TaxTMI Updates e-Newsletter
Oct 24,2020

Recovery of alleged profiteering - interim deposit with State Consumer Welfare Fund in installments - stay of interest and penalty proceedings - constitutionality of Section 171(3) of the CGST Act and Chapter XV of the CGST Rules - deposit of GST component already made with the Department

Interim deposit with State Consumer Welfare Fund in installments - recovery of alleged profiteering - deposit of GST component already made with the Department - Direction to deposit the balance principal amount found to be profiteered with the State Consumer Welfare Fund in six equated monthly installments commencing 02nd November, 2020, and related interim compliance. - HELD THAT: - The writ petition challenges the final order of the National Anti-Profiteering Authority which found that the petitioner had profiteered during the period 01st January, 2019 to 31st March, 2019. The Court noted that the GST component stated in the NAPA order has already been deposited with the Department and that the petitioner has deposited fifty percent of the total alleged profiteered amount with the Central Consumer Welfare Fund. In view of earlier orders in related matters, and having regard to the pendency of the challenge, the Court directed the petitioner to deposit the balance principal profiteered amount with the State Consumer Welfare Fund in six equated monthly installments commencing 02nd November, 2020. The Court also recorded procedural directions for the parties to file counter-affidavits and rejoinders within prescribed periods and to submit short written submissions not exceeding three pages each prior to the next hearing.

Petitioner to deposit the balance principal profiteered amount with the State Consumer Welfare Fund in six equated monthly instalments commencing 02nd November, 2020; directions given for filing of affidavits and short written submissions.

Stay of interest and penalty proceedings - Interim stay of interest and penalty proceedings directed to remain in force until further orders. - HELD THAT: - While directing the interim deposit of the balance principal amount, the Court stayed the interest amount directed to be paid by the respondents as well as any penalty proceedings arising from the impugned NAPA order. The stay is operative until further orders of the Court, preserving the parties' rights to contest liability on merit during the adjudicatory process before this Court.

Interest and penalty proceedings are stayed till further orders.

Exemption of interim application - Interim exemption application allowed. - HELD THAT: - The Court allowed the exemption application (C.M. No.26657/2020) subject to all just exceptions, and disposed of that application accordingly. This was recorded at the outset of the order and the Court directed that the order be uploaded and emailed to counsel.

Exemption allowed for the listed application, subject to exceptions; application disposed of.

Final Conclusion: The petition challenging the NAPA order is directed to proceed subject to interim directions: the petitioner shall deposit the balance principal profiteered amount in six monthly instalments commencing 02nd November, 2020; interest and penalty proceedings are stayed until further orders; procedural timelines for pleadings and short written submissions have been fixed.

Stay of operation - direction under Rule 133(4) of the CGST Rules - stay of investigation - summons and notice - coercive steps

Stay of operation - direction under Rule 133(4) of the CGST Rules - summons and notice - coercive steps - Whether the direction to respondent no.3 to undertake further investigation under Rule 133(4) of the CGST Rules and the summons dated 25th September, 2020 and notice dated 9th October, 2020 should be stayed. - HELD THAT: - The Court entertained the urgent application seeking a stay of the impugned direction under Rule 133(4) and the related summons and notice. It noted that an earlier order dated 5th October, 2020 had stayed penalty proceedings and investigation in respect of other projects, and that respondent no.3 had served the notice and summons in respect of the petitioner's project '16th Park View' in the absence of a specific stay of the impugned direction. Having heard counsel and on the basis of the potential for respondent nos.2 and 3 to take coercive steps against the petitioner if the process remained operative, the Court stayed the operation of the direction under Rule 133(4) and the summons and notice until further orders. The order was made to preserve the petitioner's position pending further consideration. [Paras 9]

Direction under Rule 133(4) of the CGST Rules given in the impugned order dated 7th July, 2020 and the notice dated 9th October, 2020 as well as the summons dated 25th September, 2020 are stayed until further orders.

Final Conclusion: The petition seeking interim relief was allowed in part: the Court stayed the impugned investigative direction under Rule 133(4) and the related notice and summons until further orders, and disposed of the interim application accordingly.

Refund of IGST on export of services - Requirement of Bank Realisation Certificate/Foreign Inward Remittance Certificate under rule 89(2)(c) of the CGST Rules, 2017 - Realisation of consideration in convertible foreign exchange as condition for export of services - Documents prescribed for processing refund claims - Circular No.37/11/2018-GST dated 15.03.2018 - Substantial compliance vs. prescribed documentary requirements

Refund of IGST on export of services - Requirement of Bank Realisation Certificate/Foreign Inward Remittance Certificate under rule 89(2)(c) of the CGST Rules, 2017 - Documents prescribed for processing refund claims - Circular No.37/11/2018-GST dated 15.03.2018 - Whether the appellant's refund claim for IGST paid on export of services could be rejected for non-submission of BRC/FIRC as required by rule 89(2)(c) of the CGST Rules, 2017. - HELD THAT: - The Commissioner (Appeals) noted that rule 89(2)(c) requires submission of a statement containing invoice details and the relevant BRC or FIRC in refund claims for export of services. The Board's Circular No.37/11/2018-GST was considered to reiterate that BRC/FIRC is a document required for processing refund claims relating to export of services and that officers should not call for documents beyond those listed. The adjudicating authority had rejected the claim for want of BRC/FIRC and the appellate forum found no infirmity in applying the statutory and administrative requirement to require BRC/FIRC as part of the claim documentation. The contention that RBI instructions discontinuing FIRC or that substantial compliance sufficed was not accepted as displacing the prescribed documentary requirement for processing refund claims under rule 89(2)(c). [Paras 6, 7]

The rejection of the refund claim for non-submission of the required BRC/FIRC was upheld.

Substantial compliance vs. prescribed documentary requirements - Validity of bank's Foreign Inward Remittance Statement as FIRC - Whether the Foreign Inward Remittance Statement submitted by the appellant, lacking invoice number and date, could be treated as a valid FIRC for linking the inward remittance to the export invoice. - HELD THAT: - The appellant submitted a Foreign Inward Remittance Statement from the bank together with an export invoice. The Commissioner (Appeals) examined the statement and observed that it did not mention the invoice number and date, thus preventing correlation between the remittance and the specific export invoice. In the absence of such linkage, the statement could not be treated as the FIRC required under rule 89(2)(c). The appellate authority therefore rejected the appellant's plea that the bank statement constituted substantial compliance with the documentary requirement. [Paras 8]

The bank's Foreign Inward Remittance Statement, lacking invoice particulars, was held not to be a valid FIRC and could not satisfy the requirement; the appeal was dismissed.

Final Conclusion: The appeal is dismissed; the adjudicating authority's rejection of the refund claim for August 2018 is upheld on the ground that the requisite BRC/FIRC, containing invoice particulars as required by rule 89(2)(c) of the CGST Rules, 2017, was not furnished and the submitted bank statement without invoice linkage could not be treated as a valid FIRC.

Revocation of cancellation of registration - non-filing of returns - requirement to furnish returns before filing revocation - rejection of revocation application for non-submission of reply - principles of natural justice - Rule 23 of the CGST Rules, 2017 - Circular No.99/18/2019-GST dated 23.04.2019

Revocation of cancellation of registration - requirement to furnish returns before filing revocation - Rule 23 of the CGST Rules, 2017 - Circular No.99/18/2019-GST dated 23.04.2019 - Applicability of the procedural requirement that returns must be furnished before filing an application for revocation of cancellation of registration and the legitimacy of rejecting such application for failure to comply with the procedure. - HELD THAT: - The adjudicating provisions in rule 23(1) require that where registration is cancelled for failure to furnish returns, an application for revocation cannot be filed unless the due returns are furnished and amounts payable in terms of such returns are paid. The Board's clarification in Circular No.99/18/2019-GST reiterates that all returns due up to the date of cancellation must be furnished before the revocation application can be entertained and that returns for the period from cancellation until revocation must be furnished within thirty days of revocation. In the present case the cancellation was on account of non-filing of returns and the revocation application was rejected for non-submission of reply; the Appellate Authority accordingly held that the appellant is required to follow the procedure prescribed under rule 23 and the Board's circular and approach the adjudicating authority for action in accordance with those provisions. [Paras 6, 7, 8, 9]

The appeal is disposed by upholding the applicability of rule 23 and Circular No.99/18/2019-GST; the appellant must comply with the procedural requirement of furnishing due returns and follow the prescribed process for revocation.

Rejection of revocation application for non-submission of reply - principles of natural justice - Whether the appellant's contention that rejection solely for non-filing of reply on the portal offended principles of natural justice was accepted and whether the factual claim of filing pending returns was adjudicated. - HELD THAT: - The appellant alleged financial hardship and lack of familiarity with the online filing process and contended that rejection on the ground of non-filing of reply on the portal violated natural justice. The Appellate Authority noted these submissions but did not adjudicate the factual contention that all pending returns had been filed. Instead, having examined the rule and the Board's circular, the Authority directed the appellant to follow the statutory procedure and approach the adjudicating authority for further action, leaving the factual verification and any consideration of natural justice to the adjudicating authority in accordance with rule 23 and the circular. [Paras 6, 9, 10]

The contention that rejection offended natural justice was not finally decided; the matter is left to the adjudicating authority to verify compliance with rule 23 and to take further action.

Final Conclusion: The appeal is disposed by directing compliance with Rule 23 of the CGST Rules, 2017 and Circular No.99/18/2019-GST; the appellant must furnish returns and follow the prescribed procedure and approach the adjudicating authority for further action, with the adjudicating authority to verify compliance and decide the revocation request. The appellate order does not finally adjudicate the appellant's factual claim that all pending returns were already filed.

Revocation of cancellation of registration - failure to furnish returns - requirement to furnish returns and pay tax, interest and penalty before revocation - Rule 23 of the CGST Rules, 2017 - Circular No.99/18/2019-GST

Revocation of cancellation of registration - Rule 23 of the CGST Rules, 2017 - requirement to furnish returns and pay tax, interest and penalty before revocation - Circular No.99/18/2019-GST - Entitlement to revocation of cancellation of GST registration where cancellation arose from non-filing of returns and the procedure to be followed for seeking revocation. - HELD THAT: - The adjudicating authority cancelled the appellant's registration on account of non-filing of returns for a continuous period of six months and absence of a reply within the specified period. Rule 23 of the CGST Rules, 2017 prescribes the procedure for revocation of cancellation of registration, including the first proviso which bars filing of an application for revocation where cancellation resulted from failure to furnish returns unless such returns are furnished and any tax, interest, penalty and late fee due in terms of such returns are paid. Circular No.99/18/2019-GST clarifies that where registration is cancelled for failure to furnish returns, all returns due till the date of cancellation must be furnished before filing for revocation and that returns for the period from the date of cancellation until revocation must be furnished within thirty days of revocation. Applying these provisions, the appellant cannot obtain revocation without complying with the statutory conditions and procedure under Rule 23 and the clarificatory circular; the proper course is to approach the adjudicating authority after completing the prescribed compliance so that the authority may consider revocation under the procedure laid down. [Paras 6, 7, 8, 9]

The appellant must follow the procedure in Rule 23 of the CGST Rules, 2017, as explained in Circular No.99/18/2019-GST, and approach the adjudicating authority for further action; the appeal is disposed accordingly.

Final Conclusion: The appeal is disposed by directing the appellant to comply with the conditions and procedure for revocation of cancellation of registration under Rule 23 of the CGST Rules, 2017 and Circular No.99/18/2019-GST and to seek appropriate action from the adjudicating authority.

Refund of unutilized input tax credit on account of inverted duty structure - interpretation of the term "inputs" for refund under Section 54(3) - Net ITC under Rule 89(5) and its application in computing maximum refund - exclusion of input services and capital goods from refund of inverted duty credit - re-credit to electronic credit ledger under Rule 93 - reliance on administrative clarification in Circular No.79/53/2018-GST

Refund of unutilized input tax credit on account of inverted duty structure - Maximum Refund Amount formula in Rule 89(5) - Whether the appellant was entitled to refund of accumulated ITC claimed for November-2017 on account of an inverted tax structure. - HELD THAT: - The appellate authority upheld the adjudicating authority's finding that the accumulated input tax credit was not attributable to an inverted tax structure because major inputs and the final product attracted the same rate of GST (5%), save for certain consumables. Applying the formula in Rule 89(5), Net ITC covers ITC availed on all inputs in the relevant period irrespective of differing tax rates on particular inward supplies. Refund under Section 54(3)(ii) is available only where credit has accumulated on account of the rate of tax on inputs being higher than the rate on output supplies; where the predominant tax incidence on major inputs equals that on outputs, accumulation on account of inverted structure is not established. The adjudicating authority's rejection of the refund claim was thus affirmed. [Paras 5, 6]

Appeal rejected to the extent of claim for refund of unutilized ITC for November-2017; appellant not entitled to the refund on the stated grounds.

Interpretation of the term "inputs" for refund under Section 54(3) - exclusion of input services and capital goods from refund of inverted duty credit - Net ITC under Rule 89(5) and Notifications aligning Rules with Act - Whether 'inputs' under Section 54(3) includes input services and capital goods such that tax paid on them is refundable as part of inverted duty credit. - HELD THAT: - The authority followed the statutory definition and administrative guidance that 'inputs' for the purpose of refund of accumulated ITC due to inverted duty structure do not include input services or capital goods. The notifications amending the definition of Net ITC and paragraph 14 of Circular No.79/53/2018-GST were applied to construe Net ITC in Rule 89(5) as limited to input tax credit on inputs (excluding input services and capital goods) for the relevant period. The appellant's contention that 'inputs' should be read broadly to include services and capital goods was rejected as legally unsustainable. Reliance placed on pre-amendment interpretations was held not to assist the appellant in the facts of this case. [Paras 5, 6]

Refund does not extend to tax paid on input services or capital goods; Net ITC for computing refund excludes those items.

Reliance on administrative clarification in Circular No.79/53/2018-GST - Whether the Circular No.79/53/2018-GST dated 31.12.2018 and related notifications could be relied upon to deny the appellant's refund claim. - HELD THAT: - The authority accepted and applied the Circular's clarification that Section 54(3) contemplates refund only in respect of inputs as defined and that the rules were aligned by notification to exclude input services and capital goods from Net ITC for refund computation. The adjudicating authority's reliance on the Circular and notifications to interpret Section 54(3) and Rule 89(5) was considered appropriate and consistent with the Act and Rules. [Paras 5, 6]

The administrative clarification and notifications were correctly applied to deny the refund claim insofar as it sought tax on input services and capital goods.

