TaxTMI Updates e-Newsletter
Nov 07,2024

Retrospective amendment to input tax credit eligibility - interpretation and application of Section 16(5) and Section 16(6) of the CGST Act, 2017 - availability of input tax credit for financial years 2017-18 to 2020-21 - rendering of departmental proceedings redundant by subsequent statutory amendment - remand for passing appropriate orders

Retrospective amendment to input tax credit eligibility - interpretation and application of Section 16(5) and Section 16(6) of the CGST Act, 2017 - availability of input tax credit for financial years 2017-18 to 2020-21 - Effect of amendments (Finance (No. 2) Act, 2024) inserting Section 16(5) and 16(6) on the petitioner's entitlement to input tax credit for the specified financial years - HELD THAT: - The Court found that the Finance (No. 2) Act, 2024 inserted sub-sections (5) and (6) into Section 16 which, notwithstanding the earlier restriction in Section 16(4), expressly entitles a registered person to take input tax credit in respect of invoices or debit notes pertaining to Financial Years 2017-18, 2018-19, 2019-20 and 2020-21 if a return under Section 39 is filed up to 30th November, 2021. The amended provisions have been given retrospective effect from 01.07.2017 by Notification No. 17/2024-Central Tax dated 27.09.2024. In consequence, the petitioner is entitled to avail the benefit of input tax credit for the relevant period subject to the conditions prescribed in the newly inserted sub-sections. The Court observed that, in view of these statutory amendments, the challenge brought in the writ petition with respect to entitlement to input tax credit no longer requires separate adjudication on the merits. [Paras 20, 21, 22]

Amendments in Section 16(5) and (6) operate retrospectively and entitle the petitioner to claim input tax credit for Financial Years 2017-18 to 2020-21 subject to the conditions in those sub-sections.

Rendering of departmental proceedings redundant by subsequent statutory amendment - remand for passing appropriate orders - Consequences for the pending departmental proceedings and impugned order in light of the retrospective amendment - HELD THAT: - The Court held that, because the statutory amendment now permits availment of input tax credit for the specified years with retrospective effect, the departmental proceedings initiated by issuance of the show-cause notice and the impugned order confirming demand have been rendered redundant. Having regard to the State respondents' requirement to issue consequential notifications and the need for the competent officer to take action consistent with the amended law, the Court set aside the impugned order and remanded the matter to the jurisdictional officer to pass appropriate orders, if necessary, in accordance with the amended statutory regime. [Paras 22, 23]

Impugned order set aside; proceedings rendered redundant by the amendment and matter remanded to the competent jurisdictional officer to pass appropriate orders in accordance with the amended law.

Final Conclusion: In view of retrospective amendments to Section 16 by the Finance (No. 2) Act, 2024 (effective from 01.07.2017), the petitioner is entitled to claim input tax credit for Financial Years 2017-18 to 2020-21 subject to the conditions in Section 16(5) and (6); the impugned departmental order is set aside as redundant and the matter is remanded to the competent officer for orders consistent with the amended provisions.

Right to travel abroad - condition of prior permission to travel as a bail condition - impounding of passport and Passports Act versus CrPC - power to impose bail conditions to ensure presence during trial - requirement to inform court of foreign travel by affidavit

Condition of prior permission to travel as a bail condition - power to impose bail conditions to ensure presence during trial - right to travel abroad - Validity of the bail condition requiring the petitioner to obtain prior permission of the Trial Court before leaving the country - HELD THAT: - The Court recognised that a trial court may impose appropriate bail conditions to secure the presence of an accused during trial and to protect the integrity of an ongoing investigation. Given that the petitioner was arrested at an early stage of investigation and initially travel restrictions were justified, the Court noted that the investigation has taken five years and remains incomplete, and that the petitioner has repeatedly sought and obtained permission to travel abroad on multiple occasions and has returned as per itinerary without obstructing the investigation. The Court emphasised that the fundamental right to travel abroad cannot be curtailed casually and that continued imposition of a blanket prior-permission condition is onerous in the factual matrix where the petitioner has demonstrated bona fides and cooperation with the investigation. Applying these considerations, the Court held that the specific condition requiring prior leave of the Trial Court before each foreign travel must be set aside and replaced with a less burdensome regime of informing the court of travel plans. [Paras 5, 6, 7, 9, 10]

The condition that the petitioner shall not leave the country without prior permission of the Trial Court is set aside; instead the petitioner must inform the concerned Court by affidavit of itinerary and residence while abroad each time he travels.

Impounding of passport and Passports Act versus CrPC - impounding of passport - special law prevails over general law - Legality of the condition directing surrender/impounding of the petitioner's passport - HELD THAT: - Relying on the principle that a special statute governing passports prevails over the general powers under the Code of Criminal Procedure, and following the reasoning in the cited decision that courts cannot impound a passport under the general impounding provision, the Court found that the condition requiring surrender of the passport was not sustainable. In view of the authority and the statutory scheme, the Court held that the petitioner need not surrender his passport; instead, a non-invasive requirement to file an affidavit disclosing travel itinerary and temporary residence while abroad was imposed to balance investigative concerns with the petitioner's rights. [Paras 8, 9, 10]

The direction to surrender the passport is set aside and the petitioner is not required to surrender his passport; he must file an affidavit in the concerned Court about itinerary and place of residence for each foreign trip.

Final Conclusion: Petition allowed: the Trial Court's conditions requiring prior permission to leave the country and surrender of passport are set aside; instead the petitioner must inform the concerned Court by affidavit of his travel itinerary and place of residence during each foreign visit.

Negative blocking of Electronic Credit Ledger - temporary withholding of input tax credit under Rule 86A - emergent protective measure for protection of government revenue - no prior show cause notice required for Rule 86A order - Rule 86A order operative for maximum period of one year - Rule 86A is not a machinery provision for recovery of tax

Negative blocking of Electronic Credit Ledger - temporary withholding of input tax credit under Rule 86A - Rule 86A is not a machinery provision for recovery of tax - Validity of the respondents' action in imposing a negative balance in the petitioner's Electronic Credit Ledger by disallowing debits in excess of available input tax credit. - HELD THAT: - The Court applied the determinative reasoning in Best Crop Science (P) Ltd. v. Commissioner and held that Rule 86A is an emergent protective measure enabling temporary non-allowance of debit of ITC from the ECL where the Commissioner or authorised officer has reason to believe the credit has been fraudulently availed or is ineligible. An order under Rule 86A(1) need not be preceded by issuance of a show cause notice and may be passed at any stage; however, Rule 86A does not authorise disallowance of debits in excess of the ITC actually available in the ECL at the time of passing the order (negative blocking). Such an interpretation would convert Rule 86A into a recovery mechanism and impose an onus on the taxpayer to replenish validly availed ITC used in the past. The Court further noted that if conditions for disallowing debit cease to exist, Rule 86A(2) mandates permitting debits, and Rule 86A(3) limits the operation of the order to a maximum of one year. Applying these principles, the Court found the respondents' action of negative blocking unsustainable and directed lifting of the negative blocking.

The action of disallowing debits resulting in a negative balance in the petitioner's ECL is set aside and the respondents are directed to lift the negative blocking forthwith.

Final Conclusion: Writ petition allowed; negative blocking of the petitioner's Electronic Credit Ledger is quashed and the respondents are directed to remove the negative balance immediately in accordance with the Court's reasoning adopted from Best Crop Science.

Entitlement to interest on delayed statutory refunds - computation and payment of interest under Section 56 of the CGST Act - remedy of setting aside impugned orders and consequent grant of refund

Entitlement to interest on delayed statutory refunds - computation and payment of interest under Section 56 of the CGST Act - Interest under Section 56 is payable where refund amounts are paid late and the appellate authority allowed the appeals directing payment of interest. - HELD THAT: - The appellate authority examined and applied Section 56(1) of the CGST/DGST Act and recorded that the departmental representative agreed with admissibility of interest since the refund amount was paid late. The appellate order allowed all eleven appeals, set aside the impugned orders and directed that interest on the refund amounts be computed as per law and paid accordingly. On that basis the High Court directed respondents to ensure payment of refunds due pursuant to the appellate order and to release amounts within the stipulated time, thereby enforcing the entitlement to statutory interest as declared by the appellate authority. [Paras 4, 5]

Interest under Section 56 is payable for the delayed refunds and is to be computed and paid as directed by the appellate authority.

Remedy of setting aside impugned orders and consequent grant of refund - judicial supervision to ensure expeditious release of refunds - The impugned orders were set aside by the appellate authority and the High Court directed release of refunds due pursuant to that order within a specified short period. - HELD THAT: - Following the appellate authority's disposition allowing the appeals and setting aside the impugned orders, the High Court, noting that nothing further survives, directed the respondents to release all refunds which have become due and payable pursuant to the appellate order dated 04 July 2024. The Court imposed a time-bound obligation on respondents to ensure disbursement within three weeks from the date of the order, thereby concluding the remedial stage and securing execution of the appellate mandate. [Paras 3, 6]

Respondents are directed to release refunds due pursuant to the appellate order within three weeks.

Final Conclusion: The appellate authority allowed the appeals, set aside the impugned orders and directed computation and payment of interest under Section 56; the High Court ordered that all refunds due pursuant to the appellate order dated 04 July 2024 be released to the petitioner within three weeks.

Validity of Rule 96(10) of the CGST Rules vis-a -vis Section 16 of the IGST Act - ultra vires - manifestly arbitrary - zero-rated supply - refund of IGST and unutilised input tax credit - conditions, safeguards and procedure - limits of delegated rule making - subordinate legislation must be subservient to plenary legislation

Validity of Rule 96(10) of the CGST Rules vis-a -vis Section 16 of the IGST Act - ultra vires - zero-rated supply - refund of IGST and unutilised input tax credit - Rule 96(10) of the CGST Rules is ultra vires Section 16 of the IGST Act. - HELD THAT: - The Court examined Section 16 of the IGST Act (pre amendment) and Section 54 of the CGST Act and held that while the plenary legislation contemplates refund of IGST or unutilised input tax credit subject to conditions, those enabling words do not authorise subordinate legislation to impose conditions which operate to take away the statutory right itself. A comparison of the regimes under Rule 89 and Rule 96 demonstrated that Rule 96(10) imposed restrictions and a classification that goes beyond the scope of Section 16 by denying refunds where certain notifications had been availed, without temporal or consignment linkage and even where only part of inputs were so procured. On that basis the subordinate provision was found to travel beyond the plenary statute and thus to be ultra vires. [Paras 7, 11, 13, 14]

Rule 96(10) is declared ultra vires Section 16 of the IGST Act and unenforceable.

Manifestly arbitrary - conditions, safeguards and procedure - limits of delegated rule making - subordinate legislation must be subservient to plenary legislation - Rule 96(10) is manifestly arbitrary and produces absurd results contrary to principles of Article 14. - HELD THAT: - Applying the test of manifest arbitrariness explained in Shayara Bano and construing the plenary provisions so as to avoid absurdity, the Court found that Rule 96(10) effected hostile discrimination between exporters who use the LUT/bond route (Rule 89) and those who pay IGST and claim refund (Rule 96), with no coherent determinative principle. The Rule denied refunds in entirety even where a small portion of inputs were procured under the notifications, and lacked necessary temporal/consignment identification - features the Court characterised as excessive, disproportionate and arbitrary, warranting strike down. [Paras 13, 14]

Rule 96(10) is manifestly arbitrary and consequently invalid.

Zero-rated supply - refund of IGST and unutilised input tax credit - remedial relief - quashing, bar on recovery and directions on further proceedings - Reliefs to be granted in consequence of invalidating Rule 96(10). - HELD THAT: - In light of the declaration of invalidity, the Court quashed any show cause notices or orders issued and held that no proceedings shall be taken to recover IGST refunded to the petitioners by application of Rule 96(10) for the period between 23 10 2017 and 08 10 2024. The Court permitted aggrieved parties to file appeals or reply to pending show cause notices on issues other than those arising from Rule 96(10) within prescribed short periods and directed proper officers to adjudicate remaining issues accordingly. [Paras 15]

Actions/orders based on Rule 96(10) quashed; no recovery of IGST refunded for the period 23-10-2017 to 08-10-2024; procedural directions given for appeals and replies on collateral issues.

Final Conclusion: The Court allowed the writ petitions: Rule 96(10) of the CGST Rules (as inserted w.e.f. 23 10 2017) was declared ultra vires Section 16 of the IGST Act and manifestly arbitrary; consequential show cause notices/orders founded on that provision were quashed; no recovery of IGST refunded pursuant to Rule 96(10) shall be undertaken for the period 23 10 2017 to 08 10 2024; limited procedural directions were given for adjudication or appeals on other issues.

Passing on benefit of rate reduction under Section 171 of the CGST Act - Anti profiteering obligation - Effect of statutory/regulated maximum price fixed by licensing authority on anti profiteering obligation - Maintainability and time bar under Rule 128 of the CGST Rules, 2017

Passing on benefit of rate reduction under Section 171 of the CGST Act - Anti profiteering obligation - Whether the petitioner was obliged to pass on the benefit of reduction in GST rate and whether CCI rightly found profiteering for not doing so. - HELD THAT: - The Court accepted the CCI's finding that once the GST rate on admission to exhibition of cinematograph films above Rs. 100 was reduced from 28% to 18% w.e.f. 01.01.2019, the petitioner was statutorily obliged under Section 171 to pass on the benefit to recipients. The CCI's comparison of the pre reduction and post reduction base prices showed that the petitioner increased its base prices instead of keeping them unchanged so as to pass on the rate reduction; consequently the benefit was appropriated by the petitioner. The High Court found this conclusion unexceptionable and declined to interfere with the CCI's determination of profiteering. [Paras 5]

CCI was correct in holding that the petitioner was required to pass on the GST rate reduction and that profiteering was established by increasing base prices rather than passing on the benefit.

Effect of statutory/regulated maximum price fixed by licensing authority on anti profiteering obligation - Whether the existence of a maximum price fixed by the licensing authority under the Telangana Cinemas (Regulation) Act, 1955 absolved the petitioner from the obligation to pass on the GST rate reduction. - HELD THAT: - The Court agreed with the CCI that the licensing authority's fixation of a maximum permissible ticket price does not negate or exempt the petitioner from the statutory obligation under Section 171 to pass on the benefit of a GST rate reduction. Fixing a ceiling by the State or licensing authority does not operate as a waiver of the applicability of the CGST Act or the duty to pass on benefits arising from rate reductions. [Paras 5]

Fixation of a maximum price by the licensing authority does not relieve the petitioner of the obligation to pass on the benefit of GST rate reduction.

Maintainability and time bar under Rule 128 of the CGST Rules, 2017 - Whether the anti profiteering proceedings were time barred and thus not maintainable. - HELD THAT: - The CCI considered the chronology of the complaint, noting the complaint was received by DGAP on 18.04.2019 and the Standing Committee forwarded minutes which reached DGAP on 02.07.2019; the interval between 18.04.2019 and 15.05.2019 was held to be less than two months and within the prescribed time limits. The High Court did not find fault with the CCI's conclusion on maintainability and did not disturb that finding. [Paras 4, 5]

Proceedings were not time barred; the maintainability objection under Rule 128 was rejected.

Final Conclusion: The writ petition is dismissed. The High Court upheld the CCI's findings that the petitioner failed to pass on the GST rate reduction for the period 01 January 2019 to 30 June 2019, that statutory price ceilings do not negate the obligation under Section 171, and that the proceedings were not time barred.

Eligibility for input tax credit under Section 16 (including newly inserted sub-sections) - extension of time limits under Section 168A on account of 'force majeure' - retrospective effect of legislative amendment - remand for passing appropriate orders

Eligibility for input tax credit under Section 16 (including newly inserted sub-sections) - retrospective effect of legislative amendment - Effect of the Finance (No. 2) Act, 2024 amendments to Section 16 on the petitioner's entitlement to input tax credit for the relevant financial years. - HELD THAT: - The Court recorded that the Finance (No. 2) Act, 2024 amended Section 16 by inserting sub-sections (5) and (6) which, with effect from the notified date (Notification No. 17/2024 dated 27.09.2024) and retrospectively from 01.07.2017, entitle a registered person to avail input tax credit in respect of invoices/debit notes pertaining to the financial years 2017-18 to 2020-21 in returns under Section 39 filed up to 30th November, 2021, subject to the conditions in those sub-sections. In view of these amendments having retrospective effect, the Court held that the petitioner's entitlement to the claimed input tax credit is governed by the newly inserted provisions and that the challenge to earlier departmental action on that basis no longer required adjudication on the original grounds. [Paras 16, 19, 20, 21, 22]

The petitioner is entitled to the benefit of input tax credit for the stated periods subject to conditions in Section 16(5) and (6) as inserted by the Finance (No. 2) Act, 2024, which have been given retrospective effect.

Extension of time limits under Section 168A on account of 'force majeure' - remand for passing appropriate orders - Effect of the prior notifications extending limitation under Section 73 (invoking Section 168A) and the consequence for proceedings initiated against the petitioner. - HELD THAT: - Although the petition attacked various notifications extending limitation on the ground that the 'force majeure' (Covid-19) rationale had ceased, the Court found that subsequent legislative amendments to Section 16 rendered the specific challenge to the impugned departmental order academic in relation to the petitioner's claimed credit. Consequently, the writ court set aside the impugned order in original passed against the petitioner and held that the show-cause proceedings had been rendered redundant by the statutory amendment. The matter was remanded to the competent jurisdictional officer to pass appropriate orders, if necessary, in light of the amended statutory provisions and corresponding notifications to be issued by the State where applicable. [Paras 22, 23]

Impugned order dated 28.03.2024 set aside; proceedings held redundant in view of the statutory amendment and matter remanded to the competent officer for appropriate action consistent with the amended law.

Final Conclusion: Writ petition disposed of: in view of the retrospective amendments to Section 16 by the Finance (No. 2) Act, 2024, the petitioner is entitled to claim input tax credit for the specified financial years subject to conditions in the newly inserted sub-sections; the impugned departmental order is set aside and the matter is remanded to the competent jurisdictional officer to pass appropriate orders in accordance with the amended provisions.

Input tax credit eligibility - retrospective amendment to entitlement - extension of limitation for adjudication under Section 73 on account of force majeure - show-cause notice and adjudication under Section 73 - remand for fresh adjudication

Input tax credit eligibility - retrospective amendment to entitlement - Effect of the Finance (No. 2) Act, 2024 amendments to Section 16 on the petitioners' entitlement to input tax credit for the specified financial years. - HELD THAT: - The Court recorded that the Finance (No. 2) Act, 2024 amended Section 16 by inserting sub-sections (5) and (6), with the amendments notified to take effect from 27.09.2024 and given retrospective effect from 01.07.2017. Under the newly inserted sub-section (5) a registered person is entitled to take input tax credit in any return under Section 39 filed up to 30th November, 2021 in respect of invoices/debit notes pertaining to the financial years 2017-18 to 2020-21. The Court held that in view of these amendments the challenge raised in the writ petition no longer required adjudication on the earlier legal grounds because the petitioner is entitled to avail the benefit subject to the conditions prescribed in Section 16(5) and (6) as amended. The Court accepted the respondents' concession that corresponding state-level action/notification would be required and noted that the amended statutory provisions operate retrospectively to enable claim of credit for the relevant periods. [Paras 16, 19, 20, 21, 22]

The petitioners are entitled to avail input tax credit for the financial years 2017-18 to 2020-21 subject to the conditions of newly inserted Section 16(5) and (6) (Finance (No. 2) Act, 2024), the amendments having retrospective effect from 01.07.2017.

