TaxTMI Updates e-Newsletter
Nov 27,2020

Right to be heard - remand for fresh consideration - opportunity of hearing - non-appearance and adjournment on medical grounds - order under Section 129(3) of the U.P. GST Act

Right to be heard - opportunity of hearing - non-appearance and adjournment on medical grounds - remand for fresh consideration - Validity of the Appellate Authority's dismissal of the appeal in the absence of the appellant's counsel and consequential relief. - HELD THAT: - The High Court accepted the petitioner's uncontested explanation that the counsel for the appellant was indisposed with high fever and therefore could not seek adjournment or appear on the hearing date. The Appellate Authority had dismissed the appeal solely on account of non-appearance without considering or recording reasons that rebutted the explanation given for absence. In these circumstances the Court found it appropriate in the interest of justice to set aside the impugned appellate order and to remit the matter to the Appellate Authority for fresh consideration. The Appellate Authority was directed to afford the counsel for the appellant an opportunity of hearing and to decide the appeal on merits. To prevent undue delay the Court directed the counsel for the appellant to appear before the Appellate Authority on the specified date and instructed the Appellate Authority to decide the appeal expeditiously and preferably within the prescribed time frame from that date.

Impugned order dated 16.11.2019 set aside; appeal remanded to the Appellate Authority for fresh hearing and decision after affording opportunity to the counsel for the appellant, with directions to appear on 10th December, 2020 and for the Appellate Authority to decide the appeal on merits expeditiously, preferably within two months from that date.

Final Conclusion: The writ petition is disposed by setting aside the appellate order dated 16.11.2019 and remitting the appeal for fresh adjudication after hearing the appellant's counsel, with directions for appearance on 10th December, 2020 and an expeditious decision preferably within two months.

Bail under Section 439 Cr.P.C. - compoundable offence - severity of punishment under Section 132 of the CGST Act, 2017 - fraudulent input tax credit and passing of forged GST credit - pendency of investigation - compliance with Section 437(3) Cr.P.C.

Bail under Section 439 Cr.P.C. - compoundable offence - severity of punishment under Section 132 of the CGST Act, 2017 - pendency of investigation - compliance with Section 437(3) Cr.P.C. - Enlargement of the accused-petitioner on bail in connection with the offence(s) under Section 132 of the CGST Act, 2017. - HELD THAT: - The Court considered the nature of the allegations against the petitioner (alleged fraudulent obtaining of input tax credit and passing of forged GST credit), the length of the petitioner's custody since 08.01.2020, the pendency of investigation against co-accused, and the compoundable nature of the offence, while noting the severity of punishment under Section 132 of the CGST Act, 2017. Without expressing any opinion on the merits of the case, the Court exercised its discretion under Section 439 Cr.P.C. to grant bail. The release was made subject to the petitioner furnishing a personal bond and two sureties and to compliance with the conditions stipulated under Section 437(3) Cr.P.C.

Bail allowed; petitioner to be released on furnishing a personal bond and two sureties and to comply with the conditions under Section 437(3) Cr.P.C.

Final Conclusion: The bail application is allowed under Section 439 Cr.P.C.; the accused-petitioner Subhash Chandra Tyagi is directed to be released on bail on specified bond and sureties and subject to compliance with Section 437(3) Cr.P.C., the Court expressing no opinion on the merits of the case.

Provisional attachment of bank accounts under Section 83 - representation under Rule 159(5) of the Central Goods and Services Tax Rules, 2017 - time bound disposal of representation

Provisional attachment of bank accounts under Section 83 - representation under Rule 159(5) of the Central Goods and Services Tax Rules, 2017 - time bound disposal of representation - The petition seeking quashing of provisional attachment orders was disposed by directing time bound adjudication of the representation filed under Rule 159(5). - HELD THAT: - The petitioner challenged orders dated 9 November 2020 effecting provisional attachment of its bank accounts and filed a representation dated 11 November 2020 under Rule 159(5). Counsel for the Directorate General of GST Intelligence undertook to abide by directions of the Court for time bound disposal. In view of that undertaking, the Court directed that the petitioner's representation be decided by a reasoned order not later than 4 December 2020 and that the decision be communicated to the petitioner not later than 8 December 2020. The Court further directed that the petitioner's submissions already before the Court and any additional written submissions filed within two days be taken into account while passing the order. The Court recorded that, if aggrieved by the decision on the representation, the petitioner remained free to pursue remedies available in law. [Paras 3, 4, 5]

Directed respondent to decide the petitioner's representation under Rule 159(5) by a reasoned order by 4 December 2020, communicate the decision by 8 December 2020, and consider the petitioner's submissions; petition disposed accordingly.

