TaxTMI Updates e-Newsletter
Nov 24,2022

Limitation under Section 275(1)(c) - initiation of penalty proceedings - assessing officer's initiation in assessment order - prescribed authority's issuance of show cause notice - penalty under Section 271D for violation of Section 269SS

Limitation under Section 275(1)(c) - initiation of penalty proceedings - assessing officer's initiation in assessment order - prescribed authority's issuance of show cause notice - Whether the limitation period under Section 275(1)(c) begins from the date on which the Assessing Officer initiated penalty proceedings in the assessment order or from the date on which the prescribed authority issued the show cause notice. - HELD THAT: - The Court applied the settled principle in JKD Capital and Finlease Ltd. and Mahesh Wood Products Pvt. Ltd. that, for the purposes of Section 275(1)(c), the relevant date is the date on which action for imposition of penalty is initiated. Where the Assessing Officer, in his assessment order, has recorded initiation of penalty proceedings, that initiation date is the triggering date for computing the six-month limb of Section 275(1)(c). The role of the prescribed authority in issuing a show cause notice does not displace the AO's initiation where the assessment order expressly initiates penalty proceedings. In the present appeals the quantum proceedings were completed and the AO initiated penalty proceedings in December 2008; consequently the six months from the end of that month expired on 30 June 2009. The penalty orders were passed on 29 September 2009, beyond the limitation period; therefore the ITAT correctly held the penalty orders to be time-barred. The Court rejected Revenue's contention that limitation should be reckoned from the date of issuance of the show cause notices in March 2009, noting that this contention had been considered and disposed of by the predecessor bench and is contrary to the established ratio. [Paras 11, 12, 13]

The limitation under Section 275(1)(c) is to be computed from the month in which the AO initiated the penalty proceedings in the assessment order; the penalty orders dated 29th September, 2009 were time-barred and rightly deleted by the ITAT.

Final Conclusion: The appeals are dismissed; the ITAT correctly held that the penalty orders under Section 271D were barred by limitation under Section 275(1)(c) because the AO had initiated penalty proceedings in December 2008 and the orders passed on 29th September, 2009 were beyond the prescribed period.

Levy of interest under Section 220(2) of the Income Tax Act - Effect of setting aside original assessment on interest liability - Demand notice pursuant to reframed assessment order - CBDT Circular No. 334 dated 3-4-1982 and para 2.1

Levy of interest under Section 220(2) of the Income Tax Act - Setting aside original assessment - Fresh assessment under Section 143(3) read with Section 254 - CBDT Circular No. 334 dated 3-4-1982 - Whether interest under Section 220(2) can be levied with reference to the original demand notice where the original assessment was set aside by the appellate authority and the assessment was subsequently reframed. - HELD THAT: - The ITAT had set aside the original assessment dated 28th December, 2006 and remanded the matter to the Assessing Officer, who thereafter framed a fresh assessment order dated 29th March, 2016 under Section 143(3) read with Section 254. Once the original assessment was set aside, that order ceased to operate and the reframed order became the subsisting assessment. CBDT Circular No. 334 (para 2.1) expressly provides that where an assessment order is set aside by an appellate authority and the cancellation/setting aside becomes final, no interest under Section 220(2) can be charged pursuant to the original demand notice and interest, if any, can be charged only after expiry of the prescribed period from service of the demand notice issued pursuant to the fresh assessment order. The Revenue's reliance on the fact that the addition remained under the same head on remand does not entitle it to relate the interest back to the original demand; Section 220(2) does not contemplate levying interest by reference to a demand in an assessment order which has been set aside. The Supreme Court decision relied upon by the Revenue was held to be distinguishable on its facts and did not alter the application of the Circular and statutory position in the present facts. Applying these principles, the CIT(A) and the ITAT were correct in holding that interest could only be levied from the date specified in the demand notice issued pursuant to the reframed assessment order and not with reference to the set aside original order. [Paras 6, 7, 8, 9, 12]

The levy of interest under Section 220(2) relating back to the original assessment order was incorrect; interest, if leviable, can be charged only from the demand notice issued pursuant to the reframed assessment order dated 29th March, 2016.

Final Conclusion: Revenue's appeal is dismissed; the levy of interest under Section 220(2) by reference to the set aside original assessment order is deleted and the reframed assessment order is the operative basis for any demand of interest.

Power of revision under section 263 - Erroneous and prejudicial to the interest of revenue - Requirement of material on record before exercise of revisionary power - Distinction between lack of enquiry and inadequate enquiry - Assessment completed under section 143(3)

Power of revision under section 263 - Erroneous and prejudicial to the interest of revenue - Distinction between lack of enquiry and inadequate enquiry - Assessment completed under section 143(3) - Whether the Principal Commissioner of Income Tax validly exercised jurisdiction under section 263 to set aside the assessment framed under section 143(3) for A.Y. 2015-16. - HELD THAT: - The Tribunal found that the Assessing Officer conducted enquiries during the assessment proceedings (including notices under section 142(1), a questionnaire, requests for scrip-wise trading details and demat statements) and the assessee furnished detailed replies with supporting documentary evidence (bank statements, demat statements, contract confirmations and statement of affairs). The PCIT's notice alleged non-enquiry and characterized the transaction as exempt under section 10(38), but that factual allegation was factually incorrect since the return and computation disclosed short-term capital gains. Reliance is placed on the principle that revision under section 263 is supervisory and may be exercised only if the impugned order is, on the record, shown to be both erroneous and prejudicial to revenue; mere difference of opinion or perceived inadequacy of inquiry is insufficient. The Tribunal noted authorities cited in the record (CIT vs Nirav Modi ; Gabriel India Ltd ; CIT vs Sunbeam Auto ; Anil Kumar Sharma ) for the propositions that an assessment cannot be branded erroneous where the AO has made enquiries and applied his mind, and that there is a distinction between absence of enquiry and inadequate enquiry. Applying these principles to the facts, the Tribunal held that the AO had made specific enquiries, considered the documents furnished and completed the assessment under section 143(3), and therefore the PCIT had no material basis to conclude that the order was erroneous and prejudicial. [Paras 16, 17, 18, 22]

The exercise of revisionary power under section 263 was not justified; the assessment order dated 13.11.2017 under section 143(3) is restored.

Final Conclusion: The Tribunal allowed the appeal, set aside the PCIT's order dated 22.03.2021 under section 263 and restored the assessment order dated 13.11.2017 framed under section 143(3) for A.Y. 2015-16.

Benefit of section 11 and 12A - time limit for filing return under section 139 - CBDT clarification on clause (ba) of section 12A(1) - restoration for fresh adjudication

Benefit of section 11 and 12A - time limit for filing return under section 139 - CBDT clarification on clause (ba) of section 12A(1) - restoration for fresh adjudication - Whether the denial of exemption under sections 11 and 12A on account of belated filing should be adjudicated afresh in light of the CBDT instructions dated 23.04.2019 and subsequent circulars. - HELD THAT: - The Tribunal noted that the assessee's return for AY 2020-21 was processed under section 143(1) with denial of section 11/12A benefits on the ground of belated filing. The Tribunal took note of CBDT clarification F.No.173/193/2019-ITA-I dated 23.04.2019 (and subsequent circular No.2/2020) which explained the time allowed for filing returns after insertion of clause (ba) in section 12A(1) and directed rectification of 143(1)(a) orders where denial had been made. Observing that these board-level instructions were not considered by the ld.CIT(A)/NFAC, and being binding on revenue authorities, the Tribunal found it appropriate in the interest of justice to remit the matter to the file of the ld.CIT(A)/NFAC for fresh adjudication applying the CBDT instructions. The ld.CIT(A)/NFAC was directed to give the assessee opportunity of hearing and decide the issue as per fact and law. [Paras 8, 9]

Issue restored to the file of the ld.CIT(A)/NFAC for fresh adjudication in the light of the CBDT instructions; grounds of appeal allowed for statistical purposes.

Stay application - Disposition of the assessee's stay application pending before the Tribunal. - HELD THAT: - Having remitted the substantive issue to the ld.CIT(A)/NFAC for fresh decision, the Tribunal held that the stay application filed before it had become infructuous. There being no independent grounds to continue the stay consequent to restoration, the application was dismissed. [Paras 10, 11]

Stay application dismissed as infructuous.

Final Conclusion: The appeal is allowed for statistical purposes by restoring the claim relating to denial of exemption under sections 11 and 12A to the ld.CIT(A)/NFAC for fresh adjudication in light of the CBDT instructions; the stay application is dismissed as infructuous.

Set off of unabsorbed depreciation - interpretation of amended section 32(2) - binding precedent of the High Court - precedential effect of CBDT Circular No. 14 of 2001 - disallowance under section 14A

Disallowance under section 14A - Disallowance under section 14A as raised in Ground No.1 - HELD THAT: - The authorised representative of the assessee expressly did not press Ground No.1 relating to disallowance under section 14A. The Bench noted the concession and recorded that the ground is not pressed. No adjudication on merits of the section 14A contention was undertaken. [Paras 8]

Ground No.1 dismissed as not pressed.

Set off of unabsorbed depreciation - interpretation of amended section 32(2) - precedential effect of CBDT Circular No. 14 of 2001 - binding precedent of the High Court - Whether unabsorbed depreciation pertaining to A.Y. 2000-01 and A.Y. 2001-02 is available for set off in A.Y. 2010-11 - HELD THAT: - The Assessing Officer denied set off of unabsorbed depreciation arising in A.Y. 2000-01 and A.Y. 2001-02 against business income of A.Y. 2010-11 on the view that those years fell outside the ambit of the amended provision. The Commissioner (Appeals) sustained the AO by following a Special Bench decision. The Tribunal held that the CIT(A) erred in not following the binding decision of the jurisdictional High Court where facts were identical. The Tribunal relied on the decision of the Hon'ble Bombay High Court in CIT v. Hindustan Unilever Ltd., which followed the Gujarat High Court and applied CBDT Circular No.14 of 2001 to conclude that unabsorbed depreciation available on 1st April, 2001 would be governed by the amended provision and could be carried forward and set off. In view of the binding precedent of the High Court and the CBDT circular supportive of the assessee's position, the Tribunal held that the assessee is eligible to set off the unabsorbed depreciation of A.Y. 2000-01 and A.Y. 2001-02. [Paras 5, 6, 7]

Grounds No.2 and No.3 allowed; unabsorbed depreciation of A.Y. 2000-01 and A.Y. 2001-02 held allowable for set off in A.Y. 2010-11.

Procedural grounds not adjudicated - Grounds No.4 and No.5 (condonation of delay and amendment of grounds) - HELD THAT: - Grounds No.4 and No.5 were general in nature and did not require substantive adjudication. The Tribunal recorded that these grounds need no adjudication and therefore did not decide them on merits. [Paras 9]

Grounds No.4 and No.5 dismissed as not adjudicated.

Final Conclusion: The appeal is partly allowed: the Tribunal allowed the claim for set off of unabsorbed depreciation pertaining to A.Y. 2000-01 and A.Y. 2001-02 against A.Y. 2010-11, dismissed Ground No.1 as not pressed, and declined to adjudicate Grounds No.4 and No.5.

Jurisdiction under section 263 - erroneous and prejudicial to the interest of the Revenue - reopening limited to specific issue / remand for reassessment on a point - twin conditions for exercise of revisionary power

Jurisdiction under section 263 - erroneous and prejudicial to the interest of the Revenue - Whether the Principal Commissioner of Income Tax rightly invoked revisionary jurisdiction under section 263 in respect of the computation of loss where the AO's assessment order referred to the original return but the computation sheet adopted the revised return. - HELD THAT: - The Tribunal examined whether the twin conditions for exercise of jurisdiction under section 263 were satisfied. It noted that although the assessment order referred to the loss declared in the original return, the AO's computation sheet in Column-11 adopted the loss as per the revised return filed on 30.03.2018 (current year loss of Rs. 3,68,49,605/-), showing that the AO had in substance taken the revised return figure for computing tax. In view of this, the assessment order was not found to be erroneous nor prejudicial to the interest of the Revenue on the question of computation of total income. Consequently, assumption of jurisdiction by the PCIT in respect of this issue was held to fail. [Paras 7]

Assumption of jurisdiction under section 263 by the PCIT in respect of computation of loss was not justified and is set aside on that issue.