Show-cause notice and adjudication under Section 73 - remand for fresh adjudication - Consequences of the retrospective amendment on the pending show-cause notices and the impugned adjudication order dated 30.12.2023. - HELD THAT: - The Court observed that, in view of the statutory amendment conferring entitlement under Section 16(5) and (6), the proceedings initiated by the issuance of the show-cause notices and the adjudication order confirming demand stand overtaken. The Court found that the impugned order confirming demand had been rendered redundant insofar as it negated the availability of credit now permitted by the amended provisions. Consequently, the Court set aside the impugned order and directed that the matter be remanded to the competent jurisdictional officer for passing appropriate orders in accordance with law and the amended statutory provisions. The remand contemplates adjudication/computation consistent with the retrospective amendment and the conditions therein. [Paras 10, 22]

The impugned order dated 30.12.2023 is set aside and the proceedings initiated by the show-cause notices are rendered redundant; the matter is remanded to the competent officer to pass appropriate orders in accordance with the amended Section 16(5) and (6).

Final Conclusion: The amendments effected by the Finance (No. 2) Act, 2024 (with notification No. 17/2024-Central Tax dated 27.09.2024 and retrospective effect from 01.07.2017) confer entitlement to input tax credit for FY 2017-18 to FY 2020-21 subject to the conditions of Section 16(5) and (6); the impugned demand order is set aside and the matter is remanded to the competent jurisdictional officer for appropriate orders consistent with the amended law.

Retrospective amendment - eligibility for input tax credit - Section 16(5) and Section 16(6) insertion - extension of limitation under Section 73 by invocation of force majeure (Section 168A) - setting aside administrative order and remand for appropriate orders

Retrospective amendment - eligibility for input tax credit - Section 16(5) and Section 16(6) insertion - Effect of the Finance (No. 2) Act, 2024 amendments to Section 16 on the petitioner's entitlement to input tax credit for the specified financial years. - HELD THAT: - The Court recorded that the Finance (No. 2) Act, 2024 inserted sub-sections (5) and (6) into Section 16, which were notified to take effect retrospectively from 01.07.2017 by Notification No.17/2024-Central Tax dated 27.09.2024. Sub-section (5) expressly entitles a registered person to take input tax credit in any return under Section 39 filed up to 30th November, 2021 in respect of invoices/debit notes pertaining to the financial years 2017-18 to 2020-21. The Court held that, in view of these amended provisions having retrospective operation, the petitioner is entitled to avail the claimed input tax credit subject to the conditions prescribed in the newly inserted sub-sections (5) and (6) of Section 16. [Paras 18, 19, 20, 21, 22]

The petitioner is entitled to the benefit of input tax credit for the relevant periods in terms of Section 16(5) and 16(6) as inserted by the Finance (No. 2) Act, 2024.

Extension of limitation under Section 73 by invocation of force majeure (Section 168A) - setting aside administrative order and remand for appropriate orders - Validity and effect of the show-cause/assessment order passed in light of the retrospective amendment and consequential relief. - HELD THAT: - The Court noted the departmental exercise of extending limitation under Section 73 by invoking Section 168A and related notifications, and that show-cause proceedings under Section 73 were initiated against the petitioner. Having found that the statutory position has been altered by the retrospective amendment to Section 16, the Court concluded that the proceedings and the impugned order confirming demand (Reference No. ZD180224009080Z dated 09.02.2024) stand rendered redundant insofar as they conflict with the amended entitlement. In consequence, the Court set aside the impugned order and remanded the matter to the competent jurisdictional officer to pass appropriate orders consistent with the amended law and the conditions in Sections 16(5) and 16(6). [Paras 10, 21, 22, 23]

Impugned order dated 09.02.2024 set aside and matter remanded to the competent officer for appropriate action consistent with the amendments to Section 16.

Final Conclusion: In view of the retrospective amendments to Section 16 by the Finance (No. 2) Act, 2024 (effective from 01.07.2017), the petitioner is entitled to claim input tax credit for the specified financial years subject to the conditions in Section 16(5) and (6); the impugned demand order is set aside and the matter is remanded to the competent jurisdictional officer to pass appropriate orders in conformity with the amended statutory provisions.

Eligibility for input tax credit - Retrospective amendment - Section 16(5) and Section 16(6) of the CGST Act - Limitation under Section 73 - Section 168A force majeure extension - Remand for fresh consideration

Eligibility for input tax credit - Retrospective amendment - Section 16(5) and Section 16(6) of the CGST Act - Effect of amendments introduced by the Finance (No. 2) Act, 2024 on entitlement to input tax credit for the specified financial years - HELD THAT: - The Court accepted the factual and legal position that the Finance (No. 2) Act, 2024 amended the law relating to input tax credit by inserting sub-sections (5) and (6) into Section 16 of the CGST Act. Those amendments were notified by Notification No. 17/2024-Central Tax dated 27.09.2024 and were given effect retrospectively from 01.07.2017. Under the inserted sub-section (5) a registered person is entitled to take input tax credit in respect of invoices/debit notes pertaining to the financial years 2017-18, 2018-19, 2019-20 and 2020-21 in any return under Section 39 filed up to 30th November, 2021, subject to the conditions contained therein. The Court held that, in view of these retrospective amendments, the petitioners are entitled to avail the benefit of input tax credit for the relevant periods subject to compliance with the conditions in Section 16(5) and Section 16(6). As a consequence, proceedings initiated under the earlier regime in respect of those periods stand rendered redundant to the extent inconsistent with the amended provisions.

Amendments in Section 16(5) and 16(6) operate retrospectively and the petitioners are entitled to claim input tax credit for the specified years subject to the conditions of the amended provisions.

Remand for fresh consideration - Limitation under Section 73 - Section 168A force majeure extension - Consequences for pending departmental proceedings and the impugned order in view of the statutory amendment - HELD THAT: - Given the retrospective operation of the amendments and the petitioners' resultant entitlement under the newly inserted provisions, the Court found that the departmental proceedings and the order impugned in the writ petition could not stand in their present form. The Court accordingly set aside the impugned order passed by the departmental authority and remitted the matter to the competent jurisdictional officer for passing appropriate orders, if necessary, in light of the amended statutory scheme. The remand contemplates application of the amended law and verification/processing by the authority consistent with Section 16(5)/16(6) and applicable procedural safeguards; the Court did not decide quantification or computation issues on the merits.

Impugned order set aside and matter remanded to the competent jurisdictional officer to pass appropriate orders in accordance with the amended provisions.

Final Conclusion: In view of the retrospective amendments effected by the Finance (No. 2) Act, 2024 (operative from 27.09.2024 with effect from 01.07.2017), the petitioners are entitled to claim input tax credit for the financial years 2017-18 to 2020-21 subject to the conditions in Section 16(5) and 16(6); the impugned departmental order is set aside and the matter is remanded to the competent officer for appropriate action consistent with the amended law, whereupon the writ petition stands disposed of.

Extension of limitation under Section 168A of the CGST Act - force majeure justification for extension of procedural timelines - limitation for initiation of proceedings under Section 73(10) of the CGST Act - eligibility for input tax credit under Section 16(4) and amended Section 16(5)-(6) - retrospective operation of statutory amendments

Eligibility for input tax credit under Section 16(4) and amended Section 16(5)-(6) - retrospective operation of statutory amendments - Entitlement of the petitioner to avail input tax credit for invoices/debit notes pertaining to specified financial years in view of amendments to Section 16 by the Finance (No. 2) Act, 2024. - HELD THAT: - The Court noted that Section 16(4) restricts entitlement to input tax credit after a specified cutoff, but the Finance (No. 2) Act, 2024 inserted sub-sections (5) and (6) to permit, notwithstanding subsection (4), availment of input tax credit in respect of invoices/debit notes pertaining to Financial Years 2017-18, 2018-19, 2019-20 and 2020-21 if the return under Section 39 was filed up to 30th November, 2021, and to deal with revocation of cancellation as provided. Those amendments were notified to take effect from 27.09.2024 with retrospective effect from 01.07.2017. In consequence, the petitioner is entitled to the benefit of input tax credit for the relevant period subject to the conditions in newly inserted Sections 16(5) and 16(6). [Paras 20, 21, 22]

Petitioner entitled to claim input tax credit for the stated financial years in accordance with Section 16(5)-(6) as inserted by the Finance (No. 2) Act, 2024 (with retrospective effect).

Limitation for initiation of proceedings under Section 73(10) of the CGST Act - extension of limitation under Section 168A of the CGST Act - force majeure justification for extension of procedural timelines - Effect of prior extensions under Section 168A and notifications extending the limitation period for issuance of orders under Section 73 on the present proceedings. - HELD THAT: - The Court recorded the history of extensions invoked under Section 168A on the ground of Covid-19 as a "force majeure" to extend timelines for initiating proceedings under Section 73, and the subsequent notifications and GST Council recommendations extending limitation for financial year 2017-18 up to 30.09.2023. However, having found that the amendments to Section 16 by the Finance (No. 2) Act, 2024 operate retrospectively to permit availment of input tax credit for the relevant years, the challenge to the impugned extension notifications and to the show-cause proceedings was rendered academic in the sense that the petitioner's entitlement is governed by the new statutory regime. The Court therefore did not proceed to adjudicate the validity of the impugned notifications on merits but disposed the writ petition in light of the legislative change. [Paras 7, 8, 21, 22]

In view of the retrospective amendment to Section 16, the dispute arising from extensions under Section 168A/Section 73 notifications does not defeat the petitioner's entitlement; the challenge is effectively superseded by the amendment.

Set aside of quasi-judicial order and remand for appropriate action - Whether the impugned demand/order passed on 02.03.2024 should be maintained in view of the statutory amendment. - HELD THAT: - The Court found that, since the amended Section 16(5)-(6) entitles the petitioner to claim input tax credit subject to conditions, the proceedings initiated by the show-cause notice and the consequent order confirming demand have been rendered redundant. Considering that State-level notifications may also be required, the Court set aside the impugned order dated 02.03.2024 and remanded the matter to the competent jurisdictional officer to pass appropriate orders consistent with the amended statutory provisions and applicable notifications. [Paras 22, 23]

Impugned order dated 02.03.2024 set aside; matter remanded to the competent jurisdictional officer for appropriate orders in light of the statutory amendments.

Final Conclusion: The Finance (No. 2) Act, 2024 retrospectively amended Section 16 to permit availment of input tax credit for financial years 2017-18 to 2020-21 subject to specified conditions; accordingly the petitioner is entitled to the benefit under the amended provisions, the impugned demand/order dated 02.03.2024 is set aside and the matter is remanded to the competent officer for reconsideration and further action consistent with the amendments.

Attachment of bank account under Section 79(1)(c) of the CGST Act - procedure prescribed under the CGST Act prior to issuance of a garnishee notice - principles of natural justice - opportunity to be heard by furnishing antecedent notices/intimations/documents and filing a reply - vacation of attachment subject to maintenance of minimum balance pending adjudication - direction to conclude proceedings within a fixed time-frame

Attachment of bank account under Section 79(1)(c) of the CGST Act - procedure prescribed under the CGST Act prior to issuance of a garnishee notice - principles of natural justice - opportunity to be heard by furnishing antecedent notices/intimations/documents and filing a reply - vacation of attachment subject to maintenance of minimum balance pending adjudication - Impugned garnishee notice dated 30.07.2024 and the consequent freezing of the petitioner's bank account were not adjudicated on merits but were directed to be proceeded with after giving the petitioner an opportunity to receive antecedent documents and to file a reply; interim relief granted by vacating the freeze subject to conditions and fixed-time directions for final disposal. - HELD THAT: - The High Court declined to decide the merits of the challenge to Annexure E or to express an opinion on compliance/non compliance with the CGST Act prior to issuance of the garnishee notice. Instead, the Court ordered a procedural course: the petitioner was directed to appear before respondent No.2 on 14.10.2024; respondent No.2 was to furnish to the petitioner copies of all notices, intimations and documents that came into existence prior to Annexure E dated 30.07.2024; the petitioner was permitted to file a reply to those documents; and respondent No.2 was to provide sufficient and reasonable opportunity to the petitioner and proceed further in accordance with law. As an interim measure, the Court directed that the blocking/freezing of the petitioner's bank account be vacated except to the extent of the alleged demand, subject to the condition that the petitioner maintain a minimum balance equal to the alleged demand until the proceedings before respondent No.2 are disposed of. The Court further directed that respondent No.2 conclude the proceedings within one month from 14.10.2024. These directions leave the substantive challenge to the notice open for adjudication by the authority after compliance with the specified procedural steps. [Paras 5, 6]

Petition disposed by directing petitioner to appear before respondent No.2 on 14.10.2024, respondent No.2 to furnish antecedent documents and afford opportunity to reply, freeze on bank account vacated except as to alleged demand subject to petitioner maintaining the minimum balance, and respondent No.2 to conclude proceedings within one month from 14.10.2024.

Final Conclusion: Writ petition disposed by way of procedural directions: petitioner to be furnished antecedent documents and given opportunity to reply; interim vacation of bank account attachment except to the extent of the alleged demand subject to maintenance of minimum balance; and respondent directed to conclude proceedings within one month from 14.10.2024.

Writ jurisdiction under Article 226 - Maintainability of writ petition - Finality of order - Appeal dismissed for limitation - Alternative statutory remedies under CGST Act, 2017

Writ jurisdiction under Article 226 - Maintainability of writ petition - Appeal dismissed for limitation - Alternative statutory remedies under CGST Act, 2017 - Writ petition dismissed as not entertained because the impugned order had attained finality by dismissal of the statutory appeal and judicial interference under Article 226 was declined. - HELD THAT: - The Court noted that the petitioner had challenged the order-in-original dated 28.03.2022 and that an appeal against that order was preferred before the Commissioner (Appeals) but was dismissed on the ground of limitation. Since the order dated 28.03.2022 had thereby attained finality, the High Court declined to exercise its writ jurisdiction under Article 226 to entertain the petition unless the order dismissing the appeal is first set aside. The court thus refrained from considering the merits of the challenge (including the contention regarding non-receipt of the personal hearing notice in time) and observed that the petitioner remains at liberty to invoke remedies available under the CGST Act, 2017 and to raise all grounds, including delay in service of notice, in those proceedings. [Paras 4, 5, 6]

Writ petition dismissed as not entertained; petitioner granted liberty to pursue statutory remedies under the CGST Act, 2017, including challenging the dismissal of the appeal.

Final Conclusion: The High Court dismissed the writ petition without adjudicating merits because the impugned order had become final following dismissal of the statutory appeal; the petitioner was left free to seek available remedies under the CGST Act, 2017 and to challenge the appeal dismissal on appropriate grounds.

Registration under section 12AB - charitable purpose - benefit of the general public - benefit of a particular religious community or caste - commercial nature of activities - genuineness of activities - jurisdiction

Registration under section 12AB - charitable purpose - benefit of the general public - commercial nature of activities - genuineness of activities - Whether the trust's objects and activities qualify as charitable and warrant registration under section 12AB, and whether certain objects are commercial or for a particular community. - HELD THAT: - The Tribunal examined the trust deed, supporting documents and financial statements and concluded that the objects are for public benefit and not confined to any particular caste, community or religion. The Tribunal found that clauses relating to construction/maintenance of crematorium, maintenance of religious establishments and provision of 'Atithigruh' and 'Bhojansala' are not restricted to any particular community and, on the material before it, are not commercial activities but facilities to serve attendees and the poor and needy. The Tribunal also considered the financials and noted that the trust had applied a portion of receipts towards establishment expenses and that the trust intends to expend funds on charitable activities; accordingly there was no infirmity in the objects or activities. In view of these conclusions the Tribunal set aside the rejection by the CIT(E) and directed the CIT(E) to examine the objects and activities and grant registration in accordance with law. [Paras 12, 13, 14]

Assessee's trust is of charitable nature, its specified activities are not for a particular community nor commercial, and the matter is remitted to the CIT(E) to examine and grant registration under section 12AB in accordance with law.

Jurisdiction - Whether the order was passed without assuming proper jurisdiction. - HELD THAT: - The Tribunal noted that the trust is situated in Gujarat and observed that the CIT(E)-Ahmedabad has jurisdiction over the assessee. The Tribunal indicated that the competent CIT(E) should pass the order in accordance with law. [Paras 15]

Jurisdiction lies with the CIT(E)-Ahmedabad; the order should be passed by the proper jurisdictional authority.

Final Conclusion: Appeal allowed; the Tribunal held that the trust's objects and activities qualify as charitable and are not restricted to a particular community nor commercial, and directed the CIT(E) to examine the objects and activities and grant registration under section 12AB in accordance with law; jurisdiction lies with CIT(E)-Ahmedabad.

Escaped assessment - Notice under Section 148 - Proceedings under Section 148A(d) - Information suggestive of escapement - Accommodation entries in the form of bogus long term capital gains - Off-market transfer of shares

Notice under Section 148 - Proceedings under Section 148A(d) - Information suggestive of escapement - Escaped assessment - Accommodation entries in the form of bogus long term capital gains - Off-market transfer of shares - Validity of the order dated 21.10.2022 under Section 148A(d) and the notice dated 21.10.2022 issued under Section 148 in respect of AY 2015-16 - HELD THAT: - The AO issued notices under Section 148A(b) and subsequently passed an order under Section 148A(d) after receiving a detailed report arising from searches on identified broker entities which described a modus operandi of routing unaccounted cash into listed shares, transferring stocks off-market to beneficiaries and generating bogus exempt long term capital gains. The information specific to the petitioner included identification of 4,800 shares of Aurobindo transferred through a dummy Demat account and received by the petitioner via Mridul Securities, together with admissions and documentary indicia in the investigative report. The petitioner denied connection with the reported entities and initially asserted market purchases, but later conceded the relevant purchase was an off-market transaction; she failed to provide material particulars - price paid, source of funds, dates of purchase or transfer - to dispel the suspicion. The Court confined its scrutiny to whether the AO possessed information suggestive of income escapement, not to adjudicate on the ultimate tax liability or whether the investment constituted unexplained investment. Applying that limited test, the Court found the material and investigatory report, coupled with the petitioner's admitted off-market purchase and absence of explanatory particulars, constituted information suggestive of escapement, thereby satisfying the precondition for issuance of a notice under Section 148. [Paras 15, 16, 17, 18, 19]

The order under Section 148A(d) and the notice under Section 148 were upheld as the AO had information suggestive of the petitioner's income escaping assessment; the petition was dismissed.

Final Conclusion: The High Court dismissed the petition challenging the Section 148A(d) order and the Section 148 notice for AY 2015-16, holding that the AO possessed information suggestive of escapement (based on the investigative report, identification of off market share transfer to the petitioner and the absence of explanatory particulars), and limiting its role to the test of whether issuance of the notice was justified without deciding the substantive tax liability.