Final Conclusion: Petition disposed by directing prompt, reasoned adjudication of the representation against provisional attachment; liberty reserved to the petitioner to seek further remedies if dissatisfied with that decision.

Validity and extension of e-way bill under Rule 138(10) - multimodal shipment and applicability of extended validity - distinction between Over Dimensional Cargo and other goods for e-way validity - detention and delivery notice under Section 129(3) of the CGST Act

Validity and extension of e-way bill under Rule 138(10) - multimodal shipment and applicability of extended validity - distinction between Over Dimensional Cargo and other goods for e-way validity - Whether the appellant was entitled to benefit of an extended e-way bill validity on account of the consignment being a multimodal shipment and/or being treated under the serial entry for ODC in the Table to Rule 138(10). - HELD THAT: - The Court examined the Table in Rule 138(10) and the 2019 insertion which recognises multimodal shipments (where one leg is by sea). The table retains separate serial entries for ODC and for goods other than ODC, and the presence of multimodal transport in the entries does not collapse that distinction. The appellant did not procure or rely upon any updation extending the e-way bill validity as required. The Court held that it would be impermissible to read the proviso or the amendment to afford the appellant a more beneficial application of serial No.4 in place of the correct serial entry applicable to the goods. Consequently, the claimed entitlement to extended validity on the basis of multimodal shipment or reclassification as ODC was rejected. [Paras 2, 4]

The contention that the appellant was entitled to extended e-way bill validity as a multimodal or ODC consignment is rejected; the distinction in the Table to Rule 138(10) must be respected and no benefit accrued to the appellant.

Validity and extension of e-way bill under Rule 138(10) - detention and delivery notice under Section 129(3) of the CGST Act - Whether the enabling proviso permitting updation of the e-way bill within eight hours of expiry authorised commencement of transport without such updation or extended validity having been effected. - HELD THAT: - The Court accepted the respondents' submission that the eight-hour proviso only permits the consignee to update the e-way bill so as to extend the validity for the period specified in the Table; it does not empower the transporter/consignee to commence or continue transport without having effected such updation within the prescribed time. There was no evidence that the appellant had invoked or effected the permitted updation within the eight-hour window. In the absence of valid extended e-way documentation accompanying the goods, detention under the statutory scheme was lawful. [Paras 5]

The proviso enabling updation within eight hours does not authorise transport to commence or continue without the updation; in the present case no such updation was effected, and detention under Section 129(3) was sustainable.

Final Conclusion: The Single Judge's order refusing broader relief was affirmed; the appellant's contentions regarding entitlement to extended e-way validity (by reason of multimodal shipment/ODC classification) and the permissive effect of the eight-hour updation proviso were rejected. The appeal is dismissed and the directions in the Single Judge's judgment are to be carried out.

Bail under Section 439 Cr.P.C. - Offence under Section 132(1)(f) of the Central Goods and Services Tax Act, 2017 and sentence limit - Economic offences and approach to bail - Role of accused and custodial period - Conditions of bail: personal bond, sureties and passport surrender

Bail under Section 439 Cr.P.C. - Offence under Section 132(1)(f) of the Central Goods and Services Tax Act, 2017 and sentence limit - Role of accused and custodial period - Economic offences and approach to bail - Grant of bail to the petitioners in proceedings registered under the CGST Act where allegations related to creation of fake firms were made and arrest had been effected. - HELD THAT: - The Court considered that the petitioners faced allegations arising from registration of multiple firms but that the case against the petitioner Hemant Kumar Singhal would not travel beyond Section 132(1)(f) of the CGST Act, whose maximum sentence is six months. The petitioners denied creation or use of fake invoices and there was no material that they had availed or passed on input tax credit; one petitioner had been in custody for three months and the main accused was absconding. While the prosecution argued that economic offences require a stricter approach to bail, the Court balanced that contention against the limited nature of the offence alleged, the custodial period already undergone, the petitioners' cooperation with authorities and the absence of material showing active involvement in claiming or passing input tax credit. On that basis the Court exercised its discretion under Section 439 Cr.P.C. in favour of bail.