Re-credit to electronic credit ledger under Rule 93 - Procedure for re-crediting the amount debited for the refund claim back to the appellant's electronic credit ledger upon rejection of the refund. - HELD THAT: - The order records that where a refund claim is rejected in whole or in part under Rule 92, the amount debited shall be re-credited to the electronic credit ledger by an order in FORM GST PMT-03 as provided in Rule 93. The appellant was directed to approach the adjudicating authority and follow the procedure laid down under Rule 93 for re-crediting the rejected amount. [Paras 6, 7]

Appellant may seek re-credit of the debited amount to its electronic credit ledger by following the procedure under Rule 93 before the adjudicating authority.

Final Conclusion: The appeal is dismissed insofar as refund of accumulated ITC for November-2017 is concerned: the authorities correctly applied Section 54(3), Rule 89(5), the notifications and Circular No.79 to hold that the appellant did not demonstrate accumulation due to an inverted tax structure and that tax on input services and capital goods is not refundable; the appellant may pursue re-credit of the debited amount under Rule 93 before the adjudicating authority.

Garnishee notice - limitation for filing an appeal - appeal under section 117 of the Central Goods and Service Tax Act - principles of natural justice - recovery of tax - interim stay - violation of Article 14 - violation of Article 19(1)(g) - violation of Article 265

Garnishee notice - limitation for filing an appeal - appeal under section 117 of the Central Goods and Service Tax Act - recovery of tax - principles of natural justice - Validity of the Garnishee Notice dated 26.08.2020 insofar as it was issued before expiry of the statutory time for filing an appeal and before expiry of the time allowed to the petitioner to respond to discrepancies intimated in respect of the returns. - HELD THAT: - The Court observed on the record that the garnishee notice for recovery of tax relating to the periods from January, 2020 to June, 2020 and January, 2019 to December, 2019 was issued before the expiry of the three-month statutory period prescribed for filing an appeal under section 117 of the Central Goods and Service Tax Act in respect of the assessment order dated 13.08.2020. Further, in respect of the period January, 2019 to December, 2019, a notice intimating discrepancies in the returns had been given on 28.07.2020 and the petitioner was required to furnish reasons on or before 27.08.2020, yet the garnishee notice was issued on 26.08.2020. In view of these facts, the Court prima facie found irregularity in issuance of the garnishee notice prior to expiry of the relevant statutory and procedural timelines and treated the matter as requiring consideration on merits after service of notice to respondents.

Notice issued to respondents and an interim stay of operation of the impugned Garnishee Notice dated 26.08.2020 was granted for a period of two days; matter listed for further hearing on 02.09.2020 along with connected WP No.15426 of 2020.

Final Conclusion: On a prima facie view that the garnishee notice was issued before expiry of the statutory appeal period and before expiry of time to respond to discrepancy notice, the High Court issued notice to the respondents, granted an interim stay of the garnishee notice for two days, and posted the matter for further hearing.

Assessment order without compliance with mandatory pre-draft procedure under Section 144C is without jurisdiction / void ab initio - revisional jurisdiction under Section 263 presupposes an order which is erroneous and prejudicial to the interest of the Revenue - non-recording of satisfaction that an order is prejudicial to Revenue vitiates exercise of Section 263 - mandatory procedural safeguards cannot be cured by corrigendum or subsequent proceedings

Assessment order without compliance with mandatory pre-draft procedure under Section 144C is without jurisdiction / void ab initio - mandatory procedural safeguards cannot be cured by corrigendum or subsequent proceedings - Validity of the assessment order dated 18/12/2009 in view of non-compliance with the mandatory draft-order procedure under Section 144C - HELD THAT: - The Court held that Section 144C confers special rights on an eligible assessee and mandates that a draft assessment order be forwarded before a final order under Section 143(3) is passed. Where the Assessing Officer entirely omits the procedure prescribed by Section 144C in cases to which it applies, the final assessment order is not merely an erroneous order but is made without jurisdiction and is null and void (void ab initio). The Court relied on and followed earlier High Court decisions which have held that non-issue of the draft assessment order renders the final order beyond jurisdiction and cannot be cured by corrigendum or by subsequent proceedings; the assessees' remedy by way of appeal or writ is available against such jurisdictional excess. Applying those authorities to the facts, the Court concluded that the assessment order dated 18/12/2009 was without jurisdiction and therefore void ab initio. [Paras 32, 34, 35, 36, 45]

The assessment order dated 18/12/2009 was without jurisdiction and void ab initio for failure to comply with the mandatory provisions of Section 144C.

Revisional jurisdiction under Section 263 presupposes an order which is erroneous and prejudicial to the interest of the Revenue - non-recording of satisfaction that an order is prejudicial to Revenue vitiates exercise of Section 263 - Validity of the CIT's exercise of revisional jurisdiction under Section 263 by order dated 20/3/2012 and the sufficiency of the notice dated 23/2/2012 - HELD THAT: - Section 263 can be exercised only when the Commissioner is satisfied that the order sought to be revised is both erroneous and prejudicial to the interest of the Revenue. Although the Commissioner in his order recognised non-compliance with Section 144C, the notice invoking Section 263 did not record any satisfaction that the assessment order was prejudicial to the Revenue. The ITAT had upheld revision on the basis that the order would not have withstood appeal and therefore was prejudicial, but the Court rejected that approach: absent an express and recorded satisfaction as to prejudice, the statutory precondition for invoking Section 263 is not met. The Court therefore found it unnecessary to decide the narrower question whether Section 263 may be invoked against an order void ab initio, because on the record the Commissioner failed to record the requisite satisfaction of prejudice and hence the invocation of Section 263 was invalid. [Paras 39, 40, 41, 42, 46]

The CIT's order dated 20/3/2012 and the notice dated 23/2/2012 invoking Section 263 are invalid for failure to record satisfaction that the assessment order was prejudicial to the interest of the Revenue; the revisional exercise is therefore set aside.

Final Conclusion: Both appeals are allowed. The order passed by the Commissioner under Section 263 and the consequential ITAT order are set aside; the assessment proceedings founded on the final order of 18/12/2009 are held to be void for non-compliance with the mandatory Section 144C procedure. No order as to costs.

Validity of assessment/reassessment order - principles of natural justice - cryptic order - disputed questions of fact - statutory appeal - limitation - coercive action

Validity of assessment/reassessment order - principles of natural justice - cryptic order - Whether the impugned assessment order was vitiated for being cryptic or in violation of principles of natural justice. - HELD THAT: - The High Court examined the impugned assessment/reassessment order and recorded that, although the order was short, all material facts necessary for adjudication had been recorded and considered by the Income Tax Officer. The court held that the brevity of the order did not render it cryptic so as to amount to a breach of principles of natural justice. Consequently, the order could not be quashed on the ground of being cryptic or arbitrary for lack of reasons.

The assessment/reassessment order is not vitiated for being cryptic or for violation of principles of natural justice.

Disputed questions of fact - statutory appeal - Resolution of disputed questions of fact raised in challenge to the assessment. - HELD THAT: - The court declined to adjudicate disputed questions of fact in the writ petition, observing that such factual controversies are to be resolved in the appellate forum. The petitioner was granted liberty to prefer the statutory appeal, the remedy being regarded as equally efficacious for resolution of the factual disputes underlying the assessment.

Disputed questions of fact are not decided; petitioner permitted to pursue statutory appeal for fresh adjudication.

Limitation - coercive action - statutory appeal - Whether limitation or coercive action would preclude or impede the petitioner from prosecuting the statutory appeal. - HELD THAT: - On representation by counsel for the Income Tax Department, the court recorded that if the petitioner filed the statutory appeal within four weeks, the department would not raise the plea of limitation nor initiate coercive action pursuant to the demand raised under the impugned order. The court accepted and recorded these statements and treated them as binding for the limited period and purpose specified.

If the petitioner files the statutory appeal within four weeks, the department will not urge limitation and will refrain from taking coercive action pending adjudication of the appeal.

Final Conclusion: Writ petition disposed of: the court refused to quash the impugned assessment order on grounds of being cryptic or violative of natural justice, declined to decide factual disputes and granted liberty to prefer the statutory appeal, and recorded the department's undertaking not to raise limitation or take coercive action if the appeal is filed within four weeks.

Revisionary powers under Section 263 of the Income Tax Act - pre-operative expenditure capitalization with block of depreciable assets - revenue receipt versus inter-divisional transfer of receipts - requirement of a show cause notice and jurisdictional scope under Section 263 - right to reasonable and adequate opportunity of hearing before exercise of revisionary powers

Revisionary powers under Section 263 of the Income Tax Act - requirement of a show cause notice and jurisdictional scope under Section 263 - right to reasonable and adequate opportunity of hearing before exercise of revisionary powers - Whether the order passed by the Commissioner invoking Section 263 was valid and sustainable - HELD THAT: - The High Court found that the orders below were passed on confused premises and without adequate factual enquiry. The Tribunal had set aside the Section 263 order on the ground that no specific show cause notice was issued in respect of the amount in question and that the Commissioner did not point out any error in the assessee's submissions; the High Court observed that both the Commissioner and the Tribunal proceeded on different and inconsistent characterisations (income v. expenditure) and that the matter had not been properly investigated by the fact-finding authorities. In these circumstances the Court held that the proceedings under Section 263 could not be sustained without a fresh, orderly consideration in accordance with law and after giving the assessee a reasonable and adequate opportunity of hearing. Consequently the impugned orders under Section 263 were set aside and the matter was remitted for fresh decision. [Paras 7, 8]

Order passed under Section 263 set aside and remitted to the Commissioner for fresh decision after giving the assessee adequate opportunity of hearing.

Pre-operative expenditure capitalization with block of depreciable assets - revenue receipt versus inter-divisional transfer of receipts - Whether the sum of Rs. 3487.18 lakhs was taxable income or pre-operative/expenditure to be capitalised - HELD THAT: - The Court noted that the Commissioner's order itself contained inconsistent characterization - a typed reference to 'expenses' that was manually corrected to 'income' - and that the Tribunal and Commissioner proceeded under confusion as to whether the amount comprised inter-divisional transfers (with no assessable income element), sale of surplus power (claimed to be accompanied by corresponding expenditure), or pre-operative items requiring capitalization. Because these foundational factual and legal characterisations were not authoritatively determined by the authorities and were central to any exercise of revisionary power, the High Court directed that the classification and taxability (income v. expenditure/capitalisation) of the Rs. 3487.18 lakhs be examined afresh by the Commissioner in the remitted proceedings in accordance with law. [Paras 3, 7]

Classification and taxability of Rs. 3487.18 lakhs remitted to the Commissioner for fresh adjudication in accordance with law.

Final Conclusion: The Revenue's appeal is allowed; the orders of the Commissioner under Section 263 and of the Tribunal dated 23.09.2012 and 28.09.2012 respectively for Assessment Year 2007-2008 are set aside and the matter is remitted to the Commissioner of Income Tax for fresh decision under Section 263 after giving the assessee a reasonable and adequate opportunity of hearing.

Prescribed authority's exclusive jurisdiction to examine eligibility under Rule 18DA - non-interference by the Assessing Officer with approval granted under Rule 18D/18DA - requirement of prior approval by the prescribed authority for claim under Section 80-IB(8A) - power of the prescribed authority to withdraw approval on violation

Prescribed authority's exclusive jurisdiction to examine eligibility under Rule 18DA - non-interference by the Assessing Officer with approval granted under Rule 18D/18DA - requirement of prior approval by the prescribed authority for claim under Section 80-IB(8A) - Whether the Assessing Officer may re-examine fulfillment of conditions prescribed in Rule 18DA for allowance of deduction under Section 80-IB(8A), despite approval being granted by the prescribed authority under Rule 18D. - HELD THAT: - The statutory scheme of Rule 18D and Rule 18DA vests the Secretary, Department of Scientific and Industrial Research (the prescribed authority) with responsibility to grant and review approvals for companies carrying on scientific research and development. Rule 18D(2) contemplates initial grant and periodic review by the prescribed authority and Rule 18DA(2) prescribes conditions to be satisfied during the currency of approval and empowers the prescribed authority to call for information and to withdraw approval on violation. Given the technical and specialised nature of the enquiries envisaged by the Rules, once the prescribed authority grants approval which remains valid, the Assessing Officer is not entitled to sit in appeal over, or re-examine, the expert determination made by that authority as to fulfillment of the conditions in Rule 18DA(1). The Tribunal correctly held that alleged violations of Rule 18DA are matters for the prescribed authority to examine and, where appropriate, to withdraw approval; they do not afford the Assessing Officer a jurisdiction to deny deduction after a valid approval has been granted and stands in force. The Tribunal's factual conclusion that approval had been granted and renewed, and that questions of non-compliance, if any, fall within the remit of the prescribed authority, was upheld. The Court agreed with prior authority to the same effect and answered the substantial question against the revenue. [Paras 8, 9]

The Assessing Officer cannot re-open or re-examine the fulfillment of Rule 18DA conditions where the prescribed authority has validly granted approval; such matters are for the prescribed authority and not for assessment proceedings.

Final Conclusion: The substantial question of law was answered against the revenue; the Tribunal's view that compliance with Rule 18DA is to be examined by the prescribed authority and not by the Assessing Officer is upheld. The revenue's appeal is dismissed.

Fees for technical services - deeming fiction under Section 9(1)(vii)(b) - territorial nexus / source rule - tax deduction at source under Section 195 - exceptions to deeming provision for services for earning income from sources outside India

Fees for technical services - deeming fiction under Section 9(1)(vii)(b) - territorial nexus / source rule - Whether the commission paid to the non-resident commission agent is deemed to accrue or arise in India and therefore taxable under the Income-tax Act, attracting disallowance under Section 40(a)(ia). - HELD THAT: - The Court examined the Annexure-B Commission Agency Contract and found that the non-resident's activities were confined to marketing, pre-sales and sales support in the European Union, North America and Middle East, and the business generated thereby was sourced from those foreign territories. Clause (b) of Section 9(1)(vii) excludes from the deeming fiction fees payable by a resident where the fees are for services utilised in carrying on business outside India or for the purpose of earning income from a source outside India. Applying the territorial nexus / source rule and the factual finding that the income of the assessee arose from sales in the foreign territories, the commission fell within the exception in Section 9(1)(vii)(b) and thus was not deemed to accrue or arise in India. The Court further held that the Explanation inserted by Finance Act, 2010 does not nullify the exceptions in sub-clause (b) where services are genuinely for earning income from sources outside India, and Sedco Forex was applied to construe the scope of an explanation without overruling clear exceptions in the principal provision. [Paras 12, 13, 24, 27, 29]

The commission paid to the non-resident is not taxable in India under Section 5(2) read with Section 9(1)(vii)(b); the Tribunal's finding upholding disallowance under Section 40(a)(ia) is set aside.

