.04.1981 - fair market value on date of sale - registered valuer's report - natural justice - duty to give opportunity when quasi judicial functions are exercised - addition under u/s 50C on account of difference between collector rate and sale consideration - capital gains computation

Valuation by DVO - fair market value on date of sale - registered valuer's report - Acceptability of the DVO's fair market value on the date of sale for the property and its use in computing capital gains. - HELD THAT: - The assessee had not raised objection to the fair market value as on date of sale before the Assessing Officer and the DVO report in the assessee's own file did not contain that valuation. A DVO report produced on record in respect of a co sharer dealing with the same property and transaction showed the fair market value as on the date of sale at Rs. 7,50,15,600/-. The Tribunal accepted that co sharer's DVO valuation as the fair market value of the property on the date of sale and directed that value to be applied for computation of capital gains. The Tribunal noted the factual basis for adopting the co sharer's DVO figure given the absence of dispute on that point by the assessee before the AO, and thereby treated that DVO valuation as the appropriate FMV on date of sale. [Paras 7]

Fair market value on the date of sale to be taken at Rs. 7,50,15,600/- for computation of capital gains.

Cost of acquisition as on 01.04.1981 - registered valuer's report - natural justice - duty to give opportunity when quasi judicial functions are exercised - capital gains computation - Whether the cost of acquisition as on 01.04.1981 should be adopted as per the registered valuer's report furnished by the assessee. - HELD THAT: - The assessee had specifically disputed the DVO's estimate of the cost of acquisition as on 01.04.1981 and furnished a report from a registered valuer estimating the cost at Rs. 1,51,94,000/-. Neither the DVO nor the Assessing Officer pointed out any defect in the registered valuer's report and instead adopted the DVO figure of Rs. 38.22 lakhs. The Tribunal found that the registered valuer's report had been ignored without any identified infirmity and that the assessee had been deprived of a fair consideration of that report. In the circumstances and having regard to the materials on record, the Tribunal directed that the cost of acquisition as on 01.04.1981 be taken as per the registered valuer's report and that the Assessing Officer compute capital gains accordingly. [Paras 7]

Cost of acquisition as on 01.04.1981 to be taken as Rs. 1,51,94,000/- as per the registered valuer's report and the Assessing Officer directed to recompute capital gains.

Final Conclusion: Appeal partly allowed; FMV on date of sale accepted at Rs. 7,50,15,600/- and cost of acquisition as on 01.04.1981 accepted at Rs. 1,51,94,000/- as per registered valuer, and the Assessing Officer directed to recompute capital gains accordingly.

Registration under Section 12A(1)(ac)(iii) and Section 12AB - natural justice - reasonable opportunity to be heard - genuineness of charitable activities and satisfaction of the registering authority - power to dismiss or reject for non-compliance/default

Condonation of delay in filing appeal - delay in filing the appeal was condoned and the appeal admitted for adjudication on merits - HELD THAT: - The assessee presented an explanation supported by a notarized affidavit for a short delay in filing the appeal. The Revenue had no objection. Having considered the explanation and the absence of objection from the Department, the Tribunal exercised its discretion to condone the delay and admit the appeal for hearing on merits. [Paras 3, 4]

Delay condoned; appeal admitted on merits.

Natural justice - reasonable opportunity to be heard - registration under Section 12A(1)(ac)(iii) and Section 12AB - impugned rejection of the application for registration was set aside and the matter remanded for de novo adjudication after affording the assessee a reasonable opportunity of hearing - HELD THAT: - The CIT(E) had rejected the application for registration on the basis that notices issued through the ITBA portal and by speed post were not complied with and, therefore, the application was deficient in evidentiary material. The assessee maintained that it did not receive the questionnaire and that no order on merits was passed. Applying the principles of natural justice, the Tribunal found that the CIT(E) must re-consider the application after providing the assessee a proper opportunity to furnish submissions and documents. The Tribunal therefore set aside the CIT(E)'s order and directed a de novo decision to be taken in accordance with law with specific findings on the charitable objects and genuineness of activities. [Paras 5, 7, 13, 15]

Impugned order set aside; matter remanded to the CIT(E) for de novo adjudication after giving reasonable opportunity to the assessee and for recording findings on objects and genuineness of activities.

Genuineness of charitable activities and satisfaction of the registering authority - power to dismiss or reject for non-compliance/default - CIT(E) is entitled to require documents and evidence to satisfy itself about the objects and genuineness of activities, but must do so after affording opportunity and on consideration of submissions - HELD THAT: - The Tribunal acknowledged the departmental position that the registering authority may call for books, documents and other evidence to be satisfied about the nature and genuineness of activities. The CIT(E)'s reliance on non-compliance and reported precedents supporting dismissal for default was noted. However, because the assessee contested non-receipt and no adjudication on merits had been recorded, the Tribunal required that the CIT(E) undertake verification and form satisfaction only after giving the assessee an adequate chance to present the requisite material and address queries. [Paras 12, 13, 14]

CIT(E) may call for and examine evidence to satisfy itself on objects and genuineness, but must do so in a de novo adjudication after affording the assessee reasonable opportunity to be heard.

Final Conclusion: The Tribunal condoned the delay in filing the appeal, set aside the CIT(E)'s rejection of the registration application, and remanded the matter to the CIT(E) to decide afresh in accordance with law after affording the assessee a reasonable opportunity and recording findings on the charitable objects and genuineness of activities; appeal allowed for statistical purposes.

Revision under section 263 - Erroneous and prejudicial to the interests of the revenue - Provision for standard assets and deduction under section 36(1)(viia) - Debatable issue and plausible view of the Assessing Officer - RBI Master Circular on provisioning for standard assets

Revision under section 263 - Erroneous and prejudicial to the interests of the revenue - Debatable issue and plausible view of the Assessing Officer - Validity of the Principal Commissioner's exercise of revisional jurisdiction under section 263 in setting aside the assessment orders. - HELD THAT: - The PCIT upheld that two cumulative conditions for exercise of revisional jurisdiction under section 263 must be satisfied: the AO's order is erroneous and such error is prejudicial to the interests of the revenue. The PCIT held the AO's allowance of deduction was erroneous because the AO allegedly did not enquire into the allowability of deduction under section 36(1)(viia) for provisions on standard assets and thereby framed the assessment on an incorrect assumption of law and fact. On scrutiny, the Tribunal observed that the AO had raised specific queries and received replies (assessment record), and that the allowability of the deduction was a debatable question of law. Applying the ratio that where two views are possible and the AO has taken one plausible view, the order cannot be treated as erroneous and prejudicial unless the view is unsustainable in law, the Tribunal found no material showing the AO's order to be erroneous or prejudicial. Therefore the prima facie basis for invoking section 263 was absent and the revision was not tenable. [Paras 9, 10, 11]

Revision order under section 263 quashed; the PCIT's conclusion that the AO's order was erroneous and prejudicial is not tenable.

Provision for standard assets and deduction under section 36(1)(viia) - RBI Master Circular on provisioning for standard assets - Debatable issue and plausible view of the Assessing Officer - Whether the AO's allowance of deduction under section 36(1)(viia) for provisions made on standard assets was unsustainable. - HELD THAT: - The Tribunal examined the statutory text of section 36(1)(viia) and the PCIT's reliance on the proviso limiting deduction to provisions for doubtful or loss assets as classified by RBI. The PCIT treated provisions for standard assets (as per RBI Master Circular) as not deductible. The Tribunal noted that the AO had applied mind after obtaining the assessee's replies and that judicial precedents and submissions showed the question of allowability for standard-asset provisioning is debatable. Relying on the principle that a difference of opinion does not render the AO's view erroneous where it is plausible, the Tribunal concluded there was no basis to hold the AO's allowance unsustainable in law and no material showing legal error justifying revision. [Paras 7, 10, 11]

The allowance of deduction by the AO is a plausible view on a debatable question; the disallowance by revisional authority cannot be sustained.

Final Conclusion: The appeals for AY 2018-19 and AY 2019-20 are allowed: the revision orders under section 263 are quashed because the AO's allowance of deduction for provisions on standard assets reflected a plausible view on a debatable legal question and was not shown to be erroneous and prejudicial to revenue.

Summary order. Civil Appeal dismissed; delay condoned; pending applications disposed of.

Delay in adjudication - quashing of show cause notice for inordinate delay - binding effect of co-noticees' decisions on identical common show cause notice - failure to inform assessee of transfer to call book - revival of long-pending show cause notice

Delay in adjudication - quashing of show cause notice for inordinate delay - The impugned show cause notices issued in 1999-2003 (including those dated 28.03.2002) were liable to be quashed on account of inordinate delay in adjudication. - HELD THAT: - The Court noted that a common show cause notice was issued to the petitioner and to co-noticees whose cases were earlier quashed by a Coordinate Bench on grounds of prolonged delay. The petitioner's notice dated 28.03.2002 remained undecided for more than 20 years. The Court held that the petitioner's case was on firmer footing than the earlier decisions (where delay was 15 years) and that such inordinate delay in adjudication justified quashing of the notices. The Court accepted that the respondents' attempt in 2023 to revive the 2002 notice by issuing an adjudication notice could not cure the long period of inaction, and accordingly granted relief by quashing the impugned notices in terms of the petition. [Paras 5, 9, 10]

The show cause notices (including the notice dated 28.03.2002 and related revival notices) are quashed on account of inordinate delay in adjudication.

Failure to inform assessee of transfer to call book - delay in adjudication - Non-communication to the petitioner that its case had been transferred to the call book did not justify the prolonged delay in adjudication. - HELD THAT: - Respondents relied on a transfer to the call book because a related matter was pending before the Supreme Court. The Court recorded absence of material demonstrating that the petitioner was informed of such transfer. It held that respondents were under an obligation to inform the petitioner of transfer to the call book, and in the absence of any communication the defence of transfer could not be accepted as justification for the unexplained delay in adjudication. [Paras 7, 8]

The defence that the matter was transferred to the call book (and thereby delayed) is rejected for want of proof of communication to the petitioner.

Binding effect of co-noticees' decisions on identical common show cause notice - delay in adjudication - The petitioner's failure to have earlier invoked writ jurisdiction after co-noticees obtained relief did not preclude the Court from applying the same ratio to the petitioner's identically-noticed case. - HELD THAT: - Respondents urged that the petitioner slept over its right after co-noticees' matters were decided in 2017 and 2019. The Court rejected this contention, holding that mere delay by the petitioner in filing the writ after those decisions cannot prevent application of the same legal principle to a co-noticee where the show cause notice was common. The Court observed that the ratio in the Coordinate Bench decisions squarely applied to the petitioner's case and therefore followed those precedents. [Paras 6]

The petition is maintainable despite petitioner not having filed earlier challenges after co-noticees' judgments; the ratio applicable to co-noticees applies to the petitioner.

Final Conclusion: Writ petition allowed; the impugned show cause notices (including those dating from 1999-2003 and the revival notice of 28.02.2023) are quashed for inordinate delay in adjudication; petition disposed of with no order as to costs.

