TaxTMI Updates e-Newsletter
Nov 16,2017

Essential condition at pre entry stage for tenders - Deposit of bid/document fee and EMD as eligibility requirement - Payment of GST and reverse charge mechanism in tender compliance - Judicial restraint in tender matters - scope of review for perversity, mala fide or arbitrariness - Validity of subsequent cure or belated compliance of tender conditions - Level playing field and privilege of participation

Essential condition at pre entry stage for tenders - Deposit of bid/document fee and EMD as eligibility requirement - Whether non payment of the full bid/document fee (including GST) entitled the Corporation to treat the petitioner as not a tenderer and to disqualify the bid at the technical stage - HELD THAT: - The Court held that the tender process (through the nProcure consolidated details and Annexure A24) made deposit of the entire bid/document fee (including GST) and the EMD mandatory for obtaining entry as a tenderer; downloading the tender free of cost did not confer a right to be treated as a bidder. The respondent applied the requirement uniformly and other bidders had complied. In such circumstances the employer's classification of the requirement as essential at the entry stage is to be respected and is not open to being recast by the Court unless shown to be mala fide, perverse or arbitrary. Applying the settled principles on judicial review in tender matters, the Court found no perversity, arbitrariness or mala fides in the Corporation's decision to treat the petitioner as not having obtained entry and accordingly not to consider its bid further. [Paras 9, 10, 11]

The petitioner's bid was rightly not considered because the petitioner had not deposited the entire prescribed bid/document fee and EMD at the relevant time; the requirement was an essential condition at the entry stage and the Corporation was entitled to disqualify the petitioner.

Payment of GST and reverse charge mechanism in tender compliance - Validity of subsequent cure or belated compliance of tender conditions - Whether the petitioner's subsequent attempts to remit the differential GST (including sending a demand draft and later paying under reverse charge) cured the non compliance and entitled the petitioner to be treated as a valid tenderer - HELD THAT: - The Court emphasised that what matters is payment of the entire prescribed bid/document fee and EMD within the stipulated time prescribed by the tender; belated attempts to tender the differential amount after technical opening, including a returned draft and later reverse charge payment, cannot cure the failure to comply at the entry stage. The respondent's procedure required generation of a receipt on timely payment to confer tenderer status; in absence of such receipt there was no entry and subsequent payment was irrelevant. The petitioner's explanation about absence of respondent's GSTIN was not pursued at the pre bid stage and was treated as an afterthought. [Paras 11, 12]

Subsequent or belated payment of the differential GST did not cure the initial non compliance; the petitioner's remedial payments did not entitle it to be treated as a tenderer.

Judicial restraint in tender matters - scope of review for perversity, mala fide or arbitrariness - Level playing field and privilege of participation - Whether interference under Article 226 was warranted in the facts of this case - HELD THAT: - Applying established precedents, the Court reiterated that judicial intervention in tender matters is confined to cases of mala fides, perversity or arbitrariness or where public interest is adversely affected. The Court found no allegation or evidence of mala fide or favouritism; the Corporation uniformly applied the tender terms, other bidders complied, and there was no distortion of the level playing field. The petitioner had opportunities (pre bid queries, nProcure support) but did not seek clarification prior to submitting the bid. On this basis the Court concluded that the decision making process was lawful and did not merit interference. [Paras 9, 10, 13]

No interference under Article 226; the Court declined to substitute its view for the employer's commercial decision in the absence of mala fides, arbitrariness or perversity.

Final Conclusion: The petition is dismissed: the Corporation lawfully treated deposit of the full bid/document fee (including GST) and EMD as an essential pre entry condition, the petitioner's belated payments did not cure the non compliance, and there was no ground for judicial interference under Article 226.

Arm's length pricing/method selection - Resale Price Method (RPM) - Transactional Net Margin Method (TNMM) - Question of law arising from choice of transfer pricing method - Capital versus revenue expenditure - Findings of fact and appellate scope

Arm's length pricing/method selection - Resale Price Method (RPM) - Transactional Net Margin Method (TNMM) - Question of law arising from choice of transfer pricing method - Whether the choice of RPM over TNMM for determining the arm's length price raised a substantial question of law permitting interference with the Tribunal's factual/conclusory findings. - HELD THAT: - The Court held that mere disagreement between the assessee and revenue authorities, or among revenue authorities, on the selection of an appropriate transfer pricing method does not, by itself, constitute a question of law. Interference is warranted only where the rule applied produces distortion or prejudice such that a legal question of substantive character arises. On the material before the Court no such distortion or prejudice was shown. The appellate authorities (CIT(A) and ITAT) had accepted RPM, and the Court noted that in the subsequent year the TPO itself endorsed RPM, reinforcing that no legal infirmity was demonstrated in selecting RPM over TNMM in the present case.

The contention that choosing RPM instead of TNMM raised a substantial question of law was rejected; the appellate findings accepting RPM were upheld.

Capital versus revenue expenditure - Findings of fact and appellate scope - Whether seed development/agronomy expenditure characterized as capital by the assessing officer but treated as revenue (or otherwise) by the appellate authorities raised a substantial question of law. - HELD THAT: - The Court treated the characterisation of the seed development/agronomy expenditure as a pure finding of fact, noting that the CIT(A)'s contrary conclusion was affirmed by the ITAT. As the matter involved factual appraisal and the appellate tribunals' findings were factual in nature, no substantial question of law arose for the High Court's interference.

The challenge to the factual characterization of the expenditure did not raise a substantial question of law and was therefore not entertained.

Final Conclusion: Both contentions advanced by the Revenue were dismissed: the selection of RPM over TNMM did not raise a substantial question of law absent shown distortion or prejudice, and the characterization of seed development/agronomy expenditure was a factual finding for which no legal interference was warranted; the appeal is dismissed.

Penalty under Section 271AAA of the Income Tax Act, 1961 - search assessment under Section 153A of the Income Tax Act, 1961 - penalty under Section 271AAA requires an admission in the search statement

Penalty under Section 271AAA of the Income Tax Act, 1961 - penalty under Section 271AAA requires an admission in the search statement - precedential value of ITAT decision in Addl. Commissioner of Income Tax v. Emirates Technologies Pvt. Ltd. - Validity of the ITAT's deletion of penalties imposed on two directors for A.Y. 2010-11 on the ground that the requisite admission in the search statement was absent. - HELD THAT: - For A.Y. 2010-11 a search assessment under Section 153A was completed and the AO imposed penalty on two directors under Section 271AAA. The Appellate Commissioner set aside the penalty and the ITAT upheld that view, concluding that the functional jurisdiction to impose penalty under Section 271AAA arises only upon an admission made in the statement recorded during search proceedings, which was not present on the facts. The ITAT applied its earlier decision in Addl. Commissioner of Income Tax v. Emirates Technologies Pvt. Ltd., and noted that that view was subsequently endorsed in the Revenue's appeal (CIT v. M/s Emirates Technologies Pvt. Ltd.). On this basis the ITAT found the imposition of penalty to be an incorrect appreciation of law and deleted the penalties.

The ITAT's deletion of the penalties was affirmed as correctly deciding that penalties under Section 271AAA could not be sustained in the absence of an admission in the search statement.

Final Conclusion: No substantial question of law arises; the appeals are dismissed and the ITAT's order deleting the penalties is upheld.

Dominant object test - charitable purpose / advancement of general public utility - exemption under section 11 and 12 - effect of amendment to section 2(15) (2009) - receipt of fees for seminars/workshops not ipso facto denial of exemption

Dominant object test - charitable purpose / advancement of general public utility - receipt of fees for seminars/workshops not ipso facto denial of exemption - effect of amendment to section 2(15) (2009) - exemption under section 11 and 12 - Whether amounts received and utilised by the assessee (including registration charges and fees for seminars/workshops) defeated its claim to exemption under section 11 and 12 by rendering its activities commercial or removing it from the scope of charitable purpose under the amended section 2(15). - HELD THAT: - The Tribunal held, and this Court agreed, that mere charging of fees from members or non-members for services such as training or conducting seminars does not ipso facto lead to denial of exemption. The determinative inquiry remains the dominant object test: whether the dominant object of the association is charitable or for advancement of general public utility. The Tribunal took into account the 2009 amendment to section 2(15) but observed, following precedent, that the amendment did not alter the test of dominant object. There was no finding that the assessee's objects had changed in the relevant years; the activities in question were incidental to the main charitable objects and benefitted the public at large. Applying these principles and the authorities relied upon by the Tribunal, the denial of exemption by the assessing officer and the CIT(A) was held not to be in accordance with law.

Denial of exemption under section 11 and 12 was set aside; amounts received and utilised for the stated activities were held to be for purposes consistent with the assessee's charitable objects.

Exemption under section 11 and 12 - Whether any substantial question of law arises warranting interference with the Tribunal's orders. - HELD THAT: - Having reviewed the Tribunal's application of the dominant object test and its reliance on binding precedents, this Court found that the Tribunal correctly applied the legal principles and there was no substantial question of law arising from the orders under challenge. Related contentions concerning application of income under section 11 were consequential on the primary finding and therefore did not require independent consideration.

No substantial question of law arises; the appeals are dismissed.

Final Conclusion: The Tribunal's conclusion that the assessee's receipt and use of fees for seminars/workshops did not defeat its charitable character under the dominant object test (having regard to the 2009 amendment to section 2(15)) is upheld; no substantial question of law arises and the appeals are dismissed.

Acceptance of TDS certificate - resulting company under demerger - tax deduction at source compliance - restraint on coercive action pending appeal - without prejudice to rights in pending appeal

Acceptance of TDS certificate - resulting company under demerger - tax deduction at source compliance - restraint on coercive action pending appeal - Respondents directed to accept the TDS certificate in the name of the applicant company and restrained from taking coercive action as per communication dated 10.11.2017, without prejudice to rights in the pending appeal. - HELD THAT: - The applicant, being the resulting company pursuant to a demerger from M/s Kesar Enterprise Limited, contended that TDS certificate could not be issued in the name of the transferor. Respondents' counsel, on instructions, stated they were prepared to accept the TDS certificate in the name of the applicant company subject to preservation of rights in the pending appeal. In view of that statement, the Court directed that respondents shall not take coercive steps as per the impugned communication and shall accept the TDS certificate in the name of the applicant company. The acceptance is recorded expressly as without prejudice to the parties' rights in the appeal, thereby preserving the appellate adjudication on merits. [Paras 5, 6, 7]

Application disposed directing respondents to accept the TDS certificate in the name of the applicant and restraining them from taking coercive action, acceptance being without prejudice to the pending appeal.

Final Conclusion: The Civil Application is disposed of by directing respondents to accept the TDS certificate in the name of the applicant company and restraining them from taking coercive action as per the impugned communication; such acceptance is without prejudice to the parties' rights in the pending appeal.

Commission as proxy for income in accommodation entry cases - accommodation entry / bogus accommodation entries - protective addition - unexplained income from undisclosed sources - penalty under section 271(1)(c) - estimation of income on basis of commission

Protective addition - commission as proxy for income in accommodation entry cases - estimation of income on basis of commission - Whether the entire cash deposits made in bank accounts could be sustained as unexplained income in the hands of the assessee, or only commission estimated on such deposits should be treated as income. - HELD THAT: - The Tribunal followed its earlier decision in the case of the principal operator where substantive additions were recorded and income was estimated by applying a commission rate of 0.20% on deposits routed through dummy concerns. Once the substantive assessment in the operator's case treated the total deposits as turnover of the accommodation entry business and assessed commission thereon, there was no basis to sustain protective additions of the entire deposits in the hands of the facilitators. The Tribunal therefore directed that only commission be determined in the hands of the assessees at the same rate of 0.20% on the deposits attributed to their bank accounts, rejecting the AO's protective addition of total deposits as unexplained income. [Paras 9, 10]

Protective addition of entire deposits dismissed; income sustained only by estimating commission at 0.20% on the deposits.

Accommodation entry / bogus accommodation entries - commission as proxy for income in accommodation entry cases - Whether a separate addition by assessing officer of commission on disclosed turnover should be sustained in addition to commission estimated on total deposits. - HELD THAT: - The Tribunal held that once commission on the entire cash deposits (being part of total turnover) is taken at 0.20%, there is no justification for a separate addition on account of commission on disclosed turnover, as that would amount to double counting. Consequently, the separate commission addition made by the AO was deleted. [Paras 11]

Separate addition on account of commission on disclosed turnover deleted.

Penalty under section 271(1)(c) - estimation of income on basis of commission - Whether penalty under section 271(1)(c) is leviable on the assessees in respect of the additions sustained. - HELD THAT: - The Tribunal found that the additions sustained were based on estimate and on the footing that the substantive assessment in the principal operator's case had already treated the deposits as turnover and applied the 0.20% commission rate. The assessees were facilitators who merely operated accounts and were estimated to have received commission; there was no material to establish concealment or furnishing of inaccurate particulars by them. Further, after applying the estimated commission the assessees' incomes were below taxable limits. On these facts the Tribunal concluded that penalty under section 271(1)(c) was not leviable and the penalties imposed by the AO were deleted. [Paras 15, 16]

Penalty under section 271(1)(c) deleted; no penalty leviable.

Final Conclusion: Following the Tribunal's earlier decision in the operator's case, protective additions of entire cash deposits were not sustained and only commission income estimated at 0.20% on the deposits was upheld for the assessment years 2004-05 and 2005-06; separate commission additions were deleted, and penalties under section 271(1)(c) were held not leviable, resulting in dismissal of the revenue's appeals and allowance of the assessees' appeals to the extent indicated.

Allowability of commission/project procurement expenses as business expenditure - onus of proof of services rendered by commission agents - admission of additional evidence at appellate stage - transfer pricing - use of single year data versus multiple year averages for comparables - computation and application of Profit Level Indicator (OP/OR) in transfer pricing - remand for fresh verification by Assessing Officer - disallowance of telephone and car expenses - requirement of verification of call registers/logbooks

Allowability of commission/project procurement expenses as business expenditure - onus of proof of services rendered by commission agents - admission of additional evidence at appellate stage - remand for fresh verification by Assessing Officer - Deletion of addition of Rs. 12,62,73,121/- on account of project procurement (commission) expenses was set aside and the matter restored to the Assessing Officer for fresh examination of documentary evidence - HELD THAT: - The Tribunal analysed the material placed before it and the authorities below, noting that the assessee had produced agreements, correspondence, invoices and payment evidence but had not produced independent third party confirmation or concrete documentary proof demonstrating that commission agents actually performed the scope of work before the parties awarding contracts. The Tribunal held that each assessment year is distinct and the assessee must discharge the onus of proving services rendered in the year under consideration; reliance on findings or statements from other assessment years was not permissible where those years had not reached finality or where relevance was not shown. Given the insufficiency of verifiable evidence in the record to establish performance of services in the year under appeal, and that the Assessing Officer had not had opportunity to verify originals or make fresh enquiries on the documents admitted at the appellate stage, the Tribunal considered it appropriate to remit the issue to the Assessing Officer for fresh scrutiny, examination of originals if necessary, and adjudication in accordance with law, with the assessee being afforded adequate opportunity of being heard. [Paras 3]

Issue restored to the file of the Assessing Officer for fresh examination and verification of documentary evidence; appeal allowed for statistical purposes.