Tax deduction at source under Section 195 - sums chargeable under the Act - deeming fiction under Section 9(1)(vii)(b) - Whether the assessee was liable to deduct tax at source under Section 195 on the commission payments to the non-resident in the absence of the commission being chargeable to tax in India. - HELD THAT: - Section 195 requires deduction of tax at source only where the sum paid is chargeable to tax under the Act. Having held that the commission did not accrue or arise in India because it was paid for services utilised to earn income from sources outside India and thus fell within the exception in Section 9(1)(vii)(b), the payments were not 'sums chargeable' under Sections 4, 5 or 9. Reliance on GE India Technology Centre (construing the threshold in Section 195) supports that no obligation to deduct arises where the payment is not chargeable to tax. Consequently there was no liability on the resident company to deduct tax at source from the commission payments. [Paras 5, 28, 30]

No obligation arose on the assessee to deduct tax at source under Section 195 in respect of the commission paid to the non-resident; question answered in favour of the assessee.

Final Conclusion: The High Court allowed the appeal, set aside the assessment insofar as it treated the commission paid to the non-resident as income deemed to accrue or arise in India, and held that no tax was deductible at source under Section 195 on those payments; questions on the DTAA (Article 14) and alleged perversity were not adjudicated in view of these findings.

Interim stay of demand - prima facie case for grant of interim relief - exercise of discretion by appellate tribunal - interference for perversity - extraordinary writ jurisdiction under Article 226 - assessment under Section 143(3) read with Section 254

Interim stay of demand - prima facie case for grant of interim relief - exercise of discretion by appellate tribunal - interference for perversity - extraordinary writ jurisdiction under Article 226 - Whether the High Court should interfere with the Tribunal's refusal to grant interim stay of the demand. - HELD THAT: - The Court held that the Tribunal did not act perversely in refusing interim relief. The assertion that amounts (principal and interest) belonged to a third party pursuant to earlier orders of the High Court of Delhi and that the assessee therefore had no taxable income was a matter which had already been considered and rejected in earlier rounds; this history weakened the assessee's claim to a prima facie case. The Tribunal had left the assessee's substantive contentions open for full consideration on appeal, including examination of the Delhi High Court orders and whether the interest payment was incurred for the assessee's business purposes. In tax matters the High Court, exercising extraordinary jurisdiction under Article 226, will not substitute its view for that of the Tribunal unless there is perversity in the Tribunal's exercise of discretion. Absent such perversity the Court declined to interfere with the Tribunal's discretionary refusal to grant an interim order.

Writ petition dismissed; no interference with the Tribunal's order refusing interim stay of the demand.

Final Conclusion: The High Court dismissed the writ petition, holding that there was no perversity in the Tribunal's refusal to grant interim relief and that the extraordinary writ jurisdiction under Article 226 is not to be used to substitute the Court's view for the Tribunal's discretion in taxation matters; liberty was granted to the assessee to seek expedition before the Tribunal.

Penalty under section 271(1)(c) for furnishing inaccurate particulars - Bona fide and inadvertent mistake - Computation of book profit under section 115JB - Electronic return software data entry error - Application of Price Waterhouse principle on penalty for bona fide mistake

Penalty under section 271(1)(c) for furnishing inaccurate particulars - Bona fide and inadvertent mistake - Computation of book profit under section 115JB - Electronic return software data entry error - Application of Price Waterhouse principle on penalty for bona fide mistake - Whether penalty under section 271(1)(c) is leviable where under reporting of book profit arose from erroneous data entry in the electronic return leading to an inadvertent discrepancy between audited Form 29B and the return - HELD THAT: - The Tribunal found that the audited profit and loss account and Form 29B correctly disclosed the book profit at the higher figure and that the return, filed electronically, wrongly contained business income details in the Part A-P&L field causing the software to adopt an incorrect "profit before tax" and thereby compute a lower book profit under section 115JB. The error was held to be a bona fide, inadvertent mistake arising from erroneous feeding of data into the return filing software rather than an intentional concealment of income. Applying the Supreme Court's reasoning in Price Waterhouse - that a bona fide and inadvertent computational or clerical error, when supported by contemporaneous audited documents, does not constitute furnishing inaccurate particulars or deliberate suppression - the Tribunal concluded that penalty under section 271(1)(c) was not justified. Having decided the matter on merits in favour of the assessee, the Tribunal did not examine other legal contentions advanced before it. [Paras 9, 10, 11, 13]

Penalty levied under section 271(1)(c) deleted as the under reporting of book profit was a bona fide inadvertent software/data entry error; appeal allowed.

Final Conclusion: The Tribunal set aside the CIT(A)'s confirmation of penalty and directed deletion of the penalty under section 271(1)(c) for A.Y. 2011-12, holding the discrepancy to be a bona fide inadvertent error in electronic return entry and not deliberate concealment of income.

Disallowance under section 14A - Rule 8D(2)(ii) and Rule 8D(2)(iii) - interest on partners' capital - requirement of AO's satisfaction under section 14A(2) - partnership firm and partners treated holistically (contra items) - remand for recomputation under Rule 8D

Interest on partners' capital - disallowance under section 14A - Rule 8D(2)(ii) - partnership firm and partners treated holistically (contra items) - Whether interest paid to partners on partners' capital is subject to disallowance under section 14A read with Rule 8D(2)(ii). - HELD THAT: - The Tribunal followed earlier decisions holding that a partnership firm and its partners must be viewed holistically for taxation purposes, and that interest payable to partners is governed by section 40(b) and taxed in the hands of the partners. In substance such interest operates as contra items between the firm and the partners and is not analogous to interest paid to external lenders. Consequentially, interest on partners' capital paid as per the partnership deed does not attract disallowance under section 14A read with Rule 8D(2)(ii). Interest payable to persons other than partners, however, remains subject to Rule 8D(2)(ii).

Interest on partners' capital is not disallowable under section 14A read with Rule 8D(2)(ii); the disallowance insofar as it relates to partners' interest is deleted.

Rule 8D(2)(iii) - requirement of AO's satisfaction under section 14A(2) - remand for recomputation under Rule 8D - Whether the disallowance under Rule 8D(2)(iii) was correctly computed and whether the matter requires reassessment/recomputation by the Assessing Officer. - HELD THAT: - The Tribunal observed that the Assessing Officer did not identify the specific investments which yielded income not forming part of total income and applied an improper averaging method. Following precedents, the Tribunal held that the AO must examine and take average only of those investments which actually yielded exempt income and must comply with the mandate of section 14A(2) and Rule 8D in recomputing the disallowance. In view of the lack of necessary details before the Tribunal and defects in the AO's computation, the matter was remanded to the AO for limited purpose of recomputation of disallowance under Rule 8D(2)(iii) in accordance with the observations in the order and applicable precedents.

Disallowance under Rule 8D(2)(iii) is restored to the file of the AO for fresh computation limited to the issues indicated; AO to compute disallowance after identifying investments yielding exempt income and applying Rule 8D correctly.

Final Conclusion: Appeals partly allowed. Disallowance under section 14A read with Rule 8D(2)(ii) insofar as it relates to interest on partners' capital is deleted; computation of disallowance under Rule 8D(2)(iii) is remanded to the Assessing Officer for limited recomputation in accordance with the Tribunal's directions for both assessment years 2015-16 and 2016-17.

Approval under section 80G(5)(vi) - Charitable Purposes - Registration under section 12AA - Opportunity of being heard - Remand for reconsideration

Approval under section 80G(5)(vi) - Charitable Purposes - Registration under section 12AA - Opportunity of being heard - Whether the rejection of the assessee's application for approval under section 80G(5)(vi) on the ground of non compliance and non pursuance was justified and whether the matter required fresh consideration. - HELD THAT: - The Tribunal found that the assessee had been granted registration under section 12AA, which establishes that the objects were charitable in nature and that the assessee was undertaking activities of a charitable character. Although the Ld. CIT(E) issued queries and show cause notices, the assessee filed responses by email and the final set of documents was transmitted after the date on which the impugned order was passed. The CIT(E) passed the order rejecting the 80G application on 28.12.2017, whereas the assessee's last reply was sent by email on 29.12.2017; consequently the CIT(E) failed to wait for or consider the documentary material filed by the assessee. In these circumstances the finding that the assessee was not interested in pursuing the matter was not warranted. Because the documentary evidence and explanations had not been considered, the matter could not be finally adjudicated at that stage and required fresh consideration with a reasonable opportunity of being heard. [Paras 6]

Impugned order rejecting approval under section 80G(5)(vi) set aside and the matter remitted to the file of the Ld. CIT(E), Chandigarh for reconsideration in accordance with law after giving the assessee a reasonable and sufficient opportunity of being heard.

Final Conclusion: The appeal is allowed for statistical purposes; the order rejecting the 80G approval is set aside and the matter is remanded to the Ld. CIT(E) for fresh consideration after affording the assessee a proper opportunity of being heard.

Royalty - transfer of copyright versus sale of a copyrighted article - right to use a copyrighted article - use of process and information concerning industrial, commercial or scientific experience - applicability of domestic amendment to treaty obligations

Royalty - transfer of copyright versus sale of a copyrighted article - right to use a copyrighted article - use of process and information concerning industrial, commercial or scientific experience - Consideration received from sale/licensing of off the shelf/shrink wrapped software to Indian distributors whether taxable as "royalty" under section 9(1)(vi) of the Act and Article 12 of the India Sweden DTAA. - HELD THAT: - The Tribunal held that the receipts on the facts of this case did not constitute royalty. The reasoning follows earlier coordinate bench decisions in the assessee's own cases for preceding years and the analysis of the jurisdictional High Court: a clear distinction exists between (a) transfer of rights in respect of a copyright (or the right to use a copyright) and (b) the sale or licence of a copyrighted article that permits only limited use. Mere supply of software as a product or a non exclusive, non transferable licence that enables the user to operate the program, without conferring rights to exploit the copyright, is the transfer of a copyrighted article and not the transfer of copyright or of the right to use the copyright. Incidental acts (such as copying for installation or backup) necessary to make the program functional do not amount to transfer of copyright. Where the owner retains the incorporeal rights and the licensee is restricted from sublicensing, commercial exploitation or dealing with the software as the copyright owner would, the consideration represents business income and not royalty under the DTAA or domestic law.

Receipts from the sale/licence of the software to Indian distributors are not taxable as "royalty" under section 9(1)(vi) or Article 12 of the India Sweden DTAA; the transaction is a transfer of a copyrighted article/right to use the product and not a transfer of copyright or right to use copyright.

Applicability of domestic amendment to treaty obligations - royalty - Whether the amendment to section 9(1)(vi) by Finance Act, 2012 alters the DTAA position so as to make such receipts taxable notwithstanding the treaty. - HELD THAT: - The Tribunal followed the view adopted by the Delhi High Court in New Skies Satellite and related decisions that unilateral amendment of domestic law cannot unilaterally alter the meaning or applicability of an international treaty. A change in domestic legislative position does not automatically modify treaty obligations between sovereign states; such change must be incorporated into the treaty itself. Consequently, the post 2012 amendment to section 9(1)(vi) cannot be read into the India Sweden DTAA to tax the assessee's receipts as royalty where the treaty's terms govern and are more beneficial to the assessee.

The 2012 amendment to section 9(1)(vi) does not apply so as to override the India Sweden DTAA; the amendment cannot be unilaterally enforced to convert the receipts into taxable royalty under the treaty.

Final Conclusion: Following the coordinate bench precedents and authoritative judicial reasoning, the Tribunal set aside the CIT(A)'s order: the assessee's consideration from sale/licensing of the software is not "royalty" under section 9(1)(vi) or Article 12 of the India Sweden DTAA, and the Finance Act 2012 amendment to section 9(1)(vi) cannot be read so as to alter the treaty position.

Penalty under section 271D of the Income-tax Act - penalty under section 271E of the Income-tax Act - application of section 269SS / section 269T - cash acceptance and repayment - reasonable cause under section 273B - transactions between near relatives and family transactions - business running/current account versus loan/advance - journal entry without actual receipt - applicability of section 269SS

Penalty under section 271D of the Income-tax Act - reasonable cause under section 273B - transactions between near relatives and family transactions - application of section 269SS / section 269T - cash acceptance and repayment - Whether penalty under section 271D (and mutatis mutandis 271E) is leviable for cash loans/advances accepted from near relatives - HELD THAT: - The Tribunal, adopting the view of coordinate Benches and relevant High Court authorities, held that cash transactions between the assessee and his wife, son and daughters amounted to family transactions which attract the doctrine of reasonable cause under section 273B and therefore do not fall within the mischief of provisions such as section 269SS. Applying those precedents and the facts that the source and genuineness of funds were accepted, the Tribunal concluded that penalty under section 271D could not be sustained in respect of amounts accepted from near relatives and accordingly deleted the penalty of Rs. 40,22,000 imposed under section 271D. The same reasoning was held to apply mutatis mutandis to repayments to the wife and penalty under section 271E, leading to deletion of Rs. 14,06,761 of penalty under section 271E. [Paras 5]

Penalty under section 271D (and accordingly section 271E) is deleted insofar as cash transactions with near relatives (wife, son, daughters) are concerned.

Business running/current account versus loan/advance - penalty under section 271D - application of section 269SS - Whether cash receipts/repayments involving Sri Hiren Kumar Patel (non-relative) are loans/deposits attracting section 269SS and penalties under sections 271D/271E or are running/business transactions - HELD THAT: - The assessee produced ledger extracts showing frequent transactions with Sri Hiren Kumar Patel and asserted a business association and running account. The Bench queried whether there was a written business understanding; the AR admitted such a document existed and requested further examination. The Department had no strong objection to remand. In view of disputed character of the transactions and the need for primary fact finding (including production and examination of books/agreements), the Tribunal restored the matter to the Assessing Officer for fresh adjudication on whether the transactions were business/running account entries and not loans/deposits. The assessee was directed to cooperate and prove the business character; unnecessary adjournments were to be avoided. [Paras 5]

Matter remanded to the Assessing Officer for examination of whether transactions with Sri Hiren Kumar Patel are business/running account transactions (not loans/deposits); penalties under sections 271D and 271E in respect of those transactions are stayed for fresh adjudication.