Jurisdiction under section 263 - prior period expenses - erroneous and prejudicial to the interest of the Revenue - reopening limited to specific issue / remand for reassessment on a point - Whether the PCIT rightly invoked section 263 in respect of allowance of 'prior period expenses' which were claimed in the profit and loss account but not disallowed in the statement of total income. - HELD THAT: - The Tribunal found that the assessee had claimed 'prior period expenses' in the P&L account but did not make any corresponding disallowance in the statement of total income, and the AO failed to disallow these inadmissible expenses while completing assessment under section 143(3). The assessee's contention that the AO had enquired and accepted the claim was not supported by evidence on record. On these facts the Tribunal concluded that the assessment order on this issue was erroneous and prejudicial to the Revenue, justifying exercise of the PCIT's revisionary power. The Tribunal therefore upheld the PCIT's exercise of jurisdiction limited to this issue and directed the AO to reframe the assessment in accordance with the PCIT's directions solely on the question of disallowance of 'prior period expenses'. [Paras 8]

Assumption of jurisdiction under section 263 by the PCIT in respect of 'prior period expenses' is upheld; assessment is set aside and remitted for fresh consideration limited to that issue.

Final Conclusion: The appeal is partly allowed: the Tribunal quashed the PCIT's revision on the computation of loss but upheld the PCIT's revision in respect of 'prior period expenses', directing the AO to reframe the assessment only on that issue in accordance with law.

Deduction under section 36(1)(ii) - bonus paid to employees - payment in lieu of profit or dividend - disallowance founded on auditor's report - admission of additional evidence by appellate authority - addition under section 68 - onus of proving genuineness of loans - remand for fresh adjudication

Deduction under section 36(1)(ii) - bonus paid to employees - payment in lieu of profit or dividend - disallowance founded on auditor's report - Deduction claimed for bonus paid to employees was allowable subject to verification of the auditor's certificate and was not hit by the proviso to section 36(1)(ii). - HELD THAT: - The Assessing Officer disallowed the claimed deduction relying on the auditor's note in the audit report which recorded the amount as "otherwise payable as profits or dividend." The assessee produced a subsequent certificate from the same auditor acknowledging the reporting mistake. The Tribunal relied on the Special Bench decision in M/s. Dalal Broacha Stock Broking Pvt. Ltd., which holds that sums paid to employees as bonus or commission for services rendered are deductible under section 36(1)(ii) and that the proviso excluding payments "in lieu of profit or dividend" applies to employees who are partners or shareholders. In the present facts there is no finding that the beneficiaries were partners or shareholders. The assessee's production of the auditor's certificate addresses the Commissioner(A)'s concern about the auditor's note, but factual verification is required. Consequently the Assessing Officer is directed to verify the auditor's certificate and, upon satisfaction, allow the deduction.

Ground allowed; deduction for bonus to employees to be allowed after factual verification of the auditor's certificate by the Assessing Officer.

Addition under section 68 - onus of proving genuineness of loans - admission of additional evidence by appellate authority - remand for fresh adjudication - Addition of unsecured loan under section 68 was not finally sustained and the matter was remanded to the Assessing Officer for fresh adjudication after considering additional evidence. - HELD THAT: - The Assessing Officer added an unsecured loan to income alleging failure by the assessee to prove the genuineness of the loan. Before the Commissioner(A) the assessee produced bank statements, returns of the lenders and other documents, but the Commissioner(A) refused to admit those additional evidences. The Tribunal held that additional evidence, which may be crucial to decide genuineness, should not be rejected merely on technical grounds and that various factors may have prevented earlier production. The issue is therefore restored to the file of the Assessing Officer for fresh adjudication after admitting and considering the evidences filed by the assessee and after affording a reasonable opportunity of being heard.

Addition under section 68 set aside; matter remanded to the Assessing Officer for fresh adjudication after consideration of additional evidence and hearing.

Final Conclusion: Appeal is partly allowed: the claim for deduction of bonus to employees is upheld subject to verification of the auditor's certificate by the Assessing Officer; the addition under section 68 is remanded to the Assessing Officer for fresh adjudication after consideration of the additional evidence and hearing.

Disallowance under section 14A read with Rule 8D(2) - computation of disallowance limited to investments yielding exempt income - deletion of notional interest disallowance where investments made from own interest-free funds - allowability of business expenditure on foreign travel - allowability of travelling, sales promotion, office maintenance and staff welfare expenses if wholly and exclusively for business

Disallowance under section 14A read with Rule 8D(2) - deletion of notional interest disallowance where investments made from own interest-free funds - computation of disallowance limited to investments yielding exempt income - Validity and quantum of disallowance under Rule 8D(2) in relation to exempt dividend income - HELD THAT: - The Tribunal held that no disallowance under Rule 8D(2)(ii) could be sustained insofar as it sought to impute interest on the basis that investments yielding exempt income were financed by interest-bearing borrowings, since the assessee had sufficient interest-free own funds as evidenced from the balance sheet; the notional interest disallowance under Rule 8D(2)(ii) was deleted. With respect to Rule 8D(2)(iii), the Tribunal directed the assessing officer to restrict the computation to only those investments which actually yielded exempt income during the year and to re-compute the disallowance after verifying the assessee's workings submitted in the record, thereby remanding the quantification for verification and recomputation. [Paras 3]

Notional interest disallowance under Rule 8D(2)(ii) deleted; disallowance under Rule 8D(2)(iii) remitted for recomputation limited to investments that yielded exempt income.

Allowability of business expenditure on foreign travel - Allowability of foreign travel expenses debited in the books - HELD THAT: - On the material and vouchers produced, the Tribunal found that foreign travel expenditures were incurred for the assessee's business of management consultancy and exploration of farming ventures requiring foreign fund-raising. The record showed that alleged personal expenditure of the director's spouse had been reimbursed to the company and was not debited in the books; thus there was no personal element retained in the company's accounts. In consequence, the assessing officer's disallowance of foreign travel expenses was deleted. [Paras 4]

Disallowance of foreign travel expenses deleted; expenditure held to be incurred wholly and exclusively for business.

Allowability of travelling, sales promotion, office maintenance and staff welfare expenses if wholly and exclusively for business - Sustainability of adhoc disallowances in respect of travelling, sales promotion, office maintenance and staff welfare expenses - HELD THAT: - The Tribunal reviewed the books, bills and vouchers and concluded that (a) travelling expenses were incurred wholly and exclusively for business including site visits and expert consultants' travel, and therefore no adhoc disallowance was warranted; (b) sales promotion expenditure, including customary gifts of gold coins to customers and conference expenses for clients, was business expenditure supported by bills and could not be disallowed merely on an adhoc basis; (c) office maintenance charges (society maintenance and housekeeping) related to the business premises and were allowable; and (d) staff welfare expenses (provisions for guest houses maintained for employees on official visits) were necessary for running those facilities and wholly for business purposes. The adhoc disallowances by the assessing officer and the reduction by the Commissioner (Appeals) were set aside and the expenditures allowed in full. [Paras 5]

Adhoc disallowances in respect of travelling, sales promotion, office maintenance and staff welfare expenses deleted; all such expenditures held allowable as wholly and exclusively incurred for business.

Final Conclusion: The appeal is allowed for statistical purposes: the notional interest disallowance under Rule 8D(2)(ii) is deleted, Rule 8D(2)(iii) disallowance is remitted for recomputation limited to investments that yielded exempt income, foreign travel expenditure and the adhoc disallowances in respect of travelling, sales promotion, office maintenance and staff welfare are deleted and allowed as business deductions.

Treatment of sale of agricultural land as business income (adventure in the nature of trade) - exemption under section 10 for income from transfer of agricultural land - capital asset as defined in section 2(14) - exclusion of agricultural land within specified municipal limits - applicability of section 40A(3) to disallow cash payments for business expenditure

Capital asset as defined in section 2(14) - exclusion of agricultural land within specified municipal limits - exemption under section 10 for income from transfer of agricultural land - Whether the land sold by the assessee qualified as agricultural land excluded from the definition of capital asset and hence whether the income was exempt under section 10. - HELD THAT: - The Tribunal accepted the unchallenged finding of the ld.CIT(A) that the land sold had been treated as non-agricultural land, noting conditions in the sale transaction that made completion subject to conversion to non-agricultural status and that the purchaser was a non-agriculturist. Since both conditions in the statutory exclusion must be satisfied - that the land be agricultural and be situated beyond specified municipal limits - the mere distance argument is irrelevant where the land is held to be non-agricultural. Consequently, the assessee failed to establish that the asset fell outside the definition of "capital asset"; the claim of exemption under section 10 therefore could not be sustained. The Tribunal dismissed the ground of appeal challenging the characterisation of the asset and the claim of exemption. [Paras 8, 9, 10]

Finding that the land was non-agricultural and not entitled to exemption under section 10; appeal on this point dismissed.

Treatment of sale of agricultural land as business income (adventure in the nature of trade) - applicability of section 40A(3) to disallow cash payments for business expenditure - Whether the income from the sale was taxable as business income and whether disallowance under section 40A(3) for cash payments was rightly imposed. - HELD THAT: - The Tribunal concurred with the revenue authorities' conclusion that the transactions amounted to an adventure in the nature of trade - acquisition and facilitation of conversion and resale to an industrial purchaser - and thus the gains were taxable as business income. Once so treated, payments made in cash for acquisition fell within the scope of business expenditure and attracted disallowance under section 40A(3). The assessee's contention that the receipts were capital gains exempt from tax (and thereby outside section 40A(3)) was rejected because the characterisation as business income stood. Accordingly, the disallowance under section 40A(3) was upheld. [Paras 6, 11, 13]

Income held to be business income; disallowance under section 40A(3) sustained and the ground of appeal dismissed.

Final Conclusion: The appeal is dismissed in toto: the Tribunal upheld the authorities' finding that the land was non-agricultural and the gains were business income (adventure in the nature of trade), and consequently sustained the disallowance under section 40A(3).

Reassessment proceedings under section 147 read with section 143(3) - Notice under section 148 - Reasons recorded for reopening of assessment - Application of mind by the Assessing Officer - Validity of reassessment when reasons are factually incorrect - Quashing of reassessment order

Reassessment proceedings under section 147 read with section 143(3) - Reasons recorded for reopening of assessment - Application of mind by the Assessing Officer - Quashing of reassessment order - Reassessment proceedings and the reassessment order were invalid because the Assessing Officer initiated reopening on the basis of incorrect facts and without application of mind. - HELD THAT: - The Assessing Officer's reasons for initiating reassessment recorded that the assessee had not filed a return for AY 2011-12, whereas the assessee had in fact filed the return on 31.03.2012 (as per the return placed at pages 1-5 of the paper book). The proforma prepared for obtaining approval under section 151 also recorded the incorrect assertion that no return was filed. The Tribunal held that initiation of reassessment on the basis of such factually incorrect material, without verifying available records and without proper application of mind, demonstrates omission to comply with the mandatory requirements attendant on reopening under the statutory scheme. The Tribunal followed the reasoning in its earlier decision (Ajendra Pal Singh) that similar factual misstatements by the AO render reassessment proceedings vitiated. Because the reopening was founded on incomplete and incorrect information and was effected without requisite verification or application of mind, the reassessment order could not be sustained and had to be quashed. [Paras 6, 7]

Reassessment proceedings and the reassessment order under section 147 read with section 143(3) are quashed for being initiated without application of mind on the basis of incorrect facts; the appellate grounds are allowed.

Final Conclusion: The appeal is allowed: the reassessment proceedings and the consequent reassessment order for Assessment Year 2011-12 are quashed because the Assessing Officer initiated reopening on a factually incorrect premise and without proper application of mind.

Charitable purpose - first proviso to section 2(15) - exemption under section 11 - principle of mutuality - predominant/dominant object test - question of fact - CBDT Circular No. 11 of 2008

Charitable purpose - first proviso to section 2(15) - predominant/dominant object test - exemption under section 11 - CBDT Circular No. 11 of 2008 - Whether the appellant's activities qualify as charitable purpose for grant of exemption under Section 11 despite the amendment to Section 2(15) and attraction of the first proviso - HELD THAT: - The Tribunal applied the dominant/predominant object test and the guidance in CBDT Circular No. 11 of 2008, treating the question as one of fact to be decided on the materials of each case. It noted that the appellant is a Section 25 company with registration under Section 12A since 09.01.1996, with objects not directed to profit-making. The appellant carried out investor-education, publication and SEBI-directed registration/certification activities, maintained separate accounts for such public-oriented activities, and had been treated as serving general public utility in earlier years. The Revenue did not allege that the appellant's public-utility objects were a mask for trade or commerce or that profit-making was the predominant object. Applying the legal tests in Surat Art Silk Cloth Mfrs. Assn. and subsequent decisions, incidental receipts or fees for activities that further the dominant charitable object do not convert the appellant's activities into trade, commerce or business within the meaning of the proviso. Consequently the Tribunal held that the proviso to Section 2(15) did not operate to deny exemption in the facts of this case and directed the Assessing Officer to allow exemption under Section 11 for the relevant receipts from non-members which were held to be charitable in nature. [Paras 16, 17, 18]

The appellant's activities for the relevant years qualify as charitable; exemption under Section 11 is to be allowed as the first proviso to Section 2(15) is not attracted on the facts.

