TaxTMI Updates e-Newsletter
Nov 08,2022

Stay of proceedings pursuant to confiscation order - release of goods and conveyance subject to payment and personal bond - application of Section 129 versus Section 130 of the CGST Act - non-obstante clause and legislative priority in goods-in-transit cases - deemed stay on appeal under Section 107(11) of the CGST Act

Stay of proceedings pursuant to confiscation order - release of goods and conveyance subject to payment and personal bond - Whether the earlier order staying proceedings pursuant to the confiscation order should be modified to permit release of the goods and conveyance on specified conditions. - HELD THAT: - The Division Bench considered the petitioner's request to modify the stay granted earlier and the contention regarding the applicability of provisions dealing with goods in transit. The Court observed an earlier Division Bench order in W.P.No.12843 of 2022, dated 04.05.2022 was squarely applicable. Having regard to the facts and following the said Division Bench order, the Court modified its earlier order dated 26.05.2022. The modification grants a stay of further proceedings arising from the impugned confiscation order dated 27.04.2022, but conditions the release of the subject goods and conveyance on payment of one-fourth of the amount proposed in the show cause notice and on execution of a personal bond for the remaining amount. The Court declined to adopt the petitioner's request for a lower deposit (25% as sought) or to alter the bond requirement, instead prescribing the one-fourth payment and personal bond as the terms for release, thereby balancing the interests of the petitioner and the revenue and following precedent of the Division Bench in similar facts.

Stay of further proceedings pursuant to the confiscation order is granted and the goods and conveyance shall be released on payment of one-fourth of the amount proposed in the show cause notice and on execution of a personal bond for the remaining amount.

Application of Section 129 versus Section 130 of the CGST Act - non-obstante clause and legislative priority in goods-in-transit cases - deemed stay on appeal under Section 107(11) of the CGST Act - Court's treatment of the petitioner's contentions regarding the alleged lack of jurisdiction in invoking Section 130 and the asserted legislative priority of Section 129 for goods in transit. - HELD THAT: - The petitioner's submissions challenged the respondent's invocation of Section 130 and relied on the removal of a non-obstante clause from Section 130 and retention of such a clause in Section 129 after the Finance Act, 2021 amendments. The petitioner argued that Section 129, being the specific provision for goods in transit, should have overriding effect and that penalties in transit cases must be under Section 129. The Court recorded these contentions and the reliance on decisions of other High Courts, but did not adjudicate these statutory contentions on merits in this application. Instead, the Court resolved the matter by reference to an applicable Division Bench order in W.P.No.12843 of 2022 and framed the relief in terms of modifying interim relief already granted. The statutory dispute between Sections 129 and 130 was not finally determined in these reasons.

The petitioner's statutory contentions regarding Sections 129 and 130 were noted but not finally adjudicated; relief was granted by modifying interim terms in accordance with an earlier Division Bench order rather than by resolving the statutory conflict on merits.

Final Conclusion: Application to modify the Court's earlier interim order is allowed; proceedings pursuant to the confiscation order are stayed and the goods and conveyance are to be released on payment of one-fourth of the amount proposed in the show cause notice and upon execution of a personal bond for the balance, while statutory contentions regarding Sections 129 and 130 remain unadjudicated in this order.

Rectification of returns under Section 37(3) - matching, reversal and reclaim of input tax credit under Sections 42 and 43 - proviso to Section 37(3) and temporal bar on amendments - GSTN portal amendment and manual rectification of filed returns - revenue neutrality of retrospective correction

Rectification of returns under Section 37(3) - proviso to Section 37(3) and temporal bar on amendments - GSTN portal amendment and manual rectification of filed returns - revenue neutrality of retrospective correction - Petitioner permitted to rectify GSTR-1 for January 2019 notwithstanding passage of time, by online or manual mode as directed - HELD THAT: - The Court found that the incorrect GSTIN in the petitioner's GSTR-1 for January 2019 was an inadvertent error and that the detailed online mechanism for discovery and rectification (forms and MIS notifications under the matching regime) had not been put in place at the relevant time. In these circumstances the temporal bar in the proviso to Section 37(3) could not be held to have operated to defeat correction at the relevant time because the matching/communication machinery (GSTR-2/GSTR-1A, GST-MIS forms and rules) necessary for discovery and rectification was not notified or operational. The reported amendments to Section 37(3) and associated rules effected by the Finance Act, 2022 were prospective and do not assist the respondent for the period in question. As there was no revenue impact (the exercise is revenue neutral and no party unjustly retained ITC), the Court directed GSTN to permit the petitioner to amend the GSTR-1 for January 2019 - either by opening the portal for a limited period or, if technical difficulties persist, by permitting manual correction - within eight weeks of receipt of the order, so that corresponding corrections auto-populate in the GSTR-2A of the concerned recipients. [Paras 11, 12, 13]

Petitioner allowed to correct its GSTR-1 for January 2019 by GSTN (online or manual) within eight weeks; correction to reflect in recipients' GSTR-2A

Matching, reversal and reclaim of input tax credit under Sections 42 and 43 - revenue neutrality of retrospective correction - claim for interest for reversed ITC - Respondent No.5 permitted to claim interest from the petitioner for ITC it had availed and subsequently reversed - HELD THAT: - The Court recorded that Eastern Coalfields Limited (Respondent No.5) had availed ITC bona fide and later reversed it upon detection that the invoice had been reported against an incorrect GSTIN; although the rectification exercise is revenue neutral, any interest consequence arising from Respondent No.5 having reversed ITC (including interest paid by Respondent No.5) is a matter between the parties. The Court therefore left it open to Respondent No.5 to claim interest from the petitioner for the period and consequences of reversal. [Paras 3, 13, 14]

Respondent No.5 may claim interest from petitioner for ITC reversed owing to the incorrect entry; right to claim left open

Final Conclusion: Writ petition allowed: petitioner directed to effect correction of GSTR-1 for January 2019 (online if GSTN portal permits or by manual mode) within eight weeks so that corresponding corrections reflect in recipients' GSTR-2A; liberty reserved to Respondent No.5 to claim interest from petitioner for reversal of ITC.

Condonation of delay - limitation - extraordinary jurisdiction under Article 226 - remittal for fresh consideration on merits - balance of convenience and substantial justice - appellate authority's lack of power to condone beyond extended period

Condonation of delay - limitation - extraordinary jurisdiction under Article 226 - balance of convenience and substantial justice - Delay in preferring the appeal was condoned and the appellate authority's order declining condonation was quashed. - HELD THAT: - The petitioner established bonafide and sufficient cause for delay: the original order was received by the inward section on 13.03.2019 and was not forwarded to the Senior Manager (Taxation) who was responsible; heavy GST compliance and audit work during March-October 2019 across multiple registrations prevented timely action; the petitioner became aware of the order only in October-November 2019 and promptly filed the appeal with a condonation application. The High Court, adopting a justice-oriented approach and relying on the distinguishing facts of the cited Division Bench authority in Simplex Infrastructures, held that the delay was wholly unintentional and justified condonation. Although the Appellate Authority lacks power to condone delay beyond the condonable period, the High Court exercised its extraordinary jurisdiction under Article 226 to condone delay to secure complete and substantial justice in the peculiar facts of the case. The Court rejected the respondents' reliance on Laxmi Electronics as factually distinguishable. [Paras 7]

Impugned order declining condonation quashed; delay in preferring the appeal is condoned.

Remittal for fresh consideration on merits - appellate authority's lack of power to condone beyond extended period - The appeal is remitted to the Appellate Authority for fresh consideration on merits without reference to limitation. - HELD THAT: - Having condoned the delay under Article 226, the Court set aside the impugned appellate order and remitted the matter to respondent No.1 for re-consideration of the appeal on merits in accordance with law. The appellate authority was directed to consider and dispose of the appeal without reference to the issue of limitation or condonation, which the Court declared concluded in favour of the petitioner. The remittal is ordered so that the appeal may be decided on substantive grounds by the competent forum. [Paras 7, 9]

Matter remitted to respondent No.1 for fresh merit adjudication; appellate authority to consider the appeal without reference to limitation.

Final Conclusion: Writ petition allowed subject to deposit to Advocates Welfare Fund; impugned appellate order set aside and delay condoned; appeal remitted to the Appellate Authority for fresh consideration on merits without raising limitation; order confined to the peculiar facts and not to be treated as precedent.

Transitional credit - Form GST TRAN-1/TRAN-2 - Goods and Services Tax Network (GSTN) portal - Filing window reopening - Technical glitches - Verification within 90 days - Electronic Credit Ledger - Article 226 of the Constitution - Directions of the Supreme Court - Opportunity of being heard

Transitional credit - Form GST TRAN-1/TRAN-2 - Goods and Services Tax Network (GSTN) portal - Filing window reopening - Technical glitches - Verification within 90 days - Electronic Credit Ledger - Petitioner's request to enable filing of Form GST TRAN-1/TRAN-2 on the GST portal for claiming transitional credit is entertained in terms of the Supreme Court's order dated 22.07.2022. - HELD THAT: - The High Court considered the Supreme Court order of 22.07.2022 which directed GSTN to open a common portal for filing TRAN-1 and TRAN-2 w.e.f. 01.09.2022 to 31.10.2022, required GSTN to ensure absence of technical glitches, and directed concerned officers to verify claims within 90 days and reflect allowed transitional credit in the Electronic Credit Ledger after granting reasonable opportunity. The High Court held that the Supreme Court's directions were not confined to any particular assessment year and, therefore, any assessee who was earlier prevented from uploading TRAN-1/TRAN-2 because of technical problems may utilize the reopened window and file or revise the relevant forms during the period indicated by the Supreme Court. The court limited its relief to giving effect to and applying the Supreme Court's directions in the present petition and did not make any separate determination as to assessment-year-specific entitlement.

Writ petition allowed to the extent of permitting the petitioner to avail the benefit of the Supreme Court's directions dated 22.07.2022 for filing/transmission of TRAN-1/TRAN-2 and for further action in accordance with those directions; no order as to costs.

Final Conclusion: The writ petition is allowed insofar as the petitioner is entitled to avail the reopened window for filing or revising Form GST TRAN-1/TRAN-2 on the GSTN portal in terms of the Supreme Court's order dated 22.07.2022; other reliefs are not granted and there shall be no order as to costs.

Validity of transfer of jurisdiction under Section 127 - Scope and jurisdictional preconditions of Section 153C - Question of jurisdiction may be raised at any stage as a matter of law - Maintainability of writ under Article 226 where authority acted without jurisdiction

Validity of transfer of jurisdiction under Section 127 - The transfer order dated 16.02.2021 by the Principal Commissioner, Vijayawada, effectuating transfer of the petitioner's case from Mumbai to Guntur was without jurisdiction and arbitrary. - HELD THAT: - Section 127 vests the power to transfer cases in the authority in whose jurisdiction the assessee is situated and requires giving the assessee a reasonable opportunity of being heard and recording reasons. The record shows the competent authority at Mumbai had not completed its transfer proceedings and, in fact, issued a notice dated 02.03.2021 proposing centralisation and affording an opportunity to the assessee, whereas the Vijayawada order of 16.02.2021 had already purported to transfer the case. There is no material that the Mumbai authority had effected the transfer or that the statutory procedural safeguards under Section 127 were complied with by the transferring authority. The action taken by the authorities of Respondent No.1 based on the impugned transfer order therefore violated the statutory mandate and Article 14, and is held to be arbitrary. [Paras 13, 14, 15]

Order of transfer dated 16.02.2021 is invalid for want of jurisdiction and is arbitrary.

Scope and jurisdictional preconditions of Section 153C - Proceedings and assessment orders initiated and passed by Respondent No.1 under Section 153C, based on the impugned transfer, are without jurisdiction and invalid. - HELD THAT: - Section 153C requires that documents or assets found in a search which pertain to a person other than the searched person be handed over to the Assessing Officer having jurisdiction over that other person, who may then proceed under Section 153A. In this case material discovered during search was not forwarded in accordance with that statutory scheme; instead, Respondent No.1 proceeded to issue notices and complete assessments against the petitioner after relying on the invalid transfer. Because the foundational transfer was unlawful and because the statutory handover/competent-jurisdictional preconditions were not satisfied, the assessments under Section 153C lack jurisdiction and must be set aside. [Paras 12, 13, 15]

Assessments and notices under Section 153C issued and finalized by Respondent No.1 are invalid for want of jurisdiction.

Question of jurisdiction may be raised at any stage as a matter of law - The petitioner can challenge the jurisdictional competence of the assessing authority in these proceedings despite not having raised the objection before the assessing officer. - HELD THAT: - While the Revenue argued that the petitioner submitted to the Assessing Officer's jurisdiction by responding to notices and summons and therefore cannot now question jurisdiction, the Court held that statutory allocation of power cannot be waived by mere conduct of parties. A jurisdictional defect that goes to the root of the authority to act is a question of law and may be raised at any stage. The Revenue identified no statutory provision or precedent establishing that mere response to notices confers jurisdiction where statute prescribes otherwise. [Paras 16]

Petitioner is entitled to challenge jurisdiction despite earlier participation; the jurisdictional objection is maintainable.

Maintainability of writ under Article 226 where authority acted without jurisdiction - Extraordinary constitutional relief under Article 226 is maintainable in this case notwithstanding the existence of an appellate remedy, because the authority acted without jurisdiction. - HELD THAT: - The Court applied the principle that writ jurisdiction should not be exercised where an adequate and efficacious statutory remedy exists, but recognised established exceptions where the statutory authority has not acted in accordance with the enactment or has acted in total violation of principles of natural justice or without jurisdiction. Given the conclusion that the transfer and consequent proceedings were unauthorized and arbitrary, the appellate remedy to the Commissioner (Appeals) was not an adequate or efficacious alternative. Consequently, the High Court properly entertained the petition under Article 226. [Paras 17, 18]

Writ petition is maintainable; alternative remedy before the appellate authority is not adequate in the circumstances.

Relief and scope for fresh proceedings in accordance with law - The impugned assessment orders, notices and penalty notices are set aside and the Revenue is granted liberty to commence proceedings afresh in accordance with law. - HELD THAT: - Having held the transfer and resulting assessments to be invalid for want of jurisdiction, the Court declared the impugned orders arbitrary and illegal and quashed them. The Court did not decide subsidiary factual/contention issues concerning seized material, alleged transactions or principles of natural justice in detail, and instead granted liberty to the Revenue to initiate fresh proceedings in conformity with statutory requirements (including competent transfer procedures and jurisdictional prerequisites). No order as to costs was made. [Paras 15, 19, 20]

Impugned orders set aside; respondent authorities may commence fresh proceedings strictly in accordance with law.