Manufacture - IGCR Rules compliance - Exemption notification interpretation - Benefit of exemption dependent on use and utilisation - Continuity bond and its cancellation - HSN/CTH classification of electric accumulators - TRU circular reliance - Limitation / extended period of limitation

Manufacture - IGCR Rules compliance - Exemption notification interpretation - Entitlement to exemption under Entry No. 512 of Notification No. 50/2017-Cus for imported parts/components used in manufacture of Lithium ion batteries. - HELD THAT: - The Tribunal applied the definition of 'Manufacture' in Rule 3(e) of the IGCR Rules, 2017, which requires processing of inputs so as to result in a new product having a distinct name, character and use. The imported lithium ion cells and other components were processed (joined, welded, insulated and packed) so that a Lithium ion battery (an accumulator distinct from individual cells) emerged. The notification's term 'manufacture' must be read with the IGCR definition and does not require that the Lithium ion battery be the importer's final marketed product. Consequently, where the imported inputs produced a battery as a new product, the procedural compliance under IGCR Rules (information submission, continuity bond, monitoring) being satisfied, the condition precedent for Entry No. 512 was met and the exemption applies. [Paras 14, 15, 16, 17]

Appellant entitled to exemption under Entry No. 512 for parts/components used in manufacture of Lithium ion battery.

HSN/CTH classification of electric accumulators - TRU circular reliance - Exemption notification interpretation - Whether manufacture of a Lithium ion battery that is subsequently captively used to make a power bank precludes the exemption under Entry No. 512. - HELD THAT: - The Tribunal examined HSN Chapter Note 85.07 and observed that electric accumulators (storage/secondary batteries) and battery packs were already covered under heading 8507; the term 'power bank' did not exist in tariff entries during the relevant period and was introduced only by notifications of January 2019. A TRU clarification dated 26.04.2017 classifying power banks as accumulators was available and relied upon by the appellant. Since the battery manufactured from imported inputs had the character and function of an electric accumulator (rechargeable, storage and supply of electrical energy) and the appellant sold the product as a Lithium ion battery pack, subsequent captive incorporation into a power bank (by adding a PCB on which duty was paid) did not negate entitlement to the exemption. The department's later separations in 2019 cannot be given retrospective effect to deny the pre amendment benefit. [Paras 25, 26, 28, 29, 32]

Captive use of the manufactured Lithium ion battery to make power banks does not disentitle the appellant from the Entry No. 512 exemption for the relevant period.

Continuity bond and its cancellation - IGCR Rules compliance - Whether the appellant's procedural compliance (submission of information, continuity bond, monitoring and cancellation of bond) under IGCR Rules 2017 was sufficient to preclude invoking penalty and recovery under extended limitation. - HELD THAT: - Rule 5 of IGCR Rules, 2017 mandates information to jurisdictional officers, submission of a continuity bond and monitoring by the jurisdictional Assistant Commissioner. The record established step by step compliance, filing of quarterly returns, monitoring by the proper officer and eventual cancellation of the continuity bonds on satisfaction of end use. Given this active supervisory regime and the departmental scrutiny throughout, the Tribunal found no scope to invoke extended provisions under Section 28(4) of the Customs Act or to impose penalty under Section 114A. [Paras 35, 36, 37, 38]

Procedural compliance and cancellation of continuity bonds negate the basis for extended period invocation and penalties; no penalty or extended period recovery justified.

Limitation / extended period of limitation - Exemption notification interpretation - Whether the show cause notice invoking the extended period of limitation was maintainable. - HELD THAT: - The Tribunal held that the IGCR Rules regime required active supervision and that the appellant had complied with the prescribed procedures, with bonds cancelled by the jurisdictional authority. Moreover, the relevant tariff amendment and separate treatment for power banks was effected only from 29.01.2019; the impugned imports were up to January 2019. The department could not apply the post amendment position retrospectively. On these grounds the Tribunal concluded the demand was barred by limitation and the extended period invocation was not sustainable. [Paras 19, 29, 39]

Show cause notice invoking extended period held barred by limitation; demand unsustainable on limitation ground.

Final Conclusion: The Tribunal set aside the adjudicating authority's order and allowed the appeal: the appellant satisfied IGCR Rules, 2017 and was entitled to exemption under Entry No. 512 of Notification No. 50/2017 for imported parts/components used to manufacture Lithium ion batteries during August 2017 to January 2019; subsequent use of those batteries in power banks and post period tariff amendments do not deprive the appellant of the pre amendment exemption, and the invocation of extended limitation and penalties was unsustainable.

Penalty under section 114 - Penalty under section 114AA (use of false or incorrect material) - Mis-declaration in baggage declaration as document filed under the Customs Act - Airway bill as document for airlines and not a document filed under the Customs Act - Confiscation under section 113

Penalty under section 114AA (use of false or incorrect material) - Airway bill as document for airlines and not a document filed under the Customs Act - Imposition of penalty under section 114AA of the Customs Act on Shri Mayank Gupta - HELD THAT: - The Tribunal examined whether Shri Mayank Gupta knowingly or intentionally made, signed or used a document filed for the purposes of the Customs Act which was false or incorrect in any material particular. Section 114AA applies only to documents filed for the purposes of the Act. The baggage declaration, which was filed under the Customs Act, was the document containing the mis-declaration; the airway bill is a document required by airlines (analogous to a bill of lading) and is not a document filed under the Customs Act. The adjudicating authority did not impose section 114AA on Mayank Gupta because he had issued the airway bill (an airlines document) and had not filed the baggage declaration. On the stated facts the requisite knowledge and use of a document filed under the Act were not established against him for the purposes of section 114AA. [Paras 32]

Revenue's appeal for imposition of penalty under section 114AA on Shri Mayank Gupta dismissed

Penalty under section 114 - Confiscation under section 113 - Validity of penalty imposed under section 114 of the Customs Act on Shri Mayank Gupta - HELD THAT: - Section 114 penalises any person who does or omits to do any act which renders goods liable to confiscation under section 113 or abets such act. Confiscation of the red sanders under section 113 was not in dispute. The Tribunal accepted the adjudicating authority's finding that without filing the airway bill in the name of a fictitious firm and arranging airline space the attempted export would not have been possible. Section 114 does not require proof of mens rea; the act or omission rendering the goods liable for confiscation is sufficient. On these findings the penalty under section 114 as imposed on Shri Mayank Gupta was sustained and his appeal against it was dismissed. [Paras 31]

Appeal by Shri Mayank Gupta against penalty under section 114 dismissed; penalty under section 114 sustained

Penalty under section 114AA (use of false or incorrect material) - Airway bill as document for airlines and not a document filed under the Customs Act - Imposition of penalty under section 114AA of the Customs Act on Shri Ravindra Kumar - HELD THAT: - The Tribunal considered whether Ravindra Kumar knowingly used or caused to be used a document filed for the purposes of the Customs Act which was false or incorrect. The mis-declaration under the Act related to the baggage declaration (a document filed under the Customs Act); Ravindra Kumar's role was in arranging the airway bill and forwarding documents to the freight forwarder who issued the airway bill. The Tribunal held that the knowledge and use required for section 114AA were not established against him because the impugned document for purposes of the Act was the baggage declaration, not the airway bill which related to the airlines. Accordingly, imposition of section 114AA was not tenable. [Paras 37]

Revenue's appeal for imposition of penalty under section 114AA on Shri Ravindra Kumar dismissed

Penalty under section 114 - Confiscation under section 113 - Validity of penalty imposed under section 114 of the Customs Act on Shri Ravindra Kumar - HELD THAT: - Section 114 penalises acts or omissions which render goods liable for confiscation under section 113. The Tribunal found that Ravindra Kumar was a key player who arranged fake airway bills and procured later changes to align airway bill particulars with the fraudulent baggage declaration; without his actions the attempted export would not have been possible. Given the established confiscation and his role in causing the act rendering goods liable to confiscation, the penalty under section 114 was properly imposed. [Paras 36]

Appeal by Shri Ravindra Kumar against penalty under section 114 dismissed; penalty under section 114 sustained

Penalty under section 114AA (use of false or incorrect material) - Mis-declaration in baggage declaration as document filed under the Customs Act - Imposition of penalty under section 114AA of the Customs Act on Shri Sarvesh Kumar - HELD THAT: - The Tribunal reviewed the role of the customs broker who received forged export-related documents and shipping instructions and forwarded them for effecting export. The baggage declaration, filed under the Customs Act, contained the mis-declaration; customs brokers have direct responsibility to ensure correct filing of such declarations. The Tribunal held that Sarvesh Kumar's forwarding of forged documents and his admission of acting on directions established that he knowingly facilitated the use of false material in a document filed for the purposes of the Act. The adjudicating authority erred in not imposing section 114AA; on consideration of his role the Tribunal found it appropriate to impose penalty under section 114AA and quantified the penalty accordingly. [Paras 40]

Revenue's appeal allowed; penalty under section 114AA imposed on Shri Sarvesh Kumar

Penalty under section 114AA (use of false or incorrect material) - Mis-declaration in baggage declaration as document filed under the Customs Act - Imposition of penalty under section 114AA of the Customs Act on Shri Krishna Chandra Jha - HELD THAT: - The Tribunal considered Krishna Chandra Jha's role as the last conspirator before attempted submission to the airline: he obtained the fake baggage declaration and airway bills, used them to facilitate export and employed another person to submit the papers. Knowledge is to be inferred from surrounding facts; here the baggage declaration and airway bill were fake and were used together after alteration to effect the fraud. The Tribunal concluded that Krishna Chandra Jha had full knowledge of the fraud and that the baggage declaration was a document filed under the Act; therefore section 114AA was attracted. The Commissioner erred in not imposing section 114AA, and the Tribunal imposed the penalty under that provision. [Paras 42]

Revenue's appeal allowed; penalty under section 114AA imposed on Shri Krishna Chandra Jha

Final Conclusion: The Tribunal sustained penalties under section 114 on Shri Mayank Gupta and Shri Ravindra Kumar and dismissed their appeals; it rejected Revenue's claims to impose section 114AA on them. The Tribunal allowed Revenue's appeals against non-imposition of section 114AA on Shri Sarvesh Kumar and Shri Krishna Chandra Jha and imposed penalties under section 114AA on each accordingly. Confiscation of the red sanders under section 113 was not disturbed.

Benefit of end-use based exemption - intended for use - end-use condition and undertaking - remission of duty on lost or destroyed goods under Section 23 of the Customs Act - remission of duty on unavoidable loss under Rule 21 of the Central Excise Rules - double benefit via insurance - penalty under section 114A of the Customs Act

End-use condition and undertaking - intended for use - Whether the imported waste paper lost in a fire satisfied the end-use condition of the concessional notification so as to retain exemption. - HELD THAT: - The Tribunal held that the phrase 'for use' in the notification must be read as 'intended for use', following the Apex Court's interpretation in State of Haryana v. Dalmia Dadri Cement Ltd. and allied precedents. The goods were imported with the intention of being used in manufacture of kraft paper and the appellants furnished the required undertaking. Destruction by fire, an unavoidable accident, does not negate the fact that the goods were intended for the specified use. To hold otherwise would render the statutory provisions dealing with loss or destruction otiose. Consequently, the benefit of the end-use based exemption could not be denied merely because the inputs were destroyed by fire before being used. [Paras 8, 9, 10]

The imported waste paper, having been intended for use and destroyed by fire, continued to qualify for the concessional end-use exemption.

