TaxTMI Updates e-Newsletter
Nov 05,2022

Grant of bail - offence under the CGST Act involving false input tax credit - custodial detention since 26.2.2022 - maximum punishment not exceeding five years - release on furnishing personal bond and two sureties - conditions of bail including non-tampering with evidence and non-influencing witnesses - power to move for cancellation of bail on breach of conditions

Grant of bail - offence under the CGST Act involving false input tax credit - maximum punishment not exceeding five years - custodial detention since 26.2.2022 - release on furnishing personal bond and two sureties - conditions of bail including non-tampering with evidence and non-influencing witnesses - power to move for cancellation of bail on breach of conditions - Applicant Amit Patil was entitled to be released on bail in Case Crime No.580 of 2022 under the CGST Act. - HELD THAT: - The Court considered that the applicant had been in judicial custody since 26.2.2022 and that the maximum punishment for the offences alleged (raising false input tax credit) is up to five years. Noting these facts and the applicant's submissions (including disclosure of earlier grant of bail in a separate matter), the Court concluded that bail was appropriate pending conclusion of trial. The Court ordered release on bail subject to the applicant furnishing a personal bond and two reliable sureties to the satisfaction of the trial court. The Court imposed specific conditions: the applicant shall not tamper with evidence, shall not influence or induce witnesses, shall appear on dates fixed by the trial court unless exempted, and shall not make inducement, threat or promise to persons acquainted with the facts so as to dissuade them from disclosing such facts or to tamper with evidence. The prosecution was left free to move for cancellation of bail before the Court in case of breach of any condition. [Paras 7, 8, 9]

Bail allowed on the stated conditions; prosecution may apply for cancellation of bail if conditions are breached.

Final Conclusion: The bail application is allowed and the applicant Amit Patil is directed to be released on bail in Case Crime No.580 of 2022 upon furnishing the prescribed bond and sureties, subject to conditions prohibiting tampering with evidence and influencing witnesses; the prosecution may seek cancellation of bail on breach.

Revival of GST registration - limitation bar in appeal against cancellation - judicial precedent and stare decisis - conditioning of revival on payment of tax, interest, penalty and filing of returns - restriction on utilisation of Input Tax Credit pending departmental scrutiny

Revival of GST registration - conditioning of revival on payment of tax, interest, penalty and filing of returns - restriction on utilisation of Input Tax Credit pending departmental scrutiny - Petitioner entitled to revival of cancelled GST registration on the terms directed in Suguna Cutpiece Centre's case - HELD THAT: - The High Court, relying on its prior decision in Tvl. Suguna Cutpiece Centre (and subsequent consistent orders), extended the same relief to the petitioner whose GST registration stood cancelled. Although the second respondent rejected the petition as barred by limitation, the Court observed that earlier writ petitions in identical circumstances were allowed subject to specified conditions. The Court followed those precedents and directed revival of registration only after the petitioner complies with the conditions set out in paragraph 229 of the Suguna Cutpiece order, which require filing of omitted returns, payment of tax, interest, and prescribed fines/fees, restriction on making payments or adjustments from any unutilised Input Tax Credit until departmental scrutiny and approval, allowance for utilisation of Input Tax Credit only after approval, obligation to file returns and pay GST for periods subsequent to cancellation in cash, and permitting respondents to impose such restrictions as necessary to prevent misuse. The Court noted that the revenue has not challenged those earlier orders and therefore applied the same remedy to the petitioner.

Writ petition allowed and GST registration to be revived on the terms and conditions stated in paragraph 229 of the Suguna Cutpiece Centre order; no costs.

Limitation bar in appeal against cancellation - judicial precedent and stare decisis - Limitation objection did not preclude exercise of the Court's discretion to grant relief where consistent earlier orders had been followed and not challenged by revenue - HELD THAT: - The Court recognised the respondent's submission that the appellate authority is bound by statutory limitation. Nevertheless, having regard to a consistent line of earlier High Court orders in identical circumstances (including the Suguna Cutpiece directions) which the revenue did not appeal against, the Court exercised its discretionary jurisdiction to follow those precedents and afford the same relief. The decision emphasises the binding effect of the Court's prior unchallenged orders and the appropriateness of imposing conditional safeguards when reviving registration despite limitation issues.

Earlier unchallenged High Court precedents permitting conditional revival prevail; the limitation objection does not preclude granting relief on the same terms.

Final Conclusion: Writ petition allowed; cancellation of petitioner's GST registration set aside and registration to be revived subject to the conditions laid down in paragraph 229 of the Suguna Cutpiece Centre order (filing of returns, payment of tax, interest, penalty/fine, restrictions and departmental scrutiny of Input Tax Credit); no costs.

Alcoholic liquor for human consumption not food or food products - services by way of job work in relation to manufacture of alcoholic liquor taxable at higher GST rate - interpretation of exemption entry for food and food products - clarificatory notification and retrospective operation - purpose of exemption - encourage production of essential food items - principles of statutory interpretation for clarificatory/amending notifications

Alcoholic liquor for human consumption not food or food products - interpretation of exemption entry for food and food products - purpose of exemption - encourage production of essential food items - Alcoholic liquor for human consumption does not constitute 'food and food products' for the purpose of the entry prescribing 5% GST on job work services relating to food and food products. - HELD THAT: - The Court held that the expression 'food and food products' in the exemption entry must be interpreted in light of the purpose of the exemption, which is to encourage production of goods in common use and need and to make food items more affordable. Reliance was placed on earlier judicial reasoning that not everything consumed by humans qualifies as 'food' for the purpose of fiscal exemptions and that it could not have been the legislature's intention to extend exemption to expensive or non-essential items such as alcoholic liquor. The GST Council's clarification excluding alcoholic beverages for human consumption from the entry prescribing 5% GST on job work services was noted and the textual placement of beverages under Chapter 22 was held insufficient to bring alcoholic liquor within the intended scope of the lower-rate entry. Consequently, job work relating to manufacture of alcoholic liquor cannot be taxed at the concessional 5% rate applicable to food and food products. [Paras 15, 17, 18, 19, 21]

Job work in relation to manufacture of alcoholic liquor for human consumption is not entitled to the 5% GST concession and cannot be treated as a food or food product for that purpose.

Clarificatory notification and retrospective operation - principles of statutory interpretation for clarificatory/amending notifications - Notification No.6/2021, insofar as it clarifies that job work relating to manufacture of alcoholic liquor for human consumption attracts 18% GST, is clarificatory in nature and operates retrospectively. - HELD THAT: - The Court examined the character of Notification No.6/2021 and, applying established principles of statutory interpretation, observed that a clarificatory amendment which explains or declares the meaning of an earlier provision is generally intended to operate retrospectively. The Court quoted the legal principle that explanatory or declaratory amendments correct omissions or clear doubts and therefore are retrospective unless the amending instrument contains clear words to the contrary. Given that the notification clarified the scope of the earlier entry and that no specific exemption for alcoholic liquor had ever been granted, the notification was treated as clarificatory and given retrospective effect. [Paras 21, 22]

Notification No.6/2021 is clarificatory and retrospective; accordingly the higher rate (9%+9%) applies retrospectively to the job work services in question.

Final Conclusion: Writ petition dismissed. The petitioner is not entitled to the concessional 5% GST for job work relating to manufacture of alcoholic liquor for human consumption; such job work is taxable at 18% and Notification No.6/2021 is clarificatory and operates retrospectively in relation to the tax periods in dispute.

Supply - consideration - agreeing to refrain from an act or to tolerate an act (clause 5(e) of Schedule II) - actionable claim - principal supply exempt - ancillary receipt not taxable - CBIC Circular No.178/10/2022-GST

Supply - consideration - agreeing to refrain from an act or to tolerate an act (clause 5(e) of Schedule II) - actionable claim - Whether liquidated damages recovered by the applicant from the contractor on account of delay in commissioning qualify as a supply under GST - HELD THAT: - The Appellate Authority examined the nature of liquidated damages (LDs) and the contractual framework and concluded that the amounts recovered are compensatory in nature and do not constitute consideration for an agreed supply of services. The Authority accepted submissions that LDs arise on breach or default and are intended to compensate loss or injury rather than to remunerate the applicant for refraining from or tolerating an act. The Authority observed that the contract does not create reciprocal enforceable obligations under which the applicant agreed to tolerate a breach; instead the LD clause is a deterrent and a right of restitution available to the aggrieved party. The Authority further noted that such recoveries may fall within the ambit of an "actionable claim" or be mere renegotiation/adjustment of the contract price, and are therefore outside the scope of supply. The CBIC guidance in Circular No.178/10/2022-GST, which states that where LDs merely compensate injury or loss and there is no agreement by the recipient to do or abstain from doing anything, such amounts are not consideration for a supply, was relied upon. On this basis the Authority set aside the earlier AAR ruling that had held LDs taxable, and held that the LDs in the facts of this case do not amount to a taxable supply under GST. [Paras 11, 12, 13, 14, 15]

No; the liquidated damages recoverable by the applicant do not qualify as a supply under GST.

Time of supply - If liquidated damages were a supply, what would be the time of supply when GST liability is triggered - HELD THAT: - The Authority determined that because liquidated damages do not constitute a supply on the facts before it, the question of time of supply does not arise and requires no decision on merits. [Paras 15]

Does not arise.

Final Conclusion: The impugned Advance Ruling is set aside. The Appellate Authority held that the liquidated damages claimed by M/s Achampet Solar Private Limited for delay in commissioning are compensatory and not consideration for a supply; accordingly they are not taxable under GST, and the question of time of supply does not arise.

Suppression of material facts - Void ab initio under Section 104 of CGST Act, 2017 - Proviso to Section 98(2) - bar where question is pending in any proceedings - Proceedings includes investigation and issuance of GST DRC-01A - Admissibility of application for advance ruling

Suppression of material facts - Void ab initio under Section 104 of CGST Act, 2017 - Admissibility of application for advance ruling - Whether the Authority for Advance Ruling was correct in declaring its earlier advance ruling void ab initio on the ground that the applicant obtained the ruling by suppression of material facts. - HELD THAT: - The AAAR found that proceedings (search and subsequent actions) had been initiated by the State Tax department prior to the filing of the advance ruling application and that the applicant had received GST DRC-01A Part A intimations. The applicant had, in the ARA-01 form, affirmed that the question was not pending or decided in any proceedings, despite those earlier steps. The AAAR held that non-disclosure of the pending investigation and the intimation of tax liability amounted to suppression within the meaning of the Act and Explanation 2 to Section 74. Once the Authority was informed of such suppression, Section 104 empowered it to declare a previously pronounced ruling void ab initio. The AAAR applied these principles to the facts, concluded that the ruling had been obtained by suppression of material facts and lawfully invoked Section 104 to set aside the earlier ruling. [Paras 13, 20, 22, 23]

The AAAR correctly declared the earlier advance ruling void ab initio on the ground of suppression of material facts and the appeal is rejected.

Proviso to Section 98(2) - bar where question is pending in any proceedings - Proceedings includes investigation and issuance of GST DRC-01A - Whether the expression 'any proceedings' in the proviso to Section 98(2) includes investigation actions and the issuance of GST DRC-01A intimations, thereby barring admission of an advance ruling application. - HELD THAT: - The AAAR examined the sequence of events and the statutory context and concluded that the term 'any proceedings' in the proviso to Section 98(2) is wide enough to encompass investigative proceedings commenced by tax authorities. The Authority observed that investigation is a step in the statutory process that may culminate in adjudication and that issuance of GST DRC-01A Part A is an intimation of ascertained tax liability arising from such proceedings. The AAAR rejected the appellant's reliance on pre GST circulars and certain Income Tax and other High Court decisions as inapposite on facts or law, noting that the pre GST circular predated the GST mechanism (including GST DRC-01A). Applying these conclusions to the facts, the Authority held that the applicant's question was already the subject of proceedings when the application was filed, which should have precluded admission. [Paras 15, 16, 17, 21]

The proviso to Section 98(2) covers investigative proceedings and the issuance of GST DRC-01A; therefore the question was barred as it was already the subject matter of proceedings when the application was filed.

Final Conclusion: The appeal is dismissed. The Appellate Authority for Advance Ruling for Gujarat correctly upheld the GAAR's order declaring the earlier advance ruling void ab initio on the grounds that the applicant had suppressed material facts and that the question was already the subject of proceedings; the impugned order is therefore sustained.

Works contract - composite supply - construction of road for use by general public - recipient of supply - ancillary services - Entry 3(iv)(a) of Heading 9954 (Rate Notification)

Works contract - construction of road for use by general public - ancillary services - Entry 3(iv)(a) of Heading 9954 (Rate Notification) - Whether the applicant's activity of shifting electrical utilities falls within Entry 3(iv)(a) of Heading 9954 and therefore constitutes a composite supply of works contract by way of construction of road. - HELD THAT: - The Authority found on the materials that the applicant is a subcontractor engaged to perform a specific, limited scope - shifting and erection of electrical utilities - pursuant to a sub-contract with the main contractor and that the main contractor (not NHAI) is the recipient of the applicant's supply. On the legal characterisation, the Authority held that services which are ancillary to construction (such as shifting of utilities) when supplied separately and limited to that specific activity cannot themselves be treated as supply by way of construction of a road under Entry 3(iv)(a). The arrangement of reimbursement in the EPC Agreement and the independence of the shifting activity indicate it is not integrally the construction of the road but an ancillary or separate service. The Authority also noted consistent reasoning in a prior ruling of another AAR where similar utility-shifting works were held not to attract the concessional entry. Applying these findings, the Authority concluded the applicant's activity does not qualify as a composite works contract for construction of a road within Entry 3(iv)(a). [Paras 4]

The applicant's activity of shifting electrical utilities does not fall under Entry 3(iv)(a) of Heading 9954 and thus cannot be regarded as a composite supply of works contract by way of construction of road.

Final Conclusion: The application is dismissed insofar as it seeks a ruling that the subcontracted utility-shifting works qualify under Entry 3(iv)(a) of the Rate Notification; such works are not covered by that entry and thus do not attract the concessional rate provided therein.

Classification of goods by nature, character and end-use - Textile products and articles for technical uses - Section XI Note 1(g) exclusion relating to plastic strips exceeding 5 mm - Chapter 59 Note 7 inclusion of textile articles of a kind used for technical purposes - HSN Heading 5404/5407 for strips and woven fabrics of synthetic textile materials - Heading 5911 Subheading 59111000 for textile fabrics coated, covered or laminated with other material (e.g. plastic) used for technical purposes - End-use / functional use classification

Heading 5911 Subheading 59111000 - HSN Heading 5404/5407 - Section XI Note 1(g) exclusion relating to plastic strips exceeding 5 mm - Chapter 59 Note 7 inclusion of textile articles of a kind used for technical purposes - End-use / functional use classification - Classification of Geomembranes (laminated HDPE woven fabrics used for waterproof pond lining) under the GST/HSN Tariff. - HELD THAT: - The Authority examined the composition, manufacturing process and functional use of the impugned goods. The manufacturing sequence begins with extrusion of HDPE into thin sheets slit into tapes/strips of width below 5 mm, which are woven on circular/flat looms into uncoated woven fabric (HSN 5404 for strips; woven fabrics of such strips under HSN 5407). Those woven fabrics are subsequently laminated/coated on one or both sides (LDPE/LLDPE extrusion lamination), joined/seamed and cut to size to produce waterproof Geomembranes. Section XI Note 1(g) excludes only plastic strips of apparent width exceeding 5 mm, so tapes/strips below 5 mm fall within the textile headings and the woven fabric test is satisfied. Chapter 59 Note 7 and the HSN text for Heading 5911 cover "textile products and articles, for technical uses" including "textile fabrics ... coated, covered or laminated with ... other material (e.g. plastic)"; the HSN explanatory text expressly treats "other material" as including plastics. The Authority applied the end-use / functional-use concept, accepting that Geomembranes are used for technical purposes (e.g., pond lining in aquaculture/Biofloc applications) and therefore fit within the scope of Heading 5911. Reliance was placed on persuasive Advance Rulings addressing identical products and on the established principle that woven fabrics of synthetic materials are textile fabrics. Cumulatively, the raw material/production route (HDPE tapes woven fabric coated/laminated product), compliance with Section XI Note 1(g), satisfaction of Chapter 59 Note 7 criteria and the technical end-use lead to classification as a textile article under Heading 5911 rather than as a plastic article in other chapters. [Paras 33, 36, 37]

Geomembranes are classifiable as textile products/articles for technical uses and merit classification under HSN Heading 5911, tariff item 59111000.

Final Conclusion: The Advance Ruling holds that the laminated HDPE woven Geomembranes manufactured and supplied by the applicant are textile products/articles for technical uses and are classifiable at HSN 5911, tariff item 59111000.

Addition under Section 68 - statements recorded under Section 131/Section 132 post-search - corroboration by contemporaneous documents and seized material - reliance on later contradictory statement recorded at assessment stage - remand for fresh determination to Assessing Officer - limited scope of High Court to re-appreciate evidence under Section 100 CPC

Addition under Section 68 - statements recorded under Section 131/Section 132 post-search - corroboration by contemporaneous documents and seized material - reliance on later contradictory statement recorded at assessment stage - Deletion of addition of Rs. 20 crores made under Section 68 in the hands of the assessee - HELD THAT: - The Tribunal found that the first statement of Devender recorded by the Investigation Wing immediately after search (18.10.2013) was corroborated by contemporaneous documents and seized material, including the MOU, agreement to sell, receipts, complaints to police, the assessment against Devender and related civil proceedings. The Tribunal held that the subsequent statement recorded at the assessment stage (11.03.2016), in which Devender purportedly implicated the assessee, was uncorroborated and contradicted earlier admissible material; further, Devender retracted before the CIT(A) by affidavit supporting his earlier investigative statement. On the basis of these findings of fact and appreciation of evidence, the Tribunal concluded there was no justification to attribute the Rs. 20 crores to the assessee under Section 68 and deleted the addition. The High Court declined to re-appreciate the evidence and upheld the Tribunal's factual conclusion, holding that no substantial question of law arises for interference. [Paras 6, 7, 8, 9, 11]

Tribunal's deletion of the Rs. 20 crores addition under Section 68 upheld; appeal dismissed.