Final Conclusion: The High Court allowed the writ petition, holding the transfer dated 16.02.2021 and the consequent proceedings and assessments by Respondent No.1 under Section 153C to be without jurisdiction and arbitrary; the impugned assessment orders and notices are quashed, and the Revenue is granted liberty to proceed afresh in accordance with law. No costs.

Validity of assessment initiated under Section 153C consequent to seizure in search of another person - admissibility of belated additional grounds raising jurisdictional defect - treatment of admitted/unreversed statement and return filed in response to notice - taxability of alleged gift from husband and burden of proof for cash gifts - afterthought plea and estoppel by prior admission

Validity of assessment initiated under Section 153C consequent to seizure in search of another person - admissibility of belated additional grounds raising jurisdictional defect - The petition to admit additional grounds challenging the validity of assessment framed under Section 153C for want of notice under Section 153A was rejected and the assessment under Section 153C was held valid. - HELD THAT: - The Tribunal found that material belonging to the assessee was seized during a search at the residence of the searched person and the AO of the searched person recorded satisfaction and forwarded the seized material to the AO having jurisdiction over the assessee who thereafter issued notice and completed assessment under Section 153C. The Tribunal held that the statutory scheme permits initiation of assessment under Section 153C on material seized in search of another person and that the assessees' reliance on an ITAT/Bengaluru decision and a Karnataka High Court authority did not apply on the facts because those decisions addressed different factual/legal contexts. Consequently, the Tribunal found no lacuna in initiation of proceedings under Section 153C and refused to admit the additional jurisdictional ground as lacking merit. [Paras 3]

Petition for admission of additional grounds challenging the validity of assessment under Section 153C was rejected; assessment under Section 153C upheld as valid.

Treatment of admitted/unreversed statement and return filed in response to notice - taxability of alleged gift from husband and burden of proof for cash gifts - afterthought plea and estoppel by prior admission - The claim that the sum admitted and offered as undisclosed income was actually a non-taxable gift from the husband was rejected; the assessing officer's and CIT(A)'s treatment of the admitted amount as taxable undisclosed income was sustained. - HELD THAT: - The Tribunal noted that during post-search proceedings the assessee admitted that four immovable properties were not reflected in books and could not satisfactorily explain their source, and she offered undisclosed income which was subsequently incorporated in the return filed in response to notice under Section 153C. The assessee only during assessment proceedings asserted that the amount constituted a gift from her husband. The Tribunal treated that late claim as an afterthought because no claim of gift was made from the date of search until the assessment stage and no documentary evidence was produced to substantiate large cash receipts allegedly received as gifts. The Tribunal observed that substantial cash alleged to have been gifted was not supported by wealth/other returns or bank evidence and therefore the assessee failed to discharge the evidentiary burden to prove the gift. Given the prior admissions and lack of corroboration, the Tribunal upheld the AO's assessment of the admitted amount as taxable undisclosed income and sustained the CIT(A)'s order dismissing the appeal. [Paras 6, 9, 10]

The claimed gift from the husband was held to be unproved and an afterthought; the addition based on the assessee's own admission was sustained and the appeal dismissed on this issue.

Final Conclusion: The Tribunal rejected the petition to admit additional jurisdictional grounds and found the assessment under Section 153C valid; it further upheld the assessment and the CIT(A)'s conclusion that the amount admitted by the assessee represented undisclosed income (the claim of gift from the husband being an unproved afterthought). The appeal is dismissed.

Disallowance under section 14A read with Rule 8D - personal funds versus business funds - attribution of interest/borrowed funds to exempt income - consistency of findings across assessment years

Disallowance under section 14A read with Rule 8D - personal funds versus business funds - attribution of interest/borrowed funds to exempt income - consistency of findings across assessment years - Whether the addition of Rs.6,30,455 made by the assessing officer under section 14A read with Rule 8D is sustainable where the assessee's exempt investments were made from personal funds and not from business or borrowed funds used for business. - HELD THAT: - The Tribunal found that the assessee consistently pleaded and produced financial statements showing that investments generating exempt income (dividend, PPF interest and tax-free long-term capital gains) were held in his personal books and not in the proprietary business accounts where interest expenses were claimed. The assessment record itself recorded the exempt income and the books were placed on record. The CIT(A) had earlier recorded an identical finding in respect of AY 2013-14 that the investments were out of personal funds and deleted a larger disallowance on the same facts. Having examined the financial statements produced before it and noting that the investments were not reflected in the business accounts, the Tribunal held that the AO's disallowance under section 14A/Rule 8D was not justified. The Tribunal therefore directed deletion of the disallowance for the impugned year, treating the factual demonstration that the investments were from personal funds (and not from borrowed or business funds) as determinative. [Paras 9, 10, 11]

The addition of Rs.6,30,455 made under section 14A read with Rule 8D is deleted.

Final Conclusion: The appeal is allowed: the Tribunal deleted the disallowance of Rs.6,30,455 under section 14A/Rule 8D for AY 2014-15 on the ground that the investments yielding exempt income were made from the assessee's personal funds and not from business or borrowed funds attributable to the business.

Section 68 of the Income-tax Act, 1961 - burden of proof in cash credits - genuineness, identity and creditworthiness of creditors - addition under section 68 - remand report and verification of source - dismissal for non-prosecution

Section 68 of the Income-tax Act, 1961 - genuineness, identity and creditworthiness of creditors - addition under section 68 - Validity of addition made under section 68 in respect of unsecured loans from directors and relatives - HELD THAT: - The tribunal upheld the conclusion that the assessee failed to discharge the primary onus under section 68 to prove identity, genuineness and creditworthiness of the lenders who were directors and their relatives. The Assessing Officer, in a remand report, accepted certain portions of the loans as genuine (specified amounts in favour of two lenders) but found that the assessee had not explained the source of credits in the bank accounts of the lenders for the balance amount. The Commissioner (Appeals) considered the remand report, applied precedents addressing the need to establish creditworthiness where close nexus exists between company and depositors, and confirmed the addition to the extent of the unexplained balance. The tribunal, noting absence of evidence produced before it and prolonged non appearance by the assessee, found no basis to interfere with the concurrent conclusion and confirmed the addition of the unexplained amount. [Paras 3, 7]

Addition of Rs. 1,93,83,674/- made under section 68 is confirmed.

Disallowance of interest - remand report and verification of source - Treatment of interest paid on the unsecured loans found to be unexplained - HELD THAT: - The Commissioner (Appeals) observed that interest paid on those portions of loans which were held to be accommodative/unexplained could not be allowed and directed recomputation of the interest disallowance after excluding interest attributable to the portions held genuine by the Assessing Officer. The tribunal noted the CIT(A)'s limited relief in respect of loans accepted as genuine on remand and, in the absence of further evidence from the assessee, saw no reason to interfere with the direction to the Assessing Officer to recompute the disallowance of interest in accordance with the findings on genuineness. [Paras 3, 7]

Disallowance of interest to be recomputed by the Assessing Officer in accordance with the amounts accepted as genuine; the CIT(A)'s direction in this regard is sustained.

Final Conclusion: The appeal is dismissed. The addition under section 68 for the unexplained unsecured loans is confirmed and the Assessing Officer is to recompute the disallowance of interest in accordance with the amounts held genuine; the order relates to A.Y. 2012-13.

Admissibility of additional evidence under Rule 46A of the Income Tax Rules, 1962 - burden of proof and substantiation for trading loss claimed on online commodity transactions - treatment of partners' capital credits as unexplained investment in the hands of the firm - liability of partners versus liability of the firm for unexplained credits in partners' capital accounts

Burden of proof and substantiation for trading loss claimed on online commodity transactions - Whether the claimed loss from commodity trading was rightly disallowed by the Assessing Officer or was proved and therefore allowable. - HELD THAT: - The Tribunal found that the assessee produced before the Assessing Officer and later before the CIT(A) supporting documentary material for the commodity trading loss, namely sample contract notes, the account of the assessee with the broker (M/s. Commodity Mandi Pvt. Ltd.), statements of daily profit and loss and a CD containing complete transaction details. The AO's assessment order contained an explicit statement that books and documents produced were examined and the returned income was accepted, yet the AO subsequently disallowed the loss by drawing adverse inferences without placing on record material contradicting the assessee's documentary proof. The remand report did not rebut the merits or genuineness of the loss; it merely objected to admission of documents as additional evidence. On the record the Tribunal held that the assessee had discharged the onus of substantiation for the trading loss and that the CIT(A) correctly allowed the loss, a view the Tribunal found sustainable and upheld. [Paras 15]

Claimed loss from commodity trading allowed; the disallowance by the AO is vacated and the CIT(A)'s acceptance of the loss is upheld.

Admissibility of additional evidence under Rule 46A of the Income Tax Rules, 1962 - liability of partners versus liability of the firm for unexplained credits in partners' capital accounts - Whether the CIT(A) was justified in admitting additional evidence regarding the source of partners' capital credits and in vacating the AO's additions treating those credits as unexplained investments of the firm. - HELD THAT: - The Tribunal held that the CIT(A) properly admitted the fresh documentary evidence filed under Rule 46A, since the AO in the original assessment had not queried the capital account credits and the partners subsequently produced confirmations and bank statements in the remand proceedings substantiating the source of the additions. On the merits, the partners' confirmations and bank statements were found to satisfactorily explain the source of the credits; therefore no adverse inference or addition was warranted in the hands of the assessee firm. The Tribunal also agreed with the CIT(A)'s proposition that if any doubt remained, appropriate action lay against the partners and not against the firm. Precedents of High Courts were noted as supporting this approach. [Paras 16, 17, 18]

Admissions of additional evidence and vacating of AO's additions in respect of partners' capital credits upheld; additions in the hands of the firm set aside.

Admissibility of additional evidence under Rule 46A of the Income Tax Rules, 1962 - Whether the CIT(A) erred in admitting fresh evidence without giving the AO adequate opportunity to examine it, thereby violating procedural requirements. - HELD THAT: - The Tribunal examined the remand proceedings and the order sheet entries showing that the AO had notice of and examined the documents (contract notes and CD) during remand. The AO's remand report objected only to admission of documents as additional evidence but did not rebut the documentary proof on merits. Given that the AO had an opportunity to examine the evidence in remand proceedings and the remand report did not controvert the substantive materials, the Tribunal found no procedural infirmity in the CIT(A)'s admission of the evidence or in his giving the AO opportunity to examine them. Consequently, the CIT(A)'s admission of evidence under Rule 46A and reliance thereon was held to be proper. [Paras 15, 16]

Admission of additional evidence by the CIT(A) and the opportunity afforded to the AO in remand proceedings upheld; no procedural violation found.

Final Conclusion: The departmental appeal is dismissed and the CIT(A)'s order is upheld: the commodity trading loss claimed by the assessee is allowed; the additions made by the AO in respect of partners' capital credits are vacated; the admission of additional evidence under Rule 46A and the remand procedure employed by the CIT(A) are sustained. The assessee's cross objection, being supportive of the CIT(A)'s order, is dismissed as infructuous.

Cancellation of registration under Section 12AA(3) - genuineness of activities of a trust - activities carried out in accordance with objects of the trust - limits of inquiry by income-tax authorities into validity of trust deed - reliance on external judicial findings inconsistent with higher court - utilisation of sale proceeds and treatment under section 11(1A)

Cancellation of registration under Section 12AA(3) - genuineness of activities of a trust - Whether registration granted under Section 12AA can be cancelled by revisiting the same trust provisions which were earlier examined at the time of grant of registration - HELD THAT: - The Court held that once registration under Section 12AA has been granted after satisfaction about the genuineness of the trust's objects and activities, the revenue cannot cancel that registration by re-opening the very same provisions and matters which had been earlier examined for grant of registration. Reliance was placed on Kamla Town Trust (interpreting the role of income tax authorities in assessing rectified trust instruments) and on precedents applying Section 12AA(3). The Court agreed with the ratio that cancellation under Section 12AA(3) is confined to situations where, upon subsequent satisfaction, the activities are found not to be genuine or are not carried out in accordance with the objects; it is not a licence to re revisit the original satisfaction reached at grant. The Tribunal and the CIT (Exemptions) had cancelled registration by primarily republishing findings based on the same trust deed provisions that had been the foundation for registration, which is impermissible. [Paras 14, 18, 22, 24, 28]

Registration cannot be cancelled by re examining the same Trust provisions already considered at the time of grant; cancellation on that basis was unlawful.

Limits of inquiry by income-tax authorities into validity of trust deed - reliance on external judicial findings inconsistent with higher court - Whether the Commissioner/ITAT could base cancellation on the High Court's PIL order which was subsequently set aside by the Supreme Court - HELD THAT: - The Court found that the CIT (Exemptions) principally relied upon this Court's order in the PIL to hold the trust's activities not genuine. The Supreme Court had set aside that High Court order and held that transfer of deity's property under the Bihar Act was permissible, and there was no public law element warranting CBI probe. Since the foundational judicial finding relied upon by the CIT was overturned by the Apex Court, the cancellation founded on that material was contrary to the highest judicial pronouncement and unsustainable. The ITAT's endorsement of the CIT's decision despite the Supreme Court's ruling rendered its conclusion legally untenable. [Paras 8, 19, 20, 25, 28]

Cancellation based substantially on the High Court's PIL order (later set aside by the Supreme Court) was invalid; the administrative order could not stand in face of the Apex Court's contrary ruling.

Utilisation of sale proceeds and treatment under section 11(1A) - limits of tribunal in travelling beyond grounds of revenue order - Whether the Tribunal rightly held that the appellant failed to show utilisation of sale proceeds for the trust's charitable objects and whether that finding was within the scope of the show cause and impugned order - HELD THAT: - The Court held that the ITAT erred in recording a fresh finding that the trust had failed to show utilisation of sale proceeds, because that issue was neither raised in the CIT's show cause notice nor formed part of the impugned order; the Tribunal cannot travel beyond the grounds on which the revenue proceeded nor build a de novo case for the Revenue. Further, the Appellant had deposited sale proceeds in bank fixed deposits for more than six months; CBDT instruction treating such deposit as utilisation for acquiring another capital asset under Section 11(1A) was noted. The Court observed that assessment stage authorities are the proper forum to examine utilisation under Section 11, and the Tribunal's adverse finding on utilisation in the cancellation proceedings was perverse. [Paras 11, 26, 27]

Tribunal's finding that the appellant failed to show utilisation of sale proceeds was beyond the scope of the cancellation proceedings and perverse; such matters fall to assessment authorities under Section 11.