Remission of duty on lost or destroyed goods under Section 23 of the Customs Act - remission of duty on unavoidable loss under Rule 21 of the Central Excise Rules - Whether loss by fire attracts provisions for remission and precludes demand of differential duty. - HELD THAT: - The Tribunal applied Section 23 of the Customs Act and Rule 21 of the Central Excise Rules, observing that these provisions contemplate remission where goods are lost or destroyed by unavoidable accidents. The reasoning in prior Tribunal decisions treating fire destruction as beyond the assessee's control was held applicable. A legal construction that would deny remission where inputs are destroyed would nullify these statutory reliefs. Therefore, duty demand on goods destroyed by fire was unsustainable. [Paras 9, 10]

Remission provisions apply to goods destroyed by fire and the demand for differential duty cannot be sustained on that basis.

Double benefit via insurance - penalty under section 114A of the Customs Act - Whether the revenue proved that the appellant obtained double benefit by claiming insurance including taxes and whether penalty and duty demand were justified. - HELD THAT: - The Tribunal found that the appellant had intimated the department of the fire by email and letter and produced a detailed survey report; revenue did not controvert receipt of intimation. The revenue's allegation that the assessee obtained insurance for tax amounts and thereby gained double benefit was not supported by documentary proof. The survey report and its findings indicated that claims for CVD and ED were disallowed and only material damage was accepted by the insurer. Assumptions and allegations without documentary proof cannot sustain a demand or penalty. In the absence of proof of diversion or of actual receipt of tax-component insurance proceeds, the imposition of penalty and demand for differential duty were held unsustainable. [Paras 6, 7, 11]

Revenue failed to prove double benefit; demand of differential duty and penalty are unsustainable and are set aside.

Final Conclusion: The appeals are allowed: the demand for differential duty and the penalty are set aside because the goods destroyed by fire were intended for the specified end-use and remission provisions apply, and revenue failed to prove any double benefit by insurance; consequential relief to follow as per law.

Mis-declaration - classification - applicability of exemption under notification entry - provisional assessment/test bond - reopening of finalized assessment - extended period of limitation - evidence and due procedure for sampling/testing - principle of natural justice - remand vs final adjudication

Classification - applicability of exemption under notification entry - Validity of the adjudicating authority's conclusion that the imported consignments were printing paper (CTH 4802) and therefore entitled to exemption under Serial No. 78 of Notification No. 11/1997-Cus. - HELD THAT: - The Tribunal accepted the CRCL, Pusa test reports which recorded mechanical wood pulp content above the threshold required by Entry No. 78 (actual ~74.6% as per CRCL, Pusa) and noted that the statutory criteria for that entry is the percentage of mechanical wood pulp. The CPPRI, Saharanpur report, though recording ash content and other parameters, did not alter the mechanical wood pulp finding in a manner sufficient to displace the CRCL, Pusa conclusions. The Tribunal held that ash content and other parameters emphasized in the Saharanpur report were irrelevant to entitlement under Serial No. 78, and that the release of goods and cancellation of test bonds based on CRCL, Pusa reports supported the importer's declared classification as printing paper. [Paras 5]

The adjudicating authority correctly accepted that the consignments were printing paper under CTH 4802 and entitled to benefit under Serial No. 78; the impugned order holding so is upheld.

Evidence and due procedure for sampling/testing - mis-declaration - principle of natural justice - Legality and admissibility of the CPPRI, Saharanpur test reports relied upon by the department in the show cause notice. - HELD THAT: - The Tribunal found contradictory laboratory reports on the same consignments and observed that the CRCL, Pusa reports pre-dated and formed the basis for provisional assessment finalisation and release of goods. There was no satisfactory material to show which samples, if any, were sent later to Saharanpur, nor proof that the prescribed sampling procedure and notice to the importer were followed before obtaining the Saharanpur reports. The Tribunal treated the Saharanpur reports as an afterthought obtained without affording the importer an opportunity to represent, and thus not a reliable basis to reopen assessment or to sustain a demand. [Paras 5]

CPPRI, Saharanpur reports were held to be unreliable and procedurally defective; they could not be relied upon to negate the earlier CRCL, Pusa findings or to justify re-opening the finalized assessment.

Provisional assessment/test bond - reopening of finalized assessment - extended period of limitation - remand vs final adjudication - Whether the department was justified in invoking extended limitation to reopen assessments and issue the show cause notice based on the subsequent Saharanpur report, and whether the matter should be remanded for fresh adjudication. - HELD THAT: - The Tribunal noted that provisional assessments were finalised and goods released on the basis of CRCL, Pusa reports and cancellation of test bonds; the department had earlier acted on those reports and the importer had obtained benefit (and decree for demurrage). In the absence of credible proof justifying subsequent sampling and testing or demonstrating that the earlier assessments were erroneous, invocation of the extended period and reopening of finalized assessments was unjustified. Given the lack of admissible evidence to controvert the earlier laboratory findings and procedural defects in obtaining the Saharanpur reports, remand for de novo adjudication was not warranted. [Paras 5, 6]

Reopening the finalized assessments by invoking the extended period was unjustified; the Tribunal declined to remand the matter and refused the department's request for fresh adjudication.

Final Conclusion: The Tribunal found no infirmity in the original adjudicating authority's order that the consignments were printing paper entitled to the claimed exemption, held the Saharanpur reports to be procedurally defective and unreliable, rejected the department's attempt to reopen finalized assessments by invoking extended limitation, refused remand, and dismissed the department's appeal, upholding the order under challenge.

Refund of excess duty - amendment of bill of entry - clerical correction under Section 154 - amendment under Section 149 - self-assessment and reassessment - requirement of modification of assessment for refund

Refund of excess duty - requirement of modification of assessment for refund - self-assessment and reassessment - Claim for refund of excess duty when no prior rectification under Section 154 was sought - HELD THAT: - The Tribunal applied the principle in ITC Ltd. v. CC, Kolkata that a refund under Section 27 cannot be entertained unless the order of assessment or self-assessment is modified in accordance with law by recourse to appropriate proceedings. The appellant had paid excess CVD but did not initially seek rectification under Section 154; the adjudicating authority therefore rightly rejected the standalone refund application. The Tribunal held that in absence of any request to rectify the assessment under Section 154 prior to claiming refund, the refund claim was unsustainable and properly dismissed. [Paras 7, 9]

Refund claim dismissed for want of prior rectification of assessment; appeal C/23215/2014 dismissed.

Amendment of bill of entry - amendment under Section 149 - clerical correction under Section 154 - self-assessment and reassessment - Right of importer to seek amendment of bill of entry under Section 149 (and correction under Section 154) despite system-based self-assessment - HELD THAT: - The Tribunal held that an importer who has self-assessed may seek amendment of the bill of entry under Section 149 and correction of clerical errors under Section 154; rejection by the proper officer solely on the ground that the system does not permit amendment was illegal and unsustainable. The Tribunal therefore permitted amendment of the bill of entry to claim the correct exemption Notification and remanded the matter to the adjudication authority to reassess the bill of entry and grant consequential relief in accordance with law. [Paras 8, 10, 11]

Amendment of bill of entry permitted; appeal C/23216/2014 partially allowed and matter remanded for reassessment and consequential relief.

Final Conclusion: Refund application dismissed for lack of prior rectification under Section 154; however amendment of the bill of entry under Section 149/154 is permissible despite system constraints and the matter is remanded for reassessment and consequential relief.

Power of Tribunal to modify sanctioned compromise or arrangement - Modification of scheme of amalgamation by amendment of swap/exchange ratio - Dispensing with meetings and reliance on consent affidavits of shareholders and creditors - Requirement of creditors' consent where scheme does not provide for arrangement with creditors - Deemed prior approval under Foreign Exchange Management (Cross Border Merger) Regulations, 2018 - Judicial precedent permitting post-approval amendments to schemes - Appropriate procedure for second motion and notices to statutory authorities

Modification of scheme of amalgamation by amendment of swap/exchange ratio - Judicial precedent permitting post-approval amendments to schemes - Validity of the NCLT's dismissal of the application for amendment of the Scheme on the ground that the share exchange ratio was substantially altered - HELD THAT: - The Tribunal found that the amendment in dispute involved only a minuscule change in the swap/exchange ratio of the Transferor Companies and did not constitute a material or substantial alteration of the original Scheme. The court examined authorities where significantly larger amendments (including exclusion of entities, change of appointed date and variation in swap ratios) were sanctioned and held that amendments to a scheme can be permitted at any stage where the modification does not affect the essential fairness or legal framework of the scheme. Having regard to the limited nature of the change and to the fact that relevant approvals and addendum to the valuation were obtained and placed on record, the NCLT's conclusion that the terms and conditions were substantially changed was erroneous. The impugned dismissal was therefore unsustainable.

The NCLT's finding of substantial alteration of the Scheme by the miniscule change in swap ratio is rejected and the dismissal is set aside.

Power of Tribunal to modify sanctioned compromise or arrangement - Appropriate procedure for second motion and notices to statutory authorities - Whether the NCLT had jurisdiction and should have permitted modification under Section 231 and Rule 17(1) instead of directing refiling of the first motion - HELD THAT: - The court observed that Section 231 of the Companies Act and Rule 17(1) of the Companies (Compromises, Arrangements and Amalgamations) Rules empower the Tribunal to give directions and make modifications necessary for proper implementation of a compromise or arrangement. Given those powers, and the scheme's own clause authorising amendments subject to Tribunal approval, the NCLT could and ought to have considered the proposed amendments on the merits. Rather than dismissing the application and directing a refiling of the first motion, the Tribunal should have dealt with the modification, while ensuring statutory authorities and other stakeholders are given notice and opportunity to object during the second motion and final sanction process. The court also noted that the NCLT could have required fresh consent affidavits if necessary instead of ordering re-initiation.

The NCLT erred in requiring refiling of the first motion; it should have exercised its modification powers under Section 231 and Rule 17(1) and allowed the matter to proceed with appropriate notices.

Dispensing with meetings and reliance on consent affidavits of shareholders and creditors - Requirement of creditors' consent where scheme does not provide for arrangement with creditors - Whether creditors' meetings or fresh creditor approvals were necessary in view of the proposed amendment - HELD THAT: - The Tribunal accepted that the scheme did not contemplate any arrangement with creditors and that the first motion order had dispensed with meetings by relying on consent affidavits. The limited amendment related only to shareholders' swap ratios and, therefore, did not materially affect creditors. The court relied on settled principles and precedents that where a scheme does not affect creditors, their consent need not be obtained afresh. Consequently, the amendment did not require renewed creditor approvals, though statutory authorities would be given an opportunity to object when notices are issued.

No fresh creditor approvals were required for the minuscule amendment; existing dispensation of meetings and consents stood sufficient.

Deemed prior approval under Foreign Exchange Management (Cross Border Merger) Regulations, 2018 - Whether the proposed amendment required additional RBI approval under cross-border merger regulations - HELD THAT: - The court noted that under the FEMA Notification (Foreign Exchange Management (Cross Border Merger) Regulations, 2018) transactions undertaken in accordance with those Regulations are deemed to have prior approval of the Reserve Bank of India as required under the Companies (Compromises, Arrangement and Amalgamations) Rules. The present modification did not attract any fresh inbound merger regulation requirements and therefore did not necessitate separate or additional RBI approval.