Remand for fresh determination to Assessing Officer - Remand of distinct addition of Rs. 10 crores (pertaining to transaction on behalf of Megatech) to the file of the Assessing Officer for fresh determination - HELD THAT: - The High Court noted that the Tribunal set aside the addition of Rs. 10 crores relating to a separate MOU between the assessee and Megatech and restored that issue to the Assessing Officer for fresh consideration. The Court observed that the Revenue did not raise or argue any substantial question of law in respect of that addition before the High Court; accordingly, the controversy was not examined on merits and remains for determination in the remand proceedings by the AO in accordance with law. [Paras 12]

Issue of the separate addition of Rs. 10 crores remanded to the Assessing Officer for fresh determination; not adjudicated by the High Court.

Final Conclusion: The High Court dismissed the revenue appeal against the Tribunal's deletion of the Rs. 20 crores addition under Section 68 for AY 2012-13, upholding the Tribunal's factual finding that the early investigative record and contemporaneous documents corroborated Devender's initial statement and that the later contradictory statement was uncorroborated; a separate addition of Rs. 10 crores was remanded to the Assessing Officer for fresh decision.

Reassessment notice issued during pendency of reassessment proceedings - reopening of assessment under Section 148 - non-disposal of objections before passing assessment - principles of natural justice - right to reasonable opportunity to rebut evidence - quashing and remand for fresh decision

Reassessment notice issued during pendency of reassessment proceedings - reopening of assessment under Section 148 - Validity of the second notice dated 07th June, 2021 issued under Section 148 during the pendency of reassessment proceedings initiated by notice dated 15th May, 2020. - HELD THAT: - The Court held that during the subsistence of reassessment proceedings another reassessment notice for the same assessment year cannot be validly issued. The Division Bench relied on established precedents, including the decision in CIT v. Sanjay Kumar Garg [2015] (9) TMI 390 - DELHI HIGH COURT and earlier authorities, to accept the principle that a fresh notice under Section 148 is impermissible while earlier reassessment proceedings are pending. In the present case the second notice dated 07th June, 2021 was therefore quashed as being issued during the pendency of reassessment proceedings initiated by the first notice dated 15th May, 2020. [Paras 7, 11, 13]

Second notice dated 07th June, 2021 and consequential notices dated 18th May, 2022 and 23rd May, 2022 quashed.

Non-disposal of objections before passing assessment - M/S GKN Driveshafts (India) Ltd. - Whether the assessment order dated 30th March, 2022 could be sustained where the objections filed by the assessee on 22nd July, 2021 were not disposed of prior to passing the assessment. - HELD THAT: - The Court accepted the petitioner's submission that the Assessing Officer failed to decide the objections before passing the assessment order, in contravention of the law laid down by the Supreme Court in M/S GKN Driveshafts (India) Ltd. . The Court observed that objections filed by the assessee must be considered and disposed of in accordance with that precedent. In consequence, the assessment order dated 30th March, 2022 was quashed and the matter remanded for fresh decision with a direction to first decide the objections within the stipulated period and thereafter complete the assessment in accordance with law. [Paras 3, 11, 14]

Assessment order dated 30th March, 2022 quashed; matter remitted to Assessing Officer to decide objections in accordance with M/S GKN Driveshafts (India) Ltd. and thereafter proceed with assessment.

Principles of natural justice - right to reasonable opportunity to rebut evidence - Whether there was a violation of natural justice in relation to the statement of Shri Kewal Krishna Arora shared with the assessee on 25th March, 2022. - HELD THAT: - The Court found that the statement relied upon by the Assessing Officer formed one of the main grounds for the addition but was furnished to the petitioner only on 25th March, 2022 with a compliance time that effectively predated issuance of the notice, thereby denying a reasonable opportunity to respond. This was held to be violative of principles of natural justice. In view of this procedural infirmity, the assessment, demand and penalty notices founded on the impugned proceedings could not be sustained and required fresh consideration after affording the assessee a proper opportunity. [Paras 4, 12, 14]

Finding of violation of principles of natural justice; assessment, demand and penalty notices quashed and remanded for fresh consideration with opportunity to respond.

Final Conclusion: Second reassessment notice issued during pendency of earlier reassessment proceedings and consequential notices quashed; the assessment order dated 30th March, 2022 and related demand and penalty notices are quashed and remitted to the Assessing Officer to first decide the objections filed by the petitioner in accordance with M/S GKN Driveshafts (India) Ltd. within eight weeks and thereafter complete the assessment in accordance with law, after affording the petitioner a reasonable opportunity to respond.

Penalty under section 271AAB - Clause (a) and clause (c) of section 271AAB - Admission of undisclosed income in return and statement recorded under section 132(4) - Distinction between penalty under section 271(1)(c) and penalty under section 271AAB - Penalty range of 10% to 30% depending on conduct after search initiated under section 132

Penalty under section 271AAB - Admission of undisclosed income in return and statement recorded under section 132(4) - Clause (a) and clause (c) of section 271AAB - Whether the penalty under section 271AAB was rightly levied at 30% under clause (c) where the assessee admitted the seized cash in the return filed in response to notice under section 153A and furnished bills claiming the manner of derivation - HELD THAT: - The Tribunal held that section 271AAB operates in cases where search has been initiated under section 132 on or after 01.07.2012 and prescribes a penalty ranging from 10% to 30% depending on the conduct of the assessee. Clause (c) of section 271AAB applies where the assessee neither admits the undisclosed income in the statement recorded under section 132(4) nor declares it in the return filed within the specified period and then pays tax with interest. In the present case the assessee admitted the seized cash by declaring it in the return filed in response to the notice issued under section 153A and produced bills explaining the manner in which the cash was derived. Although the Assessing Officer rejected the explanation, on the material filed the Tribunal found that the assessee had specified the manner of derivation and had paid tax and interest in respect of the undisclosed income. Consequently clause (a), not clause (c), was applicable and the higher 30% penalty could not be sustained. The Tribunal therefore concluded that the AO's reasons for invoking clause (c) lacked cogent support and required reduction of the penalty to the minimum rate specified under the statute. [Paras 8, 9]

Penalty under section 271AAB reduced and held to be attractable under clause (a) with direction to restrict penalty to 10% of the undisclosed income.

Final Conclusion: Appeal partly allowed; penalty levied under section 271AAB sustained in principle but reduced to the minimum rate of 10% as clause (a) is applicable since the assessee had declared the seized cash in the return and specified its manner of derivation.

Use of documents seized in search of a third party - requirement to record satisfaction before treating seized documents as relating to another person - inapplicability of assessment under section 153A where seized documents relate to a third party absent recorded satisfaction; proper recourse under section 153C - inadmissibility of impounded documents as foundation for additions where linkage is not established - penalty under section 271(1)(b) liable to be set aside where the assessment on which penalty rests is quashed

Use of documents seized in search of a third party - requirement to record satisfaction before treating seized documents as relating to another person - inadmissibility of impounded documents as foundation for additions where linkage is not established - inapplicability of assessment under section 153A where seized documents relate to a third party absent recorded satisfaction; proper recourse under section 153C - Validity of relying on DB-06 (documents impounded in search of Debabrata Behera) for making additions and completing assessment under section 153A in the assessee's case - HELD THAT: - The Tribunal found as an admitted fact that DB-06 comprised documents impounded during search on Debabrata Behera. Where documents seized in the course of search of one person are said to relate to another, the Assessing Officer must record a satisfaction in the file of the searched person linking those documents to the other person; no such satisfaction was recorded in respect of Debabrata Behera. In the absence of any recorded satisfaction or any demonstrated nexus between DB-06 and the assessee, DB-06 could not be used as evidence against the assessee. The reliance on DB-06 formed the foundation for the Assessing Officer's allegation of suppression of sales; removal of that foundation therefore vitiates the assessment. Further, if DB-06 were to be used as material relating to a third person, the proper procedure would have been to proceed under section 153C, not under section 153A; no such course was adopted. For these reasons the assessment framed on the basis of DB-06 was held invalid and quashed. [Paras 8, 9]

Assessment quashed for lack of recorded satisfaction linking DB-06 to the assessee and because the material, if pertaining to a third party, should have been processed under section 153C rather than section 153A.

Penalty under section 271(1)(b) liable to be set aside where the assessment on which penalty rests is quashed - Whether penalty under section 271(1)(b) survives after the underlying assessment for the assessment years 2008-09 and 2009-10 is quashed - HELD THAT: - The Tribunal noted that the penalty was levied on the basis of non-compliance and non-cooperation during the assessment process, which itself was concluded ex parte. Having quashed the assessment for 2008-09 and having applied the same finding to 2009-10, the Tribunal held that the foundational basis for imposing the penalty no longer survives. Consequently, the penalty confirmed by the Commissioner (Appeals) cannot be sustained. [Paras 15]

Penalty under section 271(1)(b) deleted for both assessment years as the assessment on which it was premised has been quashed.

Final Conclusion: Revenue's appeal is dismissed, the assessments for AY 2008-09 and 2009-10 framed on the basis of DB-06 are quashed, the cross-objections of the assessee are allowed, and the penalties under section 271(1)(b) for both years are deleted.

Transfer pricing adjustment on outstanding receivables - arm's length price - benchmarked comparable analysis - Comparable Uncontrolled Price (CUP) method - Transactional Net Margin Method (TNMM) - working capital adjustment - imputed interest on delayed receivables

Transfer pricing adjustment on outstanding receivables - arm's length price - Comparable Uncontrolled Price (CUP) method - imputed interest on delayed receivables - Whether interest-based transfer pricing adjustment on outstanding receivables from the AE in respect of provision of medical transcription services was warranted - HELD THAT: - The Tribunal found it was undisputed that the core international transaction for medical transcription services had been benchmarked by the assessee and found to be at arm's length using CUP. The assessee demonstrated-by comparative analysis including imputed interest (both at assessee's claimed LIBOR + 3.25% for 45 days and the TPO's chosen average 6 months USD LIBOR + 450 bps)-that the weighted average per line rate charged to the AE remained higher than the interest-adjusted rates charged by third-party vendors. Applying the same interest methodology as the TPO did not alter this outcome. On this determinative basis the Tribunal held that the alleged separate transaction of outstanding receivables did not warrant an additional upward adjustment, since the consequences of timing of payment were already reflected and the line rates remained at arm's length; accordingly the TPO/AO adjustment in respect of medical transcription services was deleted. [Paras 12]

Adjustment on account of outstanding receivables for medical transcription services deleted; no additional interest-based transfer pricing adjustment warranted.

Transfer pricing adjustment on outstanding receivables - arm's length price - Transactional Net Margin Method (TNMM) - working capital adjustment - Whether interest-based transfer pricing adjustment on outstanding receivables from the AE was required in respect of provision of IT and ITeS when TNMM benchmarking used working capital adjusted margins - HELD THAT: - The assessee benchmarked its IT and ITeS transactions under TNMM with comparables whose margins were working capital adjusted, and both the assessee and the TPO had accepted the benchmarking. The Tribunal relied on the principle-following the Delhi High Court in Kusum Healthcare-that where working capital adjustments in benchmarking already factor in the impact of receivables on pricing/profitability, a further ad hoc adjustment for outstanding receivables would distort the picture and re-characterise the transaction. Applying that reasoning, the Tribunal found no merit in making a separate adjustment on account of delayed receivables for the IT/ITeS segment and directed deletion of the TPO/AO adjustment. [Paras 13, 14]

Adjustment on account of outstanding receivables for IT and ITeS deleted; no separate interest-based adjustment required where working capital adjusted TNMM benchmarking was at arm's length.

Final Conclusion: The Tribunal deleted the entire transfer pricing adjustment made by the TPO/AO in respect of outstanding receivables for both medical transcription services and IT/ITeS for assessment year 2017-18; the appeal is partly allowed.

Revisionary jurisdiction under section 263 - Application of mind by the Principal Commissioner in exercise of revisional power - Proposal by Assessing Officer as a stimulus for exercise of revisional jurisdiction - Deemed erroneous where order passed without inquiries or verification - Limited scrutiny (CASS) and scope of verification - Condonation of delay in filing appeal during Covid-19 exclusion period

Condonation of delay in filing appeal during Covid-19 exclusion period - Delay of 430 days in filing the appeal was condoned and the appeal admitted. - HELD THAT: - The Tribunal recorded that the impugned order dated 29.05.2020 required filing by 28.07.2020, a due date falling within the period excluded by the Hon'ble Supreme Court in Suo moto Writ Petition (C) No. 3 of 2020. Applying that exclusion (15.03.2020 to 28.02.2022) and the further 90 days thereafter, the period of delay of 430 days was held to fall within the excluded period and was accordingly condoned. [Paras 4]

Delay condoned and appeal admitted for adjudication.

Revisionary jurisdiction under section 263 - Application of mind by the Principal Commissioner in exercise of revisional power - Proposal by Assessing Officer as a stimulus for exercise of revisional jurisdiction - Deemed erroneous where order passed without inquiries or verification - The Principal Commissioner validly exercised jurisdiction under section 263 by independently applying his mind on records despite the matter arising from a proposal by the Assessing Officer. - HELD THAT: - The Tribunal accepted that a proposal by the AO is a suggestive stimulus and not a substitute for the independent consideration required of the Principal Commissioner. Citing and applying the principle that the PCIT must examine records, conduct or cause such enquiry as necessary and record reasons before holding an AO's order to be erroneous and prejudicial to revenue, the Tribunal found that the PCIT on perusal of records issued a show-cause, considered the assessee's replies and recorded specific discrepancies indicating lack of verification by the AO. The PCIT therefore applied his mind and made the requisite finding required to invoke section 263 rather than merely acting on the AO's opinion. [Paras 14]

Revisionary order under section 263 was sustainable as the PCIT applied independent mind and recorded reasons.

Limited scrutiny (CASS) and scope of verification - Deemed erroneous where order passed without inquiries or verification - The PCIT did not exceed jurisdiction by directing verification on issues falling within the limited-scrutiny selection where records and order-sheet entries showed that the AO had not carried out the requisite verification. - HELD THAT: - Although limited scrutiny constrains the scope of verification to selected issues, the Tribunal found a discrepancy between the assessee's claimed submissions (including a written submission dated 21.09.2017 and supporting bills/books) and the order-sheet entries which recorded the hearing as concluded on 19.09.2017. These facts demonstrated that the AO neither recorded consideration of the claimed submissions nor conducted the verification which the selection criteria required. Given explanation 2 to section 263 (an order is erroneous if passed without necessary inquiries), the PCIT legitimately concluded that the assessment was erroneous insofar as prejudicial to revenue and directed the AO to verify the issues afresh after furnishing opportunity to the assessee. [Paras 14, 15]

The PCIT's direction to set aside the assessment for fresh verification on the limited-scrutiny issues was proper and within jurisdiction.

Final Conclusion: The appeal is dismissed: the Tribunal upheld the Principal Commissioner's revisionary order under section 263 after condoning the delay in filing the appeal, finding that the PCIT applied independent mind to the records (the AO's proposal being only a stimulus) and correctly concluded that the assessment was erroneous insofar as prejudicial to the revenue for lack of requisite verification on limited-scrutiny issues, warranting remand for fresh verification.

Condonation of delay for filing appeal - Unexplained cash credit under section 68 - Presumptive taxation under section 44AD - Typographical error and bona fide mistake in income-tax return - Duty to file revised return to rectify errors - Onus of proof and credibility of explanation - Discrepancy between closing and opening cash balances

Condonation of delay for filing appeal - Cause of substantial justice prevailing over technical delay - Whether the delay of 387 days in filing the appeal before the Tribunal should be condoned. - HELD THAT: - The assessee averred non-receipt of the physical copy of the CIT(A)'s order and that the order was discovered on the income-tax portal, followed by steps to file the appeal; part of the delay overlapped with the pandemic period covered by sovereign extensions of limitation. The Tribunal found no contrary evidence to impeach the affidavit of non-receipt and applied the principle that technicalities should yield to substantial justice as articulated in Collector of Land Acquisition v. Katiji. On this basis the Tribunal concluded there was a reasonable cause for delay and exercised discretion to condone the delay and admit the appeal for hearing. [Paras 5]

Delay of 387 days is condoned and the appeal is admitted for hearing.

Unexplained cash credit under section 68 - Presumptive taxation under section 44AD - Typographical error and bona fide mistake in income-tax return - Duty to file revised return to rectify errors - Onus of proof and credibility of explanation - Discrepancy between closing and opening cash balances - Whether the opening cash balance shown by the assessee could be accepted or whether it was rightly treated as unexplained cash credit and added to income. - HELD THAT: - The assessee claimed that the substantial opening cash balance shown for the assessment year arose from a typographical/inadvertent omission in the preceding year's return and produced a monthly cash-flow statement and earlier/succeeding years' returns to support continuity. The Assessing Officer, noting that the preceding year's return showed nil cash-in-hand, treated the opening balance as unexplained cash credit under section 68 and made an addition; the CIT(A) sustained that view observing that any error ought to have been corrected by filing a revised return. The Tribunal examined the record and found that the assessee did not disclose the identity of any person responsible for the alleged filing mistake, nor did he produce corroborative evidence or credible correspondence to support the claimed bona fides. Given the absence of reliable evidence and the discrepancy between closing and opening balances, the Tribunal accepted the revenue's contention that the explanation lacked credibility and that the addition under section 68 was justified. The authorities relied upon by the assessee were distinguished as factually inapposite. [Paras 12, 13, 14]

The addition made by the Assessing Officer treating the opening cash balance as unexplained cash credit is confirmed and the appeal is dismissed on merits.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, on the merits, dismissed the appeal by upholding the addition treating the opening cash balance as unexplained cash credit under section 68 for Assessment Year 2014-15.