Final Conclusion: Appeal allowed. The order of the ITAT dated 30.10.2019 and the order of the Commissioner (Exemptions) dated 04.09.2018 cancelling registration under Section 12AA are set aside; registration of the Trust under Section 12A/12AA is restored.

Allowability of depreciation on computer software - partial-year depreciation where period of use is less than 180 days - commercial expediency test for business expenditure - genuineness of expenditure versus AO's assessment of expediency

Allowability of depreciation on computer software - partial-year depreciation where period of use is less than 180 days - Depreciation claimed on computer software purchased on 23.3.2012 - HELD THAT: - The supplier's letter withholding payment on account of non-replacement/updating of the software did not justify denial of depreciation since a purchaser may continue to use an existing software version until updation. However, the period of use in the relevant financial year was less than 180 days; therefore the assessee was entitled only to the proportionate rate applicable for a short period (30%) rather than the full or 60% rate. This factual position as to period of use was accepted by both parties and applied by the Court. [Paras 9, 10]

Depreciation allowed but restricted to 30% for the year because use before year-end was less than 180 days; denial on basis of supplier's letter is unsustainable.

Commercial expediency test for business expenditure - genuineness of expenditure versus AO's assessment of expediency - Claimed expenditure towards business development of Rs.3,00,000 was rejected by AO for lack of business expediency - HELD THAT: - The Assessing Officer disallowed the expenditure by recording that the assessee had not shown business expediency. Relying on the principle in S.A. Builders (approving Atherton), the Court held that tax authorities must look to the genuineness of the expenditure and not sit in the armchair of a businessman to substitute their view of commercial expediency. The vouchers' genuineness was not disputed and the AO did not issue enquiries to payees; hence the disallowance on the ground of expediency alone was unsustainable. [Paras 11, 13]

Disallowance of the business development expenditure set aside; expenditure accepted as genuine and allowable under the commercial expediency test.

Final Conclusion: Appeal allowed; substantial questions of law answered in favour of the assessee - depreciation on software permitted but limited to 30% for the short period of use, and the business development expenditure accepted as allowable because authorities cannot substitute their view of commercial expediency for the assessee's bona fide business decision.

Intangible asset - business and commercial rights - pre-operative expenditure qualifying for capitalization - depreciation under Section 32(1)(ii) of the Act - leasehold/lease rights as transferable intangible rights

Pre-operative expenditure qualifying for capitalization - intangible asset - depreciation under Section 32(1)(ii) of the Act - Pre-operative expenditure incurred to obtain agreements can be capitalized and, if thereby creating intangible business or commercial rights, is eligible for depreciation. - HELD THAT: - The Tribunal correctly held that expenditure incurred during the pre operative period towards obtaining legally enforceable agreements (including payments described as legal, technical and management fees) can be capitalized as resulting in intangible assets. Where such capitalization gives rise to business and commercial rights of the nature contemplated by the statute, the assessee is entitled to claim depreciation under Section 32(1)(ii) of the Act. The High Court agreed with the ITAT's conclusion that such expenses can be capitalized and depreciation claimed, subject to satisfaction of factual proof of expenditure before the assessing authority. [Paras 12, 13]

Assessee entitled to capitalize pre operative expenditure that resulted in intangible business/commercial rights and to claim depreciation thereon, subject to proof of actual expenditure.

Leasehold/lease rights as transferable intangible rights - intangible asset - depreciation under Section 32(1)(ii) of the Act - Leasehold or lease rights accrued under an agreement constitute transferable intangible rights and are eligible for depreciation. - HELD THAT: - The court accepted that a concession or lease right which accrues over time under an agreement is in the form of an intangible asset and, being transferable, supports continuation of the benefit on transfer. Consequently, the cost incurred to acquire such leasehold rights is eligible for depreciation as an intangible asset under the statutory provision relied upon. [Paras 14]

Leasehold/lease rights held to be transferable intangible rights; cost of acquiring them is eligible for depreciation.

Burden of proof of actual expenditure - capitalization subject to verification - Claim for depreciation is made subject to the assessee demonstrating to the assessing officer the actual expenditure incurred on which the depreciation was claimed. - HELD THAT: - Although the court decided that the nature of the expenditure permits capitalization and depreciation, it recorded that the Assessing Officer and CIT(A) had noted lack of evidence proving the specific amounts incurred. The court therefore allowed the appeal conditionally and directed that, if the assessee demonstrates before the Income Tax Officer the actual expenditure upon which depreciation has been claimed, the claim may be allowed. This constitutes remand for factual verification and quantification before the assessing authority. [Paras 9, 10, 15]

Appeal allowed subject to the assessee proving the actual expenditure to the Income Tax Officer for verification and allowance of depreciation.

Final Conclusion: Appeal allowed: pre operative expenditure that gives rise to intangible business or commercial rights can be capitalized and is eligible for depreciation; leasehold/lease rights are transferable intangible rights eligible for depreciation; allowance of the claimed depreciation is subject to the assessee demonstrating the actual expenditure to the assessing officer for verification.

Revision under section 263 - Erroneous in so far as prejudicial to the interests of the Revenue - Application of mind by the Assessing Officer - Scope and limits of Commissioner's revisional power - Notice under section 142(1) and e-portal record

Revision under section 263 - Application of mind by the Assessing Officer - Notice under section 142(1) and e-portal record - Erroneous in so far as prejudicial to the interests of the Revenue - Validity of the revisional order under section 263 quashing the assessment on grounds that the Assessing Officer failed to enquire into (i) deduction claimed under section 54F, (ii) receipt of gift, and (iii) genuineness of loans. - HELD THAT: - The Tribunal examined whether the PCIT could invoke revisional jurisdiction on the stated grounds. The record shows that the Assessing Officer issued notices under section 142(1) calling for documents in support of claimed deduction/exemption, confirmations of unsecured loans and capital account details, and the assessee uploaded replies and supporting documents in the department's e-portal. The principles in Malabar Industries and subsequent authorities, as explained in Grasim Industries, require that section 263 cannot be invoked where the Assessing Officer has made enquiries, applied his mind and taken a possible view; mere disagreement by the Commissioner is insufficient. The PCIT did not consider the notices and the replies available on record before concluding that the AO had not conducted proper enquiries. On perusal of the material on record the Tribunal found that enquiries were made and a possible view was taken by the AO in respect of all three matters. Consequently the revisional order was untenable as it was not based on materials which could reasonably support a conclusion that the assessment was erroneous and prejudicial to revenue.

Impugned revision order under section 263 quashed; assessment sustained and appeal allowed.

Final Conclusion: The revisional order passed by the PCIT setting aside the assessment for AY 2017-18 was quashed because the Assessing Officer had issued enquiries under section 142(1), the assessee had furnished responses on the e-portal, and the AO had applied his mind and taken a possible view; therefore exercise of revisional jurisdiction was not justified.

Reopening of assessment - reassessment proceedings - reason to believe - escaped assessment - protective addition

Reopening of assessment - reason to believe - protective addition - escaped assessment - Validity of reassessment proceedings initiated under section 147/148 where assessment was reopened to make protective addition. - HELD THAT: - The Tribunal held that the statutory prerequisite for reopening - that the Assessing Officer must have a definite "reason to believe" that income has escaped assessment - was not satisfied. The reasons recorded by the AO show that the deposit of Rs.16.00 lakhs was sought to be verified and the reassessment in the present case was instituted to make a protective addition; the AO did not record a definite belief that the amount was assessable in the assessee's hands but proceeded on suspicion. The CIT(A) had also proceeded to decide the subsistence of the deposits in the assessee's case without first determining the substantive assessment in the hands of the person in whose case the amount was initially assessed; no finding was made as to which assessee should ultimately bear the substantive tax liability, producing an outcome where tax liability could not be enforced against any person. Reliance was placed on precedent holding that reopening for protective addition, without material to form a belief that income escaped assessment in that assessee's hands, is impermissible and constitutes mere suspicion. Applying these principles, the Tribunal concluded that the AO had not satisfied the mandatory condition for initiation of reassessment proceedings and that the reassessment was therefore bad in law. [Paras 10, 11, 12]

Reassessment proceedings and the assessment order in the assessee's case are quashed as invalid.

Final Conclusion: The appeal is allowed; the reassessment initiated for assessment year 2010-11 (reopened to make a protective addition) is quashed for want of the requisite "reason to believe" and the assessment order in the assessee's hands is set aside.

Deductor's liability under section 201(1) and section 201(1A) - Characterisation of payments as rent under section 194I versus contract payments under section 194C - Separate recipients and triparty agreement affecting TDS classification - Application of coordinate bench precedent

Characterisation of payments as rent under section 194I versus contract payments under section 194C - Separate recipients and triparty agreement affecting TDS classification - Deductor's liability under section 201(1) and section 201(1A) - Application of coordinate bench precedent - Whether TDS on payments to Ambience group was exigible at 10% under section 194I (as rent) thereby attracting deductor's liability under section 201(1) and 201(1A), or correctly deducted at 2% under section 194C as payment for services. - HELD THAT: - The Tribunal examined the material on record and noted that rent payments were made to the owner with TDS deducted under section 194I, while payments for operation/maintenance (common area maintenance) were made directly to a separate service-provider company with TDS deducted under section 194C. The Assessing Officer's conclusion that the arrangement constituted a split to avoid higher TDS was rejected because the recipients and the character of the payments were distinct. The Tribunal relied on the reasoning of a coordinate Bench in Kapoor Watch Company Pvt. Ltd., which held that where common area maintenance charges are paid to a separate entity under a triparty agreement and do not form part of the actual rent paid to the owner, such payments are chargeable as contract/service payments and not as rent. Applying that analysis, the Tribunal held that the authorities below were not justified in treating the maintenance payments as rent and in creating the impugned liability under sections 201(1) and 201(1A). Accordingly, the liability created by the AO and confirmed by the CIT(A) was deleted. [Paras 4, 6, 7]

Impugned demands under section 201(1) and section 201(1A) arising from treating maintenance payments as rent were deleted; appeal allowed.

Final Conclusion: The appeal is allowed; the Tribunal deleted the deductor's liability under sections 201(1) and 201(1A) by holding that payments for operation/maintenance made to a separate entity were chargeable under section 194C and not as rent under section 194I for Assessment Year 2011-12.

Undisclosed income deemed under Section 69A - Reliability of electronic data and draft documents as corroborative evidence - Requirement of proving ownership/possession for invoking Section 69A - Validity of reopening assessment under Section 147/148

Undisclosed income deemed under Section 69A - Reliability of electronic data and draft documents as corroborative evidence - Deletion of addition of Rs.4 crores made by the Assessing Officer under Section 69A was unjustified and the addition is reinstated. - HELD THAT: - The Assessing Officer relied upon draft deed and draft cash receipt retrieved from the hard disk of a deed-writer/advocate, which reflected the same vendor, vendee, shareholders, shareholdings and sale consideration as the executed sale deed. A specific part of the consideration (Rs.5 crores) together with cheque number, date and bank details in the draft matched the executed sale deed. These matching particulars constituted material corroboration which could not be ignored merely because the draft documents were undated, unsigned or unexecuted. The Tribunal rejected the CIT(A)'s view that Section 69A could not be invoked unless the assessee was found in possession or ownership of the cash; Section 69A applies where property is not recorded in books and the assessee fails to satisfactorily explain its nature and source, and the expression 'income' under Section 69A has a wide connotation. On the totality of facts the Tribunal held that the AO was justified in treating the unexplained cash receipt as deemed income and set aside the CIT(A)'s deletion. [Paras 10]

Order of CIT(A) deleting addition is set aside and the addition of Rs.4 crores made by the AO under Section 69A is upheld; Revenue appeal allowed.

Validity of reopening assessment under Section 147/148 - Cross-objection challenging the validity of assumption of jurisdiction under Sections 147/148 is rejected. - HELD THAT: - The assessee merely relied on a precedent (Arunkumar Kapoor) which was factually distinguishable; the present proceedings did not involve the specific factual issue decided in that case (i.e., initiation under Section 153C versus Section 148). Having considered the material and submissions, the Tribunal found no merit in the contention that the reopening was invalid and dismissed the ground raised in the cross-objection. [Paras 16]

Cross-objection of the assessee challenging assumption of jurisdiction under Sections 147/148 is dismissed.

Final Conclusion: Revenue appeal allowed by reinstating the addition of unexplained cash receipt under Section 69A for A.Y. 2011-12; assessee's cross-objection contesting validity of reopening under Sections 147/148 dismissed.

Set-off of carry forward/brought forward business losses - scope of appellate authority to entertain additional claims not made in the return - appellate authority cannot travel beyond the subject-matter of the assessment

Set-off of carry forward/brought forward business losses - scope of appellate authority to entertain additional claims not made in the return - Entitlement of the assessee to set-off brought forward business loss of AY.2016-17 against income of AY.2017-18 although the claim was not reflected in the return or dealt with in the assessment order, and whether the appellate authority may allow such claim. - HELD THAT: - The Tribunal held that appellate authorities possess power to entertain and allow a tenable claim for set-off of brought forward business losses even if the claim was not made in the original return and was not dealt with in the assessment order, provided the claim is legally tenable and verifiable from records. The Tribunal noted contrary observations in the CIT(A)'s order that, based on the principle that an appellate authority cannot travel beyond the subject matter of assessment, issues not considered by the Assessing Officer are not ordinarily entertainable. However, the Tribunal referred to consistent decisions permitting fresh claims before appellate forums where necessary facts are on record and the claim is capable of verification (Pruthvi Brokers & Shareholders; Sesa Goa Ltd.; Karnataka State Co-operative Federation Ltd.; B. G. Shirke Construction Technology (P.) Ltd.). Applying these precedents, the Tribunal concluded that in the interest of justice the matter should be restored to the Assessing Officer for verification of the assessee's claim of set-off of the brought forward loss of AY.2016-17 against AY.2017-18; if the AO finds the claim legally tenable on verification of records, the set-off is to be allowed. [Paras 6, 7]

File restored to the Assessing Officer to verify the claim of set-off of brought forward business loss of AY.2016-17 and, if legally tenable, allow the set-off; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal insofar as it directed restoration of the file to the Assessing Officer to verify the claim for set-off of brought forward business loss of AY.2016-17 against AY.2017-18 and to allow the set-off if found legally tenable; appeal disposed of in favour of the assessee.