Principle of mutuality - question of fact - Treatment of receipts attributable to members under the principle of mutuality and the scope of relief for other assessment years - HELD THAT: - The Tribunal recognised that receipts and activities directed exclusively to members fall under the principle of mutuality and were not subjected to tax by the Assessing Officer. For the assessment years 2012-13 and 2013-14, the Tribunal applied its findings in the 2011-12 appeal mutatis mutandis because the grounds and factual matrix were identical. Ground No. 8 in the 2011-12 appeal (relating to allowance of expenses) was treated as infructuous in view of the direction given; for the later years a corresponding ground did not arise as expenditure treatment had been allowed by the Assessing Officer. [Paras 17, 19, 20]

Receipts pertaining to members are governed by mutuality; the conclusions in the 2011-12 appeal apply mutatis mutandis to 2012-13 and 2013-14, and those appeals are allowed (Ground No. 8 disposed as infructuous where applicable).

Final Conclusion: The three appeals for Assessment Years 2011-12, 2012-13 and 2013-14 are allowed: the appellant qualifies as a charitable institution on the facts, exemption under Section 11 is to be granted (the proviso to Section 2(15) is not attracted), member-related receipts are governed by mutuality, and the Tribunal's 2011-12 findings apply mutatis mutandis to the subsequent years.

Stay of recovery pending appeal - Requirement of deposit as pre-condition for grant of stay - Relaxation of deposit requirement in appropriate cases - Exercise of quasi-judicial discretion - consideration of prima facie case, balance of convenience and irreparable injury - Applicability of Section 201/201(1A) and Section 194H - TDS on free samples treated as commission

Requirement of deposit as pre-condition for grant of stay - Relaxation of deposit requirement in appropriate cases - Whether the pre-condition of deposit of twenty percent of the disputed demand is a mandatory prerequisite for putting recovery in abeyance pending first appeal. - HELD THAT: - The Court held that the requirement of payment of twenty percent of the disputed tax demand is not an absolute pre-requisite for staying recovery pending first appeal in all cases and can be relaxed in appropriate cases. The Office Memorandum itself contemplates exceptions, for example where similar additions have been deleted in earlier years or where higher courts' decisions favour the assessee. The Supreme Court's dictum in PCIT v. M/s LG Electronics India Pvt. Ltd. was noted to the effect that authorities may, on the facts of an individual case, grant deposit orders for amounts less than twenty percent. Accordingly, the deposit stipulation is not inflexible and must yield to equitable considerations in individual cases. [Paras 6, 7]

The Commissioner cannot treat deposit of twenty percent as an inviolable pre-condition; deposit requirement may be relaxed depending on facts.

Stay of recovery pending appeal - Exercise of quasi-judicial discretion - consideration of prima facie case, balance of convenience and irreparable injury - Whether the impugned order dismissing the petitioner's stay application was reasoned and properly considered, and what remedial direction is warranted. - HELD THAT: - The Court found the impugned order to be non-reasoned and arbitrary, observing that the three classic criteria for stay applications - prima facie case, balance of convenience and irreparable injury - were not considered. In view of this failure to apply judicially relevant principles and to afford an opportunity of personal hearing, the matter was not decided on merits. The Court set aside the impugned order and remanded the stay application to the Commissioner of Income Tax for fresh adjudication, directing that a personal hearing be granted to the petitioner's authorised representative. Meanwhile, no coercive steps shall be taken until the stay application is decided. [Paras 8, 9, 10]

Impugned order set aside; stay application remitted for fresh decision after personal hearing and coercive action stayed till disposal.

Final Conclusion: Impugned order directing payment of twenty percent and dismissing stay was set aside. The Commissioner is directed to grant personal hearing and decide the stay application afresh, having regard to prima facie case, balance of convenience and irreparable injury; no coercive action to be taken pending that decision.

Principles of natural justice - Requirement of show cause notice and draft assessment order - Faceless assessment procedure under Section 144B - Remedial and appellate channels under the Income Tax Act

Requirement of show cause notice and draft assessment order - Principles of natural justice - Faceless assessment procedure under Section 144B - Final assessment order dated 8th September, 2021 was passed without prior issuance of a show cause notice and draft assessment order as mandated and was set aside. - HELD THAT: - The Court found that the impugned assessment under Section 143(3) read with Section 144B was passed without issuance of the show cause notice and draft assessment order mandated by the faceless assessment procedure, resulting in non-compliance with the principles of natural justice. Although the Principal Chief Commissioner filed affidavits stating that systemic alerts and checks had been introduced in ITBA and that standard operating procedures were aligned following amendment of Section 144B, the Court proceeded to set aside the final order insofar as it had been passed without the statutorily required show cause notice/draft order and without affording the assessee the opportunity contemplated by the procedure. The Court expressly refrained from commenting on the merits of the underlying additions and left substantive rights and contentions open for adjudication after compliance with procedural requirements. [Paras 9]

Impugned final assessment order dated 8th September, 2021 for AY 2018-19 set aside for want of issuance of show cause notice/draft assessment order and breach of principles of natural justice.

Faceless assessment procedure under Section 144B - Remedial and appellate channels under the Income Tax Act - Proceedings were remitted for further action: the respondent directed to issue a show cause notice (and may issue a draft assessment order) and to continue the assessment in accordance with law. - HELD THAT: - The Court directed that the Respondent shall issue a show cause notice within four weeks and is at liberty to issue a draft assessment order or show cause notice to the petitioner; thereafter the assessment proceedings shall continue in accordance with law, including consideration of the assessee's reply and any request for personal hearing. The Court noted the Income Tax Act contains remedial mechanisms (such as sections 154, 147, 263/264 and appellate forums) but did not find provision for post-hoc withdrawal of an assessment order; however, those remedial and appellate channels remain available. The Court left all substantive rights and contentions open for adjudication on merits after compliance with procedural requirements. [Paras 9, 10]

Assessment remitted for fresh consideration after issuance of show cause notice/draft order and observance of procedural safeguards; respondent directed to act within four weeks.

Final Conclusion: The final assessment order dated 8th September, 2021 for Assessment Year 2018-19 is set aside for failure to issue the statutorily required show cause notice/draft assessment order and for breach of principles of natural justice; the respondent is directed to issue a show cause notice within four weeks and proceed in accordance with law, with all substantive rights and contentions left open.

Opportunity to file supplementary reply - remand for fresh adjudication - deactivated PAN - notice issued under Section 148 - order under Section 148A(d) - entertainment of replies and evidence despite deactivated PAN

Opportunity to file supplementary reply - order under Section 148A(d) - notice issued under Section 148 - remand for fresh adjudication - Impugned order under Section 148A(d) and notice under Section 148 were set aside and the matter remanded for fresh consideration after filing of a supplementary reply. - HELD THAT: - The High Court, while not expressing any view on the merits, concluded that in the interests of justice the petitioner should be permitted to file a supplementary reply to the notice issued under Section 148A(b). Consequently, the order passed under Section 148A(d) and the notice under Section 148 dated 26th July, 2022 were set aside and the petitioner directed to file a supplementary reply within four weeks. The Assessing Officer was directed to pass a fresh order under Section 148A(d) within eight weeks thereafter and to proceed in accordance with law. The Court expressly left all rights and contentions of the parties open and did not decide the merits of the tax liability. [Paras 7, 8]

Order under Section 148A(d) and notice under Section 148 set aside; petitioner to file supplementary reply within four weeks and Assessing Officer to pass fresh order within eight weeks; merits left open.

Deactivated PAN - entertainment of replies and evidence despite deactivated PAN - Proceedings were being conducted on a deactivated PAN and the Assessing Officer was directed to accept replies/materials notwithstanding deactivation. - HELD THAT: - The Court recorded that the petitioner had communicated the surrender and subsequent deactivation of an incorrect PAN and that proceedings had been conducted on that deactivated PAN. In view of this factual position and to secure effective adjudication, the Assessing Officer was directed to entertain emails and hard copies of replies, materials and evidence filed by the petitioner despite the deactivated status of the PAN. This direction was procedural and intended to ensure the petitioner's responses are considered in the fresh adjudication. [Paras 2, 3, 7]

Assessing Officer to entertain emails and hard copies of replies/materials filed by the petitioner notwithstanding that proceedings were conducted on a deactivated PAN.

Final Conclusion: Writ petition allowed to the extent that the impugned order and notice dated 26th July, 2022 are set aside; petitioner permitted to file a supplementary reply and the Assessing Officer directed to pass a fresh order in accordance with the timetable ordered, and to accept communications despite the deactivated PAN; no adjudication on merits expressed and all rights reserved.

Forbearance from coercive recovery - stay application under Section 220(6) of the Income Tax Act, 1961 - adjustment/set-off of refund against demand - court not expressing any view on merits - directions for expeditious disposal within ten days

Forbearance from coercive recovery - adjustment/set-off of refund against demand - Prayer for an order restraining the Revenue from taking coercive steps for recovery of demand in respect of earlier assessment years and from adjusting the refund due for AY 2021-22 against those demands. - HELD THAT: - The petition seeking to forbear the Revenue from coercive recovery or from setting off the refund was not granted as a blanket relief by this Court. The Court noted that appeals against the earlier assessment orders are pending before the Commissioner (Appeals) and that a refund is due for AY 2021-22, with a threat of set-off/adjustment. The Court observed that some adjustments may already have been made and directed that its order shall not affect adjustments already carried out. The Court expressly refrained from expressing any view on the merits of the disputes underlying the assessments and appeals. [Paras 2, 3, 4]

Writ petition dismissed insofar as a direct forbearance order was sought; adjustments already made unaffected and no expression on merits.

Stay application under Section 220(6) of the Income Tax Act, 1961 - directions for expeditious disposal within ten days - Procedure to be followed by the Petitioner to obtain protection against coercive proceedings pending appeal and the obligation of the Income-tax authority to decide such an application. - HELD THAT: - The Court directed that if the Petitioner seeks protection against coercive proceedings it must file an application under Section 220(6) of the Act within one week. Upon receipt, the appropriate authority is required to consider and dispose of the stay application in accordance with law within ten days from receipt. This direction effectively remits the question of interim protection to the statutory mechanism under Section 220(6) and mandates expeditious disposal by the authority without the Court adjudicating the merits of the underlying tax demands. [Paras 4]

Petitioner to move application under Section 220(6) within one week; authority to decide such application within ten days; matter remitted for fresh consideration under the statutory provision.

Final Conclusion: Writ petition disposed of with direction to the Petitioner to file a stay application under Section 220(6) within one week and for the appropriate authority to decide it within ten days; no interim restraint granted by the Court and no opinion expressed on the merits; adjustments already effected remain unaffected.

Import of finished jewellery for remaking as an authorised operation in a Special Economic Zone - overriding effect of the Special Economic Zones Act and applicability of SEZ Rules to imports into SEZ - power of the Development Commissioner to decide whether goods are for authorised operations - confiscation for import contrary to prohibition - mis-declaration in Bill of Entry and confiscation/penalty for non-correspondence - withdrawal of SEZ exemption only upon cancellation of Letter of Approval - imposition of duty under notice provisions where exemption stands withdrawn - limitation on adjudicating authority not travelling beyond allegations in the show cause notice

Jurisdiction to entertain writ notwithstanding availability of alternate statutory remedy - jurisdictional scope - whether Customs acted within contours of its powers - High Court may entertain the writ challenging Customs action despite availability of alternative statutory appeal where the question concerns whether the authority acted without or beyond jurisdiction and there are conflicting views of competent Government authorities. - HELD THAT: - The Court declined to relegate the petitioner to the alternate remedy because the petition challenges the validity and exercise of jurisdiction by Customs in the face of divergent views taken by two Government authorities (Customs and the Development Commissioner). The availability of a statutory appeal does not oust the High Court's jurisdiction under Article 226 where the challenge pertains to whether the authority has acted within the contours of its jurisdiction or has acted wholly without jurisdiction. The Court also noted the long pendency and absence of disputed facts, justifying exercise of writ jurisdiction to determine the legal question of jurisdiction itself. [Paras 20, 21]

Writ petition entertained on the substantive jurisdictional issue; petition not relegated to alternate statutory appeal.

