TaxTMI Updates e-Newsletter
Nov 17,2022

Intermediary services - export of services - place of supply - zero rated supply - refund of unutilised input tax credit - principal-agent relationship - sub contracting not intermediary - principle of consistency in tax proceedings

Intermediary services - export of services - sub contracting not intermediary - principal-agent relationship - Whether the services rendered by the petitioner under the Master Services Sub contracting Agreement fall within the definition of "intermediary" under Section 2(13) of the IGST Act and thereby do not qualify as "export of services" for purposes of claiming refund of unutilised input tax credit. - HELD THAT: - The court examined the MSA and the statutory scheme (Sections 2(6), 2(13) IGST Act; Section 13 place of supply; Section 16 zero rated supply; Section 54 refund). The definition of "intermediary" requires (i) a principal-agent relationship, (ii) arrangement or facilitation of the principal's receipt of the main service by a third party, and (iii) that the intermediary does not perform the main service on its own account. The MSA recitals and operative clauses demonstrate that GI subcontracted performance of the BPO/IT services to the petitioner, who performs the deliverables directly for GI's customers, bears risk of performance, provides reports and operational data to GI, invoices GI and is contractually obliged to meet service levels and business continuity obligations. Clause 21.6 of the MSA disclaims agency and the agreement contains no direct contract between petitioner and GI's customers. The earlier departmental order (25.01.2018) analysing the same MSA had held the petitioner was not an intermediary; that view had become final. The court found no material change in law between the pre GST and GST definitions of "intermediary" (noting the Government circular of 20.09.2021 and the Infinera ruling reproduced in the impugned order) and held that differing treatment for the GST period, without new factual or legal basis, was impermissible. The appellate authority's contrary conclusion was also contrary to the department's earlier pleadings and relied on grounds not recorded in the impugned order. For these reasons the impugned finding that petitioner was an intermediary was held to be unsustainable.

The petitioner does not fall within the definition of "intermediary" under Section 2(13) of the IGST Act; the services qualify as export of services and the refund granted by the order in original is restored.

Final Conclusion: Impugned order holding the petitioner to be an "intermediary" is quashed; the original refund order in favour of the petitioner for the period July 2017 to March 2018 is restored, and the petitioner is entitled to the benefit of this view for subsequent refund claims.

Cancellation of GST registration - limitation for filing appeal under GST and its extension - rejection of appeal on hyper-technical grounds - right to livelihood under Article 21 - direction to consider appeal excluding bar of limitation

Cancellation of GST registration - limitation for filing appeal under GST and its extension - rejection of appeal on hyper-technical grounds - right to livelihood under Article 21 - Order dismissing appeal against cancellation of GST registration as time-barred was set aside and petitioner granted an opportunity to prefer the appeal afresh. - HELD THAT: - The Court found that the petitioner, whose GST registration had been cancelled, was deprived of the ability to carry on business and thereby of his livelihood, engaging the protection of Article 21. Reliance was placed on recent High Court decisions dealing with electronic filing and procedural strictness. Having regard to the consequences of cancellation and the legal propositions in the authorities referred to, the order dated 28.09.2022 dismissing the appeal as time barred was quashed and the petitioner was permitted to file the appeal within ten days. The Court treated the dismissal on technical limitation grounds as warranting relief in the circumstances to prevent deprivation of livelihood.

Order dated 28.09.2022 dismissed as time barred set aside; petitioner permitted to file appeal within ten days.

Direction to consider appeal excluding bar of limitation - limitation for filing appeal under GST and its extension - Authority directed to consider and decide the appeal on merits, excluding the bar of limitation. - HELD THAT: - The Court directed that upon filing of the appeal within the time granted, the competent authority shall consider and decide the appeal on all aspects in accordance with law, expressly excluding the limitation bar as a ground to refuse admission. This constitutes remand for fresh consideration on merits while removing time bar as a basis for rejection, in order to afford the petitioner an effective opportunity to seek restoration of registration.

Appeal to be considered and decided on merits by the competent authority, limitation bar excluded.

Final Conclusion: Writ petition disposed of by setting aside the order dismissing the appeal as time barred; petitioner granted ten days to file the appeal and the competent authority directed to decide it on merits, excluding limitation as a ground for rejection.

Person aggrieved - right of appeal under Section 107 - locus to appeal of consignee - adjudication under Section 129 - remand for fresh hearing and disposal

Person aggrieved - right of appeal under Section 107 - locus to appeal of consignee - The petitioner concern (consignee) had locus to prefer an appeal despite the adjudication having been made against the driver/person in charge. - HELD THAT: - The Court applied the statutory concept of a person aggrieved under right of appeal under Section 107 and held that although the adjudication proceedings and order under the GST Act were directed against the driver/person in charge under proceedings initiated under adjudication under Section 129, the petitioner's proprietorship concern as consignee had a sufficient grievance arising from that order to invoke the appellate remedy. The appellate authority was therefore not entitled to refuse to entertain the appeal merely because the original adjudication named the driver instead of the petitioner. The Court found the appellate authority's conclusion that the petitioner had no right to challenge the adjudication to be unsustainable and set aside that decision.

Impugned order declining to entertain the appeal was set aside and the petitioner's status as a person aggrieved entitled to appeal under Section 107 was recognised.

Remand for fresh hearing and disposal - The appellate authority was directed to admit and decide the petitioner's appeal on merits within a specified time-frame. - HELD THAT: - Having concluded that the petitioner had locus to appeal, the Court directed that the appeal already filed by the petitioner's concern be heard and disposed of in accordance with law. The appellate authority's earlier refusal to entertain the appeal was quashed and the matter was remitted to the appellate authority for fresh consideration and disposal. The Court stipulated a one month period for completion of the hearing and disposal from the date of communication of the order.

The appeal was remitted to the appellate authority to be heard and disposed of in accordance with law within one month from communication of this order.

Final Conclusion: The writ petition was allowed: the appellate authority's refusal to entertain the appeal was set aside, the petitioner as consignee was held to be a person aggrieved entitled to appeal under Section 107, and the matter remitted to the appellate authority for fresh hearing and disposal within one month.

Incriminating material - assessment under Section 153A - search under Section 132 - abated and unabated proceedings - nexus between assessment and seized material - statement recorded under Section 132(4) - operation of non-obstante clause in Section 153A

Incriminating material - assessment under Section 153A - nexus between assessment and seized material - Addition or disallowance under Section 153A cannot be made in respect of completed assessments in the absence of incriminating material found during the search unless there is relevant seized or post-search material establishing a nexus. - HELD THAT: - The Court held that the question is no longer res integra and followed the ratio of CIT v. Kabul Chawla summarising that while Section 153A empowers reassessment/assessment for six years following a search, completed assessments can be interfered with under Section 153A only on the basis of incriminating material unearthed during the search or other post-search material that can be related to the seized material. The Court emphasised that Section 153A does not permit arbitrary interference with finalised assessments and that the authority to reassess completed years requires a relevant nexus with material found in the search. The Court noted its consistent application of Kabul Chawla and similar High Court decisions and observed that the Revenue did not demonstrate any seized material constituting incriminating evidence in the present case. [Paras 12, 13, 14]

Assessments framed under Section 153A were not sustainable insofar as additions/disallowances were not based on incriminating material found during the search or material connected to the seizure; the ITAT and CIT(A) were rightly guided by Kabul Chawla.

Statement recorded under Section 132(4) - corroborative material - A statement recorded under Section 132(4) alone, without corroborative incriminating material discovered during the search, cannot by itself validate additions under Section 153A. - HELD THAT: - The Court observed that the Revenue did not place any statement recorded under Section 132(4) before the Court. It referred to precedents of this Court holding that a standalone statement made during search does not empower the Assessing Officer to make block or post-search additions unless supported by corroborative material discovered during the search; retracted statements similarly require corroboration. The Court therefore treated the absence of any produced Section 132(4) statement as fatal to the Revenue's contention that additions were based on search-recorded statements. [Paras 16, 17, 18]

In the absence of any produced or relied upon Section 132(4) statement disclosing incriminating material, the Assessing Officer could not sustain additions under Section 153A merely on the basis of an unproduced or uncorroborated statement.

Abated and unabated proceedings - operation of non-obstante clause in Section 153A - Judgments and material antecedent to the date of search (including earlier High Court and Supreme Court decisions) which were not seized or cited in the assessment order cannot be treated as incriminating material found during the search to validate assessments under Section 153A; where assessments had attained finality or were unabated on the date of search, Section 153A cannot be used to disturb them except on the basis of search-origin material. - HELD THAT: - The Court examined the Revenue's reliance on earlier Punjab & Haryana High Court and later Supreme Court findings concerning the assessee's transactions and noted that those materials pre-dated the 2005 search and were neither referred to nor relied upon in the Section 153A assessment orders. The Supreme Court's 2013 decision could not retrospectively constitute incriminating material found in the 2005 search. The Court also reviewed the status of the assessment years and, following the Amicus Curiae's factual matrix, concluded that the relevant years were unabated (original or reassessment proceedings had attained finality) and hence could be interfered with under Section 153A only upon discovery of incriminating material during the search. [Paras 8, 19, 20]

Pre-search judicial findings or post-2005 judgments cannot substitute for incriminating material found at the time of the 2005 search; absent such search-origin material, the Section 153A assessments were unsustainable.

Final Conclusion: The appeals are dismissed. The High Court upheld the ITAT and CIT(A) conclusions that the Section 153A assessments could not be sustained because the Revenue failed to show any incriminating material discovered in the 22.09.2005 search (including any produced Section 132(4) statement) or other seized material establishing a nexus for disturbing completed/unabated assessments for AYs 2000-01 to 2003-04.

Re-opening of assessment - reason to believe - disclosure of material facts - change of opinion - fishing inquiry

Re-opening of assessment - disclosure of material facts - change of opinion - Validity of notice under section 148 read with section 147 to reopen assessment for Assessment Year 2011-2012 where details of share allotment and share application money were furnished during original scrutiny assessment - HELD THAT: - The Court found that during the original scrutiny assessment the assessee had been specifically asked to furnish details of allotment, including names, addresses, PANs, share application forms, board resolutions and pricing certificates, and that the assessee had furnished the said information which was considered by the Assessing Officer before passing the assessment order. The Assessing Officer later sought to reopen the assessment more than four years after the end of the relevant year on the basis of information from the investigating wing alleging lack of creditworthiness of certain allottees. The Court applied the well established principle that powers to reopen cannot be exercised merely because of a later change of opinion by the Assessing Officer and that reopening is permissible only where there is tangible material showing omission or that material facts were not truly and fully disclosed at the time of the original assessment. In the present case no such tangible material was shown to have emerged after the original assessment; the matters relied upon by the department were the very facts and documents already placed before the Assessing Officer during the original assessment. Consequently the move to reopen amounted to a fishing or roving inquiry based on a change of opinion and was an abuse of the reassessment power. The objections to reassessment thus required acceptance and the notice under section 148 and the order rejecting objections were liable to be set aside. [Paras 5, 6, 7]

Notice under section 148 and the consequent order rejecting objections were set aside as reopening amounted to impermissible change of opinion and a fishing inquiry.

Final Conclusion: The petition was allowed: the notice dated 26.3.2018 under section 148 for Assessment Year 2011-2012 and the order dated 5.10.2018 rejecting objections were set aside on the ground that reassessment was based on a mere change of opinion and not on any new tangible material establishing non disclosure of material facts.

Wilful attempt to evade tax - mens rea for prosecution under Section 276C(2) of the Income Tax Act - filing of return and subsequent payment after notice as evidence of no intent to evade - voluntary declaration by filing return - payment of tax with interest after notice negating culpable mental state - abuse of process and quashing of criminal proceedings - inherent jurisdiction under Section 482 of Cr.P.C.

Wilful attempt to evade tax - mens rea for prosecution under Section 276C(2) of the Income Tax Act - filing of return and subsequent payment after notice as evidence of no intent to evade - voluntary declaration by filing return - Whether the facts disclose a wilful attempt to evade payment of self-assessed tax attracting prosecution under Section 276C(2) of the Income Tax Act. - HELD THAT: - The Court examined whether the requisite dishonest intention to evade tax was present. The undisputed facts show that the assessee filed a return admitting tax liability for assessment year 2014-15 and, upon receipt of a departmental show cause notice, furnished a challan evidencing payment of the assessed tax together with interest and other charges. There was no allegation or material that the return contained false declarations or suppression of material facts. The conduct of filing returns and making payment after notice, including excess payment towards interest, indicates delayed or deferred payment due to financial difficulties rather than a deliberate attempt to evade tax. In the absence of a positive act of concealment or other circumstances enumerated in the Explanation to Section 276C, the necessary mens rea for prosecution under Section 276C(2) is not made out on these facts. Consequently, continuation of criminal proceedings on the basis of mere delay in payment would be unwarranted. [Paras 13, 14, 15, 16]

The facts do not establish a wilful attempt to evade tax under Section 276C(2); the necessary culpable mental state is absent.

Abuse of process and quashing of criminal proceedings - inherent jurisdiction under Section 482 of Cr.P.C. - payment of tax with interest after notice negating culpable mental state - Whether the High Court should exercise its inherent powers under Section 482 Cr.P.C. to quash the prosecution in view of the absence of mens rea and the surrounding facts. - HELD THAT: - Having found that the prosecution lacks the essential ingredient of dishonest intention to evade tax and that the department accepted the tax with interest without reservation, the Court concluded that further continuation of criminal proceedings would amount to an abuse of process. Where the factual matrix demonstrates delayed payment attributable to financial difficulties and corrective payment after notice, exercise of the High Court's inherent jurisdiction to prevent misuse of criminal process is appropriate. The Court relied on precedent holding that a positive act showing intent is necessary for a charge under Section 276C and applied that principle to quash the proceedings instituted on those facts. [Paras 17, 18]

Proceedings against the petitioners are an abuse of process and are quashed by exercise of the Court's inherent jurisdiction under Section 482 Cr.P.C.

Final Conclusion: Proceedings in CC No.37 of 2018 against the petitioners relating to assessment year 2014-15 are quashed; the criminal petition is allowed.

Penalty for failure to get accounts audited under Section 271B - audit obligations under Section 44AB - voluntary filing of return versus filing in response to notice under Section 148 - use of statutory returns (entertainment tax return) as evidence of turnover

Penalty for failure to get accounts audited under Section 271B - audit obligations under Section 44AB - voluntary filing of return versus filing in response to notice under Section 148 - use of statutory returns (entertainment tax return) as evidence of turnover - Validity of the Tribunal's confirmation of the penalty imposed under Section 271B for failure to get accounts audited for AY 1995-96 - HELD THAT: - The Tribunal found that the assessee filed the income-tax return only in response to a notice under Section 148 and that the assessee's entertainment tax return showed a turnover of Rs.3,37,70,270, which undermined the assessee's claim of a bona fide belief that turnover was below the threshold requiring audit under Section 44AB. The Tribunal also rejected belated additional evidence and letters said to show delay in audit due to seizure by sales tax authorities as self-serving and not raised before the first appellate authority. Further, the Tribunal correctly observed that there is no bar on the Assessing Officer levying penalty under Section 271B before completion of assessment. Applying these findings, the High Court found no infirmity in the Tribunal's reasoning or its conclusion to confirm the penalty and held that no substantial question of law arises from the Tribunal's order. [Paras 6, 7, 8, 10, 11]

Tribunal's confirmation of penalty under Section 271B upheld; appeal dismissed.

Final Conclusion: The High Court dismissed the appeal, holding that the Tribunal rightly confirmed the penalty for failure to get accounts audited for AY 1995-96; no substantial question of law arises, and the penalty is upheld.