No additional RBI approval was required for the proposed minuscule modification to the scheme.

Appropriate procedure for second motion and notices to statutory authorities - Relief and procedural direction upon setting aside the impugned order - HELD THAT: - Having set aside the NCLT's dismissal, the Tribunal observed that notices should be issued to statutory authorities and that they should be afforded opportunity to file objections, if any, during the proceedings for the second motion and final approval. The court indicated that, in the interest of time and to avoid needless repetition of compliances, it would have been appropriate for the NCLT to consider deemed approvals or, alternatively, direct limited fresh consents rather than require a full refiling of the first motion.

The matter is permitted to proceed towards second motion and final sanction with issuance of requisite notices to statutory authorities and opportunity to object; the NCLT's direction to refile the first motion is set aside.

Final Conclusion: The impugned NCLT order dated 22.04.2024 is set aside; the appeal is allowed and the application for modification of the scheme is to be entertained and proceeded with by the Tribunal, issuing necessary notices to statutory authorities and permitting objections in the second motion and final sanction process.

Certified copy - free certified copy - condonation of delay - computation of limitation - Rule 50 of the NCLT Rules - Rule 22 of the NCLAT Rules - Section 61(2) of the Insolvency and Bankruptcy Code, 2016

Certified copy - free certified copy - Rule 50 of the NCLT Rules - Rule 22 of the NCLAT Rules - Whether the free copy furnished under Rule 50 of the NCLT Rules qualifies as a certified copy for the purposes of Rule 22(2) of the NCLAT Rules. - HELD THAT: - Rule 50 of the NCLT Rules prescribes that the Registry shall send a certified copy of the final order to the parties concerned free of cost and that certified copies may otherwise be made available on payment of fees. Both the free copy furnished under Rule 50 and a certified copy obtained on application and payment are treated as certified copies under Rule 50. Rule 22(2) of the NCLAT Rules mandates that every appeal be accompanied by a certified copy of the impugned order. The Court held that, in the present factual matrix, the free copy provided under Rule 50 falls within the category of a certified copy for the purpose of Rule 22(2), and thus can satisfy the requirement of filing an appeal with a certified copy. The Court distinguished the facts from V Nagarajan, where the decision emphasised that a litigant cannot simply forgo applying for a certified copy and thereby seek two dates for computation of limitation; here, however, the free certified copy had been made available to the appellant before the filing of the appeal, so it qualified as the certified copy contemplated by Rule 22(2). [Paras 13, 19, 22]

The free copy under Rule 50 is a certified copy for the purposes of Rule 22(2) and suffices as the certified copy accompanying an appeal.

Condonation of delay - computation of limitation - Section 61(2) of the Insolvency and Bankruptcy Code, 2016 - Whether the three-day delay in presenting the appeal was liable to be condoned under Section 61(2) of the IBC, having regard to availability of the free certified copy. - HELD THAT: - Section 61(2) permits filing an appeal beyond thirty days if the NCLAT is satisfied that there was sufficient cause, subject to a maximum extension of fifteen days. The free certified copy was made available on 14 November 2023 and the appeal was filed on 2 December 2023, resulting in a delay of three days beyond the statutory thirty-day period but within the fifteen-day condonable period. Given that the free certified copy qualified as the certified copy required by Rule 22(2), and that the appeal was therefore filed within the condonable window prescribed by Section 61(2), the Court found that sufficient cause existed to condone the three-day delay. The Court rejected the NCLAT's contrary conclusion which treated awaiting a free copy as inadequate to invoke condonation where, on the facts, the free copy had in fact been furnished before filing. [Paras 20, 22, 23]

The delay of three days in filing the appeal is condoned under Section 61(2) and the appeal is entitled to be restored.

Final Conclusion: The appeal is allowed; the impugned NCLAT order is set aside, the three-day delay in filing the appeal is condoned, and the appeal is restored to the file of the NCLAT.

Condonation of delay - limitation for appeal under Section 61 of the I&B Code - person aggrieved - requirement of certified copy for filing appeal - knowledge of proceedings and its effect on limitation - extension of limitation on account of COVID 19 (In Re: Cognizance for Extension of Limitation) - V. Nagarajan principle on exclusion for time to obtain certified copy - estoppel by conduct / presumption under Section 114 of the Evidence Act

Condonation of delay - limitation for appeal under Section 61 of the I&B Code - requirement of certified copy for filing appeal - person aggrieved - knowledge of proceedings and its effect on limitation - V. Nagarajan principle on certified copies - extension of limitation on account of COVID 19 (In Re: Cognizance for Extension of Limitation) - estoppel by conduct / presumption under Section 114 of the Evidence Act - Whether the application for condonation of delay should be allowed and the appeal admitted despite being filed beyond the prescribed period - HELD THAT: - The Tribunal held that the appeal filed on 28.05.2021 is time barred and the condonation application is unsustainable. The bench applied the principles in V. Nagarajan and related NCLAT precedents that a person seeking exclusion must demonstrate diligence by applying for a certified copy within the prescribed limitation period; time for obtaining the certified copy can be excluded only after such an application is made. The Appellant, though styled as a "person aggrieved", participated in CIRP/CoC communications (emails generated from the Appellant's email id) and therefore had knowledge of the proceedings; that knowledge precluded fixing limitation from a later date of actual receipt of the judgment. Because the Appellant first applied for the certified copy only on 30.04.2021 (well after the primary limitation expired on 01.03.2020), he could not avail the benefit of the COVID 19 extension issued by the Supreme Court (which excluded 15.03.2020-28.02.2022) or the proviso extension under Section 61(2), since the condition precedent of applying for the certified copy within the original prescribed period was not met. The Tribunal also accepted that the evidential record (email communications) permitted a presumption of knowledge under Section 114 of the Evidence Act, adding to the bar against condonation. In view of these determinative considerations, the invocation of the Suo Motu extension and Sagufa Ahmed / Aditya Khaitan authorities could not rescue the delayed filing.

The application for condonation of delay is dismissed and the appeal is held to be barred by limitation; the Company Appeal is dismissed.

Final Conclusion: The condonation application (IA No. 361/2021) is dismissed and the Company Appeal (AT) (CH) (INS) No. 177/2021 stands dismissed as time barred because the appellant failed to apply for the certified copy within the prescribed limitation period and had knowledge of the proceedings, precluding reliance on the COVID 19 extension or the proviso to Section 61(2).

Compliance with Section 19 PMLA - reason to believe and grounds of arrest - judicial review of reasons to believe at remand stage - exercise of inherent jurisdiction under Section 482 CrPC in post-remand arrests - necessity of arrest and custodial interrogation in money laundering investigations - effect of non cooperation on validity of arrest

Compliance with Section 19 PMLA - reason to believe and grounds of arrest - judicial review of reasons to believe at remand stage - Validity of the arrest under Section 19 PMLA in light of the requirement to record and furnish the 'reason to believe' and grounds of arrest, and whether the remand court lawfully satisfied itself before ordering judicial remand. - HELD THAT: - The Court examined whether the statutory preconditions in Section 19(1) - namely that the arresting officer must have material in his possession, record the reason to believe in writing and inform the arrested person of the grounds - were complied with. Relying on the arrest order and the grounds annexed thereto, the Court found that the arresting officer had recorded his reasons and communicated the grounds at the time of arrest. The Special Court was also supplied with similar material and the remand order indicates that the remand court perused the reasons and recorded satisfaction. The Court noted authorities emphasising that 'reasons to believe' are jurisdictional conditions (see Arvind Kejriwal) but applied those principles to the facts and concluded that there was no failure of compliance with Section 19 in this case. Consequently, the remand was not vitiated for lack of furnished reasons or for want of application of mind by the remand court. The Court further observed that an illegal arrest resulting from a fundamental breach of Section 19 would render the arrest void ab initio and preclude re arrest on the same grounds, but held that no such fundamental breach occurred on the facts before it. [Paras 14, 16, 17, 26, 28]

The arrest and the remand orders satisfied the statutory requirements of Section 19 PMLA and the remand court lawfully reviewed the reasons; the arrest is not vitiated for failure to furnish reasons to believe.

Necessity of arrest and custodial interrogation in money laundering investigations - effect of non cooperation on validity of arrest - Whether the necessity for arrest was established, and whether reliance on the petitioner's alleged non cooperation rendered the arrest impermissible. - HELD THAT: - The Court considered whether the need for custodial interrogation and recovery of proceeds of crime justified arrest. Having reviewed the grounds of arrest, the Court concluded that necessity was recorded and was not founded solely on alleged non cooperation. Given the magnitude of the alleged laundering and the material showing diversion of funds, the Court accepted that custodial interrogation was necessary to trace and recover proceeds. While recognising that non cooperation alone cannot be the sole ground for arrest if it contravenes precedent, the Court found on the facts that non cooperation formed one of several articulated reasons and did not by itself invalidate the arrest. [Paras 19, 23, 26, 27, 28]

The necessity for arrest was adequately recorded and the reliance on non cooperation did not, on the facts, render the arrest invalid.

Exercise of inherent jurisdiction under Section 482 CrPC in post-remand arrests - Whether the High Court should invoke its inherent jurisdiction under Section 482 CrPC to quash the arrest and remand orders in the present proceedings. - HELD THAT: - The Court addressed the petitioner's invocation of Section 482 CrPC to quash the arrest and remand orders. Noting the distinction between remedies under statutory bail provisions and extraordinary jurisdiction, the Court nevertheless proceeded to examine the statutory compliance. Because it found that Section 19 requirements were met and the remand court had applied its mind, there existed no constitutional infirmity or fundamental illegality warranting exercise of inherent jurisdiction. The Court also observed that the petitioner was not required to satisfy the twin conditions for bail under Section 45 PMLA in these proceedings, but that absence of such an application did not oblige the Court to grant relief under Section 482 when no illegality was shown. [Paras 7, 15, 21, 26, 29]

Extraordinary relief under Section 482 CrPC is not warranted; the petition to quash the arrest and remand orders is dismissed.

Final Conclusion: The petition under Section 482 CrPC challenging the arrest and remand was dismissed: the Court found the arresting officer had recorded and furnished reasons and grounds under Section 19 PMLA, the remand court lawfully considered those reasons, necessity for custodial interrogation was established on the facts and non cooperation did not alone vitiate the arrest.

Summary order. I.A. No.102591/2022 allowed; Civil Appeal dismissed as withdrawn on the appellant's statement.

