TaxTMI Updates e-Newsletter
Nov 25,2022

Grant of GST components - procuring entity liability for GST in government works contracts - representation for payment of subsumed tax - direction to consider representation - no expression on merits

Direction to consider representation - representation for payment of subsumed tax - Respondents 1 to 4 were directed to consider the Petitioner's representation dated 12.08.2022 seeking grant of GST components and interest for payment to the 5th Respondent. - HELD THAT: - The High Court found it appropriate in the exercise of writ jurisdiction to require the procuring entities (Respondents 1 to 4) to consider the Petitioner's representation dated 12.08.2022 on its own merits and to pass appropriate orders in accordance with law. The court noted the factual background that contracts were entered into prior to introduction of GST, that state Government orders addressed treatment and estimation of subsumed taxes and that adjudicatory proceedings under GST were pending before the 5th Respondent. Rather than adjudicating the competing contentions on liability, the court directed consideration of the pending representation within a fixed timeframe, expressly declining to express any view on the merits so that the procuring entities may decide in accordance with law. [Paras 5, 6]

Respondents 1 to 4 to consider the Petitioner's representation dated 12.08.2022 and pass appropriate orders in accordance with law within four weeks; petitioner may request time from GST authorities and such requests shall be considered taking into account the pendency of the representation; court made no expression on the merits.

Final Conclusion: Writ petition disposed by directing Respondents 1 to 4 to consider the Petitioner's representation of 12.08.2022 within four weeks and pass orders in accordance with law; no view expressed on merits; no costs.

Cancellation of registration under GST - show cause notice - maintainability of writ petition where statutory appeal exists - right to appeal under Section 107 of the CGST Act, 2017 - inability to file Form GSTR 3B due to blocked GSTN / cancellation - opportunity to file returns and discharge tax with interest and late fee

Maintainability of writ petition where statutory appeal exists - right to appeal under Section 107 of the CGST Act, 2017 - Whether the writ petition challenging the cancellation of registration is maintainable in view of the alternative statutory remedy of appeal under Section 107 of the CGST Act, 2017. - HELD THAT: - The Court observed that Section 107 provides a prescribed statutory remedy by which a person aggrieved by an order under the CGST Act may appeal to the appellate authority within the statutory period. Having regard to the statutory scheme and the availability of that specific remedy, the Court considered it appropriate to dispose of the writ petition by directing the petitioner to avail the alternate remedy. The Court therefore did not adjudicate the merits of the cancellation order but required the petitioner to approach the appellate authority within a limited period and for that authority to consider the matter under the relevant rules.

Writ petition disposed of as not to be entertained on merits; petitioner permitted to file an appeal under Section 107 within one week of receipt of the order and the appellate authority directed to consider and decide the appeal in accordance with law within four weeks.

Inability to file Form GSTR 3B due to blocked GSTN / cancellation - opportunity to file returns and discharge tax with interest and late fee - Treatment of the petitioner's inability to file past and subsequent returns because of non receipt of payment and alleged blocking of filing following cancellation of registration. - HELD THAT: - The Court recorded the petitioner's explanation that returns for May 2021 to January 2022 were not filed because of delayed payments by the Government and that, after paying the tax, interest and late fee for those months he could not file returns for subsequent months as the registration had been cancelled and the GSTN did not permit filing post cancellation. Rather than resolving these factual and consequential contentions, the Court left these matters for adjudication by the appellate authority in the appeal under Section 107, directing the appellate authority to consider the petitioner's readiness to comply, payment made, and the consequences of cancellation while passing appropriate orders strictly in accordance with law and rules within the stipulated time.

The factual/contentious issue about inability to file returns and related compliance is remitted to the appellate authority for fresh consideration in the appeal; the Court did not decide these matters on merits.

Final Conclusion: The writ petition challenging the cancellation of GST registration is disposed of without adjudication on merits; the petitioner is permitted to file an appeal under Section 107 of the CGST Act, 2017 within one week, and the appellate authority is directed to decide the appeal in accordance with law within four weeks, with issues regarding non filing of returns and inability to file post cancellation left for consideration by that authority.

Unexplained cash credit u/s 68 - unexplained expenditure u/s 69C - proof and verification by notice u/s 133(6) - reconciliation and ledger/bank evidence to rebut additions

Unexplained cash credit u/s 68 - reconciliation and ledger/bank evidence to rebut additions - proof and verification by notice u/s 133(6) - Deletion of addition of Rs.1,97,30,393 made by AO as unexplained cash credit under section 68. - HELD THAT: - The CIT(A) examined the ledgers, cheque-return entries and reconciliation furnished by the assessee and concluded that the primary reason for differences in creditors' balances was cheque-return entries which were part of the assessee's bank records and not undisclosed credits. The assessee produced supporting documents showing subsequent clearance of cheques and initiation of legal proceedings for dishonour, establishing identifiability and genuineness of the parties and transactions. The Departmental Representative did not controvert the appellate finding. On the facts before the Tribunal, no infirmity was found in CIT(A)'s conclusion that section 68 was not attracted. [Paras 8, 9]

Addition of Rs.1,97,30,393 as unexplained cash credit deleted; ground dismissed.

Unexplained cash credit u/s 68 - proof and verification by notice u/s 133(6) - reconciliation and ledger/bank evidence to rebut additions - Deletion of addition of Rs.93,92,892 made by AO as unexplained cash credit in respect of balances of certain suppliers. - HELD THAT: - The CIT(A) considered the suppliers' ledgers, addresses, transaction details and payments and found that substantial parts of the balances related to earlier years or arose from inter-group transfers/assumption of liabilities. The assessee had submitted the documentary evidence before the AO and again during appellate proceedings; the AO had accepted books of account. The CIT(A) held that purchases were genuine and could not be treated as bogus merely because confirmations were not obtained in year, and therefore deletion was justified. The Department did not challenge this finding before the Tribunal. [Paras 10, 11]

Addition of Rs.93,92,892 as unexplained cash credit deleted; ground dismissed.

Unexplained expenditure u/s 69C - reconciliation and ledger/bank evidence to rebut additions - proof and verification by notice u/s 133(6) - Deletion of addition of Rs.26,22,714 made by AO under section 69C as unexplained expenditure. - HELD THAT: - The CIT(A) accepted the assessee's reconciliation showing that the difference arose from cash payments for purchase of husk accounted under power & fuel, and that the seller acknowledged sales and receipts. Given the vendor's acknowledgment and the reconciliation filed with the AO and CIT(A), the expense was satisfactorily explained and section 69C did not apply. The Departmental Representative did not dispute the appellate conclusion before the Tribunal. [Paras 12, 13]

Addition of Rs.26,22,714 as unexplained expenditure deleted; ground dismissed.

Final Conclusion: All three additions sustained by the Assessing Officer were deleted by the CIT(A) on documentary reconciliation and vendor acknowledgments; the Tribunal finds no infirmity in those findings and dismisses the revenue's appeal.

Addition for undisclosed/unaccounted stock - taxation of profit element on unrecorded/undisclosed sales - reliance on survey findings of VAT authority in income tax assessment - disallowability of penal VAT under Explanation to Section 37(1) of the Act

Addition for undisclosed/unaccounted stock - taxation of profit element on unrecorded/undisclosed sales - Whether the addition made on account of alleged undisclosed/unaccounted stock (detected during DVAT survey) should be sustained in full or limited to the gross profit element. - HELD THAT: - The Tribunal found that a survey by the Department of Trade & Taxes showed a discrepancy between stock recorded in the sales office stock register (2203 bags) and the physical stock found by the survey team in the godown (1289 bags), leading to detection of 914 bags valued as unaccounted stock. The assessee contended those bags were received shortly before the survey and were lying outside the godown pending internal verification, but had not produced documentary evidence before the lower authorities. The Tribunal observed that while the existence of a shortage of stock as recorded by the survey team was established on the record, settled judicial precedents require that where unrecorded/unaccounted sales or stock are found, taxability is confined to the profit element of such unrecorded sales rather than the entire sales consideration. Applying these precedents and the assessee's disclosed gross profit rate of 17.20% in its books, the Tribunal held that the income tax addition should be limited to the gross profit attributable to the alleged unaccounted stock and reduced the addition accordingly to the profit element derived at 17.20% of the detected sum. The Tribunal declined to remit the matter for verification because the assessee elected to press its alternate ground; accordingly Grounds Nos. 1-4 and Additional Grounds Nos. 1-4 were dismissed and Additional Ground No. 5 was allowed to the stated extent. [Paras 11, 12, 13]

Addition for alleged undisclosed/unaccounted stock sustained only to the extent of the gross profit element; addition reduced to the amount computed at 17.20% of the detected stock value.

Disallowability of penal VAT under Explanation to Section 37(1) of the Act - reliance on survey findings of VAT authority in income tax assessment - Whether the payment characterized as interest/penalty on demand VAT is deductible under Section 37(1) of the Income tax Act. - HELD THAT: - The Tribunal noted that the sum of Rs. 4 lakhs disallowed by the assessing authority and sustained by the CIT(A) related to payment described as penal in nature (interest/penalty on demand VAT). The Tribunal applied the statutory principle that penal payments are not allowable as business expenditure by virtue of the Explanation to Section 37(1) of the Act. Having regard to the character of the payment as penal, the Tribunal upheld the disallowance made by the lower authorities. [Paras 14]

Disallowance of the penal VAT/interest payment affirmed; the amount is not deductible under Section 37(1).

Final Conclusion: The appeal is partly allowed: the addition for alleged undisclosed/unaccounted stock is reduced and sustained only to the extent of the gross profit element (computed at the assessee's disclosed rate of 17.20%), while the disallowance of the penal VAT/interest payment is affirmed.

Long term capital gain - power of attorney / agency and beneficial ownership - constructive receipt of sale consideration - burden of proof for deduction of transfer-related expenses - remand for verification of evidentiary materials

Long term capital gain - power of attorney / agency and beneficial ownership - constructive receipt of sale consideration - Whether the sale consideration received by the power of attorney holder must be treated as income (long term capital gain) of the assessee to the extent of his share. - HELD THAT: - The Tribunal noted that the power of attorney (PoA) and the sale deed were executed on the same date and that the PoA did not transfer any legal title or possession to the PoA-holder. The PoA expressly required the agent to render accounts and contemplated that the principals would receive the monetary consideration. The fact that the bulk of the sale proceeds was paid into the account of the PoA-holder and the PoA-holder's PAN was used for TDS purposes, coupled with absence of any declaration of the receipts by the PoA-holder, supported the conclusion that the PoA-holder had no independent beneficial interest. The Tribunal concurred with the findings of the CIT(A) and AO that the receipts in the PoA-holder's account amounted to constructive receipt of the principals' sale consideration and that the assessee had the obligation to disclose capital gains to the extent of his share. Thus the authorities below were held to have rightly treated the entire sale consideration as belonging to the owners and assessed long term capital gain accordingly. [Paras 5]

The entire sale consideration is to be assessed as capital gain in the hands of the assessee to the extent of his share; the orders of the lower authorities on this issue are confirmed.