Treatment of leasehold improvements as revenue expenditure versus capital expenditure - deduction under section 37(1) for expenditure necessary for carrying on business - repairs by a tenant under section 30(a)(i) and distinction from current repairs - creation of a new capital asset; enduring benefit as test for capitalisation - application of precedents on tenant-incurred renovation works

Treatment of leasehold improvements as revenue expenditure versus capital expenditure - deduction under section 37(1) for expenditure necessary for carrying on business - creation of a new capital asset; enduring benefit as test for capitalisation - application of precedents on tenant-incurred renovation works - Whether the amounts spent on renovations and fittings of leased premises are revenue expenditures allowable to the assessee or capital expenditures requiring capitalization for the relevant assessment years - HELD THAT: - The authorities below (CIT(A) and the Tribunal) examined the nature of the expenditures incurred by the assessee in fitting out bare shell leased premises for Domino's and Dunkin' outlets and concluded that no new asset was created and that the works, though providing benefit for a limited period, were necessary for carrying on the assessee's business. The lower authorities applied the distinction between a tenant's 'repairs' and 'current repairs' and relied on precedents which hold that tenant-incurred expenditure to make leased premises usable for business may amount to revenue expenditure where it does not bring into existence a capital asset and is an integral part of the profit-earning process. The Tribunal accepted the CIT(A)'s finding that the modifications did not create a capital asset, that the expenditure was necessitated by the nature of the franchise business, and that the enduring benefit was not of a character to convert the expenditure into capital expenditure. The High Court found these to be findings of fact based on relevant material and no substantial question of law arose to warrant interference. [Paras 5, 7, 8]

The expenditures on leasehold improvements were held to be revenue in nature and allowable as business expenditure; the Revenue's challenge was dismissed.

Final Conclusion: The appeals under Section 260A were dismissed as the CIT(A)'s and the Tribunal's concurrent factual findings that the leasehold renovation expenses did not result in creation of a capital asset and were revenue expenditures allowable in the relevant assessment years were upheld.

Depreciation on leasehold land under Section 32(1)(ii) - Intangible asset as "business or commercial rights" and Explanation 3 to Section 32(1)(ii) - Capital expenditure for acquisition of surface rights in mining leases - Distinction between royalty and compensation for acquisition of surface rights - Deduction under Section 35E for pre-production/ prospecting/development expenditure - Allowability of interest on delayed TDS as compensatory expenditure under Section 37 - Remand to Assessing Officer for verification and consequential adjustments

Depreciation on leasehold land under Section 32(1)(ii) - Intangible asset as "business or commercial rights" and Explanation 3 to Section 32(1)(ii) - Capital expenditure for acquisition of surface rights in mining leases - Allowability of depreciation on amounts spent to acquire surface rights and mining rights in respect of the mining lease area. - HELD THAT: - The Tribunal found that the assessee, having been granted a mining lease, was contractually and legally obliged to acquire surface rights of privately owned lands within the leased area and that those surface rights would vest in the State on termination of the lease. The expenditure to acquire such surface rights was held to be capital in nature and to give rise to a commercial/business right - a license/right to undertake mining operations - which falls within Explanation 3 to Section 32(1)(ii). The Tribunal distinguished payment of royalty (a per-ton revenue liability) from compensation/consideration paid to owners for surface rights, noting that royalty cannot substitute for the capital cost of acquiring surface rights. The Tribunal relied on coordinate decisions and reasoning that rights to exploit minerals or operate concession-like arrangements are intangible commercial rights eligible for depreciation, and directed the Assessing Officer to treat the expenditure as capital and allow depreciation at the applicable rate. [Paras 8]

Assessee entitled to treat amounts spent to acquire surface rights/mining rights as capital expenditure giving rise to intangible commercial rights and to claim depreciation accordingly.

Remand to Assessing Officer for verification and consequential adjustments - Carry forward loss for AY 2009-10 (impugned in AY 2010-11) to be re examined and reinstated if appropriate. - HELD THAT: - The Tribunal observed that the reduction of the carried forward loss in AY 2009-10 resulted from the disallowance of depreciation then under dispute and that the correctness of the carry forward requires adjudication by the Assessing Officer after giving the assessee an opportunity of hearing. The Tribunal therefore directed the AO to grant the loss claimed in accordance with law while passing consequential order for AY 2010-11. [Paras 9, 11]

Matter remitted to the AO to reconsider and grant the carried forward loss in accordance with law after hearing the assessee.

Deduction under Section 35E for pre-production/ prospecting/development expenditure - Interaction between Section 35E and claim for depreciation under Section 32 - Whether specific pre-production/development items disallowed by the AO under Section 35E are eligible for Section 35E deduction or excluded because depreciation is allowable. - HELD THAT: - The AO disallowed 10% under Section 35E(3) of certain items he treated as either value of mines or depreciable assets. The Tribunal held that if the assessee has capitalized the expenditure and claimed depreciation in respect of such items, Section 35E deduction is not available for those items; conversely, if no depreciation has been claimed on those items, Section 35E relief should be granted. The Tribunal therefore remitted the issue to the AO to determine, after giving the assessee opportunity of hearing and verifying records (including tax auditor certificates), which of the items had been subjected to depreciation and to allow Section 35E instalments only to the extent permissible. [Paras 12, 14]

Issue remitted to the AO for fresh consideration and verification; AO to decide entitlement under Section 35E after hearing the assessee.

Depreciation on intangible assets under Section 32(1)(ii) - Prohibition on double claim of depreciation - Allowability of depreciation on additional land/rights capitalized as intangible commercial rights during the years under appeal. - HELD THAT: - Following the Tribunal's broader finding on depreciation for mining-related surface/right acquisition (see earlier issue), the Tribunal allowed the appeals challenging disallowance of depreciation on amounts capitalized as commercial rights/intangible assets in the specified assessment years. The Tribunal clarified that there cannot be a double claim of depreciation on the same capitalized expenditure under multiple heads. [Paras 15, 16]

Depreciation claim on the intangible/commercial rights related to land acquisition for mining is allowed, subject to avoidance of any double claim.

Allowability of interest on delayed TDS as compensatory expenditure under Section 37 - Whether interest paid on delayed deposit of TDS is deductible under Section 37 as compensatory and not penal. - HELD THAT: - The Tribunal held that interest for delayed remittance of TDS is compensatory in nature and therefore deductible under Section 37, following precedents including CIT v. Oriental Insurance Co. Ltd. and other tribunal decisions. The Tribunal rejected the characterisation of such interest as penal for the purposes of disallowance and decided the issue in favour of the assessee. [Paras 17, 19]

Interest on delayed payment of TDS held to be compensatory and allowable as revenue expenditure under Section 37.

Admission and disposition of additional/legal grounds - Admission of assessee's additional alternative ground seeking deduction under Section 37 and its disposition. - HELD THAT: - The Tribunal admitted the additional ground contending that the payment for land acquisition should alternatively be allowed under Section 37. However, having upheld on merits the entitlement to treat the expenditure as capital and to claim depreciation (main ground), the Tribunal found the additional ground to be infructuous and dismissed it. [Paras 5, 20, 23]

Additional ground admitted but dismissed as infructuous in view of allowance of depreciation on the same expenditure.

Final Conclusion: The appeals are partly allowed. The Tribunal held that amounts spent to acquire surface rights and mining rights are capital in nature and constitute intangible commercial rights eligible for depreciation; directed consequential allowance of depreciation and permitted related depreciation claims in the relevant years (subject to no double claim). The Tribunal remitted the carry forward loss issue (AY 2010 11) and the Section 35E entitlement of certain items to the Assessing Officer for fresh consideration after hearing the assessee. Interest on delayed TDS was held deductible under Section 37. Appeals otherwise stand disposed of accordingly.

Reopening of assessment and notice under section 148 issued to non-existent entity (void ab initio) - reopening based on change of opinion and audit objection - assessment order void ab initio - academic disposition of substantive additions where assessment is nullity

Reopening of assessment and notice under section 148 issued to non-existent entity (void ab initio) - reopening based on change of opinion and audit objection - assessment order void ab initio - Validity of reopening of assessment for AY 2008-09 and the consequences of notice under section 148 being issued to an entity dissolved prior to issuance of the notice. - HELD THAT: - The Tribunal examined the record, the remand report and the submissions before the first appellate authority and found that the assessee-company's name was struck off the Register of Companies on 06.07.2011 and that communication about dissolution/cancellation of PAN had been forwarded to income-tax authorities. The Commissioner (Appeals) also recorded that the Assessing Officer's remand report confirmed reopening was prompted by an audit objection, indicating reopening arose from a change of opinion. The Tribunal held that a reassessment proceeding initiated by issuing notice under section 148 against a non-existent entity is a nullity. Having regard to the documentary material relied upon by the assessee and the Assessing Officer's own remand report, the Tribunal concluded the reassessment was invalid and affirmed the order of the Commissioner (Appeals) quashing the reassessment. [Paras 17, 18, 20]

Reopening held invalid; reassessment order set aside as void ab initio.

Academic disposition of substantive additions where assessment is nullity - Whether the substantive additions (alleged unaccounted sale consideration and disallowance of depreciation) required adjudication once reassessment was held void. - HELD THAT: - The Tribunal noted that having affirmed the legal nullity of the reassessment, any further adjudication of the additions becomes academic. The Assessing Officer's additions were made in the void reassessment order; therefore, substantive examination of those additions is unnecessary in light of the setting aside of the reassessment. [Paras 21]

Substantive grounds rendered academic and not adjudicated on merits.

Final Conclusion: The appeal filed by the Revenue is dismissed. The reassessment framed by notice under section 148 dated 19.10.2012 (for AY 2008-09) is quashed as having been issued against a non-existent entity and the consequential additions are academic; the order of the Commissioner (Appeals) is affirmed.

Capital gains computation - valuation of land and structure - reference under section 55A to Departmental Valuation Officer - rectification under section 154 - acceptance of Government approved valuer report

Valuation of land and structure - reference under section 55A to Departmental Valuation Officer - capital gains computation - rectification under section 154 - acceptance of Government approved valuer report - Whether the values for land and constructed area adopted for computing long term capital gains should follow the DVO report, the Government approved valuer's report, or be otherwise determined and whether the Assessing Officer's rectification adopting DVO's rates is sustainable. - HELD THAT: - The Tribunal examined both valuation reports. The DVO's report relied on three open land comparables (two from 1979) and, despite comparable rates of Rs.598/-, Rs.643/-, and Rs.263/ per sq. m., suggested an unexplained rate of Rs.880/ per sq. m., making that report unreliable. The Government approved valuer supplied ten contemporaneous 1981 comparables and detailed factual observations about the built up property's features; however, his adopted rates were found to be a little on the higher side. Balancing the deficiencies in the DVO's reasoning and the detailed comparables in the Government valuer's report, the Tribunal took a holistic view and directed compromise rates to arrive at a fair indexed cost for computation of capital gains. The Tribunal therefore directed the Assessing Officer to adopt land at Rs.1200/ per sq. m and construction (RCC and wooden) at Rs.800/ per sq. m for recomputing long term capital gains, and to allow the claimed exemptions under the relevant provisions which were not disputed at assessment. [Paras 12, 13]

The Assessing Officer is directed to recompute long term capital gains for AY 2015 16 adopting land at Rs.1200/ per sq. m and construction at Rs.800/ per sq. m and to allow the claimed exemptions; the appeal is partly allowed.

Final Conclusion: Appeal partly allowed: tribunal directed reassessment of long term capital gains for AY 2015 16 using the directed compromise rates for land and construction and permitted the claimed exemptions; other contentions rendered academic.

Unexplained cash credit - money, bullion or jewellery not recorded in books deemed to be income - competence of first appellate authority to substitute statutory provision for addition - reopening of assessment not pressed

Reopening of assessment not pressed - Grounds challenging validity of reopening under section 147 were not pressed and were dismissed as not pressed. - HELD THAT: - Counsel for the assessee expressly declined to press the legal objections to reopening under section 147 and elected to contest only the addition on merits. The first appellate forum accordingly recorded that the grounds relating to reopening were not pursued by the assessee and dismissed them as not pressed. [Paras 4]

Grounds challenging reopening under section 147 dismissed as not pressed.

Unexplained cash credit - money, bullion or jewellery not recorded in books deemed to be income - competence of first appellate authority to substitute statutory provision for addition - Whether the first appellate authority could confirm an addition under a different statutory provision (section 69A) when the Assessing Officer had made the addition under section 68. - HELD THAT: - The Assessing Officer treated the cash bank deposits as an unexplained cash credit under section 68. The Commissioner (Appeals) accepted that section 68 was not attracted but nevertheless confirmed the addition by invoking the deeming provision now encompassed by money, bullion or jewellery not recorded in books deemed to be income under section 69A. The Tribunal analysed the distinct conditions and scope of the two provisions and observed that section 68 applies to sums credited in the books of account whose source is unexplained, whereas section 69A applies to unspecified money or valuables found to be owned by the assessee but not recorded in books. Because the first appellate authority substituted the statutory basis for the addition without affording the assessee an opportunity to address the distinct factual and legal conditions of section 69A, and in view of binding authority that the scope of such provisions cannot be altered unilaterally by the appellate authority, the Tribunal held that the confirmation under section 69A was impermissible and the addition must be deleted. [Paras 7, 8]

Addition confirmed under section 69A by the Commissioner (Appeals) set aside; the addition deleted.

Final Conclusion: Appeal allowed: grounds on reopening dismissed as not pressed; addition of cash deposits confirmed under a different provision by the Commissioner (Appeals) quashed and deletion directed.

Jurisdiction of assessing authority under section 143(1) - processing of return and limited adjustments under the proviso to section 143(1) - violation of the principle of natural justice by suo motu adjustment - reliance on Form 26AS entries for making additions to income

Jurisdiction of assessing authority under section 143(1) - processing of return and limited adjustments under the proviso to section 143(1) - violation of the principle of natural justice by suo motu adjustment - reliance on Form 26AS entries for making additions to income - Whether the addition of the gross receipts reflected in Form 26AS could be made by the Assessing Officer at the stage of processing the return under section 143(1) without giving the assessee a reasonable opportunity and whether such addition was within the jurisdiction of the AO. - HELD THAT: - The Tribunal held that the power of the assessing authority at the stage of processing under section 143(1) is confined to the limited adjustments indicated in CBDT Instruction No.1814 and cannot be used to make substantive suo motu additions based solely on entries in Form 26AS. The entry in Form 26AS merely showed gross receipts; the AO treated that entry as conclusive turnover and added the full amount without affording the assessee a reasonable opportunity to explain or produce evidence regarding the nature of receipts, related expenditure or applicability of presumptive provisions. Such unilateral back-calculation and addition exceeded the scope of permissible processing adjustments and violated the principles of natural justice. Having considered the authorities and the instruction, the Tribunal concluded that the addition was arbitrary and beyond the AO's jurisdiction at the 143(1) processing stage and therefore bad in law. The factual contention on quantum/profit ratio was left undecided as consequential since the foundational processing order was quashed.

The addition of the gross receipts shown in Form 26AS made at the processing stage under section 143(1) is quashed as beyond the AO's jurisdiction and violative of natural justice.

Final Conclusion: Appeal allowed; the addition made in the intimation under section 143(1) is set aside and the impugned addition of the gross receipts is quashed.