Valuation of taxable services - reimbursable expenses - consideration for service - Rule 5 of Service Tax (Determination of Value) Rules, 2005 ultra vires - rules subordinate to statute cannot exceed statutory mandate - adjudication cannot travel beyond show cause notice - prospectivity of statutory amendment

Valuation of taxable services - reimbursable expenses - consideration for service - Rule 5 of Service Tax (Determination of Value) Rules, 2005 ultra vires - Reimbursed out of pocket expenses are not includable in the taxable value unless they constitute consideration for the service rendered - HELD THAT: - Applying and following the decision of the Hon'ble Supreme Court in Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd., the Tribunal held that service tax is leviable only on the value of the services actually rendered - i.e., the gross amount charged 'for such' taxable service - and amounts not calculated as consideration for that service cannot be included in valuation. Rule 5, insofar as it attempted to include reimbursable expenses within gross value, went beyond the mandate of Section 67 and cannot be applied to the period prior to the legislative amendment which expressly included reimbursable expenditure. The adjudicating authority's conclusion that reimbursed expenses were includable merely because separate accounts or documents were not produced was held to be erroneous: the department asserting includibility must prove that the payments were consideration and not genuine reimbursements. In view of the Supreme Court's exposition that the legislative amendment of Section 67 (Finance Act, 2015) is prospective, reimbursable expenses during the period in dispute cannot be treated as part of taxable value unless shown to be consideration. [Paras 9, 11, 12]

Reimbursable expenses held not includable in taxable value for the period in dispute absent evidence that they were consideration for the service.

Adjudication cannot travel beyond show cause notice - scope of adjudication - Adjudication travelled beyond the scope of the show cause notice and such excess cannot be sustained - HELD THAT: - Relying on the principle in CCE, Nagpur v. Ballarpur Industries Ltd., the Tribunal found that the impugned order advanced findings and conclusions beyond the case put to the assessees in the show cause notice. Where an adjudication departs from the grounds specified in the show cause notice, those parts of the order are impermissible. The Tribunal therefore disallowed findings that exceeded the scope of the notice and set aside the impugned conclusions to that extent. [Paras 14]

Findings of the adjudicating authority that travelled beyond the show cause notice are not sustainable.

Classification of services - The contention that services rendered fall under Business Support Services rather than Management Consultancy Services was not entertained as it was not the subject matter of the impugned proceedings - HELD THAT: - The Tribunal observed that the plea regarding classification into Business Support Services was not raised before or decided in the impugned order and therefore has no relevance to the present appeal. The point was not considered material to the adjudication under challenge and was not adjudicated by the lower authority. [Paras 13]

Classification plea is irrelevant to the present adjudication and not decided on merits.

Final Conclusion: The appeal is allowed: in the period under dispute reimbursed out of pocket expenses cannot be included in the taxable value unless shown to be consideration for the service; findings beyond the scope of the show cause notice are set aside; consequential relief, if any, to be given as per law.

Definition of "service" and exclusion of transfer of title in goods - trade discount / incentive as price reduction and not consideration for service - principal-to-principal commercial relationship - trading activity not being an exempted service prior to 01.04.2011 and limited application of Rule 6(3) of Cenvat Credit Rules

Definition of "service" and exclusion of transfer of title in goods - trade discount / incentive as price reduction and not consideration for service - principal-to-principal commercial relationship - Whether trade discounts/incentives paid by the manufacturer to the dealer are exigible to service tax as consideration for any service - HELD THAT: - The Tribunal held that the amounts received by the appellant from the manufacturer were trade discounts/price reductions in the course of purchase and sale and not consideration for any service. The dealership relationship was on a principal-to-principal basis and the goods became the appellant's property on purchase; no service-provider/service-recipient relationship was established in respect of the discounts. Applying the definition of "service" and its specific exclusion for transfer of title in goods, the Tribunal concluded that incentives given by the seller to its buyer in connection with the sale are part of the sale transaction and therefore outside the charge to service tax. [Paras 4]

Trade discounts/incentives received from the manufacturer are not liable to service tax; the appeal is allowed on this ground.

Trading activity not being an exempted service prior to 01.04.2011 and limited application of Rule 6(3) of Cenvat Credit Rules - Whether Rule 6(3) of the Cenvat Credit Rules could be invoked in respect of trading activity for periods prior to 01.04.2011 - HELD THAT: - The Tribunal reiterated that the amendment/notification which expressly treated "trading" as an exempted service took effect from 01.04.2011. Consequently, the fiction of "exempted service" for trading (and the concomitant obligations under Rule 6(3) regarding common input services) could not be applied to periods before 01.04.2011. Past precedents of the Tribunal were cited to support the proposition that Rule 6(3) cannot be made applicable retrospectively and demands under Rule 6(3) in respect of trading for periods up to 31.03.2011 are unsustainable. [Paras 5]

Demand under Rule 6(3) in respect of trading activity for periods prior to 01.04.2011 is not sustainable.

Final Conclusion: The Tribunal set aside the impugned orders and allowed the appeal: trade discounts/incentives given by the manufacturer to the dealer are not exigible to service tax, and demands premised on Rule 6(3) in respect of trading for periods before 01.04.2011 are unsustainable.

Residential Complex Service - Bundled Service under Section 66F - abatement under Notification No.26/2012-ST dated 20.06.2012 - negative list - extended period of limitation - invocation of extended period and consequential interest and penalty

Residential Complex Service - Bundled Service under Section 66F - abatement under Notification No.26/2012-ST dated 20.06.2012 - Whether charges such as External Development Charges, Internal Development Charges, Preferential Location Charges and Electric Substation Charges form part of the consideration for Residential Complex Service and are eligible for abatement under Notification No.26/2012-ST. - HELD THAT: - The Tribunal applied the principle of bundled service as embodied in Section 66F and held that components like EDC, IDC, PLC and ESSC do not have independent existence apart from the main contract for provision of Residential Complex Service. Following the Tribunal's earlier decision in Logix Infrastructure Pvt. Ltd. and the Appellant's own favourable final order, these components are part and parcel of the single predominant service and cannot be vivisected. Consequently the entire consideration received from buyers qualifies for the abatement provided by Notification No.26/2012-ST dated 20.06.2012. The Tribunal rejected reliance on pre-Section 66F clarifications (C.B.E. & C. letter dated 26.02.2010) to the extent they conflict with the bundling principle introduced by Section 66F. [Paras 6, 7, 8, 9]

Components such as EDC, IDC, PLC and ESSC are elements of Residential Complex Service and the entire consideration is eligible for abatement under Notification No.26/2012-ST.

Extended period of limitation - invocation of extended period and consequential interest and penalty - Whether the demand raised by invoking the extended period of limitation and the consequential interest and penalties can be sustained. - HELD THAT: - The Tribunal noted that in the Appellant's own prior adjudication for the stated period the demand could not be upheld and, where the issue was under judicial consideration in other fora, invocation of the extended period under Section 73(4) could not be sustained. Relying on the earlier Final Order No.70266/2023 and authorities cited therein, the Tribunal held it was not in a position to uphold the extended period demand and therefore could not sustain interest and penalties imposed on that basis. [Paras 8, 9]

Invocation of the extended period for making the demand is not sustained; consequential interest and penalties cannot be upheld.

Final Conclusion: The impugned Order-in-Original is set aside; the appeal is allowed and the Appellant is granted consequential relief consistent with the findings that the contested charges form part of Residential Complex Service and that the extended-period demand (and attendant interest and penalties) cannot be sustained.

Cenvat credit on capital goods - timing of availment - Interest on wrongly availed Cenvat credit - Penalty for wrongful availment of Cenvat credit - Remission of penalty where no mala fide - Verification of utilisation of credit by statutory auditor

Cenvat credit on capital goods - timing of availment - Remission of penalty where no mala fide - Whether recovery of the alleged inadmissible 50% Cenvat credit and the penalties imposed therefor could be sustained - HELD THAT: - The Tribunal held that mere early availment of 100% Cenvat credit on capital goods, instead of 50% in the first year and 50% in the next financial year, does not render the balance 50% permanently inadmissible where the credit was in substance available to the assessee in the subsequent year. In view of binding and cogent precedents cited, denial of credit and imposition of penalties for timing of availment were not warranted where no mala fide is attributable and the credit ultimately stood available; therefore the impugned confirmation of recovery of Cenvat credit and the penalties imposed for the specific violations lack merit and are not sustainable. [Paras 4]

Demand of Cenvat credit and penalties confirmed in the impugned order set aside.

Interest on wrongly availed Cenvat credit - Verification of utilisation of credit by statutory auditor - Whether interest is payable on the excess credit availed and the extent/period for which interest is leviable - HELD THAT: - The Tribunal recorded that interest may be payable for the period during which the excess credit was actually utilized and held that interest cannot be mechanically disallowed where the credit has been utilized. The Authority directed that the appellant must produce a certificate from the statutory auditor stating whether the excess credit taken in the first year was utilized prior to reversal or remained unutilized till the first day of the next financial year; interest, if any, is to be calculated and paid accordingly. Thus the question of interest is remitted for factual verification and computation based on the auditor's certificate. [Paras 4]

Interest liability remitted for verification and computation; auditor's certificate to determine if interest is payable and, if so, amount to be paid.

Penalty for wrongful availment of Cenvat credit - Remission of penalty where no mala fide - Whether penalties under Rule 15/Section 78 and Sections 77(1)(b) and 77(1)(c) could be sustained - HELD THAT: - Relying on the jurisprudence collected and the factual position that the excess credit was ultimately available and there was no proven mala fide, the Tribunal concluded that penal action for timing of availment was not called for. The adjudicating authority's view that failure to maintain/produce records warranted penalty was examined in context and, on the facts and precedents, penalties imposed for the specific violations were set aside. [Paras 4]

Penalties imposed in the impugned order are set aside.

Final Conclusion: Appeal allowed in part: the demand of Cenvat credit and penalties confirmed in the impugned order are set aside; the question of interest is remitted for verification by production of a statutory auditor's certificate and for computation/payment of interest if the excess credit was utilized.

Writ challenge to show cause notice - Interference at stage of issuance of show cause notice - Jurisdictional defect and vires of the authority - Violation of principles of natural justice - Scope of reliance on pre-enquiry statements and right to cross-examination - Obligation to raise defences in adjudication and availability of alternate remedies - Exclusion of time for limitation during pendency of writ

Writ challenge to show cause notice - Interference at stage of issuance of show cause notice - Jurisdictional defect and vires of the authority - Violation of principles of natural justice - Whether the writ petition could be entertained to quash the impugned show cause notice at the threshold - HELD THAT: - The Court applied settled precedents that writ relief against a mere show cause notice is ordinarily inappropriate unless the notice is ex facie without jurisdiction, offends the principles of natural justice, or seeks enforcement of fundamental rights. Absent a demonstrable total want of jurisdiction or breach of natural justice, the recipient should be directed to reply to the show cause notice and raise all available contentions during adjudication; challenges to the legal sufficiency of the notice can be considered by the adjudicating authority or in appeal/after final order. On the material before it, the Court found no such jurisdictional vice or denial of natural justice justifying pre-adjudication interference and therefore declined to quash the notice at this interim stage. [Paras 13, 14, 17, 20, 21]

Writ petition dismissed; no interference with the impugned show cause notice and all defences left open to be raised during adjudication

Scope of reliance on pre-enquiry statements and right to cross-examination - Obligation to raise defences in adjudication and availability of alternate remedies - Whether statements recorded prior to issuance of the show cause notice could be relied upon and whether the petitioner was entitled to pre-reply cross-examination of declarants - HELD THAT: - The Court distinguished the coordinate-bench decision relied upon by the petitioner, noting that that decision held only that statements recorded before issuance of a notice are not statements made in the course of adjudication and that a noticee has no right to insist on cross-examination of those witnesses prior to filing a reply. The present challenge did not establish that reliance on such statements rendered the notice ex facie invalid. The Court held it was open to the petitioner to dispute reliance on those statements and other evidentiary contentions, including the burden of proof, during the adjudication; if witnesses are summoned and their statements recorded in adjudication, opportunity for cross-examination must be afforded in accordance with law. [Paras 15, 16, 17, 20]

Objections regarding reliance on pre-enquiry statements and cross-examination may be raised in adjudication; no pre-adjudication entitlement to set aside the notice on that basis

Exclusion of time for limitation during pendency of writ - Whether the petitioner should be granted time to reply and whether that period should be excluded for limitation for disposal of the show cause notice - HELD THAT: - The Court granted the petitioner eight weeks to file the reply to the show cause notice and expressly directed that the period from institution of the writ petition to filing of the reply (i.e., the eight-week period allowed) shall not be counted for limitation for disposal of the show cause notice. This direction was given to preserve the petitioner's opportunity to respond without prejudice to limitation. [Paras 19]

Eight weeks granted to file reply; that period excluded from limitation for disposal of the show cause notice

Final Conclusion: Writ petition dismissed without costs; impugned show cause notice not quashed at threshold, petitioner granted eight weeks to reply and all contesting defences preserved for adjudication; the eight-week period is excluded for limitation purposes.