Burden of proof for deduction of transfer-related expenses - remand for verification of evidentiary materials - Whether the claimed eviction/encroachment expenses are allowable as deductions against capital gains and whether the matter requires fresh adjudication. - HELD THAT: - The Tribunal recorded that the assessee had claimed large eviction-related expenses which were not substantiated before the CIT(A). The AO had given limited time and the CIT(A) held that the assessee failed to discharge the burden of proving that the expenditure was incurred and was incidental to the transfer. Having heard submissions that evidentiary material exists and was not placed before the CIT(A), the Tribunal observed that the claim depends on proof and verification of documents. In the exercise of its appellate power the Tribunal did not decide the substantive allowability on merits but directed that the assessee be given an opportunity to place evidence before the AO for fresh adjudication and verification. [Paras 6, 7]

The issue is remanded to the Assessing Officer for fresh adjudication after verification of the evidences; the remand is allowed and set aside for statistical purposes.

Final Conclusion: The Tribunal confirmed the assessment of long term capital gain in the hands of the assessee to the extent of his share, and remanded the claim for eviction expenses to the Assessing Officer for fresh adjudication after verification of supporting evidence; the appeal is otherwise partly allowed for statistical purposes.

Treatment of interest on fixed deposits as business income - nexus between security deposits and business activity - set-off of interest against project/construction expenses - refund of tax deducted at source on interest income

Treatment of interest on fixed deposits as business income - nexus between security deposits and business activity - set-off of interest against project/construction expenses - refund of tax deducted at source on interest income - Interest earned on fixed deposits kept as security for bank guarantees under the concession agreements is business income, may be set off against construction/project expenses, and tax deducted at source on such interest is refundable. - HELD THAT: - The assessees had to furnish bank guarantees under concession agreements and the banks held fixed deposits as security. The Tribunal found that the fixed deposits were kept in direct connection with the assessees' construction and maintenance business and that the interest earned therefore had a direct nexus with the business activity. Consequently, the interest income for the impugned assessment year must be treated as income from business and may be adjusted against the cost of construction. The Revenue's sole basis for denying refund of TDS - that the interest had been adjusted against construction expenses and thus did not qualify as income for the year - was rejected. The Tribunal applied the principle laid down by the jurisdictional High Court in CIT vs. Jaypee DSC Ventures Ltd , holding that identical reasoning supports treatment of such interest as business income and permits set-off against project expenses; accordingly, where TDS was deducted on that interest, refund is to be granted. [Paras 3, 4]

Appeals allowed and Assessing Officer directed to refund the TDS amount to the assessees.

Final Conclusion: The Tribunal held that interest on fixed deposits kept as security for performance guarantees is business income connected with the construction project, may be set off against construction cost, and the TDS deducted thereon for AY 2018-19 is refundable; appeals allowed.

Power under Section 119(2)(b) to condone delay - delay relevant to an application for refund is to be measured from the date of filing the return (application for refund) - CBDT Circular No.9/2015 does not preclude exercise of power under Section 119(2)(b) where the relevant delay relates to filing of the return - interest under Section 244A on delayed refund

Power under Section 119(2)(b) to condone delay - delay relevant to an application for refund is to be measured from the date of filing the return (application for refund) - CBDT Circular No.9/2015 does not preclude exercise of power under Section 119(2)(b) where the relevant delay relates to filing of the return - Validity of rejection of the condonation application (Ext.P6) on the ground that it was filed beyond six years as per CBDT Circular No.9/2015 - HELD THAT: - The Court held that Section 119(2)(b) relates to condonation of delay in making an application or claim for relief (here, the application for refund by filing the return) and not to delay in filing the petition seeking condonation. Accordingly the relevant period for measuring delay is the interval between the statutory last date for filing the return and the actual date when the return (the application for refund) was filed. The Principal Commissioner misdirected himself by treating the date of filing the Section 119(2)(b) petition as the relevant date and by applying CBDT Circular No.9/2015 to reject the condonation request. Section 119(2)(b) contains no internal six-year limitation; therefore reliance on the Circular as a bar to entertaining the condonation application was legally unsound. For these reasons Ext.P6 was quashed and the matter remitted for fresh consideration on the correct legal basis. [Paras 5, 6]

Ext.P6 quashed as the date relevant to condonation under Section 119(2)(b) is the date of filing the return (application for refund), not the date of filing the condonation petition; the Principal Commissioner misdirected himself in law.

Power under Section 119(2)(b) to condone delay - Remand for fresh consideration of the condonation request and consequential processing of the return if delay is condoned - HELD THAT: - The Court directed that Ext.P5 (the condonation application) be restored to the file of the Principal Commissioner who must consider whether the delay from 31.3.2012 (last date for filing return for AY 2010-11) to 13.7.2012 (date when the return was filed) can be condoned under Section 119(2)(b). The remand is for fresh consideration on merits in accordance with the correct legal test; the Principal Commissioner is to decide the matter within one month of receipt of the certified copy of the judgment. If the delay is condoned, the return filed on 13.7.2012 shall be processed in accordance with law. [Paras 6]

Ext.P5 restored; Principal Commissioner to reconsider the condonation of delay for the period 31.3.2012 to 13.7.2012 within one month and, if condoned, to process the return in accordance with law.

Interest under Section 244A on delayed refund - Entitlement to interest on any refund found payable for AY 2010-11 - HELD THAT: - The Court observed that because the petitioner did not pursue the refund application for nearly eight years after filing the return, any refund allowed upon condonation of the short filing delay (1.4.2012 to 13.7.2012) shall not carry interest under Section 244A for the entire intervening period. However, the Department is directed to pay interest under Section 244A if the refund, once the petitioner is found eligible, is not actually paid within six weeks from the date the petitioner is found eligible for the refund. [Paras 6]

No interest under Section 244A for the prolonged period the petitioner failed to pursue the claim; interest under Section 244A will be payable only if the refund is not paid within six weeks from the date of eligibility.

Final Conclusion: Writ petition allowed; Ext.P6 set aside. The condonation application (Ext.P5) is restored for fresh consideration by the Principal Commissioner under Section 119(2)(b) with reference to the date of filing the return (13.7.2012) and the delay from 31.3.2012 to 13.7.2012; if condoned the return shall be processed. Interest under Section 244A is not payable for the long period the petitioner did not pursue the claim, but the Department must pay statutory interest if the refund is not made within six weeks from the date the petitioner is found eligible.

Application of CBDT Circular No.3/2018 to appeals below prescribed monetary limit - monetary limit for filing appeals by the Department - cascading effect - liberty to the Revenue to seek review of orders - precedential effect of S.C. Naregal on applicability of the Circular - binding effect of Mavilayi Service Co operative Bank Ltd on similar disputes

Application of CBDT Circular No.3/2018 to appeals below prescribed monetary limit - monetary limit for filing appeals by the Department - precedential effect of S.C. Naregal on applicability of the Circular - Whether the Revenue's appeal in respect of Assessment Year 2015-16 is maintainable despite CBDT Circular No.3/2018 and the decisions of the Supreme Court, or whether it must be dismissed as falling within the monetary limit prescribed by the Circular. - HELD THAT: - The Court examined the question in the light of the Apex Court decisions cited, including S.C. Naregal and the earlier authority in Mavilayi Service Co operative Bank Ltd. It held that the principal question is no longer res integra and that the subject appeal does not involve any cascading effect or group litigation that would disentitle application of the Circular. The value in the appeal is below the limit prescribed by the CBDT Circular No.3/2018 and, accordingly, falls within the category of matters which the Supreme Court has treated as covered by the Circular. The Court also noted that the order in Civil Appeal No.7526/2011 gave liberty to the Revenue to seek review where appropriate, but that liberty does not alter the applicability of the monetary limit to the present appeal. Applying the settled precedents, the Court concluded that the appeal is governed by the Circular and the relevant Supreme Court decisions and therefore must be treated as falling within the prescribed monetary threshold. [Paras 4]

The appeal is dismissed as falling within the monetary limit prescribed by CBDT Circular No.3/2018 and governed by the cited Supreme Court precedents, subject to the liberty to the Revenue to seek review as indicated in the earlier order.

Final Conclusion: The Revenue's appeal against the Tribunal's order in respect of Assessment Year 2015-16 is dismissed as covered by CBDT Circular No.3/2018 and the relevant Supreme Court decisions; the Department retains the liberty to seek review where permitted by the earlier order.

Liability to deduct tax under Section 201 - interest for delayed payment of tax under sub-section (1A) of Section 201 - definition of capital asset affecting TDS obligation - refund of deducted tax and its bearing on TDS liability - exercise of writ jurisdiction under Article 226 in tax matters

Liability to deduct tax under Section 201 - interest for delayed payment of tax under sub-section (1A) of Section 201 - definition of capital asset affecting TDS obligation - refund of deducted tax and its bearing on TDS liability - Whether interest under sub-section (1A) of Section 201 can be levied where no liability to deduct tax arose because the payments related to lands claimed to be outside the definition of capital asset and refunds were subsequently made. - HELD THAT: - The Court accepted the legal proposition that the statutory obligation to deduct tax arises only when the provisions of the Act require deduction. Where no liability to deduct exists, a belated remittance of amounts so deducted cannot properly give rise to interest under sub-section (1A) of Section 201, which is intended to compensate for delay in payment of taxes that are rightfully due to the Government. The factual matrix showed that the deducted amounts were subsequently refunded to awardees, and the delay in remittance resulted from deputation of the responsible officer for election duty. On these facts, the Court held that levy of interest was unwarranted because the underlying obligation to deduct tax was absent and the delay was attributable to the stated deputation. The Court also rejected the contention that refund to awardees precludes relief, observing that refund demonstrates that the amounts were not chargeable as TDS and therefore could not found a claim for interest against the petitioner. [Paras 4]

Levy of interest under sub-section (1A) of Section 201 quashed as unwarranted where there was no liability to deduct TDS and the delay in remittance was due to deputation for election duty.

Interest for delayed payment of tax under sub-section (1A) of Section 201 - refund of deducted tax and its bearing on TDS liability - Whether the Income Tax Department was obliged to pay interest on refunds from a date earlier than the date on which it actually received the deducted amounts. - HELD THAT: - The Court found that the Department was under no obligation to pay interest from a date prior to the date on which it actually received the deducted amounts. The statutory scheme compensates for delay in payment to the Government; the Department cannot be required to compute interest liability from dates preceding its receipt of the sums. Accordingly, the contention that the Department had to pay interest from an earlier date was held untenable. [Paras 4]

Claim that the Department must pay interest from a date prior to receipt of the deducted amounts rejected; no such obligation arises.

Final Conclusion: Writ petition allowed; orders recorded in Exts.P2 and P3 quashed. The levy of interest under sub-section (1A) of Section 201 was held to be unwarranted on the facts that no TDS liability existed and the delay in remittance was due to deputation for election duty; no costs.

Credit of TDS - carry forward of TDS - taxability of advance receipt - rectification under section 154 - remand for verification by Assessing Officer

Credit of TDS - carry forward of TDS - taxability of advance receipt - rectification under section 154 - remand for verification by Assessing Officer - Whether the TDS of Rs.60,000 reflected in Form 26AS for FY 2014-15, carried forward and claimed in FY 2015-16 relevant to AY 2016-17, is allowable to the assessee and whether the matter requires fresh examination by the Assessing Officer. - HELD THAT: - The Tribunal recorded that the assessee received an advance in FY 2014-15 on which TDS was deducted and reflected in Form 26AS but the full consideration was not received in that year and the assessee did not treat the advance as income in FY 2014-15 nor claim the TDS then; the assessee carried the TDS forward. In FY 2015-16 (relevant to AY 2016-17) the assessee received the full consideration, offered the income to tax and claimed the earlier TDS. The Assessing Officer at CPC had rejected the assessee's rectification application under rectification under section 154 and treated the amount as taxable in the assessment, a view affirmed by the Commissioner (Appeals). Given the factual matrix, the Tribunal held that the question whether the TDS carried forward was properly claimed in FY 2015-16 is a matter of fact and verification. Accordingly, rather than deciding the claim on merits, the Tribunal remitted the matter to the Assessing Officer for examination of the records and documents; if on verification it is found that the full consideration was received and income offered in FY 2015-16 and the previously unclaimed TDS was claimed in that year, the Assessing Officer should allow the TDS credit in accordance with law. The Tribunal directed the assessee to cooperate and produce relevant evidence in the assessment proceedings. The Tribunal allowed the ground of appeal for statistical purposes and remitted the issue for fresh consideration by the Assessing Officer.