Transfer pricing - use of single year data versus multiple year averages for comparables - computation and application of Profit Level Indicator (OP/OR) in transfer pricing - Rule 10B(4) - relevance of prior years' data for comparables - Deletion of transfer pricing adjustment of Rs. 95,47,197/- by the CIT(A) was set aside and the TPO/AO's adjustment restored - HELD THAT: - The Tribunal examined the TPO's reliance on single year data for comparables against the assessee's use of multiple year averages. It recorded that Rule 10B(4) permits use of prior years' data only where such data reveal facts that could influence determination of transfer price; the assessee failed to produce evidence linking variations in comparables' profits to cyclical or other factors having multi year financial impact. The Tribunal found that the CIT(A) had not given adequate reasons for rejecting the TPO's single year approach and for accepting the assessee's multiple year averaging. As no factual justification was placed on record to warrant multiple year averaging, the Tribunal concluded that the TPO/AO's adjustment ought to stand and accordingly set aside the CIT(A)'s deletion. [Paras 4]

Finding of the CIT(A) cancelled; the TPO/AO's transfer pricing adjustment is restored.

Disallowance of telephone and car expenses - requirement of verification of call registers/logbooks - mechanical ad hoc disallowance versus verification of specific instances of non business use - remand for fresh verification by Assessing Officer - Deletion of ad hoc disallowances relating to telephone and car expenses was not sustained and the issue was remanded to the Assessing Officer for verification - HELD THAT: - The Tribunal noted that the Assessing Officer had made ad hoc 5% disallowances on telephone and car expenses because the assessee had not produced call registers or vehicle logbooks during assessment. Although the CIT(A) deleted these disallowances relying on precedent that non business use disallowances may be made in the hands of directors as perquisites, the Tribunal observed that the Assessing Officer had not been given the opportunity to examine documents like call registers or logbooks which were neither placed before him nor forwarded by the CIT(A). Given existing authorities that expenses for personal use are not allowable, and because the lower authorities had not verified the documentary evidence, the Tribunal found it appropriate in the interests of justice to remit the matter to the Assessing Officer for verification of the telephone and vehicle records and adjudication in accordance with law, with the assessee being afforded adequate opportunity to be heard. [Paras 5]

Issue restored to the Assessing Officer for verification of call registers/logbooks and fresh decision; appeal allowed for statistical purposes.

Final Conclusion: The Revenue appeal is partly allowed: the CIT(A)'s deletion of the transfer pricing adjustment is set aside and the TPO/AO's determination restored; the deletions relating to project procurement (commission) expenses and to telephone and car disallowances are remanded to the Assessing Officer for fresh verification and adjudication, with the assessee to be afforded adequate opportunity of hearing.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - change of head of income not amounting to furnishing inaccurate particulars - distinction between assessment proceedings and penalty proceedings - Explanation 1 deeming additions as concealed income where explanation is false or unsubstantiated - bona fide claim and absence of mens rea in civil penalty under section 271(1)(c)

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - change of head of income not amounting to furnishing inaccurate particulars - distinction between assessment proceedings and penalty proceedings - bona fide claim and absence of mens rea in civil penalty under section 271(1)(c) - Validity of deletion by the Commissioner (Appeals) of penalties imposed under section 271(1)(c) in respect of amounts treated by the Assessing Officer as business income though declared by the assessee as short-term capital gains for the assessment years 2005-06, 2006-07, 2007-08 and 2008-09. - HELD THAT: - The Tribunal held that penalty under section 271(1)(c) requires concealment of particulars of income or furnishing of inaccurate particulars; mere taking of a claim unsustainable in law or a change of head of income does not ipso facto amount to furnishing inaccurate particulars where facts were fully disclosed. The assessment and penalty proceedings are distinct; findings in assessment may be evidence but are not conclusive in penalty proceedings. In the present matters the impugned amounts forming the basis of the additions were fully reported in the returns and no material fact or transactional detail was withheld or shown to be factually incorrect. Applying the ratio that making an incorrect claim in law is not equivalent to furnishing inaccurate particulars, and relying on precedents to the effect that absent concealment or false/unsubstantiated explanation the deeming in Explanation 1 cannot be invoked, the Tribunal found no justification to sustain the penalties. Consequently, the Commissioner (Appeals) was correct in deleting the penalties for the four years.

Deletion of penalties under section 271(1)(c) by the Commissioner (Appeals) for assessment years 2005-06, 2006-07, 2007-08 and 2008-09 is upheld and the Department's appeals are dismissed.

Final Conclusion: The Tribunal refused to interfere with the Commissioner (Appeals)' orders deleting the penalties for all four assessment years and dismissed the Department's appeals.

Arm's length price - transfer pricing comparables - functional comparability - segmental data - extra-ordinary events - transactional net margin method (TNMM) - operating profit to operating cost ratio (OP/OC) - remand for fresh comparable selection

Transfer pricing comparables - functional comparability - segmental data - extra-ordinary events - operating profit to operating cost ratio (OP/OC) - Validity of TPO's selected comparable companies and whether specific comparables should be excluded from the TP bench marking set - HELD THAT: - The Tribunal examined each comparable relied upon by the TPO/DRP against functional profile, availability of segmental break up for software services, and occurrence of extraordinary events affecting financials. Wipro Technologies Services Ltd. was held functionally different because it is predominantly engaged in program management, data security, QA and business process management and is a product/large scale services provider under different commercial arrangements; it was directed to be excluded. Zylog Systems Ltd. was excluded because segmental data separating software services from product revenues was not available and because the company undertook an acquisition (Brainhunter Inc.) constituting an extraordinary event affecting results. Persistent Systems & Solutions Ltd. was excluded on the ground of incomparable financial results due to exceptional circumstances and abnormal profits in FY 2010 11. Sasken Communication Technologies Ltd. and Larsen & Tubro Infotech Ltd. were excluded due to absence of segmental data distinguishing product and software services and presence of extraordinary/business circumstances or significant intangibles distinguishing them from the assessee. Persistent Systems Ltd. was excluded as it is engaged in product development and design and thus functionally different from a pure software services provider. The Tribunal also examined companies proposed for inclusion by the assessee (Cat Technologies Ltd., CG VAK Software & Exports Ltd., Chakkilam Infotech Ltd.) and rejected them for lack of clear segmental information or functional differences. Having excluded all the comparables used by the TPO/DRP, the Tribunal found there remained no reliable comparable set for the TNMM/OP OC benchmarking and therefore remanded the matter to the Assessing Officer/TPO to select a new set of comparables that are functionally similar, meet the segmental data and other filters, and to verify the assessee's proposed comparables; the assessee is to provide the new set for verification. [Paras 4, 5, 6]

All challenged comparables were excluded for being functionally dissimilar, lacking segmental data, or affected by extraordinary events; no comparable remained and the matter was remanded to the Assessing Officer/TPO to select and verify a fresh, functionally similar set of comparables and re determine arm's length price.

Final Conclusion: The assessee's appeal is partly allowed for statistical purposes: the Tribunal excluded the comparables relied upon by the TPO/DRP and remanded the transfer pricing study to the Assessing Officer/TPO for fresh selection and verification of functionally comparable entities and recomputation of the arm's length price.

Section 14A - disallowance of expenditure in relation to exempt income - admitted expenditure as basis for disallowance - Rule 8D inapplicability to AY 2007-08 - strategic investments exclusion from section 14A

Section 14A - disallowance of expenditure in relation to exempt income - Rule 8D inapplicability to AY 2007-08 - Disallowance under section 14A where no exempt income is earned in the year - HELD THAT: - The Tribunal observed that the assessee did not earn any exempt (dividend) income in AY 2007-08 and therefore the statutory premise for making a disallowance under section 14A was absent. Relying on the ratio of the Hon'ble Delhi High Court in Cheminvest Ltd. and subsequent coordinate and High Court decisions followed by the Tribunal, the Bench held that section 14A applies to expenditure incurred in relation to income which is actually earned and not includible in total income; where no exempt income is earned or receivable in the relevant year, section 14A will not apply. The Tribunal therefore concluded that the higher mechanical disallowances made by the AO (3%) and sustained partly by the CIT(A) (1%) could not be sustained in view of the factual position of no exempt income. [Paras 5, 6]

Since no exempt income was earned in the year under consideration, disallowance under section 14A cannot be made and the addition under section 14A is to be deleted except as expressly admitted by the assessee.

Admitted expenditure as basis for disallowance - strategic investments exclusion from section 14A - Extent of disallowance where assessee admitted a reasonable disallowance and investments were strategic - HELD THAT: - The Tribunal noted the assessee had voluntarily accepted and admitted an expenditure of Rs. 5 lakhs to be disallowed under section 14A and had contended investments were strategic in group/sister concerns. Following its own earlier decisions in the assessee's cases for subsequent years and decisions holding strategic investments are to be excluded while computing any section 14A disallowance, the Tribunal held that the admitted disallowance of Rs. 5 lakhs represented the reasonable disallowance in the factual matrix. Consequently the Tribunal upheld deletion of the excess disallowance and restricted the disallowance to the amount admitted by the assessee. [Paras 5, 6]

The disallowance is restricted to the admitted amount of Rs. 5 lakhs; the balance additions under section 14A are deleted.

Final Conclusion: Appeal partly allowed: additions/disallowance under section 14A for AY 2007-08 deleted except insofar as the assessee had admitted and accepted a disallowance of Rs. 5 lakhs, which is upheld.

Adjustment of seized assets against advance tax - application of seized assets under section 132B - interpretation of Explanation 2 to section 132B - interest under section 234B and section 234C - effect of declaration/offering of undisclosed income on advance tax liability

Adjustment of seized assets against advance tax - application of seized assets under section 132B - interpretation of Explanation 2 to section 132B - effect of declaration/offering of undisclosed income on advance tax liability - Claim for adjustment of cash seized and pay orders in possession of the department as payment/credit of advance tax on income offered in the return filed after search - HELD THAT: - The Tribunal found the facts to be undisputed that cash and pay orders were taken into possession during search and the assessee offered the amounts as income in the return filed for AY 2012 13 and had made written requests to departmental authorities to adjust the amounts towards advance tax prior to the relevant installment becoming due. The Tribunal rejected the CIT(A)'s reliance on Explanation 2 to section 132B to deny adjustment, placed reliance on the view of the jurisdictional High Court and other decisions to the effect that once undisclosed income is offered to tax before the due date for payment of the advance tax installment, the liability to pay advance tax in respect of that amount arises and the amounts lying with the department can be adjusted against such advance tax. Applying that principle to the facts, the Tribunal held that the amounts of cash and pay orders lying with the department deserved to be adjusted as advance tax. [Paras 6]

The assessee is entitled to have the cash seized and pay orders amounting to the sums declared in the return adjusted against the advance tax liability.

Interest under section 234B and section 234C - effect of declaration/offering of undisclosed income on advance tax liability - Consequential liability to interest under sections 234B and 234C in view of non adjustment of the seized amounts - HELD THAT: - Having held that the departmental sums should have been adjusted as advance tax, the Tribunal concluded that interest charged under section 234C for non payment of the third installment and interest under section 234B could not lawfully be levied to the extent attributable to the unadjusted seized/pay order amounts. The Tribunal directed the AO to allow the credit of the seized amounts and to recompute the interest under sections 234B and 234C after giving effect to the adjustment. [Paras 6, 7]

Interest under sections 234B and 234C shall not be chargeable to the extent covered by the adjustment; the AO is directed to recompute interest after allowing the credit.

Final Conclusion: The appeal is allowed: the Tribunal directs that the cash seized and pay orders in the department be adjusted as advance tax for AY 2012 13 and directs recomputation of interest under sections 234B and 234C after allowing such credit.

Revision of orders prejudicial to Revenue - Exercise of jurisdiction under section 263 - Requirement of application of mind by Commissioner - Audit objection not sufficient to sustain revision - Duty to make inquiry before invoking revision

Exercise of jurisdiction under section 263 - Requirement of application of mind by Commissioner - Duty to make inquiry before invoking revision - Audit objection not sufficient to sustain revision - Whether the order of the Principal Commissioner of Income Tax invoking revision under section 263 was sustainable - HELD THAT: - The Tribunal found that although an audit objection existed, the Principal CIT's order did not rest merely on that objection and recorded that the assessment record had been called for and examined. However, statutory revision under section 263 requires the Commissioner to identify a specific error after examining records and, where necessary, to make or cause to be made such inquiry as he deems fit before concluding that an assessment order is erroneous in so far as prejudicial to revenue. The Principal CIT noted absence of documentary material to substantiate the assessee's explanations on purchase reconciliation and stock valuation, but did not undertake necessary enquiries or frame specific findings of error in the assessment; a mere observation of missing documents or an audit objection without enquiry is insufficient to sustain exercise of revisionary power. In the absence of a demonstrated specific error discovered after enquiry, the Tribunal held that the invocation of section 263 was unsustainable and the revisionary order had to be set aside.

Order passed by the Principal CIT under section 263 set aside for lack of requisite inquiry and identification of specific error; revision held unsustainable.

Final Conclusion: The appeal is allowed and the order passed by the Principal Commissioner of Income Tax under section 263 in respect of Assessment year 2012-13 is set aside for failure to make necessary enquiries and to demonstrate a specific error in the assessment.

Disallowance under section 14A - application of rule 8D - scope of assessment under section 153A following search and seizure - limited to income found in search or with nexus to incriminating material - forfeiture of share warrants - capital receipt versus revenue receipt - bogus purchases - estimation of leakage and partial disallowance - deductibility of employees' contribution to PF/ESIC when paid before filing under section 139(1) - deduction under section 80IC - distinction between manufacturing unit and distribution/stock transfer

Disallowance under section 14A - application of rule 8D - scope of assessment under section 153A following search and seizure - limited to income found in search or with nexus to incriminating material - Whether expenditure disallowance under section 14A r/w rule 8D could be re-opened and re-assessed in proceedings under section 153A in absence of any incriminating material found during search. - HELD THAT: - The Tribunal held that where, at the time of search, the original assessment for the year had been completed, the Assessing Officer in proceedings under section 153A can make additions only in respect of income found as a result of search or having nexus with incriminating material discovered during search. If the section 14A disallowance was concluded in the original assessment and no incriminating material regarding that issue was found in search, the Assessing Officer has no power in section 153A proceedings to revisit that concluded issue. Applying this principle, the Tribunal upheld deletion of the section 14A addition for AY 2008-09. For later assessment years where the original section 14A disallowance had been the subject of appellate remand (or required fresh adjudication), the Tribunal directed restoration of the issue to the file of the Assessing Officer for fresh adjudication with opportunity to the assessee, clarifying that incorporation of an original-assessment disallowance into a fresh assessment under section 153A does not amount to double assessment of the same income. [Paras 5, 23, 38, 54, 62]

Deletion of the section 14A addition upheld for AY 2008-09; for other affected years the issue is restored to the Assessing Officer for fresh adjudication (statistical remand) to decide in accordance with law without causing double disallowance.

Forfeiture of share warrants - capital receipt versus revenue receipt - Whether amounts received on forfeiture of share warrants are capital receipts or taxable revenue receipts. - HELD THAT: - On the facts, the assessee had issued share warrants against share application money; a portion of warrants were later forfeited and the forfeiture amounts were credited to capital reserve. The Tribunal followed precedents holding that forfeiture of share warrants, where not in the regular course of the assessee's business and credited to capital reserve, is capital in nature. The Tribunal also observed that the matter was on the record at the time of the original assessment and not based on incriminating material from the search; accordingly, additions in section 153A on this issue could not be sustained. [Paras 13, 32]

The forfeiture amounts are capital receipts; additions sustained by the Assessing Officer are deleted (Revenue appeals dismissed for the relevant years).

Bogus purchases - estimation of leakage and partial disallowance - Appropriate treatment where Assessing Officer disallows alleged bogus purchases but the assessee proves availability of goods and corresponding sales while failing to establish exact source of purchases. - HELD THAT: - The Tribunal found that where the assessee produced invoices, stock registers, payment details and evidence of corresponding (including export) sales but could not establish the exact source of purchases, it was unreasonable to disallow the entire purchases. To account for potential revenue leakage (e.g., VAT evasion) while recognising evidence of actual purchases and sales, the Tribunal directed a reasonable estimate of disallowance at 12.5% of the alleged bogus purchases and directed the Assessing Officer to give effect accordingly. [Paras 19, 36, 52]

Disallowance on account of alleged bogus purchases restricted to 12.5% of the disputed purchases (assessee's appeals partly allowed).