Bail granted to the petitioners.

Conditions of bail: personal bond, sureties and passport surrender - Terms and conditions on which bail is to be granted to the petitioners. - HELD THAT: - The Court imposed conditions as a measure to secure attendance and prevent flight: each petitioner was required to furnish a personal bond and two sureties to the satisfaction of the trial court, to appear on all subsequent dates of hearing and as and when called, and to surrender their passports with a prohibition on leaving India without prior court permission. These conditions were deemed necessary and proportionate given the allegations and to safeguard the process of trial.

Bail subject to furnishing specified bonds and sureties, appearance obligations, surrender of passport and prohibition on leaving India without court permission.

Final Conclusion: Bail applications allowed; petitioners released on bail subject to furnishing prescribed personal bond and sureties, appearance conditions, surrender of passports and prior court permission before leaving India.

Grant of bail - Personal liberty versus investigative rights - Nascent stage of investigation - Risk of tampering documentary evidence - Offence under CGST Act involving fraudulent input tax credit

Grant of bail - Personal liberty versus investigative rights - Nascent stage of investigation - Risk of tampering documentary evidence - Bail application of the accused Raghav Aggarwal was dismissed. - HELD THAT: - The court balanced the competing interests of personal liberty and the investigative rights of the prosecuting agency. It observed that, although personal liberty is fundamental, it is not absolute and may be curtailed where necessary to protect the integrity of an ongoing investigation. The investigation in the present matter was held to be at a nascent stage and involved documentary evidence which, the court found, could be tampered with if bail were granted. Having regard to the stage of the investigation and the potential prejudice to the prosecuting agency's ability to investigate, the court concluded that grant of bail would undermine the investigation and therefore refused bail.

Bail dismissed on the ground that the investigation was at a nascent stage and there was a real risk of tampering with documentary evidence, thereby prejudicing the investigation.

Final Conclusion: The bail application was dismissed; the court refused to grant bail because the investigation was at an early stage and there was a risk that documentary evidence could be tampered with, which would prejudice the prosecuting agency's investigation.

Cancellation of GST registration for non-filing of returns - Revocation of cancellation of registration - Restoration of GST registration - Withdrawal of appeal

Cancellation of GST registration for non-filing of returns - Revocation of cancellation of registration - Restoration of GST registration - Withdrawal of appeal - Appeal dismissed as withdrawn after restoration of the appellant's GST registration and withdrawal of the appeal. - HELD THAT: - The adjudicating authority had cancelled the appellant's GST registration on account of continuous non-filing of returns and had rejected the revocation application for failure to reply to the show cause notice. On personal hearing the appellant's representative stated that the GSTIN had been restored and confirmed by email that the appeal would be withdrawn. The adjudicating authority furnished a report confirming that the GSTIN is active. In view of the restoration of registration and the appellant's withdrawal, the Commissioner (Appeals) allowed the withdrawal and dismissed the appeal as withdrawn. [Paras 6, 7]

Appeal dismissed as withdrawn following restoration of registration and withdrawal by the appellant.

Final Conclusion: The appeal was allowed to be withdrawn and is dismissed as withdrawn because the jurisdictional authority restored the appellant's GST registration and the appellant withdrew the appeal.