Characterisation of land as agricultural - exception under section 2(14) of the Income Tax Act - capital gains exemption - revenue records and Village Revenue Officer certificate - relevance of absence of declared agricultural income

Characterisation of land as agricultural - exception under section 2(14) of the Income Tax Act - revenue records and Village Revenue Officer certificate - relevance of absence of declared agricultural income - mode of receipt of sale consideration - Whether the lands sold by the assessee are agricultural in character and therefore exempt from capital gains under the exception in section 2(14) of the Income Tax Act for AY 2010-11. - HELD THAT: - The Tribunal accepted the Village Revenue Officer's certificate and other revenue records showing the lands were agricultural and that the assessee carried on agricultural operations. The absence of declared agricultural income for earlier years did not prove non-agricultural use: where there is no taxable income, non-filing or non-declaration does not displace revenue records or on-site inspection reports. The departmental inspection and accompanying report indicated the lands lay in an agricultural belt (presence of a sugar mill and surrounding agricultural activity), supporting their agricultural character. The fact that permission for conversion to non-agricultural use was granted subsequently was held to confirm that the lands were agricultural prior to conversion, and therefore conversion after the sale could not negate the pre-existing agricultural character. Objections based on the quantum of sale consideration or on receipt of consideration in shares were held immaterial to the question whether the land was agricultural; receiving consideration by allotment of shares does not, as a matter of law, convert the nature of the land or bar the exemption where revenue records and other evidence establish agricultural use. Applying these considerations, the Tribunal concluded that the lands fell within the exception in section 2(14) and that the capital gains arising on their sale were not taxable. [Paras 5, 6, 7, 8]

The lands were held to be agricultural and the exemption under section 2(14) was allowed; the appeal was allowed.

Final Conclusion: The Tribunal set aside the orders of the authorities below, held that the lands sold were agricultural in character and entitled to the exception under section 2(14) of the Income Tax Act for AY 2010-11, and allowed the assessee's appeal.

Exemption under Section 10(38) for long term capital gains - Unexplained cash credit under Section 68 - Reliance on investigation reports and statements in making additions - Principles of natural justice - disclosure of material and right to cross examination

Exemption under Section 10(38) for long term capital gains - Unexplained cash credit under Section 68 - Reliance on investigation reports and statements in making additions - Principles of natural justice - disclosure of material and right to cross examination - Whether the addition treating long term capital gains as unexplained income under Section 68 and denial of exemption under Section 10(38) could be sustained on the basis of investigation materials and statements without giving the assessee the material relied upon and opportunity to meet and, if required, to cross examine the deponents. - HELD THAT: - The Tribunal recorded that the Directorate of Investigation and SEBI had treated the two scrips as penny stocks and explained a modus operandi by which such scrips were used to provide accommodation entries. However, the investigation report, the AO and the CIT(A) did not place any material on record to specifically link the assessee to that modus operandi or otherwise demonstrate that the assessee was a participant in the alleged accommodation transactions. On the other hand, the assessee produced contract notes, broker records and banking routings showing transactions through registered brokers and demat account. Given that neither the Revenue nor the assessee conclusively proved or disproved the factual link between the assessee's transactions and the alleged scam, the Tribunal held that it was not appropriate to adjudicate the matter finally on the existing record. In the interests of fair adjudication and in accordance with the principles of natural justice, the AO must disclose the information and material relied upon to the assessee, afford an opportunity to meet the allegations and, if necessary, permit cross examination of persons whose statements are relied upon, before deciding whether the consideration received is unexplained cash credit taxable under Section 68 or qualifies for exemption under Section 10(38). The Tribunal directed the AO to follow these steps and decide the issue afresh in accordance with law. [Paras 6]

Matter remitted to the file of the Assessing Officer with directions to furnish the material relied upon to the assessee, provide an opportunity of hearing and, if necessary, permit cross examination, and thereafter decide the question of taxability under Section 68 and entitlement to exemption under Section 10(38) in accordance with law; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the findings of the authorities below and remitted the issue relating to denial of exemption and the addition under Section 68 to the Assessing Officer for fresh adjudication after disclosure of material and affording the assessee an opportunity to rebut and to cross examine, and allowed the appeal for statistical purposes.

Entitlement to incentive additional licence - applicability of Exim Policy 1990-93 to exports made during its currency - eligibility determined by actual export in the preceding year - promissory estoppel against change of government incentive policy - no remedy from others' erroneous grants; negative discrimination

Applicability of Exim Policy 1990-93 to exports made during its currency - eligibility determined by actual export in the preceding year - Whether the appellant was entitled to additional licence for exports of processed iron ore made between April 1990 and March 1991. - HELD THAT: - The Court held that the controlling Exim Policy for exports made between April 1990 and March 1991 was the Exim Policy 1990-93, under which "Minerals and Iron Ore" were listed in Appendix 12 as ineligible for additional licence. The scheme granted additional licences only on the basis of actual export of eligible items in the preceding year; hence the relevant test is the character of the export at the time it was made under the operative policy. The appellant's exports occurred during the currency of the 1990-93 Policy and therefore fell within the ineligible category; the appellant never challenged the 1990-93 Policy itself. For these reasons the denial of additional licence on merits was upheld. [Paras 5, 6, 9]

The appellant is not entitled to additional licence for exports made in April 1990-March 1991 under the Exim Policy 1990-93.

Promissory estoppel against change of government incentive policy - entitlement to incentive additional licence - Whether the doctrine of promissory estoppel entitled the appellant to the benefit of additional licence despite the subsequent change in Exim Policy. - HELD THAT: - The Court rejected the application of promissory estoppel. It held that grant of additional licence was an incentive and a policy decision which the Government/DGFT could vary or withdraw; such incentives are not enforceable as a matter of right. Because the relevant date is the date of actual export under the operative policy, and the incentive scheme could lawfully be changed, the appellant's reliance on prior policy and commercial commitments did not give rise to an estoppel against the Government in this context. Precedents cited for promissory estoppel did not assist the appellant on these facts. [Paras 6, 7]

Promissory estoppel does not entitle the appellant to additional licence when the incentive scheme was lawfully changed before the exports were made.

No remedy from others' erroneous grants; negative discrimination - entitlement to incentive additional licence - Whether the appellant could claim additional licence on the ground that other similarly situated exporters had been granted the benefit. - HELD THAT: - The Court held that an erroneous grant to others cannot confer a right on the appellant. Allowing the appellant relief on the basis that others were wrongly granted benefits would perpetuate illegality. Although the High Court had earlier directed inquiry into how others received benefits, no effective enquiry was conducted; in any event, the appellant cannot derive entitlement from others' de hors-the-scheme grants where the scheme itself excludes the item. [Paras 8]

The appellant cannot claim additional licence merely because some other exporters were wrongly granted the benefit.

Final Conclusion: The High Court's judgment denying additional licence to the appellant for processed iron ore exported during April 1990-March 1991 is affirmed: the 1990-93 Exim Policy governs those exports, promissory estoppel does not apply to the withdrawn incentive, and erroneous grants to others do not entitle the appellant to relief. Appeal dismissed.

Interim release of detained imported goods - waiver certificate under Regulation 10(1) of the Handling of Cargo in Customs Area Regulation, 2016 and Regulation 10(1) of the Ship Cargo Manifest and Transhipment Regulation, 2018 - applicability of the Toys (Quality Control) Order, 2020 - classification of imported goods - administrative clarification by DPIIT as determinative for regulatory scope - release subject to payment of differential duty and conditions to safeguard revenue - power of a writ court to order interim relief pending appellate proceedings where revenue interest is protected

Interim release of detained imported goods - power of a writ court to order interim relief pending appellate proceedings - release subject to payment of differential duty and conditions to safeguard revenue - waiver certificate under Regulation 10(1) of the Handling of Cargo in Customs Area Regulation, 2016 and Regulation 10(1) of the Ship Cargo Manifest and Transhipment Regulation, 2018 - Direction to release the detained consignments subject to compliance with conditions and issuance of waiver certificate while an appeal by the revenue is pending. - HELD THAT: - The Court affirmed the Single Bench's direction for release because the Assistant Commissioner of Customs had, by communication dated 22nd June, 2022, authorised provisional release subject to specified conditions (including payment of differential duty) and indicated finalisation would follow the ultimate outcome. The High Court held that, on the peculiar facts, release could be ordered notwithstanding a pending appeal so long as the revenue's interest was adequately protected by the conditions imposed and by issuance of the statutory waiver certificate. The Court recorded that such relief does not prejudice the revenue's right to canvass all grounds in the pending appeal before the Tribunal.

Release of the consignments directed within ten days on compliance with the Assistant Commissioner's conditions and upon issuance of the Regulation 10(1) waiver certificate; rights of revenue in the pending appeal preserved.

Applicability of the Toys (Quality Control) Order, 2020 - administrative clarification by DPIIT as determinative for regulatory scope - classification of imported goods - classification dispute remains subject to appellate adjudication - Effect of the DPIIT clarification that the imported party decoration/foil items do not fall within the scope of the Toys (Quality Control) Order, 2020, and the standing of the classification dispute. - HELD THAT: - The Court accepted that DPIIT's clarification dated 24th February, 2022, stated that holiday/party decoration items intended primarily for ornamental purpose are not covered by the Toys Order and that the product codes relied upon by the respondent were not within its scope. The High Court treated that clarification as dispositive on the prohibition issue, thereby removing that basis for absolute confiscation. The separate question of correct classification (CTH) remains open and is the subject of the revenue's pending appeal; the Court nevertheless allowed release while preserving the appellate challenge and by conditioning release upon payment of any differential duty.

DPIIT clarification accepted as excluding the goods from the Toys (Quality Control) Order; classification issue left for the appellate forum but does not bar interim release subject to conditions.

Final Conclusion: The intra-Court appeal is dismissed; the Single Bench's order directing release of the goods is confirmed subject to compliance with the Assistant Commissioner's conditions, payment of differential duty where directed and issuance of the Regulation 10(1) waiver certificate, without prejudice to the revenue's rights in the pending appeal.

Definition of "insecticide" under the Insecticides Act, 1968 - Section 38(1)(b) exemption under the Insecticides Act, 1968 - import permit for non-insecticidal use - role of the Registration Committee/CIB&RC in grant of import permit - DGFT Policy condition on import of insecticides - customs to act on valid import permit - FSSAI guidance on artificial ripening and consumer labelling

Definition of "insecticide" under the Insecticides Act, 1968 - Section 38(1)(b) exemption under the Insecticides Act, 1968 - Whether the imported product ethephon falls within the definition of "insecticide" and the effect of Section 38(1)(b) in relation to other provisions of the 1968 Act where import is for non-insecticidal use. - HELD THAT: - The Court found that the imported product, described as "ethephon" (chemical name 2-chloroethylphosphonic acid, also known as ethrel), is included in the schedule to the 1968 Act and therefore falls within the statutory definition of "insecticide". The petitioners' primary contention that Section 38(1)(b) (an exemption provision) excludes applicability of other provisions of the 1968 Act for non-insecticidal uses was considered; however, given that ethephon is an "insecticide" by definition, the statutory and regulatory regime governing registration and import cannot be ignored merely because the end-use is non-insecticidal. The Court treated the question of applicability as material to the requirement of regulatory permissions for import and clearance. [Paras 14, 15]

Ethephon is an "insecticide" within the meaning of the 1968 Act; the exemption argument under Section 38(1)(b) does not obviate the relevance of statutory/regulatory controls applicable to import.

Import permit for non-insecticidal use - role of the Registration Committee/CIB&RC in grant of import permit - DGFT Policy condition on import of insecticides - customs to act on valid import permit - Whether an import permit from the Registration Committee/CIB&RC was required and the procedure to obtain clearance from customs once such permit is granted. - HELD THAT: - The Court noted the DGFT notification (Policy Condition No.3 under Chapter 38) which requires mandatory registration for import of chemicals defined as insecticides and, in cases of import for non-insecticidal purpose, an import permit from the Registration Committee. The petitioners agreed to furnish the information as per the standard form prescribed by CIB&RC. The Court recorded the CIB&RC's undertaking to consider the furnished information and to issue the import permit if the information is found to be genuine. It was further observed that once an import permit is issued, the customs authorities (respondent nos.1 and 2) will act in accordance with law to permit clearance for home consumption. [Paras 9, 11, 12, 13, 19]

Petitioners to furnish the required information to CIB&RC; CIB&RC to consider and, if satisfied, issue the import permit expeditiously; upon issuance, customs authorities shall act in accordance with law to clear the consignments.

FSSAI guidance on artificial ripening and consumer labelling - Directing respondent FSSAI to consider framing a regime for indicating artificial ripening of fruits/vegetables where ethylene (including that generated from ethephon) is used, so as to inform consumers. - HELD THAT: - The Court noted FSSAI's scientific panel view that ethephon-derived ethylene is not carcinogenic provided it does not come in direct contact with food, and that FSSAI's Guidance Note on Artificial Ripening contemplates use of ethylene sources with precautions. The Court directed respondent no.4/FSSAI to consider framing a broad framework covering all artificial ripeners to ensure that fruits and vegetables ripened artificially carry appropriate indication to inform consumers. The Court asked FSSAI to deliberate on the matter and place proposed guidelines before the Court for consideration. [Paras 16, 20]

FSSAI to consider and frame a broad framework/guidelines regarding indication on fruits/vegetables ripened artificially (including those using ethylene from ethephon) and place the proposed guidelines before the Court.

Final Conclusion: The petitions were disposed of with directions that the petitioners shall furnish the information sought by CIB&RC, which will consider and, if satisfied, issue the import permit; customs authorities will act on a valid permit; ethephon is an "insecticide" under the 1968 Act; and FSSAI has been directed to consider framing a consumer information framework for artificially ripened produce, with compliance to be reported on the next listing.