Import of finished jewellery for remaking as an authorised operation in a Special Economic Zone - power of the Development Commissioner to decide authorised operations - overriding effect of the SEZ Act and applicability of SEZ Rules - Import of finished (new/unused) jewellery for remaking by an SEZ unit holding Letter of Permission/Approval is a permissible authorised operation under the SEZ regime. - HELD THAT: - The Court held that Rule 27(1) of the SEZ Rules permits SEZ units to import goods required for authorised operations and that jewellery explicitly falls within the term 'goods' and within the definition of 'manufacture' (which includes remaking). The Court recorded that only goods specifically prohibited by notifications under the FTDR Act would be barred, and no such prohibition was shown. The Court further emphasised that the Development Commissioner is the competent authority to decide whether particular goods are required for authorised operations and that the DC had in this case affirmed permissibility; the Customs authority failed to consider the DC's letter and affidavit. Instruction No.37/2009 and the SEZ Act/Rules support that remelting/remaking and re-import of exported jewellery are authorised activities. [Paras 27, 28, 29, 30, 31]

Import of finished jewellery for remaking in SEZ is an authorised activity; invocation of confiscation on that basis was incorrect.

Mis-declaration in Bill of Entry and confiscation/penalty for non-correspondence - scope of Section 111(m) - requirement of non-correspondence between entry and actual goods - Section 111(m) cannot be invoked where there is no mis declaration in the Bill of Entry; mere non mention of raw materials in the Letter of Approval or alleged non-compliance with SEZ procedural Rule 29(7) are not grounds for invoking Section 111(m). - HELD THAT: - The Court explained that Section 111(m) applies where the entry made (Bill of Entry) does not correspond in value or other particulars with the goods actually imported. In the present case the description and value in the Bill of Entry corresponded to diamond studded gold and silver jewellery; there was no proven mismatch. Allegations that the LOP did not list the raw material or that Rule 29(7) should have been followed do not constitute the statutory mis declaration contemplated by Section 111(m). Further, non mention of raw materials in Form G or LOP is not attributable to the unit and, if any misrepresentation had occurred in obtaining LOP, it was for the DC/competent SEZ authority to act. The Court also held that the Rule 29(7) contention was not pleaded in the show cause notice and its ingredients did not apply to these facts. [Paras 33, 34, 35]

Invocation of Section 111(m) was unsustainable and improperly made.

Withdrawal of SEZ exemption only upon cancellation of Letter of Approval - notice for recovery of duties under Section 28 and its limits - Customs could not validly demand duty under Section 28 absent withdrawal of SEZ exemptions; withdrawal of exemptions follows cancellation of the LOA by the SEZ Approval Committee and cannot be invoked retroactively by Customs without such cancellation. - HELD THAT: - The Court noted Section 26 of the SEZ Act grants exemption from customs duties for SEZ units and that Section 16(1)-(3) provides the mechanism for cancellation of LOA and consequent withdrawal of exemptions. There was no allegation or record that the petitioner's LOA had been cancelled; therefore the blanket exemption under Section 26 continued to apply. The Adjudicating Authority's invocation of Section 28 by corrigendum without addressing or recording any withdrawal of exemption was arbitrary. Even if conditions of LOP were alleged to be breached, the statutory process under the SEZ Act had to be followed before customs exemptions could be treated as withdrawn and duties claimed. [Paras 36, 37, 38, 39, 40]

Demand of customs duty under Section 28 was untenable in the absence of cancellation/withdrawal of SEZ exemption.

Limitation on adjudicating authority not travelling beyond allegations in the show cause notice - penalty imposition only to the extent alleged in show cause notice - Imposition of penalty under Section 114A in the adjudication order was invalid because the show cause notice did not propose penalty under that provision and an adjudication order cannot traverse beyond the matters raised in the show cause notice. - HELD THAT: - The Court relied on settled precedent that the show cause notice is the foundation of adjudication and the Department cannot advance new grounds in the adjudication order which were not the subject of the show cause notice. Since Section 114A was not proposed in the SCN, imposition of penalty under that section in the impugned order was impermissible. [Paras 41, 42]

Penalty under Section 114A set aside as beyond the scope of the show cause notice.

Final Conclusion: The impugned show cause notices and consequential adjudication orders dated 14th July 2009 (with addenda) and the Order in Original dated 18/19th August 2010 were quashed and set aside; petitioners discharged from the obligation to renew bank guarantees, bank guarantees to be returned, and consignments not released may be applied for and shall be released in accordance with the directions of the Court.

Limitation for refund of Special Additional Duty (SAD) - prescription of limitation by notification - subordinate legislation cannot create substantive limitation on statutory rights - application of Section 27 of the Customs Act to SAD refunds

Limitation for refund of Special Additional Duty (SAD) - prescription of limitation by notification - subordinate legislation cannot create substantive limitation on statutory rights - application of Section 27 of the Customs Act to SAD refunds - Whether a period of limitation for claiming refund of Special Additional Duty (SAD) can be prescribed by a notification and, if not, the consequence for the refund application before the revenue. - HELD THAT: - The Court concurred with the reasoning in Sony India Pvt. Ltd. that the limitation period for SAD refunds cannot be prescribed by subordinate legislation such as a circular or notification. The court noted that Section 27 of the Customs Act had not been understood as applying to SAD refunds until the issuance of circulars and Notification No. 93/2008, which sought to introduce a one year time-limit. Fundamental policy matters affecting substantive rights, including limitation periods, cannot be formulated for the first time by subordinate legislation; such matters require clear provision in the parent enactment. Having adopted that legal principle, the Court dismissed the revenue's appeal and directed that the appellant/revenue process the respondent's refund application in accordance with law and the decision rendered in the present appeal. The Court also observed that if the revenue appeals to the Supreme Court and that appeal is tagged with the pending Wilhelm Textiles appeal, the final view will be governed by the Supreme Court's decision in that matter. [Paras 6, 7, 8, 9]

The limitation prescribed by notification cannot be sustained; the revenue must process the SAD refund application in accordance with law, and the appeal is dismissed.

Final Conclusion: Appeal dismissed; the High Court affirmed that limitation for SAD refunds cannot be prescribed by notification or subordinate instruments and directed the revenue to process the refund claim as per law, subject to any authoritative determination by the Supreme Court in related proceedings.

Recovery of cost recovery charges under the Handling of Cargo in Customs Area Regulations, 2009 - obligation to bear cost of customs officers on cost recovery basis as a condition/responsibility of Customs Cargo Service Provider - procedure for suspension or revocation and imposition of penalty under regulation 12 of the 2009 Regulations - absence of statutory machinery in the 2009 Regulations for realisation of defaulted cost recovery charges

Recovery of cost recovery charges under the Handling of Cargo in Customs Area Regulations, 2009 - obligation to bear cost of customs officers on cost recovery basis as a condition/responsibility of Customs Cargo Service Provider - absence of statutory machinery in the 2009 Regulations for realisation of defaulted cost recovery charges - Confirmation of outstanding cost recovery charges could not be ordered under regulations 5(2) and 6(1)(o) of the 2009 Regulations. - HELD THAT: - Regulations 5(2) and 6(1)(o) record the obligation of an applicant/ Customs Cargo Service Provider to undertake to bear the cost of customs officers on a cost recovery basis and to make payment at rates and in the manner prescribed. The Tribunal examined the scheme of the 2009 Regulations and found that those provisions impose an obligation to bear such cost but do not contain or prescribe a machinery for realisation or recovery of defaulted cost recovery charges. A Division Bench of the Tribunal in Container Corporation of India interpreted Regulations 5(2), 6(1)(o) and 12 and held that the Regulations do not provide for recovery of defaulted cost recovery charges and that regulation 12 deals with suspension/revocation and penalty procedures but not with recovery of unpaid charges. The present appeals fall within the scope of that reasoning; the Commissioner's orders confirming the demands under the cited regulations therefore exceeded the scope of the 2009 Regulations and were unsustainable. [Paras 24, 28, 29]

Demand of outstanding cost recovery charges confirmed under regulations 5(2) and 6(1)(o) set aside.

Procedure for suspension or revocation and imposition of penalty under regulation 12 of the 2009 Regulations - penalty under regulation 12(8) of the 2009 Regulations - Imposition of penalty under regulation 12(8) was set aside. - HELD THAT: - The show cause notices invoked regulation 12 (procedure for suspension/revocation and imposition of penalty). While regulation 12(8) prescribes that a Customs Cargo Service Provider who contravenes the regulations may be liable to a penalty, the Tribunal has held that where the substantive recovery of cost recovery charges cannot be sustained under the 2009 Regulations, the related penalty imposed under regulation 12(8) cannot stand. Prior Tribunal decisions addressing identical issues have set aside penalties imposed under regulation 12(8) in comparable circumstances, and the impugned orders here imposing penalty were similarly unsupportable. [Paras 27, 28, 29]

Penalty imposed under regulation 12(8) set aside.

Final Conclusion: The appeals are allowed to the extent that the Commissioner's orders confirming outstanding cost recovery charges and imposing penalty are set aside; the custodianship was not revoked and security was not forfeited and those aspects remain undisturbed.

Presumption of smuggling - burden of proof under Section 123 of the Customs Act - town seizure - absence of foreign/refinery marking - confiscation and penalty under the Customs Act

Presumption of smuggling - burden of proof under Section 123 of the Customs Act - absence of foreign/refinery marking - Whether Revenue was entitled to draw the presumption that the seized gold was smuggled and thereby shift the burden of proof on the appellant under Section 123 of the Customs Act. - HELD THAT: - The Tribunal examined the factual matrix: the seizure was a town seizure, the seized gold bore no foreign/refinery embossing or serial number, and the seller (from whom the appellant purchased) had procured the metal from an open market in Chennai. The only material suggesting smuggling were initial statements which were subsequently retracted; although the appellant later affirmed the panchnama and purchase, the absence of corroborative indicia of foreign origin - such as customary foreign refinery markings or weights typical of imported bars - meant Revenue lacked a reasonable basis to form the belief that the goods were smuggled. In these circumstances the statutory presumption under Section 123 could not be invoked to shift the evidential burden on the appellant, and Revenue failed to establish that the gold was smuggled. [Paras 9, 18]

No presumption of smuggling arose; burden under Section 123 did not shift to the appellant and Revenue failed to establish smuggled nature of the gold.

Town seizure - confiscation and penalty under the Customs Act - Whether the confiscation of the seized gold and cash and the imposition of penalty on the appellant should be sustained. - HELD THAT: - Having held that Revenue did not prove the smuggled character of the seized gold and that the presumption under Section 123 could not be applied, the Tribunal concluded that the consequential measures premised on smuggling - namely absolute confiscation of the gold and confiscation of cash and penalty - could not stand as against this appellant. The Tribunal applied this legal conclusion to the reliefs sought, observing that in view of the failure of proof the confiscation and penalty orders insofar as they affect the appellant must be set aside and the seized items returned. [Paras 18, 19]

Confiscation and penalty set aside insofar as they apply to the appellant; seized gold and currency/cash to be released to the appellant.

Final Conclusion: Appeal allowed: on the factual finding of a town seizure, absence of foreign/refinery marking and absence of satisfactory proof of smuggling, the Tribunal held that the presumption under Section 123 did not arise; accordingly the confiscation and penalty orders against the appellant were set aside and the seized gold and cash were ordered to be released.