Deductibility of employees' contribution to PF/ESIC when paid before filing under section 139(1) - Whether employer's claim for deduction of employees' contribution to PF/ESIC is allowable when such contributions were paid before the due date for filing return under section 139(1). - HELD THAT: - Applying the ratio of the jurisdictional High Court, the Tribunal accepted that where employee's contributions to PF/ESIC were paid before the due date of filing the return under section 139(1), the deduction is allowable notwithstanding the Explanation to section 36(1)(va) concerning due dates. The Assessing Officer's disallowance was therefore held to be not sustainable. [Paras 29, 42, 58]

Deduction allowed where employee contributions were paid before the due date of filing the return; additions for delayed payment deleted (Revenue appeals dismissed).

Deduction under section 80IC - distinction between manufacturing unit and distribution/stock transfer - Whether deduction under section 80IC in respect of the Baddi unit was allowable where the Assessing Officer relied on a survey statement alleging receipt of readymade garments from another unit. - HELD THAT: - The Tribunal accepted the first appellate authority's factual findings that the Baddi unit carried out manufacturing activity and that transfers of readymade garments to a Baddi distribution centre were under stock transfer against 'F' Forms and were not the subject of the section 80IC claim. The Commissioner (Appeals) had examined delivery challans, fabric receipt notes and inventory reconciliation and found deduction was claimed only for garments manufactured at Baddi. In the absence of cogent contrary evidence from the Revenue, the Tribunal declined to disturb those findings. [Paras 45, 60]

Deduction under section 80IC in respect of the Baddi manufacturing unit upheld (Revenue's ground dismissed).

Final Conclusion: The Tribunal disposed the consolidated appeals by: dismissing Revenue appeals where additions were unsustainable (including section 14A addition for AY 2008-09, forfeiture of share warrants, delayed PF/ESIC disallowance and denial of section 80IC for the Baddi unit); directing uniform partial relief on alleged bogus purchases (disallowance restricted to 12.5%); and restoring recurring section 14A disputes in other assessment years to the Assessing Officer for fresh adjudication with opportunity to the assessee, while clarifying that incorporation of original-assessment disallowances into section 153A proceedings must not result in double assessment.

Treatment of opening cash balance - unexplained cash credits under section 68 - bank withdrawals as evidence of opening cash - genuineness and creditworthiness of creditors - onus of proof under section 68 - advances received against sale of property

Treatment of opening cash balance - bank withdrawals as evidence of opening cash - unexplained cash credits under section 68 - Whether the opening cash balance of Rs. 4,95,222/- as on 01.04.2013 is to be treated as unexplained income and added under section 68. - HELD THAT: - The Tribunal examined bank statements showing deposits and subsequent withdrawals in February and March 2013 and also the balance sheet as on 31.03.2013 showing cash-in-hand of Rs. 4,95,222/-. The assessee had deposited Rs. 3,10,000/- in February 2013 and withdrawals in February (net Rs. 1,13,000) and March (Rs. 1,94,500) together amounting to Rs. 3,07,500/-, and the balance sheet corroborates cash-in-hand as at 31.03.2013. On these materials the Tribunal found no justification for restricting acceptance to Rs. 1,50,000/- as done by the CIT(A) and directed the AO to accept the opening cash balance of Rs. 4,95,222/-, thereby deleting the addition made under section 68.

Addition on account of unexplained opening cash balance deleted and opening cash of Rs. 4,95,222/- accepted.

Unexplained cash credits under section 68 - genuineness and creditworthiness of creditors - onus of proof under section 68 - Whether unsecured loans totaling Rs. 15 lakhs from three persons are to be treated as unexplained income under section 68. - HELD THAT: - The Tribunal considered documentary evidence and confirmations. The CIT(A) had accepted the loan from one creditor who was an income-tax assessee but sustained additions in respect of two other creditors on the basis that identical cash was deposited in their accounts prior to advancement. The assessee produced confirmations, bank statements, evidence of landholding and agricultural receipts for one creditor and pay evidence and ITR/Form 16 for the other; repayments through bank were also shown. On the totality of record the Bench found the identity, creditworthiness and genuineness of the transactions established and held that the assessee discharged the onus under section 68. Accordingly the additions sustained by CIT(A) were deleted.

Addition in respect of unsecured loans deleted; loans treated as genuine and not assessable as unexplained income.

Advances received against sale of property - unexplained cash credits under section 68 - onus of proof under section 68 - Whether advances of Rs. 15 lakhs received against an agreement to sell land are to be treated as unexplained income under section 68. - HELD THAT: - The assessee produced the agreement for sale dated 24.05.2013 and the purchasers appeared and gave statements accepting payment of the advance and explaining the source as sale proceeds of agricultural produce and past savings; the agreement also noted encumbrance/encroachment and the registry was to follow on vacancy. The Tribunal found no contrary material to displace the purchasers' admissions and held that suspicion arising from the fact that registration did not occur later was not sufficient to treat the advances as unexplained income. On the record the identity and genuineness of the advances were established and the addition was deleted.

Addition in respect of advances against proposed sale deleted; advances accepted as genuine.

Final Conclusion: The assessee's appeal is allowed in full: the additions made under section 68 in respect of opening cash balance, unsecured loans, and advances against sale of property are deleted and the respective amounts are accepted as explained.

Revisionary jurisdiction under section 263 - erroneous and prejudicial to the interest of revenue - allowability of repairs and maintenance - capital v. revenue expenditure - obligation to make enquiries in assessment proceedings - lack of inquiry by Assessing Officer as ground for revision - plausible view of Assessing Officer

Revisionary jurisdiction under section 263 - lack of inquiry by Assessing Officer as ground for revision - allowability of repairs and maintenance - capital v. revenue expenditure - erroneous and prejudicial to the interest of revenue - Whether the Principal Commissioner was justified in invoking revisionary jurisdiction under section 263 on the ground that the Assessing Officer failed to enquire into the allowability of 'Repairs & Maintenance - Buildings' leading to an order which was erroneous and prejudicial to the revenue - HELD THAT: - The Tribunal found that the assessee had filed a general note with the return describing aggregate expenditure under 'Repairs & Maintenance - Buildings' but did not furnish a detailed break-up that would have triggered specific enquiries. The Assessing Officer, though calling for details of all expenses, did not raise any query or examine the particular claim of repairs and maintenance (including interior works) and therefore made no independent enquiry into whether those expenditures were revenue in nature or capital. The Principal Commissioner treated the non-enquiry as rendering the assessment order erroneous and prejudicial to the revenue and set aside the assessment for fresh adjudication. The Tribunal applied settled law that mere non-enquiry of an item can make an assessment order erroneous and prejudicial (as in the cited Supreme Court precedents) and held that when the requisite enquiry warranted by the facts was not made by the AO, exercise of revisionary jurisdiction under section 263 was justified. The Tribunal rejected the assessee's contention that the AO had implicitly considered the issue because a general note was filed or because similar issues had been decided in an earlier assessment year, observing that no specific examination was made in the assessment proceedings before the AO. [Paras 6]

Revision under section 263 was rightly invoked by the Principal Commissioner because the Assessing Officer failed to make the requisite enquiry into the allowability of the repairs and maintenance expenditure, rendering the assessment order erroneous and prejudicial to the revenue.

Final Conclusion: The appeal is dismissed; the Tribunal upholds the revision order under section 263 and confirms that the assessment is to be re-framed after proper enquiry into the repairs and maintenance claim.

Service of Order-in-Original - personal liability of director after resignation - interim injunction restraining recovery proceedings - right to invoke appellate remedy upon receipt of order

Personal liability of director after resignation - service of Order-in-Original - Prima facie entitlement to relief where demand was raised against a former director who resigned prior to show cause notice and had not been served with the adjudication order - HELD THAT: - The Court recorded the petitioner's case that he resigned as Managing Director on 18.12.2003 (with Form 32 filed on 21.1.2004) prior to the show cause notice dated 29.3.2004, and that he had not been served with the Order-in-Original dated 14.2.2008 which founded the subsequent demand. On the material placed before it, the Court found that the petitioner had established a prima facie case warranting interim protection from recovery proceedings while questions of liability and service remained to be examined by the appropriate forum. The Court therefore granted interim relief restraining respondents from initiating recovery against the petitioner pending further steps.

Interim protection was warranted; respondents restrained from initiating recovery proceedings against the petitioner pursuant to the impugned communications.

Service of Order-in-Original - right to invoke appellate remedy upon receipt of order - interim injunction restraining recovery proceedings - Consequences of subsequent service of the Order-in-Original and time allowed to the petitioner to pursue statutory remedies - HELD THAT: - After the interim order, the respondents served a copy of the Order-in-Original on the petitioner on 18.9.2017. In light of this development the Court declined to continue an open-ended stay of recovery and instead kept the impugned demand in abeyance for a limited period. The petitioner was granted a 30-day period from receipt of the copy of this order to file an appeal against the Order-in-Original and to avail the legal remedies available under the statute. This course balanced the petitioner's opportunity to seek appellate relief with the respondents' interest in enforcing the adjudication once procedural prerequisites (service and opportunity to appeal) were met.

Demand kept in abeyance for 30 days from date of receipt of this order to enable the petitioner to file an appeal against the Order-in-Original; thereafter normal proceedings may follow.

Final Conclusion: Writ petition disposed of by recording interim protection earlier granted, directing that the impugned demand remain in abeyance for 30 days to enable the petitioner to pursue available appellate remedies upon having been served with the Order-in-Original; no costs.

Confiscation for violation of over-side discharge procedures - penal liability for omission to amend overside discharge guarantee - breach of procedural requirements under the Customs Act - liability where imported goods are non-dutiable - application of Section 112(a) for procedural omission

Confiscation for violation of over-side discharge procedures - liability where imported goods are non-dutiable - penal liability for omission to amend overside discharge guarantee - Whether confiscation of the imported goods and the barges and imposition of penalty for failure to include the barges in the over-side discharge guarantee was justified where the goods were duty-free and the appellants advanced explanations of bad weather and urgent operational necessity. - HELD THAT: - The Tribunal accepted the factual finding that the barges in which the Canadian whole yellow peas were loaded were not included in the over-side discharge guarantee and that procedural requirements were not observed. However, the imported yellow peas were not dutiable. The appellants and the stevedore explained that adverse weather, heavy swell and poor communications at Sagar anchorage on a Sunday compelled use of available barges to avoid further demurrage and damage, and that inclusion of the barges in the overside guarantee was applied for on the next working day. Given absence of any duty liability on the cargo and the reasonable operational explanation for the procedural lapse, the Tribunal held that confiscation of the goods and barges and imposition of penalty would be disproportionate and unjustified. The Tribunal therefore set aside the Commissioner's order of confiscation and penalty and allowed the appeals.

Confiscation of the goods and barges and imposition of penalty set aside; appeals allowed.

Final Conclusion: On the facts found, and in view of absence of duty liability and the appellants' credible explanation for the procedural omission, confiscation and penalty imposed by the Commissioner were set aside and the appeals were allowed.

Penalty on co-appellant for customs duty default - effect of payment of duty with interest and 15% penalty by main noticee under Explanation 3 to Section 28 - extinguishment of proceedings against co-noticees where main party's settlement is within 30 days - inapplicability of settlement-scheme decisions to Explanation 3 to Section 28

Effect of payment of duty with interest and 15% penalty by main noticee under Explanation 3 to Section 28 - penalty on co-appellant for customs duty default - extinguishment of proceedings against co-noticees where main party's settlement is within 30 days - Whether penalty imposed on the appellant (a co-appellant/co-noticee) is sustainable where the main party paid the entire duty, interest and 15% penalty under Explanation 3 to Section 28 and proceedings against the main party were dropped. - HELD THAT: - The Tribunal held that Explanation 3 to Section 28 operates to render the show-cause proceedings unsustainable where the principal/importer (the main noticee) has paid the entire duty along with interest and 15% penalty within the stipulated period, and that consequence extends to co-noticees. The Bench considered and followed the Tribunal's earlier decision in Gautam Pukhraj Bafna, which treated settlement by the main noticee (payment of duty, interest and 15% penalty within 30 days of the SCN) as terminating proceedings against co-noticees. The respondent's reliance on Yogesh Korani was rejected because that decision arose under the Kar Vivad Samadhan Scheme, 1998 and was held inapplicable to the present statutory regime and facts. Applying the foregoing legal principle to the admitted fact that the main party had paid duty, interest and the 15% penalty and the proceedings against it were dropped, the Tribunal concluded that the penalty confirmed against the appellant could not be sustained. [Paras 6, 8, 9]

Penalty imposed on the appellant is set aside and the appeal is allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, holding that where the main importer paid the entire duty with interest and 15% penalty under Explanation 3 to Section 28 and proceedings against the main party were dropped, penalty against the co-appellant could not be sustained; the impugned order imposing penalty on the appellant was set aside.

Classification under Customs Tariff Heading - interpretation of tariff headings for medical devices - haemofiltration instruments - classification of blood filtration/haemofiltration devices - order rendered inconsequential by subsequent appellate order - modification of appellate order - reassessment speaking order requirement under Section 17(5) of the Customs Act, 1962

Order rendered inconsequential by subsequent appellate order - Whether Order-in-Appeal No. 525/2014 dated 17-6-2014 remained operative or had become inconsequential in view of a later Order-in-Appeal decided on merits. - HELD THAT: - The Tribunal found that Order-in-Appeal No. 525/2014 had been superseded by a later Order-in-Appeal (No. 1161/2015 dated 4-8-2015) which decided the classification of the same goods on merits. Because the subsequent order addressed the same subject-matter on merits, the earlier order could not stand and was set aside as inconsequential. [Paras 4]

Order-in-Appeal No. 525/2014 set aside as inconsequential; Revenue's appeal in that matter allowed.

Classification under Customs Tariff Heading - interpretation of tariff headings for medical devices - haemofiltration instruments - classification of blood filtration/haemofiltration devices - modification of appellate order - Proper classification of imported item described as 'Toraymyxin Single Unit Cartridge (Dialyser Blood Filter)' for tariff purposes. - HELD THAT: - The Tribunal examined the product literature and accepted that the item is used medically to treat sepsis and functions as an endotoxin removal cartridge, falling within the category of blood filtration/haemofiltration instruments. While the Revenue contended it was a general filtering apparatus classifiable elsewhere, the Tribunal held that within the chapter the item aligns with haemofiltration instruments and therefore its appropriate classification is CTH 9018 90 33. For these reasons the Tribunal set aside the Order in Original and modified the Commissioner (Appeals)' order accordingly. [Paras 5, 6]

Item classified under CTH 9018 90 33; Order in Original set aside and the impugned Order in Appeal modified; Revenue's appeal against that order dismissed.

Final Conclusion: The earlier appellate order dated 17-6-2014 was set aside as inconsequential; on merits the imported Toraymyxin cartridge was held to be a haemofiltration instrument and classified under CTH 9018 90 33, resulting in modification of the appellate order dated 4-8-2015 and dismissal of the Revenue's appeal against that order.