Internal Comparable Uncontrolled Price method - Transactional Net Margin Method - Most Appropriate Method - Arm's length price - Arithmetic mean of uncontrolled prices - Marked to market foreign exchange loss - Revenue nature of exchange fluctuation loss attributable to working capital - Allowability of expenditure despite non-service of section 133(6) notices - Burden of proof and supporting evidence (cheque payments, bills, TDS)

Internal Comparable Uncontrolled Price method - Transactional Net Margin Method - Most Appropriate Method - Arm's length price - Arithmetic mean of uncontrolled prices - Validity of deletion of transfer pricing adjustment made by AO/TPO where assessee applied internal CUP and TPO applied external TNMM - HELD THAT: - The Tribunal upheld the Ld. CIT(A)'s finding that the assessee's application of the internal CUP method was appropriate and that the purchases of greasy wool from the associated enterprise were comparable with purchases from independent parties. The CIT(A) accepted the assessee's weighted average pricing and micron-content comparison showing the purchases fell within the tolerance range of +/-5%, and held that minor micron variations did not materially affect price. The Tribunal agreed that the TPO had proceeded on wrong factual premises and had improperly 'cherry-picked' instances to reject the TPSR. The CIT(A)'s reliance on the statutory provision permitting arithmetic averaging where multiple uncontrolled prices exist and on prior departmental acceptance of the same methodology in earlier assessment years supported the conclusion. Because internal CUP was found to be the Most Appropriate Method and, when applied, showed transactions at arm's length, the impugned adjustment was unsustainable and deleted. [Paras 7]

Grounds 1-4 dismissed; transfer pricing adjustment of Rs.4,75,00,000/- deleted and the application of internal CUP upheld as the Most Appropriate Method.

Marked to market foreign exchange loss - Revenue nature of exchange fluctuation loss attributable to working capital - Allowability of marked-to-market foreign exchange loss apportioned to working capital - HELD THAT: - The Tribunal affirmed the Ld. CIT(A)'s conclusion that the exchange fluctuation loss relating to the portion of the foreign currency loan used for working capital is revenue in nature and deductible. The assessee had apportioned the year-end restatement loss between fixed assets (capitalised) and working capital (charged to P&L). The CIT(A) relied on accounting principles under AS-11 and on Supreme Court precedents which treated MTM loss attributable to working capital as a real loss allowable in the year of recognition. In view of these authorities and the factual finding about utilisation of loan proceeds, the disallowance by the AO was reversed. [Paras 11]

Ground no.5 dismissed; deduction of the marked-to-market exchange loss attributable to working capital allowed.

Allowability of expenditure despite non-service of section 133(6) notices - Burden of proof and supporting evidence (cheque payments, bills, TDS) - Deletion of addition made on account of payments to alleged non-existent parties where assessee produced vouchers, cheque payments and evidence of TDS - HELD THAT: - The Tribunal endorsed the CIT(A)'s finding that mere non-service or return of notices under section 133(6) against the payees cannot justify disallowance where the assessee produced contemporaneous supporting evidence. The assessee had placed bills/vouchers, contract/invoice copies, payment by account-payee cheques and proof of TDS deduction on record in respect of repair and maintenance payments and commission. On these facts the CIT(A) rightly accepted the expenditures as genuine and allowable; adverse inference from non-service of notices was not warranted. [Paras 15]

Ground no.6 dismissed; additions on account of payments to the two parties deleted and expenditure allowed.

Final Conclusion: The revenue's appeal is dismissed: the Tribunal affirms the CIT(A)'s deletion of the transfer pricing adjustment by upholding internal CUP as the Most Appropriate Method; allows the marked-to-market foreign exchange loss attributable to working capital; and upholds deletion of additions made in respect of payments to alleged non-existent parties where supporting documentary and payment evidence existed.

Income from other sources - taxable territory receipt rule under Section 5 of the Income-tax Act - time of accrual/receipt determining previous year - double taxation - TDS credit under Section 199 of the Income-tax Act - assessment year for which income is assessable

Income from other sources - taxable territory receipt rule under Section 5 of the Income-tax Act - time of accrual/receipt determining previous year - double taxation - Whether interest on FDR taxed in Assessment Year 2013-14 could be sustained when the assessee acquired the right to receive the amount only after the High Court judgment and the same amount was offered to tax in later assessment years. - HELD THAT: - The Tribunal found that the assessee acquired the right to receive the interest only after the High Court's order dated 15/11/2016, and the amount was received in the taxable territory thereafter and offered to tax in Assessment Year 2017-18 (and also in 2016-17). Applying the rule in Section 5 that income of a resident includes income received or deemed to be received in the taxable territory in the relevant previous year, the Tribunal held that the interest was not taxable in Assessment Year 2013-14. Taxing the same amount in AY 2013-14 would amount to double taxation. Accordingly the addition made in AY 2013-14 was deleted. [Paras 9]

Addition of interest on FDR in Assessment Year 2013-14 deleted.

TDS credit under Section 199 of the Income-tax Act - assessment year for which income is assessable - Whether the assessee is entitled to credit for TDS deducted on the said interest and in which assessment year such credit should be given. - HELD THAT: - The Tribunal noted that credit for tax deducted at source must be given to the deductee for the assessment year in which the income is assessable. Since the assessee offered the subject income for taxation in Assessment Year 2016-17 and Assessment Year 2017-18, the assessee is entitled to receive TDS credit in accordance with Section 199 for the assessment year(s) in which the income has been assessed. [Paras 10]

Assessee entitled to TDS credit as per Section 199 for the assessment year(s) in which the income is assessable.

Final Conclusion: The appeal is partly allowed: the addition of interest on FDR in Assessment Year 2013-14 is deleted, and the assessee is entitled to TDS credit in accordance with Section 199 for the assessment year(s) in which the interest income has been assessed (Assessment Year 2016-17 and Assessment Year 2017-18).

Exemption under section 54(1) for reinvestment in residential property - Deposits in Capital Gains Account Scheme as procedural requirement under section 54(4) and due date under section 139(1) - Substantial compliance versus procedural non-compliance - Investment in construction on an already owned site qualifies for section 54

Exemption under section 54(1) for reinvestment in residential property - Deposits in Capital Gains Account Scheme as procedural requirement under section 54(4) and due date under section 139(1) - Substantial compliance versus procedural non-compliance - Whether a 31-day delay in depositing capital gains in the Capital Gains Account Scheme disentitles the assessee from claim of exemption under section 54(1) where the entire capital gain was invested in construction of a new residential house within the statutory three year period - HELD THAT: - The Tribunal accepted the assessee's factual position that the entire amount claimed as deduction under section 54 was spent on construction of the new residential house within the three year period stipulated by section 54(1). The Tribunal held that subsection (4) (deposit in CGAS by the due date for furnishing return under section 139(1)) is attracted only where the assessee has not invested the sale consideration in purchase or construction within the period prescribed by subsection (1). Accordingly, subsection (4) operates as a procedural mechanism to preserve the benefit where the sale consideration is not otherwise invested by the prescribed time, and does not defeat the exemption where the mandatory requirement of section 54(1) - actual investment in the new asset within the statutory period - is satisfied. The Tribunal placed reliance on authoritative High Court decisions which held that compliance with section 54(1) is substantial and mandatory for the exemption, whereas the deposit requirement in the notified capital gains account is of a procedural character and comes into play only on failure to invest within the period prescribed by section 54(1). Applying that principle to the facts, the Tribunal found the 31 day delay in making deposits into CGAS immaterial because the subsequent utilisation for construction occurred within the three year window, and therefore the assessee was entitled to the deduction under section 54(1).

Addition under section 54 was deleted; Revenue's appeal dismissed and exemption under section 54(1) upheld despite the short delay in CGAS deposit.

Final Conclusion: The Tribunal upheld the CIT(A)'s deletion of the addition under section 54, ruling that a short delay in depositing capital gains in the notified account does not defeat the exemption when the capital gain has been fully invested in construction of the new residential house within the period prescribed by section 54(1).

Revisional jurisdiction under section 263 - treatment of surrendered income as business receipt or deemed income under sections 68 to 69D - applicability of special rate under section 115BBE (maximum marginal rate) - onus on assessee to establish source of investments disclosed during survey

Revisional jurisdiction under section 263 - Validity of Pr. CIT invoking revisional jurisdiction under section 263 against the assessment order. - HELD THAT: - The Tribunal upheld the Pr. CIT's exercise of powers under section 263. The Assessing Officer accepted the surrendered amount in the return and proceeded to revalue sales without enquiring whether parts of the surrendered amount related to investments (jewellery, immovable property) disclosed during survey. That failure amounted to an order which was erroneous and prejudicial to the interests of revenue because the AO did not examine whether the surrendered amounts should have been treated under the deeming provisions or taxed under the special rate. On that basis the revisional action was held to be justified and the order of the Principal CIT interfering with the assessment was sustained. [Paras 15, 16, 18]

Pr. CIT validly invoked section 263; the impugned order does not require interference and the appeal is dismissed on this ground.

Treatment of surrendered income as business receipt or deemed income under sections 68 to 69D - applicability of special rate under section 115BBE (maximum marginal rate) - onus on assessee to establish source of investments disclosed during survey - Whether the Assessing Officer erred in not examining application of the deeming provisions and section 115BBE to the surrendered amounts and whether further enquiry was required into nexus between surrendered receipts and investments in property/jewellery. - HELD THAT: - The Tribunal held that the AO failed to enquire whether the surrendered sums (which included entries relating to purchase of plot and jewellery) were proceeds of undisclosed business receipts or represented identifiable investments/expenditure attractable to sections 68-69D. For invoking deeming provisions there must be an identifiable asset or expenditure; where an alleged undisclosed investment has independent existence (as in immovable property and jewellery disclosed in the survey) the AO was obliged to examine nexus and source. The Tribunal found the AO simply adjusted estimated sales to justify the surrender without testing whether the surrendered amounts should have been taxed under section 115BBE at the special rate. Consequently the Pr. CIT rightly directed the AO to investigate applicability of section 115BBE (including the relevant explanation) and to enquire into source and nexus of investments, placing the onus on the assessee to establish the source. [Paras 14, 15, 16, 17, 18]

AO was required to examine and determine whether parts of the surrendered amount related to identifiable investments and whether sections 68-69D or section 115BBE applied; the matter must be enquired into as directed.

Final Conclusion: The Tribunal dismissed the appeal; it upheld the Pr. CIT's exercise of revisional jurisdiction under section 263 and sustained the direction to the Assessing Officer to examine the applicability of the deeming provisions and section 115BBE by enquiring into the source and nexus of the surrendered amounts (including investments in immovable property and jewellery) for A.Y. 2017-18.

Income from business - exemption under section 11(4A) where business is incidental to the attainment of objects - commercial activity / corporate training - charitable purpose and educational activity - relevance of Memorandum of Understanding in characterisation of receipts

Income from business - exemption under section 11(4A) where business is incidental to the attainment of objects - commercial activity / corporate training - charitable purpose and educational activity - relevance of Memorandum of Understanding in characterisation of receipts - Whether the training fees received by the assessee trust constituted income from business and were not exempt under section 11(4A) as being incidental to the trust's objects. - HELD THAT: - The Tribunal upheld the factual and legal conclusions of the authorities below that the amounts received as training fees from two hotels were commercial receipts and not incidental to the trust's charitable/educational objects. The Memoranda of Understanding show that the assessee conducted customised managerial-level training at the hotels' venues, with the hotels identifying beneficiaries, providing infrastructure and ensuring attendance; the assessee primarily supplied trainers and awarded certificates (not degrees/diplomas recognised by statutory authorities). The programmes were designed to benefit the contracting hotels (including enhancement of revenue and on-the-job training for recruits) rather than to advance the trust's educational objects for the needy or students at its institution. The presence of TDS under the provision applicable to professional services and charging of service tax on the receipts reinforced the commercial character of the transactions. The Tribunal accepted the First Appellate Authority's application of the tests in the authorities relied on by the Assessing Officer and agreed that the training activity was more than incidental: it was a business-like activity carried on for the benefit of the corporate service-takers and did not satisfy the requirements for exemption under the proviso in section 11(4A). For these reasons the impugned addition treating the receipts as income from business was sustained. [Paras 17, 18, 19, 20, 21]

Appeal dismissed; income from imparting corporate training held to be business income not incidental to the trust's objects and therefore not exempt under section 11(4A).

Final Conclusion: The Tribunal dismissed the assessee's appeal and sustained the assessment treating the corporate training receipts as business income not incidental to the trust's objects, upholding the taxation of the impugned amount.

Addition under Section 68 as unexplained cash credit - Unexplained investment treated under Section 69A - Capital introduced in earlier years / opening balance treatment - Remand for verification and opportunity of hearing

Addition under Section 68 as unexplained cash credit - Capital introduced in earlier years / opening balance treatment - Remand for verification and opportunity of hearing - Validity of addition of Rs. 50 lakhs shown as unsecured loan in the balance sheet and treated as unexplained cash credit under Section 68. - HELD THAT: - The assessee claimed that the amount shown as unsecured loan in the balance sheet represented her own capital introduced in earlier financial years (2007-08 and 2008-09) and explained the source as sale proceeds of property and jewel loans. The Assessing Officer rejected the explanation, observing that the balance sheet showed purchase of another property and therefore the source was not available; the Tribunal found that this was a misreading of the balance sheet because the unsecured loan appeared on the liability side while purchase of property appeared on the asset side. The contention that additions cannot be made in respect of opening balances introduced in earlier years was not raised before the lower authorities and therefore not entertained by the Tribunal. Given the AO's apparent misunderstanding and the assessee's explanation about source, the Tribunal directed that the matter be re-examined by the AO after affording the assessee an opportunity of hearing rather than adjudicating the claim on merits at appellate stage. [Paras 7]

Issue set aside and remitted to the Assessing Officer for fresh examination and verification, with opportunity of hearing to the assessee.

Unexplained investment treated under Section 69A - Remand for verification and opportunity of hearing - Validity of addition of Rs. 19,32,780 treated as unexplained investment/unsecured loan given to the assessee's husband. - HELD THAT: - The assessee stated that the amount represented loans to her husband which were debited to her drawings account and therefore not reflected on the asset side of the balance sheet; she also asserted that large drawings were taken in the relevant year. The Assessing Officer did not verify the claim that the loans were accounted for through the drawings account and accordingly made the addition under Section 69A. The Tribunal observed that the AO had failed to verify the assessee's explanation and evidence and, in view of that lack of verification, remitted the matter to the AO for further enquiry and decision in accordance with law. [Paras 9]

Issue set aside and remitted to the Assessing Officer for further verification and decision after affording opportunity to the assessee.

Final Conclusion: Both additions (Rs. 50 lakhs under Section 68 and Rs. 19,32,780 under Section 69A) were not finally adjudicated on merits by the Tribunal; both issues are set aside and remitted to the Assessing Officer for fresh examination/verification and decision after giving the assessee an opportunity of hearing. The appeal is treated as allowed for statistical purposes.

Condonation of delay - exclusion of COVID-19 period for limitation - section 68 unexplained cash credits - burden of proof on assessee to prove identity, creditworthiness and genuineness of share capital - consequence of non-appearance / failure to furnish evidence

Condonation of delay - exclusion of COVID-19 period for limitation - Application for condonation of delay in filing the appeal was allowed and the appeal admitted for adjudication. - HELD THAT: - The assessee's appeal was time-barred but an affidavit explained non-receipt/late knowledge of the order and attributed a substantial portion of the delay to COVID-19 related disruptions. Applying the principle that the limitation period between 15.03.2020 and 28.02.2022 is excluded for calculation of limitation (as per the cited Supreme Court position referred to by the Tribunal), the Tribunal found that the COVID-19 period and other reasonable causes justified condonation. In view of that exclusion, the delay was condoned and the appeal admitted for adjudication. [Paras 2, 3]

Delay condoned and appeal admitted for adjudication.

Section 68 unexplained cash credits - burden of proof on assessee to prove identity, creditworthiness and genuineness of share capital - consequence of non-appearance / failure to furnish evidence - The addition of Rs.1,22,00,000 made by the Assessing Officer under section 68 in respect of share capital and share premium was confirmed. - HELD THAT: - The Assessing Officer found that the assessee had raised share capital/share premium amounting to the impugned sum but failed to satisfactorily explain the identity and creditworthiness of the shareholders or the genuineness of the transactions despite service of statutory notices and opportunities. The assessee did not appear before the CIT(A) or the Tribunal and furnished no evidence to rebut the presumption of unexplained cash credit. The Tribunal held that where the assessee fails to discharge the burden to explain the source and genuineness of credited sums, the provisions of section 68 are rightly invoked. The consistent non-appearance and absence of documentation led the Tribunal to conclude that the amounts were routed as bogus accommodation entries and to uphold the addition. [Paras 6, 7, 8, 9, 10]

Addition under section 68 confirmed and grounds of appeal dismissed.

Final Conclusion: Condonation of delay granted (appeal admitted). On merits the Tribunal affirmed the addition under section 68 in respect of share capital/share premium for AY 2012-13 and dismissed the appeal.

Unexplained cash credit under section 68 - burden of proof under section 68 - identity, creditworthiness and genuineness of shareholders - duty of assessing authority to examine and communicate dissatisfaction with explanation - non-applicability of Finance Act, 2012 amendment on 'source of source' to AY 2012-13

Unexplained cash credit under section 68 - burden of proof under section 68 - identity, creditworthiness and genuineness of shareholders - duty of assessing authority to examine and communicate dissatisfaction with explanation - Whether the amounts credited as share capital and share premium aggregating to Rs.2,77,00,000/- could be treated as unexplained cash credit under section 68. - HELD THAT: - The assessee furnished documents evidencing identity (PAN, share applications), creditworthiness (audited balance sheets showing share capital, reserves and surplus) and genuineness (bank statements, assessment orders showing regular assessment) of the three subscribing companies. These documents were placed before the Assessing Officer who, however, did not make any substantive examination of their correctness and merely disregarded them on account of non-appearance of directors. The Tribunal relied on binding principles that once the assessee discharges the initial burden under section 68 by producing satisfactory material on identity, creditworthiness and genuineness, the onus shifts to the revenue to show defect or improbability in that material; the assessing authority must examine the explanation and communicate dissatisfaction so as to give the assessee an opportunity to respond. Having found on the record that no contrary material was placed by the Revenue and that the assessing authority failed to discharge its obligation to examine the proofs, the Tribunal held that the explanation offered by the assessee was satisfactory and section 68 could not be invoked to make the addition. [Paras 9, 10, 12]

Addition under section 68 deleted; assessee's explanation held to be satisfactory and amounts not exigible as unexplained cash credit.