Validity of share allotment to person resident outside India under FEMA - Effect of non obtaining prior RBI/Government permission on allotment of shares in print media - Power of company/board to cancel shares issued in contravention of foreign investment rules - Rectification of register of members where allotment is void - Maintainability of company petition vis a vis prior civil suit / Order II Rule 2 CPC - Relief under Companies Act for oppression and mismanagement (sections 397/398 scheme) - Alteration of articles and acquiescence / waiver by shareholders - Appointment of interim chairman and directions to regulate company affairs under section 402

Validity of share allotment to person resident outside India under FEMA - Effect of non obtaining prior RBI/Government permission on allotment of shares in print media - Power of company/board to cancel shares issued in contravention of foreign investment rules - Legal consequence of allotment of shares to the 1st respondent (foreign national) without RBI/Government permission and validity of board's cancellation of those shares - HELD THAT: - The Tribunal held that the allotment and acquisition of the large block of shares by the 1st respondent in a print media company was in breach of the FEMA regulations (Regulation 4 and Regulation 7 framework restricting issuance to persons resident outside India in that sector) and, absent the requisite RBI/Central Government permission, the allotment could not be treated as a valid title. In that factual and legal context the directors were entitled to treat and act upon the allotment as illegal and to cancel/annul the offending share allotments and keep the consideration in deposit pending directions from the Enforcement Directorate or other authorities. Consequently the NCLT's direction to restore those shares and to rectify the register was set aside. The Appellate Tribunal recorded that issues as to penalties/confiscation under FEMA determined by the Enforcement Directorate (and appeals therefrom) remain open to the parties before the competent fora.

Allotment to the 1st respondent without required FEMA/RBI approval was not a valid allotment; the board's cancellation/annulment of those shares was lawful and the NCLT order directing restoration and rectification is set aside.

Rectification of register of members where allotment is void - Power of company/board to cancel shares issued in contravention of foreign investment rules - Whether register of members must be rectified to restore shares annulled by the company - HELD THAT: - Because the allotment was held to be void for contravention of FEMA/regulations and therefore not a lawful acquisition, the company was not obliged to restore the 1st respondent as holder on the register. The NCLT's direction to rectify the register in favour of the 1st respondent was reversed: an entry which rests on an invalid allotment does not require rectification in favour of the purported allottee.

No rectification in favour of the 1st respondent; the NCLT direction to restore the cancelled shares on the register is set aside.

Form 32 and cessation of directorship where disqualification arises - Section 283(1)(g) consequences for non attendance at board meetings - Validity of filing Form 32 intimating cessation of directors and effect of non attendance of board meetings causing vacation under statute - HELD THAT: - The Tribunal concluded that the circumstances recited (non attendance and statutory consequences) justified the company filing Form 32 notifying cessation of the petitioners as directors with effect from the stated date, and that the NCLT's finding that the Form 32 was 'illegal' was not sustainable on the record before the Appellate Tribunal.

Form 32 filed by the company intimating cessation of the petitioners as directors is valid; the NCLT direction treating it as illegal is set aside.

Alteration of articles and acquiescence / waiver by shareholders - Scope of relief under oppression/mismanagement where shareholders previously consented - Whether amendments to the articles (Articles 31(a), 32 and 39(b)) could be impugned as oppressive when they were earlier approved with the petitioners' consent - HELD THAT: - The Tribunal noted that the amendments to the articles were carried by unanimous approval at the relevant meetings and that the petitioners had, at the time, consented; having acquiesced to and participated in those changes, they could not later challenge them as oppressive absent proof of subsequent abusive exercise. The NCLT's deletion of those clauses was not upheld.

Amendments to the articles that were duly adopted with the petitioners' consent cannot be set aside as oppressive on the present record; NCLT deletions are reversed.

Maintainability of company petition vis a vis prior civil suit / Order II Rule 2 CPC - Whether the company petition was barred by the earlier civil suit and withdrawal of certain prayers under Order II Rule 2 CPC - HELD THAT: - The Appellate Tribunal held that, on the facts, the remedies and reliefs sought before the Company Law forum were proper and not barred by the procedural consequences of the civil suit; the deletion/withdrawal of certain prayers in the civil suit did not operate to bar the company petition filed under statutory company law remedies. The preliminary technical objection based on multiplicity was therefore rejected.

The company petition was maintainable despite the earlier civil suit and the withdrawal of certain prayers; objection under Order II Rule 2 CPC did not bar the statutory petition.

Appointment of interim chairman and directions to regulate company affairs under section 402 - Scope of tribunal powers to regulate company management in oppression/mismanagement proceedings - Validity of NCLT directions appointing a chairman for six months and permitting nomination of additional directors beyond articles without altering the articles - HELD THAT: - The Appellate Tribunal found that the NCLT's orders went beyond what could be sustained on the record because they effected changes (additional directors beyond the maximum fixed by the articles and supervisory directions) without appropriate basis or alteration of the articles; appointment of an interim chairman and the specific directions given by the NCLT were not supported and were set aside as exceeding what the reliefs and facts warranted.

NCLT directions appointing a chairman for six months and permitting nomination of additional directors beyond the articles are set aside as unsustainable.

Final Conclusion: The appeal is allowed. The NCLT order dated 27.05.2020 (delivered 01.06.2020) in TCP/26/2018 (CP/54/2012) is set aside: the allotment to the foreign national without requisite FEMA/RBI authorisation was not a valid allotment and the company's cancellation/annulment of those shares and related steps (including the Form 32 cessation) are upheld; the NCLT directions to restore shares, rectify the register, delete the challenged articles, appoint a chairman and add directors beyond the articles are reversed. The company petition is dismissed; parties remain free to pursue pending FEMA adjudication and appeals before the competent authorities.

Existence of a pre existing dispute under Section 8(2)(a) of the Insolvency and Bankruptcy Code, 2016 - admission of an undisputed operational debt and threshold requirement for Section 9 - application under Section 9 of the IBC cannot be used as a debt recovery forum - Mobilox Innovations test for adjudicating Section 9 applications - setting aside admission of CIRP where a plausible pre existing dispute exists

Existence of a pre existing dispute under Section 8(2)(a) of the Insolvency and Bankruptcy Code, 2016 - Mobilox Innovations test for adjudicating Section 9 applications - Whether there existed a real pre existing dispute between the parties such as to preclude admission of the Section 9 application. - HELD THAT: - The Tribunal examined the contemporaneous correspondence and found repeated communications evidencing billing disputes, claims of over charging, admission by the Operational Creditor of invoicing errors, requests for reconciliation and assertions of counterclaims prior to the Section 8 notice. Applying the Mobilox test, the Court held that the defence pleaded by the Corporate Debtor was a plausible, non spurious dispute requiring further investigation and therefore amounted to a pre existing dispute. The adjudicating authority's acceptance of the Section 9 application despite these materials was erroneous because the existence of a genuine pre existing dispute bars initiation of CIRP under Section 9. [Paras 16, 21, 23]

There was a real pre existing dispute between the parties which disentitles the Operational Creditor to relief under Section 9.

Admission of an undisputed operational debt and threshold requirement for Section 9 - setting aside admission of CIRP where a plausible pre existing dispute exists - Whether the emails relied upon by the Operational Creditor amounted to admission of undisputed liability exceeding the statutory threshold so as to justify admission of the Section 9 petition. - HELD THAT: - The Tribunal analysed the communications relied upon by the Adjudicating Authority and concluded that the exchanges, when read in context, did not constitute an unconditional admission of liability. The e mails relied on by the Adjudicating Authority were shown to coexist with contemporaneous and prior communications raising billing discrepancies, claims for credits, and threats of counterclaims. The mere reference to proposed settlement amounts or correspondence about payment did not displace the existence of the wider dispute. Consequently, the Adjudicating Authority erred in treating those communications as establishing an undisputed debt meeting the threshold for Section 9 admission. [Paras 11, 12, 14, 18]

The communications did not establish an undisputed admitted liability that could sustain admission of the Section 9 petition.

Application under Section 9 of the IBC cannot be used as a debt recovery forum - setting aside admission of CIRP where a plausible pre existing dispute exists - Whether the impugned order admitting the Section 9 petition and initiating CIRP should be set aside. - HELD THAT: - Having found that a plausible pre existing dispute existed and that the purported admissions did not demonstrate an undisputed liability, the Tribunal held that the Adjudicating Authority committed a legal error in admitting the Section 9 application. The Court emphasised that IBC is not a vehicle for routine debt recovery and that CIRP cannot be initiated where genuine disputes are shown. In consequence, the admission, appointment of IRP and all consequential orders were declared illegal and set aside. [Paras 23, 24, 25]

The impugned order admitting the Section 9 application and all consequential orders are set aside; the Corporate Debtor is released from CIRP.

Final Conclusion: The appeal is allowed: the Tribunal found a plausible pre existing dispute concerning billing and overcharges which precluded admission under Section 9; the communications did not establish an undisputed liability meeting the threshold; the Adjudicating Authority's admission of the Section 9 petition and consequent initiation of CIRP are set aside and the Corporate Debtor is restored to its board with immediate effect.

Power to review by the Adjudicating Authority / NCLT under Rule 11 - rectification of judgment for "mistake apparent on the face of the record" under Section 420 of the Companies Act - fraudulent trading / recovery under Section 66 of the Insolvency and Bankruptcy Code, 2016 - overriding effect of the Insolvency and Bankruptcy Code - attachment and sale of assets of the corporate debtor in liquidation

Power to review by the Adjudicating Authority / NCLT under Rule 11 - Adjudicating Authority/NCLT does not possess an inherent power to review its own order under Rule 11 of the NCLT Rules or otherwise in the context of the IBC, 2016. - HELD THAT: - The Tribunal held that the IBC is a self-contained code and contains no express provision empowering the Adjudicating Authority to review its own orders. Reliance on earlier NCLAT decisions was noted to the effect that power of review is not inherent. Given the absence of statutory authority comparable to provisions in other statutes (for example Section 254(2) of the Income-tax Act), Rule 11 of the NCLT Rules cannot be read as conferring a review jurisdiction to disturb finality of orders under the IBC. Accordingly, the review petition could not be entertained as a exercise of a general review power. [Paras 22, 26]

The Adjudicating Authority cannot exercise a general power to review its own order under Rule 11 or otherwise in the IBC proceedings; the review petition was not maintainable on that ground.

Rectification of judgment for "mistake apparent on the face of the record" under Section 420 of the Companies Act - Alleged errors were not "mistakes apparent on the face of the record" and thus not amenable to rectification under Section 420(2) of the Companies Act, 2013. - HELD THAT: - The Tribunal examined the specific contentions put forward as 'apparent mistakes' - limitation, cancellation of a registered sale deed, characterization as benami, and the nature of the loan - against the record. It found that (a) limitation was not a bar in view of Section 66 jurisprudence where fraudulent transactions have no look back limit, (b) the impugned order did not cancel the sale deed but directed attachment and auction to realise assets of the corporate debtor, (c) the Adjudicating Authority had not conclusively labelled the property as benami and the question was debatable, and (d) the loan account and forensic findings on record contradicted the appellants' claim that the company was merely a guarantor. Where matters are debatable or require consideration of evidence or where more than one view is possible, Section 420 remedy is unavailable. Hence no patent error was shown. [Paras 23, 26]

The rectifications sought did not constitute mistakes apparent on the face of the record and were beyond the scope of Section 420(2); the review/rectification was rightly refused.

Fraudulent trading / recovery under Section 66 of the Insolvency and Bankruptcy Code, 2016 - attachment and sale of assets of the corporate debtor in liquidation - The Adjudicating Authority rightly concluded, on the forensic audit and supporting bank records, that the property was procured from the corporate debtor's funds and the attachment and direction for its sale in liquidation were justified. - HELD THAT: - The Tribunal accepted the liquidator's forensic audit findings and contemporaneous bank/loan records which showed that the loan for the property was in the corporate debtor's loan account, EMIs were auto debited from the company's account and cheques in the sale deed traced to the corporate debtor's funds. The forensic report recorded diversion of company funds to create the asset in the ex director's name and recommended restoration to the company to protect stakeholders' interests. Under Section 66(1)/(2) the Adjudicating Authority may order contribution or direct action where business has been carried on with intent to defraud creditors; where fraud is established on the record, limitation arguments do not bar relief. The impugned order did not purport to cancel the sale deed but attached the property and authorised steps for auction to maximise liquidation value. [Paras 15, 19, 26]

The attachment of the property and directions for its sale in liquidation were sustainable on the material on record; the Adjudicating Authority did not commit jurisdictional error in allowing the liquidator's application under Section 66.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority's orders rejecting the review/rectification and directing attachment of the property in question were held to be legally tenable on the record: no inherent review power under the IBC was found, no "mistake apparent on the face of the record" was shown for rectification, and the finding that the property was procured from corporate debtor funds justified attachment and steps for its realisation in liquidation.

Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 - eligibility to file declaration - clarificatory circular binding on revenue - allowance of declarations despite appeal not arising from show cause notice - condition of compliance with Scheme's remaining conditions (withdrawal of pending cases, payment of dues)

Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 - eligibility to file declaration - allowance of declarations despite appeal not arising from show cause notice - Petitioners who are parties to appeals before the Supreme Court in matters concerning service tax on renting of immovable property are eligible to file declarations under the Scheme notwithstanding that the appeal was not initiated pursuant to a show cause notice. - HELD THAT: - The Court examined Circular No. 1073/06/2019.CX (clause (5)) which records representations by the Retailers Association of India and notes that the Supreme Court had allowed lessees to file civil appeals challenging applicability of service tax subject to specified conditions. The circular expressly clarifies that such persons are allowed to file a declaration under the Scheme and avail its benefits. The court held that this clarificatory instruction entitles the petitioners to file declarations under the Scheme even though their appeals were not founded on show cause notices, and that rejection of declarations solely on that ground was not sustainable. [Paras 5, 6, 7]

Declarations filed by the petitioners cannot be rejected merely because the appeals pending before the Supreme Court were not pursuant to show cause notices; petitioners are permitted to file declarations under the Scheme.

Clarificatory circular binding on revenue - condition of compliance with Scheme's remaining conditions (withdrawal of pending cases, payment of dues) - Whether the revenue is bound by the Circular and what consequence follows where declarations were rejected on the ground contrary to that Circular. - HELD THAT: - The Court characterised the Circular as clarificatory and binding on the respondent. In light of the circular's clarification that members in the described position may file declarations, the impugned orders rejecting the petitioners' declarations were set aside. The Court nevertheless emphasised that entitlement under the circular is subject to all remaining conditions of the Scheme - including withdrawal of pending cases and payment of dues as determined by the designated committee - and directed the respondent to reconsider the declarations without relying on the ground on which the rejections were earlier made. [Paras 7, 8]

Impugned rejections set aside; respondent directed to reconsider declarations in accordance with the Circular and subject to compliance with the Scheme's remaining conditions.

Final Conclusion: The writ petitions were allowed: the Circular No.1073/06/2019.CX is clarificatory and binding, petitioners may file declarations under the Sabka Vishwas Scheme despite their appeals not arising from show cause notices, and the revenue is directed to reconsider the declarations in accordance with the Circular while ensuring compliance with the Scheme's residual conditions.

Exemption of value of goods and materials sold by service provider - documentary proof indicating the value of goods and materials - interpretation of Notification No. 12/2003-S.T. - valuation of commercial or industrial construction service - remand for fresh consideration after complying with principles of natural justice

Documentary proof indicating the value of goods and materials - interpretation of Notification No. 12/2003-S.T. - Whether the appellant satisfied the condition of Notification No. 12/2003-S.T. by producing documentary evidence of the value of goods and materials sold for exclusion from service tax - HELD THAT: - The Tribunal held that the condition in Notification No. 12/2003-S.T. requires production of documentary proof specifically indicating the value of goods and materials sold by the service provider, but does not mandate that such proof must be in the form of a separate invoice. The sufficiency of the evidence is a matter for factual satisfaction by the adjudicating authority. In the present case the Tribunal found that documents such as contract, R.A. (Running Account) bills, books of account and sales tax returns could, if they establish the value of goods supplied, satisfy the notification's condition. Because the adjudicating authority and the Commissioner (Appeals) did not adequately examine the evidence brought by the appellant and confined themselves to selective parts of the invoice, the question of applicability of Notification No. 12/2003-S.T. was not finally adjudicated on merits and requires fresh consideration. [Paras 4]

Matter remanded to the original authority to permit the appellant to lead documentary evidence and to decide afresh whether the condition of Notification No. 12/2003-S.T. is satisfied.

Remand for fresh consideration after complying with principles of natural justice - valuation of commercial or industrial construction service - Whether the appellate order upholding the demand should be set aside and the matter remanded for fresh adjudication - HELD THAT: - The Tribunal set aside the order of the Commissioner (Appeals) and remanded the matter to the original adjudicating authority because the authorities below had not examined the documentary material in the manner required by Notification No. 12/2003-S.T. and had not afforded the appellant adequate opportunity to establish the value of goods and materials supplied. The Tribunal directed that the adjudicating authority should reconsider the matter afresh, permitting the appellant to produce documentary evidence, examine those documents for sufficiency, and pass a reasoned order after complying with the principles of natural justice. [Paras 5]

Impugned order set aside; appeal disposed of by remand to the adjudicating authority for fresh adjudication after compliance with natural justice.

Final Conclusion: The Tribunal set aside the impugned appellate order and remanded the matter to the original adjudicating authority to re-examine, after permitting documentary evidence and observing principles of natural justice, whether the value of goods and materials supplied can be excluded under Notification No. 12/2003-S.T.

Cenvat credit on rent-a-cab service - availability of credit where provision of service was completed before exclusion date - Cenvat credit on outdoor catering service - nexus between input service and output service

Cenvat credit on rent-a-cab service - availability of credit where provision of service was completed before exclusion date - Whether Cenvat credit is admissible for rent-a-cab service utilized before 01.04.2011 though invoices and entries in Cenvat register were recorded after 01.04.2011. - HELD THAT: - The Tribunal found on the record that the rent-a-cab service was received and utilised by the appellant prior to 01.04.2011 as evidenced by documentary travel dates, although the invoices were recorded in the books and Cenvat credit register after 01.04.2011. Reliance was placed on the Tribunal's decision in M/s. Mediacom Media India Pvt. Ltd. and the Government circular dated 29.04.2011 which clarified that credit would be available where the provision of service was completed before 01.04.2011. Applying that principle, the late recording of invoices did not disentitle the appellant to credit where the service had been provided prior to the exclusion effective date. [Paras 4]

Cenvat credit for rent-a-cab service was allowed on merits.

Cenvat credit on outdoor catering service - nexus between input service and output service - Whether Cenvat credit is admissible for outdoor catering service utilized for providing meals to employees and claimed during 2014-15. - HELD THAT: - The Tribunal accepted the appellant's contention that the department's disallowance included amounts attributable to air travel service, which had already been allowed, and directed deduction of that element, leaving only Rs.1,837 attributable to outdoor catering service. The Tribunal held that the outdoor catering service was used in the appellant's business to provide meals to employees round the clock to enhance efficiency and performance and was not a mere welfare or perquisite. On that basis, and following earlier Tribunal decisions, the Tribunal concluded that the requisite nexus between the input service and the output service existed and the Cenvat credit was therefore admissible. [Paras 4]

Cenvat credit for outdoor catering service was allowed to the extent claimed (after excluding the portion attributable to air travel).

Final Conclusion: The appeal is allowed: the disallowance of Cenvat credit for rent-a-cab service (2011-12) and for outdoor catering service (2014-15, after excluding amounts attributable to air travel) is set aside and credit is permitted on the merits.

Classification of works contract as original works - application of Rule 2A(ii)(A) of Service Tax (Determination of Value) Rules, 2006 - valuation of service portion at forty per cent versus seventy per cent - service tax liability on works contracts - requirement for adjudicatory analysis of individual work orders and scope of work

Classification of works contract as original works - application of Rule 2A(ii)(A) of Service Tax (Determination of Value) Rules, 2006 - valuation of service portion at forty per cent versus seventy per cent - Whether the works contract services received by the appellant for the listed bills/work orders fall within the definition of "original works" and are therefore taxable on forty per cent of the contract value under Rule 2A(ii)(A), rather than on seventy per cent under Rule 2A(ii)(B)(ii). - HELD THAT: - The authorities below upheld a differential demand without analysing each bill or work-order against the definition of "original works" and the scope of services specified therein. The Tribunal examined the work-orders and the annexed scopes of work (pages 98 to 125 of the appeal paper book) and found that the majority of the works - including construction of new civil foundations and creation of a new plant area (e.g. DAF at ZLD plant) and erection/installation type tasks - are new construction or erection/installation of plant/structures, falling within the definition of "original works" in Explanation 1 to the rule. Where most items constituted original works and only a fraction, if any, related to finishing/installation/maintenance, proper classification favoured treating the contracts as original works. The Tribunal held that, on the material examined, the appellants were justified in applying Rule 2A(ii)(A) and taxing the service portion at forty per cent of the contract value; the lower authorities erred in mechanically treating the works as falling under the seventy per cent category without granular analysis. [Paras 5, 6, 7]

The works contract services in question are to be classified as original works and taxable on forty per cent of the total amount charged under Rule 2A(ii)(A); the appeal is allowed with consequential relief.

Final Conclusion: The appeal is allowed: on scrutiny of the work-orders and scope of work the Tribunal finds the services constitute "original works" and are taxable on forty per cent of the contract value under Rule 2A(ii)(A), and the demand confirmed by the lower authorities is set aside to that extent with consequential relief in accordance with law.

Pre-deposit refund with interest - unjust enrichment - wrongful retention of pre-deposit by revenue - relevant date for interest calculation - incorrect invocation of Section 35FF

Pre-deposit refund with interest - unjust enrichment - wrongful retention of pre-deposit by revenue - Appellant entitled to interest on sanctioned refund of pre-deposit where liability has not been finally adjudicated and department retained the amount. - HELD THAT: - The Tribunal found that the amount refunded represented the pre-deposit made pursuant to court directions and that the demand in respect of three show cause notices for the periods 2008-2009, 2009-2010 and 2010-2011 has not been finally adjudicated. Applying the principle of unjust enrichment as recognised by the Apex Court, the Department had no authority to retain the pre-deposit pending final adjudication. Consequently, the assessee was held entitled to refund of the pre-deposit together with interest, and the appellate order denying interest was set aside. The Tribunal directed payment of interest at 12% from the relevant date until payment. [Paras 7, 8]

Refund sanctioned earlier is to carry interest at 12% as the Department could not retain the pre-deposit while liability remained undecided.

Relevant date for interest calculation - pre-deposit refund with interest - Relevant date from which interest on the refund is to be computed is the date of the refund application, 14.03.2019. - HELD THAT: - While earlier authorities have identified different anchor dates, the Tribunal examined the facts that the Final Order in the appellant's favour was dated 02.11.2017 but the refund application was filed on 14.03.2019. Relying on the Apex Court's approach and subsequent precedent, the Tribunal held that, in the circumstances of the present case, interest should be computed from 14.03.2019, the date of the application for refund, until payment. [Paras 8, 9]

Interest to be computed from 14.03.2019 (date of refund application) until actual payment.

Incorrect invocation of Section 35FF - pre-deposit refund with interest - Invocation of Section 35FF by the Commissioner (Appeals) to deny interest was incorrect in the present facts. - HELD THAT: - The Tribunal observed that Section 35FF, as applied by the Commissioner (Appeals), contemplates interest calculations with reference to the relevant date and certain timelines, but in the present case the adjudication on the demand is pending and the refund claim related to the pre-deposit. Given that the Department retained the pre-deposit without the demand having been finally established, the statutory provision was incorrectly invoked to deny interest. The appellate order refusing interest on that basis was set aside. [Paras 6, 9]

Section 35FF was wrongly invoked to deny interest on the pre-deposit refund; the denial is set aside.

Final Conclusion: The appeal is allowed: the refund of the pre-deposit is confirmed to carry interest at 12% from 14.03.2019 until payment; the Commissioner (Appeals) order denying interest and invoking Section 35FF is set aside.

Refund of service tax paid under mistake of law - Construction of Residential Complex Service - Works Contract Service - limitation under Section 11B - doctrine of unjust enrichment - revenue deposit - interest under Section 11BB - booking of tax in profit and loss account and passage of incidence

Construction of Residential Complex Service - Works Contract Service - refund of service tax paid under mistake of law - Entitlement to refund of service tax paid in respect of construction of single/duplex residential units - HELD THAT: - The Tribunal recorded that the services rendered by the appellant related to construction of individual residential houses/duplexes for the Rajasthan Housing Board and therefore did not qualify as construction of a residential complex. Reliance was placed on prior findings in the proceedings and authorities dealing with the classification of individual residential units. Having concluded that no service tax was leviable on such construction, the Tribunal held that amounts deposited under the head "Construction of Residential Complex Service" were paid under a mistake of law and are in the nature of a revenue deposit. Consequently, the appellant is entitled to repayment of the tax so deposited. [Paras 11]

Refund granted in respect of service tax paid on construction of individual residential houses/duplexes, the deposits being revenue deposits paid under mistake of law.