Classification as glass beads under Customs Tariff Heading 7018 10 20 - transaction value and rejection of declared value - misdeclaration of value - confiscation with option of redemption and redemption fine under Section 125(1) of the Customs Act, 1962

Classification as glass beads under Customs Tariff Heading 7018 10 20 - Classification of the imported goods as glass beads (not glass chatons/stones). - HELD THAT: - The Commissioner (Appeals) analysed the nature and description of the goods and concluded that they are to be classified as glass beads under Customs Tariff Heading 7018 10 20. The Revenue did not produce any substantial material or evidence to rebut or differ from that classification. The Tribunal, upon review, finds no reason to disturb the classification recorded in the impugned order-in-appeal. [Paras 5]

Classification as glass beads under Customs Tariff Heading 7018 10 20 is upheld.

Transaction value and rejection of declared value - misdeclaration of value - Whether the transaction value declared by the importer could be rejected and the assessable value enhanced for alleged undervaluation/misdeclaration. - HELD THAT: - The impugned order-in-appeal examined the valuation materials and found that the Department failed to produce clear and cogent evidence to discard the transaction value declared in the import documents. The Additional Commissioner had enhanced assessable value and treated the goods as undervalued by reference to other imports and databases, but the Commissioner (Appeals) concluded that such enhancement was not supported by convincing material. The Tribunal finds that the Department has not furnished further evidence to substantiate misdeclaration of description or value and that there are no convincing grounds to reject the declared transaction value. [Paras 6, 7]

The transaction value declared by the importer is accepted; the enhancement of assessable value and findings of misdeclaration are not sustained.

Final Conclusion: The appeal filed by Revenue is dismissed; the Order in Appeal setting aside the order in original is sustained, with the classification as glass beads and the declared transaction value accepted, and the revenue's challenge to confiscation/penalty and valuation disallowed.

One Time Settlement (OTS) policy - Writ jurisdiction under Article 226 - Winding up and Official Liquidator / liquidation proceedings - Section 446 - suits stayed on winding up order and Tribunal's jurisdiction - Judicial restraint in interfering with commercial recovery where statutory remedy exists

One Time Settlement (OTS) policy - Writ jurisdiction under Article 226 - Judicial restraint in interfering with commercial recovery where statutory remedy exists - Validity of respondent No.2's rejection of the petitioner's OTS proposals and availability of writ relief directing acceptance of settlement. - HELD THAT: - The Court examined the sequence of correspondence, the prior attempts at settlement before the Delhi High Court and the Supreme Court, and the Board decision dated 20/06/2017 rejecting the petitioner's OTS proposals. Having regard to the Delhi High Court's detailed findings that the petitioner repeatedly failed to comply with deadlines and that the OTS offer as finally determined by the corporation had not been paid, the High Court held that the corporation was entitled to reject proposals not in accordance with its OTS determination. The Court recorded that the State-cum-corporation was not under any legal obligation to accept an offer which, in its view, did not conform to the policy and that exercise of extraordinary writ jurisdiction to compel a commercial settlement would be inappropriate where statutory remedies and winding up proceedings exist. The judgments relied upon by the petitioner were found distinguishable on facts and did not mandate interference in the present circumstances. Consequently the petitioner's contention that the Board's rejection was arbitrary or illegal was rejected. [Paras 18, 19, 21]

Petitioner's challenge to the rejection of its OTS proposals is dismissed; the rejection is not shown to be illegal or arbitrary and writ relief to compel acceptance is declined.

Winding up and Official Liquidator / liquidation proceedings - Section 446 - suits stayed on winding up order and Tribunal's jurisdiction - Effect of the winding up order on the petitioner's right to seek settlement and the appropriate forum for adjudication of claims after winding up. - HELD THAT: - The Court noted that the Delhi High Court had admitted the winding up petition, appointed a provisional liquidator and had afforded the petitioner one final opportunity to pay the admitted liability; that order was affirmed by the Supreme Court and has attained finality. Section 446 was examined and the Court observed that once a winding up order is made and a provisional liquidator appointed, continuation or commencement of suits or proceedings against the company is subject to the Tribunal's leave, and the Company Court (Tribunal) has jurisdiction to entertain claims in the winding up. In view of the statutory scheme and the finality of the winding up proceedings, the High Court concluded that there was no bar on the petitioner approaching the appropriate statutory forum for relief and that the writ jurisdiction was not to be used to bypass the statutory mechanism provided in winding up proceedings. [Paras 19, 22]

Winding up order being final, the petitioner must pursue remedies under the statutory scheme (including before the Tribunal/Company Court and the Official Liquidator); the writ court will not supplant that forum.

Final Conclusion: Writ petition dismissed; the High Court declines to interfere with respondent No.2's rejection of the OTS proposals or to empower the petitioner to compel settlement, observing that the winding up order has attained finality and that the petitioner must pursue statutory remedies under the winding up regime.

Moratorium under insolvency proceedings - interim resolution professional's authority to pay operational charges - restoration of essential services during corporate insolvency - month-to-month liabilities for ongoing supply after restoration - non-liability for pre-moratorium dues pending resolution plan

Interim resolution professional's authority to pay operational charges - restoration of essential services during corporate insolvency - month-to-month liabilities for ongoing supply after restoration - Payment of electricity consumption dues during the moratorium period and restoration of supply - HELD THAT: - The Tribunal permitted the Interim Resolution Professional (IRP) to deposit the electricity charges for consumption accruing from the commencement of moratorium (17.01.2017) up to September 2017. Upon deposit of that amount, the electricity distributor agreed to restore the connection within 48 hours so that the corporate debtor remains operational. Thereafter the IRP, on behalf of the corporate debtor, is required to pay electricity charges month to month; failure to do so permits the distributor to take appropriate steps, including disconnection. The order thereby recognises the IRP's authority to make payments necessary to maintain essential services during the moratorium and conditions continued supply on contemporaneous payment of ongoing charges.

IRP allowed to pay electricity consumption dues from 17.01.2017 to September 2017 for restoration; distributor to restore supply within 48 hours; IRP to pay subsequent monthly charges or risk appropriate action by distributor.

Moratorium under insolvency proceedings - non-liability for pre-moratorium dues pending resolution plan - Liability for electricity dues prior to the moratorium - HELD THAT: - The Tribunal clarified that neither the corporate debtor nor the Resolution Professional is liable to pay dues that accrued prior to the order of moratorium. Such pre-moratorium dues are not to be enforced against the corporate debtor in the interim and can be considered only at the stage of payment to creditors in the resolution plan. This preserves the priority and treatment of claims under the insolvency process and prevents enforcement of pre-moratorium operational debts outside the resolution framework.

Corporate Debtor and Resolution Professional are not liable to pay electricity dues that accrued before the moratorium; those dues may be considered during distribution under the resolution plan.

Final Conclusion: The appeals are disposed of by permitting the IRP to pay electricity consumption charges from 17.01.2017 to September 2017 for immediate restoration of supply (subject to continued month-to-month payment thereafter), and by clarifying that pre-moratorium electricity dues remain payable only in the course of the resolution process and are not enforceable against the corporate debtor or IRP at this stage.

Oppression and mismanagement - invalidity of meeting held without notice - invalid increase of authorised share capital - invalid allotment to outsider in a private company - invalid allotment to existing shareholders without notice - deemed vacation of directorship under section 283(1)(g) of Companies Act, 1956 - alteration of Memorandum and Articles effected by invalid meeting - applicability of Companies Act, 1956 to pending proceedings - relief under section 402 of Companies Act, 1956

Invalidity of meeting held without notice - oppression and mismanagement - Increase of authorised share capital in the EOGM held on 28.11.2013 is invalid as the meetings were held without valid notice to the petitioners and were oppressive. - HELD THAT: - The Bench found that the respondents failed to prove service of the statutory notices required for the Board meeting of 04.10.2013 and the Extra-Ordinary General Meeting of 28.11.2013. A calendar of events sent in advance did not satisfy the statutory requirement of a notice specifying place, day, hour and business, and a belated postal reminder could not cure non-service. Holding a board meeting and convening an EOGM without giving the petitioners proper notice, particularly when a petitioner was an active director (P2), was held to be an act of mala fide suppression and oppressive conduct. The meeting convened and the resultant resolution to increase authorised share capital were therefore declared invalid and prejudicial to the petitioners' interest. [Paras 12, 13, 14, 15]

Increase of authorised share capital effected in the proceedings of 28.11.2013 is invalid; the meetings were held without valid notice and constitute oppressive conduct.

Invalid allotment to outsider in a private company - invalid allotment to existing shareholders without notice - Allotment of shares to an outsider (R5) and allotments to R2 and R3 at par without giving notice to the majority shareholder are invalid and prejudicial to the petitioners. - HELD THAT: - R1 is a private company whose Articles require compliance with the procedure in section 81(1A) before issuing shares to persons not covered by the statutory rights issue; no special resolution authorising allotment to an outsider was proved. Further, allotments to R2 and R3 were made without serving notice on the petitioners and at par, which, in the factual matrix, showed an intention to dilute the majority shareholder's interest. The Bench held that necessity for funds does not excuse non-compliance with notice and requisite procedure; hence the allotments are bad in law and prejudicial to the petitioners. [Paras 16, 17, 18, 19, 20]

Allotment to R5 and the allotments to R2 and R3 are declared invalid and prejudicial to the petitioners.

Deemed vacation of directorship under section 283(1)(g) of Companies Act, 1956 - invalidity of Form 32 filing - Removal (deemed vacation) of P2 as director under section 283(1)(g) is invalid and the Form-32 filed to that effect is invalid. - HELD THAT: - The respondents failed to prove the particulars required to invoke section 283(1)(g): the specific meetings P2 allegedly missed were not identified, the dates were inconsistent, and there was no proof that the statutory prerequisites (absence from three consecutive board meetings or continuous absence for three months without leave) were complied with. The inconsistent dates in the notice and in Form-32, both produced by the respondents, led the Bench to conclude that the resolution to vacate P2's office was not validly passed and that the Form-32 filing was invalid. [Paras 21, 22, 23]

The purported vacation of office of P2 and the Form-32 filed thereon are invalid; P2 is to be reinstated as director.

Alteration of Memorandum and Articles effected by invalid meeting - Alteration of the Memorandum and Articles of Association made at the invalid EOGM is invalid and prejudicial to the petitioners. - HELD THAT: - Because the EOGM of 28.11.2013 was held without valid notice to the petitioners and was therefore invalid, the resolutions passed at that meeting to alter the Memorandum and Articles cannot stand. The alteration was consequent to the invalid meeting and so is itself invalid. [Paras 25]

Alteration of the Memorandum and Articles of Association effected at the invalid meeting is declared invalid and prejudicial to the petitioners.

Appointment of director consequent to invalid allotment - Appointment of R5 as director is invalid. - HELD THAT: - Since the allotment to R5 (an outsider) was held invalid and because the appointment flowed from that allotment and the invalid meetings, the appointment of R5 as additional director is likewise invalid and prejudicial to the petitioners. [Paras 24, 25]

Appointment of R5 as director is invalid.

Applicability of Companies Act, 1956 to pending proceedings - Proceedings under sections 397-398 instituted before the advent of the Companies Act, 2013 are governed by the Companies Act, 1956 and not the Companies Act, 2013. - HELD THAT: - Applying principles of prospective operation of statutes and the saving provisions, the Bench held that substantive rights arising before the new enactment are governed by the law in force at the time. Relying on section 465 of the Companies Act, 2013 and the General Clauses Act principles, the Bench concluded that these proceedings are to be adjudicated under sections 397-398 of the Companies Act, 1956. [Paras 27, 29, 31, 35, 36]

The Companies Act, 1956 applies to these proceedings; the Companies Act, 2013 does not govern the adjudication of the instant petition.

Final Conclusion: The Bench held that the respondents conducted the affairs of R1 oppressively and prejudicially: the Board meeting(s) and the EOGM convened without valid notice were invalid; the increase of authorised capital, allotments to R2, R3 and R5, alteration of Memorandum and Articles, and appointment of R5 and the Form-32 removal of P2 are declared invalid; P2 is to be reinstated and the petitioners (P1 through P2) are directed to take over management with specified safeguards. The Bench ordered a forensic audit (from 01.04.2013), valuation and exit mechanism for R2-R4 and directed refund/adjustment in respect of funds infused by R5 in accordance with the auditor's report, disposing of the company petition under section 402 of the Companies Act, 1956.

Moratorium under Section 14 of Insolvency & Bankruptcy Code, 2016 - enforcement of security interest under SARFAESI Act, 2002 - confirmation of sale under Rule 9 of the Security Interest (Enforcement) Rules, 2002 - concluded sale versus sale in progress - fraud and recall under Section 65 of Insolvency & Bankruptcy Code, 2016 - prevailing effect of the Insolvency & Bankruptcy Code over inconsistent laws

Moratorium under Section 14 of Insolvency & Bankruptcy Code, 2016 - enforcement of security interest under SARFAESI Act, 2002 - confirmation of sale under Rule 9 of the Security Interest (Enforcement) Rules, 2002 - concluded sale versus sale in progress - Sale alleged to be confirmed under SARFAESI proceedings and whether it is hit by the moratorium declared under Section 14 of the Code - HELD THAT: - The Tribunal examined Rule 9 of the Security Interest (Enforcement) Rules, 2002 and held that the process envisages (i) an initial declaration of highest bidder by the authorised officer (sub rule (2)), (ii) immediate deposit of 25% by the purchaser (sub rule (3)), and (iii) payment of the balance and subsequent confirmation by the secured creditor and issuance of a sale certificate only after full compliance (sub rule (4) and (6)). The word "confirmation" in sub rule (2) is distinct from the secured creditor's confirmation under sub rule (6); full payment and secured creditor confirmation are prerequisite to a concluded sale. As the purchaser had paid only 25% and the secured creditor had not given confirmation under sub rule (6), the transaction remained a sale in progress under Section 13 of SARFAESI. Section 14 of the Insolvency & Bankruptcy Code bars enforcement of security interest and suspension of proceedings in progress during moratorium; therefore SARFAESI proceedings in progress (including the sale here) are suspended for the moratorium period and the alleged sale is hit by the moratorium. [Paras 10, 26]

The sale is not a concluded sale and proceedings under SARFAESI are suspended during the moratorium declared under Section 14 of the Code.

Fraud and recall under Section 65 of Insolvency & Bankruptcy Code, 2016 - prevailing effect of the Insolvency & Bankruptcy Code over inconsistent laws - Whether the miscellaneous application seeking recall/modification of the moratorium order can be entertained as a grievance under Section 65 on the ground of fraud - HELD THAT: - The Tribunal considered the contention that the petition under Section 7 was filed fraudulently to frustrate JM's SARFAESI rights. The Adjudicating Authority had before it the pendency of SARFAESI proceedings when admitting the Section 7 petition and found no material to conclude that the petitioner acted fraudulently or with malicious intent to curtail JM's rights. Given that a financial creditor is statutorily entitled to initiate proceedings under Section 7 notwithstanding SARFAESI proceedings and that the Code (including Section 238) prevails over inconsistent laws, the circumstances did not warrant invocation of Section 65 to recall the validly passed moratorium order. The Tribunal rejected the argument that lack of prior hearing to JM required recall, noting no legal mandate to serve or hear secured creditors other than the corporate debtor before admission. [Paras 10, 11]

No fraud was found and Section 65 does not justify recalling or setting aside the moratorium; the application is dismissed.

Final Conclusion: The miscellaneous applications (IVN. P. No. 02/2017 and MA 222/2017) are dismissed: the SARFAESI sale was not a concluded sale and is suspended by the moratorium under Section 14 of the Code, and there is no basis under Section 65 to recall or modify the moratorium.