Condonation of delay under Section 119(2)(b) - obligation to file return on or before due date under Section 139(1) - deduction not allowable unless return furnished within time under Section 80AC - availability of statutory alternative remedy under Section 234F - maintainability of condonation application after filing belated return

Condonation of delay under Section 119(2)(b) - deduction not allowable unless return furnished within time under Section 80AC - Whether the petitioner's application to condone 216 days' delay in filing ITR should be allowed - HELD THAT: - The court examined the petition filed under Section 119(2)(b) seeking condonation of 216 days' delay so that deductions under Section 80P could be claimed. The statutory scheme requires filing the return by the due date under Section 139(1) and Section 80AC bars the allowance of certain deductions where the return is not furnished within that due date. The Income Tax authority's rejection was upheld on the basis that the petitioner failed to establish genuine hardship or sufficient cause for the delay. The court also observed that condoning delay in the absence of adequate reasons would undermine the object of Section 80AC and encourage similar approaches by other assessees. Having considered the material on record and submissions, the court found no merit in the condonation plea and refused to interfere with the impugned order. [Paras 10, 11, 21, 26]

Application to condone the delay refused and impugned order dated 27.12.2023 upheld

Obligation to file return on or before due date under Section 139(1) - Validity of the petitioner's plea that delay resulted from non-receipt of the audit report - HELD THAT: - The audit certificate dated 02.07.2019, along with the statements required, was found to have been issued and communicated to the society on that date. The court recorded that the audit report and accompanying statements were available well before the due date of 31.10.2019 and that the society had means of inspection and receipt. Consequently, the asserted ground of delayed receipt of audit report (allegedly on 24.02.2020) did not constitute a sufficient or genuine cause for the belated filing. [Paras 16, 17, 18]

Delay cannot be attributed to non-receipt of the audit report; that reason rejected

Condonation of delay under Section 119(2)(b) - Acceptability of COVID-19 outbreak as a ground for the delay in filing the ITR - HELD THAT: - The court noted the audit certificate was available on 02.07.2019, whereas the COVID outbreak relevantly arose in March 2020. As the audit report and requisite documents were available seven months prior to the COVID period, nothing prevented the petitioner from filing the return before the outbreak. The court therefore held that COVID-19 could not be accepted as a genuine hardship or operative cause for the 216-day delay in this case. [Paras 19]

COVID-19 not accepted as a sufficient ground for condonation of delay

Maintainability of condonation application after filing belated return - availability of statutory alternative remedy under Section 234F - Whether the application under Section 119(2)(b) was maintainable after the petitioner had filed the belated return and paid the fee under Section 234F - HELD THAT: - The court observed that the petitioner had already filed the belated ITR on payment of the fee under Section 234F and that the return had been taken on record. In those circumstances the court recorded that the contention for condoning delay to enable entitlement to deductions effectively became misplaced; the condonation application filed post facto to secure deductions was not maintainable in the circumstances. Even assuming maintainability, the court found the substantive reasons inadequate and therefore affirmed the rejection. [Paras 25, 26]

Application held not maintainable after belated return was filed and, alternatively, dismissed on merits

Final Conclusion: Writ petition dismissed; the rejection of the petitioner's application to condone the 216-day delay in filing the ITR for Assessment Year 2019-20 is upheld and the order dated 27.12.2023 requires no interference.

Effect of omission of a statutory provision on pending proceedings - application of law for the relevant assessment year - validity of reference to Transfer Pricing Officer under replaced/omitted provision - scope of transfer pricing adjustments limited to international transactions with associated enterprises - principle in Kolhapur Canesugar Works regarding repeal/omission and savings

Effect of omission of a statutory provision on pending proceedings - validity of reference to Transfer Pricing Officer under replaced/omitted provision - principle in Kolhapur Canesugar Works regarding repeal/omission and savings - Whether reference to the Transfer Pricing Officer made under clause (i) of Section 92BA (now omitted) was valid and sustainable for assessment proceedings concerning AY 2016-17. - HELD THAT: - The Court followed the reasoning of the Coordinate Bench which applied the authoritative principle in Kolhapur Canesugar Works that omission of a statutory provision without an appropriate saving has the effect that the provision is to be treated as not having existed for purposes running from the date of omission. The Coordinate Bench held that clause (i) of Section 92BA having been omitted w.e.f. 01.04.2017 could not sustain actions founded on it and that references and consequential orders of the TPO and DRP based on that clause could be invalid. The High Court, for parity of reasons, found the questions raised by Revenue in respect of the omitted clause to be not maintainable and answered them against Revenue, thereby upholding the conclusion that orders founded on the omitted provision were unsustainable in law. [Paras 5, 6, 7, 8]

Reference to the TPO under the omitted clause (i) of Section 92BA is unsustainable and the challenge to the Tribunal's holding on that ground is rejected; questions answered in favour of the assessee.

Application of law for the relevant assessment year - effect of omission of a statutory provision on pending proceedings - Whether the law in force for the relevant assessment year (AY 2016-17) must be applied and whether omission of Section 92BA(1) w.e.f. 01.04.2017 could be treated as retrospective to invalidate that position. - HELD THAT: - The Court noted the Coordinate Bench's consideration that the omission operated prospectively and that the question regarding retrospectivity is governed by the principles in Kolhapur Canesugar Works and the General Clauses Act; where an omission is effected without a saving clause, the omitted provision cannot be treated as if it had existed for continuing proceedings. The High Court held that the Revenue's contention that omission should be treated as non-existent from its insertion was not sustainable and that the Tribunal's conclusions on this point do not give rise to substantial questions of law requiring interference. [Paras 5, 6, 7, 8]

The contention that omission of Section 92BA(1) should be treated so as to alter the law applicable to AY 2016-17 is rejected; law applicable to the assessment is to be determined in accordance with the established principles relied upon, and the questions are answered for the assessee.

Scope of transfer pricing adjustments limited to international transactions with associated enterprises - application of Chapter X for re-determination of consideration in international transactions - Whether transfer pricing adjustment can be extended to transactions with non-associated, independent parties when the assessee provides services to both AEs and non-AEs and does not bifurcate profits in books. - HELD THAT: - Relying on the decisions of the Bombay High Court cited by the parties, the Court observed that Chapter X of the Act mandates re-determination of consideration for purposes of determining income arising from international transactions, i.e., transactions with associated enterprises. The High Court agreed with the view that adjustments mandated by Chapter X are confined to international transactions with AEs and that extending the TPO's margin to transactions with independent third parties falls beyond the scope of Chapter X. On that basis the Tribunal's restriction of TP adjustment to transactions with AEs was affirmed and the Revenue's broader contention rejected. [Paras 6, 7, 8, 9]

Transfer pricing adjustment is confined to international transactions with associated enterprises; the Tribunal's restriction to AE transactions is upheld and the Revenue's challenge is dismissed.

Final Conclusion: The appeal is dismissed. The substantial questions of law raised by Revenue are answered in favour of the assessee: orders and references founded on the omitted clause are unsustainable and transfer pricing adjustments are confined to international transactions with associated enterprises; no costs.

Power to condone delay under Section 119(2)(b) of the Incometax Act for avoiding genuine hardship - Genuine hardship as basis for condonation of delay - Reliance on professional valuer's inability and pandemicrelated human factors as sufficient cause - Quashing administrative order for failure to consider valid reasons - Direction to permit filing of belated return without penalty, fees and interest

Power to condone delay under Section 119(2)(b) of the Incometax Act for avoiding genuine hardship - Genuine hardship as basis for condonation of delay - Reliance on professional valuer's inability and pandemicrelated human factors as sufficient cause - Delay of 80 days in filing the return for Assessment Year 2020-2021 was to be condoned under the Board's power to avoid genuine hardship - HELD THAT: - The Court examined the scope of the Board's power under Section 119(2)(b) to admit claims after the prescribed period for the purpose of avoiding genuine hardship. Applying that principle to the facts, the Court accepted the petitioner's explanations that COVID19 duties as a medical professional, the bereavement in the family, and the valuer's inability to physically inspect the property (the valuer being a 75yearold senior citizen with respiratory issues) prevented completion of the valuation and hence timely computation of longterm capital loss. These human factors, reliance on a professional valuer and pandemicrelated restrictions were held to be valid and sufficient reasons which would otherwise cause genuine hardship if the delay were not condoned. The Court rejected the respondent's mechanical reasoning that the petitioner's education or access to tax practitioners negated the explanation, observing that the petitioner did not claim lack of access but inability to obtain the valuation report in time due to circumstances beyond her control. The Court therefore held that the conditions for exercise of power to condone delay were satisfied and that the impugned rejection failed to appreciate the justifiable reasons presented. [Paras 16, 17, 18]

Delay of 80 days in filing the return for AY 20202021 is condoned.

Quashing administrative order for failure to consider valid reasons - Direction to permit filing of belated return without penalty, fees and interest - Impugned order rejecting the condonation application was quashed and consequential directions were issued permitting filing of the return without penalty, fees and interest - HELD THAT: - Having concluded that the petitioner's reasons amounted to genuine hardship and warranted condonation, the Court found the impugned order dated 20th October, 2023 to be legally unsustainable because it proceeded on incorrect findings and a mechanical approach. The Court quashed and set aside that order and directed the respondents to permit the petitioner to file the return of income (for AY 20202021) without penalty, fees and interest within two weeks from uploading of the order. The Court expressly kept all contentions on the merits of the return open, confining its decision to the condonation and consequential administrative relief. [Paras 17, 21]

Impugned order quashed; petitioner permitted to file the return without penalty, fees or interest within two weeks; merits left open.

Final Conclusion: The High Court quashed the CBDT's order rejecting condonation, held that the petitioner's COVID19 related circumstances and dependence on a valuer constituted genuine hardship justifying condonation of 80 days' delay for AY 20202021, and directed respondents to allow filing of the return without penalty, fees or interest within two weeks while keeping merits open.

Stay of assessment proceedings - assessment without credit for tax deducted at source - set-off of tax deducted at source - entitlement to refund pending adjudication

Stay of assessment proceedings - entitlement to refund pending adjudication - Interim procedural position and listing of the petition for final disposal in respect of petitions alleging deduction of tax by employer which was not deposited and consequent denial of set-off/refund - HELD THAT: - The Court recorded the petitioners' grievance that although tax was deducted from their salaries by their employer, Karvy Stock Broking Limited, the tax was not deposited by the employer, resulting in assessment proceedings being pursued without giving credit for the tax deducted and preventing the petitioners from obtaining refunds. The Court noted that by its earlier order dated 29.04.2024 it had issued notice and stayed the impugned notices until final disposal of the petition. The respondents have filed a reply in at least one matter. Having considered the submissions and the petitioners' claim of continuing prejudice, the Court has directed that the matters be listed for final disposal on 07.10.2024 on top of the Board.

Matters listed for final disposal on 07.10.2024; earlier interim stay (dated 29.04.2024) remains part of the record.

Final Conclusion: The Court, having recorded the petitioners' claim of non-deposit of TDS by the employer and the resultant prejudice in obtaining refunds, has listed the matters for final disposal on 07.10.2024; the earlier interim order of stay dated 29.04.2024 is on record.

Pre-deposit requirement for statutory appeals - Refusal of interim protection without compliance with pre-deposit - Undertaking to pay arrears and installment conditions - Relief by way of waiver of pre-deposit under Supreme Court precedent - Challenge under Section 226(6) to recovery proceedings

Pre-deposit requirement for statutory appeals - Refusal of interim protection without compliance with pre-deposit - Writ petitions challenging recovery and seeking protection from tax recovery were dismissed for non-compliance with pre-deposit requirement in respect of Assessment Year 2018-2019. - HELD THAT: - The Court recorded that an assessment order for AY 2018-2019 fixed the tax demand and that the petitioner had given an undertaking to pay a portion of the assessed demand and to pay the balance by monthly installments. The petitioner, however, had paid only a negligible amount in relation to the demand. The Court held that, in view of the Office Memoranda of the Central Board of Direct Taxes and the undertaking given, the petitioner cannot expect the appeal to be heard or claim protection from recovery unless the requisite pre-deposit obligations are complied with. Consequently, the writ petitions seeking stay/protection from recovery were dismissed for failure to make the mandated pre-deposit and to adhere to the terms of the undertaking. [Paras 4, 5]

Writ petitions dismissed for non-compliance with pre-deposit requirement; petitioner not entitled to protection from recovery without pre-deposit.

Undertaking to pay arrears and installment conditions - Challenge under Section 226(6) to recovery proceedings - Relief by way of waiver of pre-deposit under Supreme Court precedent - Court declined to set aside the recovery proceedings and rejected challenge under Section 226(6), while granting liberty to seek waiver of pre-deposit under the Supreme Court's decision in LG Electronics. - HELD THAT: - The Court noted that proceedings under Section 226(6) had been rejected and that the petitioner had furnished an undertaking dated 24.02.2022 to pay specified percentages and instalments for various assessment years. Given the petitioner's default in making substantial payments for AY 2018-2019, the Court found no basis to interfere with the recovery process. Nevertheless, the Court accorded the petitioner liberty to move an appropriate application for waiver of the pre-deposit requirement, invoking the authority of the Supreme Court in Principal Commissioner of Income Tax v. M/s. LG Electronics India Pvt. Ltd., thereby permitting the petitioner to seek discretionary relief in accordance with that precedent. [Paras 2, 3, 5]

Challenge to recovery and to the rejection under Section 226(6) not upheld; liberty granted to apply for waiver of pre-deposit under the Supreme Court precedent.

Final Conclusion: Writ petitions dismissed for failure to comply with the pre-deposit and undertaking conditions in relation to AY 2018-2019; petitioner granted liberty to apply for waiver of pre-deposit in accordance with the Supreme Court's decision in the LG Electronics case.

Exemption from income tax - prima facie case - non-application of mind - stay of coercive action pending appeal - deposit as condition for interim relief - reliance on CBDT Office Memorandum

Exemption from income tax - reliance on CBDT Office Memorandum - non-application of mind - Appellate authority failed to consider exemption notifications relied upon by the petitioner before directing interim deposit. - HELD THAT: - The petitioner, a statutory Board, produced two notifications purporting to exempt it from income tax. The appellate authority, when granting only a partial stay and directing deposit of 20% of the demand, proceeded mainly on the basis of CBDT Office Memorandums dated 29.02.2016 and 31.07.2017 without any discussion or application of mind to the exemption notifications (Annexures-P.9 and P.10). The High Court found on a prima facie reading that the notifications raised a substantive ground which the appellate authority did not consider. In these circumstances the court held that the appellate authority ought to have at least adverted to and considered the exemption notifications before directing the deposit as a condition for interim relief. [Paras 6, 7, 8]

Impugned interim direction is vitiated by non-consideration of the exemption notifications and the appellate authority failed to apply its mind to the petitioner's primary contention.

Prima facie case - stay of coercive action pending appeal - deposit as condition for interim relief - Whether coercive action pursuant to the assessment order should be restrained during the pendency of the appeal. - HELD THAT: - Having found that the petitioner made out a prima facie case based on the exemption notifications and noting the appellate authority's omission to consider that ground, the High Court exercised its discretionary jurisdiction under Article 226 to restrain the respondents from taking any coercive action pursuant to the assessment order during the pendency of the appeal. The court clarified that it did not express any opinion on the merits and left the appellate authority free to adjudicate the appeal on its own merits after considering the notifications and other submissions. [Paras 8, 9, 10]

Respondents restrained from coercive action during pendency of appeal; matter remitted to appellate authority to decide on merits.

Final Conclusion: Writ petition disposed by restraining the respondents from taking coercive action pursuant to the assessment order during the pendency of the appeal, on the basis that the petitioner made out a prima facie case and the appellate authority had not applied its mind to the exemption notifications; no opinion expressed on merits and appellate authority is free to decide the appeal on its own merits.

Eligibility to file application for settlement - definition of "case" for purposes of settlement - effect of search under Section 132 on pendency of proceedings - abolition of the Settlement Commission and constitution of Interim Board for settlement - validity of extension of time under Section 119(2)(b) for filing settlement applications

Eligibility to file application for settlement - effect of search under Section 132 on pendency of proceedings - validity of extension of time under Section 119(2)(b) for filing settlement applications - Whether persons in respect of whom a search under Section 132 was conducted prior to 31-03-2021, but notices under Section 153A were issued after 01-02-2021, could maintain applications for settlement before the Interim Board/Settlement Commission and whether such applications filed by 30-09-2021 could be entertained. - HELD THAT: - The Court held that where a search under Section 132 was conducted prior to or on 31-03-2021, the proceedings arising from that search are to be regarded as pending for the purposes of the definition of 'case' in Section 245A(b) and therefore the persons subjected to such search are entitled to file applications for settlement. The Court accepted the effect of the Central Board's order issued under Section 119(2)(b) permitting filing till 30-09-2021, and held that applications filed on or before that date would be maintainable and ought to be adjudicated by the Interim Board constituted under Section 245AA. The Court thus directed that orders of the Interim Board declaring such applications not maintainable be set aside and the applications restored for disposal in accordance with law. [Paras 6, 13]

Where the search under Section 132 was prior to 31-03-2021, the persons subjected to the search are entitled to maintain applications for settlement, provided the applications were filed on or before 30-09-2021; orders dismissing such applications as not maintainable are set aside and the applications are restored to the Interim Board for disposal.

Definition of "case" for purposes of settlement - effect of search under Section 132 on pendency of proceedings - Whether Explanation (iiia) to Section 245A(b) restricts the definition of 'case' so as to make pendency depend upon issuance of the Section 153A notice rather than the date of the search or requisition. - HELD THAT: - The Court concluded that Explanation (iiia) - which states that proceedings arising under Section 153A shall be deemed to have commenced on the date of issue of the notice initiating such proceeding and conclude on the date of assessment - does not undermine or limit the broader definition of 'case' in Section 245A(b). The Court reasoned that proceedings resulting from a search or requisition are intrinsically connected to the date of the search or requisition and remain pending from that date; the explanations were tied to deleted provisos and cannot, by themselves, re-impose exclusionary time-frames that Parliament removed when it enlarged the scope of 'case'. The Court rejected the contrary approach that would make the right to apply depend solely on the date of the Section 153A notice. [Paras 9, 12]

Explanation (iiia) does not restrict the definition of 'case' so as to make pendency depend only on the date of issue of the Section 153A notice; where a search under Section 132 occurred prior to 31-03-2021 the proceedings are to be regarded as pending from the date of the search for purposes of Section 245A(b).

Abolition of the Settlement Commission and constitution of Interim Board for settlement - validity of extension of time under Section 119(2)(b) for filing settlement applications - Whether the Finance Act, 2021's abolition of the Settlement Commission (with effect from 01-02-2021) prevents assessees who had searches before 31-03-2021 from exercising their accrued right to apply for settlement and whether the Interim Board and the Central Board's order operate compatibly with that right. - HELD THAT: - The Court interpreted the amendments effected by the Finance Act, 2021 in the context of prior legislative changes enlarging the scope of 'case' and held that where a vested right to file an application to the Settlement Commission had accrued (by virtue of a search prior to 31-03-2021), Parliament's abolition of the Settlement Commission did not extinguish that accrued right without clear intent. The Interim Board constituted under Section 245AA was intended to deal with pending cases and the Central Board's order under Section 119(2)(b) permitting filing till 30-09-2021 validly enabled eligible assessees to file their applications which the Interim Board would adjudicate in accordance with law. [Paras 7, 13]

The abolition of the Settlement Commission did not retrospectively extinguish the right of eligible assessees (whose searches were prior to 31-03-2021) to seek settlement; such eligible applications could be filed and were to be disposed of by the Interim Board, and filings made by 30-09-2021 pursuant to the Central Board's order are to be entertained.