Adjudicating authority for personal guarantors - Interim moratorium on filing of application under Part III - Filing date for triggering interim moratorium - Scope of interim moratorium confined to debts of the debtor - Transfer and consolidation of proceedings under Section 60

Adjudicating authority for personal guarantors - Transfer and consolidation of proceedings under Section 60 - The proper adjudicating authority for insolvency proceedings commenced against individuals who are personal guarantors of a corporate debtor. - HELD THAT: - A harmonious reading of Section 60(1) and the supplemental provisions in Section 60(2) and (3) leads to the conclusion that the NCLT is the adjudicating authority in relation to insolvency resolution of personal guarantors of corporate persons irrespective of whether a CIRP is currently pending against the corporate debtor. Sub-section (2) and (3) operate to ensure consolidation where a CIRP is pending before a particular NCLT, but do not limit the scope of sub-section (1). Rule 3(1)(a) of the 2019 Rules likewise treats the NCLT as the adjudicating authority for purposes of Section 60. Earlier contrary approaches that confined Section 60(1) to situations where a CIRP is pending are rejected in light of statutory text, scheme and recent appellate authorities. [Paras 16, 18, 19, 20, 22]

Proceedings under Section 95 in respect of the defendants as personal guarantors are maintainable before the NCLT; NCLT is the appropriate adjudicating authority.

Interim moratorium on filing of application under Part III - Filing date for triggering interim moratorium - When the interim moratorium under Section 96 commences for a personal guarantor and the legal effect of an application filed under Section 95. - HELD THAT: - Section 96(1) provides that an interim moratorium commences 'on the date of the application' filed under Section 94/95 and stays all pending legal proceedings in respect of any debt. The statute contemplates 'filing' of the application as the relevant triggering event. Administrative formalities such as registry numbering do not alter the date of filing; filing is complete on presentation at the registry (including electronic registration). Accordingly, the interim moratorium for defendant no.1 commenced on the date the Section 95 application was filed (28th May, 2022), and for defendant no.2 on the earlier filed date (4th March, 2020). [Paras 24, 25, 26, 30]

The interim moratorium under Section 96 took effect from the respective dates of filing of the Section 95 applications, and pending legal proceedings are stayed from those dates.

Scope of interim moratorium confined to debts of the debtor - Interim moratorium on filing of application under Part III - Whether an interim moratorium granted in respect of one co-guarantor extends automatically to other co-guarantors of the same corporate debt. - HELD THAT: - Section 96(1)(a) and (b) refer to 'all the debts' and to creditors 'of the debtor', indicating that the interim moratorium operates in relation to the debts of a particular debtor. The language cannot be stretched to include independent co-guarantors who have separate, joint and several liabilities. Statutory and contractual principles (including provisions of the Indian Contract Act) support the view that creditors retain independent recourse against each guarantor and that discharge or incapacity of one guarantor does not automatically discharge others. Therefore, a moratorium in respect of one guarantor does not ipso facto extend to other independent co-guarantors. [Paras 34, 35, 36, 37]

The interim moratorium applies to the debts and legal proceedings in respect of the particular debtor against whom the Section 95/94 application is filed and does not automatically extend to other independent co-guarantors.

Interim moratorium on filing of application under Part III - Whether the pendency of judgment (judgment reserved but not pronounced) precludes taking cognisance of subsequent insolvency filings for the purpose of moratorium. - HELD THAT: - A matter remains pending until judgment is pronounced, signed and dated; subsequent developments occurring after the judgment is reserved may be brought to the court's notice and, where they bear on the outcome, must be considered. The interim moratorium operates from the date of filing of the Section 95 application even if the application was filed after judgment was reserved but before pronouncement. Consequently, where an insolvency application was filed after reservation but before pronouncement, the court may have to refrain from pronouncing judgment if the moratorium would stay the proceedings. [Paras 28, 29, 30, 32]

Subsequent insolvency filings, made after judgment was reserved but prior to its pronouncement, can be considered; if a moratorium is triggered, the court must refrain from pronouncing judgment to the extent proceedings are stayed.

Interim moratorium on filing of application under Part III - Immediate judicial consequence in these suits arising from the insolvency applications against the defendants. - HELD THAT: - Given that Section 95 applications were filed against defendant no.2 on 4th March, 2020 and against defendant no.1 on 28th May, 2022, the interim moratorium under Section 96 is operative in respect of both defendants. The statutory effect of the moratorium is to stay all pending legal proceedings in respect of the relevant debts. Having applied these statutory principles to the present suits, the Court held that proceedings are required to be stayed and therefore applications seeking leave to defend cannot be finally adjudicated at this stage. [Paras 23, 26, 32, 38, 39]

Proceedings in the present suits are stayed against both defendants; the listed interlocutory applications stand disposed of accordingly.

Final Conclusion: The Court held that NCLT is the competent adjudicating authority for insolvency proceedings against the defendants as personal guarantors; the interim moratorium under Section 96 of the IBC commenced on the dates the Section 95 applications were filed (rendering pending legal proceedings stayed), the moratorium operates in respect of the debts of the particular debtor and does not automatically extend to other co guarantors, and accordingly the proceedings in these suits are stayed against both defendants with the specified interlocutory applications disposed of.

Condonation of delay in filing appeal - limitation under Section 61(2) of the Insolvency and Bankruptcy Code, 2016 - expiry of prescribed period when Court is closed (Section 4 of the Limitation Act, 1963) - principle underlying Section 14 of the Limitation Act, 1963 - exclusion of time of proceeding bona fide in court without jurisdiction - scope of Tribunal's power to extend limitation (proviso to Section 61(2))

Condonation of delay in filing appeal - limitation under Section 61(2) of the Insolvency and Bankruptcy Code, 2016 - expiry of prescribed period when Court is closed (Section 4 of the Limitation Act, 1963) - scope of Tribunal's power to extend limitation (proviso to Section 61(2)) - Whether the appeal filed on the 47th day could be held within time by applying Section 4 of the Limitation Act and/or by condonation under proviso to Section 61(2) of the Code. - HELD THAT: - The prescribed limitation under Section 61(2) of the Code is 30 days, with a discretionary extension not exceeding 15 days under the proviso. Section 4 of the Limitation Act permits instituting proceedings on the date the Court re-opens only where the prescribed period expires on a day when the Court is closed. Here the 30-day period expired on 15th July, 2022, a day on which the Tribunal was not closed; the alleged holidays (30th-31st July) fell well after expiry of the 30-day period. The Tribunal's power to condone delay under the proviso to Section 61(2) extends only up to 15 days beyond the statutory 30-day period and does not convert the limitation into 45 days as a matter of right. Consequently, Section 4 could not render the filing on 1st August, 2022 within time, and the delay beyond the additional 15 days could not be condoned. [Paras 8, 9, 10, 11]

Application for condonation of delay under Section 4 and proviso to Section 61(2) is not maintainable; delay beyond the permissible 15 days cannot be condoned.

Principle underlying Section 14 of the Limitation Act, 1963 - exclusion of time of proceeding bona fide in court without jurisdiction - Whether the principle underlying Section 14 of the Limitation Act could be invoked to exclude the period during which the appellant prosecuted I.A. No.145 of 2022 in the same proceeding and thereby make the appeal time barred within time. - HELD THAT: - Section 14 on its face addresses suits and applications prosecuted in a court without jurisdiction; its literal applicability to appeals before a quasi judicial tribunal is limited. Supreme Court authority permits invocation of the principle underlying Section 14 in appropriate cases to advance substantial justice, but the conditions for its application must be satisfied: the prior and subsequent proceedings must be civil proceedings prosecuted by the same party; the prior proceeding must have been prosecuted with due diligence and in good faith; the failure of the prior proceeding must be due to defect of jurisdiction or cause of like nature; both proceedings must relate to the same matter in issue; and both must be in a court. In the present case the I.A. No.145/2022 was prosecuted in the same Adjudicating Authority and was not shown to have been entertained by a forum lacking jurisdiction or to have failed for a like defect. The application was withdrawn as infructuous after the resolution plan was approved; there is no basis to treat the prior proceeding as one prosecuted in a wrong forum or for a jurisdictional defect. Hence the equitable principle underlying Section 14 cannot be invoked to exclude the period. [Paras 17, 18, 19, 20, 21]

Principle underlying Section 14 is not attracted where the prior proceeding was before the same competent Adjudicating Authority and not rendered incompetent by a jurisdictional defect; appellant is not entitled to exclude time under Section 14.

Final Conclusion: The application for condonation of delay is dismissed and the memo of appeal is rejected because the appeal filed on the 47th day could not be brought within time by application of Section 4 or by invoking the principle underlying Section 14, and the Tribunal's condonation power under proviso to Section 61(2) does not extend beyond 15 days.

Expunction of adverse judicial remarks - Professional ethics and conflict of interest in legal representation - Rule 33 and Rule 14 of Bar Council of India Rules, 1975 - Necessity and relevance of observations to adjudication - Principle of audi alteram partem in recording adverse comments - Confidentiality considerations in insolvency proceedings

Expunction of adverse judicial remarks - Professional ethics and conflict of interest in legal representation - Rule 33 and Rule 14 of Bar Council of India Rules, 1975 - Principle of audi alteram partem in recording adverse comments - Whether the adverse observations made against the appellant in the Adjudicating Authority's order dated 08.04.2022 should be expunged. - HELD THAT: - The Tribunal examined the material basis for the Adjudicating Authority's adverse observations recorded in paragraph 17.3 and related passages and found them to be unnecessary for deciding the IA. The Adjudicating Authority had inferred that the appellant had represented both the Resolution Professional and the Resolution Applicant in the CIRP because the appellant had separately filed a Section 7 petition on behalf of a distinct corporate entity. The Tribunal held that the Section 7 petition was instituted by a separate company with its own corporate identity and was unrelated to the CIRP of the corporate debtor; consequently, there was no appearance by the appellant for the Resolution Applicant in the CIRP and no breach of the prohibition in Rule 33. The Tribunal further observed that Rule 14 requires disclosure to a client, but the facts did not establish a conflict of interest in the CIRP. Applying the governing principle that courts should exercise restraint in recording adverse comments about counsel and having regard to the requirement of giving an opportunity to explain (audi alteram partem) as explained in Neeraj Garg, the Tribunal concluded that the remarks in paragraph 17.3 were not necessary for the decision and were uncalled for. The Tribunal therefore directed deletion of the adverse observations in paragraph 17.3 and clarified that the general admonition in paragraph 23 was not directed specifically at the appellant. [Paras 17, 23]

The adverse observations made against the appellant in paragraph 17.3 of the order dated 08.04.2022 are expunged; paragraph 23 is to be read as a general observation and not directed against the appellant.

Final Conclusion: The appeal is allowed; all adverse observations against the appellant in the order dated 08.04.2022 are expunged and the appellant's reputation is accordingly protected.

Fraudulent or malicious initiation of insolvency proceedings - Section 65 penalty for mala fide initiation - Section 9 application under the Insolvency and Bankruptcy Code - bar under Section 10A of the Insolvency and Bankruptcy Code - vitiation of CIRP where petition filed for collateral purpose - effect of vitiated initiation on subsequent orders - admissibility and probative value of proforma invoices and ledgers - interaction of regulatory orders of RERA with initiation of CIRP

Fraudulent or malicious initiation of insolvency proceedings - Section 65 penalty for mala fide initiation - vitiation of CIRP where petition filed for collateral purpose - admissibility and probative value of proforma invoices and ledgers - Section 9 petition filed by M/s. Rudra Buildwell Constructions Pvt. Ltd. was filed fraudulently/maliciously for a purpose other than insolvency resolution and whether penalty under Section 65 is payable; and whether initiation of CIRP must be set aside. - HELD THAT: - The Tribunal examined the sequence of events, communications with RERA, and the conduct of the Operational Creditor and its principal, Shri Raj Kumar. The Corporate Debtor had repeatedly represented that the project had been handed over to Mr. Raj Kumar/Rudra Buildwell and Mr. Raj Kumar had actively contested RERA proceedings on behalf of the Corporate Debtor. The Section 9 petition was filed by Rudra Buildwell through Shri Raj Kumar who had identified himself with the Corporate Debtor in prior proceedings. The invoices supporting the claim were proforma in form, dated en masse on a single date and lacked GST particulars; ledgers filed appeared to be prepared out of sequence and not in the ordinary course of business. RERA inspection reports showed construction work had been halted well before the period for which supplies were alleged. Taken together, these facts demonstrated the petition was instituted to frustrate the RERA order and to recover control of the project, rather than to effect insolvency resolution. Accordingly the initiation of CIRP was vitiated by mala fide purpose and attracted the disciplinary mechanism under Section 65, warranting imposition of penalty and setting aside of proceedings initiated thereby. The Tribunal therefore set aside the admission order and held that all consequential orders flowed from the vitiated initiation and had to be set aside. [Paras 12, 13, 18, 20, 21]

Section 9 petition was instituted fraudulently for purposes other than insolvency resolution; the admission order and consequent orders are set aside and a penalty under Section 65 is imposed on the Operational Creditor.

Section 9 application under the Insolvency and Bankruptcy Code - bar under Section 10A of the Insolvency and Bankruptcy Code - Whether the Section 9 petition was barred by Section 10A because the date of default stated was 31.03.2020 and an earlier Section 9 petition by the same Operational Creditor had been withdrawn on that ground. - HELD THAT: - The Adjudicating Authority initially took a prima facie view that the petition was hit by Section 10A and sought an additional affidavit. The Operational Creditor sought to rely on an acknowledgement dated 03.06.2021 to treat that date as the date of default, and the Adjudicating Authority accepted that explanation to rule the petition maintainable. The Tribunal held that date of default and an acknowledgement are distinct events: an acknowledgement dated 03.06.2021 cannot retroactively change the date of default from 31.03.2020 where the application itself expressly recorded the earlier date and an earlier petition was withdrawn on that very ground. Therefore the Adjudicating Authority's acceptance of the change of date based solely on the acknowledgement was erroneous and the Section 9 petition was liable to be rejected as barred by Section 10A. [Paras 14, 15, 16, 17]

The Adjudicating Authority erred in treating the date of default as 03.06.2021 on the basis of an acknowledgement; the petition was hit by Section 10A and was not maintainable.

Final Conclusion: Appeals allowed. The admission order dated 18.04.2022 and the consequential order dated 25.07.2022 are set aside; Company Petition IB-11/ND/2022 is dismissed as having been filed mala fide for purposes other than insolvency resolution, and a penalty is imposed on the Operational Creditor to be paid as directed.