Journal entry without actual receipt - applicability of section 269SS - penalty under section 271D - application of section 269SS - Whether amounts recorded by journal entry (paid by Sri Hiren Kumar Patel directly to a builder on behalf of the assessee) attracted section 269SS and penalty under section 271D in the case of Smt. Rajeshwari Pandith (AY 2007-2008) - HELD THAT: - Relying on the principle in the Delhi High Court's decision that mere journal entries without actual receipt of cash do not invoke section 269SS, the Tribunal observed that only the ledger of Sri Hiren Kumar Patel in the assessee's books was placed on record and the ledger of the developer/builder was not produced. To determine whether the payments were actual cash receipts or merely entries recording payments made directly by a third party, the Tribunal restored the matter to the Assessing Officer. The A.O. was directed to examine the books and facts to decide whether the assessee only passed journal entries and did not actually receive cash; if so, section 269SS would not be attracted and penalty under section 271D could not be sustained. [Paras 7]

Issue remanded to the Assessing Officer to examine whether only journal entries (without actual cash receipt) were made; if so, section 269SS would not apply and the penalty under section 271D cannot be imposed.

Final Conclusion: The Tribunal deleted penalties under section 271D (and consequentially section 271E) in respect of cash transactions with near relatives for the assessment years 2004-2005 to 2009-2010, restored the issues relating to transactions with Sri Hiren Kumar Patel in the appeals of both assessees to the Assessing Officer for fresh factual examination (one as to business/running account and the other as to whether only journal entries without actual cash receipt were made), and allowed the listed appeals in part or wholly as recorded.

Dependent Agent Permanent Establishment - attribution of profits to permanent establishment - arm's length transaction / transfer pricing - Article 5(7) of DTAA (agency PE conditions) - rule of consistency - precedent in assessee's own case

Dependent Agent Permanent Establishment - Article 5(7) of DTAA (agency PE conditions) - Mitsui India Pvt. Ltd. (MIPL) is not a Dependent Agent Permanent Establishment of Mitsui & Co. Ltd. for AY 2012-13. - HELD THAT: - The Tribunal followed consistent earlier decisions in the assessee's own case holding that MIPL does not satisfy any of the conditions in Article 5(7) of the India Japan DTAA. The authorities found no evidence that MIPL had and habitually exercised authority to conclude contracts on behalf of the assessee, maintained stock from which it delivered goods on the assessee's behalf, or habitually secured orders for the assessee. The functional and economic analysis undertaken by the Transfer Pricing Officer (TPO) and accepted earlier was relied upon to conclude that MIPL performed support/liaison activities akin to a liaison office rather than activities amounting to an agency PE. The Tribunal rejected the proposition that economic dependence alone converts a subsidiary into a dependent agent, noting that the DTAA conditions must be strictly satisfied and that control or dependence per se is not determinative. [Paras 11, 12, 14, 15]

MIPL is not a Dependent Agent PE of Mitsui & Co. Ltd.; ground of appeal/cross-objection on this point allowed for the assessee.

Attribution of profits to permanent establishment - arm's length transaction / transfer pricing - No profits are attributable to a PE in India because MIPL is not a Dependent Agent PE; consequently attribution-based additions are not sustained for AY 2012-13. - HELD THAT: - Following the Tribunal's consistent earlier rulings in the assessee's own case, and having held that MIPL is not a DAPE, the Tribunal held that there is no basis to attribute trading profits to a PE in India. The Tribunal also observed that the TPO had undertaken and accepted a functional and economic (FAR) analysis under transfer pricing, and that once such analysis is accepted there is no separate need to attribute additional profit to a PE. The finding that no PE exists rendered the attribution issue academic, and prior tribunal conclusions in favor of the assessee were followed. [Paras 13, 14, 15]

No income is attributable to a PE in India; grounds regarding attribution are allowed for the assessee.

Arm's length transaction / transfer pricing - rule of consistency - The commission paid to MIPL (claimed by the assessee) is accepted as at arm's length and not disallowable for AY 2012-13. - HELD THAT: - The CIT(A) accepted the TPO's conclusion that the commission payment was at arm's length. The Tribunal found no infirmity in that acceptance. Further, the issue was rendered academic by the finding that MIPL is not a DAPE and thus no attribution arises. The Tribunal also applied the rule of consistency: the department had accepted the same view in preceding years and had not appealed earlier favourable orders on this point, so the view could not be reopened in the current year. [Paras 15]

The addition restricting commission payments is deleted; the commission is allowed as claimed by the assessee.

Final Conclusion: Following consistent Tribunal decisions in the assessee's own case and acceptance of the TPO's FAR/transfer pricing analysis, MIPL is held not to be a Dependent Agent Permanent Establishment of Mitsui & Co. Ltd. for AY 2012-13; accordingly no profits are attributable to a PE in India and the commission claimed is sustained. The revenue's appeal is dismissed and the assessee's cross-objection is allowed.

Most Appropriate Method in transfer pricing - Resale Price Method - Transactional Net Margin Method - Functional comparability - Value addition - distribution versus manufacturing - Arm's length price

Resale Price Method - Transactional Net Margin Method - Most Appropriate Method in transfer pricing - Value addition - distribution versus manufacturing - Functional comparability - Arm's length price - Acceptance of the Transfer Pricing Officer's rejection of Resale Price Method and adoption of Transactional Net Margin Method as the most appropriate method for benchmarking the assessee's international transactions. - HELD THAT: - The Tribunal upheld the view that the assessee did not perform merely limited distribution functions to justify RPM. The Tribunal examined the assessee's business model and functional profile, noting activities including territory strategy, marketing and contract negotiation, vendor development and selection, procurement and quality control of local vendors, assembly of kits from semi finished goods and locally procured components, sourcing and inbound logistics, inventory and market risk, limited product liability and warranty responsibilities, and R&D for customization. Financial indicators and disclosures were taken into account: unusually high gross and operating margins for a mere reseller, substantial employee and operating expenses, and presence of plant, moulds and tools. These factors showed substantive value addition and post purchase processing of semi finished goods, making RPM unsuitable because it does not account for manufacturing/processing costs and related functions. TNMM was held appropriate as it compares net margins and can incorporate operating costs, indirect expenses and depreciation; the TPO's selection of OP/OR as the profit level indicator and the benchmarking exercise were endorsed. The Tribunal also considered a precedential decision relied upon by the assessee and found its facts distinguishable because that case concerned a true reseller and different functional profile. On this basis the TP adjustment computed under TNMM was sustained. [Paras 10, 11, 12]

The rejection of RPM and adoption of TNMM by the TPO/DRP was upheld and the assessee's appeal on this ground dismissed.

Final Conclusion: The Tribunal dismissed the assessee's appeal for AY 2012-13, upholding the transfer pricing adjustment and the adoption of TNMM as the most appropriate method in place of RPM.

Distinctness of 'concealment of income' and 'furnishing inaccurate particulars of income' - show cause notice specifying the limb of Sec. 271(1)(c) - penalty under Sec. 271(1)(c) for concealment or furnishing inaccurate particulars - non-application of mind in issuance of show cause notice - principles of natural justice under Sec. 274(1)

Show cause notice specifying the limb of Sec. 271(1)(c) - non-application of mind in issuance of show cause notice - principles of natural justice under Sec. 274(1) - Validity of the show cause notice issued under Section 274 read with Section 271(1)(c) where the notice did not specify whether proceedings were for concealment of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal held that the two defaults in Section 271(1)(c) - 'concealment of income' and 'furnishing inaccurate particulars of income' - are separate and distinct and operate independently. Because the Assessing Officer's show cause notice called upon the assessee to explain 'for having concealed particulars of your income OR furnished inaccurate particulars' without striking off the inapplicable limb or otherwise specifying which charge was being proceeded with, there was no clear notice to the assessee of the exact charge. That failure manifested a non-application of mind and defeated the statutory right to be heard under Section 274(1). Relying on authoritative decisions treating the two limbs as distinct and condemning defective notices, the Tribunal concluded that the SCN was defective and that jurisdiction to impose penalty under Section 271(1)(c) was not validly assumed. [Paras 8, 9, 10, 11]

The show cause notice was defective for not specifying the limb of Section 271(1)(c); penalty proceedings thus lacked valid jurisdiction and cannot stand.

Penalty under Sec. 271(1)(c) for concealment or furnishing inaccurate particulars - distinctness of 'concealment of income' and 'furnishing inaccurate particulars of income' - Validity of the penalty imposed under Section 271(1)(c) in view of the defective show cause notice. - HELD THAT: - Because the SCN failed to specify the particular limb of Section 271(1)(c) relied upon, and there was no proper application of mind by the Assessing Officer either at the stage of initiation or imposition of penalty, the Tribunal held that the penalty order suffers from a fundamental infirmity. The defect was not treated as a mere technicality because it deprived the assessee of the statutory opportunity to know and meet the specific charge. In consequence the penalty imposed by the Assessing Officer (and confirmed by the CIT(A)) was quashed. Having quashed the penalty on this jurisdictional/notice ground, the Tribunal declined to adjudicate the merits of the additions/disallowances. [Paras 9, 10, 11, 12]

Penalty imposed under Section 271(1)(c) is quashed for want of valid initiation and notice; merits not adjudicated.

Penalty under Sec. 271(1)(c) for concealment or furnishing inaccurate particulars - Application of the Tribunal's conclusion to A.Y. 2014-15. - HELD THAT: - The Tribunal observed that the facts and issues for A.Y. 2014-15 are the same as for A.Y. 2012-13 and therefore applied the reasoning and result mutatis mutandis to quash the penalty imposed for A.Y. 2014-15 as well. [Paras 14]

Penalty for A.Y. 2014-15 under Section 271(1)(c) is quashed on the same grounds.

Final Conclusion: The Tribunal allowed the appeals, quashing the penalties imposed under Section 271(1)(c) for A.Y. 2012-13 and A.Y. 2014-15 on the ground that the show cause notice failed to specify which limb of Section 271(1)(c) was being invoked, resulting in non-application of mind and denial of the assessee's statutory right to know the charge; the Tribunal therefore set aside the penalty orders and did not decide the merits of the additions/disallowances.

Royalty - purchase of licensed software as royalty - tax deduction at source - assessee in default - bona fide belief - retrospective application of law - deletion of demand under section 201(1) and 201(1A)

Royalty - tax deduction at source - bona fide belief - retrospective application of law - deletion of demand under section 201(1) and 201(1A) - Whether the assessee can be treated as an assessee in default for not deducting tax at source on subscription payments to M/s Gartner Group for AY 2010-11 - HELD THAT: - The Tribunal examined that identical payments for licensed software/subscription had been made prior to the Karnataka High Court's pronouncement on 15-10-2011 holding such payments to be in the nature of royalty. The assessee had relied on earlier coordinate-bench Tribunal decisions holding that payments for software/database subscriptions did not constitute royalty and therefore no TDS was required. The Tribunal applied the principle that liability to deduct tax at source is governed by the law as it stood at the time of payment and that a subsequent judicial ruling or a retrospective legislative clarification cannot be used to fasten TDS liability retrospectively on transactions completed earlier. Relying on its co-ordinate bench decisions and authorities considering similar facts, the Tribunal concluded that the assessee entertained a bona fide belief, based on existing precedents, and thus could not be treated as an assessee in default for payments made prior to 15-10-2011. Consequently the demands and interest raised under the provisions impugned were not sustainable for the payments made before that date. [Paras 9, 10]

Set aside the CIT(A) order and direct the AO to delete the demand raised under section 201(1) and interest under section 201(1A) in respect of the impugned payments made prior to 15-10-2011; appeal allowed.

Final Conclusion: Appeal allowed: demands under section 201(1) and interest under section 201(1A) deleted insofar as they relate to subscription/licence payments made prior to 15-10-2011 (AY 2010-11), the assessee having reasonably relied on prior Tribunal decisions and not being liable to deduct TDS retrospectively.

Provisional release of seized goods under Section 110A of the Customs Act, 1962 - Directory nature of administrative circulars governing provisional release - Security deposit/bank guarantee to cover duty, fine and penalties on provisional release - Availability of alternative efficacious remedy and maintainability of writ under Article 226

Availability of alternative efficacious remedy and maintainability of writ under Article 226 - Petition under Article 226 entertained on ground that no alternative efficacious remedy was available to the petitioner. - HELD THAT: - Petitioner averred that the appellate Division Bench of the Central Excise, Customs and Service Tax Appellate Tribunal was not available and therefore no efficacious alternative remedy existed. The respondents did not dispute the contents of the petitioner's rejoinder affidavit asserting non-availability of the Division Bench. On that undisputed basis the Court accepted the petitioner's contention and exercised jurisdiction under Article 226 to entertain the writ petition instead of requiring an appeal to the Tribunal.

Writ petition entertained for want of an available alternative efficacious remedy.

Provisional release of seized goods under Section 110A of the Customs Act, 1962 - Directory nature of administrative circulars governing provisional release - Security deposit/bank guarantee to cover duty, fine and penalties on provisional release - Impugned order directing provisional release only upon deposit of a specified amount and bond quashed; matter remanded for reconsideration of provisional release conditions. - HELD THAT: - The Court limited its examination to the legality of the condition imposed for provisional release under Section 110A and the requirement imposed pursuant to Circular No. 35/2017-Cus dated 16-08-2017. Having considered the Circular and the precedents relied upon by the petitioner and respondent, the Court observed that the Circular lays down guidelines which are directory and not mandatory in every circumstance. The Court noted the existence of an order by the Superintendent dated 20-02-2020 under which similar betel nuts were provisionally released on deposit of 25% of seizure value and execution of bond for 100% value. In view of the directory character of the Circular as reflected in the authorities cited and the factual disparity in deposit demanded (as pleaded by the petitioner), the impugned order could not be sustained. The Court therefore quashed the impugned order and remanded the matter to the Commissioner of Customs (Preventive), NER, Shillong to reconsider provisional release in light of the decisions cited by the Court and the Superintendent's order, directing a fresh decision after hearing the petitioner within fixed timelines.