Remitted to the Assessing Officer to examine and verify whether the TDS reflected in FY 2014-15 was validly carried forward and claimed in FY 2015-16; if so, allow TDS credit in accordance with law; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal remitted the claim of TDS credit (Rs.60,000) carried forward from FY 2014-15 and claimed in FY 2015-16 to the Assessing Officer for factual verification and allowance if established; the appeal is allowed for statistical purposes.

Genuineness of claim of exemption under section 10(38) - Unexplained cash credit and addition under section 68 - Doctrine of human probabilities - Fraud vitiates everything (fraud unravels transactions and judicial acts) - Reliance on investigation report and statements of alleged entry providers

Genuineness of claim of exemption under section 10(38) - Unexplained cash credit and addition under section 68 - Doctrine of human probabilities - Fraud vitiates everything (fraud unravels transactions and judicial acts) - Reliance on investigation report and statements of alleged entry providers - Claimed exemption of long term capital gains under section 10(38) for sale of shares is not genuine and the sale proceeds were liable to be taxed as unexplained/unsubstantiated receipts. - HELD THAT: - The Tribunal examined material placed on record including the assessment findings, investigation report and statements of persons identified as entry providers and directors of dummy companies, and the appellant's failure to substantiate genuineness despite opportunity. The Assessing Officer treated the sale proceeds as unexplained/unsubstantiated and invoked section 68; the CIT(A) confirmed that conclusion applying the doctrine of human probabilities. The Tribunal observed that the matter is covered by earlier judicial decisions and by the Calcutta High Court decision in PCIT vs. Swati Bajaj , which upheld findings that a stock exchange mechanism was misused to generate bogus long term capital gains. Further, the Tribunal applied the settled principle that fraud vitiates transactions and judicial acts, relying on the ratio in Friends Trading Co. and other Supreme Court authorities cited in the order, and noted that the appellant had withheld material within his exclusive knowledge which was necessary to prove genuineness. On these combined grounds - inadequacy of evidence to discharge the onus, corroboration from investigation statements, acceptance of human probability reasoning by the lower authorities, and the rule that transactions founded on fraud are void ab initio - the Tribunal concluded the transactions were sham and the exemption could not be allowed. [Paras 8, 9, 10, 11]

Orders of the Assessing Officer and the CIT(A) confirming disallowance of the exemption and taxing the sale proceeds were upheld and the appeal was dismissed.

Final Conclusion: The Tribunal dismissed the appeal for AY 2014-15, upholding the addition of sale proceeds as unexplained/void transactions and rejecting the claim for exemption under section 10(38) on the grounds of sham transactions, reliance on investigation material, application of human probabilities and the principle that fraud vitiates all transactions.

Recording of satisfaction note - invalidity/void ab initio of assessment under section 153C for failure to record satisfaction - admissibility of raising jurisdictional objection in the second round of litigation - applicability of CBDT Circular No. 24 of 2015 and the Supreme Court's guidance in Calcutta Knitwears

Admissibility of raising jurisdictional objection in the second round of litigation - jurisdictional issue - Jurisdictional objection to the validity of proceedings under section 153C may be raised in the second round of litigation. - HELD THAT: - The Tribunal applied precedent, including Peerless General Finance & Investment Co. Ltd and authorities following P.V. Doshi and Inventors Industrial Corporation Ltd, and held that a jurisdictional provision which goes to validity of the assessment can be taken up in subsequent rounds of litigation even if not raised earlier. The Tribunal found force in the assessee's submissions and rejected the revenue's contention that the issue could not be admitted in the second round. The Tribunal therefore permitted the assessee to raise and have adjudicated the contention regarding the validity of proceedings under section 153C in the later proceedings. [Paras 10, 11, 12]

The objection to jurisdiction under section 153C was admissible in the second round and was properly admitted and adjudicated by the CIT(A).

Recording of satisfaction note - invalidity/void ab initio of assessment under section 153C for failure to record satisfaction - applicability of CBDT Circular No. 24 of 2015 and the Supreme Court's guidance in Calcutta Knitwears - Assessment proceedings under section 153C/143(3) are void ab initio where the assessing officer failed to record the requisite satisfaction note prior to initiation of proceedings. - HELD THAT: - The Tribunal examined the facts and found that the Assessing Officer did not prepare the satisfaction note before initiating proceedings under section 153C; the revenue did not rebut that fact. Applying the Supreme Court's guidance in Calcutta Knitwears and CBDT Circular No. 24 of 2015 (which adopted the Court's requirement that a satisfaction note be recorded at one of the specified stages and directed that litigation contrary to that guideline not be pressed), the Tribunal upheld the CIT(A)'s conclusion that the assessment framed under section 153C/143(3) was invalid and ab initio. In view of the admitted absence of a satisfaction note and consistent judicial guidance, the Tribunal found no scope for interference with the quashing of the assessments. [Paras 13, 14]

Assessments under section 153C/143(3) were quashed as void ab initio for failure to record the mandatory satisfaction note; the CIT(A)'s order was upheld.

Final Conclusion: Both revenue appeals for AY 2007-08 and AY 2010-11 were dismissed; the CIT(A)'s orders quashing assessments under section 153C/143(3) for failure to record the satisfaction note were upheld, and the assessee was permitted to raise the jurisdictional challenge in the second round of proceedings.

Bogus purchases - restriction of addition to a percentage of non-genuine purchases - estimation of income from undisclosed purchases - corresponding sales not disputed - precedent in assessee's own case - reassessment under the Income Tax Act

Bogus purchases - restriction of addition to a percentage of non-genuine purchases - corresponding sales not disputed - precedent in assessee's own case - Whether the addition on account of alleged bogus purchases should be sustained in full or restricted to a percentage of the disputed purchases. - HELD THAT: - The Tribunal found that the Assessing Officer could not establish the identity of the selling dealers or the genuineness of the purchases because notices under section 133(6) returned unserved and the assessee failed to produce cogent evidence of delivery. However, the revenue did not dispute the corresponding sales made by the assessee. In that factual matrix, the Tribunal held that an addition equalling the entire disputed purchases was not justified because, in the absence of purchases, the assessee could not have effected the recorded corresponding sales. Applying the precedent from the assessee's own cases for adjacent assessment years, where identical facts led the Tribunal to estimate profit at 6% of non-genuine purchases as reasonable, the Tribunal respectfully followed that ratio. Consequently the Assessing Officer was directed to restrict the addition to 6% of the alleged bogus purchases.

Addition on account of alleged bogus purchases is partly disallowed and is restricted to 6% of the disputed purchases; appeal is partly allowed.

Final Conclusion: The appeal is partly allowed: the addition sustained by the Assessing Officer is to be restricted to 6% of the alleged bogus purchases for AY 2007-08, following the Tribunal's precedent in the assessee's own case; other grounds were not pressed or are otherwise not sustained.

Transfer pricing adjustment - corporate guarantee fee - arm's length rate - precedential application of Everest Kanto Cylinders - deductibility of debenture redemption premium - Zero Coupon Convertible Bonds - accrual under mercantile system - disallowance under section 14A - Rule 8D apportionment - requirement of Assessing Officer's satisfaction under section 14A(2)

Corporate guarantee fee - arm's length rate - precedential application of Everest Kanto Cylinders - Whether the CIT(A)'s restriction of the transfer pricing adjustment on account of corporate guarantee fee to 0.5% is sustainable. - HELD THAT: - The Tribunal considered the TPO's computation of guarantee commission at 2.5% and the CIT(A)'s application of 0.5% by following the coordinate bench's decision in the assessee's own earlier proceedings and the Bombay High Court's decision in CIT v. Everest Kanto Cylinders Ltd. The Bench held that the distinction between corporate guarantees issued by a parent for its AE and bank guarantees issued by commercial banks was material and that the precedent supporting a 0.5% benchmark applied on the facts. No change in facts or law for the year under appeal was demonstrated by the Revenue; accordingly the impugned restriction to 0.5% was upheld. [Paras 10]

Ground No. 1 dismissed; CIT(A)'s restriction of guarantee fee to 0.5% sustained.

Deductibility of debenture redemption premium - Zero Coupon Convertible Bonds - accrual under mercantile system - Whether the AO was justified in disallowing the claim for premium/interest payable on redemption of Zero Coupon Convertible Bonds. - HELD THAT: - The Tribunal followed its coordinate-bench precedent in the assessee's own earlier years and relevant higher court authorities, holding that the liability for debenture redemption premium had accrued and was properly reflected (albeit in share premium) under the mercantile system of accounting. The Bench rejected the AO's contentions that the amount was contingent or not admissible for want of debit to profit and loss account, and accepted the submissions and precedent that such premium constitutes a deductible expense on accrual. No material distinction was shown in facts for the year under consideration to warrant a different view. [Paras 17]

Ground No. 2 dismissed; the disallowance by the AO set aside and the deduction allowed.

Disallowance under section 14A - Rule 8D apportionment - requirement of Assessing Officer's satisfaction under section 14A(2) - Whether the CIT(A) erred in deleting the disallowance under section 14A computed by the AO under Rule 8D. - HELD THAT: - The Tribunal observed that the AO merely disagreed with the assessee's suo motu disallowance without recording the requisite satisfaction after examining the assessee's accounts as mandated by section 14A(2). Relying on the coordinate-bench decision and binding principles that Rule 8D applies only after the AO records non-satisfaction on objective basis, the Bench found the AO's blanket application of Rule 8D unsustainable. Consequently the CIT(A)'s deletion of the disallowance was upheld. [Paras 24]

Ground No. 3 dismissed; deletion of section 14A disallowance upheld.

Final Conclusion: All grounds raised by the Revenue were dismissed and the appeal is dismissed.

Condonation of delay - admission of additional ground of law - limitation for passing order under section 201(3) - rectification/revision of TDS statement does not extend limitation where corrections are minor - benefit under the First proviso to Section 201(1) - cause of substantial justice prevails over technical considerations

Condonation of delay - cause of substantial justice prevails over technical considerations - Whether the delay in filing the appeals before the Tribunal should be condoned. - HELD THAT: - The Tribunal examined the assessee's affidavit and submissions that as a public sector bank internal hierarchical approvals caused unintentional delay. Applying a liberal approach and balancing technical considerations against substantial justice, and having regard to the public character of the bank and the interest involved, the Tribunal held that the delay was not deliberate and condoned the delay so that the appeals could be heard on merits. [Paras 5, 6, 8]

Delay in filing the appeals is condoned and the appeals are admitted for adjudication on merits.