Money laundering (Section 3 of the PML Act) - presumption under Section 24 of the PML Act - special bail provisions under Section 45 of the PML Act (twin tests) - predicate/scheduled offence (Section 420 IPC) - non-cooperation with investigation as a factor militating against bail - overriding effect of the PML Act

Special bail provisions under Section 45 of the PML Act (twin tests) - presumption under Section 24 of the PML Act - money laundering (Section 3 of the PML Act) - predicate/scheduled offence (Section 420 IPC) - non-cooperation with investigation as a factor militating against bail - Application for bail under Section 439 Cr.P.C. in light of Section 45 of the PML Act was rejected. - HELD THAT: - The Court applied the twin tests in Section 45 of the PML Act. While the public prosecutor was afforded an opportunity to oppose the bail application (first limb), the petitioner failed to satisfy the second limb that there are reasonable grounds for believing he is not guilty and that he is not likely to commit an offence while on bail. The record discloses prima facie material that the petitioner, a partner in the named firms, facilitated receipt of public monies through apps and routed funds to various entities including alleged shell companies. The conduct - alleged diversion of receipts, manipulation of software/gateways, and transfer of funds to multiple fictitious entities - falls within the definition of money laundering under Section 3 read with the explanation thereto and is punishable under Section 4. The offence under Section 420 IPC is a scheduled predicate offence, and Section 24 raises a rebuttable presumption in favour of the prosecution which the petitioner has not rebutted. The petitioner's alleged non-cooperation with investigation, the ongoing nature of the probe, the magnitude and alleged economic impact of the fraud, and involvement in similar offences elsewhere cumulatively weighed against exercising discretion to grant bail. The petitioner's medical grievance under the proviso to Section 45 was considered but held insufficient to override the other factors, particularly as treatment could be provided while in custody. On these grounds the Court declined bail. [Paras 8, 9, 10, 11, 12]

Bail petition rejected.

Final Conclusion: The petition for regular bail under Section 439 Cr.P.C. was dismissed as the Court found the second limb of Section 45 PML Act unsatisfied, the presumption under Section 24 unrebutted, and prima facie material of money laundering and non-cooperation in investigation established; petition rejected.

Proportionate reversal of CENVAT credit on account of exempted/non taxable activity - availability of CENVAT credit under Rule 6(5) of the Cenvat Credit Rules, 2004 - definition and scope of "input service" under the Cenvat Credit Rules, 2004 - treatment of trading of securities as exempted service and valuation under Explanation to Rule 6(3D)(d) - invocation of extended period of limitation under proviso to Section 73(1) read with Rule 14 of CCR, 2004 - penalty under amended Rule 15 and Section 78 of the Finance Act, 1994 - remand for recomputation and reconsideration of admissible credit

Invocation of extended period of limitation under proviso to Section 73(1) read with Rule 14 of CCR, 2004 - penalty under amended Rule 15 and Section 78 of the Finance Act, 1994 - Whether the extended period of limitation and consequential penalties could be invoked against the assessee. - HELD THAT: - The Tribunal examined the material placed before the adjudicating authority and the nature of information furnished by the assessee. It held that mere production of voluminous financial records, balance sheets and general information did not ipso facto constitute suppression justifying invocation of the extended period. The Bench found no specific omission or concealment of facts material to the issue of CENVAT credit that would attract the extended period. In consequence, the legal basis for invoking the extended period and imposing penalties under the amended provisions was absent in the files before the authority. The Tribunal relied on the principle that revenue's failure to make specific inquiries within the limitation period cannot be cured by subsequently invoking the extended period without establishing suppression or fraud. [Paras 4]

Extended period could not be invoked and penalties imposed under Rule 15/Section 78 are not sustainable; demand to that extent set aside.

Availability of CENVAT credit under Rule 6(5) of the Cenvat Credit Rules, 2004 - Whether the assessee is entitled to full CENVAT credit on services covered by Rule 6(5) for the period up to 31.3.2011. - HELD THAT: - The Tribunal accepted the adjudicating authority's application of Rule 6(5) to specified services for the period up to 31.3.2011. The order records that five categories of services fell within Rule 6(5) and, accordingly, the assessee was entitled to full credit on those services for the prescribed period. The Tribunal noted this as a beneficial provision and affirmed the allowance made in the impugned order. [Paras 4]

CENVAT credit under Rule 6(5) allowed for the identified services up to 31.3.2011.

Definition and scope of "input service" under the Cenvat Credit Rules, 2004 - services excluded from definition of input service w.e.f. 1.4.2011 - Whether the 21 services identified by the adjudicating authority are not 'input services' and therefore ineligible for CENVAT credit. - HELD THAT: - The Tribunal found that the Commissioner had broadly classified and disallowed credit on 21 services for multiple reasons (lack of nexus, exclusions from the definition post 1.4.2011, construction related exclusions and the narrowed scope of 'input service'). However, the Tribunal held that the adjudicating authority had not adequately examined the specific replies and documentary nexus explanations furnished by the assessee for each service. Given the fact sensitive nature of nexus and the submissions already made by the assessee, the Tribunal held that these determinations require fresh consideration and directed the original authority to re examine the eligibility of each of the 21 services in light of the assessee's explanations and applicable law. [Paras 4]

Issue of admissibility of credit on the 21 services remitted to the original authority for fresh consideration.

Treatment of trading of securities as exempted service and valuation under Explanation to Rule 6(3D)(d) - proportionate reversal of CENVAT credit on account of exempted/non taxable activity - Characterisation of the assessee's investment activity (whether trading in securities) and the applicability of proportionate reversal/valuation methodology for common input services. - HELD THAT: - The Tribunal analysed the appellant's status as a Core Investment Company under RBI directions and the nature of its investment management activity. It disagreed with the revenue's contention that the assessee was engaged in trading in securities for the purpose of applying Rule 6(3)/6(3A). The Bench held that the appellant's activity was management of investments rather than trading, and that the legal authorities relied upon by revenue on 'trading' did not advance its case in light of the assessee's CIC status. Nevertheless, the Tribunal observed that certain services may have been used both for brand promotion (taxable) and for investment management (non service or exempted activities) and that identification of common inputs is fact sensitive. Accordingly, rather than finally adjudicating the identification and proportionate apportionment of common inputs, the Tribunal remitted the matter to the original authority to re determine which services are exclusively for taxable activity and which are common, and then to apply the correct method for quantification (including any applicable valuation approach) consistent with the observations in the order. [Paras 4]

Characterisation of investment activity as management of investments (not trading) accepted; identification and quantification of common input services and any reversal remitted to the original authority for fresh determination applying appropriate legal tests and valuation methodology.

Remand for recomputation and reconsideration of admissible credit - Whether computational errors and the arithmetic/computational quantification in the impugned order require correction. - HELD THAT: - Both parties pointed out computational discrepancies in the impugned order. The Tribunal treated these as factual/mathematical matters not involving new legal principles and directed that the original authority recompute the demand (if any) in accordance with the legal conclusions and observations made by the Tribunal on the admissibility, nexus and limitation issues. The Tribunal emphasised that remand should be completed within three months and that interest would apply only to the redetermined amount. [Paras 4, 5]

Computational issues remitted to the original authority for rectification and recomputation in accordance with the Tribunal's directions; remand to be completed within three months.

Final Conclusion: The appeals are allowed in part. The Tribunal set aside the impugned order and remitted the matter to the original adjudicating authority to reassess eligibility and quantification of CENVAT credit on the identified services, correct computational errors and recompute demand (if any) in accordance with the Tribunal's observations. Invocation of the extended period and penalties were held unsustainable. The adjudicating authority was directed to complete remand proceedings within three months and interest, if any, will be payable only on the redetermined liability.

Summary order. Delay condoned; notice issued (to be given dasti) limited to the question whether salary paid on secondment of employees constitutes a taxable service under Section 65(105)(k) of the Finance Act, 1994; matter listed and tagged with Civil Appeal No. 3692/2017.

Supply of tangible goods service - right of possession and control - Service Entry Sheet (SES) - assessable value - record of actual use - payment of VAT

Supply of tangible goods service - right of possession and control - Service Entry Sheet (SES) - record of actual use - payment of VAT - Whether supply of drill pipes on a rental basis to M/s Cairn Energy India Pvt. Ltd. amounted to a taxable supply of tangible goods service on the ground that possession and control remained with the appellant - HELD THAT: - The Tribunal found that the appellant supplied drill pipes without sending any engineer, operator or expert manpower to the user's premises; the pipes were used independently by the user and rent was to be calculated on the basis of actual usage under the service order. The mere generation or existence of a Service Entry Sheet and a record of actual use does not, by itself, establish that effective possession and control of the goods remained with the appellant. The appellant had in other transactions charged service tax where equipment was supplied along with expert manpower, treating those as tangible goods services, which indicates a different factual matrix; in the present case no such manpower was provided. The appellant also asserted that VAT was paid on the transaction. On these findings the Tribunal rejected Revenue's contention that SES or the terms of the service order alone demonstrate retained possession and control by the appellant.

Demand of service tax, interest and penalty set aside and the appeal allowed.

Final Conclusion: On the presented facts the Tribunal held that supplying drill pipes without supplying expert manpower and where the user exercised independent use, together with the existence of only a record of actual use (SES) and payment of VAT, did not establish that possession and control remained with the appellant; the demand was therefore set aside and the appeal allowed.

Manpower recruitment and supply agency service - contractor-job work vs taxable service - control and supervision of workmen - service receiver not paying wages - service tax liability for manpower supply

Manpower recruitment and supply agency service - contractor-job work vs taxable service - control and supervision of workmen - service receiver not paying wages - Whether the appellant rendered manpower recruitment and supply agency service and was liable to the service tax demands, interest and penalties confirmed by the authorities - HELD THAT: - The Tribunal examined the contract between the appellant and the service recipient and found that the agreement was for packing and salvaging on a job-contract basis, with payment on a fixed per kg / per metric ton basis. The workmen deployed remained under the supervision and control of the appellant and the recipient was not concerned with, nor did it pay, any specific price to the workmen. There was no specific contractual provision for deployment of labour or reimbursement of wages and salaries by the service recipient. On these facts the activity could not be characterized as providing a manpower recruitment and supply agency service. Applying the distinction between true manpower supply and independent job-contract performance, the Tribunal concluded that the services performed fell within job work/contractor activity and not the taxable manpower supply category, and hence the service tax demands, interest and penalties predicated on that characterization could not be sustained. [Paras 6, 7]

Service tax demands, interest and penalties confirmed on the basis that the appellant provided manpower recruitment and supply agency service were set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the appellant performed job-contract packing and salvaging services (paid on a per kg/MT basis) and did not supply manpower as a recruitment/supply agency; the service tax demand and consequential interest and penalties were quashed.

Abatement of appeal under Rule 22 of CESTAT (Procedure) Rules, 1982 - effect of approval of resolution plan under Section 31(1) of the Insolvency and Bankruptcy Code, 2016 - binding nature of an approved resolution plan on creditors including Central Government - infructuousness of appeal consequent to approval of resolution plan - tribunal's lack of power to grant refund of pre-deposit where appeal has abated

Effect of approval of resolution plan under Section 31(1) of the Insolvency and Bankruptcy Code, 2016 - abatement of appeal under Rule 22 of CESTAT (Procedure) Rules, 1982 - infructuousness of appeal consequent to approval of resolution plan - Whether the appeal has become infructuous and abates in terms of Rule 22 of the CESTAT (Procedure) Rules, 1982 upon approval of the resolution plan by the NCLT and its upholding by the NCLAT. - HELD THAT: - The Tribunal held that once a resolution plan is approved by the Adjudicating Authority under Section 31(1) IBC, the claims provided in the plan stand frozen and are binding on the corporate debtor and its creditors, including the Central Government. The NCLT approved the appellant's resolution plan and clarified that only crystallised liabilities admitted/verified would be settled and extinguished; the NCLAT upheld that order. Having regard to the binding effect of the approved resolution plan and the Tribunal's earlier final order in the appellant's own case applying the law laid down by the Supreme Court, the present appeal has become infructuous. Consequently, the appeal is abated in terms of Rule 22 of the CESTAT (Procedure) Rules, 1982, with effect from the date of approval of the resolution plan. [Paras 3, 4, 6]

The appeal is abated as infructuous under Rule 22 of the CESTAT (Procedure) Rules, 1982 in view of the approval of the resolution plan and its being upheld by higher authority.

Tribunal's lack of power to grant refund of pre-deposit where appeal has abated - Whether this Tribunal can order refund of any pre-deposit made by the appellant after the appeal has abated. - HELD THAT: - The Tribunal held that having abated the appeal, it lacks the jurisdictional power to entertain or direct refund of pre-deposits; remedies in respect of refund lie before courts/fora having the appropriate powers as per law. The appellant therefore cannot claim refund before this Tribunal and is at liberty to seek redressal before the appropriate forum. [Paras 7]

The Tribunal will not order refund of the pre-deposit; the appellant may seek relief before an appropriate forum in accordance with law.

Final Conclusion: The appeal is held to be infructuous and abated under Rule 22 of the CESTAT (Procedure) Rules, 1982 following approval and upholding of the resolution plan; the Tribunal declines to order any refund of pre-deposit and directs the appellant to seek appropriate remedy before competent fora.

Definition of "factory" under Section 2(e) of the Central Excise Act, 1944 - availability of CENVAT credit on capital goods under Rule 4(2) of the CENVAT Credit Rules, 2002 - exclusion of components, spares and accessories from the possession-and-use condition in Rule 4(2)(b) - inter-unit transfer of CENVAT credit within the same factory premises - transfer of CENVAT credit under Rule 8 of the CENVAT Credit Rules, 2002 - effect of audit para being dropped on consequential show cause notice - limitation and extended period where facts known to department

Definition of "factory" under Section 2(e) of the Central Excise Act, 1944 - inter-unit transfer of CENVAT credit within the same factory premises - Whether Rourkela Fertiliser Plant (RFP) and Rourkela Steel Plant (RSP) constitute one factory for the purpose of CENVAT credit and whether credit availed by RSP in respect of inputs/capital goods used in RFP is permissible. - HELD THAT: - The Tribunal applied the statutory definition of "factory" in Section 2(e) and precedents holding that multiple plants manufacturing different excisable goods within the same premises constitute a single factory. Separate Central Excise registrations granted for administrative convenience do not alter the legal character of a single factory co terminous with the premises. On the facts, RFP and RSP formed parts of an integrated plant under the same legal entity and PAN, sharing premises, management and accounts; therefore intra premises transfers and availment of credit by RSP in respect of goods received for use in RFP are governed by the law applicable to a single factory. The Tribunal relied on earlier decisions recognising inter unit transfer of CENVAT credit where units fall within the same factory premises and held those authorities applicable to the facts. [Paras 5, 8, 10]

RFP and RSP are one factory for CENVAT purposes and availment of credit by RSP in respect of goods used in RFP is permissible.