Addition of unexplained cash deposits as unaccounted income - burden of proof on assessee to explain source of cash deposits - adequacy of documentary evidence for claimed unsecured loans and director remuneration - reopening of assessment and proceedings under notice issued in response to AIR information

Addition of unexplained cash deposits as unaccounted income - burden of proof on assessee to explain source of cash deposits - adequacy of documentary evidence for claimed unsecured loans and director remuneration - Whether the addition of Rs. 16,63,000/- as unexplained cash deposits was correctly upheld in absence of adequate evidentiary support for the claimed sources - HELD THAT: - The Tribunal accepted the assessment and appellate records showing substantial cash deposits disclosed by AIR. The assessee asserted the deposits represented unsecured loans and director's remuneration and produced an audited balance sheet and a salary certificate, but did not furnish ledger particulars showing loans given or taken, details of persons purportedly lending (relationship, ledgers), rate of interest, TDS or other corroborative documentary evidence. The company (Excel Health Care Pvt. Ltd.) stated no interest was paid in the year and no cash transactions other than those recorded. The authorities therefore found the explanations and documents inadequate to discharge the onus cast on the assessee to prove the genuineness and source of the deposits. In absence of cogent material and independent enquiry establishing the claimed source, the addition was held to be sustainable. [Paras 8, 9]

Addition of Rs. 16,63,000/- as unexplained cash deposits upheld and the appeal dismissed

Final Conclusion: The Tribunal dismissed the assessee's appeal for A.Y. 2008-09, upholding the addition of cash deposits as unexplained income on the ground that the assessee failed to produce adequate documentary evidence to prove the claimed sources.

Classification of old unpaid advances as income from other sources - allowability of expenses under section 57(iii) as deductions from income from other sources - nexus between claimed expenses and the income against which deduction is sought - application of CBDT Circular No. 14 dated 11-4-1955 to write back of old personal loans

Classification of old unpaid advances as income from other sources - application of CBDT Circular No. 14 dated 11-4-1955 to write back of old personal loans - The write back / treatment of an old personal loan amount as income under the head "income from other sources" and the applicability of CBDT Circular No.14 dated 11-4-1955 to delete that amount. - HELD THAT: - The assessee had shown the old dues as income from other sources in the return and did not, in earlier years, record the amount as a debt or liability. The assessee did not produce evidence of any enforceable right to recover the advance, nor steps taken against the alleged creditor or his legal heirs; the mere unilateral assertion that the amount was wrongly treated does not establish its genuineness as a recoverable debt. In these circumstances the Tribunal agreed with the authorities below that the old unpaid advances were properly reflected as income in the year under consideration. The claimed reliance on CBDT Circular No.14/11-4-1955 did not furnish a basis to delete the amount where the factual matrix shows the amount was returned as income and no material was produced to demonstrate that it should have been retained as a debt or liability. [Paras 8]

The addition of the old advance as income from other sources is sustained and the claim for deletion under the Circular is rejected.

Allowability of expenses under section 57(iii) as deductions from income from other sources - nexus between claimed expenses and the income against which deduction is sought - Whether the expenses claimed against the amount shown as income from other sources were allowable deductions under the statutory provision relied upon. - HELD THAT: - The Assessing Officer disallowed the expenses claimed against the income on the ground that there was no nexus between the expenses and the income offered. The CIT(A) confirmed the disallowance after examining the record. The Tribunal found that the material on record did not establish that the expenditures related to the advances or to the income which had been offered; accordingly the disallowance was correctly upheld. There was no basis to reclassify those expenses as business deductions or to permit them against the income from other sources in the absence of proven connection. [Paras 8]

The disallowance of the claimed expenses for lack of nexus with the income is upheld.

Final Conclusion: The appeal is dismissed; the findings of the Assessing Officer and the CIT(A) that the old advance is taxable as income from other sources and that the claimed expenses are not allowable for want of nexus are affirmed.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - abeyance of proceedings during the Corporate Insolvency Resolution Process (CIRP) - overriding effect of the Insolvency and Bankruptcy Code on other statutes - revival or restitution of proceedings after cessation of moratorium

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - abeyance of proceedings during the Corporate Insolvency Resolution Process (CIRP) - revival or restitution of proceedings after cessation of moratorium - Effect of NCLT-imposed moratorium on continuation of Income-tax appeal proceedings before the Tribunal - HELD THAT: - The Tribunal recorded that NCLT admitted a petition under the IBC and declared a moratorium under Section 14, which, by virtue of sub-section (4), places pending proceedings in abeyance. Having regard to the moratorium and the Coordinate Bench decisions applying Section 14 to stay statutory proceedings during CIRP, the Tribunal held that the present appeal cannot be proceeded with while the moratorium subsists. The Tribunal therefore treated the appeal as dismissed in limine but granted liberty to the Revenue to revive or restitute the proceedings after the moratorium expires or upon approval of a resolution plan by the adjudicating authority. The Revenue did not dispute the NCLT proceedings. The decision follows the principle that proceedings against a corporate debtor are stayed during CIRP and may be revived thereafter. [Paras 3, 5, 6]

Appeal dismissed in limine on account of the moratorium; liberty granted to revive/restitute after the moratorium period expires or as approved by the adjudicating authority.

Final Conclusion: The appeal is dismissed in limine because NCLT has imposed a moratorium under Section 14 of the IBC placing proceedings in abeyance; liberty is granted to the Revenue to revive or restitute the appeal after the moratorium ceases or upon approval of a resolution plan.

Addition under Section 68 - proof of identity, creditworthiness and genuineness of cash credits - rejection of books of account for estimation of income - estimation by applying percentage of turnover / disallowance by adopting gross profit ratio

Addition under Section 68 - proof of identity, creditworthiness and genuineness of cash credits - Deletion of addition made by the Assessing Officer under Section 68 in respect of unsecured loans/cash credit - HELD THAT: - The Tribunal upheld the finding of the CIT(A) that the assessee had furnished requisite evidence to discharge the onus in respect of the cash credit/opening loans. The assessee produced confirmation cum contra account, names and addresses, PAN details, income-tax returns, audited accounts, audit report and bank statements establishing identity, creditworthiness and genuineness. The record also showed that no fresh loans were received in the year and the amount represented an opening balance carried forward. The CIT(A) gave detailed reasons accepting the evidentiary material and the Tribunal found no infirmity in that conclusion and no basis to interfere with the deletion of the addition. [Paras 9]

Addition under Section 68 of Rs. 1,61,68,247/- deleted; Revenue's ground in this regard dismissed.

Rejection of books of account for estimation of income - estimation by applying percentage of turnover / disallowance by adopting gross profit ratio - Challenge to deletion of generalized gross-profit (G.P.) addition and to disallowance based on rejection of books of account and subsequent estimation - HELD THAT: - The Tribunal agreed with the CIT(A) that the Assessing Officer's rejection of the assessee's books of account lacked recorded satisfaction/reasons and was therefore not sustainable. The assessee had furnished audited accounts, income-tax returns, audit report and details of G.P. and N.P. ratios for the preceding three years, and explained the variation in the current year (reduced G.P./N.P. rates despite higher turnover). On this basis the CIT(A) rightly declined to make the large G.P.-based addition and the Tribunal found no reason to disturb that conclusion. [Paras 9]

Gross profit based addition and related estimation disallowed; Revenue's ground in this regard dismissed.

Final Conclusion: Both appeals by the Revenue against the CIT(A)'s deletions - (i) the addition under Section 68 relating to cash credits and (ii) the gross-profit based estimation arising from rejection of books - were dismissed and the assessment order was not restored.

Revisionary powers under section 263 - erroneous and prejudicial to the interests of Revenue - penny stock / accommodation entry - genuineness of share transactions - short term capital gain - plausible view of the Assessing Officer

Revisionary powers under section 263 - erroneous and prejudicial to the interests of Revenue - plausible view of the Assessing Officer - Whether the Principal CIT was justified in exercising revisionary power under section 263 by holding the assessment order erroneous and prejudicial to the interests of Revenue. - HELD THAT: - The Tribunal examined whether the AO's order accepting the assessee's return of short term capital gain was per se erroneous so as to attract revision under section 263. The court noted that the AO had before him specific inquiry notices under section 142(1), received detailed replies and documentary evidence (broker ledger, BSE investor reports, exchange invoices and bank statements), and took a plausible view that the transactions were genuine trading and not a device for accommodation entries. The Principal CIT did not identify contemporaneous deficiencies in the AO's reasoning nor specify what adverse information in the Investigation Wing report contradicted the material placed before the AO. Absent any pointed demonstration that the AO ignored material evidence or took a perverse view, the Tribunal held that there was no basis to conclude that the assessment order was erroneous and prejudicial to Revenue warranting exercise of revisionary power. [Paras 11, 12]

The exercise of power under section 263 was unjustified and the revisionary order is set aside.

Penny stock / accommodation entry - genuineness of share transactions - short term capital gain - Whether the transactions in shares of VAS Infrastructure Ltd. were penny-stock accommodation entries or genuine trades giving rise to short term capital gains. - HELD THAT: - On the material placed before the AO and reproduced before the Tribunal, the assessee showed multiple purchases and sales of 69,191 shares throughout the year, trading through a registered broker on the exchange, payments by bank instruments, and subsequent purchases at higher rates. The Tribunal found these contemporaneous records and the pattern of transactions supported the AO's conclusion of genuine trading resulting in short term capital gain (which was declared and taxed), rather than a scheme to introduce unaccounted money by returning exempt long term capital gains. The Principal CIT did not controvert the factual evidence or point to specific contrary information that would vitiate the AO's view. [Paras 8, 11, 12]

The transactions were held to be genuine trading producing short term capital gains and not penny-stock accommodation entries.

Final Conclusion: The appeal is allowed; the order of the Principal CIT under section 263 is set aside and the Assessing Officer's acceptance of the assessee's claim of short term capital gain on trading in VAS Infrastructure Ltd. is sustained.

Maintainability of appeal under Section 130 of the Customs Act - dispute relating to valuation - breach of condition of exemption notification - appeal lying before High Court as distinct from appeal under Section 130E - application of Motorola (India) Ltd. precedent - application of Asean Cableship Pte. Ltd. decision

Maintainability of appeal under Section 130 of the Customs Act - breach of condition of exemption notification - dispute relating to valuation - application of Motorola (India) Ltd. precedent - application of Asean Cableship Pte. Ltd. decision - The appeal to the High Court under Section 130 of the Customs Act was maintainable because the dispute concerned alleged breach of a condition of an exemption notification and not valuation or classification of goods. - HELD THAT: - The Court examined whether the Department's appeal was barred from being heard by the High Court on the ground that the controversy amounted to a valuation dispute requiring appeal to this Court. Relying on the binding principle in Motorola (India) Ltd. and the subsequent decision in Asean Cableship Pte. Ltd., the Court observed that where an appeal does not raise a question as to rate of duty, valuation for assessment or classification, the High Court may entertain the appeal under Section 130(1). The present controversy involves alleged contravention of conditions of an exemption notification which may lead to a demand of duty, but that characterisation does not convert the dispute into one of valuation. The High Court was therefore incorrect in holding the appeal not maintainable on the valuation ground. The impugned order conflicted with the cited precedents and was liable to be quashed. The Court restored the appeal to the High Court for fresh consideration on merits, expressly refraining from expressing any opinion on the merits of the underlying dispute.

High Court's order dismissing the appeal as not maintainable is quashed and set aside; the appeal is restored to the High Court to be considered on merits.

Final Conclusion: The appeal is allowed; the High Court's dismissal of the departmental appeal as not maintainable is quashed and set aside and the appeal is restored to the High Court for adjudication on merits; no expression is made on the merits and no costs are awarded.

Adjudication of show cause notice within reasonable time - procedural fairness and natural justice - transfer to call book and obligation to inform the answering party - delay, resurrection of proceedings and resultant prejudice - mootness of adjudication where identical issue is finally decided - quashing of show cause notice as remedy for inordinate delay - refund of amounts deposited consequent to quashed proceedings

Adjudication of show cause notice within reasonable time - transfer to call book and obligation to inform the answering party - procedural fairness and natural justice - delay, resurrection of proceedings and resultant prejudice - quashing of show cause notice as remedy for inordinate delay - Inordinate delay in adjudication and failure to inform the petitioner of call book transfer violated principles of procedural fairness and warranted quashing of the show cause notice. - HELD THAT: - The Court found that although some delay between issuance of the show cause notice and filing of reply may be attributable to the petitioner, there was no satisfactory explanation for the prolonged inaction by the adjudicating authority from October 2014 onwards. Authorities are required to act diligently and, where proceedings are kept in abeyance or transferred to the call book, to inform the answering party so that evidence can be preserved and the party can take steps to protect its rights. The facts showed an unexplained and prolonged period during which the petitioner received no intimation and the proceedings were effectively resurrected after substantial delay, causing prejudice and impinging on procedural fairness. The Court relied on established principles that delayed adjudication without compelling justification and without notifying the answering party is contrary to natural justice and may render the proceedings void. Applying those principles to the material facts, the Court held the impugned show cause notice was to be quashed. [Paras 2, 3, 4]

The show cause notice dated 19th October, 2012 is quashed on account of inordinate and unexplained delay and failure to inform the petitioner of transfer to the call book, thereby violating procedural fairness.

Mootness of adjudication where identical issue is finally decided - quashing of show cause notice as remedy for inordinate delay - Adjudication would be futile because the identical issue was finally decided by the appellate/tribunal orders relied upon by the respondents. - HELD THAT: - Respondents themselves averred that the issue in the present show cause notice is covered by the decision in the Greenwich matter by CESTAT, which was upheld on further contest, with the High Court and Supreme Court dismissing respondents' appeals. Having accepted that the CESTAT order covers the issue and that those proceedings attained finality, the Court held that proceeding to adjudicate the present notice would serve no purpose and would be a futile exercise. This consideration reinforced the appropriateness of quashing the notice. [Paras 5, 6]

Because the identical issue has been finally decided in the tribunal/court proceedings relied upon by respondents, adjudication of the impugned notice would be futile and the notice is quashed.

Refund of amounts deposited consequent to quashed proceedings - Amounts paid during investigation which were deposited consequent to the impugned proceedings are to be refunded with interest as a consequence of quashing the show cause notice. - HELD THAT: - The petitioner sought return of amounts paid during the course of investigation. Given the Court's quashing of the show cause notice as invalid, the natural and consequential relief is restoration of amounts deposited. The Court therefore directed the department to refund the amounts together with interest, observing that such restitution flows directly from the annulment of the proceedings. [Paras 7]

The department is directed to refund the amounts deposited during investigation, together with interest, within eight weeks from the date of uploading of the order.

Final Conclusion: The writ petition is allowed: the show cause notice dated 19th October, 2012 is quashed on grounds of inordinate and unexplained delay and failure to inform the petitioner of call book transfer, and amounts deposited during the proceedings are to be refunded with interest within eight weeks.

Rectification of mistake - recall of tribunal order - doctrine of merger - common order and non party specific documents - power of tribunal to recall its order

Rectification of mistake - common order and non party specific documents - Whether petitioner was entitled to the benefit of the rectification granted to other appellants in respect of a common order when the documents said to have been overlooked were not party specific. - HELD THAT: - The Court found that the impugned order of CESTAT dated 4th October 2016 was a common order in which four appellants, including the petitioner, were heard and decided together. CESTAT subsequently allowed rectification applications filed by the other three appellants on the ground that it had not considered a clarification issued by the Department of Electronics and Information Technology and other materials which were produced before the Tribunal and were not specific to those three parties. Since those materials were not party specific and the petitioner had been heard under the same common order, the benefit granted to the other appellants ought to be extended to the petitioner. The Court held that denying the petitioner an opportunity to seek rectification would produce gross injustice and therefore directed that petitioner's rectification application be considered on merits by CESTAT afresh. [Paras 6, 12, 13]

Set aside the impugned order dated 26th August 2019 and direct CESTAT to consider petitioner's rectification application and to hear and dispose Appeal No.C/85678 of 2015 preferably within twelve weeks.