Admission of additional ground of law - benefit under the First proviso to Section 201(1) - Whether the Tribunal should admit the additional ground that the assessing officer's order is barred by limitation. - HELD THAT: - The Tribunal found the additional ground to be purely legal, going to the root of the matter, with no new facts required and with material available on record. Relying on the principle that a question of law may be raised at any stage where it emanates from the record, the Tribunal admitted the additional ground. [Paras 9, 12]

The additional legal ground challenging limitation is admitted.

Limitation for passing order under section 201(3) - rectification/revision of TDS statement does not extend limitation where corrections are minor - Whether the orders passed by the Assessing Officer under section 201(1)/201(1A) are time-barred in view of the date of filing of the last quarterly TDS statement. - HELD THAT: - The Tribunal examined the dates on which quarterly statements for the relevant financial year were originally filed and noted that the last quarterly statement was filed on 22.05.2009. The applicable limitation (two years from the end of the financial year in which statement under section 200 was filed) required the assessing officer to pass order by 31.03.2012. The orders impugned were passed on 30.03.2016 and 14.03.2017, respectively, which the Tribunal held to be beyond the prescribed period. The Revenue's contention that subsequent revisions/rectifications of the TDS statements reset limitation was rejected by the Tribunal on the basis that the subsequent corrections were minor/rectificatory and did not affect the tax liability; reliance was placed on precedents holding that such trivial revisions do not extend limitation. [Paras 24, 25]

The orders under section 201(1)/201(1A) are time-barred and therefore quashed.

Admission of additional ground of law - cause of substantial justice prevails over technical considerations - Consequences of allowing the legal/limitation ground on further adjudication of merits and additional evidence. - HELD THAT: - Having allowed the appeals on the legal ground of limitation, the Tribunal held that adjudication on the merits and the question of additional evidence (relating to Form 26A and the First proviso to Section 201(1)) became academic. Therefore those matters were not decided on merits. [Paras 26, 31, 33]

As appeals are allowed on limitation grounds, merits and additional evidence need not be adjudicated; all four appeals are allowed.

Final Conclusion: The Tribunal condoned the delay in filing the appeals, admitted the additional legal ground that the assessing officer's orders were time barred, held that minor rectifications of TDS statements do not extend the limitation period, quashed the orders under section 201(1)/201(1A) as time barred for AYs 2009-10 to 2011-12, and allowed the appeals; adjudication on merits and additional evidence was rendered academic.

Rectification of mistake apparent from record - Jurisdiction to amend assessment under section 154 - Mistake of law as ground for rectification - Exclusion from speculative transaction under section 43(5)(e) - Speculative transaction and its effect on set-off of loss - Remand for fresh determination due to absence of findings - Separation of speculation business for set-off (s. 73 and Explanation 2 to s. 28)

Rectification of mistake apparent from record - Jurisdiction to amend assessment under section 154 - Mistake of law as ground for rectification - Validity of notice and jurisdiction to invoke rectification under section 154 - HELD THAT: - The Tribunal held that the AO had jurisdiction to issue notice under section 154 because the assessment overlooked and proceeded de hors the statutory provision defining speculative transactions (s. 43(5)). A failure to take note of a statutory provision or requirement amounts to a mistake of law and is rectifiable under section 154. On the material before the AO (assessee's own submissions describing the transactions as commodity/foreign exchange trading and the absence of findings regarding applicability of s. 43(5)(e)), the notice dated 14/12/2016 was a valid exercise of power to rectify the mistake apparent from the record. Consequently the rectification proceedings were not barred for want of jurisdiction. [Paras 3]

Notice under section 154 upheld as valid; AO had jurisdiction to seek rectification as mistake of law (failure to apply s. 43(5)) was apparent from the record.

Exclusion from speculative transaction under section 43(5)(e) - Speculative transaction and its effect on set-off of loss - Remand for fresh determination due to absence of findings - Whether the impugned losses are non-speculative under clause (e) of section 43(5) (and thus allowable against business income) or are speculative losses requiring segregation - HELD THAT: - The Tribunal found that the material on record showed the transactions to be in commodity/foreign exchange derivatives which are, prima facie, speculative unless they satisfy the three conditions in clause (e) of s. 43(5) (eligible transaction, through a recognised association, and chargeable to commodities transaction tax). The assessee had not placed before the AO clear documentary evidence in rectification proceedings to satisfy those conditions and had in places altered its stance (e.g., claiming hedging only in rectification). The rectification order itself lacked explicit findings addressing each of the statutory conditions of s. 43(5)(e) and did not consider the assessee's explanations on the record. Given these lacunae and the limited scope of rectification, the appropriate course was to remit the matter to the AO to determine, with reasons and after giving the assessee a reasonable opportunity, whether the transactions meet the requirements of s. 43(5)(e) and therefore are non-speculative, or otherwise to treat the losses as speculative and apply segregation and set-off rules accordingly. [Paras 3]

Merits not finally decided; matter remitted to the AO for fresh adjudication on whether s. 43(5)(e) applies, with directions to record definite findings and afford the assessee opportunity of hearing.

Separation of speculation business for set-off (s. 73 and Explanation 2 to s. 28) - Remand for fresh determination due to absence of findings - Validity of the CIT(A) order that allowed set-off of the losses and quashed the rectification - HELD THAT: - The Tribunal concluded that the CIT(A) erred in failing to notice that the assessment ignored s. 43(5) and related statutory requirements, and that the appellate order did not address or correct the omission of the AO to examine applicability of s. 43(5)(e). The CIT(A)'s order was therefore held to be de hors the facts and law, lacking proper application of the defining provision and failing to confront the materials on record. For these reasons the Tribunal set aside the CIT(A) order and found it could not be sustained. [Paras 3, 4]

CIT(A) order set aside for failing to deal with the statutory provision (s. 43(5)(e)) and the record; appellate order cannot be upheld.

Final Conclusion: Both the rectification order and the appellate order are set aside. The AO is directed to examine afresh, and decide with recorded reasons after giving the assessee a reasonable opportunity, whether the impugned transactions satisfy the conditions of section 43(5)(e) and hence are non speculative; pending that determination the question of allowability or segregation of the losses is remitted. Revenue's appeal is allowed for statistical purposes and the assessee's cross objection is partly allowed for statistical purposes.

Employees' contribution to provident fund and ESI - deduction under Section 43B of the Income tax Act - deposit by due date under the relevant employee welfare legislation - distinction between employer's contribution and employees' contribution - Section 36(1)(va) - explanation requiring deposit on or before the due date - deemed income under Section 2(24)(x) - non obstante clause in Section 43B and its limited application

Employees' contribution to provident fund and ESI - deduction under Section 43B of the Income tax Act - deposit by due date under the relevant employee welfare legislation - Section 36(1)(va) - explanation requiring deposit on or before the due date - deemed income under Section 2(24)(x) - non obstante clause in Section 43B and its limited application - Whether employees' contributions to PF and ESI remitted before the due date for filing the return under section 139(1) qualify for deduction under section 43B. - HELD THAT: - The Tribunal applied the reasoning of the Hon'ble Supreme Court in Checkmate Services (P.) Ltd. v. CIT and held that employees' contributions retained or deducted by the employer retain the character of others' income (deemed income under Section 2(24)(x)) unless deposited in terms of the relevant welfare enactments on or before the due date specified therein. Section 43B's non obstante clause cannot be read so as to override the employer's separate obligation to deposit employees' contributions by the due date prescribed under statutes like the PF Act or ESI Act. Consequently, the mere remittance of employees' contributions before the due date for filing the return under section 139(1) does not satisfy the condition for deduction under section 36(1)(va)/43B unless the deposit was made on or before the due date under the respective welfare legislation. Relying on the Supreme Court's exposition of the legislative intent and the distinction between employer's contribution and employees' contribution, the Tribunal held that the condition of timely deposit under the welfare laws is an essential precondition for allowing deduction. [Paras 7, 8]

Employees' contributions are allowable only if deposited on or before the due date prescribed by the relevant employee welfare legislation; deposits merely before the due date for filing the return under section 139(1) do not suffice.

Appeal against CIT(A)'s order upholding disallowance - application of Supreme Court precedent - Whether the CIT(A) erred in sustaining the disallowance of the employees' contribution and whether the Tribunal should interfere. - HELD THAT: - The Tribunal found no reason to interfere with the CIT(A)'s order because the disallowance was sustained consistently with the legal principle articulated by the Hon'ble Supreme Court in Checkmate Services (P.) Ltd. The Tribunal accepted the Department's reliance on that precedent and observed that the condition of deposit by the due date under the welfare enactments was decisive. Although the assessee contended that subsequent amendments were clarificatory or not applicable to the assessment year, the Tribunal disposed the appeal on the basis of the Supreme Court's authoritative decision which resolves the conflicting High Court precedents and governs the present assessment year. [Paras 8, 9]

The CIT(A)'s sustention of the disallowance is upheld and the assessee's appeal is dismissed.

Final Conclusion: Applying the Hon'ble Supreme Court's decision in Checkmate Services (P.) Ltd., the Tribunal held that employees' contributions to PF and ESI are deductible only if deposited on or before the due date prescribed by the respective welfare enactments; the CIT(A)'s disallowance for AY 2018 2019 was therefore upheld and the appeal dismissed.

Interpretation of Foreign Trade Policy - Power of DGFT to issue clarifications versus power to amend the Foreign Trade Policy - Status Holder Incentive Scrip (SHIS) eligibility - Validity of departmental clarification/circular - Interpreter cannot amend the policy by issuing clarifications - Entitlement of 100% EOU status holder to policy benefits

Power of DGFT to issue clarifications versus power to amend the Foreign Trade Policy - Validity of departmental clarification/circular - Interpreter cannot amend the policy by issuing clarifications - Validity of the DGFT clarification restricting eligibility under the Plastics sector to items falling under headings 3901 to 3914 - HELD THAT: - The Court examined the statutory scheme under the Foreign Trade (Development and Regulation) Act, 1992 and observed that the Central Government alone has the power to formulate or amend the Foreign Trade Policy (Section 5) and that powers delegated under Section 6 do not include the power to amend the policy. Paragraphs 2.3 of the FTP provide for reference of questions of interpretation to DGFT, but such interpretative power can be exercised only where the policy language is ambiguous. The Court applied the principle that an interpreter (DGFT) cannot, under the guise of interpretation, introduce new restrictions or rewrite the policy to narrow eligibility which the framers did not provide. Reliance on precedents (including the reasoning in M/s Yum Restaurants and E.I. DuPont) supported the view that departmental clarifications which effect substantive changes to policy conditions are not permissible. Consequently, the DGFT letter of 28.03.2012 and office communications purporting to limit the Plastics sector to headings 3901-3914 were treated as doing more than interpretation and thus not binding to amend eligibility under the FTP. The Court therefore invalidated the departmental clarification to the extent it sought to curtail the policy entitlement. [Paras 12, 13, 14, 15]

DGFT clarification restricting the Plastics sector to headings 3901-3914 is not a valid amendment of the FTP and cannot be used to deny eligibility under the policy.