Non-applicability of Finance Act, 2012 amendment on 'source of source' to AY 2012-13 - Whether the post-2012 amendment requiring verification of 'source of source' applied to the assessment year under consideration. - HELD THAT: - The Tribunal noted that the amendment by Finance Act, 2012 bringing in requirement to examine 'source of source' of monies credited to companies came into effect from 01.04.2013 and therefore is not applicable to assessment year 2012-13. Accordingly, the enhanced statutory mechanism for deeming an explanation unsatisfactory could not be invoked in the instant appeal; the determination proceeded on the statutory position prevailing for AY 2012-13 together with the requirement on the revenue to test the explanations furnished by the assessee. [Paras 10]

Finance Act, 2012 amendment relating to 'source of source' is inapplicable to AY 2012-13 and could not justify the addition.

Final Conclusion: The Tribunal allowed the appeal, held that the assessee had satisfactorily proved identity, creditworthiness and genuineness of the share subscriptions, found that the Assessing Officer/CIT(A) failed to properly examine the explanations, and deleted the addition made under section 68 for AY 2012-13.

Application of the Benami Transactions (Prohibition) (Amendment) Act, 2016 to pre-amendment transactions - Provisional attachment under Section 26(3) of the Prohibition of Benami Property Transactions Act, 1988 - Retrospective operation of statutory amendments - Binding effect of precedent

Application of the Benami Transactions (Prohibition) (Amendment) Act, 2016 to pre-amendment transactions - Provisional attachment under Section 26(3) of the Prohibition of Benami Property Transactions Act, 1988 - Binding effect of precedent - Provisional attachment and adjudicating authority's orders under Section 26(3) in respect of a transaction dated 20.12.2014 could not be sustained on the basis of the 2016 Amendment. - HELD THAT: - The Court considered the challenge to the adjudicating authority's orders dated 26.04.2022 and 27.04.2022 which affirmed provisional attachment proceedings under Section 26(3) of the Prohibition of Benami Property Transactions Act, 1988 in relation to a transaction occurring on 20.12.2014. Relying on this Court's earlier decision in Nexus Feeds Limited v. Assistant Commissioner of Income Tax (2022 (5) TMI 262) and the subsequent affirmation by the Supreme Court in Union of India v. Ganpati Dealcom Pvt. Ltd. (2022 SCC Online SC 1064), the Court held that the provisions introduced by the Benami Transactions (Prohibition) (Amendment) Act, 2016 could not be applied so as to validate proceedings in respect of that pre-amendment transaction. Having applied the binding precedent, the Court concluded that the impugned orders could not stand and set them aside.

Impugned orders dated 26.04.2022 and 27.04.2022 set aside; writ petitions allowed.

Final Conclusion: The High Court allowed the writ petitions, quashed the adjudicating authority's orders of 26.04.2022 and 27.04.2022 concerning the transaction of 20.12.2014, and declined to make any order as to costs.

Direction to administrative authority to decide representation expeditiously - single agency to conduct examination to avoid duplication and delay - speaking order requirement - expedited decision on application for de-stuffing of containers - perishability as factor in expeditious disposal

Direction to administrative authority to decide representation expeditiously - single agency to conduct examination to avoid duplication and delay - perishability as factor in expeditious disposal - Petitioner's representation seeking appointment of a single agency to examine the consignments and an expeditious decision thereon - HELD THAT: - The Court confined its order to the limited relief sought - a direction to the CBEC to consider the petitioner's representation dated 17.10.2022 and to ensure a prompt determination so that multiple agencies do not simultaneously examine the same consignments. The Court refrained from adjudicating the merits as to the true nature of the goods and instead directed administrative resolution to obviate delay, noting the additional urgency arising from the claimed perishability of the goods. Respondents were given an opportunity to accept disposal at this stage and did so, leading to a direction for final administrative action within a fixed short timeline. [Paras 3, 4, 5, 6, 9]

CBEC directed to consider the representation and render a decision expeditiously, within 10 days, to avoid multiplicity of agencies examining the consignments

Expedited decision on application for de-stuffing of containers - perishability as factor in expeditious disposal - speaking order requirement - Petitioner's request for an expedited decision on any application for de-stuffing the containers - HELD THAT: - The Court observed that delay in deciding de-stuffing applications could render the consignments economically unviable and therefore directed that any such application shall be decided as expeditiously as possible. The Court also required that CBEC pass a speaking order on the representation and furnish a copy to the petitioner, thereby ensuring transparency and accountability in the administrative process. [Paras 9, 10]

Any application for de-stuffing shall be decided expeditiously and CBEC shall pass and furnish a speaking order

Final Conclusion: Writ petition disposed of by directing CBEC to consider the petitioner's representation and pass a speaking order within 10 days, and by directing that any application for de-stuffing of containers be decided expeditiously; pending application closed.

Directory versus mandatory time limit for statutory references - statutory duty of appellate tribunal to draw up and refer statement of case - liability for delay attributable to a public body - return and substitution of bank guarantee pending adjudication

Directory versus mandatory time limit for statutory references - statutory duty of appellate tribunal to draw up and refer statement of case - liability for delay attributable to a public body - Construction of the 120 day time limit in Section 130(A)(4) of the Customs Act and consequence of non submission of the statement of case by the Appellate Tribunal (CESTAT). - HELD THAT: - The court held that the 120 day period in Section 130(A)(4) is directory and not mandatory. Treating the period as mandatory could deprive a party of the statutory right to have a question of law considered by the High Court when delay is attributable to the Tribunal, a public body beyond the parties' control. The court applied the principle that statutory directions imposing duties on public bodies should be construed as directory where strict enforcement would work injustice to parties who have no control over the default, relying on earlier authorities [Raja Benoy Kumar Sahas Roy vs. Commissioner of Income Tax] and noting supporting observations in Duncan Brothers & Company Ltd. . On the facts, the Assistant Commissioner's affidavit and communications established that Respondent No.2 had not abandoned the reference and that papers in three of eight matters (including the petitioner's) had been submitted to CESTAT; accordingly CESTAT was directed to submit the statement of case within six weeks of receipt of this order and Respondent No.2 was directed to follow up and provide details to CESTAT within two weeks of upload. [Paras 7, 8, 11]

Section 130(A)(4)'s 120 day period is directory; CESTAT must submit the statement of case within six weeks and Respondent No.2 shall follow up and provide necessary details within two weeks.

Return and substitution of bank guarantee pending adjudication - judicial discretion to direct return of security - Petitioner's claim for immediate return of the Bank Guarantee furnished to the High Court. - HELD THAT: - The petition for immediate return of the Bank Guarantee was refused. The court recorded the petitioner's plea of severe liquidity difficulties but found it cannot direct return at this stage because the reference remains to be processed; however, the court provided a remedial mechanism: if, after CESTAT forwards the statement of facts, the Customs Application is not disposed within one year, the petitioner may apply for return of the Bank Guarantee and its substitution with satisfactory security, to be considered on merits at that time. [Paras 12, 13]

Immediate return of the Bank Guarantee is refused; petitioner may reapply for return or substitution of security if the reference is not disposed within one year after submission of the statement of facts.

Final Conclusion: The petition is disposed: the court declares the 120 day period in Section 130(A)(4) to be directory, directs CESTAT to submit the statement of case within six weeks with Respondent No.2 to follow up, refuses immediate return of the Bank Guarantee but permits a fresh application for return or substitution if the matter is not disposed within one year.

Inclusion of additional land within Private Bonded Warehouse (PBW) - effect of departmental permission/intimation for extension of PBW - liability for customs duty where goods are within bonded premises

Inclusion of additional land within Private Bonded Warehouse (PBW) - effect of departmental permission/intimation for extension of PBW - Warehouse-2 forming part of the assessee's Private Bonded Warehouse with retrospective effect and therefore the goods found therein were within the PBW - HELD THAT: - The Tribunal examined the application dated 06.02.2009, the on-site verification of 17.06.2009, the Deputy Commissioner's approval dated 03.07.2009 and the subsequent intimation letters to DRI and the assessee. Those records and the Assistant Commissioner's licence letter dated 20.10.2010 confirm that the additional land (including Warehouse-2) was approved and included in the PBW (revised ground plan) effective from the approval; the intimation was sent later. The Tribunal held that the departmental letters collectively establish that the additional area stood included in the PBW and that the goods found on 04.03.2010 were within the registered bonded premises. [Paras 6, 7, 8]

Warehouse-2 was included in the PBW (revised bonded area) with effect from the departmental approval and the goods found on 04.03.2010 were within the PBW

Liability for customs duty where goods are within bonded premises - effect of late intimation of licence/possession on duty liability - Demand of customs duty and proposed penalties in respect of goods found in Warehouse-2 were unsustainable and rightly dropped by the adjudicating authority - HELD THAT: - Having concluded that the disputed goods were within the PBW on the date of search, the Tribunal applied the legal consequence that no customs duty demand as proposed in the show cause notice could be sustained. The revenue's arguments about the form of the application, the date of physical possession, or the absence of specific section references in the intimation were considered and rejected because the approvals, verification report and licence correspondence demonstrate departmental sanction for inclusion of the additional area. On this basis the Commissioner's decision to drop the main demand and not impose penalties on directors was affirmed. [Paras 6, 8, 9]

The demand and penalties alleged in the show cause notice are not sustainable; impugned order dropping the demand is upheld

Final Conclusion: The appeal is dismissed and the adjudicating authority's order upholding that Warehouse-2 formed part of the assessee's Private Bonded Warehouse and dropping the customs duty demand is affirmed.

Includability of charges in assessable value - application of Rule 9(1)(b) and Rule 9(1)(e) read with Rule 4 of the Customs Valuation Rules - effect of prior assessment under Chapter 49 on subsequent valuation - completion of assessment and effect of order permitting clearance under Section 47 - re-assessment and limitation under Section 28

Effect of prior assessment under Chapter 49 on subsequent valuation - completion of assessment and effect of order permitting clearance under Section 47 - re-assessment and limitation under Section 28 - Whether the design engineering and site run had been finally assessed under Chapter 49 and, if so, what effect that assessment had on inclusion of their value in the fermenters' assessable value. - HELD THAT: - The Tribunal examined the assessment process under the Customs Act and held that assessment is completed only when the proper officer issues an order permitting clearance of goods for home consumption under Section 47 (except in provisional assessment where finalization completes assessment). Although the Bill of Entry for design engineering and site run was initially assessed on documents by the appraising group, physical examination revealed a discrepancy linking those items to the fermenters and necessitated re-assessment. There is no record of any order permitting clearance for home consumption under Section 47 in respect of the design engineering and site run. Consequently the assessment under Chapter 49 had begun but was not completed; it remained open and susceptible to re-assessment. Therefore the appellant's contention before the Supreme Court that those items had been finally assessed under Chapter 49 and so their value could not be included was factually incorrect and ineffective to prevent re-assessment and inclusion. [Paras 14, 15, 16, 22, 26]

The assessment of the design engineering and site run under Chapter 49 was not completed (no Section 47 clearance) and therefore did not preclude re-assessment or inclusion of their value in the fermenters' assessable value.

Includability of charges in assessable value - application of Rule 9(1)(b) and Rule 9(1)(e) read with Rule 4 of the Customs Valuation Rules - transaction value adjustments - Whether the value of design engineering and site run could be included in the assessable value of the fermenters under Rule 9(1)(b) or Rule 9(1)(e) read with Rule 4 of the Valuation Rules. - HELD THAT: - Rule 4 requires valuation by transaction value adjusted as provided in Rule 9. Rule 9(1)(b) applies where the buyer supplies goods or services free or at reduced cost to the overseas seller and sub-clause (iv) covers engineering/design work necessary for production of the imported goods. The Tribunal found no allegation or evidence that the importer supplied anything free of charge to the overseas supplier; here the overseas supplier provided the design engineering and site run for consideration. Further, those services were not shown to be necessary for the production of the imported fermenters (they were required for the fermenters to meet WHO GMP in use). Accordingly Rule 9(1)(b) did not apply. Turning to Rule 9(1)(e), it applies to payments made as a condition of sale. The Tribunal found no contractual term making purchase of design engineering and site run a condition for sale of the fermenters; the supplier sold fermenters without those services and the record contained no clause making the services a precondition of sale. Mere invoicing together or import under the same airway bill does not convert separate goods into a condition of sale. Therefore Rule 9(1)(e) was not attracted and the value of the design engineering and site run could not be added to the assessable value of the fermenters. [Paras 30, 33, 34, 35, 36]

Rule 9(1)(b) is inapplicable and Rule 9(1)(e) is not satisfied; the value of the design engineering and site run cannot be included in the assessable value of the fermenters.

Final Conclusion: The appeal is allowed insofar as valuation is concerned; the impugned order is set aside to the extent it included the value of design engineering and site run in the assessable value of the fermenters, with consequential benefits to the appellant.

Maintainability of writ petition under Article 226 - public function / public law element - Right under Section 160 of the Companies Act, 2013 to have candidature placed before the general meeting - Duty of Nomination and Remuneration Committee under Section 178 of the Companies Act, 2013 - RBI's regulatory powers in relation to board composition of banking companies under the Banking Regulation Act, 1949 - SEBI's regulatory remit under securities laws vis-a -vis corporate elections - availability of alternative statutory remedies under the Companies Act, 2013 / civil forum

Maintainability of writ petition under Article 226 - public function / public law element - Right under Section 160 of the Companies Act, 2013 to have candidature placed before the general meeting - availability of alternative statutory remedies under the Companies Act, 2013 / civil forum - Whether writ petitions under Article 226 are maintainable to challenge the rejection by a private banking company of nominations for election to its Board of Directors. - HELD THAT: - The Court held that the challenge to rejection of nomination for directorship of the private banking company does not disclose the requisite public law element to sustain a writ under Article 226. While Sections 160 and 178 and Rule 13 prescribe procedural requirements for notice of candidature and duties of the Nomination and Remuneration Committee, those statutory prescriptions regulate internal corporate procedure and do not, by themselves, transform the subject into public law for writ jurisdiction. The Banking Regulation Act and SEBI statutes do not grant RBI or SEBI power to interfere with a company's rejection of nominations in the AGM process; provisions cited deal with board composition requirements and regulation of securities markets but do not authorise intervention in electoral rejection of candidates. Reliance on authorities recognising writ jurisdiction against bodies performing public functions was considered, but on the facts the Bank's act of rejecting nominations was held to fall within the private domain of shareholders' corporate governance. Consequently, the petitioners have efficacious statutory and civil remedies under the Companies Act and before civil courts, and Article 226 remedy is not available. The Court therefore set aside the Single Judge's interim order admitting the writs and dismissed the writ petitions as not maintainable, leaving merits and factual disputes open to appropriate fora. [Paras 57, 58, 69, 70, 71]

Writ petitions challenging the rejection of nominations for directorship of the private bank are not maintainable under Article 226; petitions dismissed as not maintainable while leaving merits open to appropriate forums.

RBI's regulatory powers in relation to board composition of banking companies under the Banking Regulation Act, 1949 - SEBI's regulatory remit under securities laws vis-a -vis corporate elections - Whether complaints made to RBI and SEBI (Exts. P6 and P7) concerning conduct of RBI nominees are connected to the primary challenge of rejection of nomination and support maintainability of the writ petition. - HELD THAT: - The Court examined Exts. P6 and P7 and found the whistle blower and other allegations against RBI nominees to be unrelated to the central grievance of rejection of nomination (Ext. P3). The statutory powers of RBI under the Banking Regulation Act to ensure board composition and of SEBI under securities laws do not confer authority to adjudicate or reverse a company's electoral rejection of candidates in the AGM. As such, the complaints before RBI/SEBI are detached from, and not germane to, the petitioners' claim that their nominations were required to be placed before the general meeting. Inclusion of those complaints does not render the writ petition maintainable under Article 226. [Paras 43, 44, 45, 50]

Exts. P6 and P7 complaints to RBI and SEBI are not connected to the rejection of nomination and do not make the writ petitions maintainable under Article 226.

Final Conclusion: The Division Bench allowed the appeals, set aside the Single Judge's interim order, and held that the writ petitions challenging rejection of nominations for directorship of the private bank are not maintainable under Article 226; the writ petitions are dismissed as not maintainable, with all factual and legal questions on merits left open to appropriate forums.

Power to dissolve company when affairs completely wound up or liquidator cannot proceed (Section 481 of the Companies Act, 1956) - court's power to declare dissolution void and recall dissolution within two years (Section 559 of the Companies Act, 1956) - reliance on precedent affirming dissolution where winding-up cannot proceed (Meghal Homes Pvt. Ltd.) - discharge of official liquidator upon dissolution - permitted payment from company in liquidation and transfer to common pool

Power to dissolve company when affairs completely wound up or liquidator cannot proceed (Section 481 of the Companies Act, 1956) - reliance on precedent affirming dissolution where winding-up cannot proceed (Meghal Homes Pvt. Ltd.) - Acceptance of the Official Liquidator's report and dissolution of M/s ARM Polymers Limited (In Liquidation). - HELD THAT: - The Court examined the Official Liquidator's report, the steps taken in the winding up (inspection of records, taking possession of premises, constitution of sale committee, sale of units, verification and partial payment of secured and worker claims) and the limited residual funds. Applying the principle in Meghal Homes Pvt. Ltd., which recognises that where affairs are completely wound up or the liquidator cannot proceed for want of funds the court may dissolve the company, the Court found it just and reasonable to dissolve the company under the statutory power. The Official Liquidator had given statutory notices and obtained no adverse responses from ROC and SEBI; half-yearly accounts and an auditor's balance certificate were placed on record. In these circumstances the report was accepted and dissolution ordered. [Paras 19, 21]

The company M/s ARM Polymers Limited (In Liquidation) is dissolved and the Official Liquidator is discharged and relieved as liquidator.