Impugned release condition quashed; matter remanded for fresh reconsideration of provisional release and security conditions in accordance with the Court's directions.

Final Conclusion: Writ petition allowed to the extent that the impugned provisional-release condition is quashed; the matter is remitted to the Commissioner of Customs (Preventive), NER, Shillong for reconsideration of provisional release conditions in light of the directory nature of the Circular and relevant precedents, with directions to decide after hearing the petitioner within the specified timeframe.

Seizure under Section 110 of the Customs Act - reasons to believe - confiscation under Section 111 of the Customs Act - provisional release under Section 110-A of the Customs Act - binding departmental instructions (Instruction No. 01/2017-Cus.) and requirement of a separate order recording reasons - alternative remedy and perishable-goods exception to writ maintainability - limits on Board instructions under Section 151-A

Alternative remedy and perishable-goods exception to writ maintainability - no appeal lies against a seizure order - Maintainability of the writ petition despite availability of statutory appeal remedy. - HELD THAT: - The Court rejected the preliminary objection based on alternative remedy. It held that no appeal lies against a seizure order and that the petitioners had made out established exceptions justifying exercise of writ jurisdiction: (i) the detention related to perishable goods so relegation to the appellate remedy would render relief futile; (ii) the seizure memo and provisional release order were contrary to statutory provisions and departmental instructions; (iii) there was violation of principles of natural justice in the provisional release order; and (iv) the provisional release order appeared to be passed without independent exercise of discretion. In view of these factors the availability of an alternative remedy did not bar entertaining the writ petition under Article 226.

Preliminary objection based on availability of alternative remedy is rejected and the writ petition is entertained.

Seizure under Section 110 of the Customs Act - reasons to believe - confiscation under Section 111 of the Customs Act - binding departmental instructions (Instruction No. 01/2017-Cus.) and requirement of a separate order recording reasons - Validity of the seizure of goods and vehicle effected by Panchnama dated 17.8.2020. - HELD THAT: - The Court examined the material on which the proper officer purportedly formed 'reasons to believe' that the Areca Nuts were illegally imported and liable to confiscation. The recorded grounds were limited to prima facie visual examination, inscriptions in a foreign language on some bags and informal opinion of local traders. The Court noted authoritative certificates from the Department of Agriculture and ICAR that country of origin of Areca Nuts cannot be reliably determined by naked-eye or available laboratory tests. The Court held that 'reasons to believe' must rest on acceptable material and cannot be founded on such insubstantial bases; the Panchnama did not record independent reasons by a proper officer as required by Instruction No. 01/2017-Cus. Consequently there was no lawful basis under Section 110 read with Section 111 to seize the goods and vehicle. The seizure failed Wednesbury-type review and statutory requirement standards, and was quashed.

Seizure order dated 17.8.2020 is quashed for want of valid 'reasons to believe' and for non compliance with binding departmental instructions.

Provisional release under Section 110-A of the Customs Act - Consequences of quashing the seizure with respect to provisional release order. - HELD THAT: - Because the Court quashed the foundational seizure, it declined to adjudicate the legality of the provisional release order dated 1.9.2020 on merits. The Court observed that once seizure is held invalid and no confiscation can validly follow, there is no need to decide the separate contentions directed at the provisional release conditions.

No adjudication on validity of the provisional release order; directions follow from quashment of seizure.

Seizure under Section 110 of the Customs Act - provisional release under Section 110-A of the Customs Act - Relief to be granted following quashment of seizure. - HELD THAT: - As a direct consequence of quashing the seizure, the Court directed immediate release of the Areca Nuts and the vehicle to the petitioners upon filing a copy of the judgment with the authority concerned. The Court therefore provided operative relief restoring possession to the petitioners without addressing other challenges to the provisional release order.

Respondent authorities directed to forthwith release the goods and vehicle in favour of the petitioners on production of this order.

Final Conclusion: Writ petition allowed: the seizure dated 17.8.2020 is quashed for lack of lawful 'reasons to believe' and for non compliance with binding departmental instructions; appeal remedy objection rejected on established exceptions including perishable goods concern; the goods and vehicle are to be released forthwith on production of a copy of this order.

Interim stay of board resolution - service of notice of board meeting - appointment of additional directors by board resolution - operation of company bank account by directors - direction for communication by electronic mail - expeditious disposal under Section 422 of the Companies Act, 2013

Interim stay of board resolution - service of notice of board meeting - Stay on operation of the resolution purportedly passed at 4 PM on 20th January, 2020, pending final adjudication of the company petition. - HELD THAT: - The appellants disputed receipt of notice for a second board meeting on 20th January, 2020 at 4 PM and contended that appointments and other actions taken at that meeting were invalid. The respondents maintained that two notices were sent and that the appellants attended and signed the minutes. The appellate tribunal held that the question whether proper notice was served and whether the meeting and the resolutions are valid must be adjudicated in the main petition. In the meantime, having regard to the pendency of the petition and the contested nature of service and validity, the Tribunal found it appropriate to preserve the status quo by staying the operation of the resolution allegedly passed at 4 PM on 20th January, 2020 until the petition is finally decided. [Paras 12]

Operation of the resolution purportedly passed at 4 PM on 20th January, 2020 is stayed pending final decision of the company petition.

Operation of company bank account by directors - Interim direction on who may operate the bank account of the respondent company until final determination. - HELD THAT: - In order to maintain the company's functioning and to prevent disruption arising from the disputed board action, the Tribunal directed that, until the decision in the company petition, the respondent company's bank account shall be operated by the four directors who were operating the account prior to the alleged board meeting of 20th January, 2020. This measure was ordered as an interim preservative step while the substantive question of validity of the subsequent board action remains pending. [Paras 13]

Till the decision of the case, the respondent company's account will be operated by the four directors who operated it before the alleged board meeting dated 20th January, 2020.

Direction for communication by electronic mail - expeditious disposal under Section 422 of the Companies Act, 2013 - Directions to improve communication between the company and its directors and mandate to the Tribunal for expeditious adjudication of the main petition. - HELD THAT: - To eliminate disputes over service of notices in future, the Tribunal directed that the company and its directors shall communicate by e-mail in addition to other channels. Further, recognising that the substantive petition under Sections 241/242 remains pending and requires final adjudication, the appellate tribunal directed the National Company Law Tribunal to endeavour to decide the petition on merits after hearing both parties expeditiously in terms of Section 422 of the Companies Act, 2013. The appellate order is interlocutory in nature and does not decide the merits of the underlying petition. [Paras 13, 14]

The company and its directors shall communicate by e-mail in addition to other channels; the National Company Law Tribunal is directed to hear and decide the petition expeditiously under Section 422, with the appellate order remaining interlocutory.

Final Conclusion: The appeal is disposed of by granting limited interim reliefs: stay of the operation of the resolution purportedly passed at 4 PM on 20th January, 2020; interim operation of the company bank account by the four directors who operated it earlier; a direction to use e-mail for communications; and a direction to the National Company Law Tribunal to decide the pending company petition expeditiously under Section 422 of the Companies Act, 2013. The substantive issues are remitted for final adjudication by the Tribunal.

Scheme of arrangement - sanction under section 230-232 - prohibition on using scheme as rectification - compliance with regulatory authorities - public policy and investor protection - role of the Regional Director - locus to object under section 230(4)

Scheme of arrangement - prohibition on using scheme as rectification - sanction under section 230-232 - The scheme could not be sanctioned where it was being used to ratify or rectify prior irregularities and non-compliances committed by the company. - HELD THAT: - The Tribunal found that the proposed scheme was being pressed into service to validate past acts of the company including unauthorized capital reduction, retention of application monies, and other non-compliances which had earlier resulted in adverse action by the stock exchange and SEBI. A scheme under section 230 cannot be used as a cloak to ratify illegal or irregular actions already taken; compliance with law and regulatory requirements is integral to public policy and must be ensured before sanction. Sanctioning a scheme in the face of such unfinished or unresolved regulatory actions would set a wrong precedent and undermine the duty of courts/tribunals to promote compliance rather than permit defaults to be regularised post facto. [Paras 27, 31, 32]

The sanction of the scheme was held impermissible to the extent it sought to ratify past irregularities and non-compliances; such use of a scheme is prohibited.

Compliance with regulatory authorities - role of the Regional Director - public policy and investor protection - Objections by statutory authorities, including the Regional Director, regarding procedural non-compliance and regulatory lapses must be given due weight and cannot be treated as immaterial mere procedural objections when they implicate public policy and investor protection. - HELD THAT: - The Tribunal noted that the Regional Director raised substantive objections pointing to contraventions of statutory provisions, irregular allotments, and failure to act in accordance with the statutory scheme. Even if some objectors are restricted by thresholds applicable to shareholders, there is no similar limitation on regulatory authorities; the statutory scheme requires notices to regulators and gives them opportunity to represent within fixed time. The Tribunal emphasised that compliance with sectoral regulators (stock exchanges, SEBI etc.) is part of the scheme approval process and that procedural lapses going to legality cannot be overlooked as mere formalities. [Paras 28, 30]

The objections of the Regional Director and other regulatory concerns could not be brushed aside as merely procedural and had to be considered before sanctioning the scheme.

Locus to object under section 230(4) - role of the Regional Director - Even if the individual appellant's shareholding fell below the threshold in section 230(4), that limitation does not curtail the power of the Regional Director or other statutory authorities to raise objections to a scheme. - HELD THAT: - The Tribunal observed that the appellant held a negligible percentage of share capital, which may fall short of the threshold for certain shareholder objections under section 230(4). However, that statutory limitation on shareholders does not apply to the Regional Director or other public authorities who are expressly entitled to receive notice and make representations within the statutory period. Therefore, statutory authorities retain their competence to object irrespective of a particular shareholder's locus. [Paras 28]

The threshold in section 230(4) for shareholders does not impede the Regional Director from raising objections to the scheme.

Sanction under section 230-232 - compliance with regulatory authorities - The order of the NCLT sanctioning the scheme was set aside and the implementing actions were directed to be undone. - HELD THAT: - Having found that the scheme impermissibly sought to regularise earlier irregularities and that regulatory objections were not adequately addressed, the Tribunal allowed the appeal, set aside the impugned NCLT order dated 6th July, 2020 and directed the company to reverse actions taken in implementation of the scheme. The Regional Director was directed to observe compliance of this direction. The Tribunal thereby provided final relief rather than remitting the matter for further consideration. [Paras 33]

Appeal allowed; impugned NCLT order set aside and the respondent company directed to undo actions taken pursuant to the sanctioned scheme, with oversight by the Regional Director.

Final Conclusion: The appeal was allowed: the NCLT sanction of the scheme was set aside because the scheme sought to ratify prior irregularities and non-compliances and regulatory objections were not properly addressed; the respondent company is directed to undo actions implemented under the scheme and the Regional Director is to observe compliance. No order as to costs.

Validity of demand notice - Amendment to petition - Mistake in demand notice and prejudice test - Pre-existing dispute - Quality of goods defence - Running account and existence of undisputed sum - Triggering of CIRP on operational debt and default - Section 8 and Section 9 IBC requirements - Admission of additional evidence on appeal - Order 41 Rule 27 CPC - substantial cause test

Validity of demand notice - Amendment to petition - Mistake in demand notice and prejudice test - Whether the discrepancy between amounts in the demand notice and the petition/application vitiates the Section 9 proceedings and whether the amendment allowed by the Adjudicating Authority was impermissible. - HELD THAT: - The Tribunal held that a mistake in a demand notice does not automatically render it defective; what matters is whether the debtor suffered prejudice as a result. The additional affidavit filed before the Adjudicating Authority to cure defects in Part V of Form 5 was held to be only to rectify procedural defects and not a variation of the debt amount. The Adjudicating Authority had allowed the amendment after recording that no prejudice would be caused to the corporate debtor and afforded opportunity to file reply. Consequently the amendment was not a fatal jurisdictional error and the discrepancy in figures did not invalidate admission where the creditor was clearly owed at least the statutory minimum and no demonstrable prejudice was shown to the corporate debtor. [Paras 38, 39, 40, 41, 42]

Discrepancy in amounts did not vitiate the Section 9 proceedings; amendment was permissible and not a ground to set aside the admission.

Pre-existing dispute - Quality of goods defence - Running account and existence of undisputed sum - Whether a pre-existing and genuine dispute as to quality of goods existed and barred admission of the Section 9 petition. - HELD THAT: - The Tribunal applied the statutory scheme that a corporate debtor must bring to the operational creditor's notice a pre-existing dispute within the time prescribed. The Appellant's contention that defective/low-quality goods created a pre-existing dispute was rejected: the impugned communications with the customer (Indian Oil Corporation) did not bind the operational creditor and did not demonstrate that the dispute was raised with the creditor before receipt of the demand notice. The WhatsApp message relied upon was one factor among others and did not constitute a contemporaneous, substantive objection by the corporate debtor to the operational creditor. Given the admitted part payments, TDS entries in the invoices and the running account reconciliation, the Tribunal found there remained an undisputed sum that met the statutory threshold and the defence was a mere assertion insufficient to defeat the petition. [Paras 46, 47, 48, 52, 53]

No pre-existing genuine dispute established; defence on quality of goods insufficient to bar admission.

Admission of additional evidence on appeal - Order 41 Rule 27 CPC - substantial cause test - Whether additional documents sought to be placed on record in the appeal (IA 2375/2020) should be admitted. - HELD THAT: - The Tribunal examined the limited jurisdiction to admit additional evidence on appeal and applied the test of whether additional documents are necessary to enable it to pronounce judgment satisfactorily and whether there was a substantial cause for non-production before the Adjudicating Authority. Several documents were held to have been within the appellant's knowledge earlier and not shown to be indispensable; accordingly they were refused. However, the Tribunal permitted filing of certain judicial orders (orders dated 22.09.2020 and 06.01.2020) and the translated copy of the FIR (Annexure A9) as being permissible. Other communications between the corporate debtor and its customer did not bind the operational creditor and were not admitted as they were unnecessary to decide the central controversy. [Paras 49, 50, 51, 52]

IA 2375/2020 allowed only in part - judicial orders and specified documents admitted; other additional documents refused.