Limitation under Section 11B - doctrine of unjust enrichment - revenue deposit - booking of tax in profit and loss account and passage of incidence - Whether the refund claim is time-barred under Section 11B and/or barred by unjust enrichment - HELD THAT: - The Tribunal held that where tax has been paid under a mistake of law or under wrong advice and stands as a revenue deposit, the limitation provision under Section 11B does not apply to bar refund. On unjust enrichment, the Tribunal examined the contractual position and factual material: Rajasthan Housing Board had expressly stated that taxes were to be borne by the contractor and had not paid any service tax to the appellant. The mere fact that the appellant had booked the tax as expenditure in its profit and loss account was held not to be conclusive of passage of incidence to the beneficiary; on the facts, the Tribunal found that the appellant had borne the tax and unjust enrichment did not arise. Accordingly, neither limitation nor unjust enrichment prevented refund of the deposited tax. [Paras 11, 12]

Limitation under Section 11B not attracted to bar refund of revenue deposit; unjust enrichment not established, refund is payable.

Final Conclusion: The appeal is allowed. The impugned order is modified and the appellant is entitled to refund of the service tax deposited for the period April,2007 to September , 2008; the adjudicating authority is directed to grant the refund with interest under Section 11BB within 60 days from receipt of the order.

CENVAT credit admissibility - reasonable steps under Rule 9(3) of the CENVAT Credit Rules, 2004 - validity of invoice as document under Rule 9(1) of the CENVAT Credit Rules, 2004 - effect of departmental alert circular on denial of credit - bona fide purchaser - limitation for issuance of show cause notice

CENVAT credit admissibility - reasonable steps under Rule 9(3) of the CENVAT Credit Rules, 2004 - validity of invoice as document under Rule 9(1) of the CENVAT Credit Rules, 2004 - effect of departmental alert circular on denial of credit - bona fide purchaser - CENVAT credit availed on the invoice issued by M/s. Sri Kamala Udyog is admissible and cannot be denied solely on the basis of an alert circular where the recipient has taken reasonable steps and is a bona fide purchaser. - HELD THAT: - The Tribunal found that the appellant possessed an invoice meeting the requirements of Rule 9(1) and had documentary and transactional evidence of receipt and utilization of the inputs, payment by banking channels, electronic way bill covering movement of goods and entries in statutory records. The buyer had taken the reasonable steps which Rule 9(3) requires - including verification of supplier registration and documentation - and is therefore to be treated as a bona fide purchaser. The Tribunal applied the principle that a buyer is not required to go behind the supplier's records to verify duty payment and that an alert circular, issued after the transaction, is not by itself a ground to deny credit where prima facie documents and reasonable steps exist. Reliance was placed on settled authority that the Explanation to Rule 9(3) and the statutory test permit a pragmatic inquiry into whether reasonable steps were taken, and that if so credit must be allowed. The departmental audit conducted later drew no adverse inference against the credit. On these findings the impugned denial of credit was set aside. [Paras 8, 9, 10, 13, 15]

CENVAT credit upheld and the adjudication and appellate orders denying credit were set aside.

Limitation for issuance of show cause notice - The Show Cause Notice issued on 27.01.2016 was barred by limitation and the extended period could not be invoked. - HELD THAT: - The Tribunal observed that the return for the quarter was filed and the normal period for issuance of notice had expired on 08.09.2013. The alert circular was issued on 30.07.2013 (after the transaction) and the show cause was issued much later (January 2016). The department's subsequent audit (undertaken on 28.05.2016) did not draw adverse inference against the CENVAT credit. There was no material to establish failure or willful suppression by the appellant; transactions were recorded in books and payments were made by cheque. On these facts the Tribunal held the claim that extended limitation applied to be unsustainable and concluded that the SCN was time-barred. [Paras 11, 14]

Show Cause Notice held to be barred by limitation; extended period not invokable.

Final Conclusion: The Tribunal allowed the appeal, set aside the adjudication and appellate orders, upheld the CENVAT credit claimed by the appellant and held the Show Cause Notice to be time-barred, granting consequential relief as per law.

Application of Rule 3(5B) of the Cenvat Credit Rules, 2004 - general provision for slow moving/non-moving inventory - writing down of inventory versus writing off of inventory - reversal of Cenvat credit on account of write-off

Application of Rule 3(5B) of the Cenvat Credit Rules, 2004 - general provision for slow moving/non-moving inventory - writing down of inventory versus writing off of inventory - reversal of Cenvat credit on account of write-off - Whether Rule 3(5B) is attracted where the assessee makes a general provision for slow moving/non-moving inventory in the books of account without writing off or removing the inventory. - HELD THAT: - The Tribunal found that the appellant had created only a general provision for slow/non-moving inventory by appropriation to the profit and loss account and had not written off or removed any amount from the asset/inventory account. Rule 3(5B) is attracted only where the value of the asset and/or inventory is written off fully or partially, or where there is a specific provision in the books of account to write off fully or partially. A general provision that is not attributable to any particular asset or inventory and which does not reduce the inventory/asset account therefore does not trigger reversal under Rule 3(5B). The revenue was unable to identify any particular inventory or asset for which the general provision was made, and the records showed year-to-year adjustments of the provision depending on usage. On these facts, the demand for reversal of Cenvat credit based on the creation of a general provision was unsustainable. [Paras 12, 13]

Demand for reversal of Cenvat credit under Rule 3(5B) on account of the general provision for slow/non-moving inventory set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that a general provision for slow/non-moving inventory which does not write off or reduce the inventory/asset account does not attract Rule 3(5B) of the Cenvat Credit Rules, 2004; the impugned demand was set aside. The contention on limitation was left open.

Benefit under sub-section (2B) of Section 11A - Liability to interest under Section 11AB - Imposition of penalty under Section 11AC - Appropriation under the proviso to Section 11A(1) - Extended period for demand

Benefit under sub-section (2B) of Section 11A - Liability to interest under Section 11AB - Payment of differential duty and interest before service of show cause notice attracts the protection of sub section (2B) of Section 11A and does not permit issuance of a demand notice in respect of that duty. - HELD THAT: - The Tribunal accepted the finding of the original adjudicating authority that the assessee paid the differential duty and interest before issuance of any show cause notice, either on its own ascertainment or after being pointed out in audit. Sub section (2B) of Section 11A precludes service of a notice under sub section (1) in respect of duty so paid; Explanation 2 and Section 11AB make clear that such payment remains subject to interest but do not attract a fresh demand where payment precedes the notice. The Tribunal relied on the reasoning of the original authority which applied the Supreme Court decision in SKF to hold that the case falls squarely within sub section (2B) and that the Central Excise Officer could not have issued any notice demanding duty already paid. [Paras 4]

Assessee's payment of differential duty and interest prior to issuance of show cause notice falls within sub section (2B) of Section 11A; no notice could be issued in respect of the paid duty.

Imposition of penalty under Section 11AC - Extended period for demand - Penalty under Section 11AC could not be imposed where the duty and interest were paid before issuance of notice; the Commissioner (Appeals) erred in directing imposition of penalty. - HELD THAT: - The Commissioner (Appeals) treated delayed payment/omission as justifying penalty, referring to matters of alleged suppression and extended period demands. The Tribunal, however, observed that the entire duty and interest had been paid prior to any showcause notice and that the protection afforded by sub section (2B) removes the foundation for a subsequent demand and for imposing penalty under Section 11AC. The Tribunal therefore disagreed with the Commissioner (Appeals)'s reliance on extended period and prior authorities, noting that decisions prior to SKF do not advance the revenue's case, and held that the order imposing penalty was without merit. [Paras 4, 5]

Order of Commissioner (Appeals) directing imposition of penalty under Section 11AC is set aside; penalty is not imposable where duty and interest were paid before service of the notice.

Final Conclusion: The appeal is allowed: the Tribunal affirms that payment of duty and interest prior to service of notice attracts protection under sub section (2B) of Section 11A and negates the basis for a demand or penalty under Section 11AC; the Commissioner (Appeals)'s direction to impose penalty is set aside and the original adjudicating authority's approach is upheld.

Classification of goods for Value Added Tax - emulsified bitumen vis-a -vis bitumen - taxability as an unclassified item - applicability of Entry 16, Schedule 2, Part II of the Madhya Pradesh VAT Act - precedent of a co-ordinate Bench

Emulsified bitumen vis-a -vis bitumen - classification of goods for Value Added Tax - applicability of Entry 16, Schedule 2, Part II of the Madhya Pradesh VAT Act - precedent of a co-ordinate Bench - Whether emulsified bitumen is a different and distinct commodity from bitumen so as to be taxable as an unclassified item at 12.5%, or is liable to tax under Entry 16, Schedule 2, Part II of the Madhya Pradesh VAT Act at 4%. - HELD THAT: - The Court, construing the classification issue and applying the binding view of a co-ordinate Bench in Commissioner of Commercial Tax, Uttar Pradesh v. AR Thermostat Private Limited (2016) Volume XVI SCC 122, held that emulsified bitumen is not to be treated as a separate taxable commodity attracting the higher rate as an unclassified item. Following the cited precedent, the Court concluded that the product falls within the scope of the entry attracting the lower rate under Entry 16, Schedule 2, Part II of the Madhya Pradesh VAT Act for the relevant period. The impugned High Court judgment was set aside and the assessee's classification at the rate provided by the said entry was accepted.

Appeal allowed; impugned judgment set aside and the Appellant-Assessee held liable to tax at 4% under Entry 16, Schedule 2, Part II of the Madhya Pradesh VAT Act for the relevant period.

Final Conclusion: The appeal is allowed by following the co-ordinate Bench decision; the High Court's judgment is set aside and the assessee's liability is confined to tax at 4% under Entry 16, Schedule 2, Part II of the Madhya Pradesh VAT Act for the relevant period.

Reopening of assessment - formation of opinion - change of opinion - mechanical issuance of notice / non-application of mind - requirement to record reasons for reopening - distinction between power to reassess and power to review - judicial review under Article 226 where action is without jurisdiction

Reopening of assessment - formation of opinion - mechanical issuance of notice / non-application of mind - requirement to record reasons for reopening - change of opinion - Validity of initiation of reassessment proceedings under Rule 12(4) of the Central Sales Tax (Odisha) Rules, 1957. - HELD THAT: - The Court held that initiation of reassessment under Rule 12(4) required the assessing authority to be "of the opinion" that turnover had escaped assessment and that such opinion must be formed with reasons recorded before issuing the notice. The record (Order Sheet dated 24.08.2013) showed only a mechanical direction to issue Form IVA without any antecedent formation of opinion or assignment of reasons, and the assessing authority had earlier, in the Audit Assessment under Rule 12(3), examined books and accepted the return figures including the exemption claimed. Reopening the concluded assessment on the same materials, prompted solely by the Auditor General's objection, amounted to a mere change of opinion and non-application of independent mind, which is impermissible. Reliance was placed on the settled principle that reassessment cannot be used as a vehicle for review and that reasons forming the basis of reopening must be reflected on the file prior to issuing notice; absent these, the reassessment is without jurisdiction. [Paras 7, 8, 9]

The reassessment proceedings initiated under Rule 12(4) were invalid for want of formation and recording of an opinion and are therefore quashed.

Distinction between power to reassess and power to review - judicial review under Article 226 where action is without jurisdiction - Consequences of setting aside the reassessment order and maintainability of writ petition despite existence of alternative statutory remedies. - HELD THAT: - The Court found that, because the reassessment order was a nullity (being made without jurisdiction), the petitioner was entitled to seek redress under Article 226. The availability of alternative statutory remedies did not bar writ relief where the authority acted in excess of jurisdiction by effectively reviewing a concluded assessment in absence of any statutory power to do so. Consequently, the consequential order refusing petitions under Section 81 (to rectify alleged defects) could not survive once the reassessment order was set aside. [Paras 9, 10]

The writ petition was entertained; the reassessment order was set aside and the order refusing the rectification petitions was quashed.

Final Conclusion: The Assessment Order dated 28.01.2014 under Rule 12(4) CST(O) Rules for tax periods 01.07.2007 to 31.03.2010 is quashed for want of formation and recording of opinion; the consequential Order dated 29.07.2015 refusing rectification petitions is also quashed and the writ petition is allowed (no order as to costs).

Definition of "business" - commencement of business and trial production - levy of Entry Tax on manufacture - sale during trial production - distinguishing precedent

Definition of "business" - commencement of business and trial production - Whether the activity of trial production undertaken between 05.08.2010 and 01.11.2010 amounted to commencement of business under Sec.2(d) of the VAT Act. - HELD THAT: - The Court construed Sec.2(d) of the VAT Act to include manufacture within the definition of "business" irrespective of motive to make profit or whether profit accrues. The authorities had found on facts that manufacturing activity began on 05.08.2010 and that sales of cement also commenced from that date. The Court held that labelling the process as "trial production" did not alter the character of the activity; once manufacture and sale had in fact begun, the event fell within the statutory definition of business and constituted commencement of business for tax purposes. [Paras 5, 6, 8, 9]

Trial production which involved actual manufacture and sale from 05.08.2010 amounted to commencement of business under Sec.2(d).