Writ of mandamus - stay application - re-hearing - expeditious disposal - mandamus for disposal of appeal - senior citizen consideration - Article 226 of the Constitution

Stay application - re-hearing - writ of mandamus - Re-hearing of the petitioner's stay application (Ext.P3) and direction to the Commissioner (Appeals) to pass orders thereon within a fixed time. - HELD THAT: - The High Court directed that the Commissioner of Income Tax (Appeals) shall conduct a re-hearing of the stay application filed by the petitioner (Ext.P3) with notice to the petitioner, and thereafter pass orders on that application. The Court recognised that Ext.P3 had been heard earlier but remained undecided, and it imposed a timetable for re-hearing and final orders in order to secure expeditious judicial disposal. The directive is a prerogative writ remedy ordering the appellate authority to re-hear and decide the pending interlocutory application within the specified periods, thereby mandating prompt administrative action without adjudicating the merits of the appeal or the stay application itself. [Paras 3]

The Commissioner (Appeals) ordered to re-hear Ext.P3 with notice within two weeks and pass orders on it within a further two weeks.

Expeditious disposal - mandamus for disposal of appeal - senior citizen consideration - Consideration of the petitioner's request for early disposal of the appeal (Ext.P2) in light of his age. - HELD THAT: - The Court recognised that Ext.P2 appeal was pending and ripe for hearing, and, while noting the departmental contention of heavy pendency, directed the appellate authority to consider the petitioner's request for early disposal of the appeal. The order does not decide the merits of the appeal but instructs the Commissioner (Appeals) to give due regard to the petitioner's advanced age (80 years) and endeavour expeditious disposal. This is a supervisory direction under Article 226 to facilitate timely adjudication rather than a determination on the substance of the appeal. [Paras 1, 3]

The Commissioner (Appeals) to consider the request for early disposal of Ext.P2, having regard to the petitioner being a senior citizen, and take appropriate steps for expeditious hearing/decision.

Final Conclusion: Writ petition disposed by directing the Commissioner of Income Tax (Appeals) to re-hear the stay application within two weeks and decide it within a further two weeks; the Commissioner is also directed to consider and endeavour early disposal of the pending appeal in view of the petitioner's advanced age.

Reopening of assessment on the basis of information and formation of reasons to believe - best judgment assessment consequent to non-compliance - explanation of unexplained cash deposits and burden to account for source of funds - effect of time-lag between withdrawal and subsequent deposit as not establishing diversion of funds - deletion of additions where withdrawals sufficiently explain deposits

Reopening of assessment on the basis of information and formation of reasons to believe - Validity of reopening the assessment proceedings initiated on the basis of AIR information - HELD THAT: - The Tribunal found that the Assessing Officer had requisite information (AIR data showing cash deposits) and had applied his mind to form a reason to believe that income had escaped assessment. The reopening was therefore held to be valid and in accordance with statutory requirements; the alternative contentions that proceedings were a mere mechanical initiation without application of mind were rejected. The order sustaining the reopening and consequent proceedings was affirmed. [Paras 7]

Reopening of assessment sustained; grounds challenging validity of reopening dismissed.

Explanation of unexplained cash deposits and burden to account for source of funds - effect of time-lag between withdrawal and subsequent deposit as not establishing diversion of funds - deletion of additions where withdrawals sufficiently explain deposits - Whether the addition made on account of alleged unexplained cash deposits was justified, and to what extent the deposits were explained by prior cash withdrawals - HELD THAT: - On examination of the cash flow statement and bank transactions, the Tribunal accepted that substantial portions of the deposits were traced to earlier cash withdrawals from the same bank account. The Tribunal found that certain deposits on specified dates were adequately explained as being sourced from earlier withdrawals and that mere time-lag between withdrawal and subsequent deposit did not, without contrary evidence, indicate diversion of funds. Applying this reasoning, the Tribunal held that part of the addition confirmed by the CIT(A) was not sustainable and directed deletion of that portion, while leaving the balance addition intact for which explanation was not shown. [Paras 8]

Addition of Rs. 514,000/- sustained in part; Rs. 340,000/- out of the addition deleted as explained, balance upheld.

Final Conclusion: The appeal is partly allowed: the reopening of assessment was upheld, but on the merits the Tribunal deleted Rs. 340,000/- from the addition sustained by the CIT(A) as those deposits were satisfactorily explained by prior cash withdrawals; the remainder of the addition stands.