Doctrine of merger - power of tribunal to recall its order - Whether the doctrine of merger operated so as to bar petitioner from seeking rectification after it had been permitted by the Apex Court to withdraw its statutory appeal. - HELD THAT: - The Court examined the applicability of the doctrine of merger and concluded it did not apply in the facts of this case. The petitioner had sought and been granted leave by the Apex Court to withdraw its appeal; there was no order of admission by the Apex Court, no adjudication on the merits by the Apex Court, and no dismissal or affirmance of the Tribunal's order by the Apex Court. In those circumstances the withdrawal did not operate as an affirmance or merger of the CESTAT order. Consequently, the Tribunal's conclusion that the petitioner had exhausted its remedy and could not pursue rectification because it had invoked the Supreme Court's jurisdiction was not sustainable. [Paras 8, 9, 10, 12]

Doctrine of merger held inapplicable; petitioner not barred from seeking rectification by reason of having withdrawn the appeal before the Apex Court.

Final Conclusion: Writ petition allowed; impugned CESTAT order dated 26th August 2019 set aside and CESTAT directed to consider petitioner's rectification application on merits and dispose the appeal preferably within twelve weeks.

Power of the Central Government under the Foreign Trade (Development and Regulation) Act, 1992 to regulate, prohibit or restrict imports - Validity and effect of DGFT notifications fixing minimum import price / CIF value for imports - Interaction between notifications under the FTDR Act and consequences under the Customs Act including confiscation - Requirement of a reasoned and speaking order and remand for fresh consideration

Power of the Central Government under the Foreign Trade (Development and Regulation) Act, 1992 to regulate, prohibit or restrict imports - Validity and effect of DGFT notifications fixing minimum import price / CIF value for imports - Interaction between notifications under the FTDR Act and consequences under the Customs Act including confiscation - Requirement of a reasoned and speaking order and remand for fresh consideration - Whether the Tribunal erred in setting aside confiscation and ancillary orders without considering the FTDR Act, DGFT notifications and binding judicial decisions, and whether the matter required re-hearing by the Tribunal. - HELD THAT: - The High Court found that the Tribunal had followed a coordinate bench decision but failed to consider binding precedents of this Court and later decisions of the Supreme Court concerning the FTDR Act and DGFT notifications fixing minimum import prices/CIF values. The Court explained that the FTDR Act empowers the Central Government to frame policy and issue orders restricting or regulating imports and that such notifications (and consequent trade notices) can validly operate to regulate imports and have consequences under the Customs Act. Given that the Tribunal had not been addressed with or taken into account the relevant precedents (including the Division Bench decision in Union of India v. Navin Kr. Jha and subsequent Supreme Court pronouncements), the High Court concluded that the Tribunal should re-hear the matter and decide on merits after taking note of those decisions and any other submissions placed before it. The High Court therefore set aside the Tribunal's order and remanded the case for a reasoned and speaking decision on the legal issues raised.

Tribunal's order set aside; matter remanded to the Tribunal for fresh consideration and a reasoned speaking order in accordance with law.

Final Conclusion: Appeal allowed in part: the Tribunal's order is set aside and the matter remanded to the Tribunal for fresh hearing and adjudication on merits after taking into account the FTDR Act, DGFT notifications and binding judicial decisions; substantial questions of law left unanswered.

Classification of goods under Customs Tariff Heading 8424 - interpretation of notification entries for taxing sprinklers - applicability of IGST rate based on Schedule-II v. Schedule-III - scope and effect of CBIC Circular clarifying entry coverage

Classification of goods under Customs Tariff Heading 8424 - interpretation of notification entries for taxing sprinklers - scope and effect of CBIC Circular clarifying entry coverage - Whether the imported fire sprinklers are classifiable under entry at Serial No. 195B (attracting 12% IGST) or under entry at Serial No. 325 (attracting 18% IGST) of the notification dated 28.06.2017. - HELD THAT: - The Court examined the language of Serial No. 195B which expressly lists three distinct items: sprinklers; drip irrigation system including laterals; and mechanical sprayers. The term "sprinklers" in entry 195B is not qualified or restricted to irrigation use and is separated from the other items by punctuation, indicating distinct coverage. Serial No. 325, by its express wording, excludes the goods covered by Serial No. 195B and does not include "sprinklers." The CBIC Circular dated 31.12.2018 merely clarified that the term "sprinklers" in entry 195B also covers sprinkler irrigation systems and related components; it was issued to resolve field doubts and does not operate to restrict the unqualified term "sprinklers" only to irrigation . Consequently, the Circular cannot be read as excluding fire sprinklers from the scope of entry 195B. Applying these principles of interpretation, the impugned goods (fire sprinklers) fall within entry 195B and not within Serial No. 325, so the demand based on classification under Serial No. 325 was unsustainable. [Paras 14, 15, 16]

Fire sprinklers imported by the respondent are classifiable under entry at Serial No. 195B of the notification dated 28.06.2017; the Commissioner (Appeals) correctly set aside the demand.

Final Conclusion: The Commissioner (Appeals) correctly interpreted the notification and the CBIC Circular; the appeal challenging classification in favour of the respondent is dismissed and the demand confirmed by the Deputy Commissioner is set aside.

Cartelisation and bid rigging - Anti-competitive conduct under Section 3(1) - Collusive cover bidding / supporting bids - Cease and desist direction under Section 27(a) - Imposition of penalty under Section 27(b) - Liability of persons in charge under Section 48 - Relevant turnover versus total turnover (Excel Crop Care principles) - Remand for reconsideration of penalty quantum

Cartelisation and bid rigging - Anti-competitive conduct under Section 3(1) - Collusive cover bidding / supporting bids - Liability of persons in charge under Section 48 - Cease and desist direction under Section 27(a) - Appellant found to have participated in collusive cover bidding and thereby contravened Section 3(1) read with Section 3(3)(c) and 3(3)(d); cease and desist direction under Section 27(a) upheld. - HELD THAT: - The Tribunal examined the investigation report and the impugned order which record contemporaneous and testimonial material: issuance and admission of fake experience certificates/work orders; identical/forged commercial invoices and tax invoices not supported by supplier records; common IP address and email identifiers used for e-bids; admissions by the appellant's proprietor that invoices were arranged by Yash Solutions and that appellant submitted supporting/cover bids at the request of Yash Solutions; and corroborative statements of other persons including the managing director of Yash Solutions. On that factual matrix the Commission concluded that the appellant, though a proprietorship without prior soil-testing experience or infrastructure, participated as a cover bidder to facilitate Yash Solutions, and was therefore a member of the cartel. The Tribunal found no error in the Commission's legal conclusion that such conduct amounted to contravention of Section 3(1) read with Section 3(3)(c) and 3(3)(d), and that officers / persons in charge were liable under Section 48. Accordingly the cease-and-desist direction issued under Section 27(a) was affirmed. [Paras 16]

Affirmed the finding of contravention of Section 3(1) read with Section 3(3)(c) and 3(3)(d) against the appellant and upheld the cease-and-desist direction under Section 27(a).

Imposition of penalty under Section 27(b) - Relevant turnover versus total turnover (Excel Crop Care principles) - Remand for reconsideration of penalty quantum - The Commission's exercise of discretion in fixing penalty by reference to average turnover was not interfered with on merits, but penalty quantum as imposed on the appellant (a proprietorship) is remitted to the Commission for reconsideration of quantum. - HELD THAT: - The Tribunal recognised that Section 27(b) permits imposition of penalty up to specified limits and that the Commission exercised discretion to impose 5% of the average turnover/income for the three financial years 2017-18 to 2019-20. The Tribunal noted the Excel Crop Care guidance on considering relevant turnover to avoid disproportionate penalties but observed that, given the factual finding that the appellant acted as a cover bidder and was part of cartel activity, the Commission's use of total turnover could not be characterised as plainly erroneous. However, bearing in mind the appellant's status as a proprietorship and settled principles that discretion must not be exercised indiscreetly, the Tribunal directed that the question of penalty quantum as applied to the appellant be remitted to the Commission for fresh consideration with a view to leniency and appropriate adjustment of percentage, while leaving the Commission's underlying finding of liability intact. [Paras 17, 18]

Did not disturb the Commission's authority to impose penalty but remitted the matter to the Commission to reconsider and recompute the penalty on the appellant, taking into account its proprietorship status and the Excel Crop Care guidelines.

Final Conclusion: Appeal disposed. The Tribunal affirms the Commission's findings of cartelisation and misuse of documents and upholds the cease-and-desist direction under Section 27(a); the question of penalty quantum imposed under Section 27(b) on the appellant (proprietorship) is remitted to the Commission for reconsideration and recomputation with a direction that lenity may be considered.

Restoration of company name in Register of Companies - Struck off companies and restoration under Section 252 - Shell company doctrine - Compliance with filing requirements and effect of non-filing - Procedural notices under Section 248 and STK publications

Restoration of company name in Register of Companies - Struck off companies and restoration under Section 252 - The appellants did not establish any grounds warranting restoration of the company's name and the NCLT's rejection of the restoration application is affirmed. - HELD THAT: - The Appellate Tribunal considered the material placed before the NCLT and the submissions of the parties. The tribunal's finding that there were no grounds for ordering restoration was examined against the appellants' contentions of continued operation, payment of property tax, conduct of AGM and availability of audited financial statements. The Appellate Tribunal found that these contentions did not successfully confront the NCLT's conclusion that the company appeared to be a shell and that the restoration application was devoid of merit. Having regard to the record and the NCLT's reasons, the court concluded there was no error in rejecting the application for restoration under Section 252 of the Companies Act, 2013. [Paras 12]

Appeal dismissed; NCLT order refusing restoration is affirmed.

Shell company doctrine - Compliance with filing requirements and effect of non-filing - Procedural notices under Section 248 and STK publications - The NCLT's finding that the company appears to be a shell company and that the Registrar followed prescribed notice procedures was upheld. - HELD THAT: - The Appellate Tribunal noted the Registrar's reliance on MCA records showing financial statements filed only up to the financial year ending 31.03.2012 and the consequent initiation of removal proceedings under the statutory scheme, including issuance of STK notices and publication in the official gazette and newspapers. The Tribunal accepted that the absence of filings for the immediately preceding two financial years and the Registrar's compliance with the procedural steps provided reasonable cause to strike off the company. The appellants' evidence of payments such as property tax and later audited statements and filings before other authorities were not held to displace the NCLT's conclusion that the company, on the material before it, appeared to be a shell. [Paras 12]

NCLT's characterization of the company as a shell and the Registrar's compliance with removal procedure are affirmed.

Final Conclusion: The Appellate Tribunal found no merit in the appeal, affirmed the NCLT's conclusion that the company appeared to be a shell, and dismissed the appeal thereby upholding the refusal to restore the company's name in the Register of Companies.

Extinguishment of claims under approved resolution plan - operational creditor's obligation to file proof of claim in CIRP - binding nature of approved resolution plan and freezing of claims - interpretation of Regulation 12.5 of MERC (charge on premises) - interim relief - processing of electricity connection subject to outcome

Operational creditor's obligation to file proof of claim in CIRP - extinguishment of claims under approved resolution plan - Whether MSEDCL's past-due claim for arrears, not filed within the IRP/RP timeline, stands extinguished by the approved Resolution Plan prima facie. - HELD THAT: - The Court took a prima facie view that a creditor who, despite notice, fails to submit proof of claim within the time fixed by the IRP (and the extended period) cannot later set itself outside the CIRP and seek full recovery against the corporate debtor or the successful resolution applicant. The judgment relies upon the Supreme Court's exposition that an approved resolution plan becomes binding on creditors and other stakeholders and that the legislative scheme intends to 'freeze' claims so the resolution applicant may begin on a clean slate. Applying those principles to the undisputed facts - MSEDCL did not file its claim by the public notice last date (17th December 2018) nor by the extended 90-day period (5th March 2019), and forwarded its claim to the RP only after the CoC had approved the plan - the Court concluded prima facie that MSEDCL's past claim is liable to be regarded as extinguished for purposes of the approved plan. The Court rejected the submission that the RP or the Resolution Applicant's knowledge of litigation disclosure absolves the operational creditor of its statutory duty to lodge a proof of claim with the IRP/RP, observing that mere disclosure by others is not equivalent to filing and verifying a claim before the RP and would undermine the CIRP framework. [Paras 32, 33, 35, 41, 43]

Prima facie the past-due claim of MSEDCL, not lodged within the IRP/RP timelines, stands extinguished insofar as the approved Resolution Plan governs, subject to final adjudication.

Interpretation of Regulation 12.5 of MERC (charge on premises) - statutory charge vs personal liability - Whether Regulation 12.5 of the MERC Regulations creates a statutory charge in specie over premises that would enable MSEDCL to stand outside or override the approved Resolution Plan. - HELD THAT: - The Court analysed Regulation 12.5 and concluded prima facie that the term 'charge' in that Regulation denotes a liability recoverable from successors-in-title or occupiers of premises rather than a proprietary charge in specie over the land or premises enabling sale/attachment. The Regulation makes the dues recoverable from legal representatives or new occupants who benefit from supply, but does not create an enforceable security over the premises permitting MSEDCL to recover by treating the dues as a charge on the property itself. Consequently, Regulation 12.5 does not, on its face, permit MSEDCL to position itself outside an approved Resolution Plan that has dealt with past dues. [Paras 21, 39, 40, 41, 42]

Prima facie Regulation 12.5 does not create a statutory charge in specie over premises and does not enable MSEDCL to stand outside or override the approved Resolution Plan with respect to past dues.

Binding nature of approved resolution plan and freezing of claims - relevance of Supreme Court precedents (Ghanashyam Mishra and Rainbow Papers) - How the Supreme Court precedents bearing on the effect of an approved resolution plan apply to MSEDCL's position as an operational creditor and to the present dispute. - HELD THAT: - The Court applied the ratio of Ghanashyam Mishra that an approved resolution plan becomes binding on creditors and other stakeholders and that the 2019 amendment ensures statutory dues may be extinguished if not included in the resolution. The Court considered Rainbow Papers and observed it follows and reinforces Ghanashyam Mishra's requirement that the RP and the adjudicating authority ensure statutory demands are addressed in the plan; but on the facts before the Court MSEDCL had unexplained delay in lodging its claim and did not avail itself of the RP process prior to CoC approval. Thus, prima facie, MSEDCL's failure to file within the prescribed times distinguishes its case from Rainbow Papers and points towards extinguishment of its past claims under the approved plan, subject to final determination. [Paras 34, 35, 36, 38, 43]

In light of authoritative Supreme Court rulings, and on the present facts, the approved Resolution Plan prima facie governs and freezes claims; MSEDCL's delayed filing places its past dues outside protection absent further adjudication.

Interim relief - processing of electricity connection subject to outcome - balancing of equities in interlocutory relief - What interim relief should be granted pending final adjudication of MSEDCL's claims and NRC Ltd's petition. - HELD THAT: - Balancing competing equities and having formed a prima facie view that MSEDCL's past claims were not validly preserved, the Court directed that MSEDCL must process NRC Ltd's applications for new high-tension connections at the four villages and must not insist on payment of past arrears as a pre-condition to processing. The Court qualified this relief: processing and supply are to be on the clear understanding that (a) no equities are created in favour of NRC Ltd with respect to MSEDCL's claimed arrears by the grant of the connections; (b) the applications and any restoration will be subject to the ultimate outcome of the petition; and (c) MSEDCL may continue to record and show in its books and bills the amount of arrears and interest for internal and limitation-record purposes. NRC Ltd is to pay current bills for continuing charges only after restoration or grant of new connections; MSEDCL cannot refuse new connections or disconnect solely on the basis of past unpaid arrears until further orders. [Paras 42, 44, 45, 48]

Interim relief granted: MSEDCL must process and, subject to outcome, provide the requested connections without insisting on payment of past arrears, while preserving both parties' rights for final adjudication and permitting MSEDCL to maintain records of arrears.