Final Conclusion: Writ petitions allowed in part: where a search under Section 132 was conducted prior to 31-03-2021, the petitioners are entitled to maintain settlement applications before the Interim Board provided such applications were filed on or before 30-09-2021; orders of the Interim Board holding those applications not maintainable are set aside and the applications are restored for disposal in accordance with law.

Constitutional validity of statutory prescription of inventory valuation methods - application of Income Computation and Disclosure Standards (ICDS) in computation of income - manifest arbitrariness - reasonable classification - retrospective operation of taxation provisions

Constitutional validity of statutory prescription of inventory valuation methods - application of Income Computation and Disclosure Standards (ICDS) in computation of income - manifest arbitrariness - reasonable classification - Validity of the amended Section 145A read with paragraph 16 of ICDS II and Notification dated 29.09.2016 prescribing FIFO or Weighted Average Cost for valuation of inventories and excluding LIFO. - HELD THAT: - The court held that the legislative amendment and the ICDS prescription were enacted with the determining principle of achieving uniformity and consistency in computation of income for assessees chargeable under the head 'Profits and gains of business or profession'. ICDS applies for computation of income and does not restrict maintenance of books of accounts; therefore assessees may maintain accounts by any recognised accounting method but must compute taxable income as per the prescribed ICDS methods. The exclusion of LIFO was not susceptible to being characterised as manifestly arbitrary: the prescription reasonably relates to the object of uniform tax computation, and classification is directed towards a defined class of assessees and bears a rational relation to that object. The earlier decision of the Delhi High Court in The Chamber of Tax Consultants was rendered in the context of the unamended Section 145A and is not applicable after the Finance Act, 2018 amendment which remedied the defect identified therein. Given the scope for legislative experimentation in economic policy and that expert financial opinion informed the change, judicial interference was unwarranted. (See paragraphs 8, 11 and 12.) [Paras 8, 11, 12]

The constitutional challenge was rejected; Section 145A, paragraph 16 of ICDS II and the Notification are valid insofar as they prescribe FIFO or Weighted Average Cost for computing income.

Retrospective operation of taxation provisions - Retrospective application of Section 145A/ICDS to valuation of opening stock for assessment year 2017-18. - HELD THAT: - The learned Single Judge found that the stipulation under Clause 16 of ICDS II for adoption of FIFO and Weighted Average Cost could not be applied to valuation of the opening stock for assessment year 2017-18, since opening and closing stock for the year must be valued by the same methodology and retrospective application would create notional income. The Revenue did not challenge this finding before the High Court, and the High Court noted and accepted the Single Judge's conclusion on this limited retrospective aspect. (See paragraph 4.) [Paras 4]

Retrospective operation of the prescription from 01.04.2017 is not to be applied to valuation of opening stock for assessment year 2017-18; that declaration stands unimpugned.

Final Conclusion: The constitutional challenges to the amended Section 145A and the ICDS prescription (para 16 and Notification dated 29.09.2016) are dismissed; however, the earlier declaration that the prescription cannot be applied retrospectively to valuation of opening stock for assessment year 2017-18 remains effective. Appeals dismissed without costs.

Compounding of offences under direct tax laws - applicability of administrative guidelines by date of application/receipt - prospective operation of guidelines on pending applications

Compounding of offences under direct tax laws - applicability of administrative guidelines by date of application/receipt - prospective operation of guidelines on pending applications - Whether the compounding application filed on 15 February 2018 must be governed by the 2014 compounding guidelines or by the 2019 guidelines - HELD THAT: - The Court found on the admitted facts that the writ petitioners had submitted their applications for compounding on 15 February 2018, prior to the communication of 14 June 2019 which made the 2019 Guidelines effective from 17 June 2019 for applications received on or after that date. The respondents treated the petitioners' matter as though the application had been first made on 24 September 2020 and computed the compounding fee under the 2019 Guidelines, without referring to the earlier filing of 15 February 2018. The Court held that, given the express stipulations that the 2019 Guidelines apply only to applications received on or after 17 June 2019, the earlier application must be treated as having been made on 15 February 2018 and governed by the 2014 Guidelines. The Court therefore directed the respondents to compute the compounding charges in accordance with the 2014 Guidelines, and to process and dispose of the compounding application further upon deposit of the computed charges. The Court preserved the petitioners' right to challenge the final computed amount. [Paras 9, 10]

Writ petition allowed; respondents directed to compute compounding charges under the 2014 Guidelines treating the application as first made on 15 February 2018, and to process the application further subject to deposit of the computed charges; petitioners' right to challenge the computed amount reserved.

Final Conclusion: The Court allowed the writ petition and directed the respondents to apply the 2014 compounding guidelines to the application filed on 15 February 2018 (relating to AY 2011-12 to 2015-16), compute the compounding charges accordingly, and proceed to process and dispose of the application upon deposit; the petitioners' right to challenge the computed amount is reserved.

Exemption under Section 54F for investment in construction of residential house - deposit in capital gains account under Section 54F(4) - application of Section 54F where sale proceeds are invested in construction on a site owned by the assessee - re-assessment under Section 147 on notice issued under Section 148 - quashing of assessment, demand and penalty notices

Exemption under Section 54F for investment in construction of residential house - deposit in capital gains account under Section 54F(4) - application of Section 54F where sale proceeds are invested in construction on a site owned by the assessee - Whether non-deposit of the balance sale consideration in a designated capital gains account precludes claim of exemption under Section 54F when the balance is invested in construction of a residential house within the statutory period - HELD THAT: - The Court applied the Division Bench decisions which construed Section 54F and held that Sub section (4) is attracted only where the sale consideration is not invested either in purchase or construction of a residential house within the periods prescribed by Section 54F(1). If the assessee invests the sale proceeds in construction of a residential house within three years from the date of transfer, the requirement to deposit the unutilized amount in a notified capital gains account before filing the return is not attracted. The Court further accepted the principle that investment in construction on a site already owned by the assessee falls within the scope of Section 54F(1) and is eligible for exemption, and that mere non deposit of the sale consideration or a portion thereof in a capital gains account does not defeat the exemption where construction investment has been completed within the prescribed period. Relying on the cited Division Bench precedents, the Court held that the petitioner satisfied the statutory requirements for exemption by purchasing the site within the one year period and completing construction within three years, hence Sub section (4) did not operate to deny the benefit. [Paras 6]

The petitioner is entitled to claim exemption under Section 54F despite not having deposited the unutilised sale proceeds in a capital gains account, because the balance was invested in construction within the prescribed period.

Re-assessment under Section 147 on notice issued under Section 148 - quashing of assessment, demand and penalty notices - Whether the reassessment order, demand notice and penalty notice issued consequent to the reassessment are sustainable in view of the petitioner's compliance with Section 54F - HELD THAT: - Having concluded that the petitioner was entitled to exemption under Section 54F because the sale proceeds were invested in construction within the statutory period, the Court found that the reassessment and the consequential demand and penalty notices were contrary to law. The impugned proceedings proceeded on the basis that non deposit in a capital gains account barred the exemption; but in light of the settled interpretation of Section 54F(1) and (4), that premise was incorrect. Consequently, the reassessment order and the notices based on that incorrect premise were vitiated and liable to be quashed. [Paras 6]

The reassessment order, the demand notice and the penalty notice dated 28.03.2022 are quashed.

Final Conclusion: The petition is allowed: the Court held that where the balance of sale proceeds was invested in construction of a residential house within the prescribed period, Section 54F(4) did not require deposit in a capital gains account and, accordingly, quashed the reassessment order, demand notice and penalty notice dated 28.03.2022.

Deduction under section 80P(2)(a)(i) - Deduction under section 80P(2)(d) - Co-operative society engaged in banking or providing credit facilities to its members - Interest on deposits/investments from co operative banks and from scheduled/nationalized banks - Precedential authority of coordinate benches of the Tribunal

Deduction under section 80P(2)(a)(i) - Deduction under section 80P(2)(d) - Interest on deposits/investments from co operative banks and from scheduled/nationalized banks - Allowability of deduction under section 80P(2)(a)(i) and section 80P(2)(d) in respect of interest income earned by the assessee cooperative society from investments/deposits with co operative banks and other scheduled/nationalized banks - HELD THAT: - The assessee, a cooperative society engaged in extending credit facilities to its members, claimed deduction under section 80P(2)(a)(i)/80P(2)(d) in respect of interest earned on deposits/investments made with various co operative banks and scheduled/nationalized banks during AY 2018 19. The Assessing Officer disallowed the entire interest on the ground that only interest attributable to credit facility to members or interest from investments with other co operative societies was deductible. The Commissioner (Appeals) allowed deduction only insofar as interest from co operative banks and disallowed interest from commercial/scheduled banks. The Tribunal, however, following a series of decisions of the coordinate Benches and High Courts which held that co operative credit societies engaged in banking/business of providing credit to members are entitled to claim section 80P deductions in respect of interest earned on deposits made out of surplus funds even when such deposits are with scheduled/nationalized banks, found the issue no longer res integra. In view of the consistent precedents of co ordinate Benches, and absent any material to take a different view, the Tribunal set aside the CIT(A)'s limited allowance and held that the interest income from the investments/deposits with the other banks qualifies for deduction under section 80P(2)(a)(i) and/or section 80P(2)(d) as applicable to the facts of the assessee. [Paras 9, 11]

The Tribunal allowed the appeal and directed that deduction under section 80P be allowed in respect of the interest income claimed by the assessee from deposits/investments with co operative as well as scheduled/nationalized banks in accordance with the coordinate bench precedents.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2018 19, setting aside the CIT(A)'s disallowance and directing allowance of the claimed deduction under section 80P(2)(a)(i)/80P(2)(d) in respect of interest income from deposits/investments with co operative and other scheduled/nationalized banks, in conformity with coordinate bench precedents.

Penalty for under-reporting and misreporting of income under 270A of the Income-tax Act, 1961 - disallowance of depreciation as a difference of interpretation not amounting to concealment - application of principles governing penalty for concealment or furnishing inaccurate particulars to penalty under 270A - reliance on precedents for deletion of penalty

Penalty for under-reporting and misreporting of income under 270A of the Income-tax Act, 1961 - disallowance of depreciation as a difference of interpretation not amounting to concealment - application of principles governing penalty for concealment or furnishing inaccurate particulars to penalty under 270A - Levy of penalty under Section 270A in respect of disallowance of depreciation was not justified and is unsustainable - HELD THAT: - The assessee filed return for AY 2017-18 declaring loss and claimed depreciation on internally generated software at the rate adopted by it. The Assessing Officer disallowed excess depreciation by applying a different depreciation rate, resulting in an adjustment in assessment. The Tribunal held that the adjustment arose from a bona fide difference of opinion on the rate of depreciation and was merely a disallowance of a claim made by the assessee, not an instance of concealment or misreporting of income. All relevant particulars were placed on record in the return and tax audit, and there was no omission of material information. The Tribunal applied the established principle that penalties for concealment or furnishing inaccurate particulars (as recognised by the Supreme Court and High Courts) govern the scope of penalty under Section 270A, and that mere disagreement on a claim's correctness does not import the element of deliberate concealment or misreporting. Reliance was placed on the authorities cited in the order and as supporting deletion of penalty. In view of these considerations, the levy of penalty under Section 270A was found to be unjustified and was set aside. [Paras 3, 4]

Penalty under Section 270A deleted and the assessee's appeal allowed

Final Conclusion: The Tribunal allowed the appeal for AY 2017-18, deleting the penalty under Section 270A as the disallowance of depreciation resulted from a difference of opinion and did not constitute underreporting or misreporting.

Undisclosed investment - binding effect of Settlement Commission determination - binding nature of Tribunal directions on remand/verification - double taxation of the same income in different assessment years - yearspecific chargeability of income

Undisclosed investment - binding effect of Settlement Commission determination - binding nature of Tribunal directions on remand/verification - Whether the addition on account of undisclosed investment in committees for AY 2007-08 and AY 2008-09 could be sustained when the amount was admitted before the Income Tax Settlement Commission and the Tribunal in the earlier round directed verification of coverage of that amount with the opening balance accepted by the Settlement Commission - HELD THAT: - The Tribunal recorded in its earlier order that investments aggregating to the relevant amounts for AY 2007-08 and AY 2008-09 had been considered by the Settlement Commission and subsumed within the additional income offered for AY 2010-11, and directed the Assessing Officer to verify whether the specific investment was covered in the opening balance on which tax was paid pursuant to the Settlement Commission's order. In the subsequent assessment proceedings the assessee furnished the trial balance, seized diary pages and charts linking the seized entries with the trial balance as directed. The Assessing Officer, however, ignored the Tribunal's directions and the documents produced, proceeded to retax the same transaction invoking yearspecific chargeability, and the Commissioner (Appeals) upheld that action. The Appellate Tribunal held that ignoring the binding directions of the Tribunal and the Settlement Commission's determination and retaxing the same transaction amounted to a perverse action; having been shown documents which, if verified as directed, would demonstrate that the investment was covered by the Settlement Commission's acceptance, the addition could not be sustained. [Paras 6, 7, 11]

Addition on account of undisclosed investment in committees for AY 2007-08 and AY 2008-09 deleted; Grounds Nos. 8 & 9 allowed.

Final Conclusion: The Tribunal set aside the additions for undisclosed investment for AY 2007-08 and AY 2008-09, finding that the Assessing Officer and CIT(A) had ignored the earlier Tribunal directions and the Settlement Commission's acceptance; both appeals are partly allowed with deletion of the impugned additions.

Self-assessment under Section 17 and verification/re-assessment by the proper officer - Clearance for home consumption and satisfaction of proper officer - Recovery of duties and extended limitation under Section 28 including subsection (4) - Wilful misstatement, suppression of facts and collusion as trigger for extended limitation - Appeal under Section 128 and suo motu review under Section 129D - Preliminary judicial interference with a show cause notice

Self-assessment under Section 17 and verification/re-assessment by the proper officer - Appeal under Section 128 and suo motu review under Section 129D - Recovery of duties and extended limitation under Section 28 including subsection (4) - Jurisdiction of customs authorities to issue a show cause notice under Section 28 despite no prior verification under Section 17 or appeal against the self-assessment. - HELD THAT: - The Court examined the scheme of Section 17 (self-assessment, verification and re-assessment) alongside Section 28 (power to recover duties not levied/paid or short-levied/paid and to determine duty and interest). Section 17 empowers verification and re-assessment where self-assessment is found incorrect, but Section 28 confers a separate power to determine duty or interest and to issue notices for recovery. The text of Section 28 contains no requirement that its exercise be conditional upon reopening an assessment under Section 17 or upon prior appellate action under Section 128 or review under Section 129D. Decisions concerning refund litigation (and principles limiting reassessment in refund proceedings) do not convert the power under Section 28 into one subordinate to Section 17. Having considered the statutory provisions and precedents relied upon by the parties, the Court concluded that invocation of Section 28 is independent of whether the proper officer has exercised verification or filed appeals against self-assessment. [Paras 29]

Power under Section 28 to initiate recovery proceedings and determine duty is not conditional upon verification/re-assessment under Section 17 or upon the filing of appeals under Section 128 or review under Section 129D; respondent had jurisdiction to issue the show cause notice.

Wilful misstatement, suppression of facts and collusion as trigger for extended limitation - Preliminary judicial interference with a show cause notice - Whether invocation of the extended five-year limitation under Section 28(4) was without jurisdiction at the show cause notice stage where allegations of wilful misstatement and suppression of facts were made. - HELD THAT: - Section 28(4) permits issuance of notice within five years where non-levy, non-payment, short-levy or erroneous refund arises from collusion, wilful misstatement or suppression of facts. The impugned show cause notice contains detailed allegations and paragraphs asserting wilful misstatement and suppression across numerous bills of entry for various telecom products. At the interlocutory stage, the Court emphasised that a definitive finding of wilful misstatement cannot be made without close examination of disputed facts and documents; however, mere presence of inferences in the notice does not render invocation of Section 28(4) per se jurisdictionally invalid. Given the factual complexity and the prima facie appearance that the notice was issued within five years, the Court held that it was inappropriate, in exercise of summary writ jurisdiction, to quash the notice; detailed adjudication of the allegations must await the statutory proceedings where evidence and contentions can be fully examined. [Paras 30, 33, 34]

The invocation of the extended period under Section 28(4) cannot be set aside at this preliminary stage; the show cause notice stands and the petitioner is not entitled to quash it on the present record.

Final Conclusion: Writ petition challenging the show cause notice is dismissed; the Court refuses to interfere with the notice but grants the petitioner one month from receipt of this order to file its reply, after which the respondent may proceed in accordance with law.

Fraud vitiates transactions - Liability for duty and interest for use of forged DEPB/TRA - Penalty under Section 112(a) of the Customs Act - scope and discretionary reduction - Duty Entitlement Pass Book (DEPB) scheme - freely transferable scrips and duty-neutralisation object and due diligence - Settlement Commission under Chapter XIV-A (Section 127-B) - scope of settlement and effect on co-noticees - Appellate interference with Tribunal's fact finding - perversity standard

Liability for duty and interest for use of forged DEPB/TRA - Fraud vitiates transactions - Duty and interest confirmed against importers and other appellants who used forged or fabricated TRAs/DEPB scrips. - HELD THAT: - The Court accepted the CESTAT's factual finding based on investigation that the TRAs and DEPB scrips were forged and fabricated and that the transactions were vitiated by fraud. Reliance was placed on precedent holding that no credit can be derived from forged scrips and that liability for duty and interest follows even where an assessee claims absence of collusion. No perversity was shown in the Tribunal's appreciation of evidence warranting interference, and therefore the component of duty and interest adjudged was upheld.

Duty and interest confirmed; appellate interference declined.

Penalty under Section 112(a) of the Customs Act - scope and discretionary reduction - Appellate interference with Tribunal's fact finding - perversity standard - Tribunal's exercise of discretion in relation to penalties was partly sustained but modified: penalties upheld for the mastermind, reduced to 50% for traders/brokers, and restored to 50% for importers (where Tribunal had earlier deleted them completely). - HELD THAT: - The CESTAT had upheld penalties against the principal wrongdoer and had set aside or reduced penalties for importers and intermediary traders/brokers. The High Court found no perversity in the reduction of penalties for traders/brokers and sustained that exercise of discretion. However, the Court disagreed with the Tribunal's deletion of penalties against importers in full, observing that the evidence established falsity of the scrips and the importers' failure to establish bona fides; accordingly the Court restored penalty liability to the extent of 50% for importers to align with the treatment of traders/brokers. The penalty upheld against the mastermind was left intact.

Penalties: mastermind's penalty upheld; traders/brokers' penalties reduced to 50%; importers' penalties restored at 50%.