Status Holder Incentive Scrip (SHIS) eligibility - Entitlement of 100% EOU status holder to policy benefits - Interpretation of Foreign Trade Policy - Whether the petitioner, a 100% EOU and recognised Status Export House manufacturing products in the Plastics sector, is entitled to SHIS under Para 3.16.4 of the FTP - HELD THAT: - The Court noted that Para 3.16.4(v) of the FTP explicitly includes the Plastics sector among those eligible for SHIS and that the petitioner's exports of plastic products were not disputed. The impugned order rejected the claim on the ground that the petitioner was a 100% EOU; the Court found no provision in the FTP barring 100% EOUs from availing SHIS, nor any lawful basis to deny the incentive on that ground. Having held that the departmental clarification could not lawfully narrow the policy, and given that the petitioner is a recognised Status Holder manufacturing in the Plastics sector, the petitioner was held entitled to the incentive. The Court accordingly set aside the impugned rejection and directed payment of the incentives as per the FTP. [Paras 16, 17]

The petitioner, though a 100% EOU and a Status Holder manufacturing in the Plastics sector, is entitled to SHIS under Para 3.16.4 and the impugned order rejecting the claim is set aside; respondent directed to pay the incentives.

Final Conclusion: The departmental clarification narrowing the Plastics sector eligibility was held impermissible as an amendment of the FTP; the impugned rejection of the petitioner's SHIS claim (grounded on EOU status and the restricted interpretation) was set aside and the respondent was directed to grant/pay the incentives due to the petitioner under Para 3.16.4 of the FTP.

Clarificatory or curative nature of a notification amendment - exemption from Integrated Goods and Services Tax and Compensation Cess for imports under the EPCG Scheme - intention of the Government as reflected in GST Council minutes and Committee on Exports - entitlement to refund of IGST paid subject to reversal of credit ledger entries - temporary relief to address working capital blockage for exporters

Clarificatory or curative nature of a notification amendment - exemption from Integrated Goods and Services Tax and Compensation Cess for imports under the EPCG Scheme - intention of the Government as reflected in GST Council minutes and Committee on Exports - Whether Notification No.79/2017 (amendment to Notification No.16/2015-Cus.) is clarificatory/curative and applies to imports made during 1st July 2017 to 13th October 2017 so as to exempt EPCG imports from IGST and compensation cess. - HELD THAT: - The Court examined the sequence of notifications, the objectives of the EPCG/Foreign Trade Policy 2015-2020 and the contemporaneous record of the GST Council and Committee on Exports. The Minutes and agenda of the GST Council meeting (6 October 2017) and the Committee's recommendations show a conscious policy decision to grant a temporary exemption from IGST and cess for advance authorisation/EPCG/EOU imports to alleviate working capital blockage. The omission of the words relating to Sub sections (7) and (9) in the earlier amendment was found to be inadvertent or an oversight. In light of the policy intent recorded in the Minutes and prior judicial authority following the same reasoning, the subsequent amendment by Notification No.79/2017 is to be read as clarificatory/curative and therefore applies to the period 1st July 2017 to 13th October 2017, preserving the exemption for EPCG imports during that period. [Paras 8]

Notification No.79/2017 is clarificatory/curative and the exemption from IGST and compensation cess for EPCG imports applies to the period 1st July 2017 to 13th October 2017.

Entitlement to refund of IGST paid subject to reversal of credit ledger entries - temporary relief to address working capital blockage for exporters - Consequences arising from the finding that the amendment is clarificatory, including the petitioner's entitlement to refund and the procedural steps for claiming refund. - HELD THAT: - As the amendment is clarificatory, importers who paid IGST on EPCG imports during the stated period are entitled to refund. The Court directed that the refund be processed and paid with interest, if any, within four weeks of the petitioner reversing the entries of availment of the subject credit and debiting the said amount from the electronic credit ledger. Petitioner must file evidence of such reversal along with the refund application; the application is to be filed physically unless an electronic facility is made available by the Department. The Court also directed that Customs authorities permit any necessary amendment to the bill of entry. [Paras 11, 12, 14]

Petitioner entitled to refund of IGST paid; refund to be processed within four weeks after reversal of the relevant credit ledger entries and filing of the refund application, and Customs to permit necessary amendments to bills of entry.

Final Conclusion: The amendment by Notification No.79/2017 is declarable as clarificatory/curative and therefore the exemption from IGST and compensation cess for imports under the EPCG Scheme applies to the period 1st July 2017 to 13th October 2017; petitioner is entitled to refund of IGST paid subject to reversal of the relevant credit entries and compliance with the procedural directions given by the Court.

Validation of transfers after commencement of winding up - Section 536(2) of the Companies Act, 1956 - voidness of transfers after commencement of winding up - Discretion of the Court to order otherwise under Section 536(2) - Incomplete transfer cannot be validated after the winding up order - Delay and laches in asserting title as material to exercise of discretion - Vesting of company property in the Official Liquidator upon winding up

Section 536(2) of the Companies Act, 1956 - voidness of transfers after commencement of winding up - Discretion of the Court to order otherwise under Section 536(2) - Delay and laches in asserting title as material to exercise of discretion - Incomplete transfer cannot be validated after the winding up order - Vesting of company property in the Official Liquidator upon winding up - Whether the Court should exercise its discretion under Section 536(2) to validate the claimed acquisition and subsequent transfers of shares that were purportedly effected after commencement of winding up and after the winding up order. - HELD THAT: - Section 536(2) declares disposals and transfers made after commencement of winding up to be void unless the Court otherwise orders; that power is discretionary and must be exercised judiciously. Precedents recognise a pragmatic approach where bona fide transactions in the ordinary course, or transactions necessary to keep a company going, may be validated, but the power is not available to approve transactions which are void ab initio or where incomplete rights are sought to be completed after the winding up order. Here the applicant claimed acquisition in 1998 but made no effort to register title until 2014, acted with full knowledge of liquidation, and thereafter executed transfer agreements in 2019. The claimed transfers were incomplete at the time of the winding up order and the applicants sought validation of transactions entered into while cognisant of the prohibition under Section 536(2). No element of benefit to the company, its creditors or keeping the company as a going concern is shown; the delay, the incompleteness of transfer, and enrichment of the transferor weigh against exercising the discretionary power to validate the transactions. Applying these principles, the Court declined to exercise its discretion in favour of the applicants and refused to validate the claimed acquisition and subsequent transfers. [Paras 18, 19, 20, 21, 22]

Application for validation of the acquisition and subsequent transfers of the shares is rejected; the Court will not exercise its discretion under Section 536(2) to validate the transactions.

Vesting of company property in the Official Liquidator upon winding up - Procedure for claims against the Official Liquidator - Whether the applicant may nonetheless be permitted to present a fresh claim to the Official Liquidator in respect of the alleged shares. - HELD THAT: - While declining to validate the contested transactions, the Court left the statutory and administrative route open to the applicant. The Court recorded that the applicant is at liberty to lodge a fresh claim with the Official Liquidator, who is to adjudicate that claim in accordance with law, thereby preserving the Official Liquidator's jurisdiction and the statutory procedure for determination of claims and rights over company property vested in the liquidator. [Paras 23]

Applicant No.1 is permitted to lodge a fresh claim with the Official Liquidator, which shall be adjudicated in accordance with law.

Final Conclusion: The application for court validation of the claimed acquisition and subsequent transfers of shares in the company in liquidation is dismissed for want of merit - the Court declines to exercise its discretionary power under Section 536(2) given delay, knowledge of liquidation, incompleteness of transfers and absence of benefit to the company - but Applicant No.1 is permitted to lodge a fresh claim with the Official Liquidator for adjudication in accordance with law.

Related party - definition of 'related party' under Section 5(24) of the Code - associate company - joint venture - significant influence - control - right to appoint directors / participation in policy decisions - IRP's power to maintain and update list of claims / reclassify a creditor upon valid objection

Related party - associate company - joint venture - control - significant influence - Appellant is a 'related party' of the Corporate Debtor. - HELD THAT: - The Tribunal examined whether the Appellant fell within the expression 'a body corporate which is a holding, subsidiary or an associate company of the corporate debtor' under the definition of 'related party' and whether the MoU between the parties constituted a joint venture giving the Appellant significant influence or control. The MoU dated 26.11.2012 disclosed a joint venture arrangement for development of the Corporate Debtor's sole project, with revenue- and brokerage-sharing provisions and a clause requiring mutual consent for fixation of selling price. The Companies Act definition of 'associate company' expressly includes a joint venture, and the concept of 'control' extends beyond de jure appointment of directors to de facto ability to influence management or policy decisions. The requirement of mutual consent on pricing and the joint-venture structure demonstrated sufficient participation in policy decisions and significant influence indicative of an associate/joint venture relationship. Consequently, the Appellant qualified as a 'related party' of the Corporate Debtor and was ineligible to participate in the CoC as a financial creditor. [Paras 7, 10, 11, 12, 13]

Appellant is a related party of the Corporate Debtor and thus not eligible to participate in the CoC.

IRP's power to maintain and update list of claims / reclassify a creditor upon valid objection - IRP was justified in changing the classification of the Appellant from a financial creditor to a related financial creditor. - HELD THAT: - The Tribunal found that the IRP's action was not an arbitrary suo-moto reversal of an admitted claim but a correction prompted by an objection raised in the first CoC meeting (by a CoC member) supported by documentary material indicating a joint-venture relationship. The IRP sought clarification from the Appellant and thereafter communicated the related-party conclusion, and also filed an application before the Adjudicating Authority alleging willful concealment. The earlier decision to admit the claim was therefore revisited on valid grounds and in the course of maintaining an updated and accurate list of creditors. The Tribunal distinguished the authority relied upon by the Appellant, observing that that decision did not apply to a situation where the IRP corrects classification based on valid documentary objection and follows up by placing the matter before the Adjudicating Authority. [Paras 15, 16, 17]

IRP correctly reclassified the Appellant as a related financial creditor; the Adjudicating Authority rightly upheld that action.

Final Conclusion: The Appellant was correctly held to be a related party (joint-venture/associate) of the Corporate Debtor and ineligible to participate in the CoC; the IRP's reclassification was justified and the appeal is dismissed.

Rectification under Section 420(2) of the Companies Act, 2013 - power to amend orders to rectify mistake apparent from the record - absence of inherent power of review vested in the Appellate Tribunal under the Companies Act - expungement of adverse observations - suppression of material facts by the Resolution Professional

Rectification under Section 420(2) of the Companies Act, 2013 - power to amend orders to rectify mistake apparent from the record - absence of inherent power of review vested in the Appellate Tribunal under the Companies Act - Whether this Tribunal has power to review its own order under the Companies Act, 2013 or whether Section 420(2) permits only amendment to rectify mistakes apparent from the record. - HELD THAT: - The Tribunal examined Section 420 and observed that the provision permits the Tribunal, within two years, to amend any order to rectify a mistake apparent from the record and to make such amendment if the mistake is brought to its notice by the parties. The provision does not confer a general power of review on the Tribunal to re-open or re-hear its orders. Applying the statutory language to the Review Application filed under Section 420(2), the Tribunal held that the remedy invoked was in substance a review of its judgment and not a mere rectification of an apparent mistake. Consequently, the statutory power is limited to correction of mistakes apparent on the face of the record and does not extend to reviewing findings of fact or reappraising the materials which formed the basis of the Tribunal's decision. [Paras 14, 15, 18, 19]

Section 420(2) permits amendment to rectify a mistake apparent from the record but does not confer a power of review; the Review Applications are therefore without jurisdiction.

Expungement of adverse observations - suppression of material facts by the Resolution Professional - Whether the adverse observations made by this Tribunal in paras 38, 39 and 47 were errors apparent from the record warranting expungement. - HELD THAT: - The Tribunal considered the challenged observations - that the Resolution Professional had suppressed service of DSKL's application, had permitted DSKL to submit EoI, and had thereby misled the CoC - and examined the materials placed before it when passing the impugned order. The Tribunal found that those findings were reached on the basis of materials before it and were not shown to be patent errors apparent on the face of the record. The Tribunal reiterated that the adverse remarks were necessary for appreciating the record and to decide the appeals and therefore could not be expunged on the present review application. [Paras 16, 17]

The observations in paras 38, 39 and 47 are based on the materials before the Tribunal and are not errors apparent from the record; expungement is not warranted.