Final Conclusion: The Court, on a prima facie assessment, held that MSEDCL's failure to lodge its proof of claim within the IRP/RP timeline materially undermines its claim to enforce past arrears against NRC Ltd or the successful Resolution Applicant, and that Regulation 12.5 does not create a proprietary charge over premises to circumvent the approved Resolution Plan. Consequently, the Court directed MSEDCL to process NRC Ltd's new connection applications and refrain from insisting on payment of past arrears as a precondition, while preserving all rival rights for final hearing.

Non-speaking order - Principle of natural justice - Pre-existing dispute - Section 9 of the Insolvency and Bankruptcy Code, 2016 - Demand notice under Section 8 of the Code - Remand for fresh adjudication

Non-speaking order - Pre-existing dispute - Section 9 of the Insolvency and Bankruptcy Code, 2016 - The Adjudicating Authority's dismissal of Section 9 applications on the ground of a pre-existing dispute where the sole basis was an email dated 01.03.2017. - HELD THAT: - The Tribunal found that the Adjudicating Authority dismissed the Section 9 applications only on the basis of an email dated 01.03.2017, without explaining how that communication established a pre-existing dispute. The email, as reproduced on record, did not on its face disclose any clear dispute, and counsel for the respondents could not satisfactorily explain how it amounted to a pre-existing dispute. The impugned order therefore lacked reasons demonstrating the nexus between the email and a concluded pre-existing dispute; in consequence the order was held to be a non-speaking order and in breach of the requirement to record reasons when declining a Section 9 petition on such a ground. [Paras 15]

The impugned dismissal for alleged pre-existing dispute was set aside as a non-speaking order for want of explanation and reasoning.

Principle of natural justice - Remand for fresh adjudication - Demand notice under Section 8 of the Code - Relief to be afforded where the Adjudicating Authority's order is non-speaking and in breach of natural justice. - HELD THAT: - Applying the principle of natural justice, the Tribunal held that the defective non-speaking orders required interference. The appropriate remedy was to set aside the impugned orders, restore the applications to their original numbers and remit the matters to the Adjudicating Authority for fresh disposal with reasons. The Tribunal noted that in some matters the demand notice under Section 8 had not been replied or was replied after the statutory period, facts which merited reconsideration by the Adjudicating Authority while recording reasons in a speaking order. [Paras 16]

All five appeals allowed; impugned orders set aside; matters remanded to the Adjudicating Authority for fresh decision on merits after affording parties opportunity and for issuance of a speaking order; applications restored.

Final Conclusion: All five appeals were allowed. The Adjudicating Authority's orders dismissing the Section 9 applications were set aside as non-speaking and violative of natural justice; the matters were restored and remanded for fresh adjudication with reasons and the parties were directed to appear before the Adjudicating Authority on the appointed date.

Proviso to Section 244(1) of the Companies Act, 2013 - leave to initiate proceedings under Section 244 - interim reliefs under Section 242(4) of the Companies Act, 2013 - inherent powers of the Tribunal under Rule 11 of the NCLT Rules, 2016

Proviso to Section 244(1) of the Companies Act, 2013 - leave to initiate proceedings under Section 244 - Whether the impugned NCLT order admitting the company petition by waiving the requirements in the proviso to Section 244(1) should be set aside. - HELD THAT: - The Appellate Tribunal did not enter into the merits of the challenge to the NCLT's admission order. The appeal under Section 421 was disposed of by directing the NCLT (Kolkata Bench) to expedite disposal of the pending proceedings and by recording that the parties are at liberty to raise all contentions before the Tribunal. The Bench observed precedent and submissions concerning the Tribunal's power to make interim orders and to exercise inherent powers, but refrained from adjudicating the correctness of the NCLT's exercise in admitting the petition or in waiving the specified requirements of the proviso to Section 244(1). Consequently, no substantive determination was made on whether the admission should be sustained or set aside; the matter was returned to the Tribunal for fresh consideration and final decision after hearing the parties.

Appeal disposed of without adjudication on merits; matter remitted to the NCLT for expedited consideration with liberty to parties to raise all issues.

Final Conclusion: The appeal was disposed of without deciding the substantive merits of the NCLT's order admitting the petition under the proviso to Section 244(1); the Appellate Tribunal directed the NCLT (Kolkata Bench) to expedite disposal of the pending petition and granted the parties liberty to press all contentions before the Tribunal.

Intervention by a financial creditor in Section 9 proceedings - exception to non-intervention where collusion or material facts require adjudication - duty of Adjudicating Authority to examine material affecting maintainability - subrogation and discharge by an operational creditor of an insurer

Intervention by a financial creditor in Section 9 proceedings - exception to non-intervention where collusion or material facts require adjudication - Whether a financial creditor has a right to intervene in Section 9 proceedings prior to admission of the Section 9 application - HELD THAT: - The Tribunal held that ordinarily a financial creditor does not have the right to intervene in proceedings instituted by an operational creditor under Section 9 prior to admission of the Section 9 application; financial creditors may file claims and participate after admission. However, the Court recognised the settled exception-where specific allegations or material facts (for example, allegations of collusion or other circumstances raising questions about the maintainability of the Section 9 petition) are shown, intervention may be permitted so that the Adjudicating Authority can consider those matters. The Tribunal relied on its earlier decision in L&T Infrastructure Finance Company Ltd. and the Supreme Court's decision in Beacon Trusteeship Ltd. to articulate that intervention is exceptional and must be grounded on material necessitating consideration by the Adjudicating Authority. [Paras 13]

Ordinarily no right to intervene before admission of Section 9; intervention permissible in exceptional cases where material warrants Adjudicating Authority's consideration.

Subrogation and discharge by an operational creditor of an insurer - duty of Adjudicating Authority to examine material affecting maintainability - Whether, on the facts of these appeals, the appellants should be permitted to intervene in the Section 9 petitions - HELD THAT: - The Tribunal examined the material placed by the appellants, notably a 'Claim Discharge and Subrogation Form' dated 04.12.2017 evidencing that the operational creditor had received an insurance payment, discharged the insurer, and purportedly subrogated rights to the insurer (including authorization for the insurer to pursue claims). The Tribunal considered that this document is relevant to whether the operational creditor's claim (which is the subject of the Section 9 petitions) remains enforceable and whether the maintainability of the Section 9 petitions requires adjudication in light of such discharge/subrogation. Given those exceptional facts and the absence of full disclosure of insurance-related details in the Section 9 filings (a matter already raised before the Adjudicating Authority), the Tribunal concluded that the appellants should be permitted to intervene in the two Section 9 proceedings so that the Adjudicating Authority can consider the impact of that material. [Paras 17, 18, 19]

Appellants permitted to intervene in C.P. (IB) No. 55 (AHM) 2021 and C.P. (IB) No. 204 (AHM) 2022 on the exceptional facts shown.

Duty of Adjudicating Authority to examine material affecting maintainability - Whether the Tribunal had decided the admissibility of the Section 9 petitions - HELD THAT: - The Tribunal expressly refrained from deciding whether the Section 9 applications should be admitted. It observed that the question of admission-including the effect of the insurance payment and subrogation-remains for the Adjudicating Authority to examine and decide on the merits. The Tribunal's grant of leave to intervene was limited to permitting the appellants to place relevant material and make submissions before the Adjudicating Authority; it did not constitute a determination on admission or merits of the Section 9 petitions. [Paras 17, 19]

Admissibility and merits of the Section 9 petitions remain to be examined and decided by the Adjudicating Authority.

Final Conclusion: The appeals are allowed to the extent that the orders rejecting the applications for intervention are set aside and the appellants are permitted to intervene in the two Section 9 proceedings; this direction is confined to the exceptional facts shown and does not decide the admission or merits of the underlying Section 9 petitions, which the Adjudicating Authority must determine after considering the material now permitted to be placed on record.

Resolution Plan - Transfer Date - live bank guarantees - invoked bank guarantees - treatment of claims under approved resolution plan - Source of Funds and its Utilization - surprise claims - purposive interpretation of contractual terms

Resolution Plan - Transfer Date - live bank guarantees - invoked bank guarantees - treatment of claims under approved resolution plan - Whether the Successful Resolution Applicant is liable to pay 52.50% of the amounts in respect of live bank guarantees invoked prior to the Transfer Date under the approved Resolution Plan - HELD THAT: - The adjudication rests on the terms of the approved Resolution Plan, specifically Paras 3.5 and 3.7(2)(c), read with the defined meanings of "Closing Date" and "Transfer Date". Paras 3.5(a) and (b) indicate the source and broad summary of utilisation of funds and contain a footnote stating that utilisation will be as provided in the Resolution Plan; the footnote also notes that the amount includes the equivalent of 52.50% of invoked bank guarantees pertaining to large projects. Para 3.7(2)(c) expressly conditions the obligation of the Resolution Applicants to pay 52.50% of invocation amounts on the invocation occurring subsequent to the Transfer Date, and provides for payment within 60 days of such post-Transfer Date invocation. The Transfer Date is the date on which management and control are handed over to the board constituted by the Resolution Applicants and therefore demarcates the temporal point from which the SRA assumes operative liabilities. The invoked bank guarantees in question were called by beneficiaries on 18.10.2021, which was prior to the Transfer Date of 04.01.2022. Applying the clear textual condition in Para 3.7(2)(c) and giving weight to the punctuation and specific drafting of the clause, the Court finds that the Resolution Applicants did not undertake liability for invocations occurring before the Transfer Date. The Court further applies the principle that a Successful Resolution Applicant cannot be saddled with "surprise claims" not covered by the approved plan, and holds that permitting recovery here would contravene the allocation of liabilities fixed by the plan. For these reasons the contention that the SRA is liable to pay for invocations before Transfer Date is rejected. [Paras 21, 22, 23, 24, 25]

The Successful Resolution Applicant is not liable to pay 52.50% of the amounts in respect of live bank guarantees invoked prior to the Transfer Date; the appeal is dismissed.

Final Conclusion: The appeal is dismissed. The Tribunal held that, in accordance with the terms of the approved Resolution Plan (notably Para 3.7(2)(c) read with Paras 3.5 and the definitions of Closing Date and Transfer Date), the SRA's obligation to pay 52.50% of invoked live bank guarantees arises only where invocation occurs subsequent to the Transfer Date; invocations prior to the Transfer Date are not payable by the SRA.

Initiation of liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - appointment of liquidator under Section 34 of the Insolvency and Bankruptcy Code, 2016 - effect of moratorium on liquidation and fresh moratorium under Section 33(5) of the Insolvency and Bankruptcy Code, 2016 - continuation of pending arbitration proceedings during liquidation - duties and reporting obligations of the liquidator under the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - custody and control of assets and public announcement on commencement of liquidation - vesting of management and control in the liquidator on commencement of liquidation

Initiation of liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - requirement of Committee of Creditors' decision by not less than sixty-six percent voting share - Liquidation of M/s. Sohrab Textiles Mills Ltd. to be initiated under Section 33(2) of the IBC. - HELD THAT: - The Tribunal examined Section 33(2) and the circumstances permitting a liquidation order. The Corporate Insolvency Resolution Process had been conducted, Form G was republished but no resolution plan was received, and the Committee of Creditors in its 10th meeting held on 26.05.2022 resolved for liquidation with 100% voting share. The CoC's compliance with applicable CIRP Regulations (including Regulation 39(B), 39(C) and 39(D)) and rectification of estimated expenses was placed on record. On satisfaction of these conditions and absence of a viable resolution plan, the Adjudicating Authority was justified in passing a liquidation order under Section 33(2). [Paras 4, 5, 6, 7]

IA No. 788/2022 is allowed and the Corporate Debtor is ordered to be liquidated under Section 33(2) of the IBC.

Appointment of liquidator under Section 34 of the Insolvency and Bankruptcy Code, 2016 - resolution professional acting as liquidator subject to written consent - Mr. Prem Chand Goyal, the resolution professional, is appointed as liquidator of the Corporate Debtor. - HELD THAT: - Section 34 provides that the resolution professional appointed for CIRP shall act as liquidator upon liquidation order subject to submission of written consent. The record shows that the CoC resolved for appointment of the RP as liquidator (100% voting) and the RP gave his written consent along with the AFA certificate dated 26.05.2022. The Tribunal's verification of the RP's credentials disclosed no adverse material. Consequently, the Tribunal appointed Mr. Prem Chand Goyal as liquidator in exercise of powers under Sections 33 and 34. [Paras 8, 9, 10, 12]

Mr. Prem Chand Goyal is appointed as the liquidator to take charge of the liquidation proceedings.

Effect of moratorium on liquidation and fresh moratorium under Section 33(5) of the Insolvency and Bankruptcy Code, 2016 - continuation of pending arbitration proceedings during liquidation - duties, custody of assets, public announcement and reporting obligations of the liquidator under Liquidation Regulations - vesting of management and control in the liquidator - Consequential directions on commencement of liquidation were issued including cessation and re commencement of moratorium, custody of assets, continuation of arbitration, reporting obligations and vesting of management powers in the liquidator. - HELD THAT: - On passing the liquidation order the Tribunal directed that the corporate debtor be liquidated immediately and that the earlier moratorium under Section 14 cease and a fresh moratorium under Section 33(5) commence. The liquidator was directed to take custody and control of assets, make a public announcement as per Regulation 12 of the Liquidation Process Regulations, continue prosecution of pending arbitration proceedings and proceedings before appellate authorities as permitted by Section 33(5), submit a preliminary report within 75 days under Regulation 13 and fortnightly progress reports under Regulation 15, and exercise the powers of management with officers and employees deemed discharged under Section 33(7). The Tribunal also directed communication of the order to the RoC and the IBBI and permitted the liquidator to seek further directions if necessary. [Paras 11, 12]

The Tribunal issued the specified directions to the liquidator for the conduct of the liquidation process, including custody of assets, public announcement, continuation of arbitration, reporting requirements and vesting of management powers.

Final Conclusion: The Tribunal allowed IA No. 788/2022, held that conditions for initiation of liquidation under Section 33(2) were satisfied, ordered immediate liquidation of M/s. Sohrab Textiles Mills Ltd., appointed Mr. Prem Chand Goyal as liquidator, and issued consequential directions governing the liquidation process, reporting obligations and continuation of specified legal proceedings.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - consolidated declaration - classification of demands as arrears or investigation/inquiry/audit - beneficial legislation - minimisation of litigation and settlement of disputed tax liability - remand for fresh consideration / disposal in accordance with law

Consolidated declaration - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - classification of demands as arrears or investigation/inquiry/audit - beneficial legislation - minimisation of litigation and settlement of disputed tax liability - Validity of Form No.3/amount stated payable under SVLDRS when petitioner filed a single consolidated declaration covering demands earlier adjudicated (arrears) and a pending show cause notice (investigation/inquiry/audit). - HELD THAT: - The Court held that SVLDRS is a beneficial scheme enacted to minimise tax disputes and to facilitate settlement of disputed tax liabilities by allowing declarations. A party is entitled to file a consolidated declaration for amounts it contends are payable to the revenue; the fact that those amounts may fall into different SVLDRS categories (arrears on earlier adjudication and amounts under pending investigation/inquiry/audit) does not permit respondents to treat the consolidated filing in a manner that results in a demand greater than what would follow from a valid consolidated application. In the present case the respondents had raised a demand based on the reference number appearing in the pending show cause notice, resulting in the figure shown in Form No.3. Having regard to the purpose and beneficial character of the Scheme, the Court directed that the respondents should treat the declaration filed by the petitioner as a valid declaration and reconsider and dispose of it in accordance with law so as to effectuate the Scheme's object of minimising litigation and settling liabilities.