Cenvat credit - condition of non availment of credit for exemption under Notification No.01/2011 CE - utilisation of Cenvat credit for payment of duty - reversal of Cenvat credit and payment of interest as curative measure - interpretation of the notification condition in relation to inputs and input services

Condition of non availment of credit for exemption under Notification No.01/2011 CE - Cenvat credit - utilisation of Cenvat credit for payment of duty - Whether the appellant contravened the condition of Notification No.01/2011 CE by utilizing Cenvat credit while clearing goods at concessional rate of duty - HELD THAT: - The Tribunal found as an undisputed factual position that the appellant had not taken Cenvat credit in respect of inputs or input services used in the manufacture of goods cleared at the concessional rate under Notification No.01/2011 CE. The condition in the notification prohibits taking credit in respect of inputs or input services used in manufacture of the exempted/concessional goods; it does not, by its terms, prohibit utilization of Cenvat credit lawfully and correctly availed in respect of inputs/services used in manufacture of other (taxable) goods. On the facts, the credits availed related to inputs/input services used for goods cleared at the 6% rate and therefore did not fall within the embargo contained in the notification. Consequently, mere utilisation of such legitimately availed credit for payment of duty on goods cleared under the notification did not amount to contravention of the statutory condition. [Paras 4]

No contravention of the notification condition was established; the appellant did not violate Notification No.01/2011 CE by utilizing credit availed on inputs/input services used for goods cleared at 6%.

Reversal of Cenvat credit and payment of interest as curative measure - Cenvat credit - precedent on reversal treating situation as if no credit was availed - Whether reversal of the amount of Cenvat credit utilized and payment of interest cures any alleged breach and bars demand, interest and penalty - HELD THAT: - The Tribunal held that the appellant had reversed the amount of Cenvat credit that was utilized for payment of duty on the concessional clearances and had paid interest thereon. Applying the settled principle in Chandrapur Magnet Wires (supra) and subsequent consistent authority, the reversal together with payment of interest renders the situation as if no Cenvat credit had been availed in respect of those clearances. The Tribunal rejected the Revenue's reliance on Amrit Paper to the extent it conflicts with the Chandrapur principle, noting that Amrit Paper did not consider the Chandrapur decision and that High Courts and Tribunals have followed Chandrapur. On this basis the demand, interest and penalty founded on the alleged wrongful availment/utilisation were not sustainable. [Paras 4, 5]

Reversal of the utilized credit and payment of interest cured the alleged breach and the departmental demand, interest and penalty were unsustainable.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned adjudication confirming the demand, interest and penalty, and granted consequential relief to the appellant.

Imposition of penalty under Section 11AC - applicability of Section 11A(2) - suppression or intent to evade payment of duty - amortization of value of capital goods supplied free of cost - appropriation of duty and interest

Imposition of penalty under Section 11AC - applicability of Section 11A(2) - suppression or intent to evade payment of duty - Imposition of mandatory penalty under Section 11AC sustained by lower authorities or not - HELD THAT: - The Tribunal concluded that the provisions of Section 11A(2) applied because the assessee paid the differential duty promptly (within three days of the officers' visit) and also paid applicable interest shortly thereafter, and informed the Central Excise Officer. Under Section 11A(2) a person who has paid the duty and informed the officer precludes service of any notice in respect of that duty or any penalty leviable thereunder. The Tribunal further found no justification to attribute suppression or a deliberate intention to evade payment of duty; the lower authority itself recorded that the omission arose from ignorance of law. Reliance on precedent establishing that invocation of extended or punitive provisions requires specific factual findings of fraud, collusion, wilful mis-statement or suppression was accepted. On these grounds the Tribunal held that invoking Section 11AC for mandatory penalty was not justified and the appellate order sustaining the penalty could not be maintained. [Paras 6, 7, 8, 9, 10]

Penalty under Section 11AC set aside; invocation of Section 11AC not justified in view of payment under Section 11A(2) and absence of suppression or intent to evade duty.

Appropriation of duty and interest - amortization of value of capital goods supplied free of cost - Validity of appropriation of the differential duty and interest demanded for non-inclusion of amortized value - HELD THAT: - The Tribunal recorded that the assessee accepted the need to include the amortized cost of capital goods supplied free of cost in the value of finished products under the Valuation Rules. The differential duty and interest had been paid by the assessee prior to issuance of the show cause notice. On this basis the Tribunal declined to interfere with the appropriation of the demand of duty and interest by the revenue. [Paras 1, 7, 11]

Appropriation of the demand of differential duty and interest upheld; demand and interest not disturbed.

Final Conclusion: The appeal is allowed to the extent of setting aside the penalty under Section 11AC while leaving intact the appropriation of the differential duty and interest; consequential relief, if any, to follow as per law.

Reverse charge mechanism - Section 66A - charge of service tax on services received from outside India - establishment / fixed establishment in India - revenue neutrality and Cenvat credit - extended period of limitation and mala fide

Reverse charge mechanism - Section 66A - charge of service tax on services received from outside India - establishment / fixed establishment in India - Appellant not liable to pay service tax under reverse charge for intellectual property service where the foreign provider has an establishment in India. - HELD THAT: - The Tribunal examined the scope of Section 66A which treats as taxable those services provided from a country other than India and received in India unless the provider has an establishment in India from which the service is provided. The undisputed facts show that the service provider, though incorporated abroad, maintains an office at Bangalore and the agreement was executed by the provider's Chief Financial Officer at that Bangalore office. Applying the statutory proviso and the explanations in Section 66A, the Tribunal held that the service was not a service received from outside India for the purpose of attracting reverse charge, and therefore the recipient-appellant is not liable to discharge service tax under the reverse charge mechanism on the IPR service. [Paras 4]

Demand under reverse charge set aside; appellant not liable to pay service tax on the IPR service.

Revenue neutrality and Cenvat credit - extended period of limitation and mala fide - Demand (including for the extended period) unsustainable on limitation and merits given revenue neutrality and absence of mala fide. - HELD THAT: - The Tribunal found that even if service tax had been exigible, the appellant would be eligible to take Cenvat credit, rendering the transaction revenue neutral. In the absence of evidence of suppression or mala fide on the part of the appellant, the invocation of the extended period was not justified. The Tribunal relied on the principle that revenue neutrality negates a finding of mala fide and accordingly concluded that the demand could not be sustained for the extended period. [Paras 4, 5]

Demand struck down on limitation and merits; extended period invocation rejected.

Final Conclusion: Impugned order set aside; appeal allowed as the service provider's establishment in India excludes the applicability of reverse charge under Section 66A and, alternatively, the demand fails on revenue neutrality and for want of mala fide to sustain the extended period.

CENVAT credit and refund on accepted duty payment - Extended period of limitation under Section 11A - invokability - Admissibility of statements recorded during investigation and procedure under Section 9D - Right to cross-examination in adjudication when statements are relied upon - Liability of partners/directors under rule 26 for penalty where adjudication is vitiated

CENVAT credit and refund on accepted duty payment - Extended period of limitation under Section 11A - invokability - CENVAT credit/refund could not be denied where duty paid on clearance had been accepted and refunds granted by the jurisdictional authority; consequently the demand and recovery invoking the extended period was not sustainable. - HELD THAT: - The Tribunal accepted the appellant's contention that duty paid at the time of clearance had been accepted by the department and that refunds/self-credit granted by the jurisdictional Assistant Commissioner had not been set aside. Applying the principle that once an assessment or acceptance of duty is allowed to become final the payment must be treated as valid, the Tribunal relied upon the reasoning in earlier High Court decisions to hold that CENVAT credit could not be retrospectively denied by invoking Section 11A. The Tribunal observed that the Revenue could not resort to collateral proceedings under Section 11A to disturb an order granting refund or acceptance of duty where a statutory remedy (such as revisional or appellate remedy) existed and had not been invoked; accordingly the extended period of limitation could not be validly invoked in the facts of this case and the denial of credit and recovery based on that premise was unsustainable. [Paras 17, 18, 19, 20, 21]

Demand, denial of CENVAT credit and invocation of the extended period were set aside; CENVAT credit/refund could not be denied.

Admissibility of statements recorded during investigation and procedure under Section 9D - Right to cross-examination in adjudication when statements are relied upon - Statements recorded during investigation before gazetted officers could not be relied upon in adjudication unless admitted in evidence in accordance with Section 9D(1); denial of cross-examination where such statements were relied upon vitiated the adjudication. - HELD THAT: - The Tribunal examined the procedure prescribed by Section 9D and the relevant High Court authorities and held that the adjudicating authority cannot straightaway rely upon statements recorded during investigation unless they are admitted in evidence by summoning and examining the person who made the statement (or otherwise falling within clause (a) of Section 9D(1)). The Commissioner had relied upon such statements and refused cross-examination on the ground that departmental verification and test reports sufficed; the Tribunal found those conclusions contrary to the statutory procedure. Reliance on statements without following Section 9D renders the material irrelevant for proving the truth of the contents and vitiates the order. For these reasons the findings based on those statements could not be sustained. [Paras 24, 25, 26, 27, 28]

Adjudication based on statements recorded in investigation without admitting them under Section 9D and without offering cross-examination was invalid; such reliance vitiated the order.

Liability of partners/directors under rule 26 for penalty where adjudication is vitiated - Penalties imposed on the partners/directors under rule 26 could not be sustained where the adjudication itself was vitiated by reliance on inadmissible material and failure to follow Section 9D. - HELD THAT: - Because the Commissioner's order was set aside for improper reliance on statements recorded during investigation and for denial of statutory procedural safeguards, the ancillary imposition of penalty on the partners and managing director under rule 26 could not stand. The Tribunal held that penalties grounded on a vitiated adjudication must also be set aside. [Paras 28, 29, 30]

Penalties on the partners/director set aside as unsustainable.

Final Conclusion: Impugned order dated 17.05.2010 set aside insofar as it denied CENVAT credit/refund, invoked the extended period of limitation, and imposed interest and penalties; appeals allowed with consequential reliefs to the appellants.