Triggering of CIRP on operational debt and default - Section 8 and Section 9 IBC requirements - Whether the Adjudicating Authority correctly admitted the Section 9 petition and initiated CIRP against the corporate debtor. - HELD THAT: - Applying the statutory prerequisites under Sections 8 and 9, the Tribunal found that the operational creditor had delivered demand notice and that no reply indicating a pre-existing dispute was received within the stipulated time. The account reconciliation demonstrated sales and part payments leaving an outstanding undisputed sum exceeding the statutory threshold as on the relevant date. The Tribunal reiterated that where debt and default are established and the application is complete, the Adjudicating Authority is entitled to admit the petition; it will not undertake a trial on disputed facts at the admission stage. On the totality of evidence and absence of a pre-existing dispute brought to the creditor's notice, the admission of the petition and consequent initiation of CIRP did not suffer from material irregularity or patent illegality. [Paras 20, 37, 46, 47, 53]

Admission of the Section 9 petition and initiation of CIRP was upheld; appeal dismissed.

Final Conclusion: The Tribunal dismissed the appeal: the discrepancy in amounts was not fatal in the absence of shown prejudice; no pre-existing genuine dispute on quality was proved; additional evidence was admitted only in part; and the Adjudicating Authority's admission of the Section 9 petition and initiation of CIRP was affirmed.

Existence of operational debt requiring provision of goods or services - relationship of operational creditor and corporate debtor - existence of a dispute under Section 8(2) of the IBC - limitation for filing under Section 9 of the IBC - prima facie proof required to invoke CIRP under Section 9

Existence of operational debt requiring provision of goods or services - relationship of operational creditor and corporate debtor - prima facie proof required to invoke CIRP under Section 9 - The appellant failed to establish that she was an operational creditor or that a seller buyer relationship with the corporate debtor existed. - HELD THAT: - The Tribunal held that Section 5(21) of the IBC requires provision of goods or services as a prerequisite for operational debt. The corporate debtor had flatly denied any purchase orders, supplies or payments and challenged the authenticity of the invoices. The appellant produced only fourteen invoices, without corroborative documents such as purchase orders, way bills, transport documents, tax invoices or tax remittance receipts, and the invoices bore only a stamp stating "Stocks Received" without signatures or identification of the recipient. In these circumstances the appellant did not establish, prima facie, the supply of goods or a seller buyer relationship and therefore failed to prove existence of operational debt or the status of operational creditor necessary to maintain an application under Section 9. [Paras 15, 16, 19, 20, 21]

The appellant is not an operational creditor vis a vis the corporate debtor and has not established the existence of operational debt.

Limitation for filing under Section 9 of the IBC - prima facie proof required to invoke CIRP under Section 9 - Only one invoice fell within the three year limitation period for filing under Section 9; the remaining claims were time barred. - HELD THAT: - The Adjudicating Authority examined dates of the fourteen invoices and found that only the invoice dated 21.11.2016 was within three years of the application filed on 25.09.2019. The other thirteen invoices predated the limitation period and therefore could not be relied upon for initiation of CIRP under Section 9. While the single in limitation invoice exceeded the statutory monetary threshold, the Tribunal considered limitation as materially narrowing the claims that could be pressed before the Adjudicating Authority. [Paras 9, 12]

Only one transaction is within limitation; the balance of the claims are time barred for purposes of Section 9.

Existence of a dispute under Section 8(2) of the IBC - prima facie proof required to invoke CIRP under Section 9 - The application under Section 9 was correctly dismissed because a bona fide dispute and material discrepancies existed which precluded prima facie admission. - HELD THAT: - Given the corporate debtor's categorical denial of any business relationship, its challenge to the authenticity of documents, and the absence of corroborative evidence from the appellant, the Adjudicating Authority found material discrepancies and a real dispute as contemplated by Section 8(2). The Tribunal agreed that investigation of the factual claim of supply and sale is beyond the Adjudicating Authority's limited threshold enquiry, and on the present record the appellant had not established a prima facie case to initiate CIRP. The Adjudicating Authority therefore dismissed the Section 9 application while not precluding the appellant from other recovery remedies if she can establish her claim. [Paras 10, 14, 15, 20]

The Section 9 petition was rightly dismissed for want of prima facie proof in the face of a bona fide dispute and document discrepancies.

Final Conclusion: The appeal is dismissed. The appellant failed to prove the existence of operational debt and the requisite operational creditor relationship, most of the claimed invoices were time barred and a bona fide dispute with material discrepancies justified dismissal of the Section 9 application; the Adjudicating Authority's order is upheld.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - protection of contractual rights as part of the corporate debtor's assets for maximization of value - continuance of Power Purchase Agreement (PPA) during liquidation to preserve the asset as a going concern - liquidator's duty to take custody and control of assets and carry on business for beneficial liquidation - interplay between contractual termination rights and insolvency priorities for realization of secured assets

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - protection of contractual rights as part of the corporate debtor's assets for maximization of value - Application of the moratorium under Section 14 of the IBC to the PPA and its effect on the purchaser's (GUVNL) attempt to terminate the PPA after commencement of CIRP and liquidation. - HELD THAT: - Section 14(1)(b) prohibits the corporate debtor from transferring, encumbering, alienating or disposing of any of its assets or any legal right or beneficial interest therein. A PPA constitutes a beneficial interest of the corporate debtor in the solar power project because the PPA converts the physical plant into an economically viable asset by providing a long term revenue stream. Termination of the PPA by the purchaser after commencement of CIRP and after the liquidation order would directly affect the asset and its value, thereby undermining the objective of IBC to maximize the value of assets for the stakeholders. The Tribunal therefore held that the moratorium applies to the PPA to the extent that unilateral termination which would prejudice realization of value during liquidation is prohibited, particularly where the power producer continues to generate and supply power and the liquidator is undertaking steps for realization of the asset's value. [Paras 15, 16, 23, 24, 30]

The moratorium under Section 14 applies to the PPA so as to prevent termination that would impair the corporate debtor's asset and its value during liquidation.

Continuance of Power Purchase Agreement (PPA) during liquidation to preserve the asset as a going concern - liquidator's duty to take custody and control of assets and carry on business for beneficial liquidation - interplay between contractual termination rights and insolvency priorities for realization of secured assets - Whether the contractual provisions of the PPA permit GUVNL to terminate the PPA in view of the liquidation process and whether such termination can be enforced against the liquidator or secured creditor seeking realization of the asset. - HELD THAT: - The PPA and the physical solar plant together form an integrated economic asset: the PPA yields the steady revenue stream essential to the project's long term viability and thus to realisation of value under IBC. The liquidator is mandated to take custody and control of all assets and carry on the business for beneficial liquidation under Section 35, and steps prescribed (including possible revival or sale as a going concern) must be available. Where the power producer is continuing to supply power and is capable of performing its obligations, unilateral termination of the PPA on account of liquidation would frustrate maximisation of asset value. Accordingly, contractual termination rights that operate to cut short the insolvency process or destroy the asset's economic value cannot be allowed to prevail; the Adjudicating Authority rightly set aside the termination notice and protected the secured creditor's right to realise the secured asset consistent with the objectives of the IBC. [Paras 22, 24, 28, 29, 31]

Contractual provisions do not permit the purchaser to terminate the PPA in a manner that defeats preservation and realisation of the integrated asset during liquidation; the termination notice was set aside and the PPA must be preserved for the purpose of maximising asset value.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority's order setting aside the termination of the PPA and directing protection of the secured creditor's rights to realise the secured asset during liquidation is upheld; no order as to costs.

Initiation of corporate insolvency resolution process - insolvency commencement date versus initiation date - suspension of filing for defaults arising during COVID 19 period - non obstante clause and retrospective operation

Initiation of corporate insolvency resolution process - suspension of filing for defaults arising during COVID 19 period - non obstante clause and retrospective operation - Section 10A bars filing of applications under Sections 7, 9 and 10 for defaults arising on or after 25th March, 2020 for the specified suspension period - HELD THAT: - The Court construed Section 10A, which begins with a wide non obstante clause, as creating a prohibitory embargo on filing applications for initiation of CIRP in respect of any default arising on or after 25th March, 2020 for the six month period (or any notified extension not exceeding one year). The proviso further bars initiation even for defaults occurring during the suspension period in the post suspension timeframe, and the Explanation limits the embargo so that it does not apply to defaults committed prior to 25th March, 2020. Adopting a purposive interpretation to effect the object of the Ordinance-preventing COVID 19 related distress from triggering insolvency-the provision was held to operate retrospectively with 25th March, 2020 fixed as the cut off date for applicability of the bar. [Paras 9]

Section 10A operates to bar filing of insolvency applications for defaults arising on or after 25th March, 2020 during the notified suspension period.

Insolvency commencement date versus initiation date - initiation of corporate insolvency resolution process - An application filed after 25th March, 2020 but before promulgation of the Ordinance is not barred by Section 10A if the underlying default occurred before 25th March, 2020 - HELD THAT: - The Court distinguished 'initiation date' (date of filing the application by the eligible applicant) from 'insolvency commencement date' (date of admission by the Adjudicating Authority). Section 10A bars the act of filing (initiation) in respect of defaults arising on or after 25th March, 2020; it does not operate to invalidate filings made in respect of defaults that occurred prior to that cut off merely because the filing happened after 25th March but before the Ordinance's promulgation. An eligible applicant could not have foreseen the Ordinance; accordingly the embargo does not apply to post 25th March filings that relate to pre 25th March defaults. [Paras 11, 12, 13]

Applications filed after 25th March, 2020 but before 5th June, 2020 remain maintainable so long as the default in question occurred before 25th March, 2020.

Initiation of corporate insolvency resolution process - suspension of filing for defaults arising during COVID 19 period - The appeal is dismissed as the appellant's application was barred because the stated date of default falls after 25th March, 2020 - HELD THAT: - On the facts, the Operational Creditor's Form 5 and Form 3 specify 30th April, 2020 as the date of default, which is after the 25th March, 2020 cut off. Consequently the Adjudicating Authority rightly rejected the Section 9 application as barred by Section 10A, and the Tribunal affirmed that rejection. [Paras 14]

The Adjudicating Authority correctly rejected the application; the appeal is dismissed.

Final Conclusion: Section 10A bars filing of CIRP applications in respect of defaults arising on or after 25th March, 2020 for the notified suspension period; filings made after 25th March but before promulgation of the Ordinance are maintainable only if the underlying default occurred prior to 25th March, 2020. The appellant's Section 9 application (default dated 30th April, 2020) was rightly rejected and the appeal is dismissed.

Pre-existing dispute - reply to demand notice under Section 8(2) of the IBC - admission of Section 9 application and initiation of CIRP - requirement that dispute must exist prior to receipt of demand notice - quashing of CIRP where pre-existing dispute is established

Pre-existing dispute - requirement that dispute must exist prior to receipt of demand notice - admission of Section 9 application and initiation of CIRP - Existence of a pre existing dispute between the parties prior to the Demand Notice dated 11.04.2019 and its effect on the maintainability of the Section 9 application and initiation of CIRP. - HELD THAT: - The Tribunal examined the correspondence between the parties (various emails and communications before 11.04.2019) and applied the binding principle in Mobilox and related authorities that a dispute must exist prior to receipt of the demand notice. The record contained multiple communications prior to the demand notice (including emails of 04.10.2018, 01.11.2018, 05.11.2018, 30.08.2018 and others) showing repeated complaints about incomplete, deficient or exaggerated billing, abandonment of site and requests for joint inspection and supporting documentation. Those contemporaneous exchanges, along with the audit and joint inspection evidence, were held to establish a pre existing dispute in the eye of law. The Adjudicating Authority's reliance on the technical objection that there was no formal reply to the demand notice within ten days under Section 8(2) was held to be misplaced because the material on record demonstrably showed a pre existing dispute which the Adjudicating Authority ought to have considered on the merits before admitting the Section 9 application. Applying the legal test that existence of such a pre existing dispute takes the matter out of the Code's machinery for CIRP initiation, the Tribunal concluded that admission was improper. [Paras 22, 23, 24, 27, 28]

The correspondence established a pre existing dispute prior to 11.04.2019; the Adjudicating Authority erred in admitting the Section 9 application and initiating CIRP, and the admission and consequent CIRP were quashed and set aside.

Reply to demand notice under Section 8(2) of the IBC - Whether the Adjudicating Authority was justified in rejecting the existence of dispute solely because no formal reply was filed within the ten day period under Section 8(2). - HELD THAT: - The Tribunal held that a mere technical objection about non compliance with the ten day reply provision under Section 8(2) could not override substantive material placed on record showing a pre existing dispute. The Adjudicating Authority should have analysed the contemporaneous documents and communications to determine whether a dispute pre existed the demand notice, rather than mechanically treating absence of a formal reply within ten days as conclusive. [Paras 14, 18, 19, 21, 25]

The Adjudicating Authority should not have admitted the Section 9 application solely on the ground of non reply under Section 8(2) without considering the substantive materials demonstrating a pre existing dispute; that approach was held to be erroneous.

Quashing of CIRP where pre-existing dispute is established - Relief and consequential directions upon finding of pre existing dispute. - HELD THAT: - On establishing the pre existing dispute and concluding that admission of the Section 9 petition was improper, the Tribunal set aside the Adjudicating Authority's order admitting CIRP, quashed all consequential steps taken during the CIRP, released the Corporate Debtor from the rigour of CIRP and directed the Interim Resolution Professional/Resolution Professional to hand over assets and records to the Corporate Debtor/promoters/board of directors. The Tribunal also directed that the Adjudicating Authority decide fee and cost of the CIRP payable to the IRP/RP by the Operational Creditor. [Paras 27, 28, 29, 30]

Impugned order admitting Section 9 petition and initiation of CIRP quashed; CIRP consequences set aside; assets and records to be handed back; matter remitted to Adjudicating Authority to decide CIRP fee and costs payable by the Operational Creditor.

Remand for decision on fee and cost of CIRP - Whether any matter was to be remitted for further consideration. - HELD THAT: - The Tribunal remitted a limited issue to the Adjudicating Authority for determination: the adjudication of fee and cost of the CIRP which shall be payable to the Interim Resolution Professional/Resolution Professional by the Operational Creditor. This was ordered because, although CIRP was quashed, fees/costs incurred required adjudication in the first instance by the Adjudicating Authority. [Paras 30]

Matter remitted to the Adjudicating Authority to decide the fees and costs of the CIRP payable to the IRP/RP by the Operational Creditor.

Final Conclusion: The Tribunal found, on the material before it, that a pre existing dispute existed prior to the demand notice dated 11.04.2019; the Adjudicating Authority therefore erred in admitting the Section 9 petition and initiating CIRP. The impugned admission and all consequential CIRP steps are quashed and set aside, the Corporate Debtor is released from CIRP and assets/records are to be handed back; the limited issue of CIRP fees and costs is remitted to the Adjudicating Authority for decision.