Duty Entitlement Pass Book (DEPB) scheme - freely transferable scrips and due diligence - Liability for duty and interest for use of forged DEPB/TRA - Importers who acquired DEPB scrips in the market without obtaining title and without making enquiries cannot retain the notificational benefit where the scrips are shown to be fabricated; bona fides must be established. - HELD THAT: - The Court noted the DEPB scheme permits transferable scrips but emphasised that where investigation demonstrates scrips are fake, an importer who acquired scrips in the market and did not make enquiries (e.g., from DGFT/JDGFT) failed to establish bona fides. The Tribunal's observation that importers could and should have made enquiries was accepted as a proper basis for denying full relief; hence the importers remain liable for the undue benefit obtained and corresponding consequences.

Importers who failed to establish bona fides and did not conduct due diligence are liable to surrender the notificational benefit; penalties reduced to 50% rather than deleted.

Settlement Commission under Chapter XIV-A (Section 127-B) - scope of settlement and effect on co-noticees - An order of the Settlement Commission in favour of one declarant does not automatically extend its immunity or operate as a settlement in favour of co-noticees who have not themselves applied to the Settlement Commission. - HELD THAT: - The Court distinguished the Kar Vivad Samadhan Scheme (under which prior authority had held a declarant's settlement may extend to co noticees) from the statutory settlement mechanism under the Customs Act. Section 127-B requires an application in respect of the 'case' relating to the applicant and prescribes specific procedural requirements; there is no express provision in Chapter XIV-A making a declarant's settlement binding on other co-noticees who have not complied with the statutory procedure. Therefore the benefit of a settlement granted to one person does not automatically accrue to others who did not apply.

Settlement Commission order in favour of one declarant does not bind or confer immunity on co-noticees who have not applied under Section 127-B.

Appellate interference with Tribunal's fact finding - perversity standard - No question of law requiring interference arose from the factual findings of the Tribunal; the High Court will not overturn concurrent findings of forgery and fabrication absent perversity. - HELD THAT: - The Court recorded that the CESTAT was the final fact finding authority and that its findings - supported by investigation results establishing forgery and fabrication - were not shown to be perverse. As the individual appellants advanced factual contentions which failed before the Tribunal, the High Court found no basis to re-appraise evidence or reverse those findings.

Tribunal's factual findings affirmed; no interference on facts.

Final Conclusion: The High Court affirmed confirmation of duty and interest in all cases and sustained the finding of forgery and fabrication; penalties were upheld against the principal mastermind, reduced to 50% for traders/brokers (and restored to 50% for importers where deleted by the Tribunal). The Court held that a Settlement Commission order in favour of one declarant does not automatically benefit co-noticees who have not applied under Section 127-B. Civil miscellaneous appeals disposed accordingly; no costs.

Merchandise Exports from India Scheme - inadvertent mistake in marking reward column - intent to claim MEIS benefit - procedural lapse not to defeat substantive entitlement - direction to release reward amounts - Policy Relaxation Committee rejection

Merchandise Exports from India Scheme - inadvertent mistake in marking reward column - intent to claim MEIS benefit - procedural lapse not to defeat substantive entitlement - Entitlement to MEIS rewards where shipping bills were marked 'N' instead of 'Y' due to an inadvertent error despite the exporter having declared intent to claim the benefit. - HELD THAT: - The Court found that the sole reason for denial of MEIS benefits was an inadvertent marking of 'N' instead of 'Y' in the reward column of 28 EDI shipping bills, whereas the petitioner had otherwise declared the intention to claim MEIS rewards. Relying on the Supreme Court's decision in Commissioner of Customs v. N.C. John & Sons Pvt. Ltd., the Court accepted that where the claimant has from the outset manifested the intention to claim the reward and the error is inadvertent, the procedural lapse should not bar substantive entitlement. The Court noted analogous high court decisions and observed that the Policy Relaxation Committee's rejection could not withstand this principle. Applying that reasoning to the admitted facts of inadvertence and prior declaration of intent, the Court held that the petitioner is entitled to the MEIS rewards and directed release of the amounts in respect of the specified shipping bills. [Paras 9, 10, 11]

Petitioner entitled to MEIS rewards for the 28 shipping bills despite the inadvertent marking; respondents directed to release the reward amounts within six weeks.

Final Conclusion: Writ petition allowed; respondents directed to release the MEIS reward amounts due to the petitioner in respect of the 28 shipping bills within six weeks, the denial being set aside as based solely on an inadvertent procedural error where intent to claim was otherwise declared.

Condonation of delay - Substantial justice over technicality - Delay in filing appeal - Remand to Appellate Authority - Opportunity of hearing - Setting aside of order

Condonation of delay - Substantial justice over technicality - Delay in filing appeal - Setting aside of order - Condonation of 66 days' delay in filing the appeal and setting aside of the order rejecting the appeal as time-barred. - HELD THAT: - The petitioner attributed the delay in filing the appeal to non-receipt of the impugned order which was sent to the company's old address. Applying the settled principle that substantial justice must prevail over technical objections, the High Court found merit in preferring the cause of substantial justice where it conflicted with technical limitation grounds. In view of that principle and the material on record, the Court exercised its discretion to condone the delay of 66 days and set aside the appellate order which had rejected the appeal as barred by limitation. [Paras 8, 10]

Delay of 66 days in filing the appeal is condoned and the order dated 02.04.2024 rejecting the appeal as time-barred is set aside.

Remand to Appellate Authority - Opportunity of hearing - Remand of the matter to the Appellate Authority for fresh adjudication on merits after permitting the appeal to be taken on record. - HELD THAT: - Having condoned the delay and set aside the order rejecting the appeal, the Court directed the first respondent to take the appeal on record if otherwise in order and to decide the appeal on merits and in accordance with law. The Appellate Authority was directed to provide the petitioner a sufficient opportunity to be heard and to pass appropriate orders expeditiously. The parties were left free to contest the merits before the Appellate Authority. [Paras 9, 10]

Matter remitted to the Appellate Authority to admit the appeal (if in order), afford opportunity of hearing and decide the appeal on merits expeditiously.

Final Conclusion: The writ petition is allowed by condoning the 66-day delay, setting aside the order rejecting the appeal as time-barred, and remitting the matter to the Appellate Authority to admit and decide the appeal on merits after affording the petitioner an opportunity of hearing; writ petition disposed of with no costs.

Revocation of customs broker licence - forfeiture of security deposit - penalty under Customs Brokers Licensing Regulations - breach of duty to obtain client authorization - duty to advise client to comply with statutes - due diligence in information imparted to client - prohibition on attempting to influence customs officials - verification of correctness of specified particulars - requirement of proof beyond presumption

Breach of duty to obtain client authorization - requirement of proof beyond presumption - Whether the charge for failure to obtain authorisation from the client was proved - HELD THAT: - The enquiry officer had earlier held the charge not proved, but the licensing authority reversed that finding relying on lack of contact with a particular director and inferred absence of authorisation. The Tribunal observed that a company operates through authorised persons and the regulation contemplates a document of authorisation; the manner of delivery does not negate its existence. There is no record positively establishing non-existence of the authorisation, only evidence of flawed delivery or lack of direct contact with a director. Conflating absence of personal contact with absence of documentary authorisation is legally erroneous and founded on presumption rather than proof.

Charge under regulation 10(a) not proved; finding to the contrary was erroneous.

Duty to advise client to comply with statutes - requirement of proof beyond presumption - Whether the charge that the broker failed to advise the client to comply with statutory provisions was proved - HELD THAT: - The licensing authority relied on the fact that communications and documents were routed through a freight forwarder and that there was no direct contact with the director. The Tribunal held that there is no evidence showing that the broker did not advise the client or that any specific advice given was incorrect. It is not feasible to disprove the giving of advice merely from such circumstantial facts; the charge required particulars of the advice and evidence that it was contrary to law. In the absence of such evidence, the presumption that no advice was given cannot sustain the charge.

Charge under regulation 10(d) not proved.

Due diligence in information imparted to client - requirement of proof beyond presumption - Whether the charge that the broker failed to exercise due diligence in the correctness of information imparted to the client was proved - HELD THAT: - Regulation 10(e) requires a broker to ensure correctness of information furnished to a client. The licensing authority inferred breach because the broker was present during examination and mis-declaration was discovered. The Tribunal found no evidence that any information actually furnished to the client was incorrect, nor that the broker had been shown to have given erroneous information. The mere occurrence of an offence under the Customs Act does not, without more, establish that the broker furnished incorrect information to the client. The charge rested on speculation rather than on proof of incorrect information imparted.

Charge under regulation 10(e) not proved.

Prohibition on attempting to influence customs officials - requirement of proof beyond presumption - Whether the charge that the broker attempted to influence the conduct of customs officials was proved - HELD THAT: - Regulation 10(i) proscribes attempting to influence customs officials by threat, duress, inducement, gift or other advantage. The licensing authority based the charge on the fact that despite an earlier examination goods were later found undeclared, and inferred improper influence from the broker's presence. The Tribunal observed that 'attempt' implies a failed effort and that the regulation presupposes conduct such as threats, promises, or inducements; there is no allegation or evidence of any such conduct by the broker nor any complaint by an official. The inference drawn from subsequent discovery of undeclared goods is insufficient to demonstrate an attempt to influence.

Charge under regulation 10(i) not proved.

Verification of correctness of specified particulars - requirement of proof beyond presumption - Whether the charge that the broker failed to verify the correctness of specified particulars was proved - HELD THAT: - Regulation 10(n) requires verification of certain particulars. The licensing authority found breach because documents had been received through a freight forwarder and there was no substantive record of direct communication with the importer. The Tribunal held that treating receipt of documents via an intermediary as conclusive proof of non-verification imposes additional requirements not found in the regulation. The existence of the specified particulars on record undermines the inference of non-verification, and the finding was therefore based on flimsy presumptions rather than positive proof.

Charge under regulation 10(n) not proved.

Revocation of customs broker licence - forfeiture of security deposit - penalty under Customs Brokers Licensing Regulations - requirement of proof beyond presumption - Whether revocation of licence, forfeiture of security deposit and imposition of penalty were justified - HELD THAT: - The licensing authority revoked the broker's licence, forfeited the security deposit and imposed a penalty after holding all charges proved. The Tribunal found that the charges were either wrongly framed or not proved on the evidence and that the licensing authority had based its conclusions on presumptions drawn from lack of direct contact and intermediary involvement rather than on positive proof of wrongdoing. As the foundational findings of misconduct were erroneous, the consequential actions of revocation, forfeiture and penalty lacked basis.

Revocation of licence, forfeiture of security deposit and imposition of penalty set aside.

Final Conclusion: The appellate authority set aside the licensing authority's findings of misconduct under regulations 10(a), 10(d), 10(e), 10(i) and 10(n) as not proved, and consequently revoked the order of revocation, forfeiture and penalty; the appeal is allowed.

Immediate suspension of customs broker licence in appropriate cases where immediate action is necessary - Requirement to record reasons when ordering immediate suspension - Post-decisional hearing and continuation of suspension - Inquiry proceedings under Regulation 17 of CBLR, 2018

Immediate suspension of customs broker licence in appropriate cases where immediate action is necessary - Requirement to record reasons when ordering immediate suspension - Post-decisional hearing and continuation of suspension - Continuation of immediate suspension of the appellant's Customs Broker licence under Regulation 16(1) of CBLR, 2018 - HELD THAT: - The Tribunal examined whether the Principal Commissioner correctly continued the immediate suspension of the customs broker licence. The impugned order relied on CIU offence reports and factual findings about attempted gate-out and alleged unauthorized movement and opening of the container, but did not discuss the specific alleged violations under Regulation 10(d), (e), (m) and (n) while deciding continuation of suspension. The Tribunal found material contradictions in the CIU panchanama and the later 100% examination report regarding number and condition of packages, and observed that the Bill of Entry processing details and the responsibilities for examination and out-of-charge rest with Customs officers and the CFS custodian. The Board's Instruction No.24/2023 requires that suspension under Regulation 16(1) be exercised only in appropriate cases where immediate action is necessary and that reasons be recorded; those requirements were not complied with in the impugned order. Applying the authorities cited, the Tribunal held there were no sufficient and reasonable grounds shown to justify continuation of the immediate suspension and that the Commissioner had not applied his mind to the necessity for immediate action. [Paras 6, 7, 10]

The continuation of the immediate suspension of the appellant's CB licence is not sustainable and is set aside; the suspension is quashed.

Inquiry proceedings under Regulation 17 of CBLR, 2018 - Post-decisional hearing and continuation of suspension - Whether inquiry proceedings under Regulation 17 should continue despite setting aside the suspension - HELD THAT: - While quashing the suspension, the Tribunal made clear that it is not deciding the merits of the alleged violations under Regulation 10(d), (e), (m) and (n). The Tribunal directed that the separate inquiry under Regulation 17 shall continue in accordance with law and that the Principal Commissioner shall immediately issue orders allowing operation of the CB licence so that the appellants may cooperate in the enquiry. Thus, the continuance of the disciplinary inquiry was upheld and the regulatory process under Regulation 17 remains intact notwithstanding withdrawal of the suspension. [Paras 6, 10, 11]

Proceedings under Regulation 17 shall continue; the suspension is withdrawn but the inquiry remains unaffected.

Final Conclusion: The Tribunal set aside the continuation of the immediate suspension of the appellant's Customs Broker licence for want of sufficient reasons and non-compliance with the requirement to record necessity for immediate action, but directed that the inquiry under Regulation 17 of CBLR, 2018 shall proceed and the Principal Commissioner shall immediately restore operation of the licence so the appellant may participate in the inquiry.

Interest on refund under Section 27A read with Section 18(4) of the Customs Act, 1962 - provisional assessment and final assessment - security deposit under PDA Regulations, 2011 not constituting duty

Interest on refund under Section 27A read with Section 18(4) of the Customs Act, 1962 - provisional assessment and final assessment - security deposit under PDA Regulations, 2011 not constituting duty - Entitlement to interest on refund of 20% provisional deposits paid under PDA Regulation, 2011 where goods were provisionally assessed and finally assessed, and refund was sanctioned. - HELD THAT: - The Tribunal applied the scheme of provisional and final assessment under Section 18 and the interest provision in Section 18(4) read with Section 27A. It observed that Section 18(4) mandates payment of interest only if a refundable amount arising from final assessment is not refunded within three months from the date of final assessment. The facts showed that final assessment was completed and the refund was sanctioned within the three-month period prescribed by Section 18(4). The Tribunal rejected the appellant's contention that interest is a corollary to refund in all cases, holding that where refund is effected within the statutory three-month period no interest is payable. The Tribunal further noted that the claim related to 20% deposits under PDA Regulation, 2011, which do not partake the character of duty for the purposes of section 27/27A, and relied on earlier decisions considering provisional assessment refunds under Section 18. Consequently, previous authorities relied upon by the appellant were found distinguishable as not addressing refund under Section 18(4) read with Section 27A. The Tribunal followed its earlier decision in M/s Saraswati Knitwear Pvt Ltd (supra) and other precedents holding no interest is payable where refund is made within three months of final assessment. [Paras 6, 7]

The claim for interest on the refunded 20% deposits is rejected and the impugned order refusing interest is upheld; the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the appeal and upheld the Commissioner (Appeals) order rejecting interest on the refunded 20% provisional deposits, holding that where refund pursuant to provisional/final assessment is granted within three months of final assessment as prescribed by Section 18(4), no interest under Section 27A is payable.

Anti-dumping duty concession - Benefit of lower ADD rate under notification list of producers - Certificate of origin as evidence of producer - Documentary evidence prevailing over packing marks - Accepting producer identity despite trade/brand name discrepancy

Benefit of lower ADD rate under notification list of producers - Certificate of origin as evidence of producer - Documentary evidence prevailing over packing marks - Accepting producer identity despite trade/brand name discrepancy - Entitlement to concessional anti-dumping duty rate under Notification No. 32/2019 for PVC Resin SG-5 where importer's documents identify the producer as CNSG Jilantai Salt Chlori-Alkali Chemical Co. Ltd despite the packing bearing a slightly different name. - HELD THAT: - The Tribunal examined documentary evidence submitted by the appellant - commercial invoice, packing list, certificate of origin and other transport/insurance documents - all indicating the producer as CNSG Jilantai Salt Chlori-Alkali Chemical Co. Ltd. The department relied on the name appearing on the sacks, which omitted the word 'Salt'. Applying the principle that credible documentary evidence prevails over assumptions drawn from packing material, and in view of the Tribunal's earlier decision in M/s. Vinayak Trading where identical facts were held sufficient to establish the manufacturer, the Tribunal held that the mere discrepancy on the sacks did not outweigh the uncontroverted documents. The Tribunal noted absence of any material to show falsification or that the named exporter was the actual manufacturer; earlier administrative findings treating the goods as non-offending were also relied upon to reject differential duty demand. Consequently, the appellant was entitled to the concessional rate specified for the named producer in the notification. [Paras 4, 5, 6]

Impugned orders denied the benefit of the lower ADD rate are set aside and the appeals are allowed; appellant entitled to concessional rate as producer identified in documentary evidence.

Final Conclusion: On the basis of uncontroverted commercial and origin documents, and following the Tribunal's precedent in a substantially identical matter, the appeals are allowed and the benefit of the lower anti-dumping duty rate under the notification is granted to the importer treating CNSG Jilantai Salt Chlori-Alkali Chemical Co. Ltd as the producer.

Maintainability of appeals - Rule 6A of the CESTAT Procedure Rules, 1982 - Explanation to Rule 6A - multiplicity of appeals where more than one order-in-original is passed - one memorandum of appeal against a common order-in-appeal - monetary threshold under the National Litigation Policy applies to each appeal separately

Maintainability of appeals - Rule 6A of the CESTAT Procedure Rules, 1982 - Explanation to Rule 6A - multiplicity of appeals where more than one order-in-original is passed - one memorandum of appeal against a common order-in-appeal - monetary threshold under the National Litigation Policy applies to each appeal separately - Whether a single departmental appeal is maintainable against a common order-in-appeal disposing appeals relating to 93 separate Bills of Entry, or whether separate appeals equal to the number of orders-in-original are required. - HELD THAT: - The Tribunal examined Rule 6A which permits filing one Memorandum of Appeal against an order or decision of the authority below where a common order-in-original exists, but its Explanation mandates that where the impugned order-in-appeal has been passed with reference to more than one order-in-original, the number of Memoranda of Appeal must correspond to the number of orders-in-original. In the present matter the Commissioner (Appeals) passed a common order-in-appeal disposing the importer's 93 separate appeals, each of which relates to an assessment embodied in an individual Bill of Entry (orders-in-original). Applying the plain language of the Explanation to Rule 6A, and following precedents that have held the department must file appeals corresponding to the number of Bills of Entry, the Tribunal held that a single departmental appeal against the collective order is not maintainable. The Tribunal further accepted the interpretation that the monetary threshold in the National Litigation Policy applies to each appeal singly (each cause of action), not to the aggregate of multiple appeals, and relied on the decisions cited concerning that principle. Consequently, the Revenue was directed to file separate appeals for each order-in-original if so advised. [Paras 6, 7, 10, 11]

The single appeal filed by the Revenue against 93 Bills of Entry is not maintainable; the Revenue must file 93 separate appeals corresponding to the orders-in-original.