Revenue expenditure - capital expenditure - deduction under section 37 for business expenditure - forfeiture and repayment of booking advances - treatment of refunded forfeiture previously taxed - consistency in tax treatment

Revenue expenditure - deduction under section 37 for business expenditure - forfeiture and repayment of booking advances - treatment of refunded forfeiture previously taxed - capital expenditure - Whether the repayment of a previously forfeited booking amount of Rs. 355,999 made in the year under appeal is allowable as a business (revenue) expenditure under section 37, or is to be treated as capital expenditure and disallowed. - HELD THAT: - The assessee, engaged in real estate development, had earlier received and offered to tax a forfeited booking amount in assessment year 2015-16. During the year under appeal the assessee refunded the same sum to the allottees when the allotment was cancelled. The Tribunal concluded that the repayment arose directly from the assessee's business of real estate (booking and allotment of units) and was incurred wholly and exclusively for the purpose of that business. The Tribunal rejected the lower authorities' characterization of the repayment as capital expenditure, observing that the amount initially received had been treated as revenue receipt and taxed; to treat the later refund as capital expenditure would be inconsistent. Applying the principle that expenditures arising out of and necessary to the business operations (here, refunding forfeited booking consideration upon cancellation) are revenue in nature, the Tribunal held the payment deductible under the provision relating to business expenditure. The Tribunal therefore set aside the disallowance and directed deletion of the addition.

The repayment of the forfeited booking amount is revenue expenditure deductible under section 37 and the disallowance is deleted.

Final Conclusion: The appeal is allowed: the Tribunal deleted the disallowance of Rs. 355,999 for AY 2016-17, holding the refunded forfeiture to be a revenue expenditure wholly and exclusively incurred for the assessee's real estate business and allowable under section 37.

Settlement under The Direct Tax Vivad Se Vishwas Scheme, 2020 - Dismissal of appeal consequent to taxpayer's election under settlement scheme - Conditional reinstitution of appeal if settlement does not finally resolve tax arrears

Settlement under The Direct Tax Vivad Se Vishwas Scheme, 2020 - Dismissal of appeal consequent to taxpayer's election under settlement scheme - Whether the appeal should be dismissed in view of the assessee's election to settle the dispute under The Direct Tax Vivad Se Vishwas Scheme, 2020. - HELD THAT: - The assessee filed Forms 1 and 2 and informed the Tribunal that it had opted to settle the tax dispute for the assessment year under the aforesaid Scheme. Having considered the communication and the documentation placed on record, the Tribunal dismissed the present appeal on that basis. The dismissal was conditioned upon the settlement proceeding under the Scheme and was recorded after noting the assessee's election to avail the statutory settlement mechanism. [Paras 3, 4, 5]

Appeal dismissed in view of the assessee's election to settle the dispute under The Direct Tax Vivad Se Vishwas Scheme, 2020.

Conditional reinstitution of appeal if settlement does not finally resolve tax arrears - Whether the assessee may seek reinstitution of the appeal if the settlement under the Scheme does not ultimately resolve the tax arrears. - HELD THAT: - The Tribunal recorded a caveat that if the dispute relating to tax arrears for the assessment year is not finally resolved under the Scheme, the assessee shall be at liberty to approach the Tribunal for reinstitution of the appeal. The Tribunal further stated that it would consider any such application as per law. The Revenue raised no objection to this procedural safeguard. This preserves the assessee's right to seek revival of the appeal in the event the settlement fails to achieve final resolution. [Paras 4]

Assessee permitted to apply for reinstitution of the appeal if the settlement under the Scheme does not finally resolve the tax arrears; Tribunal to consider such application as per law.

Final Conclusion: The appeal was dismissed in view of the assessee's election to settle the dispute under The Direct Tax Vivad Se Vishwas Scheme, 2020, subject to a caveat permitting reinstitution of the appeal if the settlement does not ultimately resolve the tax arrears; the Revenue raised no objection to this arrangement.