Impleading of association of workmen in Section 9 proceedings - Corporate Insolvency Resolution Process - Role of association of workmen post-admission - Claims by individual workmen - Powers and duties of the Insolvency Resolution Professional

Impleading of association of workmen in Section 9 proceedings - Role of association of workmen post-admission - Claims by individual workmen - Powers and duties of the Insolvency Resolution Professional - Whether an association of workmen can be impleaded in a Section 9 application and what role, if any, such association has after admission of the application. - HELD THAT: - The Tribunal held that an association of workmen cannot be impleaded in proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016; after the Adjudicating Authority admitted the Section 9 application and initiated the Corporate Insolvency Resolution Process against the corporate debtor, the association has no role to play in the insolvency proceedings. Members of the association may, however, participate only by filing claims individually. The Insolvency Resolution Professional is required to proceed with the insolvency process in accordance with the provisions of the I&B Code.

Association of workmen cannot be impleaded in Section 9 proceedings; post-admission only individual members may file claims and the Insolvency Resolution Professional shall proceed as per the I&B Code.

Corporate Insolvency Resolution Process - Whether the Appellate Tribunal should interfere with the impugned order after the Adjudicating Authority admitted the Section 9 application. - HELD THAT: - Having regard to the admission of the Section 9 application by the Adjudicating Authority, the Tribunal declined to interfere with the impugned order. The Tribunal recorded that its refusal to interfere does not preclude any aggrieved person from challenging the order of admission under Section 9 by appropriate remedy.

Tribunal declined to interfere with the impugned order admitting the Section 9 application, while leaving open the right of aggrieved persons to challenge the admission order.

Final Conclusion: Appeal disposed of; association of workmen cannot be impleaded in Section 9 proceedings and has no role after admission except through individual members filing claims; Insolvency Resolution Professional to proceed in accordance with the I&B Code; refusal to interfere with the admission does not bar challenge to the admission order.

Condonation of delay - Notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - Authority to issue Section 8 notice - person authorised holding position with or in relation to Operational Creditor - Invalidity of advocate's notice as Section 8 notice - Consequences of invalid Section 8 notice - dismissal of Section 9 petition and setting aside of consequent orders - Payment of Interim Resolution Professional's fees by applicant/operational creditor

Condonation of delay - Application for condonation of delay in filing the appeal was allowed. - HELD THAT: - The appellant's appeal was filed beyond the prescribed 30-day period. The Tribunal accepted the explanation that part of the delay related to the Appellate Tribunal's summer vacation and, excluding the vacation period, found a short delay of 11 days. Having heard the parties and being satisfied with the explanation, the Tribunal exercised its discretion to condone the delay. [Paras 2, 3]

Delay of 11 days is condoned and the appeal is admitted.

Notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - Authority to issue Section 8 notice - person authorised holding position with or in relation to Operational Creditor - Invalidity of advocate's notice as Section 8 notice - Notice under Section 8 issued through the legal firm (advocate) was not valid as a Section 8 notice and therefore could not sustain proceedings under Section 9. - HELD THAT: - The Tribunal found, and the respondent conceded, that the demand notice under sub-section (1) of Section 8 was issued by a legal firm and not by the Operational Creditor itself. Relying on the Appellate Tribunal's earlier ruling in Uttam Galva Steels Limited v. DF Deutsche Forfait AG & Anr., the Tribunal applied the principle that a Section 8 notice must be issued by the Operational Creditor or by a person authorised to act on its behalf who holds a position with or in relation to the Operational Creditor; an ordinary advocate or external professional, absent board-authorised authority or positional relationship, cannot issue a notice under Section 8. As the notice in this case was issued by an advocate/firm without evidence of such authority or positional relationship, it could not be treated as a valid notice under Section 8, rendering the Section 9 application unsustainable. [Paras 4, 5, 6, 7]

The Section 8 notices issued through the legal firm are invalid; the Section 9 petition is not maintainable on that basis.

Consequences of invalid Section 8 notice - dismissal of Section 9 petition and setting aside of consequent orders - Payment of Interim Resolution Professional's fees by applicant/operational creditor - All orders and actions flowing from the impugned order under Section 9 were set aside; the Section 9 application was dismissed; the respondent was directed to pay the Interim Resolution Professional's fees for the period of functioning; no costs were awarded. - HELD THAT: - Having held the Section 8 notices invalid and the Section 9 petition unsustainable, the Tribunal set aside the impugned order of the Adjudicating Authority and declared illegal all consequential orders and actions (including appointment of any Interim Resolution Professional, declaration of moratorium, freezing of accounts, and any advertisement or call for applications). The Tribunal directed the Adjudicating Authority to close the proceedings, released the appellant company to function through its Board, directed fixation of the IRP's fees by the Adjudicating Authority and ordered the respondent to pay those fees for the period the IRP functioned. In the circumstances, the appeal was allowed but no order as to costs was made. [Paras 7, 8, 9]

Impugned order and all consequential actions are set aside; Section 9 application dismissed; Respondent to pay IRP's fees as fixed by Adjudicating Authority; no costs ordered.

Final Conclusion: The appeal is allowed: delay in filing is condoned; the Section 8 notices issued through a legal firm were held invalid, the Section 9 petition consequently dismissed, and all orders and actions consequent to the impugned Adjudicating Authority order set aside; the Adjudicating Authority will fix the IRP's fees which the respondent shall pay; no order as to costs.

Rigors of Section 45 of the Prevention of Money Laundering Act - money laundering offence under Section 3 of PMLA - proceeds of crime - burden of proof under Section 24 of PMLA - special statute prevailing over Code of Criminal Procedure - bail enquiry on broad probabilities / prima facie satisfaction

Rigors of Section 45 of the Prevention of Money Laundering Act - special statute prevailing over Code of Criminal Procedure - bail enquiry on broad probabilities / prima facie satisfaction - Whether the High Court and Sessions Court rightly rejected the appellant's regular bail application by applying the threshold conditions of Section 45 of the PMLA - HELD THAT: - The Court held that Section 45 of the PMLA, being a special statute with a non obstante clause, imposes mandatory threshold conditions for grant of bail which bind courts considering bail under Section 439 Cr.P.C. The conditions require opportunity to the public prosecutor and satisfaction on reasonable grounds that the accused is not guilty and is not likely to commit an offence while on bail. The Courts below applied the appropriate exercise of mind under the special statute, examined materials on record on broad probabilities (not by weighing evidence meticulously) and recorded that the appellant failed to satisfy the threshold. The appellant's interim release order granted by a Single Judge on the basis of his mother's illness was held to be inapplicable to the regular bail petition, which must meet the Section 45 threshold. On the facts, the material and antecedents supported refusal of regular bail and this Court found no reason to interfere. [Paras 17, 18, 21, 27, 29]

The rejection of the regular bail application by the Sessions Court and the High Court for failure to satisfy the threshold requirements of Section 45 PMLA is upheld.

Money laundering offence under Section 3 of PMLA - proceeds of crime - burden of proof under Section 24 of PMLA - Whether the materials on record prima facie establish involvement of the appellant in money laundering (i.e., that the property was 'proceeds of crime') - HELD THAT: - The Court analysed Sections 3 and 4 and the definitional provisions, observing that the core of Section 3 is 'proceeds of crime' as defined in Section 2(1)(u). The courts below relied on documentary material, statements recorded under Section 50 PMLA, call data records, bank account analyses and recoveries to conclude prima facie that the deposits, demand drafts in fictitious names and possession of large demonetized and new currency were indicia of criminal activity and thus proceeded of crime. In view of the statutory presumption under Section 24, the burden lay on the appellant to dispel the presumption by explaining the source; no satisfactory explanation was offered. The Court affirmed that mere payment of tax or absence of an express allegation in the predicate charge sheet that the cash was crime proceeds did not negate the prima facie case under PMLA. [Paras 22, 23, 24, 28]

On the materials taken at their face value and having regard to the statutory presumption, a prima facie case of money laundering involving proceeds of crime was made out; the appellant failed to discharge the burden to the contrary.

Bail enquiry on broad probabilities / prima facie satisfaction - Whether the interim bail granted earlier to the appellant (on humanitarian grounds) estops or supports his claim for regular bail - HELD THAT: - The Court clarified that the Single Judge's order granting interim bail was primarily a humanitarian indulgence on account of the mother's illness and did not address the merits of a regular bail application under Section 45. The observations in the interim order (such as past cooperation, period of incarceration and filing of charge sheet in the predicate offence) do not discharge the statutory threshold; hence the interim release is of no avail in assailing the refusal of regular bail. [Paras 15, 16]

The interim bail order does not vitiate application of Section 45 or compel grant of regular bail; it is not a ground to overturn the rejection of the regular bail petition.

Final Conclusion: The appeals are dismissed. The Courts below correctly applied the mandatory threshold of Section 45 PMLA and, on the materials and statutory presumptions, rightly refused regular bail; trial shall proceed expeditiously and the trial court must consider evidence on merits independently.

Summary order. Petition admitted and delay condoned.

Cenvat credit and revenue neutrality - Taxation of services provided from outside India and timing of provision of services - Extended period of limitation and suppression with intent to evade - Underwriting and merchant banking services (Banking and Other Financial Services) - Remand for de novo adjudication

Cenvat credit and revenue neutrality - input service - Whether the appellants are entitled to Cenvat credit or revenue neutrality in respect of service tax paid on fees to foreign service providers and whether this affects the demand. - HELD THAT: - The Tribunal found that the adjudicating authority did not examine the factual aspects relevant to the claim of Cenvat credit and revenue neutrality, including whether the services qualify as input services and the effect of alleged payments from the PLA account. The appellants contend that had service tax been discharged the liability would have been revenue neutral and that they had in fact paid the tax under protest and/or availed credit. Those factual contentions were not verified by the adjudicating authority. In view of the lack of factual determination on entitlement to credit, revenue neutrality and related accounting treatment, the Tribunal remanded the issue for fresh verification and adjudication.

Remanded to the adjudicating authority for fresh adjudication on entitlement to Cenvat credit and revenue neutrality after factual verification; matter not finally decided on merits.

Taxation of services provided from outside India and timing of provision of services - Tax point / time of provision of services - Whether the services were provided before or on/after 18-4-2006 and the consequent liability to service tax (including reverse charge implications). - HELD THAT: - The Tribunal observed that the adjudicating authority did not examine disputed factual matters bearing on when the service was rendered - the appellants maintain services were provided before 18-4-2006 while the Revenue points to documentation (offer circular, invoice dates, and delivery/consummation dates) suggesting material activity on or after 18-4-2006. Because the factual question of when the service was provided is determinative of whether service tax liability arose and was incorrectly left unexamined, the Tribunal directed a fresh factual inquiry by the adjudicating authority.

Remanded for determination of the period when services were rendered and consequent taxability (including reverse charge timing); not decided on merits by the Tribunal.

Extended period of limitation and suppression with intent to evade - Registration and filing obligations and invocation of extended limitation - Whether extended period of limitation and provisions invoked by the Revenue (including imposition of penalty) were justified by suppression of facts or malafide intention, given the appellants' registration, returns and payment conduct. - HELD THAT: - The Tribunal recorded that the adjudicating authority did not verify factual assertions relevant to invocation of extended limitation - including whether the appellants had registration under the relevant service category, filed returns, had a bona fide belief about taxability in light of contemporaneous litigation, and whether there was suppression with intent to evade. Because these factual matters remain undecided and are central to whether extended limitation and penalty provisions apply, the Tribunal remanded the issue for fresh factual and legal consideration by the adjudicating authority.

Remanded for fresh adjudication on the question of extended limitation, suppression with intent to evade and related penalties after factual verification; no final finding by the Tribunal.

Final Conclusion: The impugned order is set aside and the matters concerning entitlement to Cenvat credit/revenue neutrality, the period when services were rendered (pre- or post-18-4-2006) and the correctness of invoking extended limitation/penalty are remanded to the adjudicating authority for de novo adjudication after verifying relevant facts; the adjudicating authority shall afford the appellant opportunity of personal hearing and dispose of the matter within three months.

Revenue neutrality - Cenvat credit - Denovo adjudication - Suppression of facts - Extended period of demand

Revenue neutrality - Cenvat credit - Denovo adjudication - Suppression of facts - Whether the claim of revenue neutrality raised by the appellant requires fresh adjudication and verification of facts - HELD THAT: - The Tribunal observed that the adjudicating authority rejected the claim of revenue neutrality solely on the ground of suppression of facts without examining the factual matrix required to determine revenue neutrality. Relying on the Larger Bench principle that revenue neutrality is a question of fact to be decided in light of the particulars of each case, the Tribunal held that several factual aspects must be examined before rejecting or allowing the claim - including whether the assessee discharged excise duty/service tax on output services/goods in cash to an extent at least equal to the input service tax, whether the services claimed as inputs are admissible under the Cenvat Credit Rules (including Rule 2(l)), and whether exempted supplies or other facts affect availability of credit. Because these factual elements were neither placed on record in detail by the appellant nor examined by the adjudicating authority, the Tribunal concluded that the matter could not be finally disposed of on the record before it and required a fresh adjudication. The Tribunal therefore remanded the issue for denovo adjudication by the original authority with directions to consider the appellant's factual claims after affording personal hearing and to decide the matter on merits. [Paras 6]

Revenue neutrality claim remanded to the original adjudicating authority for denovo adjudication after factual verification; all other issues kept open.

Final Conclusion: The appeal is allowed to the extent that the question of revenue neutrality is remanded to the original adjudicating authority for fresh adjudication after affording the appellant a personal hearing and examining factual aspects (including admissibility of Cenvat credit); other contentions were left open. The adjudicating authority is directed to decide the matter within three months from receipt of this order.

Rent-a-cab service - control and possession - negative list service tax levy - stage carriage versus contract carriage - special permit under section 88(8) of the Motor Vehicles Act

Rent-a-cab service - control and possession - Whether hire charges for provision of APSRTC buses for marriage functions/pilgrimages up to 30.06.2012 attract service tax as rent-a-cab service. - HELD THAT: - Applying the principle that a taxable transaction under the rent-a-cab rubric requires actual renting of the vehicle such that control and possession are given to the hirer, the Tribunal followed the ratio of the High Court in CCE v. Sachin Malhotra that mere hiring where the owner retains control and possession does not amount to renting under the rent-a-cab scheme. The Tribunal observed that APSRTC's buses remained stage carriages with control retained by the Corporation when provided for such functions and accordingly no rent-a-cab service tax liability arose for the impugned period up to 30.06.2012. [Paras 10]

Demands of service tax under rent-a-cab for the period till 30.06.2012 set aside.

Negative list service tax levy - stage carriage versus contract carriage - special permit under section 88(8) of the Motor Vehicles Act - Whether the same activities are liable to service tax from 01.07.2012 when the negative list regime came into effect. - HELD THAT: - Under the negative list regime from 01.07.2012, services not specifically excluded are taxable. Although transportation by stage carriage is included in the negative list entry, the Tribunal held that when a vehicle issued a stage carriage permit operates under a contract carriage permit or a special permit (including temporary special permits under section 88(8) of the Motor Vehicles Act) for hire, the vehicle assumes the character of a contract/special-permit carriage for that period and therefore cannot claim the stage-carriage negative-list exclusion. Applying this legal characterisation, the Tribunal sustained the impugned service tax demands from 01.07.2012 onwards. However, noting the substantial litigation and confusion over the legal interpretation, the Tribunal set aside the penalties imposed. [Paras 11, 14]

Service tax demands sustained from 01.07.2012; penalties imposed are set aside.

Final Conclusion: Appeals partly allowed: service tax demands relating to hire of buses for marriage/pilgrimage set aside up to 30.06.2012; demands from 01.07.2012 onwards upheld while penalties are quashed; appeals otherwise dismissed.

Summary order. Notice issued; recovery of penalty stayed pending further orders.

Summary order. Delay condoned; special leave petition admitted; operation of the impugned order stayed.