Material irregularity in CIRP - duty of Resolution Professional to place plans before Committee of Creditors - maximization of assets - commercial wisdom of Committee of Creditors - extension of CIRP timelines in exceptional cases - judicial intervention excluded from computation of extended timelines

Material irregularity in CIRP - duty of Resolution Professional to place plans before Committee of Creditors - Validity of the Adjudicating Authority's order dated 18th March, 2020 rejecting IA No.27/2020 on the ground that the highest bidder's Resolution Plan had already been approved by the Committee of Creditors on 12th February, 2020. - HELD THAT: - The Tribunal found that the Adjudicating Authority's rejection of IA No.27/2020 rested on an incorrect factual premise that the Committee of Creditors had approved the H1 Resolution Plan on 12th February, 2020. A contemporaneous order granting extension of the CIRP period (IA No.22/2020) showed that approval on 12th February, 2020 had not occurred and remained under consideration of the higher authority of the Committee of Creditors. Because the impugned March 18 order treated the application as infructuous on the basis of that incorrect factual finding, it suffered from material irregularity and factual frailty and could not be supported. The Tribunal therefore set aside the impugned order and held that the Appellants' application required fresh consideration uninfluenced by the subsequent approval recorded at the 7th COC meeting on 6th March, 2020. [Paras 10, 11]

The impugned order dated 18th March, 2020 was set aside for resting on an incorrect factual basis and for material irregularity in the conduct of the CIRP.

Duty of Resolution Professional to place plans before Committee of Creditors - maximization of assets - Whether the Resolution Professional acted contrary to the I&B Code by not placing the Appellants' revised Resolution Plan (submitted by email on 14th February, 2020) before the Committee of Creditors for consideration. - HELD THAT: - The Tribunal held that the Resolution Professional failed in his duty under the Code by not placing the Appellants' revised plan before the Committee of Creditors, even though the revised plan was submitted within the ordinary CIRP period and the earlier exclusion arose only on grounds of impending timelines rather than disqualification. That omission was contrary to the objective of maximizing the assets of the corporate debtor and violated the mandate of Sections 25(2) and 30(3) as reflected in the judgment. The Tribunal did not impinge upon the COC's commercial wisdom; instead it identified a material irregularity in procedure warranting fresh consideration of the revised plan. [Paras 12]

The failure to place the revised Resolution Plan before the Committee of Creditors was contrary to the statutory mandate and the matter must be revisited on merit.

Extension of CIRP timelines in exceptional cases - judicial intervention excluded from computation of extended timelines - commercial wisdom of Committee of Creditors - Whether, in the circumstances of this case, the timelines prescribed under the I&B Code could be relaxed or extended to permit consideration of the Appellants' revised plan and how the extended timeline should be computed. - HELD THAT: - Relying on the doctrine that timelines may be extended in exceptional cases (as explained by the Apex Court in the referenced authority), the Tribunal held that limited relaxation or extension of timelines is permissible where it would serve stakeholders' interests and where delay is not attributable to the applicant. The Appellants had filed the revised plan within the ordinary 180-day period and the Resolution Professional himself had sought a 90-day extension, so exclusion on account of timelines was unjustified. The Tribunal directed that the CIRP resume for consideration of Resolution Plans and that the period of judicial intervention be excluded while computing the extended timelines of 270 days. [Paras 11, 14, 15]

Timelines may be relaxed in appropriate cases; the CIRP is to resume, the plans are to be placed before the COC, and judicial intervention time shall be excluded in computing the extended timelines.

Final Conclusion: Impugned orders are set aside; the CIRP shall resume at the stage of consideration of Resolution Plans. The Resolution Professional is directed to place the H1 and H2 plans and the Appellants' revised plan before the Committee of Creditors for fresh consideration, and the period of judicial intervention shall be excluded while computing the extended timelines.

Proof of security interest under Section 52(3) of the Insolvency and Bankruptcy Code, 2016 - requirement of registration of charge with Registrar of Companies under Section 77 of the Companies Act, 2013 - IBBI (Liquidation Process) Regulation 2016 - Regulation 21 proof of security interest - hypothecation entry under Section 51 of the Motor Vehicles Act, 1988 - distinction between registration under Companies law and registration under Motor Vehicles Act

Proof of security interest under Section 52(3) of the Insolvency and Bankruptcy Code, 2016 - IBBI (Liquidation Process) Regulation 2016 - Regulation 21 proof of security interest - requirement of registration of charge with Registrar of Companies under Section 77 of the Companies Act, 2013 - The Appellant was not a secured financial creditor for the purposes of liquidation because the claimed security interest was not proved in the manner required by Section 52(3) of the IBC read with Regulation 21 of the IBBI (Liquidation Process) Regulations, 2016 and Section 77 of the Companies Act, 2013. - HELD THAT: - The Tribunal held that Section 52(3) of the IBC permits realisation of a security interest in liquidation only after verification by the liquidator, and the existence of a security interest must be proved by records maintained by an information utility or by such other means as may be specified by the Board. Regulation 21 prescribes the modes of proof, including certificate of registration of charge issued by the Registrar of Companies. Section 77(3) of the Companies Act, 2013 provides that no charge created by a company shall be taken into account by the liquidator or any creditor unless it is duly registered and a certificate of registration is issued. The material on record did not show registration of the charge with the ROC, nor proof from an information utility, nor registration with the Central Registry. The Tribunal applied the settled principle that unregistered charges of the kinds enumerated in the Companies Act are void against the liquidator and creditors and relied on binding precedent to the same effect. On these bases the Tribunal concluded that the Appellant failed to establish a legally enforceable charge and therefore could not be treated as a secured financial creditor entitled to realise the security under Section 52(1)(b). [Paras 15, 16, 17, 29]

Claim rejected as not that of a secured financial creditor; appellant treated as unsecured for liquidation distribution.

Hypothecation entry under Section 51 of the Motor Vehicles Act, 1988 - distinction between registration under Companies law and registration under Motor Vehicles Act - Registration of hypothecation by entry in the vehicle registration certificate under Section 51 of the Motor Vehicles Act, 1988 does not satisfy the statutory requirement of registration of charge under the Companies Act or the modes of proof prescribed under the IBC and Regulation 21. - HELD THAT: - The Tribunal examined the scope of Section 51 of the Motor Vehicles Act and observed that it provides for an entry in the certificate of registration regarding an agreement of hypothecation but does not amount to registration of a charge under the Companies Act. The IBC and Regulation 21 require proof by an information utility or by registration of charge with the ROC (or other specified modes). In the absence of such registration or proof, an entry under the MV Act cannot be treated as fulfilling the requirements of Section 52(3)(a) of the IBC or Regulation 21(b). Consequently, the Appellant's reliance on RTO/ MV Act entry was held insufficient to establish a secured interest in liquidation proceedings. [Paras 29]

MV Act hypothecation entry does not substitute for ROC registration; MV Act registration alone is insufficient to confer secured creditor status in liquidation.

Final Conclusion: The appeal is dismissed: the Appellant failed to prove the existence of a registered charge as required by Section 52(3) IBC read with Regulation 21 and Section 77 of the Companies Act, 2013; an RTO entry under the Motor Vehicles Act does not substitute for registration of charge with the ROC, and the Claimer must be treated as an unsecured creditor in the liquidation.

Fraudulent or malicious initiation of insolvency proceedings - penalty under Section 65 of the Insolvency and Bankruptcy Code - admission of a petition under Section 7 of the Insolvency and Bankruptcy Code - existence of debt and default for initiation of CIRP - appointment of Interim Resolution Professional - declaration of moratorium under Sections 13 and 14 of the Insolvency and Bankruptcy Code - completeness of an application under Section 7 - limitation for filing Section 7 petition

Fraudulent or malicious initiation of insolvency proceedings - penalty under Section 65 of the Insolvency and Bankruptcy Code - IA No. 300 of 2018 alleging that the Section 7 petition was a fraudulent and malicious initiation and seeking action under Section 65 of the Code was rejected. - HELD THAT: - The Adjudicating Authority considered the IA which alleged collusion between the Financial Creditor and a third party and contended that the petition amounted to a fraud. On review of the record and the communications exchanged between the Corporate Debtor and the Financial Creditor, the Authority found that the Corporate Debtor had on numerous occasions accepted responsibility for the default and had sought time and support to remediate the dues. The Authority also observed that the third party named in the IA was not a party to the main petition and had no locus to be impleaded. The contention that customers were constrained to buy only from the Corporate Debtor was rejected as untenable. On these findings, the plea of fraudulent or malicious initiation under Section 65 was dismissed and no penalty under Section 65 was imposed. [Paras 15, 18]

IA No. 300 of 2018 is dismissed; no penalty under Section 65 is imposed.

Admission of a petition under Section 7 of the Insolvency and Bankruptcy Code - existence of debt and default for initiation of CIRP - completeness of an application under Section 7 - limitation for filing Section 7 petition - appointment of Interim Resolution Professional - declaration of moratorium under Sections 13 and 14 of the Insolvency and Bankruptcy Code - The Section 7 petition filed by the Financial Creditor was admitted and CIRP initiated against the Corporate Debtor; directions were issued including appointment of IRP and declaration of moratorium. - HELD THAT: - On the material placed before it, the Adjudicating Authority was satisfied that the Corporate Debtor had availed financial facilities from the Financial Creditor, that the debt exceeded the statutory minimum, and that there was a proven default beginning on dates from 10.04.2016 onwards as reflected in the statement of accounts and supporting records. The petition was held to have been filed within the limitation period and to be complete for the purpose of initiation of CIRP under Section 7. Consequently, the petition was admitted. The Authority appointed the proposed Interim Resolution Professional and directed him to make the public announcement and to perform the duties specified under the Code. The Authority declared moratorium in terms of Sections 13 and 14, prohibiting suits, transfer or disposal of assets, enforcement of security, and other actions listed in the order, effective from the date of the order until completion of the CIRP. The Authority also advised adherence to statutory timelines and directed cooperation by personnel of the Corporate Debtor. [Paras 19, 20, 21, 22, 23]

CP(IB) No. 161 of 2017 is admitted; Mr. Anish Niranjan Nanavaty is appointed as Interim Resolution Professional; moratorium declared and directions issued to IRP and Registry.

Final Conclusion: The IA alleging fraudulent initiation was rejected and the Section 7 petition filed by the Financial Creditor was admitted; an Interim Resolution Professional was appointed, moratorium declared under the Code, and the Corporate Insolvency Resolution Process ordered to proceed.

Availability of Cenvat credit on Deposit Insurance Service - input service - Cenvat credit - nexus or connectivity with output service - Banking and Other Financial Services

Availability of Cenvat credit on Deposit Insurance Service - input service - nexus or connectivity with output service - Whether Cenvat credit of service tax paid on Deposit Insurance Service provided by DICGC is admissible to the bank as an input service for rendering banking services. - HELD THAT: - The Tribunal recorded that availment of Cenvat credit on Deposit Insurance Service by banks was a debatable question with conflicting decisions of Benches, which led to a reference to the Larger Bench. The Larger Bench in South Indian Bank v. Commissioner of Customs, Central Excise & Service Tax, Calicut, held that the insurance service provided by the Deposit Insurance Corporation to banks is an input service and that Cenvat credit of service tax paid for this service can be availed by banks for rendering their output services. Applying that binding conclusion, the present controversy is no longer res integra and the impugned demand and penalties based on denial of such credit cannot be sustained. The Tribunal therefore set aside the order confirming demand and penalty insofar as they arose from denial of Cenvat credit on Deposit Insurance Service. [Paras 5, 6]

Impugned order set aside; appeal allowed insofar as denial of Cenvat credit on Deposit Insurance Service is concerned.

Final Conclusion: On the authority of the Larger Bench decision, the Tribunal allowed the appeal and set aside the impugned order to the extent it denied Cenvat credit on Deposit Insurance Service, holding such service to be an input service admissible to banks.

Cenvat credit - input service - deposit insurance service - Deposit Insurance and Credit Guarantee Corporation (DICGC) - output services - nexus/connectivity requirement - binding Larger Bench precedent - Banking and Other Financial Services (BOFS)

Cenvat credit - input service - deposit insurance service - output services - binding Larger Bench precedent - Entitlement of the bank to Cenvat credit of service tax paid on Deposit Insurance Service provided by DICGC as an input service for rendering output services. - HELD THAT: - The Tribunal considered the contentious question whether service tax paid on Deposit Insurance Service provided by DICGC to banks qualifies as an input service eligible for Cenvat credit and whether such credit requires a specific nexus/connectivity requirement with the bank's actual performance of banking services. Noting conflicting views of earlier benches, the Tribunal applied the binding decision of the Larger Bench in South Indian Bank v. Commissioner which held that the insurance service provided by the Deposit Insurance Corporation to banks is an input service and that Cenvat credit of service tax paid for this service can be availed by banks for rendering output services. In light of that Larger Bench precedent, the Tribunal held the issue to be settled in favour of the assessee and set aside the impugned order denying credit. [Paras 4, 5]

Credit claimed for service tax paid on Deposit Insurance Service provided by DICGC is allowable as Cenvat credit; the appellant's appeal is allowed and the Revenue's appeal is dismissed.

Final Conclusion: Applying the Larger Bench ruling in South Indian Bank, the Tribunal allowed the bank's claim of Cenvat credit on Deposit Insurance Service supplied by DICGC and set aside the order denying credit; the Revenue's appeal was dismissed.

Refund of accumulated unutilized Cenvat Credit - Krishi Kalyan Cess - impact of implementation of GST on availment/refund of pre-GST credits - conflicting precedents requiring authoritative resolution - remand for fresh adjudication pending outcome of SLP before the Supreme Court

Refund of accumulated unutilized Cenvat Credit - Krishi Kalyan Cess - conflicting precedents - pending Supreme Court SLP - Whether the appellant's claim for refund of accumulated unutilized Cenvat credit of Krishi Kalyan Cess as on 30.6.2018 should be adjudicated or requires remand pending the Supreme Court's decision. - HELD THAT: - The Tribunal recorded that there exist conflicting decisions of larger benches and various High Courts on the permissibility of refund of accumulated unutilized Cenvat credit following implementation of GST. Noting that a Larger Bench decision of the Bombay High Court (in Gauri Plasticulture) holding refund not permissible is under challenge before the Supreme Court by way of SLP (registered 09.06.2020), the Tribunal held that it would be inappropriate to decide the appellant's refund claim in presence of the pending Supreme Court proceedings. Consequently, the Tribunal set aside the impugned order and remanded the matter to the adjudicating authority for de novo consideration after the outcome of the said SLP, so that the adjudicating authority may proceed in conformity with the authoritative pronouncement of the Supreme Court. [Paras 4, 5]

Impugned order set aside; matter remitted to the adjudicating authority for de novo adjudication after the Supreme Court decides the pending SLP.