Discharge of official liquidator upon dissolution - permitted payment from company in liquidation and transfer to common pool - court's power to declare dissolution void and recall dissolution within two years (Section 559 of the Companies Act, 1956) - Reliefs consequential to dissolution: discharge of Official Liquidator, payment of auditor's fee, and preservation of right to apply under Section 559. - HELD THAT: - The Court authorised incidental actions necessary upon dissolution. It discharged and relieved the Official Liquidator from office and permitted payment of the auditor's fee (from the company's account) for preparation of the auditor's certificate. The Court noted the Official Liquidator's proposal to pay the first charge holder from available funds and to transfer any remaining balance to the common pool for future expenses, and permitted the Official Liquidator to take such steps. The Court also recorded that any affected party may seek review or invoke the statutory provision permitting voidance of the dissolution within two years under Section 559, thereby preserving statutory remedies. [Paras 17, 19, 20]

Official Liquidator discharged; payment of auditor's fee permitted; right of aggrieved parties to apply under Section 559 preserved.

Final Conclusion: The Official Liquidator's report is accepted; M/s ARM Polymers Limited (In Liquidation) is dissolved under the statutory power to dissolve where winding-up cannot proceed, the Official Liquidator stands discharged and limited payments from the company's account are permitted; statutory remedies under Section 559 remain available for two years.

Limitation under the Limitation Act, 1963 (residuary Article 137) - validity of a Memorandum of Understanding - authority of a company signatory / indoor management rule - operational creditor application under Section 9 of the Insolvency and Bankruptcy Code, 2016

Limitation under the Limitation Act, 1963 (residuary Article 137) - operational creditor application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - The claim based on the MOU dated 24.08.2013 for Rs. 4.50 Crores is barred by limitation and the Section 9 petition filed on 13.04.2019 is time barred. - HELD THAT: - The MOU recorded settlement of past dues as on 31.07.2013 and fixed interest w.e.f. 01.08.2013; therefore the right to apply in respect of that settled sum accrued from 31.07.2013. The residuary Article 137 of the Limitation Act, 1963 prescribes a three year limitation from the date when the right to apply accrues. Even if subsequent payments or entries were made in 2018, the payments relied upon by the appellant do not constitute part payment of the settled sum; documents on record show those were professional charges and not part payment of the alleged Rs. 4.50 Crores. The contention that a payment in 2018 revived the limitation is therefore rejected and the Section 9 petition claiming the settled sum is barred by limitation. [Paras 9]

Claim based on the MOU for Rs. 4.50 Crores is time barred; the Section 9 application is barred by limitation.

Validity of a Memorandum of Understanding - authority of a company signatory / indoor management rule - The MOU is not established as binding on the Corporate Debtor because there is no evidence that the signatory, Shri Shantilal R. Lunkad, was authorized by the company to execute the MOU on its behalf. - HELD THAT: - The MOU purports to be signed for the company by Shri Shantilal R. Lunkad as "Authorized Signatory", but the appellant has not produced any evidence showing that he was a director, key managerial personnel, or was authorized by a board resolution to bind the company. Absent proof of authority to bind the corporate debtor, the alleged MOU cannot be treated as valid and enforceable against the company. The tribunal therefore correctly found lack of authorization and rejected the genuineness of the MOU on that basis. [Paras 10]

MOU not proved to be binding on the Corporate Debtor for want of evidence of authority of the signatory.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority correctly held the Section 9 petition to be time barred and found no evidence that the MOU was binding on the Corporate Debtor for want of authorization of the signatory; no interference is required. No costs.

Approval of Resolution Professional's fees by the Committee of Creditors - Enforcement of Committee of Creditors' fee decision - Obligation of members to pay approved CIRP fees - Effect of ex-parte adjudication for non-appearance of CoC members - Affirmation of Adjudicating Authority's order by appellate tribunal

Approval of Resolution Professional's fees by the Committee of Creditors - Obligation of members to pay approved CIRP fees - Effect of ex-parte adjudication for non-appearance of CoC members - Validity and enforceability of the Committee of Creditors' resolution approving the Resolution Professional's consolidated fee of Rs. 15 lakhs and the Adjudicating Authority's direction for payment. - HELD THAT: - The Committee of Creditors in its fifth meeting approved fees for the Resolution Professional at the rate of Rs. 2,50,000 per month subject to a maximum of Rs. 15 lakhs for the entire CIRP. The Resolution Professional filed an application for recovery of unpaid fees after the approved fees were not paid, and the Adjudicating Authority disposed of that application directing payment of the consolidated fee. The Appellate Tribunal examined the record, including the CoC resolution approving the fee, and noted that other CoC members complied with the Adjudicating Authority's order while the appellant withheld payment despite holding a substantial voting share. The Adjudicating Authority's order was passed ex parte because CoC members did not appear, and the Appellate Tribunal found no error in the Adjudicating Authority's consideration of the CoC recommendation and facts on record. On this basis the Tribunal concluded that the Adjudicating Authority rightly directed payment and that there was no merit in upsetting that direction. [Paras 10, 11]

The Adjudicating Authority's order directing payment of the consolidated fee to the Resolution Professional is affirmed and the appeal is dismissed.

Final Conclusion: The order of the Adjudicating Authority directing payment of the Resolution Professional's consolidated fee (as approved by the Committee of Creditors) is affirmed by the Appellate Tribunal; the appeal is dismissed.

Fraudulent transactions under Section 66 of the Insolvency and Bankruptcy Code, 2016 - transaction audit report-disclaimer and evidentiary insufficiency - remand for detailed and in-depth investigation - restoration of right to file reply and principles of natural justice - stay of criminal prosecution and recovery pending further investigation

Fraudulent transactions under Section 66 of the Insolvency and Bankruptcy Code, 2016 - transaction audit report-disclaimer and evidentiary insufficiency - remand for detailed and in-depth investigation - Whether the Adjudicating Authority's finding that certain transactions fall within the ambit of Section 66 IBC was sustainable on the material on record. - HELD THAT: - The Transaction Audit Report expressly recorded inability to give conclusive opinions on transactions alleged to be preferential, undervalued or fraudulent due to limited, inadequate and incomplete information and observed that further investigation was required. The Adjudicating Authority nonetheless accepted the TAR's observations and, after noting non-filing of replies by several respondents, concluded that the transactions amounted to misappropriation and ordered recovery and criminal prosecution. Having regard to the TAR's explicit disclaimers and the absence of any steps by the Resolution Professional to undertake the further investigation recommended by the TAR, the Tribunal concluded that the true nature of the transactions requires deeper and detailed examination. Consequently the impugned conclusions on merits under Section 66 could not be sustained at this stage and the matter must be remanded to the Adjudicating Authority for an independent, detailed and in-depth investigation to arrive at a conclusive opinion on whether the transactions fall within Section 66, uninfluenced by observations in this judgment. [Paras 10, 11, 12, 13, 14]

Impugned order set aside insofar as it adjudicates the transactions as falling under Section 66; matter remanded to the Adjudicating Authority for detailed investigation and fresh decision on merits.

Restoration of right to file reply and principles of natural justice - Whether the Appellant's right to file a reply ought to have been foreclosed and what remedial opportunity should be afforded. - HELD THAT: - The Appellate Tribunal noted the Appellant's explanation of COVID-related incapacity which, while not automatically excusing delay, warranted consideration in the circumstances. The Tribunal observed that foreclosure of the Appellant's right to reply by the Adjudicating Authority could have been avoided and that denying an opportunity when further investigation was necessary militated against principles of natural justice. In the interest of a fair and objective examination, the Tribunal restored the Appellant's right to furnish reply/clarifications and directed the Adjudicating Authority to permit one further opportunity, while retaining discretion to fix a timeline to prevent undue delay. [Paras 12, 13, 14]

Appellant's right to file reply restored; Adjudicating Authority directed to allow one further opportunity and may fix a timeline for filing.

Stay of criminal prosecution and recovery pending further investigation - Whether the directions to institute criminal prosecution and to recover the disputed amounts should be acted upon before completion of the further investigation and fresh adjudication. - HELD THAT: - Given the Tribunal's conclusion that the factual characterisation of transactions required detailed investigation and that the impugned order had foreclosed the Appellant's opportunity to be heard, the Tribunal held that initiating criminal prosecution and enforcing recovery prior to completion of further investigation would be premature and contrary to fairness. Accordingly, the Tribunal directed that until the Adjudicating Authority completes the detailed investigation and decides the matter afresh, no steps shall be taken to institute criminal prosecution under Section 69 of the IBC nor to enforce recovery of any amounts in respect of the disputed transactions. [Paras 13, 14]

Directions for criminal prosecution and recovery stayed until investigation is completed and matter is decided afresh by the Adjudicating Authority.

Final Conclusion: Impugned order set aside and matter remanded for a detailed investigation into the disputed transactions; the Appellant's right to file reply is restored (one opportunity to be granted subject to a timeline), and initiation of criminal prosecution and enforcement of recovery in respect of these transactions are stayed pending the outcome of the further investigation and fresh adjudication.

Operational debt - default giving rise to operational debt - pre-existing dispute / existence of dispute - demand notice under Section 8 of the IBC and service at corporate office / director's email - adjudicating authority's jurisdiction to admit Section 9 petition following the Mobilox test - initiation of Corporate Insolvency Resolution Process under Section 9 of the IBC - admission of debt by the corporate debtor

Operational debt - default giving rise to operational debt - admission of debt by the corporate debtor - adjudicating authority's jurisdiction to admit Section 9 petition following the Mobilox test - Existence of an operational debt due and payable and whether the corporate debtor committed default such as to entitle the operational creditor to file under Section 9. - HELD THAT: - The Tribunal examined the documentary record including the Technical-Commercial Letter dated 08.04.2019 and invoices relied upon by the Operational Creditor. The parties treated the 08.04.2019 letter as the core commercial arrangement for supply of HRC and payment terms were recorded therein. The Adjudicating Authority found, and the Tribunal agreed, that invoices were issued and that the Corporate Debtor had admitted payment of a portion of the sum due leaving an outstanding balance. Applying the Mobilox criteria, the Tribunal held that the documentary evidence showed an operational debt exceeding the statutory threshold which was due and payable and that there was an implied admission of liability from the Corporate Debtor's communications seeking time to pay. On these findings the condition precedent for filing under Section 9 - existence of operational debt and default - was satisfied. [Paras 11, 12]

There was an operational debt which had become due and payable and the Corporate Debtor committed default; the Section 9 threshold in this respect is met.

Demand notice under Section 8 of the IBC and service at corporate office / director's email - adjudicating authority's jurisdiction to admit Section 9 petition following the Mobilox test - Validity of service of the demand notice under Section 8 and whether the notice was duly delivered. - HELD THAT: - The Tribunal reviewed the Adjudicating Authority's consideration of service evidence, including speed post tracking and delivery confirmation as well as service on the e-mail ID recorded in the Registrar of Companies master data and on the director's e-mail. The Adjudicating Authority applied Rule 5 of the IBBI (Application to Adjudicating Authority) Rules, 2016 and relevant precedents to hold that service at the corporate office and on the director's e-mail constituted valid service. The Tribunal found no error in this conclusion and affirmed that the demand notice was duly served in terms of Section 8(1) of the Code. [Paras 13, 14]

The demand notice under Section 8 was validly served at the corporate office and on the director's e-mail and must be treated as duly delivered.

Pre-existing dispute / existence of dispute - adjudicating authority's jurisdiction to admit Section 9 petition following the Mobilox test - Whether a real and substantial pre-existing dispute existed prior to receipt of the demand notice such that the Section 9 application should be rejected. - HELD THAT: - Applying the Mobilox test, the Tribunal examined whether any dispute or pendency of suit/arbitration existed before receipt of the demand notice or whether a plausible contention was made to the Operational Creditor at the required stage. The Adjudicating Authority found no contemporaneous correspondence with the Operational Creditor raising dispute about quality, no evidence of joint inspection having been requested, and that complaints confined to correspondence between the Corporate Debtor and its client were not communicated to the Operational Creditor. Further, requests by the Corporate Debtor for further supplies after prior consignments undermined the contention of genuine quality complaints. The Tribunal agreed that the alleged grievances were not pre-existing disputes communicated to the Operational Creditor and were, at best, an afterthought. [Paras 15, 16, 17]

No real pre-existing dispute was established; the defence was spurious and did not preclude admission of the Section 9 application.

Final Conclusion: The Tribunal found that the conditions for admission under Section 9 of the IBC were satisfied (existence of operational debt and default, valid service of demand notice, and absence of a pre existing dispute) and accordingly affirmed the Adjudicating Authority's order admitting the Section 9 petition and initiating CIRP; the appeal is dismissed.

Power to recall orders - distinction between recall and review - inherent power to set aside orders obtained by fraud or mistake - absence of jurisdictional defect or fraud as ground for recall - maintainability of objections by individual allottee after CoC approval - rectification under Companies Act not applicable

Power to recall orders - distinction between recall and review - inherent power to set aside orders obtained by fraud or mistake - absence of jurisdictional defect or fraud as ground for recall - Whether the Adjudicating Authority erred in rejecting I.A. No. 4004 of 2022 seeking recall of its order dated 27.05.2022 - HELD THAT: - The Tribunal found that I.A. No. 2407 of 2022 had been heard on merits and was rejected by the Adjudicating Authority. The subsequent I.A. No. 4004 of 2022, though styled as an application to "recall" the earlier order, in substance sought reconsideration/review of the merits of the previously rejected application. Mere use of the word "recall" does not alter the nature of the relief sought. The Court noted that established principles permitting recall or setting aside of orders-such as where an order is obtained by fraud, where the court was misled, or where the court itself committed a prejudicial mistake-were not made out on the facts. Reliance on precedents concerning inherent power to recall was therefore inapplicable, as there was no demonstration of fraud, lack of jurisdiction, or other infirmity rendering the earlier order void. The Tribunal also observed that the appellant's other submissions, including reliance on rectification provisions of the Companies Act, did not apply to the present proceedings. Having considered the record and authorities relied upon, the Tribunal concluded that the Adjudicating Authority did not commit any error in dismissing I.A. No. 4004 of 2022. [Paras 7, 8, 10, 13]

The Adjudicating Authority correctly rejected I.A. No. 4004 of 2022 as an impermissible attempt to review the earlier order; there being no fraud, jurisdictional defect or other ground for recall, the rejection is upheld.

Final Conclusion: The appeal is dismissed; no error is found in the Adjudicating Authority's rejection of I.A. No. 4004 of 2022 seeking recall of the order dated 27.05.2022.

Realization of security interest - liquidator's duty and diligence - exclusion of delay period - calculation of liquidator's fee under Regulation 4 - compliance with Liquidation Process Regulations including Regulation 21-A and Regulation 37

Exclusion of delay period - calculation of liquidator's fee under Regulation 4 - Whether the period from 30.11.2018 to 24.2.2020 could be excluded while determining the slab for the liquidator's fee under Regulation 4 of the Liquidation Process Regulations. - HELD THAT: - The Tribunal examined the chronology of communications between SIDBI and the liquidator, the actions taken by the liquidator (including public announcement for e-auction and seeking requisite undertakings), and the applications filed by the liquidator before the Adjudicating Authority to resolve stalemates with the secured creditor. The Bench found that the liquidator acted in accordance with the procedures laid down in the Liquidation Process Regulations, and that the delays in progressing the realization of the secured asset arose from SIDBI's inability or refusal to comply promptly with regulatory requirements (including furnishing the undertaking and payment of its share of estimated liquidation costs). In view of these findings, the Adjudicating Authority's decision to exclude the period from 30.11.2018 to 24.2.2020 for the purpose of determining the appropriate fee slab under Regulation 4 was held to be correct. [Paras 19, 22]

Period 30.11.2018 to 24.2.2020 rightly excluded for computing the liquidator's fee; appeal on this ground dismissed.

Realization of security interest - compliance with Liquidation Process Regulations including Regulation 21-A and Regulation 37 - liquidator's duty and diligence - Whether the liquidator was responsible for the delay in liquidation of the secured asset and whether a secured creditor remains bound by the Liquidation Process Regulations when seeking to realise its security interest. - HELD THAT: - The Tribunal interpreted Regulation 21-A and Regulation 37 of the Liquidation Process Regulations and noted that these regulations require a secured creditor to inform the liquidator of its intention (Form D), to intimate the price at which it proposes to realise the asset, and to pay its proportionate share of fees and estimated costs within prescribed timelines. The Bench recorded that the liquidator sought requisite undertakings and, on encountering resistance or non-compliance from SIDBI, approached the Adjudicating Authority for directions. The Tribunal relied on a precedent of this Tribunal confirming that compliance with Regulations 2(ea), 2-A, 21-A, 37 and Sections 52/53 of the IBC is necessary even where a secured creditor seeks to realise its security interest. Concluding that the liquidator had discharged his duties with due diligence and that the secured creditor's delays/misinterpretations caused the impugned interval, the Tribunal held the liquidator not responsible for the delay. [Paras 15, 16, 19, 21]

Liquidator not responsible for the delay; secured creditor required to comply with Liquidation Process Regulations when realising security interest.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority did not err in excluding the period 30.11.2018 to 24.2.2020 for calculating the liquidator's fee; the liquidator acted with due diligence and the secured creditor's non-compliance with Liquidation Process Regulations caused the delay.

Financial debt - Initiation of CIRP under section 7 of the Insolvency and Bankruptcy Code, 2016 - Admission/acknowledgement of debt for extension of limitation - Date of default - Limitation defence

Financial debt - Initiation of CIRP under section 7 of the Insolvency and Bankruptcy Code, 2016 - Existence of a financial debt and correctness of admitting the section 7 application to initiate CIRP against the corporate debtor. - HELD THAT: - The Tribunal examined documentary material including the promissory note, disbursal by cheque, ledger showing payment of interest, TDS records and correspondence between the parties. The ledger entries and TDS particulars demonstrated payment of interest in 2014-2015, corroborating that the amount advanced was a loan used in the corporate debtor's business. The corporate debtor's own communications (including correspondence and replies) admitted receipt of the loan and issuance of cheques towards repayment. The Adjudicating Authority considered these documents and events and concluded that the transaction constituted a financial debt. The Tribunal found no misapplication of the test for determining a financial debt and that the Adjudicating Authority rightly performed the requisite scrutiny before admitting the section 7 petition. [Paras 12, 13, 18, 19]

The existence of a financial debt was established and the section 7 application was correctly admitted.