Reopening of assessment - reasons to believe for income escaping assessment - sanction under section 151 as pre condition for issuing notice under section 148 - mechanical sanction / lack of application of mind - quasi judicial function of sanctioning authority - reliance on investigation report and admissions found in search/seizure - accommodation entries and addition under section 68

Sanction under section 151 as pre condition for issuing notice under section 148 - mechanical sanction / lack of application of mind - quasi judicial function of sanctioning authority - Validity of reopening of assessment where Principal Commissioner of Income Tax accorded sanction and whether such sanction and the reasons recorded by the Assessing Officer demonstrate application of independent/judicial mind. - HELD THAT: - Tribunal examined the approval accorded by the Principal CIT and the reasons recorded by the AO for reopening. The Principal CIT's endorsement merely stated 'Yes. I am satisfied' without production of the Annexure said to contain the reasons on which satisfaction was purportedly formed, and there was no material on record showing what documents were perused or what reasoning led to satisfaction. The AO's reasons were largely a recital of the Investigation Wing's report and admissions recorded during search/survey, without independent examination of the profile, creditworthiness or genuineness of the companies alleged to have provided accommodation entries; the AO also widened the scope after issuing the notice by including an additional company for which no reason sufficient to form belief was recorded. The Tribunal held that the function of according sanction is quasi judicial and requires application of mind, that mechanical or ritualistic approval is unsustainable, and that the reopening cannot be sustained where both the sanction and the reasons to believe are tainted by lack of independent consideration. The Tribunal relied on earlier decisions and judicial guidelines emphasising that the reasons and the sanctioning endorsement must be self speaking and reflect meaningful application of mind. Given these defects, the Tribunal declined to consider the merits of the addition since the initiation of reassessment itself was held invalid. [Paras 20, 21, 22, 24, 25]

Reopening held invalid; sanction and reasons quashed for being mechanical and lacking application of mind, and reassessment proceedings under sections 147/148 are quashed.

Final Conclusion: Reassessment for Assessment Year 2010-11 was invalidly initiated: sanction by the Principal CIT and the AO's reasons lacked independent application of mind and were mechanical; reassessment is quashed and the appeal is allowed.

Revision under section 263 of the Income-tax Act - Erroneous and prejudicial to the interests of the revenue - Requirement of inquiry or verification by the Assessing Officer - Acceptance of explanation by the Assessing Officer after scrutiny - Family partition as source of cash deposits

Revision under section 263 of the Income-tax Act - Erroneous and prejudicial to the interests of the revenue - Acceptance of explanation by the Assessing Officer after scrutiny - Family partition as source of cash deposits - Whether the Principal Commissioner was justified in treating the Assessing Officer's assessment for AY 2009-10 as erroneous and prejudicial to the interests of revenue and in invoking revision under section 263. - HELD THAT: - The Tribunal examined whether both prerequisites for exercise of powers under section 263 - that the assessment order is erroneous and that such error is prejudicial to revenue - were satisfied. The record shows that the AO had specifically called for explanation about cash deposits, the assessee responded in writing on the dates indicated and furnished bank passbook, copy of sale agreement and family partition memorandum and death certificate. The AO accepted the explanation after scrutiny and framed assessment accordingly. The Tribunal found that the evidence on record (sale deed dated 05.01.2008, family partition dated 21.05.2008 and bank entries of cash deposits on 22.05.2008) established nexus between the deposits and the family partition; the AO had made requisite enquiries and applied his mind. In these circumstances the order could not be regarded as passed without inquiry or as allowing relief without inquiry; therefore the order was not shown to be erroneous and prejudicial to revenue as required for valid exercise of section 263. The Principal Commissioner, having ignored the material on record and the inquiries made by the AO, wrongly assumed jurisdiction under section 263. [Paras 11, 20, 21, 22]

The Tribunal held that the conditions for exercise of revisionary powers under section 263 were not satisfied; the Principal Commissioner's order setting aside the AO's assessment was quashed and the AO's assessment order dated 12.12.2016 was restored.

Final Conclusion: Appeals allowed. The order passed by the PCIT under section 263 was quashed and the assessment order framed by the Assessing Officer for AY 2009-10 is restored.