Availability of CENVAT credit on capital goods under Rule 4(2) of the CENVAT Credit Rules, 2002 - exclusion of components, spares and accessories from the possession-and-use condition in Rule 4(2)(b) - Whether the balance 50% CENVAT credit on capital goods (spares, components and accessories) received in 2002-03 could be availed subsequently when the fertiliser unit had stopped production. - HELD THAT: - Rule 4(2)(a)-(b) permits only fifty per cent credit in the year of receipt and the balance in subsequent years subject to possession and use, except for specified items. The Tribunal accepted the adjudicating authority's finding that the goods in question were components, spares and accessories, which are expressly excluded from the possession and use condition in Rule 4(2)(b). That factual finding as recorded in the Order in Original (and not challenged by the department) has attained finality. Applying the rule and established authorities, the Tribunal held that the condition of possession and use does not bar availment of the remaining credit in respect of such excluded items. [Paras 6, 11]

The balance CENVAT credit on the identified capital goods (spares, components and accessories) was lawfully availed and could not be denied under Rule 4(2)(b).

Transfer of CENVAT credit under Rule 8 of the CENVAT Credit Rules, 2002 - Whether Rule 8 (transfer on shift, sale, merger, amalgamation, etc.) applied to permit or prohibit the intra premises availment of credit in the present facts. - HELD THAT: - Rule 8 permits transfer of unutilised credit on prescribed events such as shifting of factory, change of ownership, sale, merger or amalgamation, subject to transfer of stocks/capital goods. The Tribunal found that Rule 8 is inapplicable where no change of site, ownership or transfer event as specified has occurred. The appellate authority's reliance on Rule 8 went beyond the scope of the Show Cause Notice which was framed on other grounds. On the facts, there was no merger, sale, transfer or change of ownership warranting Rule 8, and the Rule could not be invoked to deny intra factory availment of credit. [Paras 7, 8]

Rule 8 is not attracted and cannot be invoked to deny the CENVAT credit in the present case.

Effect of audit para being dropped on consequential show cause notice - limitation and extended period where facts known to department - Whether the Show Cause Notice dated 19.11.2007, issued on the basis of an audit para that was subsequently dropped by the AG (Odisha), is maintainable and whether the proceedings were barred by limitation or amounted to suppression justifying extended limitation. - HELD THAT: - The Tribunal noted that the departmental audit para on which the SCN was premised had been dropped by the AG and intimation of that dropping formed part of the record. Where proceedings originate from an audit memo that has been dropped the consequential proceedings lose their foundation. Further, the Tribunal applied settled law that when material facts are known to both parties mere omission does not constitute willful suppression invoking extended limitation. The department was aware of the availment (including earlier disclosure and correspondence), and a prior adjudication on related credit had attained finality. In these circumstances issuance of the later SCN beyond limitation was unsustainable. [Paras 11, 12]

The SCN based on the dropped audit para is non est and the departmental proceedings were barred; extended period of limitation could not be invoked.

Final Conclusion: The Tribunal set aside the impugned appellate order, allowed the appeal, held RFP and RSP to be one factory for CENVAT purposes, upheld availment of the balance credit on the specified capital goods, found Rule 8 inapplicable, and concluded that the SCN founded on a dropped audit para and issued beyond limitation was unsustainable; appeal allowed with consequential relief.

Tax on the entry of goods into a local area for consumption, use or sale therein - local area - industrial township - entry tax - Article 243-Q - local self-government - Part IX-A - municipal services - retrospective taxation

Local area - entry tax - industrial township - Article 243-Q - local self-government - municipal services - Whether exclusion of an industrial area or industrial township from municipal limits (including by notification under the proviso to Article 243 Q) removes that area from the expression "local area" in Entry 52 of List II and thereby precludes levy of entry tax on goods entering such area. - HELD THAT: - The Court held that industrial areas or estates, even where excluded from municipal enactments or notified under the proviso to Article 243 Q, remain "local areas" for the purposes of Entry 52. Diamond Sugar Mills was a decision confined to levy on factory premises and did not hold that all industrial townships are excluded from the expression "local area." Part IX A (the 74th Amendment) and the proviso to Article 243 Q operate to exempt such areas from the constitutional scheme of municipalities (for example, electoral and representative features) but do not alter the ordinary meaning of "local area" for State taxation. State enactments which define "local area" to include industrial townships are within the legislative ambit so long as the ordinary grammatical meaning of the taxing provision is accepted and the industrial area is an area within the State administered under some legal regime providing municipal type services. The Court emphasised that industrial townships providing municipal services, covering residential colonies and civic amenities, and forming identifiable territorial units are properly regarded as "local areas" attracting entry tax, and the mere performance of some municipal functions by statutory industrial bodies does not convert them into municipalities as contemplated by Part IX A. (See paras. 29-36, 39-46.) [Paras 31, 35, 39, 45, 46]

Exclusion from municipal limits or notification under the proviso to Article 243 Q does not prevent an industrial township or estate from being a "local area" for the purpose of entry tax; the High Courts' rejections of appellants' challenges are upheld.

Retrospective taxation - compensatory character - Whether the retrospective effect given to the Entry Tax enactment (to cure defects in earlier demands) was invalid as arbitrary or otherwise impermissible. - HELD THAT: - The Court found the challenge to retrospective operation to be insubstantial on the facts. The earlier demands were quashed for defects; the State enacted the tax with retrospective effect to cure that defect. Applying the principles in precedents concerning retrospective taxation and remedial legislative action, the Court held that the retrospective amendment was valid in the circumstances of these cases. The Court therefore saw no reason to strike down the retrospective enactment as arbitrary. (See para. 49.) [Paras 49, 50]

The retrospective enactment, enacted to cure defects in prior demands, is valid in the facts of these cases and does not warrant interference.

Final Conclusion: The Supreme Court dismissed the special leave petitions and appeals challenging levy of entry tax on industrial townships and refused to disturb the decisions of the Orissa and Allahabad High Courts; the retrospective amendment was held valid in the circumstances.

Concealment of turnover - acceptance of books of account - burden of proof for concealed sales - treatment of inter book differences as concealed sales - de novo assessment and remand for verification

Concealment of turnover - acceptance of books of account - burden of proof for concealed sales - treatment of inter book differences as concealed sales - Whether the Assessing Officer was justified in treating differences between figures reflected within the assessee's accepted books of account as concealed sales and enhancing turnover on that basis. - HELD THAT: - The Court found that the Assessing Officer had accepted the assessee's books of account and recorded no adverse evidence of concealment. The AO compared the consumption account (showing cost of goods sold) with the statement of sales (showing sale realization) and treated the difference as concealed turnover. The record, however, showed the differential arose from a loss on sale of iron ore (cost > sale proceeds) as reflected in the audited books and tax audited report. The AO also treated the identical amount as shortfall in gross profit and levied tax again, demonstrating a misconstruction of the books. The Court held that concealed sales cannot be presumed merely by selecting inconsistent figures from the accepted books without rejecting those books or recording independent adverse evidence; the burden to establish concealed turnover lies on the revenue and the AO's conclusions based solely on internal book comparisons were impermissible. [Paras 10, 11]

The enhancement of turnover by treating inter book differences (which represented a loss on sale) as concealed sales was unsustainable and set aside.

De novo assessment and remand for verification - Whether the matter should be remanded for fresh assessment and, if so, on what terms. - HELD THAT: - Given the infirmity in the Assessment Order and the failure of the Appellate and Revisional authorities to appreciate the assessee's explanation, the Court quashed the assessment, appellate and revisional orders and directed a remand. The Court ordered that the Assessing Officer shall undertake a de novo assessment after giving the assessee an opportunity of hearing and enabling the assessee to explain the figures shown in its books of account. The direction contemplates fresh adjudication rather than affirmation of the AO's earlier approach. [Paras 12]

Assessment, appellate and revisional orders quashed; matter remanded for de novo assessment with opportunity to the assessee to explain the book figures.

Final Conclusion: The assessment, appellate and revisional orders enhancing turnover were quashed and set aside; the matter is remanded to the Assessing Officer for de novo assessment after hearing the assessee and permitting explanation of the figures in the books of account.

Composition scheme under Section 4(7)(d) - application of Rule 17(4) - levy of tax on purchases versus tax under composition scheme - territorial jurisdiction of assessing authority - remand to concerned assessing authority - binding effect of appellate remand directions

Territorial jurisdiction of assessing authority - remand to concerned assessing authority - Validity of assessment by the Deputy Commercial Tax Officer - I (first Respondent) on grounds of territorial jurisdiction after remand by the Appellate Authority. - HELD THAT: - The Court found that the first Respondent had earlier conducted the assessment (Order dated 06.05.2019) and the dealer had not earlier challenged the jurisdiction of that authority either before the Assessing Authority or before the Appellate Authority. Rule 59(1) was examined and interpreted to mean that where appellate or revision orders under Sections 31-35 are to be given effect, an Assistant Commissioner, Commercial Tax Officer or Deputy Commercial Tax Officer having territorial jurisdiction over the dealer is competent to pass consequential orders irrespective of whether the original order under appeal was passed by him. The term "concerned Assessing Authority" in the remand order was held to connote the authority which had earlier assessed the dealer (here, the first Respondent) and not necessarily a different territorial officer. The Court also observed that the first Respondent in fact has territorial jurisdiction over the dealer and that no prejudice arises from assessment by any of the officers empowered under the relevant G.O. and Rule; inter se appeals between those officers are not available. For these reasons the challenge to the assessment on territorial jurisdiction grounds was rejected. [Paras 19, 20, 21, 22, 23]

The assessment by the first Respondent is not invalid for want of territorial jurisdiction; the first Respondent was competent to pass the assessment on remand.

Composition scheme under Section 4(7)(d) - application of Rule 17(4) - levy of tax on purchases versus tax under composition scheme - binding effect of appellate remand directions - Whether the Assessing Authority, on remand, was justified in re-imposing tax on purchases despite the Appellate Authority having held that tax should be levied under the composition scheme and remanding for verification. - HELD THAT: - The Appellate Authority had held that where the dealer opted for the composition scheme and did not claim input tax credit, tax is to be levied under Rule 17(4) and that the Assessing Authority's earlier methodology of levying tax by adding profit to purchases was incorrect; it set aside the assessment and remanded the matter directing verification of records, Form VAT-250 and sale consideration. On remand the Assessing Authority confirmed tax on purchases on the ground that the dealer failed to establish that purchases related to the period before filing VAT-250 and that some purchases were from out of state not reflected in returns. The High Court observed that the Assessing Authority ought to have followed the ratio and directions in the Appellate Authority's order when reconsidering the matter on remand; the re-imposition of tax on purchases despite the appellate finding prima facie gives rise to double taxation and disregards the appellate remand directions. Consequently the Court remanded the matter to the Assessing Authority for fresh consideration in accordance with law and by taking into account the Appellate Authority's observations, after affording opportunity to the petitioner. [Paras 27, 28, 29, 30, 31]

The finding and confirmation by the Assessing Authority to levy tax on purchases is set aside insofar as it conflicts with the Appellate Authority's directions; the matter is remanded to the first Respondent to decide afresh in accordance with the Appellate Authority's observations and applicable law.

Final Conclusion: Writ petition allowed in part: the challenge to the first Respondent's territorial competence is dismissed, but the assessment is remitted for fresh de novo consideration by the first Respondent in accordance with the Appellate Authority's observations (including application of the composition scheme principles under Rule 17(4)), after affording the petitioner opportunity to be heard.

Appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 - arbitration clause in a shareholders agreement - arbitrability - concurrent judicial proceedings before NCLT not a bar to reference to arbitration - leave to arbitrator to decide jurisdictional/ arbitrability questions

Appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 - arbitration clause in a shareholders agreement - concurrent judicial proceedings before NCLT not a bar to reference to arbitration - Whether the High Court erred in dismissing the Section 11(6) petition and in refusing to appoint an arbitrator in respect of the Share Subscription and Shareholders Agreement dated 27.04.2016 - HELD THAT: - The Court found that the Share Subscription and Shareholders Agreement dated 27.04.2016 contains a clear dispute resolution clause providing for reference to a three-member arbitral tribunal and that the High Court should have allowed the Section 11(6) petition and left the question of arbitrability to the arbitral forum. The High Court's refusal rested on two principal grounds - (i) existence of earlier arbitral proceedings/award relating to other interlinked agreements and (ii) pendency of proceedings before the NCLT asserting oppression and mismanagement. The Court held that the appellant was not a party to the earlier arbitral proceedings in respect of the other agreements and that, following Vidya Drolia, the court at the Section 11(6) stage should not decide arbitrability where it requires deeper consideration but should ordinarily refer the dispute to arbitration. Further, pendency of separate NCLT proceedings instituted by the respondent as a minority shareholder did not justify dismissal of the Section 11(6) petition; the dispute under the SHA is distinct and ought to be considered by the arbitrator. For these reasons the High Court erred in dismissing the petition and refusing appointment of an arbitrator. [Paras 5, 6]

The High Court's order is set aside; the appellants' application under Section 11(6) is allowed and an arbitrator is appointed to resolve the dispute arising out of the SHA dated 27.04.2016.

Arbitrability - leave to arbitrator to decide jurisdictional/ arbitrability questions - Whether the question of arbitrability of the dispute should be decided by the Court at the Section 11(6) stage or left to the arbitrator - HELD THAT: - Relying on the three-judge decision in Vidya Drolia, the Court emphasised that unless the court can prima facie conclude that the dispute is not arbitrable, questions requiring further or deeper consideration should be left to the arbitral tribunal. Applying that principle, the Court declined to decide arbitrability and expressly left the question to the appointed arbitrator to determine in the course of the arbitral proceedings. [Paras 5]

The issue of arbitrability is left to be decided by the learned Arbitrator.