Refund of unutilized CENVAT credit under Rule 5 - discrepancy between ER-2 returns and CENVAT credit account - evidentiary value of Chartered Accountant certificate and CENVAT credit register - reversal of CENVAT credit as basis for refund claim - non-conclusiveness of ER-2 figures where explained by records

Refund of unutilized CENVAT credit under Rule 5 - discrepancy between ER-2 returns and CENVAT credit account - evidentiary value of Chartered Accountant certificate and CENVAT credit register - reversal of CENVAT credit as basis for refund claim - Whether the refund claim was rightly rejected on account of a discrepancy between amounts shown in ER-2 returns and the appellant's CENVAT credit account when the appellant produced a CA certificate and the credit register showing reversal of credit - HELD THAT: - The Tribunal found on perusal of records that the appellant had in fact reversed CENVAT credit amounting to Rs. 34,43,095/-, whereas the ER-2 returns erroneously showed a lower figure of Rs. 22,81,894/-. The appellant produced a Chartered Accountant's certificate and the CENVAT credit account register to explain the discrepancy. The Tribunal held that the figures in ER-2 returns are not sacrosanct and, where the claimant furnishes contemporaneous account records and a CA certificate demonstrating reversal of credit, those records are sufficient to explain and rectify an inadvertent misstatement in ER-2. The Commissioner (Appeals) erred in rejecting the refund on the ground of unexplained discrepancy despite the documentary explanation and reversal having been established. Accordingly the impugned order was set aside and the appellant's appeal allowed. [Paras 6]

Impugned order set aside; appeal allowed and refund claim accepted to the extent supported by the appellant's records and CA certificate.

Final Conclusion: The Tribunal allowed the appeal, set aside the Commissioner (A)'s order rejecting the refund claim and accepted the appellant's explanation and documentary proof (CA certificate and CENVAT credit register) for the discrepancy between ER-2 returns and the CENVAT credit account, thereby permitting the refund in accordance with the records produced.

Cenvat credit admissibility on invoices issued by a registered dealer - admissibility of statements recorded under Section 14 without opportunity for cross-examination - compliance with Rule 9(3) of the Cenvat Credit Rules - onus on Revenue to independently prove non-receipt of goods and return of consideration

Admissibility of statements recorded under Section 14 without opportunity for cross-examination - The reliance on the proprietor's statements recorded behind the back of the appellant without examination-in-chief and cross-examination cannot sustain denial of credit or penalties. - HELD THAT: - The Tribunal held that the Revenue's case principally rested on the statement of the proprietor of the supplying dealer recorded without producing him for examination-in-chief or permitting cross-examination. Citing the principle that such statements recorded against the assessee cannot be relied upon in adjudication unless the procedure in clause (b) of the relevant provision is followed, the impugned statements were excluded from evidence in the absence of opportunity to test them by cross-examination. The Tribunal noted precedent that the adjudicating authority is required to examine the deponent before relying on such statements and that untested statements cannot be preferred over exculpatory statements made by the assessee under the same statutory provision. [Paras 6]

Statement of the supplier's proprietor, recorded without examination-in-chief and cross-examination, could not be relied upon to deny credit or impose penalties.

Onus on Revenue to independently prove non-receipt of goods and return of consideration - cenvat credit admissibility on invoices issued by a registered dealer - Revenue failed to discharge the burden of proving that the inputs were not received by the appellants or that cheque payments were returned, and therefore denial of cenvat credit was untenable. - HELD THAT: - The Tribunal found no tangible evidence that the cheques paid to the supplier were encashed and amounts returned to the appellants; no bank enquiry or corroborative particulars of the alleged broker or return transactions were produced. The appellants had recorded the inputs in RG-23A Part I, used them in manufacture, and cleared final products on payment of duty. Given the absence of independent investigation by Revenue to show non-receipt of inputs or return of consideration, and the existence of exculpatory statements and contemporaneous records, the Tribunal concluded Revenue's case was incomplete and insufficient to deny credit. [Paras 7]

Denial of cenvat credit could not be upheld because Revenue did not produce independent evidence proving non-receipt of inputs or return of payments.

Compliance with Rule 9(3) of the Cenvat Credit Rules - The appellants complied with the requirements of Rule 9(3) of the Cenvat Credit Rules by relying on invoices showing the supplier's name, address and registration particulars. - HELD THAT: - The Tribunal observed that invoices issued by the supplier contained his name, address and registration number and cross-referenced manufacturer invoices; on production of such invoices the statutory requirement of acquainting oneself with the identity of the supplier under Rule 9(3) was satisfied. Consequently, the appellants fulfilled the obligation of knowing their dealer and were entitled to rely on the invoices unless Revenue established otherwise by independent evidence. [Paras 8]

Requirement of Rule 9(3) was satisfied and could not be the basis to deny cenvat credit in the facts of the case.

Cenvat credit admissibility on invoices issued by a registered dealer - Decisions holding that credit may be allowed where the buyer produced invoices from a registered dealer and Revenue failed to produce tangible evidence of fraud are applicable and govern the outcome. - HELD THAT: - The Tribunal referred to a consistent line of decisions where credit was allowed despite investigations showing fraudulent activity by dealers, noting that where Revenue relies on the same investigation it must still produce tangible evidence to prove non-receipt. The Tribunal found the facts of such precedents, including cases arising from investigations into the same supplying dealer, parallel the present case and supported allowing credit when Revenue's evidence was uncorroborated. [Paras 9, 10, 11]

Precedents where credit was upheld in similar circumstances apply; Revenue's reliance on the same uncorroborated investigation does not justify denial of credit.

Final Conclusion: Impugned order disallowing cenvat credit and imposing penalties is set aside; both appeals are allowed with consequential relief to the appellants.

Binding effect of a tribunal remand and limited scope of remand - finality of tribunal decision and its application to identical facts - distinction between a manufacturing process and testing/quality control activity - obligation of adjudicating authority to follow tribunal direction

Binding effect of a tribunal remand and limited scope of remand - obligation of adjudicating authority to follow tribunal direction - Whether the adjudicating authority exceeded the limited remand direction and was bound to confine its enquiry to ascertaining whether the facts at Pune were the same as those at the Ankleshwar unit. - HELD THAT: - The Tribunal's remand directed the adjudicating authority only to determine whether the processing and facts at Pune were the same as those found at the appellants' Ankleshwar unit and, if so, to apply the Tribunal's earlier decision in respect of that unit. The adjudicating authority, however, reopened the entire controversy and entered into broader issues including tariff restructuring and distinguishing the Tribunal's earlier view by referencing other decisions. The Tribunal's remand order had not been challenged by the Revenue and therefore had attained finality for the limited purpose specified. The adjudicating authority was bound to adhere to that limited scope and could not decide issues beyond the factual comparison mandated by the remand; doing so rendered the denovo adjudication impermissible. [Paras 5, 6]

The adjudicating authority exceeded the limited remand direction; its wider adjudication is unsustainable and set aside.

Finality of tribunal decision and its application to identical facts - distinction between a manufacturing process and testing/quality control activity - Whether the facts at the Pune unit were the same as at the Ankleshwar unit and, if so, whether the Tribunal's earlier decision in favour of the Ankleshwar unit applies to set aside the duty and penalty demand. - HELD THAT: - On the denovo adjudication record it is apparent that the activity at the Pune unit involved purchase of short lengths of bare copper wire, enamelling with varnish for purposes connected to the assessee's final product and preservation of samples which were later cleared as scrap after quality testing-facts that the adjudicator himself recorded as being the same as at the Ankleshwar unit. Given that identity of facts and that the Tribunal had earlier allowed the appeal in respect of the Ankleshwar unit, the Ankleshwar decision is applicable. The Tribunal's prior order in respect of the Ankleshwar unit has attained finality and, in view of the factual parity, the impugned demand and penalty cannot be sustained. [Paras 4, 5, 6]

Facts at Pune are the same as at Ankleshwar; the Tribunal's Ankleshwar decision applies and the impugned order confirming duty and penalty is set aside.

Final Conclusion: The appeal is allowed. The adjudicating authority exceeded the limited remand and, having found the Pune unit facts identical to the Ankleshwar unit, the Tribunal's earlier decision in favour of the Ankleshwar unit applies; the impugned order confirming duty and penalty is set aside with consequential relief as per law.

Reversal of Cenvat credit - Work-in-process destroyed in fire - Interpretation of Rule 3(5B) of the Cenvat Credit Rules, 2004 - Invocation of Rule 3(5C) and remission under Rule 21 of the Central Excise Rules, 2002 - Insurance compensation and reversal of credit

Reversal of Cenvat credit - Work-in-process destroyed in fire - Interpretation of Rule 3(5B) of the Cenvat Credit Rules, 2004 - Inputs contained in semi-finished goods (work-in-process) destroyed in fire are not liable to reversal under Rule 3(5B) of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal found that sub-rule (5B) is directed to situations where inputs or capital goods, before being put to use, are written off from the books and cannot be equated with inputs that have been used and are contained in semi-finished goods destroyed in the course of manufacture. The appellant had already reversed credit on inputs lying in stock; the demand to reverse credit on inputs consumed into WIP confused the write-off scenario contemplated by sub-rule (5B) with destruction occurring during manufacture. The Tribunal held that applying sub-rule (5B) to consumed inputs in WIP is a misreading of that provision and therefore not tenable.

Demand to reverse cenvat credit on inputs contained in WIP destroyed by fire under Rule 3(5B) set aside; such reversal not warranted.

Invocation of Rule 3(5C) and remission under Rule 21 of the Central Excise Rules, 2002 - Work-in-process destroyed in fire - Rule 3(5C) (and the related remission mechanism under Rule 21) is applicable when an assessee seeks remission for duty on finished goods; it does not apply where goods destroyed are only semi-finished and no remission application is made. - HELD THAT: - Relying on earlier Tribunal reasoning, the Court observed that Rule 3(5C) contemplates recovery of duty where remission under Rule 21 is sought in respect of finished goods. In the present case the goods destroyed were work-in-process that had not attained the stage of finished goods and no remission application was filed; consequently Rule 3(5C) could not be invoked to justify recovery of credit on inputs consumed into those WIP goods.

Rule 3(5C) and remission under Rule 21 not attracted; recovery could not be sustained on that basis.

Insurance compensation and reversal of credit - Reversal of Cenvat credit - Receipt of insurance compensation (including amount attributable to duty) for destroyed goods does not, by itself, entitle the Revenue to demand reversal of legitimately availed and utilised cenvat credit. - HELD THAT: - The Tribunal followed the reasoning in the cited precedent that merely because an insurance company compensates the assessee for loss including excise duty component, that fact does not render the prior availment and utilization of Cenvat credit irregular nor does it authorize the Excise Department to demand reversal. The Tribunal found no contrary evidence to justify treating the insurance recovery as a ground for denying or recovering credit.

Demand premised on insurance compensation set aside; insurance receipt does not justify reversal of legitimately availed credit.

Final Conclusion: The impugned order confirming recovery of cenvat credit on inputs contained in work-in-process destroyed by fire, and treating insurance compensation as a basis for reversal, is set aside; the appeal is allowed with consequential relief as per law.

Reversal of CENVAT credit for capital goods sent for job work where not returned within 180 days - permissibility and procedural compliance for removal of capital goods to a job worker - inapplicability of precedents under erstwhile Central Excise Rules to disputes under CENVAT Credit Rules, 2004 - penalty for contravention of CENVAT Credit Rules - personal penalty under Rule 15 of the CENVAT Credit Rules, 2004

Reversal of CENVAT credit for capital goods sent for job work where not returned within 180 days - permissibility and procedural compliance for removal of capital goods to a job worker - Cenvat credit availed on capital goods removed to another unit not registered with Central Excise which were not returned within 180 days must be reversed. - HELD THAT: - The Tribunal found that the appellant had availed CENVAT credit on capital goods and later removed those goods to another premises without following the CENVAT Credit Rules, 2004 procedures. Rule 4(5)(a) permits CENVAT credit where inputs or capital goods sent to a job worker are received back within 180 days; if they are not received back within that period the manufacturer must pay an amount equivalent to the CENVAT credit attributable to those goods (with re-credit permitted on actual return). Since the goods were not received back within 180 days and the procedural safeguards were not followed, the appellant was required to reverse the credit with interest. [Paras 5, 7]

Appellant required to reverse the CENVAT credit attributable to the capital goods removed and not returned within 180 days.

Inapplicability of precedents under erstwhile Central Excise Rules to disputes under CENVAT Credit Rules, 2004 - Decisions rendered under the erstwhile Central Excise Rules (e.g., Rule 57Q(1)) are not applicable to disputes arising under the CENVAT Credit Rules, 2004 where different procedural conditions (such as the 180 day return requirement) are prescribed. - HELD THAT: - The Tribunal distinguished the authorities cited by the appellant, holding that those decisions concerned capital goods credit under Rule 57Q(1) of the erstwhile Central Excise Rules, 1944, which are different in substance and procedure from the provisions of the CENVAT Credit Rules, 2004 (notably rule 3(4) and 4(5)(a)). Consequently, the cited precedents did not support the appellant's contention that procedural formalities could be dispensed with when goods were moved to another premises engaged in job work. [Paras 6, 7]

Earlier precedents under the erstwhile Central Excise Rules do not govern the present dispute under the CENVAT Credit Rules, 2004.

Penalty for contravention of CENVAT Credit Rules - Imposition of penalty on the assessee for not following the prescribed procedure for removal of capital goods for job work is justified. - HELD THAT: - The Tribunal noted that the appellant removed capital goods immediately after installation by using chits and did not follow the prescribed procedural safeguards for removal to job work (in contrast to the procedure followed for inputs where Annexure II challans were used). Given this failure to comply with the CENVAT Credit Rules, the imposition of penalty on the appellant entity was held to be justified. [Paras 7]

Penalty imposed on the appellant is sustained.

Personal penalty under Rule 15 of the CENVAT Credit Rules, 2004 - Personal penalty imposed on the director under Rule 15 is not warranted and is set aside. - HELD THAT: - Although the Tribunal upheld the penalty against the appellant for procedural contravention, it considered the facts and circumstances and found no reason to levy a personal penalty on Shri Manoj Joshi under Rule 15 of the CENVAT Credit Rules. Accordingly, the personal appeal of the director was allowed while the corporate-level penalty was maintained. [Paras 7]

Personal penalty on the director under Rule 15 is rescinded; the director's appeal is allowed.

Final Conclusion: The appeal by the assessee-company is rejected insofar as reversal of CENVAT credit and imposition of penalty on the company are affirmed; however the personal penalty imposed on the director under Rule 15 is set aside and his appeal is allowed.

CENVAT credit of 4% Additional Customs Duty (SAD) - eligibility for refund under Notification No.102/2007-Cus - manipulation of RG-23A records and fabricated issue slips - limitation and extended period of limitation - personal penalty under Rule 26 of the Central Excise Rules, 2002

CENVAT credit of 4% Additional Customs Duty (SAD) - manipulation of RG-23A records and fabricated issue slips - Admissibility of CENVAT credit of 4% SAD availed on imported goods which were sold as such instead of being received and used in factory premises. - HELD THAT: - The Tribunal found that the appellants imported Borax Pentahydrate but sold the goods at the place of import against commercial invoices instead of receiving and using them in the factory. The Department produced RG-23A Part I and II entries and issue slips which the Tribunal concluded were manipulated and fabricated (false chit numbers) to portray receipt and consumption in factory. Such deliberate falsification demonstrates intention to avail inadmissible CENVAT credit. The Tribunal rejected the appellants' contention that a bona fide belief (based on a Budget speech) absolved them: manipulation of records cannot be equated with an innocent belief and does not convert an inadmissible credit into an admissible one. The Tribunal therefore upheld the adjudication holding the credit inadmissible and the recovery justified.

Claim to CENVAT credit of 4% SAD on imported goods sold as such rejected; recovery of inadmissible credit upheld.