Final Conclusion: The Review Applications filed under Section 420(2) of the Companies Act, 2013 are dismissed for lack of jurisdiction; Section 420(2) permits rectification of mistakes apparent on the record but does not confer a power of review, and the adverse observations impugned were not found to be patent errors requiring expungement; no order as to costs.

Finality of litigation / earlier adjudications - Valuation and sale notice under IBBI (Liquidation Process) Regulations, 2016 - Change of land use / conversion and its evidentiary effect - As is where is sale basis - Costs for vexatious or dilatory litigation

Finality of litigation / earlier adjudications - Res judicata / issue estoppel by prior orders - Whether the issue of nature of land use and related objections could be reopened in the instant application in view of prior orders up to the Supreme Court. - HELD THAT: - The Tribunal found that the question regarding the nature of the land had been the subject of two earlier rounds of litigation, including this Tribunal's order and dismissal of civil appeals by the Hon'ble Supreme Court, which upheld the earlier findings that the appellant had failed to produce evidence to show the land was industrial in nature. The Adjudicating Authority and this Tribunal recorded that the earlier proceedings had decided the objections related to valuation and sale notice and that the appellant had not adduced requisite evidence before the liquidator or in earlier forums. In view of these prior adjudications and the Supreme Court's dismissal, the plea to reopen the issue on the same grounds was held to be barred and filed for delay. The Tribunal therefore treated the matter as having attained finality and declined to entertain the fresh valuation plea on that basis. [Paras 11, 14]

The contention to reopen the land-use issue was rejected as the matter had attained finality in earlier orders, including the Supreme Court.

Valuation and sale notice under IBBI (Liquidation Process) Regulations, 2016 - As is where is sale basis - Whether the Sale Notice and the valuation process were vitiated such as to require fresh valuation under Regulation 35(2) of the Liquidation Process Regulations. - HELD THAT: - The Tribunal reiterated its earlier conclusion that the valuation reports and the terms of the Sale Notice complied with the Regulations, including clear disclosure of the 'AS IS WHERE IS' basis and clauses placing the onus of confirming permitted use and liabilities on bidders. The Adjudicating Authority had given the appellant opportunities to produce a buyer or better bid and to furnish evidence; none was produced. Having found no defect in the valuation report or sale notice and noting that earlier e-auction attracted no bids at the reserve price, the Tribunal concluded there was no merit in directing a fresh valuation. [Paras 11]

No ground to direct fresh valuation; the valuation and sale notice were held to be in accordance with the Regulations.

Change of land use / conversion and its evidentiary effect - Costs for vexatious or dilatory litigation - Whether the affidavit and documents produced by Municipal Corporation Faridabad (MCF) before the Supreme Court constituted fresh material justifying reconsideration, and whether costs were rightly imposed for repeated applications. - HELD THAT: - The Tribunal considered the affidavit filed by MCF before the Supreme Court which referred to historical permissions for change of land use and outstanding external development charges. It held that notwithstanding those filings, the Supreme Court had dismissed the civil appeals and did not disturb the earlier finding that the appellant had failed to produce evidence showing industrial use before the liquidator or in earlier proceedings. Given the two earlier rounds of litigation on the same issue and the appellant's failure to produce requisite evidence previously, the Tribunal viewed the present application as a reiteration intended to delay the liquidation process. Accordingly, the imposition of costs by the Adjudicating Authority was confirmed as justified to deter baseless/repetitive litigation. [Paras 12, 13, 14]

The MCF material did not warrant reopening; costs imposed on the appellant for repeated/dilatory litigation were confirmed.

Final Conclusion: The appeal is dismissed; the Tribunal confirms the Adjudicating Authority's dismissal of the application and the imposition of costs on the appellant, having found no merit in reopening valuation or land-use issues already finally decided in earlier proceedings.

Permission to operate F&B outlet - implementation and enforcement of settlement agreement - administrator's recommendation and acceptance of sale proposal - powers and duties of an appointed administrator - remand for fresh consideration by the adjudicating authority - liberty to approach the adjudicating authority for clarification or difficulty in implementation

Permission to operate F&B outlet - implementation and enforcement of settlement agreement - powers and duties of an appointed administrator - Validity and effect of the impugned order permitting Respondent No.1 to operate a F&B outlet and its consistency with earlier orders and the settlement. - HELD THAT: - The Tribunal examined the impugned order dated 19.02.2021 which granted Respondent No.1 permission, subject to conditions, to operate, run and maintain a F&B outlet at the resort to generate revenue and meet day to day expenses. The Appellants challenged the order as being contrary to the consent order and settlement and questioned the Administrator's role. The Appellate Tribunal recorded that the impugned order was passed in the context of the consent order dated 31.01.2014, the settlement dated 15.07.2009 and the Administrator's mandate. Having considered the rival submissions, the Tribunal accepted that subsequent developments (including the Administrator receiving an offer to purchase the resort) affected implementation and, in view of the equities and background, allowed the appeal to the limited extent of directing further adjudication by the NCLT rather than quashing the impugned order summarily. The Tribunal therefore did not finally negate the impugned permission but required the adjudicating authority to consider subsequent developments and take appropriate orders. [Paras 16]

Appeal allowed in part: matters concerning the implementation of the impugned order and related developments to be considered by the NCLT after hearing the parties.

Administrator's recommendation and acceptance of sale proposal - remand for fresh consideration by the adjudicating authority - liberty to approach the adjudicating authority for clarification or difficulty in implementation - Whether applications filed by the Administrator for accepting the offer to purchase the resort (CA No. 74 of 2021 and CA No. 75 of 2021) require fresh consideration by the NCLT in light of subsequent developments. - HELD THAT: - The Tribunal noted the Administrator's disclosure that a proposal had been received from a purchaser willing to buy the resort on an "as-is-where-is" basis and that deposits had been made. Given these subsequent developments and the existence of competing contentions about implementation of the settlement and the impugned order, the Tribunal directed the National Company Law Tribunal, Chandigarh Bench to take up CA No. 74 of 2021 and CA No. 75 of 2021, hear the parties and pass appropriate orders after considering the subsequent developments. The direction effectively remitted the questions raised in those applications to the adjudicating authority for fresh consideration rather than deciding them on the merits at the appellate stage. [Paras 16]

CA No. 74 of 2021 and CA No. 75 of 2021 are directed to be taken up and considered afresh by the NCLT after hearing the parties; parties to appear on the date fixed by the Tribunal.

Final Conclusion: The appeal is allowed in part; the Appellate Tribunal directed the National Company Law Tribunal, Chandigarh Bench to take up CA No. 74 of 2021 and CA No. 75 of 2021, hear the parties and pass appropriate orders in the light of subsequent developments, and disposed of the appeal with the parties directed to appear before the NCLT on the date fixed.

Limitation under Section 7 of the Insolvency and Bankruptcy Code - Acknowledgement of debt under Section 18 of the Limitation Act, 1963 - Date of default versus date of non-performing asset (NPA) - Part-payment and one-time-settlement as extending limitation - Admission of a Section 7 petition on proof of debt and default

Limitation under Section 7 of the Insolvency and Bankruptcy Code - Acknowledgement of debt under Section 18 of the Limitation Act, 1963 - Date of default versus date of non-performing asset (NPA) - Part-payment and one-time-settlement as extending limitation - The Section 7 petition was within the period of limitation. - HELD THAT: - The Tribunal applied the ratio of the Supreme Court in Dena Bank (now Bank of Baroda) to hold that the cause of action for filing under Section 7 is governed by the date of default and not mechanically by the date of declaration as NPA. The adjudicating authority found material on record constituting acknowledgement or conduct capable of amounting to acknowledgement - including debit balance confirmations, a part-payment of Rs.50,000 on 13.10.2017 and related correspondence - which operate under Section 18 of the Limitation Act to extend the limitation period. The Demand Notice dated 29.04.2016 and subsequent acts and communications were treated as fresh causes of action or acknowledgements within the limitation window. On this basis the Tribunal concluded there was no infirmity in holding the petition filed on 31.10.2018 to be within time. [Paras 3, 4, 7, 8, 9]

Application under Section 7 was held to be within limitation.

Existence of debt and default - Admission of a Section 7 petition on proof of debt and default - The Financial Creditor successfully proved existence of debt and default and the Section 7 petition satisfied requirements for admission. - HELD THAT: - On consideration of the material placed before the Adjudicating Authority - including restructuring documents, hypothecation and loan agreements dated 12.10.2013, debit balance confirmations and the Financial Creditor's proposed IRP with consent in Form 2 - the Tribunal upheld the finding that debt and default stood established. The Tribunal noted that the Company had itself acknowledged outstanding dues in replies and that statutory and documentary material evidenced a live claim and default. Consequently, there was no illegality in admitting the Section 7 petition. [Paras 5, 8, 9]

Debt and default were held proved and the Section 7 petition was properly admitted.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority's admission of the Section 7 petition was upheld on findings that the petition was within limitation by reason of acknowledgements/part-payment and that debt and default were proved; matter is now moot insofar as the company has entered liquidation.

Works Contract Service - Commercial or Industrial Construction Services - Construction of Complex Service - Site Formation and Clearance, Excavation, Earth Moving and Demolition Service - service tax exemption under Notification No. 45/2010-ST - exemption under Notification No. 17/2005-S.T. - classification of services (works contract versus construction) - remand for fresh examination of exemption and classification claims

Works Contract Service - service tax exemption under Notification No. 45/2010-ST - classification of services (works contract versus construction) - Remand to adjudicating authority to examine afresh whether construction work carried out for Gujarat Energy Transmission Corporation Ltd. is exempt from service tax and whether the services are correctly classified. - HELD THAT: - The Tribunal noted that the appellants claimed exemption for the GETCO work under Notification No. 45/2010 ST and relied on authorities supporting that position, and that the adjudicating authority did not record any finding on this exemption claim. The Tribunal found merit in the appellant's contention that the GETCO work may fall within the exemption but observed that proper examination of contracts, documents and legal authorities by the Commissioner is lacking. Consequently the matter is remanded for fresh consideration of the exemption and classification contentions after giving the appellant an opportunity to produce and rely upon relevant documents and judgments. [Paras 4]

Matter remanded to the Commissioner for fresh examination of exemption and classification issues in relation to the GETCO work and for passing a reasoned order.

Works Contract Service - Commercial or Industrial Construction Services - classification of services (works contract versus construction) - Remand to adjudicating authority to examine afresh whether laying of drainage/sewerage pipelines and related work for AUDA and AMC are taxable and correctly classified. - HELD THAT: - The Tribunal observed that appellants contend these works are non commercial and fall within exclusions in the definitions applicable to works contract and construction services, and that supporting work orders were produced. The Commissioner did not properly examine these exemption/classification claims. The Tribunal directed reconsideration of whether the nature of the works (including whether AMC's activities are sovereign or commercial) attracts service tax and required the Commissioner to evaluate contracts, documents and precedents before passing a fresh order. [Paras 4]

Matter remanded to the Commissioner for fresh consideration of taxability and classification of the AUDA/AMC pipeline works.