Declaration filed by petitioner to be treated as valid; respondents directed to reconsider and dispose of the declaration in accordance with law.

Final Conclusion: On the peculiar facts of the case, the petition is disposed by directing respondents to treat the consolidated declaration as valid and to reconsider and decide it in accordance with law; no order as to costs.

Exemption under Entry 19A of Notification No. 25/2012 ST for canteens maintained in a factory - scope of 'canteen maintained in a factory' - location-based exemption irrespective of who operates the canteen - taxability of 'Outdoor Caterer' vis-a -vis exemption for factory canteens - waiver of penalty in view of partial acceptance of claim and payment of admitted liability

Exemption under Entry 19A of Notification No. 25/2012 ST for canteens maintained in a factory - scope of 'canteen maintained in a factory' - location-based exemption irrespective of who operates the canteen - taxability of 'Outdoor Caterer' - Whether the services provided by the appellant to factories amount to taxable 'Outdoor Caterer' services or are exempt as services provided by a canteen maintained in a factory under Entry 19A of Notification No. 25/2012 ST (as amended). - HELD THAT: - The Tribunal noted the undisputed fact that the appellant supplied food and beverages at canteens located within factory premises and produced declarations and ledgers showing the recipients were covered by the Factories Act, 1948. Entry 19A exempts 'service provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948, having the facility of air conditioning or central air heating at any time during the year.' On plain reading the exemption pertains to a canteen 'in a factory' and does not restrict the benefit to a canteen run 'by' the factory; the Notification therefore grants location based exemption irrespective of the identity of the person who maintains or operates the canteen. Consequently, services of the appellant-who maintained and served food at factory canteens-fall within Entry 19A and are exempt from service tax. The Tribunal also observed that the appellant had relied on supporting case law and documentary evidence, which the Tribunal found to support the claim. Accordingly the demand insofar as it related to services covered by Entry 19A was set aside. [Paras 8, 9]

Services rendered by the appellant in relation to canteens located in factories covered by the Factories Act fall within the exemption of Entry 19A and the corresponding service tax demand in respect of those services is dropped.

Quantification of demand and admitted liability - waiver of penalty - Extent to which the service tax demand is to be sustained after allowing the exemption, and whether penalty should be imposed. - HELD THAT: - The Tribunal found that out of the total demand, the bulk pertained to services to entities covered by Entry 19A and was therefore not leviable; the remaining portion represented an admitted liability which the appellant had paid along with interest. Given that the appellant discharged the admitted tax liability and documentary evidence supported exemption for the rest, the Tribunal upheld the demand only to the extent of the admitted and paid amount (including interest). Considering the facts and conduct of the case, the Tribunal exercised its discretion to set aside the penalty levied by the lower authorities. [Paras 10]

Demand sustained only for the portion admitted and paid by the appellant (with interest); service tax demand relating to exempted canteen services is dropped; penalty imposed by the lower authorities is waived.

Final Conclusion: The appeal is partly allowed: the Tribunal set aside the service tax demand insofar as it related to canteen services exempt under Entry 19A of Notification No. 25/2012 ST, sustained the demand to the extent of the appellant's admitted liability (with interest), and waived the penalty; the impugned order is modified accordingly.

Eligibility of input services as credit for exporters - refund of unutilised CENVAT credit - nexus between input services and exported services - precedent and stare decisis of the Tribunal - requirement of adjudication before denial of refund - Notification No. 27/2012-CE (NT) permitting refund to exporters

Eligibility of input services as credit for exporters - nexus between input services and exported services - refund of unutilised CENVAT credit - precedent and stare decisis of the Tribunal - Notification No. 27/2012-CE (NT) permitting refund to exporters - requirement of adjudication before denial of refund - Whether the appellant is entitled to refund of unutilised CENVAT credit earlier rejected by the Commissioner (Appeals) for certain input services in respect of export of services for the period between April, 2016 and June, 2017. - HELD THAT: - The Tribunal declined to re-adjudicate eligibility of the specified input-service credits where binding Tribunal precedent-including earlier final orders in the appellant's own cases-had already held those categories of input services to be admissible as credits for exporters. The Tribunal observed that Notification No. 27/2012-CE (NT) permits refund of unutilised credits to exporters and that existing decisions of the Tribunal had applied the amended Rule 5 and related clarifications to allow such refunds. In doing so the Tribunal treated the Commissioner (Appeals)'s detailed item-wise rejections as contrary to the established line of Tribunal authority and noted that denial of refund without observance of the adjudicatory process would be impermissible. Relying on the need for certainty and predictability, the Tribunal modified the Commissioner (Appeals) order and allowed the refund in respect of the previously rejected credits.

The order of the Commissioner (Appeals) is modified to allow refund of the unutilised CENVAT credit earlier rejected in respect of the specified input services; the respondent is directed to grant the refund with applicable interest.

Final Conclusion: Appeals allowed; the Tribunal set aside the partial rejection and directed grant of refund of the unutilised CENVAT credit earlier denied, with applicable interest, to be paid by the Department within the time directed.

Service tax on refundable security deposit - interest-free refundable deposit not consideration for service - notional interest on security deposit cannot be added to value of taxable service - value of taxable service under Section 67 - nexus between amount charged and the service provided

Service tax on refundable security deposit - interest-free refundable deposit not consideration for service - notional interest on security deposit cannot be added to value of taxable service - value of taxable service under Section 67 - Appellant is not liable to pay Service Tax on the interest-free refundable security deposits taken from clients for trading/demat accounts. - HELD THAT: - The Tribunal applied its earlier decision in the appellant's own case (order dated 12.04.2022) and authoritative precedents, holding that the interest-free refundable deposit was kept as security and did not represent consideration for any taxable service. Section 67 requires a nexus between the amount charged and the service provided; absent such nexus, amounts not serving as consideration for the service are not includible in the value of taxable services. There is no provision in the Service Tax law to treat notional interest on such refundable deposits as consideration. The revenue failed to produce evidence showing that the deposit influenced the service charges; on the facts and settled law, notional interest on the security deposit could not be added to the taxable value. [Paras 4, 5]

Demand of service tax on the refundable security deposit set aside; appeal allowed.

Final Conclusion: The impugned order demanding service tax on the security deposit is not sustainable; it is set aside and the appeal is allowed.

CENVAT credit on debit note - Rule 9 of the CENVAT Credit Rules, 2004 - Proviso to Rule 9(2) - document must contain particulars and Deputy/Assistant Commissioner satisfaction - Requirement that service must be provided and received (Rule 3 of the CCR, 2004) - Precedential scope of judgments on debit notes and tax invoices - Scope of adjudication vis-a -vis Show Cause Notice

Precedential scope of judgments on debit notes and tax invoices - CENVAT credit on debit note - Whether the decisions in M/s. Modular Auto Ltd. and M/s. Gates Unitta India Co. Pvt. Ltd. cover and decide the present case. - HELD THAT: - The Tribunal held that the two decisions do not directly cover the present case. In M/s. Modular Auto Ltd. the document accepted was a tax invoice and it was not disputed that the service provider had been assessed to service tax; the High Court was therefore not called upon to consider claim of input credit on a debit note. In M/s. Gates Unitta India the Bench accepted debit notes containing mandatory particulars, but in that case there was no dispute that services were rendered. Neither decision dispenses with the fundamental requirement that services must have been rendered to the claimant for claiming CENVAT credit; their principles may be of assistance but do not decide the present facts. [Paras 14]

The cited judgments do not directly cover the present facts and are only of limited assistance; they do not obviate the requirement that services must have been rendered and properly evidenced.

Scope of adjudication vis-a -vis Show Cause Notice - Whether the Order-in-Original travelled beyond the scope of the Show Cause Notice. - HELD THAT: - The Tribunal found that the Show Cause Notice specifically proposed that the debit note was not a valid document under Rule 9 and that the authorities were entitled to examine the refund claim for compliance with statutory requirements. The final findings of the lower authorities were that Rule 9 was violated because the debit note was not a prescribed document; therefore the adjudication did not travel beyond the Show Cause Notice. [Paras 15]

The impugned Order-in-Original did not travel beyond the Show Cause Notice.

Rule 9 of the CENVAT Credit Rules, 2004 - Proviso to Rule 9(2) - document must contain particulars and Deputy/Assistant Commissioner satisfaction - Whether there was violation of Rule 9 of the CCR, 2004 so as to disentitle the appellant to claim input tax credit on the debit note. - HELD THAT: - The Tribunal observed that Rule 9 permits CENVAT credit on specified documents and that a debit note may serve as the basis for credit only if it contains the particulars required by Rule 9 and the proviso to Rule 9(2) is satisfied. Examination of the debit note showed it described the entry as a 'reimbursement of expenses incurred on behalf of' the issuer and did not state the nature of the taxable service or other mandatory particulars. Consequently the debit note was incomplete and could not be treated as a document specified under Rule 9. [Paras 16]

The debit note does not satisfy the requirements of Rule 9(2) and the proviso thereto and therefore violates Rule 9, disentitling the appellant to claim CENVAT credit on that document.

Requirement that service must be provided and received (Rule 3 of the CCR, 2004) - CENVAT credit on debit note - Whether, on the facts, the appellant is otherwise entitled to the claimed credit. - HELD THAT: - The Tribunal noted material facts: the debit note purportedly dated 31.03.2017 was not reflected in the appellant's original return and was first claimed only in a revised return filed after; the retrospective agreement was executed after the returns; no tax invoice was issued by the other party; there was no evidence that the other party had offered the amounts to tax or shown the debit in its own returns; the parties are related and no rental agreement was produced. On these facts and the concurrent findings of the lower authorities, the debit note is likely a self serving document not evidencing that services were rendered and received, and the requirements of Rule 3 are not met. [Paras 7, 17]

On the preponderance of probabilities the appellant is not entitled to the claimed credit because no material shows the services were rendered and received and the debit note is not a genuine supporting document.

Final Conclusion: The Tribunal found no merit in the appeal and declined to interfere with the concurrent findings of the authorities that the debit note did not meet the requirements of Rule 9 and that services were not shown to have been rendered and received; the appeal is dismissed.

Unjust enrichment - Refund of tax deposited - Burden of tax / pass through to buyer - Accounting treatment as evidence of burden borne

Unjust enrichment - Refund of tax deposited - Burden of tax / pass through to buyer - Accounting treatment as evidence of burden borne - Whether the refund claimed by the appellant is barred by the doctrine of unjust enrichment because the appellant had passed on the burden of the deposited tax to the buyers. - HELD THAT: - The appellant, a developer, deposited service tax and interest following an audit objection but maintained that the amounts were collected and held as trustee for transfer to the society once constituted and that no service tax was collected from buyers. The Assistant Commissioner relied on the appellant's undertaking and on the fact that service tax appeared as an expense in the profit and loss account to conclude that the tax had not been collected from customers and allowed the refund. On review the matter was reopened and Commissioner (Appeals) later affirmed that the P&L entry demonstrated that the appellant had borne the burden and thus refund would not result in unjust enrichment. The Tribunal examined whether the tax burden had in fact been passed on to third parties. It concluded that there was no evidence that any buyer bore the tax; whether the amount was shown as a receivable in the balance sheet or debited as an expense in the profit and loss account, in either form the economic burden rested with the appellant. Consequently the refund claim did not offend the principle against unjust enrichment and the appellant satisfied the test for refund. [Paras 9, 10]

The appellant satisfied the test of unjust enrichment; the refund is not barred and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned order, and held that the appellant had borne the tax burden so that the refund does not constitute unjust enrichment; the appellant is entitled to consequential benefits.

Excisable goods - manufacture / process of manufacture - Cenvat credit and Rule 3(5A) of the Cenvat Credit Rules, 2004 - scrap not arising from manufacture (general/used/obsolete items) - onus on Revenue to establish availment of Cenvat credit before invoking liability - bald allegation in Show Cause Notice and requirement of supporting evidence

Excisable goods - manufacture / process of manufacture - scrap not arising from manufacture (general/used/obsolete items) - Whether scrap cleared by the assessee which is neither manufacturing scrap nor scrap of inputs/capital goods on which Cenvat credit was availed is liable to central excise duty. - HELD THAT: - The Tribunal accepted the assessee's categorical disclosure that excise duty had been paid only on manufacturing scrap and on scrap arising from cenvatable inputs/capital goods, and that other scrap cleared by it comprised general/old/used/obsolete items on which no Cenvat credit was taken. Relying on settled principle that excise is an incidence of manufacture, and on precedents holding that goods must be produced or manufactured (or arise as by-product of a manufacturing process) to be excisable, the Tribunal held that scrap which does not emerge from the process of manufacture of the excisable product cannot be subjected to duty. The Court further noted that mere saleability of an item does not render it a manufactured/excisable good and that items removed as general scrap or obsolete/used machinery are not excisable unless they satisfy the conjoint tests of Section 2(d) and 2(f) (i.e., being specified as excisable and having undergone a process amounting to manufacture). Applying these principles to the disclosed facts, the Tribunal concluded such general scrap was not liable to excise duty.

Demand in respect of scrap which is neither manufacturing scrap nor scrap of cenvatable inputs/capital goods is not sustainable and is set aside.

Cenvat credit and Rule 3(5A) of the Cenvat Credit Rules, 2004 - onus on Revenue to establish availment of Cenvat credit before invoking liability - bald allegation in Show Cause Notice and requirement of supporting evidence - Whether the Show Cause Notice and consequent demand could be sustained without any investigation or evidence that the assessee had availed Cenvat credit on the scrap/capital goods removed as scrap. - HELD THAT: - The Tribunal observed that the Show Cause Notice alleged duty liability on all scrap reflected in the balance sheet but did not show any inquiry or evidence that Cenvat credit had been availed on the items removed as scrap. Rule 3(5A) (as interpreted in authorities relied upon) operates only where credit was taken on capital goods cleared as scrap. Absent any material in the Notice or adjudication to establish availment of Cenvat credit, the allegation remained bald and unsubstantiated. In those circumstances the assessee's uncontradicted statement that no credit had been taken in respect of the general scrap must be accepted.

Demand based on the unsubstantiated Show Cause Notice is unsustainable and is quashed for lack of evidence regarding availment of Cenvat credit.

Final Conclusion: Appeal allowed; the adjudged demand of excise duty on scrap (2008-09 to 2012-13 upto (January,2013)) which neither arose from manufacture nor related to items on which Cenvat credit was availed is set aside, the Show Cause Notice being unsupported by requisite evidence.

CENVAT credit admissibility - Input Service Distributor - defective invoice and cure - credit on debit notes issued by Head Office - document production and verification - nexus of service with manufacturing activity - availability of credit for services prior to 01.04.2011 - credit where Service Tax suffered on entire consideration despite retention - remand for verification

Defective invoice and cure - Credit denied because invoices were addressed to a different unit was not sustainable. - HELD THAT: - The Department did not contend that the services were actually availed by the other unit; the invoices mistakenly named the Mettur Plant-II though services were consumed at the Cuddalore unit. On that basis the Tribunal held that denial of credit on this ground was not justified and allowed the credit in respect of the small amount disallowed for this reason. [Paras 6]

Credit allowed insofar as invoices were wrongly addressed.

Defective invoice and cure - document production and verification - Credit denied for absence of service-provider registration number in invoices was not justified where the registration number was available and subsequently added. - HELD THAT: - Sample invoices produced showed the service-provider's Service Tax registration number was included subsequently in handwriting and therefore available for verification. The Tribunal held that mere absence of that number as part of the original printed invoice, when the registration number is available for verification, does not warrant denial of credit. [Paras 7]

Denial of credit on account of missing registration number set aside; credit allowed.