Eligibility for refund under Notification No.102/2007-Cus - limitation and extended period of limitation - Whether the demand for recovery was barred by limitation or rendered revenue-neutral by the availability of refund under Notification No.102/2007-Cus from 14.9.2007. - HELD THAT: - The Tribunal held that the appellants' reliance on prospective availability of refund under Notification No.102/2007-Cus did not render the earlier availed credit revenue-neutral. Refund under the Notification is not automatic; it requires filing of claim and scrutiny by the proper officer and fulfillment of conditions. Moreover, periodical audits by the Department do not preclude invocation of extended limitation where records were manipulated to conceal true transactions. Given the deliberate falsification of RG-23A entries and issue slips, the plea of limitation and revenue neutrality was not sustainable.

Demand not barred by limitation; availability of refund under the Notification does not nullify liability absent compliance with refund procedure and where records were manipulated.

Personal penalty under Rule 26 of the Central Excise Rules, 2002 - manipulation of RG-23A records and fabricated issue slips - Sustainability of personal penalty imposed on the director under Rule 26 in view of the findings of manipulation. - HELD THAT: - The Tribunal accepted the finding that records were deliberately manipulated to show receipt and consumption of imported goods in the factory, thereby facilitating inadmissible credit. Such conduct supports imposition of a penalty on the responsible director under Rule 26. The Commissioner (Appeals) had reduced the penalty against the director to a specified sum; the Tribunal upheld the impugned order sustaining liability and penalty as adjudicated (subject to the reduction made by the Commissioner (Appeals)).

Personal penalty on the director under Rule 26 sustained in view of record manipulation; impugned order upheld.

Final Conclusion: Appeals dismissed; the Tribunal upheld the adjudication confirming recovery of inadmissible CENVAT credit of 4% SAD with interest and penalty, and sustained the personal penalty on the director, rejecting the pleas of limitation, revenue neutrality by subsequent Notification, and bona fide belief.

Options under Rule 6(3) of the Cenvat Credit Rules, 2004 - Explanation I - option once exercised cannot be withdrawn during the remaining part of the financial year - Sub rule (3A) procedure for reversal of proportionate CENVAT credit - Prohibition on switching option within the same financial year - Imposition and reduction of penalty for initial non compliance

Options under Rule 6(3) of the Cenvat Credit Rules, 2004 - Explanation I - option once exercised cannot be withdrawn during the remaining part of the financial year - Sub rule (3A) procedure for reversal of proportionate CENVAT credit - Prohibition on switching option within the same financial year - Appellant cannot switch from paying 10% of the value of exempted goods for the first quarter to reversing proportionate Cenvat credit for the remaining part of the same financial year. - HELD THAT: - A plain reading of Rule 6(3) coupled with Explanation I shows that a manufacturer/provider who avails any one of the two options must exercise that option for all exempted goods/services and shall not withdraw it during the remaining part of the financial year. The payment of 10% for the quarter 01.04.2008 to 30.06.2008 constituted exercise of the Clause (i) option for that financial year. The alternative route of reversing proportionate credit requires compliance with the procedure prescribed under Sub rule (3A). Having availed the first option in the initial quarter, the appellant was precluded by Explanation I from switching to Sub rule (3A) for the remainder of 2008 09. The Tribunal distinguished the Mercedes Benz decision relied upon by the appellant on its facts, since that case involved reversal under Sub rule (3A) albeit with procedural non compliance, and is therefore inapplicable to the present facts. [Paras 6, 9]

Switching option within the same financial year is not permissible; the assessment confirming demand on that ground is sustained.

Imposition and reduction of penalty for initial non compliance - Penalty imposed on the appellant for the non compliance was excessive and required reduction. - HELD THAT: - Although the amended Rule came into force from 01.04.2008 and the appellant did not follow the alternate procedure from the start, the Tribunal regarded the initial non compliance leniently in view of the proximity of the amendment and the nature of the non compliance. The Tribunal held that the penalty amount imposed by the adjudicating authority was harsh and accordingly reduced the penalty to a nominal sum. [Paras 9]

Penalty reduced; the adjudicatory order is modified to the extent of reducing the penalty and the appeal is partly allowed.

Final Conclusion: The Tribunal held that an assessee who paid 10% of the value of exempted goods for the quarter 01.04.2008 to 30.06.2008 could not thereafter opt to reverse proportionate CENVAT credit under Sub rule (3A) for the remainder of the financial year 2008 09; however, the penalty imposed for the initial non compliance was reduced as excessive and the appeal was partly allowed.

Modvat credit - extended period of limitation - confiscation of capital goods - penalty under Rule 173Q of Central Excise Rules, 1944 - personal penalty under Rule 209A of Central Excise Rules, 1944 - revenue neutrality - burden of proof for installation and transfer of capital goods

Modvat credit - extended period of limitation - burden of proof for installation and transfer of capital goods - Recoverability of Modvat credit availed on capital goods and validity of invoking extended period of limitation. - HELD THAT: - The Tribunal accepted the finding of the Commissioner (Appeals) that the appellant had availed Modvat credit on capital goods which were not found in its premises at the time of inspection and which, on admission by the unit's manager, had been installed in the premises of another registered unit of the group. The appellants failed to produce corroborative evidence (installation/erection charges, transfer memos, delivery vouchers or repair records) to show that the goods had been installed and used in the appellant's factory for three to four years prior to their removal. Returns filed by the appellant did not establish that the department knew of any removal so as to oust the extended period. In these circumstances the Tribunal held that the larger period of limitation was rightly invoked and the demand with interest for the wrongly availed credit was sustainable. [Paras 6, 7, 8]

Demand of Modvat credit with interest confirmed against the appellant.

Confiscation of capital goods - burden of proof for installation and transfer of capital goods - Whether confiscation of the seized capital goods and plant and machinery is sustainable. - HELD THAT: - While removal of capital goods without intimation and improper availment of credit justified recovery of the credit, the Tribunal held that confiscation of capital goods could not be sustained where the goods were duty-paid and found in the premises of another registered unit. The Court reasoned that mere removal without intimation does not render duty-paid goods liable to confiscation, and plant and machinery of the recipient unit cannot be confiscated merely for wrongful availment of credit by the transferor. [Paras 7, 8]

Confiscation of the capital goods and plant and machinery set aside.

Penalty under Rule 173Q of Central Excise Rules, 1944 - personal penalty under Rule 209A of Central Excise Rules, 1944 - proportionality - Validity and quantum of penalties imposed on the companies and on the director. - HELD THAT: - The Tribunal upheld imposition of penalty equal to the wrongly availed credit on the appellant as justified by the circumstances. However, having regard to the overall facts and the quantum involved, the Tribunal found the penalties imposed on the recipient unit and on the director to be excessive and, in the interest of justice, reduced those penalties. The order below was therefore modified to maintain liability for penalty on the appellant while moderating penalties imposed on other appellants and the director. [Paras 7, 8]

Penalty equal to the credit wrongly availed on the appellant upheld; penalties on the recipient unit and on the director reduced (as set out in the order).

Final Conclusion: The appeals are disposed modifying the impugned order: the demand of Modvat credit with interest is confirmed; confiscation of capital goods and plant and machinery is set aside; penalty liability for wrongly availed credit is upheld against the appellant, while the penalties imposed on the recipient unit and on the director are reduced in the interests of justice.

Eligibility of CENVAT credit on structural steel items used in fabrication/support structures of capital goods - user test for capital goods - requirement of evidentiary proof including Chartered Engineer's Certificate to establish use - remand for verification and fresh adjudication in light of binding tribunal precedent

Eligibility of CENVAT credit on structural steel items used in fabrication/support structures of capital goods - user test for capital goods - requirement of evidentiary proof including Chartered Engineer's Certificate to establish use - remand for verification and fresh adjudication in light of binding tribunal precedent - Claim for CENVAT credit on round bars, HR plates, MS channels, MS angles and similar structural items used in fabrication/supporting structures of capital goods remanded to the adjudicating authority for fresh examination in light of the Tribunal's precedent. - HELD THAT: - The Tribunal referred to its decision in Singhal Enterprises Pvt. Ltd., which applied the Supreme Court's user test to hold that structural steel items fabricated into support structures for capital goods fall within the definition of capital goods and are thus potentially eligible for CENVAT credit. Noting that the appellant did not place a Chartered Engineer's certificate or other corroborative evidence on record, the Tribunal found it necessary to remit the matter to the adjudicating authority for verification of the claimed user and eligibility. The adjudicating authority is directed to decide the claim afresh applying the legal principle in Singhal Enterprises and to permit the appellant to produce evidence, including a Chartered Engineer's certificate, to establish that the items were used as parts/components of capital goods. All issues were kept open for determination by the adjudicating authority upon fresh consideration. [Paras 5, 6]

Appeal allowed by way of remand to the adjudicating authority to examine and decide the eligibility of the claimed CENVAT credit in accordance with the Tribunal's precedent, permitting the appellant to adduce evidence including a Chartered Engineer's certificate.

Final Conclusion: The appeal succeeds by way of remand: the adjudicating authority is directed to re-examine the appellant's claim for CENVAT credit for the period August 2008 to Janurary 2009 in the light of the Singhal Enterprises precedent, allowing the appellant to furnish evidence (including a Chartered Engineer's certificate) and to decide all issues afresh.

Liability to pay interest under Rule 7(4) of the Central Excise Rules, 2002 - provisional assessment and final assessment - interest payable from date of determination of amount - comparative interpretation with Section 18(3) of the Customs Act, 1962 - binding precedent of Commissioner vs CEAT Ltd.

Liability to pay interest under Rule 7(4) of the Central Excise Rules, 2002 - provisional assessment and final assessment - interest payable from date of determination of amount - Interest under Rule 7(4) of the Central Excise Rules, 2002 is payable only upon determination of the amount by final assessment, and not immediately from the month succeeding the provisional assessment. - HELD THAT: - Rule 7(4) makes the assessee liable to pay interest on any amount payable to the Central Government consequent to the order for final assessment under sub rule (3), from the first day of the month succeeding the month for which such amount is determined, until payment. Applying that language, the Tribunal followed the reasoning in the Hon'ble Bombay High Court in CEAT Ltd., subsequently upheld by the Supreme Court, which holds that liability to interest arises when an amount is determined by final assessment and not merely because a provisional assessment was directed or a differential duty was paid prior to finalisation. By contrast, Section 18(3) of the Customs Act, 1962 expressly fixes interest from the month in which duty is provisionally assessed; the difference in statutory text underscores that Rule 7(4) does not create an interest liability from the date of provisional assessment. The Tribunal therefore preferred the binding Supreme Court precedent over the earlier contrary view of the Allahabad High Court and concluded that interest cannot be levied until the duty is finally determined. [Paras 6, 7, 8, 9]

The impugned order is set aside; appeals allowed - interest under Rule 7(4) is leviable only upon determination by final assessment and not from the month following provisional assessment.

Final Conclusion: Following the Supreme Court's affirmation of the Bombay High Court decision in CEAT Ltd., the Tribunal held that Rule 7(4) attracts interest only when the duty is determined by final assessment; the appeals were allowed and the impugned order set aside.

Liability to duty on transaction value of waste and scrap of capital goods - CENVAT credit on capital goods - interpretation of Rule 3(5A) of CCR, 2004 - verification of evidences to establish availing of CENVAT credit

Interpretation of Rule 3(5A) of CCR, 2004 - liability to duty on transaction value of waste and scrap of capital goods - Rule 3(5A) applies only where CENVAT credit had been availed on the capital goods and, if so, waste and scrap cleared from factory are liable to duty equal to duty leviable on transaction value. - HELD THAT: - A plain reading of Rule 3(5A), inserted w.e.f. 16.06.2005, shows that the provision becomes operative when capital goods on which CENVAT credit was availed are subsequently cleared as waste and scrap; in such event the manufacturer is liable to pay an amount equal to the duty leviable on the transaction value of that waste and scrap. Thus, applicability of the duty under Rule 3(5A) is contingent upon a prior availing of CENVAT credit on the capital goods which later generated the waste and scrap. The Tribunal therefore framed the determinative question as whether the waste and scrap arose out of capital goods on which CENVAT credit had been availed, noting that the obligation to pay duty under the Rule arises only upon that factual antecedent having been established. [Paras 6, 7]

Rule 3(5A) renders waste and scrap of capital goods dutiable on transaction value only where CENVAT credit had been availed on those capital goods.

Verification of evidences to establish availing of CENVAT credit - remand for de novo adjudication - Whether the specific clearances of iron waste and scrap in the present case were generated out of capital goods on which CENVAT credit had been availed was not finally determined and was remanded for verification. - HELD THAT: - Although the appellant asserted that the discarded parts derived from plant and machinery procured prior to the CENVAT regime (1992-93) and that no CENVAT credit had been availed on those items, it did not substantiate the claim before the adjudicating authority. The Tribunal observed that before fastening liability under Rule 3(5A) it is necessary to ascertain whether CENVAT credit had in fact been availed on the capital goods which became scrap. Given the absence of verified evidence on this pivotal factual point, the Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority for de novo consideration and verification of the evidence placed by the appellant and any further evidence that may be produced. [Paras 8]

Impugned order set aside and matter remanded to adjudicating authority to verify whether CENVAT credit had been availed on the capital goods that became waste and scrap.

Final Conclusion: Appeal allowed by way of remand; impugned order set aside and matter remitted to the original adjudicating authority for de novo verification of evidence to determine whether CENVAT credit was availed on the capital goods which generated the waste and scrap for the period May 2007 to March 2011, and for consequential decision in accordance with law.

Eligibility to avail Cenvat credit of service tax on input services used in or in relation to manufacture - treatment of tax paid by supplier and entitlement of recipient to Cenvat credit where tax was paid by supplier - apportionment of service tax liability between service provider and service recipient under Notification 30/2012 ST and its relevance to credit eligibility - condition for availing credit under reverse charge mechanism requiring tax amount to be indicated in invoice

Eligibility to avail Cenvat credit of service tax on input services used in or in relation to manufacture - treatment of tax paid by supplier and entitlement of recipient to Cenvat credit where tax was paid by supplier - apportionment of service tax liability between service provider and service recipient under Notification 30/2012 ST and its relevance to credit eligibility - condition for availing credit under reverse charge mechanism requiring tax amount to be indicated in invoice - Appellant entitled to avail Cenvat credit of service tax paid by the service provider for man power supply services received during July 2012 to December 2013. - HELD THAT: - The Tribunal applied the principle in Nahar Granites Ltd. that where duty/tax has been paid by the supplier and the department has accepted the classification and payment, the recipient who otherwise satisfies the conditions for Cenvat credit cannot be denied credit on the ground that the supplier initially paid the amount. The apportionment of liability under Notification 30/2012 ST (fixing a share of liability on service recipient) does not, by itself, render the credit inadmissible if the service tax amount paid (even by the provider) is shown in the invoice and the recipient has used the input service in or in relation to manufacture. The proviso to the provision governing reverse charge was noted to require that the tax paid or payable be indicated in the invoice; in the present case the entire service tax was reflected in the invoice and recovered from the appellant, satisfying that condition. Applying these principles to the facts, the Tribunal found no valid basis to treat the amount as a mere deposit or to withhold credit, set aside the orders below and allowed the appeal. [Paras 5, 6]

Impugned order set aside; appeal allowed and Cenvat credit held admissible with consequential relief as per law.

Final Conclusion: The appeal is allowed: the appellant may avail Cenvat credit of the service tax paid by the service provider for man power supply services during July 2012 to December 2013, and the orders below are set aside with consequential relief as per law.