Commercial or Industrial Construction Services - Works Contract Service - classification of services (works contract versus construction) - Remand to adjudicating authority to examine afresh whether construction of commercial complex (shops) at the GSRTC bus terminal is taxable under Commercial or Industrial Construction Service or is properly classifiable as works contract. - HELD THAT: - The Tribunal recorded that the appellant produced the GSRTC tender/contract and contends the activity involves supply of materials and therefore should be treated as works contract, whereas the Commissioner treated it as Commercial or Industrial Construction Service. The Tribunal found that the lower authority did not examine the contractual terms and relevant legal authorities sufficiently and directed the Commissioner to reconsider the classification and taxability after examining the agreements and precedents put forth by the parties. [Paras 4]

Matter remanded to the Commissioner for fresh consideration of taxability/classification of the GSRTC bus terminal construction.

Construction of Complex Service - definition of residential complex - classification of services (works contract versus construction) - Remand to adjudicating authority to examine afresh whether construction of residential complexes for Gujarat State Police Housing Corporation Ltd. and the Boys' Hostel for Navsari Agricultural University are taxable under Construction of Complex Service. - HELD THAT: - The Tribunal noted that the definition of 'residential complex' excludes construction intended for personal use and that the explanation extends to permitting use as residence on rent; appellants asserted non taxability and produced work orders. The Commissioner did not properly address these contentions. The Tribunal therefore directed a fresh inquiry into the nature and end use of the completed complexes, contractual terms and whether the constructions fall within the taxable definition, before passing a reasoned order. [Paras 4]

Matter remanded to the Commissioner for fresh examination of taxability of the police quarters and university hostel constructions.

Site Formation and Clearance, Excavation, Earth Moving and Demolition Service - exemption under Notification No. 17/2005-S.T. - classification of services (site formation versus construction) - Remand to adjudicating authority to examine afresh whether the earth filling/embankment works for Sabarmati River Front Development Corporation Ltd. are taxable under site formation and excavation services or are exempt under Notification No.17/2005 S.T. as works in course of construction of roads/terminals. - HELD THAT: - The Tribunal observed that Notification No.17/2005 S.T. exempts site formation and similar activities carried out in the course of construction of roads, terminals and like projects, and that appellants produced site plans and a certificate indicating the work related to road construction. The Commissioner treated the activity as taxable but did not adequately consider the exemption claim. The Tribunal therefore remanded the issue for the Commissioner to scrutinise site records, contracts, plans and relevant authorities and decide afresh. [Paras 4]

Matter remanded to the Commissioner for fresh consideration of taxability and applicability of Notification No.17/2005 S.T. to the Sabarmati works.

Final Conclusion: The impugned order is set aside and the matter is remanded to the adjudicating authority for fresh, reasoned consideration of the appellants' claims of exemption and of correct classification of the disputed construction and site works after examining contracts, documents and the judicial authorities relied upon, with opportunity of hearing to the appellant.

Inclusion of cost of materials supplied by service recipient in taxable value - commercial or industrial construction service - applicability of Larger Bench decision in M/s. Bhayana Builders Pvt. Ltd. - limitation - remand for fresh adjudication and opportunity of hearing

Inclusion of cost of materials supplied by service recipient in taxable value - applicability of Larger Bench decision in M/s. Bhayana Builders Pvt. Ltd. - Demand of service tax on value of pipes supplied free by the service recipient - HELD THAT: - The Tribunal held that the question whether the cost of materials supplied by the service receiver must be included in the taxable value is no longer res integra in view of the Larger Bench decision in M/s. Bhayana Builders Pvt. Ltd., which was relied upon by the Bench. Consequently, the demand of service tax on that issue cannot be sustained. [Paras 7]

Demand based on inclusion of recipient supplied pipes in taxable value cannot be sustained.

Limitation - remand for fresh adjudication and opportunity of hearing - Need for fresh adjudication by the Adjudicating Authority on inclusion and limitation aspects - HELD THAT: - The Tribunal found that the Adjudicating Authority did not pronounce a definite finding on whether the value of pipes supplied by the recipient is includible and did not fully examine the appellant's claim on limitation. The matter was remitted for fresh consideration so that the Adjudicating Authority may examine these issues in detail, consider the appellant's stand, decide limitation where applicable, and afford proper opportunity of hearing before passing a reasoned order. [Paras 8]

Matter remanded to the Adjudicating Authority for fresh adjudication on inclusion and limitation issues with opportunity of hearing.

Final Conclusion: The Tribunal held that, in view of the Larger Bench decision, service tax cannot be sustained on the value of recipient supplied pipes, but remitted the matter to the Adjudicating Authority for fresh consideration of inclusion and limitation issues and directed that a hearing be afforded; the appeal is disposed of accordingly.

Admissibility of statements recorded during investigation under Section 9D of the Central Excise Act - requirement of examination and cross-examination before admitting statements in evidence - reliance on uncorroborated confessional or investigative statements for proving clandestine removal and fraudulent availment of Cenvat credit - necessity of independent corroborative evidence to sustain demand for alleged fraudulent availment of Cenvat credit - procedure for admission of statements in the interests of justice

Admissibility of statements recorded during investigation under Section 9D of the Central Excise Act - requirement of examination and cross-examination before admitting statements in evidence - Statements of witnesses recorded during investigation could not be admitted as evidence unless the procedure under Section 9D(1)(b) was followed or circumstances in Section 9D(1)(a) existed. - HELD THAT: - The Tribunal examined whether the Original Adjudicating Authority rightly relied upon statements recorded during investigation (notably of Shri Amit Gupta and the transporter) to confirm demand for alleged wrongful Cenvat credit. It held that Section 9D(1) prescribes specific circumstances (clause (a)) when a statement may be relevant, and, if those do not exist, clause (b) requires that the maker of the statement be first examined as a witness before the adjudicating authority and the authority then form the opinion that admission of the statement is in the interests of justice. The Adjudicating Authority did not follow this procedure and did not examine the maker of the statement; the assessee was not afforded an opportunity to cross-examine. Earlier decisions of the Tribunal and High Court authorities were relied upon to emphasise that failure to follow the statutory procedure renders reliance on such statements impermissible. The Tribunal therefore found no infirmity in the Commissioner (Appeals) rejecting reliance on those statements. [Paras 11, 12, 13, 14, 15]

Findings founded solely on investigative statements were not admissible; Commissioner (Appeals)'s exclusion of those statements was upheld.

Reliance on uncorroborated confessional or investigative statements for proving clandestine removal and fraudulent availment of Cenvat credit - necessity of independent corroborative evidence to sustain demand for alleged fraudulent availment of Cenvat credit - The Department failed to produce independent corroborative evidence to prove that goods did not accompany the invoices or that payments made by banking channel were returned in cash, and therefore the demand for denial of Cenvat credit was unsustainable. - HELD THAT: - On the facts, the Tribunal noted that documentary records relied upon by the assessee (invoices, transport details from online sources, account statements, stock registers, RG-23) supported receipt of inputs and normal business transactions. Apart from the investigative statements, the Department produced no material directly linking seized cash or other recoveries to the impugned transactions, or proving that banking payments were returned in cash. Earlier Tribunal orders dealing with the same investigation had similarly held that in the absence of corroboration the Revenue's case could not be sustained. Where cross-examination of the investigators' witnesses produced retractions, the earlier statements lost probative value. Weighed together, the evidence was insufficient to conclude fraudulent availment of Cenvat credit for the period in dispute. [Paras 11, 16, 17, 18]

Demand for denial of Cenvat credit and penalty, based on the material before the Original Authority, could not be sustained; Commissioner (Appeals)'s relief to the assessee was affirmed.

Final Conclusion: The departmental appeal is dismissed; the Tribunal upholds the Commissioner (Appeals) order setting aside the demand because the statutory procedure under Section 9D was not complied with and there was no independent corroborative evidence to prove fraudulent availment of Cenvat credit for the period May, 2012 to September, 2014.

Availment and utilization of CENVAT credit - input service - exempted services - separate accounts for taxable and exempted services - reversal under Rule 6(3) of the Cenvat Credit Rules, 2004

Exempted services - input service - separate accounts for taxable and exempted services - Whether services provided in Jammu & Kashmir qualify as "exempted services" for the purposes of the Cenvat Credit Rules and whether Rule 6(2) (separate account maintenance) applies - HELD THAT: - The Tribunal held that services rendered in Jammu & Kashmir are not subject to levy of service tax because the Finance Act did not extend to J&K for the relevant period; however, that absence of levy does not convert those services into "exempted services." A service is an exempted service only where service tax payable on it is exempted by law or notification. Rule 6(2) addresses the situation where a provider renders both taxable and exempted output services; it does not cover situations where services rendered are simply outside the taxable territory and not chargeable to service tax. Consequently, the Department's attempt to treat services performed in J&K as "exempted services" for applying Rule 6(2) is incorrect, and the rule cannot be pressed into service where the law is silent about such non taxable territory sales. [Paras 4]

Services provided in Jammu & Kashmir are not "exempted services" within the meaning of the Cenvat Credit Rules, and Rule 6(2) (requiring separate accounts) does not apply to services which are not subject to levy.

Reversal under Rule 6(3) of the Cenvat Credit Rules, 2004 - availment and utilization of CENVAT credit - Whether the department could demand reversal by applying the percentage option (5%/6%/7%) under Rule 6(3) where the assessee had already reversed proportionate Cenvat credit under Rule 6(3)(ii) read with sub rule (3A) - HELD THAT: - The Tribunal noted that the principal objective of Rule 6 is to prevent availment of Cenvat credit in relation to exempted goods or services, and recovery cannot exceed the credit attributable to such use. In the present case the appellant had already reversed the proportionate Cenvat credit attributable to the disputed services in terms of Rule 6(3)(ii) read with sub rule (3A). There is no provision in sub rule (3) that automatically imposes the percentage flip option (5%/6%/7%) merely because the assessee did not elect a particular option at a specified time; where the assessee has complied by reversing the attributable credit under the alternate permitted option, the department cannot insist on the percentage method. Having found compliance with the reversal mechanism, the Tribunal agreed with the Commissioner that the demand based on the percentage option was not sustainable. [Paras 4]

Since the appellant had reversed the proportionate Cenvat credit under Rule 6(3)(ii) read with sub rule (3A), the department could not sustain a demand by invoking the percentage payment option under Rule 6(3); the Commissioner rightly dropped the demand.

Final Conclusion: The Revenue's appeal was dismissed. The Tribunal upheld the Commissioner's order dropping the demand, holding that services rendered in Jammu & Kashmir are not "exempted services" under the Cenvat Credit Rules and that no further reversal under the percentage option could be insisted upon where proportionate credit had already been reversed under Rule 6(3)(ii) and (3A).

Manufacture includes process incidental or ancillary to completion of a manufactured product - Cenvat credit admissibility on inputs used in returned goods subjected to process - manufacture is a question of fact

Manufacture includes process incidental or ancillary to completion of a manufactured product - Cenvat credit admissibility on inputs used in returned goods subjected to process - manufacture is a question of fact - Whether the processes undertaken on forklift trucks received back as returned goods amounted to 'manufacture' thereby permitting availment of Cenvat credit on inputs used. - HELD THAT: - The Tribunal examined the materials on record including Annexure A which showed that the returned forklift trucks were subjected to processes that converted them to different capacity and different model numbers and that they were thereafter cleared as distinct products to different customers. Section 2(f) of the Central Excise Act defines 'manufacture' to include any process incidental or ancillary to the completion of a manufactured product. Applying that statutory definition and having regard to the factual matrix, the Tribunal held that processes incidental or ancillary to completion qualify as 'manufacture'. The Tribunal distinguished and declined to apply the precedents relied on by Revenue because those decisions arose on their own facts and manufacture is a question of fact to be determined on the material before the adjudicating authority. In view of the factual finding that a new capacity/model emerged post-process, the Tribunal concluded that the activity amounted to manufacture and therefore Cenvat credit could not be disallowed on that ground. [Paras 4, 5]

Impugned orders confirming demand, interest and penalties were set aside and the appeals allowed on the ground that the processes amounted to manufacture permitting Cenvat credit.