Admission/acknowledgement of debt for extension of limitation - Date of default - Limitation defence - Whether the corporate debtor's letter dated 7.6.2016 and the dishonour of cheques on 16.12.2016 constituted acknowledgement/default such that the date of default was 16.12.2016 and the section 7 petition filed on 25.10.2019 was within limitation. - HELD THAT: - The corporate debtor's letter dated 7.6.2016 expressly acknowledged that Rs. 50 lakhs had been received by cheque and recorded that a repayment cheque had been given, with assurance that depositing the cheque would result in honour and that dishonour would permit legal action. The three cheques presented in October 2016 (for principal and interest) were dishonoured with bank advices dated 16.12.2016 stating "Account Closed." The corporate debtor, in a later reply, accepted issuance of the cheques but asserted a later intended deposit date; the Tribunal rejected that explanation and accepted that the cheques were presented as per their dates. Given the admission in the 7.6.2016 letter coupled with the dishonour advices, the Adjudicating Authority correctly treated 16.12.2016 as the date of default. Consequently the petition filed on 25.10.2019 fell within the three year limitation period measured from the date of default. [Paras 13, 14, 15, 16]

The letter dated 7.6.2016 and the dishonour of cheques on 16.12.2016 together constituted acknowledgement/default; 16.12.2016 was the date of default and the section 7 petition was within limitation.

Final Conclusion: The Appellate Tribunal found that the Adjudicating Authority correctly held that a financial debt existed and rightly treated 16.12.2016 as the date of default based on the corporate debtor's admission and the dishonour of cheques; the appeal was dismissed and the admission of the section 7 petition upheld.

Financial creditor - financial debt - time value of money - judgment/decree giving rise to a fresh cause of action - initiation of CIRP under section 7 of the Insolvency and Bankruptcy Code, 2016 - definition of financial debt under section 5(8) of the Insolvency and Bankruptcy Code, 2016

Financial debt - time value of money - definition of financial debt under section 5(8) of the Insolvency and Bankruptcy Code, 2016 - Whether the amounts advanced by the appellant under the loan agreements dated 24.2.2010 and 31.3.2010 constitute a financial debt and thereby make the appellant a financial creditor under the IBC. - HELD THAT: - The Tribunal examined the loan agreements and reproduced the operative clauses showing principal, fixed tenure and specified interest rates, penal interest on default, provision for security and post-dated cheques. Those contractual features demonstrate an advance involving the time value of money and a jural relationship of lender-borrower. The Adjudicating Authority's conclusion that the advances did not involve time value of money was based on an incorrect reading which ignored the interest-bearing nature and specified terms of the loan agreements. On these findings the amounts advanced fall within the definition of "financial debt" under the IBC and the appellant qualifies as a financial creditor. [Paras 15, 18, 23]

The amounts advanced under the two loan agreements are financial debt and the appellant is a financial creditor.

Judgment/decree giving rise to a fresh cause of action - initiation of CIRP under section 7 of the Insolvency and Bankruptcy Code, 2016 - Whether the decree of the Delhi High Court dated 11.1.2018 gives rise to a fresh cause of action enabling the appellant to file a section 7 application within the period recognized by the Supreme Court in Dena Bank. - HELD THAT: - The Tribunal relied on the ratio in Dena Bank that a judgment or decree for money in favour of a financial creditor passed by a court gives rise to a fresh cause of action to initiate proceedings under section 7 within three years from the date of such judgment or decree. The High Court decree in favour of the appellant therefore constitutes a fresh cause of action to move under section 7. The Tribunal rejected the Adjudicating Authority's approach that treated interest in the decree as the first instance of component of interest, noting that the loan agreements themselves evidenced interest and the decree merely confirmed the debt. [Paras 16, 19, 20]

The Delhi High Court decree dated 11.1.2018 gives rise to a fresh cause of action entitling the appellant to file the section 7 application within the permissible period.

Initiation of CIRP under section 7 of the Insolvency and Bankruptcy Code, 2016 - financial creditor - Whether the Adjudicating Authority erred in dismissing the section 7 petition and what relief should follow. - HELD THAT: - Having concluded that the loan agreements created financial debt and that the High Court decree furnished a fresh cause of action under Dena Bank, the Tribunal held that the Adjudicating Authority erred in dismissing the section 7 petition. The appropriate remedy is to set aside the Impugned Order, admit the section 7 application and remit the matter to the Adjudicating Authority to pass consequential orders under the IBC within a stipulated period. The Tribunal also observed there was no basis to conclude that the decree was obtained by fraud such as to render it ineffective for this purpose. [Paras 18, 20, 23]

Impugned order set aside; section 7 application directed to be admitted and the matter remitted to the Adjudicating Authority for necessary orders under the IBC.

Final Conclusion: The Tribunal held that the advances under the two loan agreements were financial debt and that the Delhi High Court decree of 11.1.2018 gave rise to a fresh cause of action under the Dena Bank principle; the Impugned Order was set aside, the section 7 petition directed to be admitted and the matter remitted to the Adjudicating Authority to pass consequential orders under the IBC within four weeks.

Abuse of process of insolvency - Corporate Insolvency Resolution Process (CIRP) - Admission of Section 7 of the Insolvency and Bankruptcy Code, 2016 - Family/business dispute as an improper purpose for initiating CIRP - Refund of deposits made pursuant to appellate directions

Abuse of process of insolvency - Corporate Insolvency Resolution Process (CIRP) - Family/business dispute as an improper purpose for initiating CIRP - Whether the admission of the Section 7 application and continuation of CIRP should be allowed where the Financial Creditor has initiated proceedings for purposes other than resolution of corporate insolvency. - HELD THAT: - The Tribunal found on the material on record that the dispute between the parties arose from a family business arrangement and that the Financial Creditor was not interested in accepting an offer to repay the claimed debt and interest, indicating an ulterior motive to pursue CIRP for purposes other than resolving corporate insolvency. Relying on the principle that admission under Section 7 is not mandatory merely on proof of debt and default, and applying the precedent cited (Vidarbha Industries Pvt. Ltd. v. Axis Bank Ltd.), the Tribunal concluded that CIRP ought not to be permitted to continue where the process is being used to settle a family/business dispute or for some other improper agenda. On this ground the impugned admission order was set aside without deciding other contested contentions. [Paras 15]

Impugned order admitting the Section 7 application set aside and CIRP terminated because the proceeding was initiated for improper purposes related to a family/business dispute.

Refund of deposits made pursuant to appellate directions - Admission of Section 7 of the Insolvency and Bankruptcy Code, 2016 - Disposition of amounts deposited pursuant to the Tribunal's interim direction and liability for IRP expenses incurred due to actions taken following admission. - HELD THAT: - The Tribunal directed that the sum deposited by the Appellant in compliance with the earlier interim direction be refunded in view of the setting aside of the admission order. The Tribunal noted that the Interim Resolution Professional had incurred expenses in publication and visiting the corporate debtor; the Appellant offered to and was directed to pay a sum of Rs. 2 lakh towards the IRP's fees and expenses within two weeks. Intervenors were left free to pursue their legal remedies separately. [Paras 15]

Amount deposited by the Appellant to be refunded; Appellant directed to pay Rs. 2 lakh to the IRP for fees and expenses; intervenors may pursue independent remedies.

Final Conclusion: The appeal is allowed: the Adjudicating Authority's order admitting the Section 7 application is set aside on the ground that CIRP was instituted for improper purposes (a family/business dispute) rather than genuine insolvency resolution; the deposit made pursuant to the Tribunal's interim direction shall be refunded to the Appellant, who is directed to pay Rs. 2 lakh to the Interim Resolution Professional towards expenses, and the parties and intervenors remain free to pursue other legal remedies.

Limitation - acknowledgment under Section 18 of the Limitation Act, 1963 - Occurrence of default - Admission under Section 7(5) of the Insolvency and Bankruptcy Code, 2016 - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Appointment of Interim Resolution Professional - One Time Settlement as evidence of acknowledgment

Limitation - acknowledgment under Section 18 of the Limitation Act, 1963 - One Time Settlement as evidence of acknowledgment - The petition is within limitation - HELD THAT: - The date of default was recorded as 06.11.2015 when the account was classified as NPA. The corporate debtor submitted a One Time Settlement offer dated 12.03.2018 with an upfront cheque, which the Tribunal treated as an acknowledgment under Section 18 of the Limitation Act, 1963. Relying on that acknowledgment and the re filing (Diary No.82 dated 06.01.2020), the Tribunal held the present Section 7 petition to be filed within the prescribed period. [Paras 8]

Petition held to be within limitation.

Occurrence of default - Admission under Section 7(5) of the Insolvency and Bankruptcy Code, 2016 - There was a default in payment by the corporate debtor and the Section 7 application is complete - HELD THAT: - The records showed that consortium financial facilities were sanctioned on 17.01.2014 and accepted by the corporate debtor, and that despite repeated requests the debtor failed to regularize accounts leading to classification as NPA on 06.11.2015. The petitioner produced the loan documentation, demand notice under SARFAESI, and related annexures evidencing the debt and default. On this basis the Tribunal was satisfied that a financial default had occurred and that the Section 7 application was complete for admission under Section 7(5). [Paras 9, 10, 11]

Default established and Section 7 application admitted on merits.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Moratorium declared consequent to admission - HELD THAT: - Upon admission of the Section 7 petition, the Tribunal directed the statutory moratorium to operate in terms of Section 14(1)-(3), restraining institution or continuation of suits and enforcement actions against the corporate debtor, prohibiting transfer or disposal of assets by the corporate debtor, and ensuring continuity of essential supplies, with effect from the date of the order until completion of CIRP or approval of a resolution plan or liquidation. [Paras 12]

Moratorium imposed in accordance with Section 14 of the Code.

Appointment of Interim Resolution Professional - Interim Resolution Professional appointed and directions issued - HELD THAT: - The Tribunal appointed Mr. Mohit Chawla as Interim Resolution Professional after verifying his credentials. Directions were given vesting management powers in the IRP under Section 17, requiring public announcement, preparation of asset inventory, constitution of the Committee of Creditors, fortnightly progress reports, and enabling retrieval of computerized data (including use of digital forensic experts if necessary). The Tribunal also directed the financial creditor to deposit a specified amount with the IRP to meet CIRP expenses, subject to adjustment by the Committee of Creditors. [Paras 13, 14]

IRP appointed with ancillary directions; deposit directed to be made to IRP.

Final Conclusion: The Section 7 petition filed by the State Bank of India was admitted: the Tribunal held the petition to be within limitation, found and recorded default, imposed the statutory moratorium, appointed an Interim Resolution Professional with directions for conduct of the CIRP, and directed payment to the IRP to meet initial expenses.

Service of demand notice - pre-existing dispute under Section 8(2)(b) - limitation for initiation of CIRP - establishment of operational debt and default above threshold (pre-revised) - admission of petition under Section 9 - moratorium under Section 14 - appointment of Interim Resolution Professional and vesting of management

Service of demand notice - Demand notice dated 13.01.2020 was duly served on the corporate debtor. - HELD THAT: - The record shows that the demand notice in Form 3 was sent to the registered address of the corporate debtor and the tracking report evidences delivery on 15.01.2020. A scanned copy of the demand notice was also sent to the corporate debtor's registered e-mail and was delivered. The petitioner filed affidavit of service and later compliance affidavits recording e-mail service of subsequent orders. On the basis of these materials the Adjudicating Authority is satisfied that the demand notice was properly served. [Paras 5, 6, 7, 9]

Service of the demand notice was proper and effective.

Pre-existing dispute under Section 8(2)(b) - There was no pre-existing dispute raised by the corporate debtor in respect of the claimed operational debt. - HELD THAT: - The petitioner filed an affidavit under Section 9(3)(b) stating that after service of the demand notice no payment was received and no reply objecting to the demand or proof of payment was produced by the corporate debtor. The corporate debtor did not appear to rebut the claim. On this material, the Authority found the liability to be undisputed. [Paras 5, 10, 13]

No pre-existing dispute was shown; the operational debt remained undisputed.

Limitation for initiation of CIRP - The Section 9 application was filed within limitation. - HELD THAT: - The application was filed on 03.02.2020 and the date of default is recorded as 20.09.2019 (the date by which outstanding invoices dated 22.07.2019 were to be cleared). The Adjudicating Authority examined these dates and concluded that the petition falls within the prescribed limitation period. [Paras 11]

The petition is time bar compliant and was filed within limitation.

Establishment of operational debt and default above threshold (pre-revised) - The petitioner established existence of operational debt and default above the pre-revised threshold. - HELD THAT: - The petition in Form 5 was supported by ledger statements, invoices and calculation of interest. The amounts claimed (principal and interest) exceed the pre-revised monetary threshold. The Authority found the application complete in all respects and that the petitioner had proved debt and default on the material presented, noting absence of any rebuttal from the corporate debtor. [Paras 3, 4, 12, 13]

Debt and default established; threshold satisfied.

Admission of petition under Section 9 - The Section 9 petition was admitted and CIRP initiated against the corporate debtor. - HELD THAT: - Having found proper service, absence of dispute, compliance with limitation, and sufficiency of evidence of debt and default, the Adjudicating Authority concluded that the conditions of Section 9(5)(i) were fulfilled and admitted the petition for initiation of the Corporate Insolvency Resolution Process. [Paras 14, 18]

The petition under Section 9 is admitted and CIRP is initiated.

Moratorium under Section 14 - A moratorium under Section 14 was imposed from the date of the order until completion of the CIRP or earlier order as provided by the Code. - HELD THAT: - On admission of the petition the Authority directed the statutory moratorium, restraining institution or continuation of suits, transfer or disposal of assets, enforcement of security, recovery of property, and non-termination of supply of essential goods or services subject to the provisos in the Code. The moratorium's operative period was tied to completion of CIRP or approval of a resolution plan or liquidation order as stipulated. [Paras 15]

Statutory moratorium was directed to operate from the date of the order.

Appointment of Interim Resolution Professional and vesting of management - An Interim Resolution Professional (IRP) was appointed and the management's powers were vested in the IRP in terms of the Code. - HELD THAT: - The petitioner did not nominate an IRP in Form 5; the Authority appointed Ms. Pooja Damir Miglani from the IBBI list and recorded directions: IRP to file consent, assume management powers with suspension of the board, prepare inventory, cause public announcement, collate claims, constitute the Committee of Creditors within statutory timelines, send fortnightly progress reports, and perform duties ethically and in accordance with the Code. The IRP's term and other obligations were imposed as per relevant provisions. [Paras 16]

IRP appointed and managerial powers vested in the IRP with specified directions.

CIRP cost deposit and interim expenses - The petitioner was directed to deposit an amount to meet immediate CIRP expenses, refundable and accountable to the IRP and CoC. - HELD THAT: - The Authority directed the petitioner to deposit a specified sum with the IRP within two weeks to meet immediate CIRP expenses; the amount was to be accounted for by the IRP and reimbursed by the Committee of Creditors as part of CIRP costs. [Paras 17]

Petitioner ordered to deposit the directed amount for immediate CIRP expenses, to be accounted and reimbursed.

Final Conclusion: The Tribunal found that the demand notice was duly served, no pre-existing dispute was shown, the application was within limitation, and the petitioner had established debt and default above the threshold; the Section 9 petition was admitted, moratorium directed, an Interim Resolution Professional appointed with vesting of management, and the petitioner ordered to deposit funds for immediate CIRP expenses.

Maintainability of writ petition despite pending statutory appeal - Withdrawal of statutory appeal with reservation of rights to pursue writ - Functioning of Appellate Tribunal and its impact on forum choice

Maintainability of writ petition despite pending statutory appeal - Withdrawal of statutory appeal with reservation of rights to pursue writ - Functioning of Appellate Tribunal and its impact on forum choice - Whether the writ petition should be continued notwithstanding an appeal pending before the Appellate Tribunal which has since become functional, and whether the petitioner may withdraw that appeal while reserving rights to pursue the writ petition. - HELD THAT: - The Court observed that the writ petition had been entertained earlier despite an appeal pending before the Appellate Tribunal because the Tribunal was then non-functional for lack of appointed members. The Tribunal has since become functional with appointment of Members and Chairperson. The petitioner, through senior counsel, elected to withdraw the appeal pending before the Tribunal, subject to reservation of rights to agitate all questions in the pending writ petition. Having received that election, the Court permitted the petitioner to withdraw the appeal on that basis and to continue with the writ petition where pleadings have already been exchanged and directions for disposal had been framed by a Division Bench in a related LPA.

Petitioner permitted to withdraw the appeal pending before the Appellate Tribunal subject to reservation of rights to pursue and agitate all questions in the writ petition; writ petition to continue.

Final Conclusion: The petitioner was allowed to withdraw the pending appeal before the Appellate Tribunal while reserving rights to continue the writ petition; the matter is listed for further consideration on 18.10.2022.

Bail in money laundering case - application of Section 45 of the Prevention of Money Laundering Act - predicate offence and scheduled offences under the PMLA - non cooperation with investigating agency and failure to account for cash receipts - risk of tampering with evidence and defeating attachment proceedings - anticipatory bail in predicate offence not determinative for PMLA bail

Bail in money laundering case - application of Section 45 of the Prevention of Money Laundering Act - non cooperation with investigating agency and failure to account for cash receipts - risk of tampering with evidence and defeating attachment proceedings - Whether the petitioner, an accused in a money laundering investigation, should be released on bail under Section 45 of the PML Act. - HELD THAT: - The Court applied the statutory standard in Section 45 of the PML Act and considered the material gathered during the predicate investigation and preliminary probe by the Enforcement Directorate. The record shows that the petitioner was an alleged borrower in the predicate offence and during ED investigation was found to have received substantial cash and bank transfers, for which he failed to give satisfactory account despite summons. He did not disclose details of alleged investments and did not cooperate with ED enquiries. The prosecution also raised a real apprehension that the petitioner possesses influence and that, if released, he may obstruct the investigation, tamper with witnesses or documents and frustrate attachment proceedings which are necessary to secure proceeds of crime. The Court noted that anticipatory bail or release in the predicate offence does not automatically entitle an accused to bail under the PML Act, and where the prosecution demonstrates risk to the objectives of the PML Act and non cooperation, the conditions for release under Section 45 are not satisfied. In these circumstances the Court concluded that more time was required for ED to trace and secure properties and that releasing the petitioner would be likely to prejudice the investigation and attachment efforts.