Duty on transaction value of waste and scrap of capital goods - liability under Rule 3(5A) of the CCR, 2004 - onus on department to establish that waste and scrap arose from capital goods on which CENVAT credit was availed - remand for verification of availment of CENVAT credit

Liability under Rule 3(5A) of the CCR, 2004 - duty on transaction value of waste and scrap of capital goods - Scope and operation of Rule 3(5A) of the CCR, 2004 in relation to clearance of waste and scrap of capital goods - HELD THAT: - The Court construed Rule 3(5A) (inserted w.e.f. 16.06.2005) to mean that its obligation to pay duty equal to the duty leviable on the transaction value applies only where waste and scrap arise out of capital goods on which CENVAT credit had in fact been availed. A plain reading shows the rule comes into play when capital goods credit had been availed earlier and later those capital goods are cleared as waste or scrap. Thus, before fastenning liability under Rule 3(5A), it is necessary to ascertain whether CENVAT credit was availed on the particular capital goods that became scrap. [Paras 6, 7]

Rule 3(5A) attracts duty on transaction value only if the waste and scrap arise from capital goods on which CENVAT credit was availed.

Onus on department to establish that waste and scrap arose from capital goods on which CENVAT credit was availed - remand for verification of availment of CENVAT credit - Whether the adjudication could be sustained without verifying whether CENVAT credit had been availed on the capital goods that became waste and scrap - HELD THAT: - The appellant produced a Chartered Accountant's certificate before this Tribunal asserting that the capital goods which became scrap were procured in 1992-93 and no CENVAT credit had been availed. That fact was not raised or examined by the authorities below. While the departmental onus to establish that scrap arose from credited capital goods remains, the evidence now placed by the appellant requires verification. Consequently the impugned order confirming duty was set aside and the matter remitted for de novo consideration so that the adjudicating authority may examine the evidence (including the certificate and any other material) and determine whether CENVAT credit had been availed on the capital goods which became scrap for the period after 16.06.2005. [Paras 7, 8]

Impugned order set aside and matter remanded to the original adjudicating authority to verify evidence and decide whether CENVAT credit was availed on the capital goods that became waste and scrap for the period after 16.06.2005.

Final Conclusion: The appeal is allowed by way of remand: the tribunal held that Rule 3(5A) imposes duty on transaction value only where CENVAT credit had been availed on the capital goods, and directed de novo verification by the adjudicating authority whether such credit was in fact availed for the scrap cleared after 16.06.2005.

Set off under Section 3(2) second proviso - point of levy under VAT for Schedule IV goods - person-specific relief - Article 14 discrimination in taxation - interest on tax demands - restitutional interest - first point levy and local area nexus - remand for quantification

Set off under Section 3(2) second proviso - point of levy under VAT for Schedule IV goods - person-specific relief - Whether the appellant (an importer/dealer) is entitled to set off Entry Tax under the second proviso to Section 3(2) of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993 for sales of petroleum products made to other oil marketing companies (OMCs). - HELD THAT: - The Court analysed the five conditions in the second proviso to Section 3(2) and construed them strictly. It held that (i) although the appellant is a registered dealer under the VAT Act, the proviso requires that the importer must be liable to pay tax under the VAT Act in respect of the imported scheduled goods; (ii) the Bihar notification dated 4 May 2006 fixes the point of levy for Schedule IV goods (including HSD and motor spirit) at the sale by OMCs to retailers or consumers, so that the appellant's sale to BPCL/HPCL does not attract VAT at that stage; (iii) accordingly the appellant did not incur VAT liability at the relevant point and the condition that "his" tax liability under the VAT Act stand reduced is not satisfied; and (iv) the proviso is person-specific and not goods-specific. The Court rejected reliance on precedents urged by the appellant (including Associated Cement Companies Ltd. and other purposive-construction cases) as distinguishable on the material facts and amendments subsequently introduced. On a literal and contextual reading the appellant was not entitled to the claimed set off. [Paras 16, 17, 18, 19, 23]

The claim for set off under the second proviso to Section 3(2) is not maintainable in favour of the appellant; set off cannot be allowed on the facts of sales to BPCL/HPCL.

Article 14 discrimination in taxation - Whether the second proviso to Section 3(2) is void for violation of Article 14 of the Constitution on the ground of discriminatory taxation. - HELD THAT: - The Court applied established principles that Article 14 in taxation is infringed only by perversity or gross and hostile discrimination without rational justification. It found no such clear and hostile discrimination in denying set off against a separate tax (VAT) when the levy and point of incidence differ; the position involves two distinct taxes and does not amount to the kind of arbitrary classification that would violate Article 14. Consequently, reading down the proviso was neither required nor appropriate. [Paras 23, 24, 27]

The challenge under Article 14 is rejected; the second proviso is not unconstitutional on the grounds urged.

Interest on tax demands - restitutional interest - Whether interest could be levied on the Entry Tax demands and, alternatively, whether restitutional interest should be awarded to the Revenue for the period of interim stay. - HELD THAT: - The High Court's finding (accepted by this Court) that there was no substantive statutory provision to levy interest on the Entry Tax demands was left undisturbed and is final; the State did not appeal that legal conclusion. As to restitutional interest, the Court recognised that restitution is discretionary, requiring a balance of hardships. Considering that set off was allowed by the State until 2014 and assessments were reopened only after an audit objection years later, and that the appellant could not reasonably have adjusted its affairs earlier, the Court exercised its discretion against granting restitutional interest in favour of the Revenue. [Paras 5, 28, 29, 30]

The levy of interest was not sustained (that finding is final); restitutional interest to the Revenue is refused on discretionary grounds.

First point levy and local area nexus - remand for quantification - Whether part of the Entry Tax demand should be struck down because subsequent sales by BPCL/HPCL were effected outside the local area of Patna and hence not exigible to Entry Tax in Patna. - HELD THAT: - The Court found that after the audit objection the assessing authority proceeded hastily and passed assessment orders without giving the appellant sufficient opportunity to produce detailed documentary material and statutory declarations from BPCL/HPCL demonstrating that substantial sales by those OMCs to retail consumers and outlets were made outside the Patna local area and therefore not subject to Entry Tax in Patna. The Court directed that the appellant be permitted to approach the Appellate Tribunal within 12 weeks with all relevant materials and that the Tribunal should expeditiously determine what portion of the demand must be struck down because the taxable sales occurred outside the Patna local area (and would have been subject to entry tax, if at all, in those other local areas). The existing stay in writ petitions was directed to continue until the Tribunal's decision. [Paras 31]

The question of quantification is remanded to the Appellate Tribunal for fresh consideration and determination after receipt of the appellant's documentary material; the Tribunal to decide how much of the demand must be struck down.

Final Conclusion: The appeals and special leave petitions are disposed of: the appellant is not entitled to set off under the second proviso to Section 3(2) on sales to OMCs; the Article 14 challenge fails; the High Court's finding that interest could not be levied under the statutory scheme is final and restitutional interest to the Revenue is refused in discretion; and the question of how much of the Entry Tax demand (for assessment years 2008-09 till 2014-15) must be struck down because sales by BPCL/HPCL were outside Patna is remanded to the Appellate Tribunal for expeditious decision, with existing writ-stay to continue until that decision.

Treatment as first seller within the State - Entry Tax collection versus payment of State sales tax - adjustment of Entry Tax under Section 4(1) of the Tamil Nadu Tax on Entry of Motor Vehicles into the Local Areas Act, 1990 - invoice entry not conclusive proof of tax treatment - duty of Assessing Officer to verify certificates and conduct enquiry before best judgment assessment - rejection of return and assessment to best of judgment

Treatment as first seller within the State - Entry Tax collection versus payment of State sales tax - Whether the petitioner can be treated as the first seller of tractors inside the State of Tamil Nadu and thereby be liable for Entry Tax rather than having the tax treated as payment of TNGST by the manufacturer. - HELD THAT: - The Court examined invoices and supporting material including a certificate from M/s Mahindra & Mahindra Ltd. stating that they were the first seller within the State and that Entry Tax collected was adjusted and paid towards Sales Tax at 4% and surcharge at 5% (total 4.2%) for the relevant period. The court held that the mere description of an invoice entry showing 'Entry Tax value at 6%' is not conclusive to treat the petitioner as first seller. In absence of any material to discredit the manufacturer's certificate, and given that the manufacturer is a registered dealer within the State who asserted that adjustment under the Entry Tax statute was made, the petitioner's position that they were a purchaser (not the first seller) was accepted. The court therefore found the Assessing Officer's presumption that the petitioner was the first seller to be misconceived.

Petitioner is not to be treated as the first seller; the invoice entry alone does not establish that status and the manufacturer's certificate supporting adjustment of Entry Tax must be given effect to.

Invoice entry not conclusive proof of tax treatment - duty of Assessing Officer to verify certificates and conduct enquiry before best judgment assessment - rejection of return and assessment to best of judgment - Whether the Assessing Officer acted lawfully in completing assessment by rejecting the petitioner's return and assessing turnover to best of judgment without making enquiries to verify the manufacturer's certificate or to ascertain whether adjustment under the Entry Tax statute had been effected. - HELD THAT: - The Court found that the Assessing Officer relied solely on the invoice entry and proceeded to issue a revision notice proposing to reject the monthly return and assess to the best of judgment. The court noted that the Assessing Officer had available the manufacturer's letter certifying that they were the first seller and that Entry Tax had been adjusted as sales tax; nevertheless no enquiry was conducted to verify payment or adjustment nor were office procedures invoked to test that claim. The court concluded that penalising the petitioner without such verification was incorrect and unsustainable.

Assessment completed by rejecting the return and determining turnover to best of judgment without verifying the manufacturer's certificate or enquiring into adjustment of Entry Tax was unlawful.

Final Conclusion: Writ petition allowed; impugned assessment order quashed for being unsustainable for want of requisite enquiry and verification; no costs.

Section 439 CrPC - credible information and reasonable suspicion - prima facie case for arrest - reliance on co-accused affidavits and recoveries - forgery under Section 467 IPC - risk of tampering with evidence, threatening witnesses or absconding

Section 439 CrPC - risk of tampering with evidence, threatening witnesses or absconding - Grant of bail to the applicant - HELD THAT: - Balancing the nature of the accusations against the materials on record, the Court found no apprehension of tampering with evidence, threatening witnesses or fleeing from trial. Applying the principles in Siddharam Satlingappa Mhetre, and having regard to absence of cogent material establishing those risks, the Court held that the applicant was entitled to be enlarged on bail. Conditions were imposed including bond with one surety, surrender of passport, monthly police station attendance and other routine bail conditions. [Paras 14, 15]

Application allowed; applicant released on bail subject to specified conditions.

Credible information and reasonable suspicion - prima facie case for arrest - reliance on co-accused affidavits and recoveries - Whether the material on record constituted credible information or reasonable suspicion justifying arrest and continued detention - HELD THAT: - The Court examined the prosecution material and concluded that the case was founded largely on affidavits of co-accused, certain witness statements and recoveries; recoveries were from premises rented to a co-accused and many recovered documents named persons other than the applicant. Cash entries and bank records did not establish that amounts were received by the applicant as consideration for alleged acts. No bogus bills, challans or clear transactional documentation showing which of the alleged 40 firms benefited or to what extent were placed on record. On this basis the Court found that the material did not prima facie establish credible information or reasonable suspicion against the applicant to justify arrest/detention. [Paras 8, 9, 10, 11, 12]

Material on record did not constitute credible information or reasonable suspicion to justify continued detention.

Forgery under Section 467 IPC - Sufficiency of material to attract the offence under Section 467 IPC - HELD THAT: - The Court observed that, apart from wild averments, no material pointing to forgery of any valuable security or the ingredients required under Section 467 IPC had been placed on record. The learned APP could not controvert this aspect and prima facie the charge under Section 467 did not find substantial material support at this stage. [Paras 13]

Prima facie material to sustain the charge under Section 467 IPC was lacking.

Final Conclusion: Bail application allowed: the Court found absence of credible information or reasonable suspicion on the materials produced, observed insufficiency of prima facie proof on the charge under Section 467 IPC, and granted bail under Section 439 CrPC subject to specified conditions and standard safeguards.

Summary order. Writ appeal admitted and interim stay granted of the impugned judgment; direction to serve the respondent, tag all related writ petitions arising from the same issue, and list the matters on 10.11.2017.

Identification of accused - conscious possession - search and seizure contemporaneousness - reversal of acquittal on appeal - appellate reappreciation of evidence - heightened scrutiny where offence is grave - suspicion cannot take the place of proof - punishment under the NDPS Act for possession and transportation of charas

Identification of accused - conscious possession - search and seizure contemporaneousness - suspicion cannot take the place of proof - Whether the prosecution proved beyond reasonable doubt that the appellant was the driver of the vehicle and in conscious possession of the contraband, thereby justifying reversal of the Trial Court's acquittal. - HELD THAT: - The Court analysed the evidence on identification and possession, observing that conviction under the provisions of the Act required proof of conscious possession. The prosecution relied principally on: (a) testimony of PW-1 and PW-8 regarding spot identification, (b) disclosure by Govind Singh that the vehicle was lent to the appellant, and (c) recovery of the appellant's bank passbook from the vehicle. PW-1 admitted he did not know the appellant prior to the incident and had seen only the back and side face from a distance of 40-50 yards; PW-8 did not assert contemporaneous identification in his examination-in-chief and only in cross-examination claimed he could recognize the driver. There was no test identification parade and no independent witnesses at the spot. The purported contemporaneous photographic evidence lacked credibility (dates absent or inconsistent) and the prosecution offered no explanation. The Court held that the passbook, though an incriminating factor, could not alone clinch identification or establish conscious possession in the absence of cogent and consistent corroboration. Applying the principle that suspicion, however grave, cannot substitute proof and that in cases of serious offences proof must be commensurately higher, the Court found the Trial Court's view to be a reasonable one and not to be displaced by the High Court's reliance chiefly on the passbook and document entries. [Paras 20, 21, 22, 23, 24]

The acquittal recorded by the Trial Court is restored; the High Court erred in reversing the acquittal as the prosecution failed to prove identification and conscious possession beyond reasonable doubt.

Heightened scrutiny where offence is grave - appellate reappreciation of evidence - Whether any ancillary administrative inquiry or action was required in relation to lapses in investigation. - HELD THAT: - Noting deficiencies and omissions in the investigation given the seriousness of the offence and the deficiencies in contemporaneous documentation, the Court endorsed the Trial Court's concern about a shoddy investigation. The Court directed the Superintendent of Police, Kullu to conduct an inquiry to ascertain reasons for omission/lapses, identify the person(s) responsible and the action taken to prevent recurrence, and to submit a report within three months. This was a direction for administrative inquiry rather than a remand for rehearing of evidence. [Paras 25]

Inquiry by the Superintendent of Police, Kullu ordered to investigate investigative lapses and submit a report within three months.

Final Conclusion: The appeal is allowed; the High Court's conviction of the appellant is set aside, the Trial Court's order of acquittal is restored, the appellant to be released if not wanted in any other case, and the Superintendent of Police, Kullu is directed to enquire into investigative lapses and report within three months.

Public policy of India - fraud in the making of the award - setting aside arbitral award under Section 34 - award affected or induced by fraud - causative link - issue estoppel - enforcement of foreign award - applicability of Part I of the Arbitration and Conciliation Act - FEMA compliance for transfer of shares - jurisdiction to entertain Section 34 proceedings

Leave granted in the Special Leave Petitions. The two-Judge Bench delivered separate and conflicting opinions on whether the LCIA Award dated 03.04.2006 should be set aside on grounds of fraud/public policy and on related questions of FEMA compliance and jurisdiction; the Bench is divided and has not rendered a collective decision on the merits. Papers are directed to be placed before the Chief Justice for appropriate further course of action. Pending applications stand disposed of.