Final Conclusion: On the facts before it, the Tribunal held that processes carried out on returned forklift trucks resulted in a change in capacity and model such that they amounted to 'manufacture' within Section 2(f), set aside the orders confirming demands and penalties, and allowed the appeals.

Penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - Payment of disputed credit prior to issuance of show cause notice as bar to imposition of penalty - Bona fide belief / absence of mens rea in self assessment regime - Tribunal precedent denying penalty where disputed amount with interest paid before show cause notice

Penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - Payment of disputed credit prior to issuance of show cause notice as bar to imposition of penalty - Bona fide belief / absence of mens rea - Tribunal precedent denying penalty where disputed amount with interest paid before show cause notice - Whether the penalty imposed under Rule 15(2) CCR, 2004 read with Section 11AC CEA is sustainable where the disputed Cenvat/service tax credit along with interest was deposited by the assessee prior to issuance of the show cause notice and the assessee acted under a bona fide belief. - HELD THAT: - The Tribunal allowed early hearing and, on merits limited to penalty, found that the assessee had deposited the disputed credit and interest prior to issuance of the show cause notice. The Commissioner himself recorded that the assessee acted under a bona fide belief in relation to quantification of reversal and, in another part of his order, acknowledged payment prior to booking of the case. The Tribunal's earlier decisions treating payment of the disputed amount with interest before issuance of notice as disentitling initiation of penalty proceedings were held to be applicable. In these circumstances the ingredient of deliberate wrongdoing or fraud necessary to sustain a penalty was not established and the statutory scheme and precedents indicate that payment prior to show cause notice negates the justification for imposing penalty under Section 11AC read with Rule 15(2). Applying these principles, the Tribunal concluded there is no justification for the penalty imposed in para 25.3 of the impugned order. [Paras 6, 7]

Para 25.3 of the impugned order imposing penalty under Rule 15(2) read with Section 11AC is set aside and the appeal is allowed to that extent.

Final Conclusion: Appeal allowed insofar as the penalty under Rule 15(2) CCR, 2004 read with Section 11AC of the Central Excise Act, 1944 (para 25.3) is set aside because the disputed credit and interest were deposited before the show cause notice and the assessee acted under a bona fide belief; all other parts of the impugned order remain undisturbed.

Mandatory inquiry under Section 202 of the Code of Criminal Procedure when accused resides outside the jurisdiction - Issuance of process under Section 204 of the Code of Criminal Procedure - Affidavit evidence under Section 145 of the Negotiable Instruments Act as satisfying inquiry - Validity of affidavit sworn before a notary in criminal inquiry - Requirement of brief reasons and application of mind in order issuing process

Mandatory inquiry under Section 202 of the Code of Criminal Procedure when accused resides outside the jurisdiction - Issuance of process under Section 204 of the Code of Criminal Procedure - Affidavit evidence under Section 145 of the Negotiable Instruments Act as satisfying inquiry - Requirement of brief reasons and application of mind in order issuing process - Whether the Magistrate complied with the mandatory inquiry requirement of Section 202 CrPC before issuing process under Section 204 CrPC, and whether the order of issuance of process is sustainable despite not expressly mentioning the word 'affidavit'. - HELD THAT: - The Court held that amended Section 202 CrPC makes inquiry mandatory where the accused resides outside the Magistrate's jurisdiction, but the amendment imposes a duty to inquire (either by the Magistrate or by directing police investigation) and does not prohibit taking cognizance without holding an inquiry. The Supreme Court's clarifications permit evidence of witnesses to be taken on affidavit under Section 145 of the N.I. Act and allow, in suitable cases, inquiry to be limited to documents without examination of witnesses. On the facts, the record shows an affidavit and supporting documents were on file prior to the order dated 11.08.2017 and the Magistrate perused the cheque, return memo, notice, postal acknowledgment and other documents and formed a prima facie opinion. Although the order did not expressly use the word 'affidavit', the presence of the affidavit on record and the Magistrate's consideration of documents satisfied the inquiry requirement. The Court emphasised that while reasons must be recorded to show due application of mind, they need only be brief and need not reproduce elaborate findings at the stage of issuance of process; the impugned order reflected sufficient application of mind and therefore was not vitiated for failing to specifically mention the affidavit. [Paras 6, 9, 11]

The Magistrate complied with the mandatory inquiry under Section 202 CrPC by perusal of affidavit and documents and the order issuing process under Section 204 CrPC is sustainable; the challenge on this ground fails.

Validity of affidavit sworn before a notary in criminal inquiry - Affidavit evidence under Section 145 of the Negotiable Instruments Act as satisfying inquiry - Whether the affidavit filed before a notary was legally tenable for the purpose of the inquiry under Section 202 CrPC and whether belated filing prevented cognizance or issuance of process. - HELD THAT: - The Court rejected the petitioners' contention that the affidavit was invalid because it was sworn before a notary and not a judicial officer. Section 6 of the Oaths Act does not restrict the form of oath in that manner, and Section 297(1)(c) CrPC expressly authorises affidavits to be sworn before a notary. The record (Roznama) shows the complaint was filed earlier and the affidavit was filed on 10.08.2017, prior to issuance of process on 11.08.2017; hence the Magistrate was entitled to rely on the affidavit when forming satisfaction to issue process. Consequently, the timing and form of the affidavit did not render the complaint or the order of issuance of process untenable. [Paras 7, 8]

The affidavit sworn before a notary was legally valid for the inquiry; it was filed prior to issuance of process and does not vitiate the proceedings.

Final Conclusion: The writ petition challenging issuance of process and the revisional court's refusal to discharge is dismissed: the Magistrate fulfilled the amended Section 202 CrPC requirement by considering the affidavit and documents, the affidavit sworn before a notary was valid and filed before issuance of process, and the order of issuance of process reflects sufficient reasons and application of mind.

Cause of action under Section 142(b) of the Negotiable Instruments Act - requirement of notice and 15 days for offence under Section 138 - multiple causes of action on repeated dishonour of the same cheque - power to take cognizance after prescribed period upon sufficient cause - court's duty to consider condonation where complaint pleads sufficient cause

Cause of action under Section 142(b) of the Negotiable Instruments Act - multiple causes of action on repeated dishonour of the same cheque - requirement of notice and 15 days for offence under Section 138 - Whether the complaint was barred by time in view of the first demand notice and the doctrine of cause of action. - HELD THAT: - The court held that the cause of action for a prosecution under Section 138 comprises the cumulative factual prerequisites in the proviso to Section 138 (presentation within time, service of notice within thirty days of memo of dishonour, and failure to pay within fifteen days of receipt of notice). Repeated dishonour that satisfies all three requirements gives rise to a fresh cause of action; however, even if the first demand notice is taken as the triggering event, the complaint here pleaded facts explaining subsequent steps including re-sending of notice, and therefore the question of temporal bar required consideration of whether sufficient cause for delay was shown. The court applied the settled principle that where the complaint itself furnishes an explanation amounting to sufficient cause, a separate condonation application is not mandatory and limiting the payee to the first opportunity would frustrate the legislative object of Section 138. [Paras 12, 13, 15, 16, 17]

The complaint is not to be dismissed as time-barred without considering the explanation in the complaint; the pleaded facts constitute sufficient cause for condonation of delay.

Power to take cognizance after prescribed period upon sufficient cause - court's duty to consider condonation where complaint pleads sufficient cause - Whether the courts below erred in dismissing the complaint without exercising jurisdiction under the proviso to Section 142(1)(b) to condone delay. - HELD THAT: - The Trial Court and the Revisional Court dismissed the complaint solely on the premise that the first legal notice fixed the limitation and rejected the second notice, without examining whether the complaint itself demonstrated sufficient cause for delay such that the court could take cognizance after the prescribed period. The High Court found this approach incorrect: where the complaint's averments disclose sufficient cause, the court must exercise the power under the proviso to Section 142(1)(b) rather than mechanically dismissing the complaint. Reliance on the complaint's own pleadings to establish sufficient cause is permissible and dismissal without such exercise of jurisdiction was held to be erroneous. [Paras 15, 16, 17, 18]

The courts below erred in dismissing the complaint without considering condonation; their orders are set aside and the matters are directed to be placed before the Trial Court for adjudication.

Final Conclusion: Petitions allowed. Orders dated 1.8.2012 and 28.9.2012 are set aside. Matters are remitted to the Trial Court for fresh adjudication on merits; parties to appear before the Trial Court on 16.11.2022 and the Trial Court is directed to decide the complaints expeditiously, preferably within nine months from receipt of certified copy.

Decree of compromise - summary recovery suits under Order 37 CPC - leave to defend - dishonour of cheques under Section 138 of the Negotiable Instruments Act, 1881 - conviction under Section 138 of the Negotiable Instruments Act, 1881 - compounding/withdrawal of criminal complaints - implementation of compromise terms

Decree of compromise - summary recovery suits under Order 37 CPC - Revision petitions were disposed of on the basis of a compromise reached between the parties. - HELD THAT: - The High Court recorded that the parties have effected a compromise and placed a decree of compromise dated 24.09.2022 on record. In view of the compromise reached between Hero Cycles Limited and Atma Tubes Products Limited (through its Managing Director), the Court disposed of the revision petitions challenging the orders dated 02.12.2017 in the eight summary-recovery suits. The Court accepted the settlement as the basis for disposing the proceedings and closed the revision petitions accordingly.

Revision petitions disposed of being compromised.

Implementation of compromise terms - compounding/withdrawal of criminal complaints - leave to defend - The Court recorded the terms of the compromise and directed implementation by the concerned courts and parties. - HELD THAT: - The Court set out the terms under which the parties agreed that payment of the amount lying in FDRs (Rs.8.35 crore) together with up-to-date interest would be applied as the total decretal amount in the eight summary suits, either individually or consolidated, and that upon release of that amount the parties would withdraw/compound the Section 138 complaints and other criminal proceedings. The Court authorised the concerned civil courts to decide the suits, individually or jointly, and to pass decretal orders reflecting the agreed total (the amount deposited in FDRs with interest), following which the criminal complaints and appeals arising from convictions under Section 138 NI Act were to be dealt with in accordance with the compromise. By recording these terms and directing implementation, the Court disposed of the revisions on the compromise basis.

Terms of the compromise recorded and directed to be implemented by concerned courts and parties; suits to be decided and complaints to be withdrawn/compounded after payment as agreed.

Final Conclusion: The High Court disposed of the eight revision petitions by recording and accepting the parties' compromise; the Court directed that the agreed amount lodged in FDRs with accrued interest be applied as the total decretal sum in the recovery suits (to be decided individually or consolidated) and that, upon release of that sum, the parties shall withdraw/compound the related Section 138 complaints and other criminal proceedings, with implementation to follow by the concerned courts.