Bail under Section 45 of the PML Act refused.

Final Conclusion: The petition for grant of bail by the petitioner accused No. 17 under section 439 Cr.P.C. in the money laundering ECIR was dismissed: on the material of non cooperation, unexplained substantial cash receipts and the real risk of tampering with evidence and defeating attachment, the court held the statutory threshold for bail under Section 45 PMLA was not met.

Offence of money-laundering - Anticipatory bail under Section 45 of the Prevention of Money Laundering Act, 2002 - Knowledge and participation in processes connected with proceeds of crime - Placement, layering and integration as elements of money laundering - Discretion of Special Court in granting bail under Section 45

Anticipatory bail under Section 45 of the Prevention of Money Laundering Act, 2002 - Offence of money-laundering - Knowledge and participation in processes connected with proceeds of crime - Placement, layering and integration as elements of money laundering - Whether the petitioner should be enlarged on anticipatory bail in proceedings under the PMLA having regard to the allegations and material that she received and dealt with proceeds of crime. - HELD THAT: - The Court considered the materials placed on record and the submissions of parties, including the contention that mere transfer from the NGO's account to the petitioner's account does not by itself attract Section 3 of the PMLA unless conscious and knowing involvement is shown. The Court noted the prosecution's case that the petitioner (mother of the main accused) received substantial amounts in her bank accounts from the NGO, created fixed deposits from alleged illegal and unaccounted cash, took loans against those FDs used to purchase vehicles, and repaid loans in cash without supporting documents. Applying the concepts of placement, layering and integration, the Court found that the petitioner assisted in acquisition and concealment of proceeds of crime, and that the material on record indicated deliberate concealment and use of proceeds generated by the main accused. The Court addressed the scope of Section 45 and the discretionary role of the Special Court in bail matters under the PMLA, having regard to the grave nature of money laundering offences and the evidence of involvement. While defenses based on age, health, alleged innocence, previous non-inclusion in FIRs/charge-sheets and reliance on precedents were noted, the Court concluded on the facts before it that anticipatory bail was not warranted. The Court further clarified that the petitioner remains free to surrender and move the trial court for regular bail, which shall be considered on merits without prejudice to the observations in this order. [Paras 18, 19, 20, 21]

Prayer for anticipatory bail rejected; petitioner granted liberty to surrender and seek regular bail, which the trial court may consider on merits.

Final Conclusion: On the material before the High Court the petitioner was found to have received and transacted in alleged proceeds of crime in a manner consonant with placement, layering and integration; the discretionary grant of anticipatory bail under Section 45 of the PMLA was declined and the application for anticipatory bail stands rejected, subject to the petitioner's liberty to surrender and seek regular bail before the Special Court.

Offence of money-laundering under Section 3 of the PMLA - effect of acquittal in predicate/scheduled offence on PMLA proceedings - proceeds of crime as independent basis for prosecution - continuing nature of process or activity connected with proceeds of crime - prosecution cannot proceed on a notional basis - prima facie material for framing of charge

Effect of acquittal in predicate/scheduled offence on PMLA proceedings - offence of money-laundering under Section 3 of the PMLA - prosecution cannot proceed on a notional basis - Whether proceedings under the PMLA (Section 3) can continue against persons whose alleged predicate/scheduled offences have been finally acquitted - HELD THAT: - The Court applied the interpretation of Section 3 as laid down by the Supreme Court in Vijay Madanlal Choudhary, holding that the offence under Section 3 is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence and concerns processes or activities connected with such property. The Apex Court declared that Authorities under the PMLA cannot prosecute on a notional basis or on the assumption that a scheduled offence has been committed unless it is so registered or pending enquiry/trial before a competent forum, and that if a person is finally discharged or acquitted of the scheduled offence by a Court of competent jurisdiction, there can be no offence of money-laundering against him or anyone claiming such property through him. Applying that principle to the facts, the Court observed that accused 1 and 2 had been finally acquitted by this Court on 14-08-2018 of the predicate IPC offences which formed the substratum of the ED complaint, and that the PMLA proceedings were instituted and charges framed in respect of property alleged to be proceeds of those now-acquitted offences. In light of the binding pronouncement of the Apex Court and the subsequent acceptance of that position by the Union in Parvathi Kollur, permitting the PMLA proceedings to continue despite the final acquittal would be an abuse of process and cause a miscarriage of justice. The Court therefore quashed the Special C.C.No.303 of 2018 insofar as it proceeded against the petitioners. [Paras 12, 15, 16]

PMLA proceedings predicated on the predicate offences were quashed because the accused were finally acquitted of those scheduled offences.

Final Conclusion: The petitions are allowed and the Special C.C.No.303 of 2018 (PMLA proceedings) pending before the XLVII Additional City Civil and Sessions Judge and Special Judge for CBI Cases, Bengaluru stand quashed, in view of the final acquittal of the accused in the predicate offences and the binding exposition of law in Vijay Madanlal Choudhary (and subsequent acceptance in Parvathi Kollur) that PMLA prosecution cannot continue once the scheduled offence has been finally discharged/acquitted.

Leviability of service tax on subsidies - Business Support Services - subsidy versus service charges - event management service - sports organisations not commercial undertakings

Leviability of service tax on subsidies - Business Support Services - subsidy versus service charges - event management service - sports organisations not commercial undertakings - Amounts received by the respondent from BCCI by way of subsidy are not taxable as Business Support Services or as event management/service charges. - HELD THAT: - The Tribunal examined the show cause notice where the Department treated amounts received from BCCI as service charges for event management. On the material, the respondent received subsidies to meet expenses incurred in conducting cricket matches and did not render taxable services to BCCI. The Tribunal applied the ratio in Vidarbha Cricket Association and the reasoning of the Apex Court that sporting organisations devoted to promotion of the sport are not to be equated with commercial organisations; incidental revenue or distribution of receipts for promotion, infrastructure or player expenses does not convert such receipts into consideration for a business-related support service. Having regard to the character of the payments (TV rights distribution, tournament receipts, infrastructure and related subsidies) and the objects of the grants, the receipts were held to be subsidies not consideration for infrastructural or event-management services and therefore not leviable to service tax under the Business Support Services or event management categories. The adjudicating authority's decision to drop the demand on this basis was upheld and no taxable service was found to have been provided to BCCI.

The demand in the show cause notice in respect of amounts received as subsidy from BCCI is unsustainable; the adjudicating authority's order dropping the demand is upheld and the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal affirmed that subsidies received by the Cricket Association from BCCI to meet expenses of conducting matches are not taxable as Business Support Services or event-management/service charges; the impugned Order in Original dropping the demand is upheld and the Revenue's appeal is dismissed.

Liability under Section 73A to deposit service tax collected - distinction between collection as a fiduciary/mediator and collection retained by the assessee - liability of the actual service provider for broadcasting service - prohibition of double taxation where tax has already been paid by the service provider

Liability under Section 73A to deposit service tax collected - distinction between collection as a fiduciary/mediator and collection retained by the assessee - liability of the actual service provider for broadcasting service - prohibition of double taxation where tax has already been paid by the service provider - Whether amounts shown as service tax on broadcasting charged to clients and collected by the advertising agency are exigible to deposit by the agency under Section 73A of the Finance Act, 1994 when the agency passed the entire amounts to broadcasters who deposited the service tax with the Government. - HELD THAT: - The Tribunal examined the factual matrix and provisions of Section 73A and held that the statutory obligation to pay over amounts collected as service tax arises only where the collector has collected and retained such amounts. The appellant acted as an intermediary/mediary/facilitator between clients and broadcasters: broadcasters invoiced the appellant, the appellant billed clients by passing through corresponding broadcasting bills (including service tax), received payment from clients and forwarded the full amounts to the broadcasters without deduction or retention. Broadcasters undisputedly deposited the service tax with the Government. Given these admitted facts, the appellant did not collect and retain service tax within the meaning of Section 73A and therefore the adjudicating authority erred in applying Section 73A to demand deposit from the appellant. The Tribunal further observed that the actual liability for broadcasting services rests with the broadcaster and that confirming a demand against the appellant where the same tax had already been discharged by the broadcaster would amount to double payment; accordingly the demand under Section 73A could not be sustained. Because the matter was decided on merits, the Tribunal did not address limitation arguments. [Paras 4]

Impugned order confirming demand under Section 73A is set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal on merits, holding that an advertising agency which merely collected and passed on broadcasting charges and service tax to broadcasters (who deposited the tax) is not liable to deposit those amounts under Section 73A; the demand confirmed by the Commissioner was set aside.

Refund of penalty deposited after adjudication - limitation for refund of penalty - Section 11B applicability to penalties - unjust enrichment - burden of penalty not passed on to service recipients - refund pursuant to successful appeal under Section 35FF of the Central Excise Act

Limitation for refund of penalty - Section 11B applicability to penalties - Limitation under the refund provisions does not apply to refund of penalty deposited after passing of the order-in-original. - HELD THAT: - The Tribunal accepted the appellant's contention that Section 11B (which deals with refund of duty) does not specifically refer to refund of penalties; consequently the time limit prescribed therein is not applicable to claims for refund of penalty which were deposited after adjudication. The court relied on the factual position that the penalty was deposited post the order-in-original and held that no limitation bar under the refund provisions could be invoked to deny the refund of such penalty. [Paras 10]

No limitation applies to the refund of the penalty deposited after adjudication; the refund claim cannot be rejected on limitation grounds.

Unjust enrichment - burden of penalty not passed on to service recipients - The doctrine of unjust enrichment did not bar the grant of refund of the penalty as the burden was borne by the appellant and not passed on to service receivers. - HELD THAT: - The Tribunal considered the respondent's plea of unjust enrichment and found that there was no evidence that the appellant had passed the burden of the penalty to its service recipients. In the absence of passing on the burden, the prerequisite for invoking unjust enrichment to refuse a refund was not established, and therefore unjust enrichment could not be a ground to deny the refund. [Paras 10]

Unjust enrichment does not operate to deny the refund since the appellant bore the burden of the penalty and did not pass it on.

Refund pursuant to successful appeal under Section 35FF of the Central Excise Act - refund of penalty deposited after adjudication - Refund of the penalty is available to the assessee following success in appeal, and Section 35FF supports entitlement to refund. - HELD THAT: - The Tribunal observed that since the appellant succeeded in the appeal (penalties were held not payable by the appellate authority), the refund flowing from that decision is available under Section 35FF of the Central Excise Act. This statutory provision bolsters the conclusion that the refund claim is maintainable despite the penalty having been deposited after adjudication, and supports directing the adjudicating authority to grant refund with interest. [Paras 10, 11]

Refund is permissible pursuant to the successful appeal and Section 35FF; the adjudicating authority is directed to grant the refund with interest.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned order rejecting the refund, and directed grant of refund of the penalty amount with interest from date of deposit to date of refund, holding that limitation under Section 11B does not apply to penalty refunds, unjust enrichment is not attracted, and refund is available under Section 35FF.

Suppression of facts - Adjudication by issuance of show cause notice - Denial of Cenvat credit for suppression under Rule 9(1)(bb) of Cenvat Credit Rules - Entitlement to Cenvat credit - Cash refund remedy and applicability of Section 11B - Prima facie refund under Section 142(3) of the CGST Act - Taxability of ocean freight

Suppression of facts - Adjudication by issuance of show cause notice - Charge of suppression of facts against the appellants - HELD THAT: - The Tribunal found that the allegation of suppression was not established because no show cause notice or adjudication proceedings were initiated demanding service tax on ocean freight. A mere payment of service tax on instruction of audit, without initiation of demand proceedings, does not amount to adjudicated suppression of facts. The Lower Authorities' conclusion that suppression occurred was based on assumption and presumption, and therefore unsustainable.

There is no established suppression of facts in the absence of adjudication by a show cause notice; the charge of suppression is negatived.

Denial of Cenvat credit for suppression under Rule 9(1)(bb) of Cenvat Credit Rules - Entitlement to Cenvat credit - Applicability of Rule 9(1)(bb) to deny Cenvat credit to the appellants - HELD THAT: - Rule 9(1)(bb) operates where suppression of facts is established. Since the Tribunal has held that suppression was not established (no adjudication/demand), the ground for invoking Rule 9(1)(bb) to deny Cenvat credit falls away. The Tribunal referred to authorities cited by the appellants and applied the principle that denial under Rule 9(1)(bb) cannot rest on mere presumption absent adjudication.

Rule 9(1)(bb) is not applicable; appellants are entitled to Cenvat credit.

Entitlement to Cenvat credit - Whether the appellants are entitled to claim Cenvat credit for service tax paid on ocean freight - HELD THAT: - Having rejected the finding of suppression and the applicability of Rule 9(1)(bb), the Tribunal held that the appellants are entitled to the Cenvat credit claimed. The Tribunal observed that the Lower Authorities' denial lacked adjudicatory foundation and must be set aside. The Tribunal directed that the matter be remanded to the Adjudicating Authority for fresh consideration consistent with these conclusions.

Appellants are entitled to the claimed Cenvat credit; impugned orders set aside and matter remanded to the Adjudicating Authority for fresh adjudication.

Cash refund remedy and applicability of Section 11B - Prima facie refund under Section 142(3) of the CGST Act - Availability of cash refund in respect of the Cenvat credit claimed - HELD THAT: - The Tribunal noted that Section 11B was not available to the appellants for cash refund as held by the lower fora. However, having allowed entitlement to Cenvat credit and in view of the transitional/special provision, the Tribunal observed that appellants are prima facie entitled to cash refund under the special provision contained in Section 142(3) of the CGST Act. The Tribunal left the detailed adjudication of refund to the Adjudicating Authority on remand.

Section 11B is not applicable; appellants are prima facie entitled to cash refund under Section 142(3) of the CGST Act; matter remanded for consideration of refund.

Taxability of ocean freight - Whether ocean freight is taxable service for the purposes of the claim - HELD THAT: - The Tribunal observed that the question of taxability of ocean freight has been considered subsequently by the Gujarat High Court in M/s SAL Steel Ltd. v. Union of India, a decision not available to the Lower Authorities when they passed their orders. Given that the relevant High Court decision post-dates the lower orders, the Tribunal kept the question of taxability open and granted the appellants liberty to raise the point before the Adjudicating Authority on remand.

Taxability of ocean freight is not finally decided in these appeals and is kept open for fresh consideration by the Adjudicating Authority.

Final Conclusion: Impugned orders denying Cenvat credit and refund are set aside; appeals allowed by remanding the matters to the Adjudicating Authority for fresh adjudication in accordance with the findings that suppression is not established, Rule 9(1)(bb) is not applicable, appellants are entitled to Cenvat credit, refund claims may be considered in light of Section 142(3) of the CGST Act, and the question of taxability of ocean freight is open for determination.

Utilization of Cenvat Credit of basic Excise duty for payment of E Cess and SHE Cess - extended period of limitation - proviso to Section 11A(1) - requirement of specific allegation of suppression, fraud, wilful mis representation or intentional evasion to invoke extended limitation - natural justice - requirement to state specific acts or omissions in show cause notice - debatable question of law and bona fide conduct as defence to extended limitation

Extended period of limitation - proviso to Section 11A(1) - requirement of specific allegation of suppression, fraud, wilful mis representation or intentional evasion to invoke extended limitation - natural justice - requirement to state specific acts or omissions in show cause notice - debatable question of law and bona fide conduct as defence to extended limitation - Invocation of the extended period of limitation for recovery of Cenvat credit and imposition of interest and penalty - HELD THAT: - The Tribunal held that the purported demands could be confirmed only if the invocation of the extended period of limitation was legally justified. The show cause notice dated 19.02.2015 did not contain any specific averment identifying which of the acts or omissions set out in the proviso to Section 11A(1) had been committed by the appellant; consequently the appellant was not put on notice of suppression, fraud, wilful mis representation or intentional evasion. Reliance on precedent requires that the show cause notice itself specify the particular ground for invoking extended limitation. The adjudicating authority's subsequent statement in the order that suppression had occurred and that the matter was detected only in audit could not cure the deficiency in the show cause notice. Further, the question whether cross utilisation of basic excise duty credit for discharge of E Cess and SHE Cess was prohibited was an arguable, interpretative issue which the appellant had raised and supported by precedents; the assessee's disclosures in returns and the conduct on record indicated bona fide action. Taking these factors together, the Tribunal concluded that the extended period of limitation was wrongly invoked and the proceedings were barred by limitation. [Paras 5, 6, 7, 8, 9]

Invocation of the extended period of limitation was unsustainable; the demands, interest and equivalent penalty were barred by limitation and therefore unsustainable.

Final Conclusion: The appeal is allowed on the ground of limitation; the disallowance of Cenvat credit and the confirmation of interest and equivalent penalty are set aside, with consequential reliefs, and the impugned order dated 28.12.2017 is quashed.

Proof of transfer otherwise than by way of sale - Form F as evidentiary material - directory character of Rule 4(3A) of the CST (TN) Rules - burden of proof to verify particulars in Form F - scope of writ revisional jurisdiction under Article 226

Form F as evidentiary material - proof of transfer otherwise than by way of sale - burden of proof to verify particulars in Form F - Validity of the Tribunal's setting aside of the Appellate Assistant Commissioner's exemption granted on the strength of Form F and whether the petitioner discharged the burden to prove that the movement of goods was otherwise than by way of sale. - HELD THAT: - The Court applied the test laid down by the Division Bench in A. Dhandapani, which treats Rule 4(3A) as directory and requires the dealer, having elected to rely on Form F, to prove the truth of the particulars therein and may also produce other evidence to support the claim. The Tribunal found that, despite opportunities, the assessee did not produce evidence sufficient to establish the truth of the particulars in Form F and therefore was not justified in allowing exemption merely on the basis of the form and sale list. The High Court, on review of the material and the governing test in A. Dhandapani, found no error in the Tribunal's conclusion that the burden of proof was not discharged and that the Appellate Assistant Commissioner's reliance solely on Form F was incorrect. [Paras 6, 7]

The Tribunal's order setting aside the exemption granted by the Appellate Assistant Commissioner was upheld; the petitioner failed to prove that the transfers were otherwise than by way of sale.