Final Conclusion: The impugned High Court order dismissing the Section 11(6) petition is set aside; the petition is allowed and Shri Justice K. Ravichandrabaabu (Former Judge, Madras High Court) is appointed as Arbitrator to resolve the dispute under the SHA dated 27.04.2016, with fees to be fixed by the Arbitrator in consultation with the parties; questions of arbitrability are left to the Arbitrator.

Complaint under Section 138 of the Negotiable Instruments Act - transfer of criminal complaint - transfer for convenience of the accused - exemption from personal appearance - compelling personal attendance only when absolutely mandatory

Complaint under Section 138 of the Negotiable Instruments Act - transfer of criminal complaint - transfer for convenience of the accused - Transfer petition seeking transfer of trial of complaint under Section 138 filed by the accused for her convenience. - HELD THAT: - The Court held that a complaint under Section 138 cannot be transferred merely for the convenience of the accused. The petition for transfer was considered and dismissed subject to the directions recorded regarding personal appearance. No broader principle permitting transfer of such complaints for mere convenience was accepted.

Transfer petition dismissed; transfer for the accused's convenience is not permissible.

Exemption from personal appearance - compelling personal attendance only when absolutely mandatory - Whether the petitioner, being a woman and a senior citizen, may be exempted from personal appearance at trial. - HELD THAT: - The Court observed that the petitioner, as a woman and senior citizen, may apply for exemption from personal appearance and that the trial Judge shall favorably consider such an application. The trial Judge is directed to compel the petitioner to appear in person only when her presence is absolutely mandatory for the conduct of the trial. This constitutes a binding, case-specific direction to the trial Court to exercise discretion sympathetically while ensuring trial requirements are met.

Petitioner may seek exemption from personal appearance; trial Judge to consider favorably and require attendance only if absolutely necessary.

Final Conclusion: The transfer petition is dismissed. The petitioner, being a woman and senior citizen, may apply for exemption from personal appearance which the trial Judge shall consider favorably and shall compel her presence only when absolutely necessary; pending applications are disposed of.

Appeal against acquittal in a private complaint under Section 138 of the Negotiable Instruments Act - definition of "victim" under Section 2(wa) of the Code of Criminal Procedure - right of a victim to prefer an appeal under the proviso to Section 372 of the Code of Criminal Procedure - remedy of a complainant by special leave appeal under Section 378(4) Cr.P.C.

Definition of "victim" under Section 2(wa) of the Code of Criminal Procedure - appeal against acquittal in a private complaint under Section 138 of the Negotiable Instruments Act - A complainant in a case instituted under Section 138 of the Negotiable Instruments Act is not a "victim" within the meaning of Section 2(wa) Cr.P.C. - HELD THAT: - The Court examined the statutory definition of "victim" in Section 2(wa) Cr.P.C. and the post amendment scheme granting victims a right of appeal under the proviso to Section 372 Cr.P.C. It relied on the reasoning in the decisions referred to in the record, including SUBHAS CHAND and the decision of the Andhra Pradesh High Court in Smt. P. Vijaya Laxmi Vs. Smt. S.P. Sravana And Another , which held that a complainant in a private complaint under Section 138 NI Act does not fall within the statutory notion of "victim" for the purpose of conferring a right of appeal to the Sessions Court. The Court observed that complainants in private complaint proceedings have historically been afforded the limited remedy of filing for special leave under Section 378(4) Cr.P.C., and that the post amendment right of appeal under Section 372 was intended for victims of cases instituted on police report, not to create a concurrent, unfettered right of appeal for complainants in private complaints. Allowing both remedies would confer inconsistent and duplicative remedies on complainants contrary to legislative intent. For these reasons the Court concluded that a complainant under Section 138 NI Act cannot be characterised as a "victim" under Section 2(wa).

Complainant under Section 138 NI Act is not a "victim" as defined in Section 2(wa) Cr.P.C.

Right of a victim to prefer an appeal under the proviso to Section 372 of the Code of Criminal Procedure - remedy of a complainant by special leave appeal under Section 378(4) Cr.P.C. - A complainant in a Section 138 NI Act case is not entitled to invoke the proviso to Section 372 Cr.P.C. to prefer an appeal against an acquittal to the Sessions Court; the proper remedy is an appeal by special leave under Section 378(4) Cr.P.C. to the High Court. - HELD THAT: - Applying the conclusion that a complainant in a private complaint is not a "victim" under Section 2(wa), the Court held that the proviso to Section 372 (which permits a victim to appeal to the court to which an appeal ordinarily lies against conviction) does not extend to such complainants. The Court noted the legislative history and that Section 378(4) (special leave to appeal by a complainant) remained available and unamended; the legislature could not have intended to confer two concurrent remedies. The court followed the settled principle reflected in the authorities cited in the record, including SUBHAS CHAND and Smt. P. Vijaya Laxmi , which restrict the complainant to the route under Section 378(4) and preclude an appeal as of right to the Sessions Court under Section 372 proviso. Consequently, an appeal before the Sessions Court by a complainant against acquittal in a Section 138 complaint is not maintainable.

Complainant is not entitled to prefer an appeal under the proviso to Section 372 Cr.P.C.; remedy is under Section 378(4) Cr.P.C. before the High Court by special leave.

Final Conclusion: The criminal appeal entertained by the Sessions Court against the acquittal in the Section 138 NI Act complaint was beyond law; the impugned judgment of the Additional Sessions Judge in Criminal Appeal No. 101 of 2015 is set aside and the petition (CRR) is allowed, with the complainant's proper remedy being an appeal by special leave under Section 378(4) Cr.P.C. to the High Court rather than an appeal under the proviso to Section 372 Cr.P.C.

Vicarious liability of directors under Section 141 of the Negotiable Instruments Act - liability of a director who signs a cheque under Section 141(2) - effect of resignation prior to presentation of the cheque on director's liability - no need for specific averment of being "in charge of and responsible for" where director signed the cheque - presumption under Section 139 and burden on accused to rebut

Effect of resignation prior to presentation of the cheque on director's liability - vicarious liability of directors under Section 141 of the Negotiable Instruments Act - Whether the petitioner could be summoned under Section 138 read with Section 141 NI Act despite having resigned as director before the cheque was dated/presented. - HELD THAT: - The Court found that the factual matrix pleaded in the complaint and documentary material (including earlier agreements signed by the petitioner on behalf of the company and an e-mail indicating continued involvement) negatived the assertion that resignation severed the petitioner's connection with the company. Reliance was placed on precedent indicating that a resignation tendered to avoid liability will not automatically absolve a director; if transactions and conduct relate to the period of directorship and there is material suggesting continued control or involvement, the plea of prior resignation is a matter for trial. Accordingly the contention that the petitioner could not be vicariously liable because he resigned prior to presentation/date of the cheque was held to be unsustainable on the record before the Magistrate and was a matter to be tested at trial. [Paras 7, 8, 9]

Summoning order was not quashed on the ground of prior resignation; the question of liability arising from resignation is left open for trial.

Liability of a director who signs a cheque under Section 141(2) - no need for specific averment of being "in charge of and responsible for" where director signed the cheque - presumption under Section 139 and burden on accused to rebut - Whether the complaint contained sufficient averments to summon the petitioner as an accused under Section 141 where he was the signatory of the dishonoured cheque. - HELD THAT: - The Court applied the legal principle that when a director signs the cheque on behalf of the company, a specific averment that he was "in charge of and responsible for" the company is not necessary to raise a prima facie case under Section 141(2); the mere fact of signing on behalf of the company gives rise to responsibility unless rebutted. The complaint also included particulars of agreements and transactions executed by the petitioner on behalf of the company, and the petitioner's own e-mail suggested continuing involvement, thereby supplying sufficient grounds for summoning. Issues of consent, connivance or exercise of due diligence were held to be matters for the trial and defence. [Paras 7, 8, 9]

Summoning of the petitioner was upheld as the complaint made sufficient averments and the fact of his signing the cheque prima facie attracted liability under Section 141(2); factual disputes are to be adjudicated at trial.

Final Conclusion: The petition under Section 482 Cr.P.C. seeking quashing of the summoning order dated 24.11.2021 was dismissed; the Magistrate's order to summon the petitioner under Sections 138 and 141 NI Act is sustained and factual contentions raised by the petitioner are left open for trial.

Intermediary - safe harbour under Section 79 of the Information Technology Act, 2000 - due diligence under the Information Technology (Intermediaries Guidelines) Rules, 2011 - no liability for third-party information, data or communication link - obligation to disable/remove content on actual knowledge or on notification by appropriate government - distinction between marketplace and inventory e-commerce models under Consumer Protection (E Commerce) Rules, 2020 - quashing of First Information Report under the High Court's inherent powers (Article 226 / Section 482 CRPC) where no prima facie offence is made out or proceedings amount to abuse of process - overriding effect of the Information Technology Act, 2000

Intermediary - safe harbour under Section 79 of the Information Technology Act, 2000 - due diligence under the Information Technology (Intermediaries Guidelines) Rules, 2011 - no liability for third-party information, data or communication link - Whether the petitioner-Company is an intermediary entitled to exemption from liability under Section 79 of the Information Technology Act, 2000 by having observed due diligence under the Intermediaries Guidelines Rules, 2011. - HELD THAT: - The Court found on the material before it that the petitioner-Company falls within the definition of an "intermediary" as defined in Section 2(1)(w) of the I.T. Act, 2000 and operates a marketplace where sellers, not the platform, own and offer the goods. The judgment applies the amended Section 79 (post-2008 amendment) and the Information Technology (Intermediaries Guidelines) Rules, 2011 to hold that an intermediary is exempt from liability for third party information if it meets the requirements of Section 79(2) and observes due diligence under Section 79(2)(c). The Court recorded that the petitioner published the requisite terms, policies and seller agreements and had mechanisms to inform and require sellers to comply with applicable laws, thereby discharging the intermediary's due diligence obligations under the 2011 Rules. The Court further observed that the intermediary's liability arises only in the limited circumstances specified in Section 79(3) (such as conspiracy/abetment or failure to disable material upon actual knowledge/notification) and that no such disqualifying circumstance is made out on the face of the FIR in this case.

Petitioner-Company is an intermediary and, having complied with the due diligence requirements, is entitled to the safe harbour protection under Section 79 of the I.T. Act, 2000; no criminal liability for the alleged third party product defect is attributable to it on the allegations in the FIR.

Quashing of First Information Report under the High Court's inherent powers (Article 226 / Section 482 CRPC) where no prima facie offence is made out or proceedings amount to abuse of process - no liability for third-party information, data or communication link - abuse of process / mala fide institution of criminal proceedings - Whether the impugned FIR and the consequent police report should be quashed as disclosing no prima facie case against the petitioner and amounting to an abuse of the criminal process. - HELD THAT: - Applying the principles in State of Haryana v. Bhajan Lal and other authorities, the Court examined the FIR on its face. The Court concluded that, even accepting the allegations in the FIR, the essential ingredients constituting the offences as alleged could not be made out against the petitioner Company because the transaction and any alleged defect related to a seller's offering and not to acts by the intermediary. Given the intermediary status and the fulfilment of due diligence, the Court held that criminal proceedings against the petitioner would be unwarranted and an abuse of the process of court. The Court also noted absence of material to show conspiracy, abetment or other disqualifying conduct by the intermediary under Section 79(3). Having regard to these factors, the continuation of the criminal proceeding against the Company was held to be unsustainable.

The impugned FIR and the consequent police report are quashed as disclosing no prima facie offence against the petitioner and amounting to an abuse of the criminal process; the writ petition is allowed.

Final Conclusion: Writ petition allowed; the FIR dated 26 January 2019 and the consequent police report are set aside and quashed insofar as they proceed against the petitioner Company, which the Court held to be an intermediary entitled to safe harbour under Section 79 of the Information Technology Act, 2000 after observing due diligence under the 2011 Rules.

Condonation of delay under Section 5 of the Limitation Act - offence under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - rebuttal of presumption by the accused - liability arising from a signed blank or security cheque - limited scope of revisional interference - jurisdictional error

Offence under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - limited scope of revisional interference - jurisdictional error - Validity of conviction under Section 138 N.I. Act and whether the revisional court should interfere with the concurrent findings of the trial and appellate courts. - HELD THAT: - The High Court upheld the conviction and sentence imposed by the trial Court and affirmed by the appellate Court, holding that no finding or observation of the courts below was shown to be perverse, illegal, or based on misreading of evidence. The complaint holder proved the cheque, its dishonour, and service of notice; the accused admitted signature on the cheque and led no defence evidence to rebut the statutory presumption under Section 139. Reliance was placed on Supreme Court authority that the presumption of liability arises and that revisional interference is impermissible in the absence of jurisdictional error. The appellate finding that the complainant's evidence remained unrebutted and that the accused's compromise and partial payment amounted to an admission of liability was accepted. In those circumstances the High Court declined to exercise revisional jurisdiction. [Paras 4, 5, 6, 7, 9]

Conviction under Section 138 N.I. Act and the concurrent conclusions of the trial and appellate courts are upheld; revisional interference is refused for want of any jurisdictional error.

Liability arising from a signed blank or security cheque - rebuttal of presumption by the accused - Whether the cheque was a blank/signature given as security and whether that fact absolved the drawer of criminal liability. - HELD THAT: - The Court rejected the plea that the cheque was a blank signed security cheque issued at the time of a partnership deed. The appellate and trial courts recorded that the complainant (CW 1) testified the cheque was given in October 2013 and filled up by the petitioner, with no suggestion during cross examination that it was a pre signed security cheque. The Court observed the absence of any defence evidence to rebut the presumption under Section 139 and found the security cheque plea unsubstantiated and improbable in the absence of documentary or testimonial support. The Court also relied on earlier decisions holding that a voluntarily signed blank or security cheque may attract the presumption and criminal liability unless cogent evidence rebuts it. [Paras 5, 8, 9]

The contention that the cheque was a security or blank signed cheque is disbelieved and does not rebut the presumption under Section 139; criminal liability consequently remains attracted.

Final Conclusion: Application for condonation of delay is allowed; however, on merits the revision petition is dismissed and the concurrent conviction and sentence under Section 138 N.I. Act, as affirmed by the appellate court, are maintained for lack of perversity or any jurisdictional error.