Excisability of by-products and waste arising in manufacture - treatment of non-excisable goods as exempted goods for reversal of cenvat credit - application of Rule 6 of the Cenvat Credit Rules, 2004 - effect of rescission of departmental circular on adjudications - invocation of extended period of limitation - requirement of positive suppression or fraud

Excisability of by-products and waste arising in manufacture - treatment of non-excisable goods as exempted goods for reversal of cenvat credit - application of Rule 6 of the Cenvat Credit Rules, 2004 - effect of rescission of departmental circular on adjudications - Validity of demand and requirement to reverse cenvat credit/levy duty on Zinc Ash/Zinc Skimmings sold or captively consumed - HELD THAT: - The Tribunal applied the subsequent law laid down by the Supreme Court in Union of India v. Indian Sucrose Limited and the Board's rescission of Circular No.1027/15/2016-CX by Circular No.1084/05/2022-CX dated 07.07.2022. On that basis the departmental position that Zinc Ash/Skimmings are non-excisable and must be treated as exempted goods for the purpose of Rule 6 was held to be unsustainable. The Tribunal followed its earlier decision in Mahesh Chemicals Allied Industries, noted that the rescission rendered the circular non-est and that adjudications based solely on the now-rescinded circular could not be sustained. Consequentially, the impugned demands founded on classification of Zinc Ash as dutiable/excisable and on reversal under Rule 6 were set aside and the appeals allowed. [Paras 6, 7]

Demand and confirmation of liability for duty/reversal under Rule 6 in respect of Zinc Ash/Zinc Skimmings set aside; appeals allowed.

Invocation of extended period of limitation - requirement of positive suppression or fraud - application of limitation law to demands based on records and audits - Sustainability of invoking extended (five years) period of limitation for adjudication of demands for the relevant period - HELD THAT: - The Tribunal examined whether the extended period could be invoked and applied settled Supreme Court principles requiring a positive act of suppression, fraud, collusion or willful mis-statement to justify extended limitation. The appellant's records were found to have been available, internal audits were conducted and there was no evidence of deliberate suppression or positive concealment. The period in issue (March 2015 to June 2017) therefore could not be subjected to extended limitation and the show cause notice dated 20.05.2019 was time-barred insofar as extended limitation was invoked. [Paras 10, 11]

Extended period of limitation not invocable; proceedings for the period held time-barred in the absence of positive suppression.

Final Conclusion: Following the Tribunal's earlier decision in Mahesh Chemicals Allied Industries and having regard to the Supreme Court judgment and the Board's rescission of the departmental circular, the impugned orders confirming demand and penalties in respect of Zinc Ash/Zinc Skimmings are set aside and all four appeals are allowed with consequential relief; invocation of extended limitation was found unwarranted.

Clandestine manufacture and removal - burden of proof on revenue - requirement of cogent corroborative evidence - reliance on statements recorded u/s.108 of the Customs Act - voluntariness and retraction of statements - inadmissibility of Settlement Commission findings in adjudication proceedings - invocation of extended period / time-bar

Clandestine manufacture and removal - burden of proof on revenue - requirement of cogent corroborative evidence - Whether the Department established that the appellant carried out manufacturing/assembling of TV sets at its Bhiwandi godown and clandestinely removed excisable goods. - HELD THAT: - The Tribunal held that the revenue failed to produce clinching, reliable and independent corroborative evidence to prove clandestine manufacture or clandestine removal. The material relied upon by the Department - presence of tables, electrical points, some assembled sets/parts, bar-coded parts and certain invoices - were insufficient to lead to the inevitable conclusion of manufacture and clandestine clearance. Statements relied upon by the Department (considered below) could not furnish the necessary corroboration. The availability of bar codes was capable of explanation consistent with legitimate trading and quality-control activities. Ledger accounts, sale invoices and Form 'C' submitted by the appellant indicated identifiable buyers and banking transactions, undermining the Department's inference of cash dealings and secret removals. Absent positive evidence of excess raw material, unaccounted finished goods actually removed, identified buyers of illicitly cleared goods, transportation proofs, abnormal electricity consumption or other cogent links, the allegation of clandestine manufacture/clearance could not be sustained; mere suspicion, inferences or weak indicia are inadequate to establish clandestine manufacture and removal beyond reasonable doubt. [Paras 11, 18, 19, 20, 28]

Allegation of manufacture/assembling and clandestine removal at Bhiwandi not established; demand on merits set aside.

Reliance on statements recorded u/s.108 of the Customs Act - voluntariness and retraction of statements - Whether statements recorded by DRI u/s.108 could be relied upon as voluntary and corroborative evidence of manufacturing/assembling. - HELD THAT: - The Tribunal found the statements recorded by DRI to be unreliable. Witnesses (loaders) had their statements recorded in English which they did not understand and during cross-examination before the adjudicating authority retracted or disavowed the contents, stating nothing was explained to them in Hindi. The adjudicating authority's characterisation of those retractions as 'afterthoughts' was rejected; retraction and circumstances of recording created real doubt as to voluntariness. In absence of corroborative evidence, such retracted or doubtful statements cannot be the sole basis for adverse findings. The Tribunal emphasised caution in admitting statements recorded during investigation and the requirement for recording evidence before the adjudicating authority to test voluntariness and truth. [Paras 12, 13, 14, 15]

Statements recorded u/s.108 were not reliable or voluntary and could not be relied upon to establish the allegations.

Inadmissibility of Settlement Commission findings in adjudication proceedings - Whether the adjudicating authority was justified in relying upon the Settlement Commission's order for establishing manufacture, clearance and fraud in the adjudication proceedings. - HELD THAT: - The Tribunal held that proceedings before the Settlement Commission are distinct and operate under a different statutory scheme where full and true disclosure and settlement are the focus; they do not amount to judicial adjudication of allegations in show cause proceedings. Chapter XIV-A (settlement) is an exception to normal adjudication and acceptance by the Settlement Commission does not prove the allegations in separate adjudication proceedings. Consequently, the adjudicating authority was not justified in basing its findings on the Settlement Commission's observations and conclusions. [Paras 21, 22, 23]

Adjudicating authority was not justified in relying on the Settlement Commission's order for establishing manufacture and fraudulent clearance.

Invocation of extended period / time-bar - Whether the show cause notice issued on 28.9.2020 after invoking the extended period was sustainable in view of facts being within the Department's knowledge in 2016. - HELD THAT: - The Tribunal found that the material facts upon which the SCN was based were within the knowledge of the Department in 2016 when DRI commenced investigations and issued a show cause notice earlier; therefore the invocation of the extended period in 2020 was impermissible. Reliance was placed on settled principles that where facts are already known to the Department, subsequent invocation of extended limitation on the ground of suppression is not sustainable. The Tribunal noted precedents to the effect that approaching the Settlement Commission or the existence of earlier proceedings places the facts within the Department's knowledge, precluding reliance on suppression to extend limitation. [Paras 25, 26, 27]

Show cause notice invoking extended period is time barred and not sustainable.

Final Conclusion: The Tribunal allowed the appeal, set aside the adjudication order and demand of central excise duty, interest and penalties: the Department failed to prove clandestine manufacture/clearance by cogent corroborative evidence; statements relied upon were unreliable; reliance on the Settlement Commission's order in adjudication was unjustified; and the SCN issued after invoking extended period was time barred.

Penalty under Rule 26(2) of the Central Excise Rules, 2002 - CENVAT credit wrongful availment / fraudulent invoices - effect of connected/precedent decision in related proceedings - absence of statutory provision during the relevant period - non-sustainability of penalty where demand against the principal recipient is set aside

Effect of connected/precedent decision in related proceedings - non-sustainability of penalty where demand against the principal recipient is set aside - Whether the penalty confirmed against the appellant is sustainable where the demand against the principal recipient has been set aside by this Tribunal - HELD THAT: - The Tribunal held that the central controversy in the connected proceedings (Neeru Enterprises) has attained finality in favour of the principal recipient, which recorded that the principal was receiving Menthol, Menthol Flakes and De-Mentholized Oil from its suppliers and had rightly availed CENVAT credit. Given that the demand against the principal has been set aside, the statutory basis for imposing penalty on the appellant for having colluded to pass on fraudulent credit no longer subsists. The Tribunal therefore concluded that the penalty confirmed against the appellant could not be sustained once the main demand against the principal was demolished and the impugned goods were held to have been actually received and supplied by the appellant and other J&K manufacturers. [Paras 5, 6, 9]

Penalty confirmed against the appellant set aside because the demand against the principal recipient was itself quashed and the principal was held to have legitimately received the goods and availed CENVAT credit

Penalty under Rule 26(2) of the Central Excise Rules, 2002 - absence of statutory provision during the relevant period - Whether penalty under Rule 26(2) could be validly imposed when the Rule did not exist during the relevant period - HELD THAT: - The Tribunal observed that Rule 26(2), under which the penalty was imposed, was not in existence during the relevant period and only came into force w.e.f. 11.05.2007. Since the statutory provision relied upon for levying penalty was not operative for the period in question, the imposition of penalty under that provision was legally unsustainable. This statutory non-existence, independently of the outcome in the connected proceedings, precluded confirmation of the penalty. [Paras 9, 10]

Penalty under Rule 26(2) could not be sustained because the Rule was not in existence during the relevant period

Final Conclusion: The appeal is allowed: the impugned order confirming penalty is set aside because the demand against the principal appellant was quashed in related proceedings (thereby removing the basis for penalty) and because Rule 26(2) relied upon for imposing the penalty was not in existence during the relevant period.

Apportionment of Cenvat credit between exempted services and dutiable goods - Scope of "total Cenvat credit" in Rule 6(3A)(b)(ii) - Exclusion of credit attributable to input services exclusively used in manufacture of dutiable goods from reversal computation - Retrospective clarification by TRU Circular on Rule 6(3A) - Penalty under Section 76 of the Finance Act for short reversal of Cenvat credit

Apportionment of Cenvat credit between exempted services and dutiable goods - Scope of "total Cenvat credit" in Rule 6(3A)(b)(ii) - Exclusion of credit attributable to input services exclusively used in manufacture of dutiable goods from reversal computation - Retrospective clarification by TRU Circular on Rule 6(3A) - CENVAT Credit exclusively used in manufacture of dutiable goods is not to be included in the "total Cenvat credit" for apportionment under Rule 6(3A); only credit on common input services is to be considered for reversal. - HELD THAT: - The Tribunal held that the determinative construction of Rule 6(3A)(b)(ii) confines the "total Cenvat credit" in the apportionment formula to credit relating to common input services used both for exempted services and dutiable goods, and does not permit inclusion of credit on input services exclusively used in manufacture of dutiable goods. The decision rests on a conjoint reading of Rule 6(1), (2) and (3) showing that credit on inputs/services exclusively used for dutiable outputs remains allowable and need not be reversed. The Tribunal further relied on the amendment to Rule 6(3A) effected by Notification dated 01.03.2016 and the retrospective clarification issued by the Tax Research Unit (TRU) that the substitution was intended to consider only common input services for computing reversal, thereby aligning the rule with the established objective that reversal should deny only that portion of total credit attributable to exempted activity. Precedents applying the same principle in identical factual contexts were noted and applied to the appellant's case. The appellant had maintained separate records for exclusive-use services and had not availed credit on services exclusively for trading; the common-credit methodology adopted by the appellant therefore complied with Rule 6(3A). [Paras 11, 14, 15, 16, 18]

Modality adopted by the appellant for proportionate reversal-taking only common input services in the numerator for apportionment-is in accordance with Rule 6(3A); the demand based on including exclusively-used dutiable-credit is unsustainable.