Levy of Entry Tax on manufacture - sale during trial production - Whether Entry Tax is exigible on inputs/materials consumed during the period of trial production commencing 05.08.2010. - HELD THAT: - Given the factual finding that manufacture and sale began on 05.08.2010, the Court affirmed the view that materials used in that manufacturing activity are subject to Entry Tax. The Court accepted the Appellate Board's factual conclusion that production (and sales) started on 05.08.2010 and held that the character of the activity, not the appellant's description of it as "trial", determines tax liability. [Paras 5, 6, 9]

Entry Tax is leviable on materials consumed during the trial production period as the activity constituted business and manufacture from 05.08.2010.

Distinguishing precedent - Whether the decision in Maihar Cement (1985) 60 STC 210 applies to exempt the appellant from Entry Tax liability. - HELD THAT: - The Court examined the precedent relied upon by the appellant and distinguished it on facts. In Maihar Cement the question concerned materials brought for construction of a plant and was held leviable; the present case, by contrast, involved actual manufacture and sale after plant construction. The Court therefore found the precedent inapplicable and confirmed the Appellate Board's reliance on the factual findings in this case. [Paras 7]

Maihar Cement is distinguishable on facts and does not exempt the appellant from Entry Tax liability in the present case.

Final Conclusion: The High Court declined admission of the appeal and dismissed it, holding that the Appellate Board's factual findings that manufacture and sale commenced on 05.08.2010 are in accordance with law, that materials consumed during that period are exigible to Entry Tax, and that the precedent relied upon by the appellant is distinguishable.

Assessment in absence of return - power of assessing authority under the Entry Tax Act - interpretation of a taxation statute - availability of alternative remedy

Assessment in absence of return - power of assessing authority under the Entry Tax Act - interpretation of a taxation statute - Assessing authority has no power to assess and demand entry tax from an importer who failed to file the return required under Section 7 of the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990. - HELD THAT: - The Court accepted and followed the Division Bench decision in Sri Balakrishna Transport which held that Section 8 authorises assessment only on the basis of a return furnished and there is no provision in the Entry Tax Act enabling assessment of an importer who has not filed the return under Section 7. When a taxation statute does not expressly confer a power to assess non-filers, such power cannot be read into the Act; it is impermissible to expand a taxing provision by construction even if equity favours the State. The writ appeal was entertained despite the Writ Court directing availing of alternative remedy because the matter had been pending for a long period, and the Court declined to relegate the appellant to the alternate statutory remedy in the circumstances. Consequently, the impugned demand notice, issued in the absence of any return, could not be sustained. The question whether the mobile crane qualifies as a "motor vehicle" under the Motor Vehicles Act was left undecided as unnecessary to the determination.

Writ petition allowed; demand set aside and order of the single Judge directing resort to alternative remedy is set aside.

Final Conclusion: The writ appeal is allowed: the assessing authority lacked statutory power to assess and demand entry tax from the appellant in the absence of a return under Section 7 of the Entry Tax Act, and the impugned demand notice is quashed.

Adjustment of refund against tax liability - levy of interest under Section 42(3) of the TNVAT Act, 2006 - refund with interest under Section 42(5) of the TNVAT Act, 2006 - maintainability of writ petition notwithstanding statutory remedy under Section 59

Adjustment of refund against tax liability - levy of interest under Section 42(3) of the TNVAT Act, 2006 - refund with interest under Section 42(5) of the TNVAT Act, 2006 - Entitlement to refund of the balance amount and interest where petitioner's refund was available with the Department but was adjusted towards tax and interest under Section 42(3). - HELD THAT: - The Court found that the petitioner had an adjudicated refund amount available with the respondents pursuant to the Appellate Commissioner's order affirmed by the Tribunal. Although the petitioner failed to file the return for June 2017, the Department adjusted the available refund towards the tax liability and imposed interest under Section 42(3). The Court held that imposition of interest under Section 42(3) at 2% per annum in these circumstances was unreasonable and unwarranted because the petitioner's funds were already with the Department. After adjustment of tax, the respondents were required to refund the balance with interest under Section 42(5). Accordingly the Court directed refund of the balance amount together with interest at 2% from 1 July 2017 and ordered the respondents to complete the refund within six weeks, together with proportionate interest in terms of Section 42(5). [Paras 10, 11, 12]

Writ allowed insofar as it directs the 3rd respondent to refund the balance sum and to pay interest at 2% from 1 July 2017 in terms of Section 42(5); refund to be made within six weeks.

Maintainability of writ petition notwithstanding statutory remedy under Section 59 - Whether the existence of a statutory appellate remedy under Section 59 of the TNVAT Act barred the petitioner from invoking writ jurisdiction. - HELD THAT: - The respondents contended that the petitioner should pursue the statutory remedy under Section 59. The petitioner replied that Section 59 would apply only to certain suo motu revisions and that no alternate efficacious remedy was available, rendering Article 226 remedy appropriate. The Court considered the submissions and proceeded to exercise writ jurisdiction, allowing the petition on merits and granting the relief sought. The order therefore treats the statutory remedy as not operating to bar the petition in the facts of this case. [Paras 7, 8, 9, 13]

Writ petition entertained and allowed; petitioner granted relief despite existence of the statutory appellate provision.

Final Conclusion: The writ petition is allowed: the respondents are directed to refund the balance amount standing to the petitioner's credit and to pay interest at 2% from 1 July 2017 in terms of Section 42(5) within six weeks; writ jurisdiction was exercised notwithstanding the availability of a statutory appeal under Section 59 in the circumstances of this case.

Recall of prosecution witnesses as defence witnesses - exercise of power under Section 540 Cr.PC - abuse of process of court - relevance of accused's property in proceedings under Section 138 N.I. Act - privilege between advocate and client - fair trial and discretion to summon additional evidence

Recall of prosecution witnesses as defence witnesses - exercise of power under Section 540 Cr.PC - abuse of process of court - fair trial and discretion to summon additional evidence - Whether the trial Magistrate was justified in summoning witnesses already examined and cross examined for the prosecution to be examined afresh as defence witnesses by invoking Section 540 Cr.PC. - HELD THAT: - The Court held that witnesses already produced and examined by one party, who have been cross examined and discharged, cannot be recalled to depose as witnesses on behalf of the opposite party at that party's instance. Section 540 Cr.PC is a safeguard to be invoked only to meet the ends of justice where summoning or recalling is essential to a just decision; it must be exercised with caution and not as a device to delay or change the nature of the case. The learned Magistrate invoked Section 540 Cr.PC without articulating why recalling those witnesses to appear as defence witnesses was necessary for a just decision; the matters for which further testimony was sought had already been put to those witnesses during cross examination. Allowing them to depose on both sides would be contrary to proper trial procedure and liable to amount to abuse of process. Consequently the order summoning those witnesses on behalf of the accused was erroneous and unsustainable. [Paras 16, 17, 18, 19, 20]

Impugned order quashed to the extent of calling Nazir Ahmad Joo and the Manager of J&K Bank Branch Chadoora to be examined as witnesses for the accused; such recalling was held to be an improper exercise of Section 540 Cr.PC and an abuse of process.

Relevance of accused's property in proceedings under Section 138 N.I. Act - abuse of process of court - Whether the Patwari Halqa Wathora was rightly summoned to furnish details of the accused's property in a complaint under Section 138 N.I. Act. - HELD THAT: - The Court observed that, for adjudication of a complaint under Section 138 N.I. Act, the property of the accused is not a relevant matter to be established by producing a Patwari; the accused himself can disclose such facts if necessary. The learned Magistrate failed to apply his mind to the relevance of the Patwari's evidence and ordered his production without demonstrating necessity, rendering that part of the order illegal and amounting to abuse of process. [Paras 11, 15, 19, 20]

Impugned order quashed to the extent of calling Patwari Halqa Wathora to prove details of the accused's property, the evidence being irrelevant to trial of a Section 138 complaint.

Privilege between advocate and client - Whether Advocate A.R. Hanjura, earlier counsel for the complainants, could be examined as a defence witness. - HELD THAT: - The Court recorded and upheld the trial Magistrate's decision declining to summon the complainants' former counsel as a defence witness on account of the professional communication and the rule of privilege between advocate and client. That aspect was correctly dealt with below in view of Section 126 of the Evidence Act. [Paras 6]

The direction not to summon Advocate A.R. Hanjura as a defence witness was approved.

Final Conclusion: The petition is allowed in part: the High Court set aside the trial court's order insofar as it summoned Nazir Ahmad Joo, the Manager of J&K Bank Branch Chadoora and the Patwari Halqa Wathora to be examined as defence witnesses, holding such directions to be an improper exercise of Section 540 Cr.PC and an abuse of process; the trial court's refusal to summon the complainants' former counsel as a defence witness was upheld. The petition is disposed accordingly.

Evidence to be discarded for failure to tender for cross examination - duty of the trial court to note and act upon non tendering of witness for cross examination - adequacy of opportunity for cross examination - presumption under Section 139 of the Negotiable Instruments Act - rebuttal of the presumption - conviction under Section 138 of the Negotiable Instruments Act

Evidence to be discarded for failure to tender for cross examination - duty of the trial court to note and act upon non tendering of witness for cross examination - adequacy of opportunity for cross examination - Whether the evidence of the complainant (PW 1) ought to have been discarded because he failed to tender himself for further cross examination despite repeated opportunities, and whether the trial and appellate courts erred in proceeding to decide the case on that evidence. - HELD THAT: - The Court found that after the trial court allowed recall of PW 1 under Section 311 Cr.P.C. on 10.07.2009, PW 1 failed to tender himself for further cross examination on not less than twenty two subsequent dates up to 19.07.2012. The trial court, despite being aware of PW 1's repeated absences and despite the accused having filed a memo seeking discarding of PW 1's evidence, proceeded to hear arguments and decide the case on the evidence of PW 1. The High Court held that it is the duty of the court itself to note and consider the consequence of a witness's failure to tender for cross examination when that witness's evidence is to be appreciated; given PW 1 was the sole witness for the complainant and had repeatedly failed to appear for cross examination, his evidence should have been discarded. The trial court's and the Sessions Judge's failure to discard PW 1's evidence rendered their fact finding unsustainable, warranting interference without deciding merits based on that incomplete evidence.

The evidence of PW 1 was liable to be discarded for failure to tender for further cross examination despite ample opportunity; the trial and appellate courts' reliance on that evidence vitiated their judgments and justified setting aside the convictions.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal of the presumption - conviction under Section 138 of the Negotiable Instruments Act - Whether, on the merits, the accused successfully rebutted the statutory presumption under Section 139 N.I. Act so as to defeat conviction under Section 138 N.I. Act. - HELD THAT: - Although the High Court's primary interference arose from the failure to discard PW 1's evidence, the Court nevertheless considered the parties' submissions on merits. The complainant established the essential facts-issuance and dishonour of the cheque and service of notice-thereby invoking the presumption under Section 139. The accused offered defences: (i) that the cheque had earlier been given to a third party (Sri Parthasarathy) and was misused, and (ii) denial of any loan on grounds of lack of financial necessity. The Court observed that the accused did not produce contemporaneous documentary proof or examine the alleged third party to substantiate the claim of prior delivery and misuse; documents produced concerning family members' bank balances and employment did not suffice to dispel the possibility of a loan and therefore failed to establish, on the preponderance of probabilities, a rebuttal of the statutory presumption. The accused's alibi evidence (attendance certificates and invoices) was also held insufficient to demonstrate impossibility of delivering the cheque in Bengaluru.

On the merits, the accused failed to rebut the presumption under Section 139; however, because the complainant's sole witness should have been discarded for non tendering to cross examination, the convictions could not stand.

Final Conclusion: Criminal revision allowed; convictions and sentences under Section 138 N.I. Act recorded by the trial and appellate courts set aside. The accused is acquitted because the sole prosecuting witness's evidence ought to have been discarded for failure to tender himself for further cross examination despite repeated opportunities; although the accused had not successfully rebutted the Section 139 presumption on merits, the procedural defect in admitting PW 1's evidence vitiated the convictions.