Final Conclusion: The appeal is dismissed as not maintainable; Revenue is directed to file separate appeals equal to the number of orders-in-original (93) if so advised.

Natural justice - double jeopardy - proportionality of disciplinary penalty - validity of disciplinary action founded on concurrent adjudications of NCLT and NCLAT - liquidator's conduct and compliance with auction procedure - delay and inconsistencies in public announcement under CIRP - disciplinary committee jurisdiction and composition

Natural justice - disciplinary committee jurisdiction and composition - Impugned disciplinary order was passed after affording due opportunity and does not suffer from breach of principles of natural justice; challenge to composition not sustained. - HELD THAT: - The show cause notice and the investigation reports were served, the petitioner filed replies and availed an oral hearing which the Disciplinary Committee granted; the Court found no serious grievance of breach of natural justice and limited its review to perversity or irrationality. The Court also treated the question of the DC's composition as not constituting a ground for interference, noting earlier authority relied upon by the respondent. Because the procedure complied with principles of natural justice, the scope for interference was narrow and confined to perversity. [Paras 7]

No breach of natural justice; composition challenge did not warrant interference.

Validity of disciplinary action founded on concurrent adjudications of NCLT and NCLAT - liquidator's conduct and compliance with auction procedure - Disciplinary action based on the NCLT order setting aside the e-auction and the subsequent NCLAT order is valid and may be relied upon by IBBI for disciplinary proceedings. - HELD THAT: - The show cause notice proceeded principally on the NCLT order of 2nd March 2023, which set aside the e-auction for failure to maintain required timelines and for conflicting dates in the sale notice, and on the NCLAT's confirmation dated 4th July 2023. Those adjudications have attained finality and therefore provided a valid factual and legal basis for the IBBI to proceed against the petitioner as Liquidator. The Court accepted that the NCLT/NCLAT findings constituted admissible and conclusive material to support disciplinary action and that the IBBI was justified in taking cognizance of those findings. [Paras 9, 10, 11]

IBBI validly relied on NCLT/NCLAT adjudications to proceed against the petitioner for misconduct in conducting the auction.

Delay and inconsistencies in public announcement under CIRP - Findings that the petitioner delayed the public announcement in DEPL and that public announcement contained inconsistencies are sustainable and justify action. - HELD THAT: - The show cause notice alleged delayed public announcement and inconsistent dates in the public announcement and Form 'A'. The petitioner could not give satisfactory explanation for the near twenty-nine day delay from the order of admission to publication and failed to rebut the discrepancies regarding last date for submission of claims. The Disciplinary Committee's conclusion that there was carelessness and negligence in these respects was not shown to be incorrect, perverse or unsustainable on the record. [Paras 8, 12]

Contraventions in DEPL relating to delayed publication and inconsistent claim dates are upheld as a basis for disciplinary action.

Double jeopardy - proportionality of disciplinary penalty - Payment of auction expenses pursuant to NCLT/NCLAT directions does not amount to double jeopardy; suspension for two years is not disproportionate in the circumstances. - HELD THAT: - The petitioner contended that having been ordered to bear auction expenses he was being punished twice. The Court held that monetary payment of expenses does not erase or cure the questionable conduct found by adjudicating authorities; consequential disciplinary proceedings for breach of code of conduct are distinct and do not constitute double punishment. On proportionality, having regard to the final adjudications of NCLT and NCLAT and the findings on DEPL, the Court found the two-year suspension not to be excessive or disproportionate. The DC also permitted creditors' committees discretion to decide continuation of ongoing assignments, mitigating total incapacitation. [Paras 11, 13, 14]

No double jeopardy; two-year suspension held to be proportionate.

Final Conclusion: Writ petition dismissed; the High Court found no breach of natural justice, no double jeopardy, and no perversity or disproportionality in the Disciplinary Committee's order suspending the petitioner's insolvency professional registration for two years.

Default - date of default - recall notice - Section 10A of the Insolvency and Bankruptcy Code, 2016 - initiation of CIRP under Section 7 - events of default - repayment schedule - penal interest

Date of default - recall notice - Section 10A of the Insolvency and Bankruptcy Code, 2016 - initiation of CIRP under Section 7 - repayment schedule - penal interest - Whether the loan recall notice dated 06.11.2020 (with 15 days) is to be treated as the date of default so as to bring the Section 7 petition within the prohibition under Section 10A. - HELD THAT: - The Tribunal found and the Appellate Tribunal accepted that the contractual repayment schedule required monthly instalments due on the 20th of each month and that instalments for January 2020 were not paid with the requisite penal interest and the instalment due on 20.02.2020 was not paid at all. Those missed payments constituted the occurrence of default in January 2020 or, at the latest, February 2020. The recall notice dated 06.11.2020 was issued pursuant to clause 10.3 upon the occurrence of the earlier defaults and was a consequential procedural step to recall the loan, not the event which first gave rise to default. Section 10A bars initiation of CIRP only where the default itself occurred during the cut-off period (25.03.2020 to 25.03.2021). Because the defaults in this case arose prior to 25.03.2020, Section 10A is not attracted merely because the recall notice was issued during the cut-off period. The decision relied upon by the Corporate Debtor was distinguishable on facts where the defaults themselves fell within the Section 10A period. [Paras 17, 18, 19, 21]

Recall notice dated 06.11.2020 is a consequence of defaults that occurred in January/February 2020; therefore Section 10A does not bar the Section 7 petition and the appeal is dismissed.

Final Conclusion: The Appellate Tribunal dismissed the appeal, holding that the date of default was January/February 2020 (prior to 25.03.2020), the recall notice was consequential and did not alter the date of default, and consequently Section 10A did not bar initiation of CIRP under Section 7.

Bail on medical grounds - "sick or infirm" proviso to Section 45(1) of PMLA - medical evaluation as threshold for bail - interim bail subject to Special Court's terms

Bail on medical grounds - "sick or infirm" proviso to Section 45(1) of PMLA - medical evaluation as threshold for bail - Petitioner's entitlement to bail on medical grounds under the proviso to Section 45(1) of PMLA. - HELD THAT: - The petitioner, aged 67, was arrested in connection with ECIR/MBZO-II/10/2021 and had been in custody for nearly a year and three months. A medical board of Sir J J Group of Hospitals, Mumbai, comprising specialists in neurology, cardiology, nephrology and ophthalmology, reported that the petitioner suffers from severe diabetic neuropathy, chronic kidney disease stage IV with reduced GFR, ischemic heart disease with worsening cardiac function and proliferative diabetic retinopathy, and requires regular medications and assistance for activities of daily living. The Court noted that the proviso to Section 45(1) of the PMLA contemplates release on bail where a person "is sick or infirm." Applying that provision and having regard to the expert medical evaluation, the Court held that the petitioner satisfies the threshold for enlargement on bail. Consequently, the Court directed release on interim bail, while leaving the precise terms and conditions to be imposed by the Special Court in relation to the ECIR. [Paras 8, 9, 10]

Petitioner fulfils the medical threshold under the proviso to Section 45(1) of PMLA and is directed to be released on interim bail subject to terms to be imposed by the Special Court.

Final Conclusion: Special Leave Petition disposed of and petitioner released on interim bail in light of the medical board report; implementation to be subject to terms and conditions as may be imposed by the Special Court in connection with ECIR/MBZO-II/10/2021.

Medical examination by constituted medical board - production of medical report before court - consideration of release on bail pending trial

Medical examination by constituted medical board - production of medical report before court - Direction to obtain a fresh medical report from a duly constituted medical board of J.J. Hospital, Mumbai, regarding the petitioner's medical condition. - HELD THAT: - The Court, noting conflicting assertions about the petitioner's ailments, directed that a fresh report be obtained from a duly constituted medical board of J.J. Hospital, Mumbai. The Court ordered that a team of doctors examine the petitioner and prepare an appropriate report addressing his medical condition, to be tendered before the Court on the next date of hearing. This direction is a procedural measure to produce authoritative medical evidence before deciding substantive relief. [Paras 3, 4, 6]

A fresh medical examination by a constituted medical board at J.J. Hospital, Mumbai shall be conducted and the resultant report shall be tendered before the Court on the next date of hearing.

Consideration of release on bail pending trial - production of medical report before court - Adjournment of bail decision pending receipt of the fresh medical report; medical condition remanded for fresh consideration in relation to bail. - HELD THAT: - The Court declined to proceed immediately to decide whether the petitioner should be released on bail pending trial, observing that the parties dispute the petitioner's medical condition. The Court therefore remanded the question of the petitioner's medical condition insofar as it bears on the bail application, directing that the fresh medical report be obtained and placed before the Court for its consideration when the matter is next listed. [Paras 2, 3, 6]

Decision on release on bail pending trial is deferred; the issue of the petitioner's medical condition is remanded for fresh consideration after the medical board's report is placed before the Court.

Final Conclusion: The Court directed a fresh medical examination and report by a constituted medical board of J.J. Hospital, Mumbai, and adjourned consideration of bail until that report is tendered; the matter is listed for further hearing on 14 October 2024.

Refund claim - remand proceedings - adjudication on merits in remand - protective show-cause notice - infructuous appeals - finality of precedent and effect of higher court directions

Remand proceedings - infructuous appeals - finality of precedent and effect of higher court directions - Appeals ST/20578 & ST/20586/2021 filed by the appellant against the Commissioner (Appeals) remand order have become infructuous. - HELD THAT: - The Tribunal considered the procedural history culminating in the Hon'ble Supreme Court's order dated 31.01.2022, which noted that the impugned order followed a previous precedent that had become final and directed that proceedings between the parties be decided on their own merits. In view of that decision and the current posture of the remand proceedings, the appeals by the appellant challenging the remand to the original authority no longer raise a live controversy and thereby stand rendered infructuous. Consequently those appeals are dismissed. [Paras 9, 10]

Appeal Nos. ST/20578 & ST/20586/2021 dismissed as infructuous.

Refund claim - finality of precedent and effect of higher court directions - Appeals ST/20492 & ST/20493/2022 filed by the Revenue against orders allowing the refund claims are not sustainable and are dismissed. - HELD THAT: - The Tribunal applied the Hon'ble Supreme Court's direction that proceedings pending between the parties be decided on their merits and observed that the remand order followed a precedent which had attained finality. Given the Supreme Court's clarification and the procedural posture, the Revenue's appeals challenging the Commissioner (Appeals) orders allowing the refund claims cannot be sustained and must be dismissed. [Paras 9, 10]

Appeal Nos. ST/20492 & ST/20493/2022 dismissed.

Protective show-cause notice - refund claim - adjudication on merits in remand - Appeal ST/20065/2022 filed by the appellant against Orders-in-Original Nos.12 & 13/2021-22 (adjudicating protective show-cause notices) is allowed. - HELD THAT: - The Tribunal noted that after sanction of refunds and subsequent issuance of protective show-cause notices, the adjudicating authority rejected the refund claims. Having regard to the Supreme Court's orders directing that proceedings be decided on merits and the overall procedural sequence, the Tribunal held that the appellant's challenge to the show-cause adjudication succeeds. On that basis the appeal against the Orders-in-Original Nos.12 & 13/2021-22 is allowed. [Paras 9, 10]

Appeal No. ST/20065/2022 allowed.

Final Conclusion: All five appeals disposed: the two appellant appeals against remand are dismissed as infructuous, the two Revenue appeals are dismissed, and the appellant's appeal against the adjudication of protective show-cause notices is allowed; matters are disposed accordingly.

Business Auxiliary Service - trade discounts - principal-to-principal relationship - mutual exclusivity of levy of sales tax and service tax - res integra

Business Auxiliary Service - trade discounts - principal-to-principal relationship - mutual exclusivity of levy of sales tax and service tax - Whether incentives/discounts received by the dealer from the manufacturer constitute a taxable service under the category of Business Auxiliary Service or are trade discounts not leviable to service tax - HELD THAT: - The Tribunal found that the incentives were given by the manufacturer to the dealer in the guise of discounts related to the purchase price of vehicles when certain sales volumes were achieved, and operated by reducing the value of subsequently purchased vehicles. The relationship between the parties was held to be on a principal-to-principal basis rather than a principal-agent or client-service provider relationship. The incentives therefore represented trade discounts connected with the sale of goods and not consideration for any service rendered to the manufacturer. The Tribunal noted that the amounts had formed part of the sale consideration subject to excise duty and CST/VAT and applied the principle of mutual exclusivity between sales tax and service tax as recognised in earlier decisions. Reliance was placed on consistent Tribunal precedents holding identical incentives not to be leviable as Business Auxiliary Service. For these reasons the activity was not regarded as a taxable service under the Business Auxiliary Service rubric and there was no basis to uphold the service tax demand. [Paras 9, 10]

Incentives are trade discounts arising from a principal-to-principal transaction and not taxable as Business Auxiliary Service; the demand for service tax is unsustainable.

Final Conclusion: Following prior Tribunal decisions, the appeal by the dealer is allowed and the Revenue's appeal is dismissed: incentives/discounts paid by the manufacturer to the dealer are trade discounts and do not attract service tax as Business Auxiliary Service.

Cenvat Credit on input services - Definition of "input service" - nexus with manufacture and clearance upto the place of removal - availability of credit if any one limb of the definition is satisfied - negative list exclusion of rent-a-cab operator's service - interest under Rule 14 of the Cenvat Credit Rules, 2004 - penalty under Rule 15 of the Cenvat Credit Rules, 2004

Cenvat Credit on input services - Definition of "input service" - nexus with manufacture and clearance upto the place of removal - availability of credit if any one limb of the definition is satisfied - interest under Rule 14 of the Cenvat Credit Rules, 2004 - penalty under Rule 15 of the Cenvat Credit Rules, 2004 - Admissibility of Cenvat Credit for renting of immovable property, management/maintenance/repair, transportation of goods by road, event management and commercial/industrial construction services for the relevant period - HELD THAT: - The Tribunal examined the statutory definition of "input service" as it stood in March 2011 and for April 2011-March 2012 and applied the settled principle that satisfaction of any one limb of the definition suffices for entitlement to credit. Relying on the case law cited by the appellant and the inclusive language of the definition (covering services used in relation to manufacture and clearance up to the place of removal, storage up to the place of removal, outward transportation up to the place of removal, and services relating to running and maintenance of premises), the Tribunal found that the listed services fall within the scope of "input service" and that the Cenvat Credit had been wrongly denied by the Commissioner. Applying these legal principles to the facts, the Tribunal allowed credit on renting of immovable property (used for stocking/display/sale after clearance), management/maintenance/repair (including CAM charges and upkeep of premises constituting place of removal), outward transportation by road, event management services (where linked to business/sales policy), and commercial/industrial construction services relating to the appellant's showrooms. The Tribunal held that interest under Rule 14 would be payable as per law but, as to penalty under Rule 15, no penalty was imposed in its order. [Paras 8, 10]

Cenvat Credit allowed on renting of immovable property service, management/maintenance/repair service, transportation of goods by road service, event management service and commercial/industrial construction service; interest payable as per Rule 14, no penalty imposed.

Negative list exclusion of rent-a-cab operator's service - documentary proof and nexus - interest under Rule 14 of the Cenvat Credit Rules, 2004 - Availability of Cenvat Credit on rent-a-cab operator's service for the relevant period - HELD THAT: - The Tribunal noted that rent-a-cab operator's service was placed in the negative list with effect from 01.04.2011. The appellant did not satisfactorily establish the purpose for which the service was availed nor produce documentary evidence to substantiate that the service fell within the allowable limbs of the definition of "input service" for the period in question. On these bases, and having regard to the statutory exclusion, the Tribunal held that Cenvat Credit on rent-a-cab operator's service is not admissible. The Tribunal directed payment of interest under Rule 14 in accordance with the rules but declined to impose any penalty under Rule 15. [Paras 9, 10]

Cenvat Credit disallowed on rent-a-cab operator's service; interest payable under Rule 14; no penalty imposed.

Final Conclusion: The appeal is partially allowed: credit on specified input services is permitted for March 2011 and FY 2011-2012, credit on rent-a-cab service is disallowed; interest under Rule 14 is payable as applicable and no penalty under Rule 15 is imposed.

Imposition of penalty for clandestine manufacture and removal - standard of evidence for establishing manufacture and clearance without payment of duty - reliance on registers, loose sheets, cash-books and stock verification as admissible evidence - concurrent findings and limits on High Court interference (exceptions where decision is based on no evidence) - corroboration of production by physical stock verification and weighment of consignments

Imposition of penalty for clandestine manufacture and removal - standard of evidence for establishing manufacture and clearance without payment of duty - corroboration of production by physical stock verification - Whether the assessment of excise duty and levy of penalty could be sustained where the Revenue relied on alleged clandestine manufacture and clearance without payment of duty. - HELD THAT: - The Court found that the penalty was not based solely on conjecture or isolated papers but rested on three concurrent factual strands: (i) a stock verification in the presence of two employees which disclosed an excess of finished goods, (ii) physical inspection and weighment of two trucks at the factory gate which showed raw material in excess of accompanying invoices, and (iii) production records, registers, note-pads and loose sheets recovered from the premises which, together with attendant initials and corroborative entries (attendance, shifts, LDO consumption, production particulars and cash-book entries), supported the conclusion of production in excess of recorded clearances. The Court rejected analogy to the Division Bench decision in Brims Products on the facts, holding that in the present case the evidence taken as a whole was reasonably capable of supporting the finding of clandestine production and clearance without payment of duty. Applying the principle that the High Court will not normally disturb concurrent factual findings except where they are unsupported by evidence, the Court held the factual basis for imposition of penalty to be adequate. [Paras 11, 12, 13, 15, 16]

Penalty and assessment upheld in favour of Revenue; the findings of clandestine manufacture and clearance without payment of duty were supported by evidence and not interfered with.

Reliance on registers, loose sheets, cash-books and stock verification as admissible evidence - corroboration of production by physical weighment of consignments - concurrent findings and limits on High Court interference (exceptions where decision is based on no evidence) - Whether proceedings could validly be initiated and sustained on the basis of registers and loose sheets recovered from the assessee's premises without independent corroboration of manufacture and clearance. - HELD THAT: - The Court observed that the recovered documents were not isolated or anonymous scraps but registers, note-pads and cash-books showing detailed entries (including initials admitted by the accounts assistant and general manager) which corresponded with other contemporaneous records such as attendance registers and production note-books. Further corroboration came from the stock verification and weighment of trucks which demonstrated discrepancies between invoiced and actual quantities. Given this matrix of documentary and physical evidence, the Court held that proceedings initiated on the basis of those documents, read with the physical stock and weighment evidence, were sustainable. The Court also noted the legal standard that interference is warranted only where findings are based on no evidence or where evidence as a whole cannot reasonably support the conclusion; that standard was not met. [Paras 11, 12, 13, 15, 16]

Proceedings and penalty based on the recovered registers, loose sheets and corroborative physical verification were held to be valid and sustainable.

Final Conclusion: The High Court dismissed the appeal, answering the framed questions of law in favour of the Revenue and upholding the assessment and penalty: the documentary entries together with stock verification and physical weighment constituted sufficient evidence of production in excess of recorded clearances to sustain the adjudication.