Final Conclusion: Appeal allowed by way of remand: the impugned order is set aside and the matter is remitted to the adjudicating authority to decide the appellant's refund claim afresh in accordance with the eventual decision of the Supreme Court in the cited SLP.

Entitlement to 'C' forms - concessional rate of tax on inter-state purchase of High Speed Diesel - binding effect of a High Court decision in rem - application of precedent pending appeal or stay

Entitlement to 'C' forms - concessional rate of tax on inter-state purchase of High Speed Diesel - binding effect of a High Court decision in rem - application of precedent pending appeal or stay - Assessing authorities must extend the benefit of 'C' forms and the concessional rate for inter-state purchases of High Speed Diesel to all eligible dealers in accordance with the Court's decision in M/s Ramco Cements Ltd., until that decision is stayed or reversed. - HELD THAT: - The Court applied the reasoning in its earlier decision in M/s Ramco Cements Ltd., together with similar decisions of other High Courts and a Supreme Court confirmation, holding that the benefit of concessional tax via 'C' forms is available to dealers who purchase High Speed Diesel by way of inter state sales. The State's intention to challenge that precedent does not displace its present binding effect; absent a stay or reversal, the decision operates in rem and must be applied by all Assessing Authorities to pending assessments. The petitioner's inability to download blocked 'C' forms was noted as inconsistent with this obligation. Accordingly, the Department was directed to take necessary action forthwith to give effect to the precedent for all eligible dealers.

Writ petition allowed; Assessing Authorities directed to apply the Ramco Cements Ltd. decision and to take necessary action forthwith to enable eligible dealers to obtain 'C' forms and claim the concessional rate, until the decision is stayed or reversed; no costs.

Final Conclusion: The writ petition is allowed and the Revenue is directed to implement the High Court's precedent forthwith for all eligible dealers purchasing High Speed Diesel inter state, the direction remaining operative unless and until that precedent is stayed or reversed.

Anticipatory bail - power under Section 438 Cr.P.C. - ex facie innocence - preliminary enquiry - free and fair investigation - counter-blast to complaint - fundamental right to life and liberty

Anticipatory bail - power under Section 438 Cr.P.C. - ex facie innocence - preliminary enquiry - free and fair investigation - Grant of anticipatory bail to the petitioner under Section 438 Cr.P.C. - HELD THAT: - The Court examined the material on record and the police's preliminary enquiry which prima facie implicated the petitioner. The police reportedly recovered the complainant's documents from the petitioner and the complaint shows payments made by the complainant's family in several instalments to the petitioner. The petitioner failed to produce any evidence to substantiate her claim of having advanced a loan to the complainant despite opportunity to do so. Further, the complaint by the petitioner under the NI Act had been dismissed and the complainant acquitted in that proceeding, rendering the assertion of a counter-blast legally irrelevant to establish the petitioner's innocence. The investigation was at a nascent stage and the Court found that granting anticipatory bail would impede the police in effecting recoveries and conducting a free and fair investigation. Given the absence of ex facie innocence and the existence of prima facie material against the petitioner, the extraordinary remedy under Section 438 Cr.P.C. was not warranted.

Petition for anticipatory bail refused and the petition dismissed.

Counter-blast to complaint - anticipatory bail - Relevance of anticipatory bail granted in a different FIR to the present petition - HELD THAT: - The Court considered the fact that a coordinate Bench had granted anticipatory bail to the petitioner in another FIR registered by the complainant's brother but held that protection in that separate case arose from its own factual matrix and therefore was irrelevant to the present petition. The mere grant of anticipatory bail in a distinct case does not oblige the Court to extend similar protection where prima facie material and investigation considerations in the current FIR are different.

Grant of anticipatory bail in another FIR held irrelevant to the present application.

Final Conclusion: The petition for anticipatory bail was dismissed as the Court found prima facie material against the petitioner, no demonstration of ex facie innocence, and that protection at this stage would impede the ongoing investigation.

Presumption under Section 139 of the Negotiable Instruments Act - burden to rebut presumption - service of statutory notice in cheque bounce case - conviction under Section 138 of the Negotiable Instruments Act - concurrent findings and limited scope of interference in revision under Section 397 Cr.P.C.

Presumption under Section 139 of the Negotiable Instruments Act - burden to rebut presumption - conviction under Section 138 of the Negotiable Instruments Act - Admissibility of conviction under Section 138 NI Act where the accused admitted the cheque and signature but claimed the cheque was issued to a third party. - HELD THAT: - The courts below found that the accused admitted that Ex.P1 belonged to her account and that the signature on the cheque was hers. On such admission, the statutory presumption under Section 139 that the cheque was issued towards discharge of a legally enforceable debt arises and the burden shifts to the accused to rebut that presumption. The accused's lone plea that the cheque had been issued earlier to a third person (Shamala Godi) for a chit subscription was self-serving and unsupported by independent evidence. The trial Court and the First Appellate Court therefore properly held that the accused failed to discharge the burden of rebutting the presumption. The courts also took into account related circumstances - the accused did not initiate any criminal proceedings against the complainant or the third person despite alleging misuse, and the accused's participation in a prior similar cheque-bounce matter - as factors reinforcing the conclusion that the presumption stood unrebutted. Applying binding precedent, the presumption once raised and not satisfactorily rebutted warranted conviction under Section 138 NI Act. [Paras 16, 19, 20, 21, 22]

Conviction under Section 138 Negotiable Instruments Act upheld as the presumption under Section 139 arose on admission of the cheque and signature and was not rebutted.

Service of statutory notice in cheque bounce case - burden to rebut presumption - Validity of service of the statutory notice and imputation of knowledge of its contents to the accused. - HELD THAT: - The courts found that the legal notice (Ex.P7) was addressed to the accused's recorded residence and that the postal acknowledgment (Ex.P6) bore the accused's signature. Although PW.1 noted slight variations in signatures, he explained such variations as possible handwriting differences. The accused's own document (Ex.R1) showed the same address, supporting the finding that the notice was duly served and its contents imputed to the accused. That finding contributed to the conclusion that the complainant had complied with the statutory precondition and that the accused had not acted to rebut the complainant's case. [Paras 5, 6, 12, 17, 18]

Notice held to have been served on the accused; knowledge of the notice's contents imputed to her and the contention of non-service rejected.

Concurrent findings and limited scope of interference in revision under Section 397 Cr.P.C. - Whether this Court should interfere with concurrent findings of fact recorded by the trial and first appellate courts in revision under Section 397 Cr.P.C. - HELD THAT: - This revision petition was evaluated in the light of the principle that interference with concurrent factual findings is permissible only in cases of perversity or glaring illegality. The High Court observed that the trial Court had, after remand and recording of defence evidence, given reasoned findings which were confirmed by the First Appellate Court. No perversity or illegality was demonstrated to justify interference. Accordingly, the limited scope of revision precluded upsetting the concurrent conclusions. [Paras 8, 9, 14, 23]

Revision petition dismissed; concurrent findings upheld and no interference warranted under Section 397 Cr.P.C.

Final Conclusion: The High Court dismissed the revision petition, upholding the conviction and sentence under Section 138 of the Negotiable Instruments Act: the presumption under Section 139 arose on admission of the cheque and signature, the accused failed to rebut it, the statutory notice was held to have been duly served, and there was no perversity or illegality in the concurrent findings to warrant interference.

Restoration of complaint under amended Section 142 of the Negotiable Instruments Act - Jurisdiction for trial of offences under Section 138 of the Negotiable Instruments Act - Return of complaint for presentation before the appropriate jurisdictional Court - Effect of amendment to Section 142 on place of trial - Requirement of notice to accused for restoration application

Restoration of complaint under amended Section 142 of the Negotiable Instruments Act - Return of complaint for presentation before the appropriate jurisdictional Court - Requirement of notice to accused for restoration application - Effect of amendment to Section 142 on place of trial - Validity of the trial Court's order restoring the complaint after it had been returned for presentation before the jurisdictional Court, and whether restoration without notice to the accused was erroneous. - HELD THAT: - The trial Court had earlier returned the complaint for presentation before the appropriate jurisdictional Court in the light of the Apex Court's decision in Dashrath Rupsingh Rathod. The record shows that after return, the complainant presented the complaint before the jurisdictional Court and proceedings were recorded there. Following the amendment to Section 142 with effect from 15.06.2015, the complainant sought re-entry in the original trial Court by filing an application under the amended provision. The High Court examined the trial Court's order and the certified proceeding sheet of the jurisdictional Court which demonstrated that the complaint had in fact been presented there. The Court held that the subsequent amendment to Section 142 legitimately entitled the complainant to apply for restoration and for the trial Court to permit re-entry; allowing such an application did not occasion prejudice to either party. Consequently, restoration of the complaint by the trial Court, even though done without separately issuing notice to the accused, was not rendered illegal or irregular in the circumstances when the amended statutory provision reallocated forum-competence back to the original Court and the complainant had already attempted prosecution in the jurisdictional Court. [Paras 6, 7, 8]

The trial Court's order restoring the complaint was upheld as not illegal or irregular; permitting restoration under the amended Section 142 did not require setting aside the impugned order.

Final Conclusion: Writ petition dismissed; no interference with the trial Court's order restoring the complaint after the amendment to Section 142 of the Negotiable Instruments Act.

Presumption under Section 139 of the Negotiable Instruments Act - duress / coercion as defence to cheque issuance - burden to rebut statutory presumption - service of statutory notice and presumption under Section 114(f) of the Evidence Act - voidness of agreement under the Karnataka Land Reforms Act and bar on alienation - unjust enrichment and refund under Section 65 of the Indian Contract Act

Presumption under Section 139 of the Negotiable Instruments Act - burden to rebut statutory presumption - Admission of signature and ownership of the cheque raises the statutory presumption that the cheque was issued for discharge of a liability and the accused failed to rebut that presumption. - HELD THAT: - The accused admitted that the cheque belonged to his account and that the signature was his. On that admitted foundation the trial Court correctly invoked the statutory presumption under Section 139 of the NI Act that the cheque was issued towards discharge of debt or liability. The onus shifted to the accused to rebut the presumption by adducing acceptable evidence. The accused relied largely on his own testimony alleging coercion but did not produce corroborative evidence or other witnesses to probabilize the defence. In these circumstances the Courts below were justified in finding that the presumption stood unrebutted.

Presumption under Section 139 arises on admission of signature and ownership; the accused failed to discharge the burden to rebut it.

Duress / coercion as defence to cheque issuance - burden to rebut statutory presumption - The defence that the agreement and cheque were obtained under duress/coercion was not established and was held to be an afterthought. - HELD THAT: - The accused contended that the documents were obtained by intimidation and coercion. The Courts noted that the accused did not controvert the notice or take early steps to challenge the documents, and produced no independent evidence to substantiate coercion. The complaint he filed earlier alleging coercion resulted in a 'B' report and subsequent dismissal which was not successfully challenged; no cogent material was placed before the Court to probabilize the coercion defence. Given the lack of corroboration and timing of the defence, the Courts below rightly rejected the claim of coercion as inadequate to rebut the statutory presumption.

Defence of coercion was not proved and did not rebut the presumption arising under Section 139.

Service of statutory notice and presumption under Section 114(f) of the Evidence Act - The statutory notice was held to have been served on the accused and its contents could be imputed to him. - HELD THAT: - The complainant produced postal correspondence indicating delivery and the trial record included the postal authority's communication stating that the notice was delivered. The accused did not dispute the authenticity of the postal authority's letter nor assert that the address was incorrect. In the absence of such challenge, the trial Court drew the evidentiary presumption under Section 114(f) of the Evidence Act that the notice was served. The appellate Court agreed with that assessment. The failure to reply to a notice containing serious allegations was held to be significant and not consistent with fabrication.

Notice was presumed served and its contents were rightly imputed to the accused.

Voidness of agreement under the Karnataka Land Reforms Act and bar on alienation - The contention that the sale agreements were void under the Karnataka Land Reforms Act was rejected; the defence was raised for the first time before the High Court and no grant order was produced to support the claim. - HELD THAT: - The accused argued that a statutory bar on alienation for 15 years rendered the agreements void. The Court observed that this defence was not taken before the trial or first appellate courts and was first raised in revision, rendering it objectionable on grounds of delay. Further, the accused failed to produce the grant order or other documentary proof of the alleged bar. The Court also noted the settled legal position that an agreement to sell is distinct from an executed transfer and that the statutory bar, even if proven, operates on transfer rather than on entering into an agreement. For these reasons the claim of voidness was held to be untenable.

Contention of void agreement under the Karnataka Land Reforms Act is rejected for being belatedly raised and for lack of supporting documentary proof; agreements not held void on the record.

Unjust enrichment and refund under Section 65 of the Indian Contract Act - Even if an agreement were void, Section 65 of the Indian Contract Act prevents the accused from being unjustly enriched and obliges restitution of amounts received. - HELD THAT: - The Court addressed the alternative contention that if agreements were void the accused could not be required to pay. Applying the principle against unjust enrichment, the Court held that the accused, having received money, cannot retain it without restitution. Section 65 of the Indian Contract Act was invoked to show that the obligation to refund money received applies irrespective of the validity of the underlying agreement, and thus supports the complainant's entitlement to recover the sums received.

Section 65 operates to prevent unjust enrichment and supports recovery of amounts received even if the underlying agreement were held void.

Final Conclusion: The High Court found no infirmity in the concurrent findings of the trial and first appellate Courts: the statutory presumption under Section 139 was attracted and not rebutted, service of the statutory notice was established, the defence of coercion and the plea of void agreement under the Karnataka Land Reforms Act were rejected, and the plea of unjust enrichment was addressed by reference to Section 65 of the Indian Contract Act. The revision petition is dismissed and the conviction and sentence under Section 138 of the Negotiable Instruments Act are upheld.