Scope of writ revisional jurisdiction under Article 226 - Whether the High Court should substitute its view on merits rather than confine itself to review of the decision making process under Article 226. - HELD THAT: - The Court reiterated that exercise of writ jurisdiction under Article 226 is confined to examination of the decision making process and not to substitute the tribunal's decision on merits. Having found no infirmity in the procedure adopted by the Tribunal in permitting the State's appeal and arriving at its conclusion, the Court declined to interfere with the merits of the Tribunal's order. [Paras 7]

Writ jurisdiction under Article 226 does not permit re adjudication of the merits where the decision making process is unimpeached; no interference was warranted.

Final Conclusion: Writ petition dismissed. The Tribunal's order allowing the State's appeal and setting aside the exemption was sustained because the petitioner did not discharge the burden to prove the particulars in Form F; the High Court declined to interfere under Article 226 as there was no flaw in the decision making process. No costs.

Definition of sale - loan transaction versus sale - transfer of property in goods - wide interpretation of 'sale' under the Central Sales Tax Act - ultimate fact-finding role of the Tribunal - penal provision under Section 12(3) as applied to assessment

Definition of sale - loan transaction versus sale - transfer of property in goods - ultimate fact-finding role of the Tribunal - penal provision under Section 12(3) as applied to assessment - Whether the inter-state movements of aluminium wire rod constituted loan transactions or sales and whether the consequential assessment and penalty were sustainable - HELD THAT: - The Court upheld the Tribunal's conclusion that the petitioner failed to establish the transactions as loan transactions. The material on record did not disclose any contract, agreement or contemporaneous documents linking the dispatches and receipts as a single loan arrangement; in the absence of such proof the independent dispatch and receipt transactions fall within the scope of 'sale' as defined in the Central Sales Tax Act. The Court observed that the definition of 'sale' in the CST Act is wide and, on the facts, the Tribunal's view that the transactions could not be treated as loans was reasonable. The High Court declined to apply the other authorities relied upon by the petitioner as distinguishable on facts and law. Given that the finding on taxability and the confirmation of the assessment (and attendant confirmation of penalty under the applicable penal provision) was one of fact and evaluation of evidence, the Court emphasised that the Tribunal is the ultimate fact-finding authority and its concurrent findings did not warrant interference. [Paras 19, 20]

Tribunal's order treating the transactions as not proved to be loans and restoring the assessing authority's order (including confirmation of assessment and penalty) is upheld and the writ petition is dismissed.

Final Conclusion: The High Court dismissed the writ petition, upholding the Tribunal's finding that the petitioner did not prove the claimed loan transactions and that the assessment and penalty confirmed by the assessing authority and restored by the Tribunal did not call for interference.

Principle of natural justice - opportunity of hearing - non-speaking order - reconsideration on merits after affording opportunity of hearing - constitutional validity of the One Hundred and First Amendment

Constitutional validity of the One Hundred and First Amendment - Challenge to the constitutional validity of the One Hundred and First Amendment as it bears on the Kerala State Goods and Services Tax Act, 2017. - HELD THAT: - The Court recorded that the challenge to the One Hundred and First Amendment and the consequent contentions against the Kerala State Goods and Services Tax Act, 2017 had already been considered and rejected by this Court in Sheen Golden Jewels (India) Pvt. Ltd. v. State Tax Officer (Investigation Branch) and others. Relying on that precedent, the petitioner is not entitled to relief on the constitutional challenge raised in this petition. [Paras 6]

The constitutional challenge to the One Hundred and First Amendment / GST enactment is rejected in view of the earlier decision; no relief on this ground.

Principle of natural justice - opportunity of hearing - non-speaking order - reconsideration on merits after affording opportunity of hearing - Validity of Ext.P3 assessment order under the Kerala Value Added Tax Act insofar as it failed to consider objections, denied opportunity of hearing and was non-speaking. - HELD THAT: - On examination of Ext.P3, the Court found that the assessing authority issued a voluminous list of alleged unaccounted sales and purchases but did not reflect detailed consideration of the specific objections raised by the petitioner, including requests for details of consignors, opportunity to cross-examine listed parties and an opportunity for personal hearing. The order was cryptic in its conclusion and did not disclose application of mind to the petitioner's contentions, rendering it a non-speaking order in violation of the principles of natural justice. Because the petitioner lacked access to essential identifying details from the KVATIS list necessary for verification, a fair adjudication required that the assessing authority re-consider the matter after affording the petitioner a hearing and taking into account all contentions before finalizing proceedings. [Paras 7, 8]

Ext.P3 is set aside; matter remitted to the third respondent to reconsider the issues on merits after affording an opportunity of hearing to the petitioner within three months and to take into account all contentions raised.

Final Conclusion: Ext.P3 assessment order is quashed and the matter is remitted for fresh consideration on merits after affording the petitioner an opportunity of hearing; the constitutional challenge to the One Hundred and First Amendment / GST enactment is rejected in view of earlier precedent.

Deceptive similarity - device mark vs word mark - comparison of composite marks as a whole - anti-dissection rule - prima facie case for interim injunction - exclusive right in a common word - estoppel by prior representations to the Registrar

Deceptive similarity - device mark vs word mark - anti-dissection rule - prima facie case for interim injunction - comparison of composite marks as a whole - Whether the appellant was entitled to a prohibitory interim injunction restraining respondent no.1 from using the device mark "VASUNDHRA FASHION /" - HELD THAT: - The Court held that the appellant failed to make out a prima facie case for grant of a prohibitory interim injunction. The VASUNDHRA Trademarks are registered as device/composite marks and such registration does not ipso facto confer an exclusive right in the word 'Vasundhra' standing alone. Applying the anti dissection rule, competing composite marks must be compared as a whole and not by isolating a portion of a mark; dominance of a component is relevant only insofar as it assists in assessing the overall commercial impression. On a holistic comparison the device mark used by respondent no.1 (including a prominent leaf device and the composite presentation) is not deceptively similar to the appellant's registered device trademarks. The court also noted contextual factors relevant to the interim relief: the goods, channels and area of operation were distinct in material respects, the word 'Vasundhra' is shown to be commonly used and thus a weak element, and the appellant had not demonstrated exclusive identification of that word with its business or any present plan to trade in respondent's classes. In light of these considerations the balance of convenience and prima facie case did not favour grant of interim relief. [Paras 33, 36, 37, 38, 43]

Interim injunction denied; appellant failed to establish deceptive similarity or a prima facie right warranting prohibitory relief.

Exclusive right in a common word - device mark vs word mark - Whether registration of composite/device trademarks entitles the appellant to an exclusive monopoly over the word 'Vasundhra'. - HELD THAT: - The Court affirmed that registration of a composite or device mark does not automatically confer an exclusive statutory right over an individual word contained within the composite. Absent registration of the word mark or clear evidence that the common word has, by extensive use, acquired a distinctiveness exclusively identifying the appellant's goods, the proprietor cannot expand the statutory protection of its registered device mark to claim monopoly over the standalone word. The word 'Vasundhra' was found to be commonly used and intrinsically weak as a mark; prima facie the appellant had not shown the requisite exclusive association across the relevant market to justify such exclusivity. [Paras 31, 34, 35, 38, 39]

No exclusive right in the word 'Vasundhra' accrued to the appellant merely by virtue of its device mark registrations.

Estoppel by prior representations to the Registrar - comparison of composite marks as a whole - Whether the appellant could now contend that respondent's device mark was deceptively similar when, before the Registrar of Trademarks, it had relied on the composite nature of its marks to distinguish earlier citations. - HELD THAT: - The Court held that the appellant could not adopt inconsistent positions. Having previously argued before the Registrar that its marks must be considered as a whole to distinguish them from other marks containing 'Vasundhra', the appellant could not in these proceedings seek, by indirect means, to claim an exclusive right in the word 'Vasundhra' or to assert similarity by focusing on that word alone. The prior stance before the Registrar operated to prevent the appellant from taking a contrary stand in these proceedings. [Paras 40, 41, 42]

Appellant estopped from asserting an exclusive claim over the word 'Vasundhra' or from relying on a dissected comparison inconsistent with its earlier representations.

Final Conclusion: The appeal is dismissed. The Single Judge's refusal to grant interim injunction is upheld: the appellant has not shown a prima facie case of deceptive similarity or an exclusive right in the word 'Vasundhra' based on its device registrations, and it is estopped from adopting an inconsistent stand contrary to earlier representations to the Registrar. Pending applications are disposed of.

Revisional jurisdiction under Sections 397 and 401 Cr.P.C. - scope of interference in revisional jurisdiction - legal notice under Section 138(b) of the Negotiable Instruments Act - presumptions under Sections 118 and 139 of the Negotiable Instruments Act - standard of proof to rebut presumption (preponderance of probabilities) - limitation on fine under Section 138 of the Negotiable Instruments Act (maximum twice the cheque amount)

Revisional jurisdiction under Sections 397 and 401 Cr.P.C. - scope of interference in revisional jurisdiction - Whether the High Court should re-appreciate evidence and interfere with concurrent convictions of the trial court and the appellate court in exercise of revisional jurisdiction - HELD THAT: - The High Court reiterated that its revisional power is supervisory and not equivalent to an appellate jurisdiction; interference is justified only where the impugned order is perverse, wholly unreasonable, based on no material, or where there is non-consideration of relevant material or a glaring miscarriage of justice. The courts below (trial and appellate) had appreciated the evidence and reached concurrent findings; no glaring feature or legal error was pointed out except a challenge to the notice. In view of settled precedents and the absence of any demonstrable perversity or legal infirmity in the concurrent findings, the revisional court declined to re-appreciate evidence or disturb the convictions. [Paras 9, 10, 11, 21]

Concurrent convictions were not interfered with and revision on merits was refused.

Legal notice under Section 138(b) of the Negotiable Instruments Act - Whether the notice issued under Section 138(b) of the Negotiable Instruments Act complied with statutory mandate - HELD THAT: - The courts below examined the contents of Exts.P10 and P14 and applied authoritative decisions holding that the notice contemplated by Section 138(b) is a demand of the amount covered by the cheque upon its return unpaid. Having regard to the precedents relied on by the courts below and their factual finding that the notices contained the demand mandated by the statute, the High Court found no merit in the objection regarding want of details in the notice and upheld the validity of the notice. [Paras 12, 13]

The notice under Section 138(b) was held valid and the objection on that ground was rejected.

Presumptions under Sections 118 and 139 of the Negotiable Instruments Act - standard of proof to rebut presumption (preponderance of probabilities) - Whether the statutory presumptions under Sections 118 and 139 operated and whether the accused successfully rebutted them - HELD THAT: - The trial and appellate courts accepted PW1 and PW2 evidence that the cheques were issued by the accused and that the underlying liability existed, thereby invoking the presumptions under Sections 118 and 139. The High Court applied settled law that these are rebuttable presumptions and that the accused must rebut them on the preponderance of probabilities. The accused did not adduce adequate evidence to discharge that burden; the courts below rightly drew the twin presumptions and found the defence insufficient to negate criminal liability under Section 138. [Paras 14, 15, 16, 19, 20]

Presumptions under Sections 118 and 139 applied and the accused failed to rebut them; conviction on merits sustained.

Limitation on fine under Section 138 of the Negotiable Instruments Act (maximum twice the cheque amount) - Whether the sentence as pronounced (fine together with interest) could result in a fine exceeding the statutory maximum of twice the cheque amount, and whether modification was necessary - HELD THAT: - The Court noted that while interest at a reasonable rate (9% per annum) is appropriate for compensation, the criminal provision in Section 138 caps the fine at twice the cheque amount. An open-ended order directing interest to accrue until payment could lead to a fine exceeding that statutory cap. Following authoritative guidance, the High Court held that the quantification of fine must be fixed so as not to exceed twice the cheque amount, and re-quantified the fines accordingly. Consequential directions were given for payment, default sentences and a timeline for compliance; execution of sentence was deferred for the limited period granted. [Paras 23, 24, 25, 26, 27]

Sentence modified so fine does not exceed statutory limit; in S.T.No.10000/2011 fine fixed at Rs.3,00,000 with default imprisonment of 4 months, and in S.T.No.10001/2011 fine fixed at Rs.1,50,000 with default imprisonment of 2 months; one month's time granted for compliance and appearance before the trial court.

Final Conclusion: Revision petitions allowed in part: concurrent convictions under Section 138 N.I. Act upheld; notice under Section 138(b) held valid; statutory presumptions under Sections 118 and 139 sustained as not rebutted; sentences modified to quantify fines so as not to exceed twice the cheque amounts with specified default imprisonment and a limited period granted for payment and appearance before the trial court.

Quashing of criminal proceedings - Maintainability of complaint under Section 138 of the Negotiable Instruments Act - Inapplicability of Sections 406 and 420 IPC where dispute arises under the NI Act - Amendment of petition prayer and treatment of IA as part of main petition - Right to file fresh complaint under Section 142 of the NI Act and proviso - Remedial direction following Yogendra Singh v. Savitry Pandey

Amendment of petition prayer and treatment of IA as part of main petition - I.A. No. 8428 of 2022 for amendment in the prayer portion of the petition was allowed and directed to be treated as part of the petition. - HELD THAT: - The Court permitted the petitioner to amend the prayer in view of the cognizance having been taken during pendency of the petition and to avoid multiplicity of litigation. No substantive objection was pressed by opposite party no. 2, who also stated he had no serious objection to the amendment. The application was allowed and disposed of and the IA was ordered to be treated as part of the petition. [Paras 5, 6, 7]

I.A. allowed; I.A. No. 8428 of 2022 disposed of and treated as part of the petition.

Quashing of criminal proceedings - Maintainability of complaint under Section 138 of the Negotiable Instruments Act - Inapplicability of Sections 406 and 420 IPC where dispute arises under the NI Act - Right to file fresh complaint under Section 142 of the NI Act and proviso - Remedial direction following Yogendra Singh v. Savitry Pandey - The criminal proceeding including the cognizance order dated 13.05.2022 in Khunti P.S. Case No. 111/2021 (G.R. No. 299/2022) was quashed and the complainant was given liberty to pursue remedy under Section 142 of the NI Act as indicated by the Supreme Court in Yogendra Singh v. Savitry Pandey. - HELD THAT: - The Court found that the allegations stem from dishonour of a cheque and the subject matter falls within offences under Section 138 of the Negotiable Instruments Act, for which the statutory mode of remedy is a complaint under Section 142. The Court observed that Sections 406 and 420 IPC are not attracted where the dispute arises under the NI Act and noted that the larger Bench of the Supreme Court is considering this question. In consequence, the Court quashed the entire criminal proceedings including the cognizance order. The Court relied on paragraph 41 of Yogendra Singh v. Savitry Pandey to grant the complainant the remedy of filing a fresh complaint within the period prescribed by Section 142(b) or, if delayed, to seek condonation under the proviso by satisfying the court of sufficient cause. [Paras 12, 13, 14, 15]

Criminal proceedings and cognizance order dated 13.05.2022 quashed; opposite party no. 2 permitted to file a fresh complaint under Section 142 of the NI Act in accordance with Yogendra Singh, with leave to seek condonation under the proviso if required.

Final Conclusion: The petition is allowed: the amendment application is permitted and treated as part of the petition; the criminal proceedings including the cognizance order are quashed as the dispute arises under Section 138 NI Act and IPC Sections 406/420 are not attracted; the complainant is directed to pursue remedy under Section 142 of the NI Act (with liberty to file a fresh complaint or seek condonation under the proviso in accordance with Yogendra Singh v. Savitry Pandey).

Magistrate's discretion to take cognizance or to refer complaint for investigation - recording of sworn statement under Section 200 Cr.P.C. and Chapter XVI procedure - no requirement for an express recital of cognizance in the order-sheet before recording sworn statements - prima facie satisfaction to take cognizance and issue process in proceedings under Section 138 of the Negotiable Instruments Act

Recording of sworn statement under Section 200 Cr.P.C. and Chapter XVI procedure - no requirement for an express recital of cognizance in the order-sheet before recording sworn statements - prima facie satisfaction to take cognizance and issue process in proceedings under Section 138 of the Negotiable Instruments Act - Legality of the Magistrate recording the complainant's sworn affidavit and taking cognizance in the same order, without an earlier explicit recital that cognizance had been taken before recording the sworn statement. - HELD THAT: - The Court considered rival authorities including a Supreme Court decision (Gopal Das Sindhi) and coordinate-bench precedents of this Court. The law recognises that a Magistrate may either take cognizance and proceed under Chapter XVI or, alternatively, refer the matter for police investigation under Section 156(3); the word 'may' in Section 190 does not compel automatic cognizance on filing of a complaint. A Magistrate's taking of cognizance can be inferred from the material on record and from the course adopted, and it is not mandatory that the order-sheet must expressly state the word 'cognizance' before recording sworn statements. Where the complaint and the sworn affidavit were filed together and, on perusal of the complaint, affidavit and documents the Magistrate formed prima facie satisfaction that the ingredients of Section 138 NI Act were established, the Magistrate was entitled to take cognizance and issue process in the same order. The petitioner's reliance on Mahadeva vs. Papireddy was found distinguishable because there the procedure followed showed a posting for recording statement without antecedent cognizance; by contrast, in the present case the Magistrate registered the PCR, perused the complaint and affidavit, and in the same order recorded his prima facie satisfaction and took cognizance. Consequently, no illegality or fatal irregularity was established merely by the absence of an earlier express recital that cognizance had been taken prior to recording the sworn statement. [Paras 6, 7, 8, 9]

The impugned order taking cognizance and issuing process in respect of the offence under Section 138 NI Act is not illegal for want of an express prior recital of cognizance; the petition for quashing is dismissed.

Final Conclusion: The petition under Section 482 Cr.P.C. challenging the Magistrate's order is dismissed; the Magistrate's acting on the complaint and sworn affidavit to form prima facie satisfaction and take cognizance in the same order did not amount to illegality, and the interlocutory application pending therewith stands disposed of.