Binding effect of appellate factual findings on subordinate/quasi judicial authorities - invocation of Section 11A powers - requirement of deliberate suppression, fraud, collusion or willful misstatement - violation of principles of natural justice - non-consideration of reply - res judicata and judicial discipline among departmental quasi judicial fora - availability of alternative statutory remedy and exceptions to bar of alternative remedy - imposition of penalty - requirement of mens rea and need for a speaking order

Binding effect of appellate factual findings on subordinate/quasi judicial authorities - res judicata and judicial discipline among departmental quasi judicial fora - Validity of the Principal Commissioner's order dated 24.03.2022 in face of earlier factual findings by Commissioner (Appeals) dated 30.08.2016 and related orders. - HELD THAT: - The Court held that the Commissioner (Appeals)'s factual findings (that earlier adjudicating order was not based on proper enquiry and that there was no willful suppression/mala fides) are quasi judicial findings which bind departmental authorities unless set aside by a higher forum. The writ appellate Court's modification permitting the department to conclude an enquiry did not disturb those factual conclusions. A collateral authority (Principal Commissioner) cannot ignore or contradict the appellate factual findings and proceed to re adjudicate the same issue while the department's appeal to CESTAT is pending. Acting contrary to such appellate findings breaches judicial discipline required of subordinate/quasi judicial officers and rendered the impugned order unsustainable. [Paras 76, 78, 79, 85, 86]

Impugned order quashed as it acted in disregard of binding appellate factual findings and violated judicial discipline.

Invocation of Section 11A powers - requirement of deliberate suppression, fraud, collusion or willful misstatement - Whether proceedings under Section 11A were maintainable against the petitioner on the record before the Principal Commissioner. - HELD THAT: - The Court applied settled precedent construing proviso to Section 11A to require deliberate suppression, fraud, collusion or willful misstatement to extend limitation. The Commissioner (Appeals) had found no evidence of suppression, clandestine removal or mala fide conduct. In those circumstances, and while the appellate factual finding remains unchallenged by a higher forum, the foundational requirement for invoking Section 11A was absent. Consequently the departmental invocation of Section 11A and consequential demand could not be sustained. [Paras 88, 90, 91, 93, 94]

Proceedings under Section 11A were improperly invoked and cannot be sustained in the facts of the case.

Violation of principles of natural justice - non-consideration of reply - Whether the Principal Commissioner properly considered the petitioner's detailed reply before passing the order dated 24.03.2022. - HELD THAT: - The impugned order does not refer to or deal with the detailed reply and materials placed on record by the petitioner. The respondents failed to demonstrate consideration of those submissions. On the face of the order, the Court found prima facie non consideration of the petitioner's defence, amounting to breach of principles of natural justice which vitiates the adjudication. [Paras 80, 81]

Impugned order set aside for failure to consider the petitioner's reply and breach of natural justice.

Availability of alternative statutory remedy and exceptions to bar of alternative remedy - Whether the writ petitions were maintainable in view of the statutory appellate remedy. - HELD THAT: - The Court recognised the general rule that alternative statutory remedies weigh against exercise of writ jurisdiction but reiterated exceptions (including violation of natural justice and where alternative remedy is not efficacious). Given the binding appellate factual findings, the nature of the grievance (breach of judicial discipline and natural justice) and the court's assessment that statutory remedy would not be efficacious in the attendant facts, the High Court exercised its discretion to entertain and decide the writ petitions. [Paras 70, 82, 83, 98]

Writ petitions entertained; alternative remedy did not bar exercise of writ jurisdiction in these facts.

Imposition of penalty - requirement of mens rea and need for a speaking order - Validity of the penalty and interest imposed by the Principal Commissioner in the order dated 24.03.2022. - HELD THAT: - The Court observed that penalty under the statutory scheme is not automatic and ordinarily requires a finding of deliberate or dishonest conduct (mens rea) or conscious disregard of obligation; penalty orders must be speaking and reasoned. Because the foundational Section 11A proceedings were unsustainable and the impugned order failed to record reasoned findings establishing mens rea or deliberate suppression, the penalty and interest could not be sustained and were quashed. [Paras 95, 96, 97]

Penalty and interest set aside for lack of supporting findings of mens rea and for being imposed without reasoned/speaking order.

Final Conclusion: The writ petitions were allowed: the Principal Commissioner's order dated 24.03.2022 (demand, interest and penalty and appropriation) is quashed. The departmental proceedings under Section 11A were held unsustainable on the record, the penalty and interest were set aside for want of reasoned findings of deliberate suppression or mens rea, and the amount deposited by the petitioner may be adjusted against any future duty found payable.

CENVAT credit admissibility - clearance of inputs as such and payment equal to CENVAT credit - deemed manufacture under Section 2(f)(iii) of the Central Excise Act, 1944 - pre-deposit requirement under Section 35F and its effect on maintainability - once duty on finished products is accepted by department, reversal of CENVAT credit not required

CENVAT credit admissibility - deemed manufacture under Section 2(f)(iii) of the Central Excise Act, 1944 - clearance of inputs as such and payment equal to CENVAT credit - once duty on finished products is accepted by department, reversal of CENVAT credit not required - Eligibility to avail CENVAT credit on clutches received from Unit I for the period 01.04.2012 to 09.05.2012 where the goods were not subjected to processes amounting to manufacture under Section 2(f)(iii). - HELD THAT: - The Tribunal examined whether the appellants' activity of packing/re-packing/labelling/affixing MRP amounted to manufacture for goods received from Unit I and whether CENVAT credit taken on such goods was therefore recoverable. The admitted facts show that the goods in question were cleared on payment of duty. The Tribunal applied the settled principle, followed in earlier decisions including the Tribunal's own Final Order in the appellant's case and High Court/Apex Court precedents, that where duty on the finished product has been paid and accepted by the department, the CENVAT credit availed on inputs need not be reversed even if the activity does not constitute manufacture. The Tribunal also noted authorities construing Rule 3(5) of the Cenvat Credit Rules (that clearance of inputs as such requires payment equal to credit availed) and decisions holding that payment of duty on such clearances operates as reversal of credit. Having regard to the identical facts and the earlier Tribunal determination in the appellant's own case, the impugned rejection was unsustainable. The Tribunal further noted that the appeal was properly admitted as the required pre-deposit was paid. On these grounds the Tribunal concluded that the demand could not be sustained and required setting aside. [Paras 6, 7, 8, 9, 10]

Impugned Order-in-Appeal No.71/2017 dated 30.11.2017 is set aside and the appeal is allowed with consequential relief, if any, as per law.

Final Conclusion: The Tribunal allowed the appeal for the period 01.04.2012 to 09.05.2012, holding that where duty on finished products has been paid and accepted by the department the CENVAT credit need not be reversed even if the process does not amount to manufacture; the impugned appellate order rejecting the appeal for non-payment of pre-deposit is set aside and the appeal is allowed with consequential relief.

Entitlement to Cenvat credit - definition of "input" under Cenvat Credit Rules - ancillary or incidental activities constituting manufacture - research and development as integral to manufacture

Entitlement to Cenvat credit - definition of "input" under Cenvat Credit Rules - research and development as integral to manufacture - Whether Cenvat credit of duty paid on inputs used exclusively in the appellant's R&D division for the period January 2009 to March 2013 was rightly disallowed and recovered - HELD THAT: - The Tribunal held that the inputs in dispute are not excluded by the definition of "input" and that there is no bar to availing credit for goods used in the research and development wing of a manufacturing facility. The entitlement to Cenvat credit flows from the rule permitting credit for inputs used in production of output; therefore the central question is whether ancillary or incidental functions (such as R&D) contribute to the output. The Tribunal relied on the concept of "manufacture" which, as interpreted, includes activities incidental or ancillary to production so that outputs of such activities may, in form and cost, find their way into the excisable product. In the present case there was no allegation or finding that the appellant did not produce excisable goods or that the R&D was unrelated to the manufacture of those goods. In the absence of a finding that R&D was not integral to manufacture, the disallowance of credit could not be sustained. Following earlier decisions on the point, the Tribunal set aside the demand.

Appeal allowed; impugned order directing recovery and penalty in respect of the contested Cenvat credit set aside.

Final Conclusion: The Tribunal allowed the appeal and set aside the order of recovery and penalty, holding that Cenvat credit on inputs used in the appellant's R&D division for the stated period could not be disallowed in the absence of any finding that the R&D was not integral or related to the manufacture of excisable goods.

Place of removal - Free on Road (FOR) destination sales - admissibility of Cenvat credit on Goods Transport Agency (GTA) service - definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 - transfer of ownership/property in goods - freight as an integral part of price - seller bearing risk of loss/damage during transit - Board Circular No.1065/4/2018-CX dated 08.06.2018

Place of removal - Free on Road (FOR) destination sales - admissibility of Cenvat credit on Goods Transport Agency (GTA) service - definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 - Whether Cenvat credit of service tax paid on GTA services for outward transportation of goods to the buyer's premises is admissible where sales are on FOR destination basis - HELD THAT: - The Tribunal applied the principle that in FOR destination sales the place of removal is the buyer's premises, drawing on Supreme Court decisions concerning the stage of transfer of ownership and place of removal (Roofit Industries and EMCO Ltd.), and having regard to the interpretation in subsequent decisions and Board Circular No.1065/4/2018-CX dated 08.06.2018. The appellant sold cement on FOR destination basis, bore freight charges, bore transit risk (including procurement of transit insurance), and the sale price charged to customers was inclusive of freight. In that factual matrix the outward transportation up to the buyer's premises falls within the place of removal and thus the service tax on GTA services for such transportation qualifies as Cenvat creditable as an input service under Rule 2(l). The Tribunal relied on coordinate and Larger Bench decisions that have held similarly and observed that the issue is no longer res integra. On these grounds the impugned order denying credit was set aside and the appeal allowed. [Paras 5, 6, 8, 11, 14]

Cenvat credit of service tax paid on GTA services for transportation of goods to the buyer's premises is admissible for FOR destination sales; impugned order set aside and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal and held that where sales are on FOR destination basis and the seller bears freight and transit risk, the place of removal is the buyer's premises and service tax paid on GTA services for outward transportation up to that place is admissible as Cenvat credit under the Cenvat Credit Rules, 2004.

Exemption for job work - transfer of duty liability under Notification No.214/86 - principal manufacturer's undertaking as substantive condition - area-based exemption - liability of job worker where principal fails to discharge duty - penalty for suppression of material facts - interest under Section 11AA

Exemption for job work - transfer of duty liability under Notification No.214/86 - principal manufacturer's undertaking as substantive condition - liability of job worker where principal fails to discharge duty - The appellant-job worker is liable to pay central excise duty on goods manufactured on job work where the principal manufacturer availed area-based exemption and did not furnish the undertaking required under Notification No.214/86. - HELD THAT: - The Tribunal applied the established principle that Notification No.214/86 operates to shift duty liability from the job worker to the principal manufacturer only when the substantive condition of the notification-viz., the principal manufacturer's undertaking that goods will be removed on payment of duty for home consumption-is complied with. Where the principal manufacturer avails area-based exemption and clears goods at nil rate without giving the requisite undertaking, the notification does not apply and the job worker, as the manufacturer of the goods, remains liable to discharge excise duty. The Tribunal followed earlier precedents, including the Larger Bench view, holding that non-compliance by the principal results in duty liability falling upon the job worker, and concluded that identical facts in the present case mandate duty liability on the appellant. [Paras 8]

Appellant liable to pay central excise duty.

Penalty for suppression of material facts - Penalty imposed on the appellant and its manager/director was validly imposed for non-disclosure and suppression of material facts regarding the principal's exemption. - HELD THAT: - The Tribunal found that the appellant had knowledge that M/s. Neelgiri Electricals was availing area-based exemption, as this was recorded on the job work challan and admitted by the manager in a statement under Section 14. The authorities below therefore rightly concluded that material facts were suppressed and that penalty provisions were attracted. The Tribunal upheld the imposition of penalty upon the appellant and the director. [Paras 9]

Penalties sustained.

Interest under Section 11AA - The appellant is liable to pay interest on the unpaid central excise duty under Section 11AA of the Act. - HELD THAT: - Having held that the appellant failed to pay the central excise duty due on goods manufactured on job work, the Tribunal applied the statutory provision for interest on unpaid duty and concluded that interest is payable under Section 11AA. [Paras 10]

Interest under Section 11AA payable.

Final Conclusion: Appeal dismissed; impugned order upholding duty demand, interest and penalties is affirmed.

Refund of accumulated CENVAT credit under transitional provision - Section 142(3) of the CGST Act, 2017 and its application to pre appointed day liabilities - inadmissibility of refund where electronic credit has been allowed in revised TRAN 1 - remand for fresh adjudication on unjust enrichment and verification of eligibility

Inadmissibility of refund where electronic credit has been allowed in revised TRAN 1 - Effect of allowance of amounts in revised TRAN 1 on the refund claims and appropriate remedy. - HELD THAT: - The Tribunal recorded that two components of the refund claim were allowed in the revised TRAN 1 by the GST authority but the credited amounts had not been reflected in the appellant's electronic credit ledger. The Tribunal held that since those claims have been allowed in TRAN 1 the corresponding refund claims have become infructuous for the present purpose and the appellant has the remedy of approaching the concerned GST authority to obtain credit in the Electronic Credit Ledger. [Paras 4]

Refund claims corresponding to amounts allowed in revised TRAN 1 are rendered infructuous and the appellant is granted liberty to approach the GST authority for credit in the electronic ledger.

Refund of accumulated CENVAT credit under transitional provision - Section 142(3) of the CGST Act, 2017 and its application to pre appointed day liabilities - remand for fresh adjudication on unjust enrichment and verification of eligibility - Whether refund of amounts paid after the appointed day but pertaining to periods before 01.07.2017 is maintainable under Section 142(3) and the appropriate course of action. - HELD THAT: - The Tribunal accepted the view in Shree Ganesh Remedies Ltd that Section 142(3) contemplates refund in cash of amounts of CENVAT credit relating to the pre GST period when the assessee cannot avail credit post appointed day. The Tribunal reasoned that even if service tax or duty was paid after 01.07.2017, if it pertains to a period prior to the appointed day it may still qualify for relief under Section 142(3). Consequently, the Tribunal found that the Revenue's rejection solely on the ground that payment was made after 01.07.2017 was not tenable. However, eligibility remains subject to statutory conditions such as absence of unjust enrichment and other verifications envisaged by law. For these reasons the Tribunal did not decide entitlement on the merits but remanded the matter to the adjudicating authority to pass a fresh order in accordance with law and the observations recorded. [Paras 4]

Refund rejections for the specified amounts set aside and remitted to the adjudicating authority for fresh adjudication in light of Section 142(3) and necessary checks including unjust enrichment.

Final Conclusion: Appeal disposed: amounts already allowed in revised TRAN 1 treated as infructuous here and appellant given liberty to seek electronic credit; other rejected refund claims set aside and remanded for reconsideration under Section 142(3) with directions to examine eligibility and unjust enrichment.

Entitlement to refund of duty actually paid - validity of recovery by issuance of show cause notice where refund sanction order is unchallenged - finality of refund sanction in absence of departmental challenge - precedential binding effect of Tribunal majority decision - res integra status of the issue

Entitlement to refund of duty actually paid - finality of refund sanction in absence of departmental challenge - validity of recovery by issuance of show cause notice where refund sanction order is unchallenged - precedential binding effect of Tribunal majority decision - Whether the demand confirmed by adjudicating authority by issuing a show cause notice to recover an amount of refund already sanctioned can be sustained where the refund sanction order has not been challenged by the department - HELD THAT: - The Tribunal found the controversy to be no longer res integra and applied earlier Tribunal and High Court decisions relied upon by the appellant. It accepted the majority view in the Tribunal's decision in the Medley Pharmaceutical line of decisions, which holds that a refund sanctioned for duty actually paid cannot be rejected merely because the duty paid was higher than what may have been payable, and that the sanctioned refund attains finality if not challenged by the department. The Tribunal further relied on the decision of the Hon'ble Gauhati High Court in CCE, Shillong vs. Jellalpur Tea Estate and subsequent Division Bench/Tribunal decisions including M/s Ravi Crop Science and M/s Pace Non Woven Fabric Products , which apply the principle that absent a challenge to the refund sanction order, recovery of that refund by issuing a show cause notice is not sustainable. Applying those precedents to the facts on record, the Tribunal concluded that the impugned demand, interest and penalty based on alleged excess refund could not be sustained where the refund sanction order remained unchallenged by the department.

Impugned order confirming recovery set aside; appeal allowed and consequential relief granted as per law.

Final Conclusion: The appeal is allowed; the order confirming recovery of the sanctioned refund is set aside because the issue is covered by prior Tribunal and High Court decisions holding that a refund sanction order not challenged by the department cannot be reopened by a show cause notice.

Refund of excess tax - limitation and condonation of delay under Rule 29 - opportunity to show cause before rejecting refund claims - remand for reconsideration on sufficient cause - restitution of erroneously collected public funds - sanction and interest on delayed refund under Rule 29(g)

Limitation and condonation of delay under Rule 29 - opportunity to show cause before rejecting refund claims - Validity of rejection of refund applications as time-barred where no opportunity was given to explain delay - HELD THAT: - The Court examined Rule 29(1)(a) which prescribes a 180-day period for filing refund applications but permits admission beyond that period if the Prescribed Authority is satisfied that the dealer had sufficient cause for delay. The impugned orders rejected the refund claims as time barred but do not record that the petitioner was given notice or an opportunity to explain the delay. The affidavit-in-opposition likewise does not show that the petitioner was put to notice before rejection. Where the claim for refund is otherwise not disputed on merits and assessment notices had been issued but not concluded by the Department, the authority ought to have afforded the assessee an opportunity to explain delay before invoking the limitation proviso to reject the claim. [Paras 14, 15, 16, 17]

Impugned orders rejecting refund claims as time-barred were set aside because the prescribed authority did not give the petitioner an opportunity to show cause for delay; matter requires reconsideration under Rule 29.

Remand for reconsideration on sufficient cause - refund of excess tax - sanction and interest on delayed refund under Rule 29(g) - Whether the refund claims should be remanded for fresh consideration and the procedure to be followed on remand - HELD THAT: - Having set aside the rejection orders, the Court remanded the matters to the prescribed authority to permit the assessee to explain causes of delay. The authority is directed to consider the explanations, determine whether the delay is sufficiently justified under the proviso to Rule 29(1)(a), and if the refund is found due, to process and sanction the refund in accordance with the Act and Rules. The Court noted the availability of interest where refund is delayed under Rule 29(g) and required that any order passed be communicated to the assessee. The remand is limited to consideration of condonation of delay and consequential processing of the refund claim; the authority shall complete the exercise within sixty days of receipt of the condonation application along with a certified copy of the order. [Paras 18, 19]

Matters remanded to the prescribed authority to consider the assessee's explanation for delay and thereafter process any refundable amount (and interest, if applicable) in accordance with the Act and Rules within 60 days.

Final Conclusion: Writ petitions allowed to the extent that the impugned orders rejecting the refund claims as time-barred are set aside and the matters are remanded to the prescribed authority to afford the assessee an opportunity to explain delay and to reconsider and, if due, sanction the refunds (and interest where applicable) within sixty days.