Input Service Distributor - credit on debit notes issued by Head Office - Credit availed on debit notes issued by the Head Office (ISD) cannot be denied merely because debit notes are not the prescribed document if there is no doubt about services and tax having been paid. - HELD THAT: - The appellant stated that debit notes were issued by its Head Office which held ISD registration. The Tribunal observed that where the nature of service and payment of tax are not in doubt, the Assistant/Deputy Commissioner can verify further; denial of credit on the ground that debit notes are not expressly prescribed was not warranted and therefore the credit was held eligible. [Paras 8]

Credit allowed where debit notes issued by ISD were relied upon and there was no doubt about services or tax paid.

Document production and verification - remand for verification - Claims of credit denied for non-production of documents in relation to certain suppliers were remanded for verification by the Original Authority. - HELD THAT: - For the amounts disallowed in respect of services from specified providers, the Original Authority recorded issues regarding documents being addressed to the Head Office and non-production. The Tribunal found these matters required factual verification and therefore remanded the specific components for examination by the Original Authority. [Paras 9]

Remanded to the Original Authority for verification of document production (amounts in question remitted for fresh consideration).

Nexus of service with manufacturing activity - availability of credit for services prior to 01.04.2011 - Credit for Helipad repair and maintenance services availed prior to 01.04.2011 is admissible as 'input service'. - HELD THAT: - For the period prior to 01.04.2011 the definition of 'input service' had broader ambit covering services in relation to business activities. The Tribunal held that denial of credit on the ground of lack of nexus with manufacturing was erroneous and that helipad services used for business/administrative travel fell within input services for that period. [Paras 10]

Credit allowed for Helipad repair and maintenance services for the period prior to 01.04.2011.

Nexus of service with manufacturing activity - Credit on Banking Charges was admissible. - HELD THAT: - The Department treated the Banking Charges as relating to reimbursement of travel expenses and denied credit. The Tribunal noted Service Tax on Banking Charges was paid by the appellant on the amounts transacted and held that such credit is eligible. [Paras 11]

Credit allowed for Banking Charges.

Credit where Service Tax suffered on entire consideration despite retention - Credit on input Service Tax could not be denied solely because the appellant retained a portion of the consideration where Service Tax was charged and paid on the entire consideration. - HELD THAT: - The Tribunal examined invoices showing Service Tax charged on the full consideration while the appellant retained 10% of the consideration (the retained amount did not include the Service Tax component). Since Service Tax had been paid on the entire consideration as per the invoices, the requirement for a one to one correlation between the retained amount and credit availed was held unnecessary and denial on this ground was rejected. [Paras 12]

Denial of credit on account of retention of consideration set aside; credit allowed.

Final Conclusion: The appeal is partly allowed and partly remanded: disallowances for most challenged services were set aside and credit allowed, while specified components concerning non-production/addressing of documents were remanded to the Original Authority for verification; consequential reliefs, if any, follow.

Modification of interim deposit condition - furnishing of bond as an alternative to cash deposit - status quo regarding seized vehicle - custody and non-use of seized vehicle pending proceedings

Modification of interim deposit condition - furnishing of bond as an alternative to cash deposit - Condition of deposit of Rs. 5,00,000/- for continuation of interim relief was modified. - HELD THAT: - The Court found merit in the petitioner's submission that the condition of depositing Rs. 5,00,000/- was harsh given that the vehicle is in a broken-down, non-usable condition and repair costs were asserted to be high. In place of the cash deposit directed earlier, the Court recalled the deposit condition and permitted the petitioner to furnish a bond for Rs. 5,00,000/- before the competent authority. The modification was confined to the mode of securing the amount (bond instead of deposit) while maintaining the protective framework of the earlier order. [Paras 5, 6]

Deposit condition of Rs. 5,00,000/- recalled and replaced with requirement to furnish a bond of Rs. 5,00,000/- before the competent authority.

Status quo regarding seized vehicle - custody and non-use of seized vehicle pending proceedings - Directions maintaining status quo and prohibiting use of the vehicle continued. - HELD THAT: - The Court retained earlier directions that the vehicle bearing the stated registration shall not be put to use and that status quo in respect of the vehicle be maintained. This protective injunction was left undisturbed while the modality of securing the disputed amount was altered to a bond. [Paras 2, 7]

Earlier directions that the vehicle shall not be used and status quo shall be maintained continue to operate.

Procedural continuance and filing of reply - Respondents directed to file reply and matter stood over for further orders. - HELD THAT: - The Court directed respondents to file their reply before the next date and permitted the petitioner to seek further orders thereafter. The matter was adjourned to a specified date for further consideration, thereby keeping the proceedings live for adjudication on merits or further interlocutory relief.

Respondents to file reply; matter adjourned for further orders on the enrolled date.

Final Conclusion: The Court modified the interim condition by allowing the petitioner to furnish a bond of Rs. 5,00,000/- in lieu of depositing the amount, retained the status quo and non-use directions in respect of the vehicle, directed the respondents to file their reply, and adjourned the matter for further orders.

Input Tax Credit - Denial of Input Tax Credit under Section 16(2)(c) of the CGST Act - Show cause notice under Section 73 of the CGST Act - Constitutional challenge to vires of a fiscal provision (Articles 14, 19(1)(g) and 300A) - Quashing of assessment/order

Input Tax Credit - Denial of Input Tax Credit under Section 16(2)(c) of the CGST Act - Show cause notice under Section 73 of the CGST Act - Petition challenging the impugned order under Section 73 denying/affecting claim of Input Tax Credit and challenging the show cause notice including absence of reference to Section 16(2)(c). - HELD THAT: - The petitioner asserts that conditions for claiming Input Tax Credit were satisfied, that the supplier had erroneously reported a sister-concern's GSTIN causing non-reflection in the petitioner's Form GSTR-2A, and that the supplier has since furnished a certificate acknowledging the mistake. The petitioner challenges the show cause notice issued on 11.04.2022 and also questions the absence of explicit reference to Section 16(2)(c) in that notice. The Court has not adjudicated these contentions on merits. Instead, after noting the pleadings and the reliefs sought (including a prayer to quash the order dated 23.05.2022), the Court issued notice to respondents and directed service as recorded, leaving the substantive claims for adjudication on the returnable date. [Paras 3]

Notice issued returnable on 24.11.2022; respondents to be served (service through speed post permitted) and no final adjudication on the merits of the challenge to the order under Section 73 or the constitutional plea regarding Section 16(2)(c).

Final Conclusion: The petition seeking quashing of the impugned order under Section 73, declaration/read-down of Section 16(2)(c), and interim relief was not decided on merits; the High Court issued notice to the respondents, directed service, and listed the matter on 24.11.2022 for further consideration.

Interstate sales / branch transfers - production of evidentiary material for verification of interstate transactions - power of assessing officer to summon affiants and verify documents - extension of limitation under sub-section (2) of Section 34 of the DVAT Act, 2004

Interstate sales / branch transfers - Impugned assessment and penalty orders set aside and matter remanded for verification whether interstate sales/branch transfers occurred. - HELD THAT: - The Court set aside the impugned orders and directed that the assessing officer be permitted to consider afresh the factual question whether the petitioner carried out interstate sales or branch transfers in the subject periods. The remand is for the purpose of enabling the petitioner to place on record documents and other evidence to establish that the transactions were interstate in nature, and for the assessing officer to reach a fresh conclusion on that factual contention. [Paras 1, 2, 3, 4, 10]

Impugned orders set aside and matter remanded to the assessing officer for fresh verification of the claim of interstate sales/branch transfers.

Production of evidentiary material for verification of interstate transactions - power of assessing officer to summon affiants and verify documents - Scope of material to be produced by the petitioner and the assessing officer's duty to permit, verify and, if necessary, summon affiants. - HELD THAT: - The Court specified the nature of evidence the petitioner should be permitted to place before the assessing officer, including stock registers, audited balance sheet, DVAT-31, original C and F Forms to the extent available, bank statements, party ledger extracts, purchase/tax invoices, goods receipts, and vehicle/recipient records. The assessing officer was directed to accept such evidentiary material, permit affidavits of transporters and recipients if necessary, and was empowered to summon affiants whose affidavits are produced. The directions are aimed at enabling a complete factual adjudication on whether movement of goods and interstate character of sales are established. [Paras 4, 5, 6, 7, 8]

Petitioner to produce specified documents and affidavits; assessing officer to admit, verify and summon affiants as necessary and complete the exercise within the prescribed time.

Extension of limitation under sub-section (2) of Section 34 of the DVAT Act, 2004 - Effect of the directions on limitation for action under Section 34(2) of the DVAT Act, 2004. - HELD THAT: - The Court indicated that the directions given for production and verification of evidence will have the consequence of extending the limitation period as envisaged under sub-section (2) of Section 34 of the DVAT Act, 2004. This preserves the petitioner's ability to have the matter adjudicated on the merits notwithstanding the remand and the time taken for the exercise ordered by the Court. [Paras 9]

Directions ordered will extend the limitation period under Section 34(2) of the DVAT Act, 2004.

Final Conclusion: Writ petition disposed by setting aside the impugned orders and remanding the matter to the assessing officer for fresh verification of the claim of interstate sales/branch transfers; petitioner permitted to produce specified evidentiary material and affidavits, assessing officer to verify and summon affiants if required and complete the exercise within eight weeks, and the limitation period is extended under Section 34(2) of the DVAT Act, 2004.

Requirement of furnishing Form-C for concessional rate of tax on inter-State sales - application of Section 8(1) and Section 8(2) of the Central Sales Tax Act, 1956 - form of declaration in Form-C under the Central Sales Tax (Registration and Turnover) Rules, 1957 - legitimate expectation in taxation - availability of alternative remedy by statutory appeal

Requirement of furnishing Form-C for concessional rate of tax on inter-State sales - application of Section 8(1) and Section 8(2) of the Central Sales Tax Act, 1956 - form of declaration in Form-C under the Central Sales Tax (Registration and Turnover) Rules, 1957 - Concessional rate of tax under Section 8(1) is available only upon production of Form-C; in absence of Form-C tax at the higher local rate under Section 8(2) applies. - HELD THAT: - Section 8(1) affords preferential 2% treatment to sales made to a registered dealer in the course of inter State trade, but sub section (4) conditions that benefit upon furnishing a declaration in the prescribed manner. Rule 12(1) prescribes Form C as the declaration. The Court accepted that if Form C is not furnished the rigour of Section 8(2) is attracted and the turnover is taxable at the rate applicable within the State. The Court relied on the statutory scheme and the Supreme Court's pronouncements approvingly referred to in the judgment to hold that production of Form C is a statutory precondition for the concessional rate and cannot be dispensed with in the absence of a valid exemption. [Paras 25, 26, 27, 28]

Petitioner, having failed to furnish Form C, is not entitled to the concessional 2% rate and the assessments correctly invoke Section 8(2).

Legitimate expectation in taxation - Representations and past administrative orders exempting C Forms up to 31.3.2015 do not create a legal right or legitimate expectation to waive Form C beyond the period of the exemption. - HELD THAT: - While the State had earlier issued orders dispensing with C Forms for certain periods, the Court found no continuing exemption after 31.3.2015. Mere pendency of representations or prior administrative concessions does not confer a statutory right to the concessional rate where the statute requires Form C. The Court held that the principle of legitimate expectation cannot be invoked to override a taxing statute or to create a continuing entitlement where no exemption has been validly extended. [Paras 6, 7, 10, 28]

No legitimate expectation arises to entitle the petitioner to waiver of Form C beyond the expressly exempted period; exemption was not available for the period in question.

Availability of alternative remedy by statutory appeal - Writ petition is not maintainable in respect of assessments where an adequate and efficacious statutory appeal remedy exists. - HELD THAT: - The Court observed that the petitioner had remedy under Section 9(2) of the CST Act read with Section 31 of the VAT Act to challenge the assessments dated 11.3.2019 and 31.3.2019. In the presence of such an alternative remedy, the High Court will not ordinarily exercise writ jurisdiction to examine the legality of assessment proceedings, absent allegations of breach of natural justice or other exceptional circumstances. The petition, filed after the limitation period for appeal had expired, does not convert into a maintainable writ where the statutory remedy was available. [Paras 19, 20, 29]

Petition is not maintainable insofar as it seeks to challenge the assessments where a statutory appeal lies; petitioner should pursue the prescribed appellate remedy.

Final Conclusion: Writ petition dismissed. The Court held that Form C is a statutory prerequisite for the concessional rate under Section 8(1) and, in its absence for the relevant period, Section 8(2) applies; prior administrative exemptions did not extend beyond 31.3.2015 and representations do not create a right to waiver; further, the petitioner had an adequate statutory appeal remedy and the writ was not maintainable.

Assessment of taxable turnover - recovered records and suppressed sales - equal addition for probable omission - appellate interference with findings of fact - remand for computation of tax and penalty

Assessment of taxable turnover - recovered records and suppressed sales - appellate interference with findings of fact - Tribunal's confirmation of addition of Rs.1,95,000/- to taxable turnover was not to be interfered with. - HELD THAT: - The Court observed that the assessing authority's addition rested on entries recovered from the petitioner and findings that opening stock, purchases, sales and gross profit figures were incorrectly adopted by the assessee. The first appellate authority had examined those particulars and set aside parts of the original assessment where incorrect details were found; the Tribunal reviewed the records and upheld the assessment insofar as the turnover of Rs.1,95,000/- was concerned. The High Court treated these determinations as findings of fact by the Tribunal and declined to reappraise factual materials under Article 226, concluding there was no sufficient basis to disturb the Tribunal's conclusion on that addition. [Paras 6]

Tribunal's order upholding the addition of Rs.1,95,000/- is affirmed and not interfered with.

Equal addition for probable omission - recovered records and suppressed sales - remand for computation of tax and penalty - The equal/further addition of 50% made by the Assessing Authority is contrary to the law as applied by this Court and is to be deleted; matter remitted for fresh calculation of tax and proportionate penalty. - HELD THAT: - The Court found that the practice of making an equal addition as a further estimation for probable omissions (i.e., adding 50%) was contrary to the legal principle applied by this Court in the cited precedent relied upon by the petitioner. While the Tribunal had upheld certain additions based on recovered records, the High Court held that the additional 50% enhancement imposed by the Assessing Officer could not stand under the settled law and therefore ordered its deletion. Because deletion of that addition affects the computation of tax and any penalty, the matter was directed to be recalculated by the assessing authority and a fresh order issued within a stipulated period. [Paras 6, 7]

The 50% equal addition is deleted; the Second Respondent is directed to issue a fresh order computing tax liability and proportionate penalty within three months.

Final Conclusion: Writ petition partly allowed: the Tribunal's factual finding upholding the addition of Rs.1,95,000/- is affirmed, but the Assessing Authority's equal 50% addition is deleted and the assessing authority is directed to recompute tax and proportionate penalty and issue a fresh order within three months.

Admissibility of documents in appeal - requirement of recorded reasons for first-time evidence - burden of proof on the dealer/assessee - sale suppression - judicial review under Article 226 - review of decision-making process not merits

Admissibility of documents in appeal - requirement of recorded reasons for first-time evidence - burden of proof on the dealer/assessee - Whether the Appellate Tribunal was right in reversing the Appellate Assistant Commissioner's allowance of the belated affidavits and upholding the assessment for alleged sale suppression. - HELD THAT: - The Court examined whether the attempted production of evidence (affidavits of persons named in the slips) long after the assessment notice and only before the Appellate Commissioner could be treated as admissible. The High Court emphasized that its supervisory jurisdiction under Article 226 is limited to the decision-making process and does not permit reappraisal of the merits. The record shows that the petitioner sought to distance himself from liability by producing affidavits only at the appellate stage, after the assessment notice dated 31.12.1998. The Court relied on the statutory requirement that where documents or accounts are first produced in appeal, the Appellate Assistant Commissioner must record reasons in writing to treat such material as genuine and to accept that failure to produce earlier was beyond the dealer's control. The first appellate authority erred in admitting and acting upon the late affidavits without complying with that requirement, and on that basis the Tribunal's decision reversing the Appellate Assistant Commissioner was held to be well considered and immune from interference in writ jurisdiction. [Paras 7]

The Tribunal's order upholding the assessment and rejecting the belated affidavits was affirmed; writ petition dismissed.