Penalty under Section 76 of the Finance Act for short reversal of Cenvat credit - Penalty and interest not recoverable when demand unsustainable - Penalty and interest cannot be sustained where the underlying demand for short reversal of Cenvat credit is held to be incorrect. - HELD THAT: - Having held that the demand for short reversal was without merit, the Tribunal concluded that consequential punitive measures under Section 76 and interest recovery could not be maintained. The imposition of penalty and interest is dependent on the existence of a valid demand; once the demand is set aside, penalty and interest follow and are also set aside. [Paras 21]

Penalty and interest are not imposable or recoverable as the primary demand itself is unsustainable.

Final Conclusion: The impugned order upholding the demand, interest and penalty is set aside; the appeal is allowed and the reversal/demand, with consequential penalty and interest, is quashed with consequential relief as per law.

Includability of service charges in assessable value - transaction value under section 4 of Central Excise Act, 1944 - Central Excise Valuation Rule 5 - exclusion of costs attributable to services and transportation - service tax paid excludes levy of excise on the same activity

Includability of service charges in assessable value - transaction value under section 4 of Central Excise Act, 1944 - Central Excise Valuation Rule 5 - exclusion of costs attributable to services and transportation - service tax paid excludes levy of excise on the same activity - Type test charges collected from customers for tests carried out before removal are not includable in the assessable value of transformers for levy of central excise duty. - HELD THAT: - The Tribunal found that duty is leviable on the manufacture of goods and that manufacture of the transformers is complete irrespective of whether an optional type test is carried out for certain customers before clearance. The contractual provision for carrying out tests for specific customers and the fact that such tests are performed before removal do not convert the service charge into part of the transaction value of the goods. Rule 5 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 excludes from assessable value the cost of transportation from the place of removal and other costs attributable to services. Further, where the activity has been subjected to levy under the Finance Act, 1994 and service tax has been discharged, excise cannot be levied again on the same activity. Reliance on prior decisions treating taxed services as precluding inclusion in excise value supports this conclusion. Applying these principles, the Tribunal set aside the impugned orders which had included the type test charges in assessable value and upheld recovery and penalty imposed below as unsustainable. [Paras 4, 5, 6, 9, 10]

Impugned orders including type test charges in assessable value set aside; such charges are not includable for central excise levy.

Final Conclusion: The appeals are allowed; inclusion of type test charges in the assessable value of transformers is held unsustainable and the impugned orders are set aside.

Summary order. Special Leave Petitions dismissed; delay condoned; pending applications, if any, disposed of.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Rebuttable presumption and probable defence - Cheque issued as security - Limited scope of re-appreciation in revisional jurisdiction under Section 397 Cr.P.C.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Rebuttable presumption and probable defence - Cheque issued as security - Validity of conviction under Section 138 NI Act in view of admitted issuance of cheques, applicability of statutory presumption under Section 139, and the accused's defence that cheques were issued as security. - HELD THAT: - The High Court found that the complainant proved sale of hardware material and production of two cheques which were dishonoured for insufficiency of funds, along with service of statutory notice. The accused had not specifically denied issuing the cheques or his signatures and in his Section 313 statement admitted purchase (though for a lesser amount) and that blank cheques were given as security. No cogent or positive evidence was produced by the accused to probabilize the defence or to rebut the statutory presumption under Section 139. The Court observed that a cheque said to be issued as security is not per se excluded from presentation and that the Negotiable Instruments Act does not create a categorical exception for "security cheques"; if the secured obligation is not fulfilled the cheque may be presented and, if dishonoured, Section 138 consequences follow. Relying on the principles that (a) Section 139 creates a rebuttable presumption which can be displaced on preponderance of probabilities by a probable defence, and (b) absence of any material to raise such a defence permits the presumption to operate, the Court upheld the concurrent findings that all ingredients of Section 138 were established on the record. [Paras 8, 10, 11, 12, 13]

Conviction under Section 138 NI Act upheld; accused's plea that cheques were security not shown to rebut statutory presumption.

Limited scope of re-appreciation in revisional jurisdiction under Section 397 Cr.P.C. - Whether the High Court should interfere in revision in the face of concurrent findings of fact and law by the trial and appellate courts. - HELD THAT: - The Court reiterated that revisional jurisdiction under Section 397 Cr.P.C. is supervisory and not appellate; ordinarily re-appreciation of evidence is inappropriate where both the Magistrate and the Sessions Judge have concurrently appreciated the evidence unless a glaring error or miscarriage of justice is shown. No material irregularity, illegality or gross miscarriage of justice was pointed out by the defence; consequently the High Court declined to re-appreciate evidence or disturb the concurrent factual findings. [Paras 14, 15, 16, 17]

No interference in revisional jurisdiction; concurrent judgments affirmed.

Final Conclusion: Criminal revision petition dismissed; concurrent conviction and sentence under Section 138 NI Act upheld and revisional interference refused; accused directed to surrender and bail bonds cancelled.

Maintainability of complaint after death of payee - holder in due course - application of Section 138 of the Negotiable Instruments Act

Maintainability of complaint after death of payee - holder in due course - application of Section 138 of the Negotiable Instruments Act - Whether a son, suing after the death of the original payee, could maintain a complaint under Section 138 of the Negotiable Instruments Act as payee or holder in due course. - HELD THAT: - The Court considered the facts that the cheque was issued in favour of the complainant's father and that the father died during the process of clearance of the cheque, even before the bank's advice of return. The High Court accepted the Trial Court's analysis that the complainant, being the son, could not be treated as the payee or a holder in due course for the purpose of invoking Section 138 of the Negotiable Instruments Act. Relying on the Trial Court's findings and relevant authorities, the High Court observed that in the circumstances the statutory notice and complaint did not attract the provisions of Section 138. The Court therefore agreed with the Trial Court's conclusion that the offence under Section 138 could not be attributed on the facts presented and that the acquittal was legally justified. [Paras 8, 9]

Complaint by the son was not maintainable as payee or holder in due course under Section 138; acquittal upheld.

Final Conclusion: Appeal dismissed; the High Court affirmed the Trial Court's order of acquittal, holding that the offence under Section 138 of the Negotiable Instruments Act could not be made out where the cheque was in favour of the deceased father and the son could not be treated as payee or holder in due course.

Right of victim to prefer appeal without leave - Statutory right under proviso to Section 413 BNSS - Requirement of special leave to appeal by a complainant who is not a victim - Correspondence between Section 413 BNSS and Section 372 Cr.P.C. - Consideration of limitation where appeal was prosecuted bona fide before wrong forum

Right of victim to prefer appeal without leave - Statutory right under proviso to Section 413 BNSS - Correspondence between Section 413 BNSS and Section 372 Cr.P.C. - Victim has a statutory right to prefer an appeal against an order of acquittal without seeking leave. - HELD THAT: - The Court held that the cheque-payee (the appellant) is a "victim" within the meaning of Section 2(y) BNSS and therefore falls within the proviso to Section 413 BNSS which accords a victim the right to prefer an appeal against an order of acquittal, conviction for a lesser offence or imposition of inadequate compensation. The proviso to Section 413 BNSS corresponds to the proviso to Section 372 Cr.P.C., and in line with authoritative pronouncements in Mallikarjun Kodagali and Joseph Stephen , a victim need not seek special leave to prefer such an appeal; the statutory right is exercisable without obtaining leave of the High Court.

The appellant, being a victim as defined, was entitled to file an appeal against acquittal without leave.

Requirement of special leave to appeal by a complainant who is not a victim - Requirement of leave under sub-Section 4 of Section 378 BNSS - A complainant who is not a victim must obtain special leave before the High Court to prefer an appeal against an order of acquittal under the provision corresponding to Section 378(4) Cr.P.C. - HELD THAT: - The Court observed that sub-Section 4 of Section 378 BNSS (reproducing Section 378(4) Cr.P.C.) requires that where an order of acquittal is passed in a case instituted upon complaint, the complainant may present an appeal to the High Court only if the High Court, on an application by the complainant, grants special leave to appeal. Thus, a non-victim complainant lacks the statutory right enjoyed by a victim and must seek and obtain leave before preferring an appeal.

A complainant who is not a victim must obtain special leave from the High Court before presenting an appeal against acquittal.

Consideration of limitation where appeal was prosecuted bona fide before wrong forum - Direction as to filing of appeal and consideration of limitation where the appellant bona fide prosecuted the matter before the wrong forum. - HELD THAT: - Although the present petition for leave is disposed of, the Court granted the appellant liberty to present an appeal against the acquittal before the concerned Sessions Judge within 15 days from the date of the order. The Court directed that the learned Appellate Court, when considering the period of limitation, shall take into account that the appellant bona fide prosecuted the matter before the wrong forum (this High Court) from 21.11.2023 until the date of the present order, and adjust the limitation accordingly.

Liberty granted to file appeal before the Sessions Judge within 15 days; appellate court to consider bona fide prosecution before wrong forum in computing limitation.

Final Conclusion: Leave to file an appeal is disposed of; the appellant, being a victim, may file an appeal against the acquittal before the appropriate Sessions Judge within 15 days and the Appellate Court shall consider the period during which the appellant bona fide prosecuted the matter before the wrong forum for the purpose of limitation.

Quashing of summons under inherent jurisdiction - prima facie evidence for summoning - liability of partner under legal fiction in Section 141 of the Negotiable Instruments Act - abuse of process of law - discharge/dismissal to be considered at trial stage

Quashing of summons under inherent jurisdiction - prima facie evidence for summoning - liability of partner under legal fiction in Section 141 of the Negotiable Instruments Act - abuse of process of law - Summons issued to the petitioner were quashed under the inherent jurisdiction of the High Court for want of prima facie evidence linking the petitioner to the offence alleged in the complaint. - HELD THAT: - The Court examined the complaint and the reply and found that the petitioner was neither the signatory nor the proprietor of the firm which issued the cheque (paragraph 9). The magistrate, before summoning, must find prima facie legally admissible evidence attributing a role that constitutes a penal offence (paragraph 10). The complaint is silent as to any role of the petitioner and contains no evidence pointing to his criminal liability in relation to the bounced cheque (paragraph 11). While precedents recognise that partners may be brought within the purview of liability by the legal fiction in Section 141 of the Negotiable Instruments Act if they were in charge of or responsible for the conduct of the firm's business or if the offence is with their consent or connivance, liability depends on evidence that, at the time of the offence, the partner was in charge of and responsible for the firm's business (paragraphs 12-15). Applying these principles to the material before the Court, continuation of proceedings against the petitioner would amount to an abuse of the process of law; accordingly the Court exercised its inherent jurisdiction to quash the summons and all subsequent proceedings against the petitioner (paragraph 16). [Paras 12, 13, 14, 15, 16]

Summons and all subsequent proceedings against the petitioner quashed and set aside.

Final Conclusion: The petitions are allowed; the summoning orders qua the petitioners are quashed and set aside and all pending applications are closed.