Claim of exemption under Section 6(2) of the Central Sales Tax Act, 1956 - transit sales - genuineness of declaration in Form C - burden of proof on the assessee to establish exemption - adverse inference from non-production of departmental records - penalty for wilful evasion

Claim of exemption under Section 6(2) of the Central Sales Tax Act, 1956 - genuineness of declaration in Form C - burden of proof on the assessee to establish exemption - adverse inference from non-production of departmental records - penalty for wilful evasion - Exemption claimed as transit sales under Section 6(2) CST allowed because the Forms C produced were not disproved by the Department and the Tribunal's finding of non-genuineness cannot be sustained. - HELD THAT: - The Court examined whether the C Forms produced by the petitioner could be rejected as non-genuine and whether the exemption for transit sales could therefore be denied. The Revenue was directed to produce inter-office communications and the C-Form Register from the assessing circle which, as a routine practice, would record issued C Forms. No such register or communications were produced. The petitioner had placed on record copies of the relevant C Forms with serial numbers. Although the presumption of genuineness is rebuttable and the Department is entitled to prove falsity, the Department failed to produce any material to disprove the Forms. The first appellate authority itself had accepted the Forms for the limited purpose of holding there was no wilful evasion and deleted the penalty. That concurrent acceptance of the existence of the Forms and deletion of penalty by the appellate authority, unchallenged by the Department, is material and receives weight in assessing the merits. In these circumstances the Court drew an adverse inference from the absence of departmental records, found the Department had not discharged its burden to show the Forms were false, and concluded that the exemption rightly claimed as transit sales could not be denied on the basis relied upon by the assessing authorities and the Tribunal. [Paras 16, 17, 18, 20, 21]

Impugned order denying exemption set aside; exemption claim sustained and writ petition allowed.

Final Conclusion: For the tax period 1997-98 the Tribunal's order upholding denial of transit-sale exemption was quashed because the Department failed to produce records disproving the C Forms; the writ petition is allowed and the impugned order set aside.

Priority of charge under the SARFAESI Act vis-a-vis State tax/VAT dues - registration of charge in the Central Registry under the SARFAESI Act - attachment under State tax enactment cannot prevail over a registered SARFAESI charge - quashing of attachment and cancellation of mutation entries

Priority of charge under the SARFAESI Act vis-a-vis State tax/VAT dues - registration of charge in the Central Registry under the SARFAESI Act - Priority of the petitioner's registered SARFAESI charge over earlier attachment/charge purportedly created by the State and its effect on revenue mutation entries. - HELD THAT: - The Court accepted the petitioner's contention that it had registered its charge with the Central Registry under the SARFAESI Act and, pursuant to the scheme and settled decisions of this Court, a secured creditor exercising powers under the SARFAESI Act has priority over State dues in the nature of sales tax/VAT. The Court relied on the reasoning in Kalupur Commercial Co-operative Bank Limited and the subsequent coordinate authorities referred to in Partners of Siddheshwar Tax Fab & Ors, observing that the Rainbow Papers Ltd. line of decisions (in the IBC context) does not displace the application of Section 26E of the SARFAESI Act to the facts before it. The Court further noted the settled principle that the Crown/state does not enjoy a prior claim over the secured creditor for recovery of debts where security exists, as reflected in earlier precedents applied by the High Court. Applying those principles to the facts, the earlier attachment order passed by the State in 2011 could not survive against the petitioner's registered SARFAESI charge.

The attachment order passed by the respondent-State is quashed and set aside on the ground that the petitioner's registered SARFAESI charge has priority over the State's claimed attachment.

Quashing of attachment and cancellation of mutation entries - Consequential effect on revenue records and mutation entries following quashing of the State's attachment. - HELD THAT: - Having quashed the attachment on the ground of the petitioner's paramount security interest, the Court directed that the mutation entries in the revenue records reflecting the State's charge or attachment stand cancelled. The Court treated cancellation of the revenue mutation as a necessary consequence of invalidating the attachment and referred to coordinate bench decisions which recorded similar relief where State-created charges were held ineffective against SARFAESI-registered security interests.

Mutation entries in the revenue records consequent to the impugned attachment are cancelled.

Final Conclusion: The petition is allowed: the State's attachment order is quashed and set aside and the corresponding mutation entries in the revenue records are cancelled; no order as to costs.

Priority of secured creditor under the SARFAESI Act over state tax/VAT charges - first charge created and registered prior in point of time under section 26E of the SARFAESI Act - inefficacy of subsequent state charge for sales tax/VAT against prior mortgagee/secured creditor

Priority of secured creditor under the SARFAESI Act over state tax/VAT charges - first charge created and registered prior in point of time under section 26E of the SARFAESI Act - The charge created by the petitioner Bank prior in point of time under the SARFAESI Act overrides and invalidates the subsequent charge entered in revenue records in favour of the State for VAT/sales tax dues. - HELD THAT: - The Court recorded that the petitioner Bank had earlier created, registered and exercised remedies under the SARFAESI Act and that the state authorities subsequently recorded a charge in revenue records. Relying on the settled position as discussed in the coordinate decisions referred to (including Kalupur Commercial Cooperative Bank and Partners of Siddheshwar Tax Fab & Ors), the Court held that VAT/sales tax charges created subsequently do not have precedence over dues of a secured creditor who has a prior charge under the SARFAESI Act. The Court noted that the decision in Rainbow Papers Ltd. was confined to its facts and did not impinge on the application of Section 26E of the SARFAESI Act vis a vis state tax charges, and referred to authorities establishing that crown/state debt does not take priority over a secured creditor's charge where the secured creditor's charge is prior in time. Applying these principles to the present facts, the subsequent revenue entry recording the state's charge was held to be without efficacy and liable to be removed from the revenue records.

Respondent No.2 is directed to remove the charge recorded in revenue records and the mutation entry is deleted; the petition is disposed of.

Final Conclusion: The petition succeeds: the Court directed removal of the subsequent state charge and deletion of the mutation entry, holding that a prior charge of the bank under the SARFAESI Act prevails over later VAT/sales tax charges recorded by the State.

Validity of revenue charge after sale under the Recovery of Debts and Bankruptcy Act - Effect of auction sale by secured creditor on antecedent mutation and charge - Priority of secured creditor's dues vis-a -vis sales tax/VAT claims - Deletion of mutation entry consequent to valid sale and transfer of absolute title

Validity of revenue charge after sale under the Recovery of Debts and Bankruptcy Act - Effect of auction sale by secured creditor on antecedent mutation and charge - Deletion of mutation entry consequent to valid sale and transfer of absolute title - Whether the charge created by the Sales Tax Department and the mutation entry over the property survive after the property was sold in public auction by the secured creditor under the RDB Act and sale deed executed in favour of the auction purchaser. - HELD THAT: - The Court applied the settled position that where a secured creditor exercises its rights under the RDB Act (and SARFAESI Act) and the property is validly sold by the secured creditor with issuance of sale certificate and execution of sale deed, the prior charge created by the State in respect of sales tax/VAT dues cannot be sustained against the auction purchaser who has become the absolute owner. The Court relied on its earlier analysis distinguishing the Rainbow Papers decision and following precedents holding that sales tax/VAT does not take precedence over secured creditors' rights exercised under SARFAESI/RDB Act. On these grounds the Court quashed the charge created by the Sales Tax Department and directed deletion of the mutation entry in the revenue records relating to that charge, as the petitioner had acquired absolute title by the sale and conveyance effected by the secured creditor. [Paras 6, 7]

Charge created by the Sales Tax Department over the property is quashed and set aside and the mutation entry (Entry No. 5303) stands deleted; the petitioner, being the auction purchaser with sale certificate and sale deed, is the absolute owner for this purpose.

Priority of secured creditor's dues vis-a -vis sales tax/VAT claims - Claim against sale proceeds - Whether the State may pursue its claim in relation to sales tax dues against the sale consideration realized from the auction sale. - HELD THAT: - Although the Court held that the charge on the property cannot be sustained against the auction purchaser, it expressly left open the State's right to pursue its claim by initiating appropriate proceedings to claim priority over the sale proceeds realized from the auction. The Court noted that no charge was recorded in favour of the secured creditor in the revenue record and observed that the State may initiate proceedings against the secured creditor in accordance with law to assert any permissible claim over the sale consideration. [Paras 5, 7]

The State is permitted to pursue its claim against the sale consideration realized from the auction in accordance with law; the question of any entitlement to the sale proceeds was not adjudicated on the merits and remains open for appropriate proceedings.

Final Conclusion: The petition succeeds to the extent that the Sales Tax Department's charge over the property and the corresponding mutation entry are quashed and deleted because the petitioner acquired absolute title by auction sale and sale deed under the RDB Act; the State, however, remains at liberty to seek any lawful claim against the sale proceeds through appropriate proceedings.

Limitation on recovery of electricity charges under section 56(2) of the Electricity Act, 2003 - continuation of pre-existing statutory liabilities upon repeal - application of section 6 of the General Clauses Act, 1897 to pre-existing liabilities - limitation for recovery of price of goods under Article 15 of the Limitation Act, 1963 - effect of interim orders and finality of interlocutory determinations - issue estoppel / res judicata

Limitation on recovery of electricity charges under section 56(2) of the Electricity Act, 2003 - application of section 6 of the General Clauses Act, 1897 to pre-existing liabilities - Whether section 56(2) of the Electricity Act, 2003 applies to bar recovery of sums which became due before the 2003 Act came into force. - HELD THAT: - The Court held that liabilities which accrued prior to the enforcement of the 2003 Act are not barred by the two year limitation in section 56(2). Relying on this Court's decisions in Kusumam Hotels and the three Judge Bench in K.C. Ninan, the Court applied section 185(5) of the 2003 Act read with section 6 of the General Clauses Act, 1897 to conclude that the bar of limitation in section 56(2) operates only in respect of liabilities arising under the 2003 Act after it came into force. Consequently, the Division Bench's contrary conclusion that section 56(2) extinguished recovery of dues incurred between June 1996 and May 2000 was held to be unsustainable. [Paras 10, 11, 12, 13]

Section 56(2) of the 2003 Act does not apply to liabilities incurred prior to the Act coming into force; the Division Bench erred in so holding.

Issue estoppel / res judicata - effect of interim orders and finality of interlocutory determinations - limitation for recovery of price of goods under Article 15 of the Limitation Act, 1963 - Whether the appellants' demand (second show cause notice) was unsustainable on account of delay or otherwise, having regard to prior interlocutory orders and the law on limitation and disconnection under the 1910 Act. - HELD THAT: - The Court examined the statutory regime under the Electricity Act, 1910 (section 24) and the Limitation Act, 1963 (Article 15) and observed that while section 24 authorised disconnection after seven days' notice, it did not itself prescribe a limitation period for recovery by suit; suits for price of goods (electricity) are governed by Article 15 (three years). The Court found that the High Court had earlier, by orders dated 4 May 2000 and 14 February 2001, expressly required the respondent to pay minimum guarantee charges and sustained the first show cause notice; those interlocutory determinations were not challenged and attained finality. Having regard to settled principles of issue estoppel and res judicata, the respondent was estopped from re litigating the same demand in the second writ petition. The Court further noted that although delay and limitation are facts to be considered and relief by way of suit might be time barred, the operative consequence in this case was that the issue of liability had been judicially crystallised against the respondent and could not be reopened in the second writ petition. The appellants' subsequent reduction of demand and encashment of the bank guarantee were accepted by the appellants, and no further interference was ordered in respect of amounts already recovered. [Paras 33, 36, 37, 39, 40]

The second show cause notice was not maintainable in the writ forum because the issue of liability had been finally determined earlier; the respondent was estopped from re agitating the same demand.

Final Conclusion: The Division Bench's judgment quashing the second show cause notice is set aside. Section 56(2) of the 2003 Act does not bar recovery of liabilities incurred prior to that Act coming into force, and on the facts the respondent was estopped by prior High Court orders from re litigating the liability; the civil appeal is allowed and parties bear their own costs.

Leave to defend under Order XXXVII Rule 3(5) - grant of leave to defend is the rule; denial is the exception - repayment on demand versus repayment 'as and when able' - effect of material alteration under Section 87 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - authority to complete an undated cheque - condonation of delay in filing application under Order XXXVII

Leave to defend under Order XXXVII Rule 3(5) - grant of leave to defend is the rule; denial is the exception - repayment on demand versus repayment 'as and when able' - condonation of delay in filing application under Order XXXVII - Whether the defendants are entitled to leave to defend the suits under Order XXXVII Rule 3(5) of the CPC - HELD THAT: - Applying the principles distilled in B.L. Kashyap, the Court held that denial of leave to defend is an exception and where a defendant raises triable issues indicating a fair, bona fide or reasonable defence, unconditional leave is ordinarily appropriate; where doubts exist, leave may be granted subject to conditions. The defendants admitted receipt of money and admitted a liability to repay but pleaded that repayment was to occur only 'as and when able' or upon a future contingent event (release of a third party) or after an asserted period of years. The Court found that where liability to repay is admitted and no definite time for repayment is stipulated, repayment is due on the creditor's demand; allowing a debtor to unilaterally determine when repayment becomes due would convert the transaction into a gift. Reliance on limitation principles (Articles 19-21 of the Limitation Act) reinforced that money lent or repayable on demand gives rise to a right of the lender to sue within the limitation period from the date of loan/cheque presentation. On the facts, the defence that repayment is at the defendants' sole discretion was rejected as moonshine, frivolous and vexatious. Where earlier interlocutory applications for condonation of delay were allowed, that did not affect the ultimate finding that the substantive defence lacked merit. The applications for leave to defend were therefore dismissed and the suits decreed in favour of the plaintiff. [Paras 46, 59, 60, 62, 63]

Leave to defend is refused; the defendants' defence that repayment was payable 'as and when able' is rejected as frivolous; CS(OS) 232/2022 and CS(OS) 233/2022 are decreed in favour of the plaintiff (with costs).

Effect of material alteration under Section 87 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - authority to complete an undated cheque - Whether insertion of a date in undated but signed cheques furnished to the plaintiff amounted to a material alteration rendering the cheques void under Section 87 NI Act - HELD THAT: - The Court examined Section 87 in the light of related provisions of the NI Act and authoritative decisions. It noted that a signed cheque handed over incomplete (for example, undated) carries an implied or express authority to the holder to fill in the missing particulars and present the cheque; mere filling up of the date (or other particulars) after delivery does not constitute a material alteration under Section 87 so long as the signature of the drawer remains intact. The Court relied on the reasoning in Ravi Chopra and subsequent Supreme Court authority (including Bir Singh) to observe that insertion of date in a signed undated cheque is not a material alteration that would render the cheque void, and that the presumption under Section 139 applies unless rebutted by cogent evidence. On the facts, the defendants had voluntarily delivered signed undated cheques and failed to show any cogent basis to displace the statutory presumptions; the plea of material alteration was therefore rejected. [Paras 51, 52, 53, 54, 56]

The contention that the plaintiff materially altered the cheques by inserting dates is without merit; the cheques are not rendered void by such filling in and the defence under Section 87 NI Act fails.

Final Conclusion: Interlocutory applications for condonation of delay were allowed where recorded; on the merits, the defendants' contentions were rejected as frivolous and leave to defend was refused. Both suits under Order XXXVII were decreed in favour of the plaintiff and against the respective defendants, with directions to pay the claimed amounts and with costs.

Vicarious liability of directors - Section 138 Negotiable Instruments Act - Section 141 Negotiable Instruments Act - scope of exercise of inherent jurisdiction under Section 482 Cr.P.C. - requirements of averments in complaint against company officers - alter ego / identification principle for corporate liability - standard for quashing summons at interlocutory stage

Vicarious liability of directors - requirements of averments in complaint against company officers - standard for quashing summons at interlocutory stage - Summons issued to the petitioner-director in proceedings under Section 138 NI Act were not liable to be quashed under Section 482 Cr.P.C. - HELD THAT: - The Court applied settled principles governing quashing under Section 482 Cr.P.C., observing that such jurisdiction must be exercised sparingly and only in rare cases where allegations are palpably absurd or no offence is disclosed. The law as expounded in precedents requires specific averments to make out vicarious liability under Section 141 of the NI Act, but the complainant need only plead generally who was in charge of the company; detailed internal administrative facts are peculiarly within the company's knowledge. Where a director seeks quashing on the ground of non-involvement, the director must produce unimpeachable and incontrovertible evidence beyond suspicion and doubt to persuade the High Court that proceedings would be an abuse of process. The complaint in the present case alleges that the accused company was engaged in financial services, that after the death of the signatory director the petitioner and another director became jointly responsible for day-to-day affairs and financial transactions, and that the petitioner personally undertook remedial measures on representation to the complainant. The petitioner's factual assertions of non-involvement and non-signature were not supported by such incontrovertible evidence. Given that the master data shows the petitioner as one of only three directors and no unimpeachable material was placed before the Court to negate her responsibility, the Court held that it was not appropriate at the interlocutory stage to quash the summons; those contentions are matters for trial. [Paras 15, 17, 18]

Petition dismissed; summoning order maintained and the petitioner shall face trial.

Final Conclusion: The petition under Section 482 Cr.P.C. challenging the summons issued in the Section 138 NI Act complaint is dismissed for want of unimpeachable evidence to displace averments that the petitioner, as one of three directors, was responsible for the company's affairs; the summoning order stands.

Anticipatory bail / pre-arrest bail - custodial interrogation not essential - cooperation with investigation - criminal proceedings not a mode for recovery of civil dues - conditions of bail

Anticipatory bail / pre-arrest bail - custodial interrogation not essential - cooperation with investigation - criminal proceedings not a mode for recovery of civil dues - Applicants entitled to anticipatory bail because custodial interrogation was not necessary - HELD THAT: - The Court found that the dispute primarily involved accounting entries and ledger examination and that necessary ledgers and documents had been recovered and expert assistance obtained; the applicants had been cooperating during the interim protection and had supplied documents sought by the Investigating Officer. The Court observed that criminal law is not the proper mode for recovery of money and that, on the material before it, sending the applicants to custody would not serve any investigative purpose. In view of these factors the Court concluded that custodial interrogation was not required and confirmed interim protection, granting anticipatory bail to the applicants. [Paras 12, 14]

Interim protection confirmed and anticipatory bail granted to the applicants; custodial interrogation held unnecessary.

Anticipatory bail / pre-arrest bail - conditions of bail - cooperation with investigation - Applicant Bharat to be released on bail on specified conditions - HELD THAT: - With regard to Bharat Machhindra Khedkar the Court noted that he had resigned earlier, that whether he held a supervisory position was a question of fact for trial, that relevant bank account material had been recovered and that nothing remained to be recovered from him. Considering his cooperation, the Court held that custodial interrogation was unnecessary and directed his release on bail subject to furnishing personal and surety bonds and compliance with enumerated conditions prohibiting tampering with prosecution witnesses and requiring attendance at the police station on written notice until the chargesheet is filed. [Paras 13, 14]

Bharat Machhindra Khedkar to be released on bail on furnishing P.B. and S.B. with conditions including non-tampering with witnesses and attendance at the police station as required.

Final Conclusion: The High Court confirmed interim protection and granted anticipatory bail to the applicants, holding that custodial interrogation was not required in the facts of the case and directing that applicant Bharat be released on bail on furnishing bonds and complying with specified conditions.