Final Conclusion: The High Court declined to interfere with the Appellate Tribunal's reversal of the Appellate Assistant Commissioner's order, holding that the belated affidavits produced only at the appellate stage could not discharge the assessee's burden without the requisite recorded reasons; the writ petition was dismissed.

Imposition of penalty is not automatic - penalty under Section 27(3) of the Tamil Nadu Value Added Tax Act - requirement of wilful nondisclosure for levy - best judgment assessment versus penalty - differing degree of proof - requirement of application of mind to wilful suppression - remittance of tax with interest at inspection as relevant circumstance

Imposition of penalty is not automatic - best judgment assessment versus penalty - differing degree of proof - Whether penalty under Section 27(3) of the Tamil Nadu Value Added Tax Act can be levied automatically upon detection of discrepancy in turnover. - HELD THAT: - The Court held that levy of penalty under Section 27(3) is not automatic. Precedent Full Bench decisions require careful scrutiny of all relevant circumstances before imposing penalty and emphasise that the degree of proof required for penalty is higher than that for framing a best judgment assessment. The earlier Full Bench in Kathiresan Yarn Stores, followed by the Full Bench in Golden Homes, established that mere difference between books/returns and assessment is insufficient; there must be a judicial determination that the escapement arose from wilful nondisclosure or suppression. The decision in Vijay Steels did not consider the Full Bench precedents relied upon by the petitioner; however, the Court preferred the line of Full Bench authorities which mandate that penalty cannot be imposed mechanically without application of mind to the element of wilfulness. [Paras 8, 9, 10, 11, 15]

Penalty under Section 27(3) cannot be imposed automatically; it requires a recorded satisfaction that escapement resulted from wilful nondisclosure, and the appellate conclusion that penalty was automatic was erroneous.

Penalty under Section 27(3) of the Tamil Nadu Value Added Tax Act - requirement of wilful nondisclosure for levy - requirement of application of mind to wilful suppression - remittance of tax with interest at inspection as relevant circumstance - Whether the show cause notices and assessment orders in the present case satisfied the statutory requirement of a recorded satisfaction of wilful nondisclosure necessary to invoke Section 27(3). - HELD THAT: - The Court found the show cause notices and assessment orders deficient because they proceeded solely on enforcement proposals and did not record an independent application of mind or specific findings that the escapement was due to wilful nondisclosure. The notices did not state satisfaction by the assessing authority as required by the provision. Further, the petitioner had remitted the differential tax with interest at the time of inspection, a fact not disputed and relevant to the question of wilfulness. In this factual matrix and following binding Full Bench authority, the imposition of penalty is vitiated for lack of requisite satisfaction and consideration of circumstances. [Paras 4, 5, 14, 15]

Show cause notices and assessment orders are deficient for failing to record satisfaction of wilful nondisclosure; penalty levied thereunder is unsustainable in the facts of these cases.

Final Conclusion: Writ petitions allowed; the appellate order is set aside insofar as it sustained imposition of penalty under Section 27(3). The levy of penalty is held to be erroneous in law for want of recorded satisfaction of wilful nondisclosure; no costs.

Proof of demand as sine qua non for offence under the Prevention of Corruption Act - Presumption under section 20 of the Prevention of Corruption Act and rebuttal on preponderance of probability - Ingredients of offence: demand, acceptance and recovery of illegal gratification - Requirement of valid sanction for prosecution and competence of sanctioning authority - Reliability and use of evidence of a hostile witness

Proof of demand as sine qua non for offence under the Prevention of Corruption Act - Ingredients of offence: demand, acceptance and recovery of illegal gratification - Prosecution failed to prove, beyond reasonable doubt, that the appellant demanded illegal gratification prior to or on the date of trap. - HELD THAT: - The Court analysed the testimony of the decoy (P.W.11) and the overhearing witness (P.W.6) and found material inconsistencies and prevarications. P.W.11's chief and cross-examination statements were contradictory about whether he had submitted the assessee's return to the appellant and about the prior demand; his hostile turn limited reliance on his evidence. The circumstances of the trap - including deviation from the pre-trap plan, lack of clarity who instructed the decoy to call the appellant outside, and absence of evidence that the appellant had occasion to demand money because no work was pending with him - undermined the prosecution's case on demand. The Court held that mere recovery and acceptance, without proof of demand, are insufficient to convict under the provisions charged, and on the totality of evidence the demand element was not proved beyond reasonable doubt. [Paras 11, 12]

Demand not established; prosecution failed to prove the essential element of demand beyond reasonable doubt.

Presumption under section 20 of the Prevention of Corruption Act and rebuttal on preponderance of probability - Burden on accused to rebut presumption on preponderance of probability - The statutory presumption under section 20 could be and was rebutted on the touchstone of preponderance of probability. - HELD THAT: - Although acceptance and recovery of money were not disputed, the Court examined whether the presumption under section 20 could be drawn. The appellate court found the accused's explanation - that the money was part repayment of a loan involving B.D. Gupta and delivered through the complainant - to be established on a preponderance of probabilities. Given that the prosecution failed to prove demand, the condition for invoking the presumption (proof of acceptance consequent to demand) did not obtain. Applying settled law, the Court held that the appellant discharged the lesser burden required to rebut the statutory presumption. [Paras 13]

Section 20 presumption successfully rebutted on preponderance of probability; presumption does not operate to sustain conviction.

Requirement of valid sanction for prosecution and competence of sanctioning authority - The sanction order (Ext.8) produced for prosecution was defective and the authority who accorded sanction was not shown to be competent in the material particulars. - HELD THAT: - The Court analysed the evidence about Ext.8 and found it silent on mode of receiving documents, the grounds or facts considered, names of witnesses, and absence of any material indicating application of mind by the sanctioning authority. The Assistant Commissioner (P.W.3) conceded deficiencies in Ext.8 in cross-examination. In view of authority requiring either production of the original sanction containing the facts and grounds or evidence aliunde to show satisfaction by the sanctioning authority, the Court held the sanction to be defective and thus a fatal infirmity in the prosecution. [Paras 14]

Sanction (Ext.8) defective; competence of sanctioning authority not established.

Reliability and use of evidence of a hostile witness - Ingredients of offence: demand, acceptance and recovery of illegal gratification - On the combined analysis of witness credibility, failure to prove demand, successful rebuttal of the statutory presumption and defective sanction, the conviction could not be sustained and appellate acquittal was warranted. - HELD THAT: - The Court reaffirmed that evidence of a hostile witness may be acted upon to the extent it is reliable and corroborated, but here the key prosecution witness's contradictions materially impaired the prosecution case. Coupled with the absence of proof of demand, the successful rebuttal of section 20 presumption on preponderance, and the defective sanction, the cumulative effect was that the prosecution had not proved the offences charged beyond reasonable doubt. Accordingly, the Court set aside the conviction and sentence imposed by the trial court. [Paras 8, 15]

Conviction and sentence set aside; appellant acquitted of all charges.

Final Conclusion: Criminal appeal allowed. Impugned judgment of conviction under the Prevention of Corruption Act set aside and appellant acquitted on grounds that the prosecution failed to prove the essential element of demand beyond reasonable doubt, the statutory presumption under section 20 was rebutted on preponderance of probability, and the sanction for prosecution was defective.

Mandatory registration of FIR where information discloses cognizable offence - preliminary inquiry permissible only where information does not disclose cognizable offence - scope of inherent powers under Section 482 CrPC and the Bhajan Lal principle - prima facie material for investigation and non-interference with investigation at nascent stage - maintainability of quashing application filed by constituted attorney under Appellate Side Rules - rope-in of company directors: necessity of incriminating material or vicarious liability to proceed

Maintainability of quashing application filed by constituted attorney under Appellate Side Rules - Application for quashing under Section 482 CrPC filed by the petitioner's constituted attorney is maintainable in this Court. - HELD THAT: - The Court considered the Appellate Side Rules of the Calcutta High Court (Rule 8, Chapter IV) which require that every application be signed and dated by the applicant, declarant or advocate. The constituted attorney is also the declarant of the present petition and compliance with the Appellate Side Rules renders the petition maintainable. Authorities from other High Courts holding to the contrary were distinguished and no binding contrary decision of this Court was shown. [Paras 7, 8]

The revisional application filed by the power of attorney holder is maintainable.

Mandatory registration of FIR where information discloses cognizable offence - prima facie material for investigation and non-interference with investigation at nascent stage - The petition under Section 156(3) CrPC disclosed a cognizable offence and there are prima facie materials to proceed; therefore the Magistrate's direction to register the FIR and the resultant investigation were not vitiated. - HELD THAT: - On the averments in the Section 156(3) petition the complainant had alleged that blank cheques delivered to the finance company were filled up with an inflated amount and presented for encashment after the death of one of the drawers; there was also a variance between the amounts claimed under SARFAESI notices and the cheque. The finance company had knowledge of the death, the account had been closed, and insurance claims in respect of the loans were in issue. These distinctive facts provide primary materials warranting investigation to ascertain complicity and the roles of individuals in custody of the cheques. The Court reiterated the settled principle that at the quashing stage the court should not probe probability or reliability of allegations unless they are absurd or inherently improbable; no such absurdity was found. [Paras 9, 12, 15]

The allegations disclose a cognizable offence and the criminal revision is dismissed; investigation should proceed.

Preliminary inquiry permissible only where information does not disclose cognizable offence - mandatory registration of FIR where information discloses cognizable offence - No preliminary inquiry was required before registration of FIR because the information filed under Section 156(3) CrPC disclosed a cognizable offence as understood in Lalita Kumari. - HELD THAT: - The Court relied on the legal proposition in Lalita Kumari that where information discloses commission of a cognizable offence the FIR must be registered and preliminary inquiry is not permissible; preliminary inquiry is allowed only when the information does not prima facie disclose a cognizable offence and is limited to ascertaining whether a cognizable offence is disclosed. Applying that principle to the present facts, the petition under Section 156(3) disclosed a cognizable offence and therefore the Magistrate acted within the scope of law in directing registration and investigation. [Paras 11]

No preliminary inquiry was necessary and the FIR registration was proper.

Rope-in of company directors: necessity of incriminating material or vicarious liability to proceed - prima facie material for investigation and non-interference with investigation at nascent stage - Whether the Managing Director/CEO (petitioner) had a role in the alleged offence could not be determined at the quashing stage and required investigation; directors may be implicated only if incriminating material or applicable vicarious liability is shown by investigation. - HELD THAT: - Counsel relied on authorities that a company's directors can be prosecuted only if sufficient incriminating evidence or statutory vicarious liability exists. The Court observed that investigation was ongoing and that the peculiar facts (custody of blank cheques by the company, presentation after the death of a drawer, variance in amounts) meant that the petitioner's role could only be ascertained after investigation. The Supreme Court precedents relied upon by the petitioner were found distinguishable on facts, and the Court declined to quash the proceedings against the petitioner at this stage. [Paras 10, 12]

Allegations against the petitioner require investigation; the matter cannot be quashed at this stage for want of specific incriminating material.

Final Conclusion: The criminal revision (CRR No.139 of 2021) is dismissed on contest; the Magistrate's order to register FIR and proceed with investigation is upheld, subject to the petitioner's rights and contentions at trial, and the Court's observations shall not prejudice those rights.

Reference to arbitration - Appointment of arbitrator - Doctrine of Group of Companies - Non-signatory parties and arbitration agreement - Arbitrability of fraud and forgery allegations - Lis in personam and lis in rem

Reference to arbitration - Appointment of arbitrator - The disputes inter se between the petitioner (Sandeep Singh) and respondent No.1 (Simran Sodhi) are to be referred to arbitration and an arbitrator is to be appointed. - HELD THAT: - The Court found that both parties have invoked the arbitration clause in the Partnership Deed and that the petitioner (in earlier proceedings) and respondent No.1 have no objection to appointment of an arbitrator for adjudication of their inter se disputes. The Court therefore granted the prayers insofar as appointment of an arbitrator between the parties to the partnership is concerned and appointed Justice Asha Menon (Retd.) as arbitrator, with fees in accordance with the Fourth Schedule and with disclosure obligations under Section 12 of the Act. The order is procedural and expressly not a determination on merits of the substantive allegations. [Paras 52, 70, 71]

Arbitration appointed between the petitioner and respondent No.1; Justice Asha Menon (Retd.) appointed as Arbitrator; appointment not a determination on merits.

Doctrine of Group of Companies - Non-signatory parties and arbitration agreement - Respondent No.3 (M/s Rugs Enterprises Pvt. Ltd.), a non-signatory company, cannot be referred to arbitration under the arbitration clause of the Partnership Deed between the partners. - HELD THAT: - The Court analysed the Doctrine of Group of Companies and reiterated the principles where a non-signatory affiliate may be bound only if the facts show a mutual intention or direct engagement in negotiation/performance such that the non-signatory is part of a composite transaction. The Court held that the doctrine is inapplicable here because a partnership and a company are different entities and the petitioner has not shown that respondent No.3 was engaged in negotiation or performance of the partnership contract or that there was an intention to bind respondent No.3 to the arbitration agreement. Consequently, respondent No.3 cannot be impleaded into arbitration between the partners. [Paras 53, 54]

Respondent No.3 is not amenable to arbitration under the Partnership Deed and cannot be referred to arbitration along with the partners.

Arbitrability of fraud and forgery allegations - Lis in personam and lis in rem - Claims arising out of partnership disputes (rights in personam) are referable to arbitration; however, allegations of serious fraud/forgery that affect third party rights or attract criminal sanctions are not to be referred in the absence of the affected third party. - HELD THAT: - Applying the governing precedents (Ayyasamy, Rashid Raza, Avital, Vidya Drolia and others), the Court held that ordinarily civil or commercial disputes between parties to an arbitration agreement are arbitrable. Allegations of fraud simpliciter that concern internal affairs of partners and do not vitiate the arbitration clause are referable to arbitration. Accordingly, claims relating to performance of the partnership deed, finalisation of accounts, division of profit/loss and partners' shares of debts (being lis in personam) were held referable to arbitration. By contrast, the petitioner's claim based on allegations of forgery (creation of a forged rent agreement), misappropriation through respondent No.3 and other conduct that give rise to criminal offences and affect third party rights were held to be of a serious criminal character; such claims cannot be adjudicated by a private arbitral tribunal in the absence of the third party and thus are not to be referred to arbitration. The Court therefore delineated which specific claims fall within arbitration and which do not. [Paras 56, 57, 66, 67, 69]

Claims between the partners relating to partnership performance and liabilities are referred to arbitration; claims based on serious fraud/forgery affecting third party rights (including allegations involving respondent No.3 and forged documents) are excluded from reference to arbitration and may be pursued by the petitioner by other legal remedies.

Final Conclusion: The Court appointed Justice Asha Menon (Retd.) as Arbitrator to adjudicate disputes between the partners arising under the Partnership Deed; disputes inter se that relate to the partnership's accounts, division of profit/loss and partners' shares of liabilities are referred to arbitration, but claims based on serious allegations of forgery/fraud that affect third party rights (including allegations implicating respondent No.3) are not referred to arbitration and remain available for pursuit by appropriate legal remedies.