Levy of fee under section 234E - processing under section 200A - prospective application of Finance Act, 2015 amendment to section 200A - deletion of fees levied for delay prior to 01.06.2015

Levy of fee under section 234E - processing under section 200A - prospective application of Finance Act, 2015 amendment to section 200A - deletion of fees levied for delay prior to 01.06.2015 - Whether the Revenue was justified in levying fee under section 234E in TDS statements processed under section 200A when processing and filing occurred before 01.06.2015. - HELD THAT: - The Tribunal examined prior coordinate-bench decisions and the effect of the Finance Act, 2015 amendment to section 200A. It held that the amendment conferring jurisdiction to levy fee under section 234E is prospective with effect from 01.06.2015; therefore CPC/assessing authorities lack jurisdiction to impose section 234E fees in respect of returns processed prior to that date. The Tribunal applied the same reasoning to the present appeals where the quarterly returns were filed and processed before 01.06.2015 and observed that any portion of fee attributable to delay prior to 01.06.2015 must be deleted; where delay continued beyond 01.06.2015, fees could only be sustained for the period from 01.06.2015 to the date of actual filing. The Tribunal directed revenue authorities to verify and delete any fee levied for the pre-01.06.2015 period and confirmed relief to the assessee accordingly. [Paras 8, 9, 10, 11]

Levy of fee under section 234E in respect of returns processed before 01.06.2015 is not sustainable; the appeals are allowed and fees levied for the pre-01.06.2015 period are to be deleted.

Final Conclusion: The Tribunal allowed all six appeals, holding that the Finance Act, 2015 amendment empowering levy under section 234E is prospective from 01.06.2015; fees levied in processing completed before that date are to be deleted and revenue to verify and confirm any fee only for delay occurring from 01.06.2015 onwards.

Taxation of profit element in bogus purchases - estimation of gross profit as a permissible assessment method - revisional jurisdiction under section 263 - requirement of an erroneous order prejudicial to revenue - scope of two views doctrine in assessment proceedings

Taxation of profit element in bogus purchases - estimation of gross profit as a permissible assessment method - Assessment Officer was justified in estimating and taxing the gross profit embedded in alleged bogus/accommodation purchases rather than adding the entire amount of such purchases to the assessee's income. - HELD THAT: - The Tribunal found that the Assessing Officer, after reopening and conducting investigations, accepted the sales declared by the assessee and concluded on the basis of records that certain purchases were accommodation entries. Given acceptance of sales, the Assessing Officer reasonably assumed that the assessee procured corresponding goods from the grey market and obtained bogus bills from entry providers; accordingly he estimated the gross profit at 12.5% on such entries to tax the profit element. The Tribunal relied on jurisdictional High Court decisions holding that where sales/turnover are not disputed, purchases which are found to be bogus need not be wholly added back and only the profit element embedded in such bogus purchase bills is to be brought to tax. The Assessing Officer's approach therefore represented one permissible view and was in line with judicial precedents; consequently taxing only the profit element, rather than the entire alleged purchases, was legally sustainable. [Paras 4, 5, 6, 7]

Addition limited to the profit element by estimating gross profit was upheld and the Assessing Officer's estimation treated as a permissible view.

Revisional jurisdiction under section 263 - requirement of an erroneous order prejudicial to revenue - scope of two views doctrine in assessment proceedings - The Principal Commissioner of Income Tax erred in invoking section 263 because the two conditions for exercise of revisional power (an erroneous order and prejudice to revenue) were not satisfied where the Assessing Officer had taken a legally sustainable view. - HELD THAT: - Section 263 can be invoked only when the AO's order is both erroneous and prejudicial to the interests of revenue. The Tribunal observed that where two views are possible and the Assessing Officer has adopted one such view after examining the record, disagreement by the Commissioner does not render the order erroneous. Applying this principle, and having held that the AO's estimation of gross profit was a permissible approach supported by documents and judicial authority, the Tribunal concluded that the PCIT had merely disagreed with a tenable view and thereby overstepped his revisional powers. Reliance was placed on the Supreme Court precedent that an assessment cannot be treated as erroneous merely because the Commissioner prefers a different view. [Paras 6, 8, 9]

Impugned orders passed under section 263 were quashed as the statutory conditions for revision were not fulfilled.

Final Conclusion: The Tribunal quashed the Principal Commissioner of Income Tax's orders passed under section 263 for Assessment Years 2011-12, 2012-13 and 2013-14, upheld the Assessing Officer's approach of taxing only the profit element by estimating gross profit on alleged bogus purchases, and allowed the assessee's appeals.

Deduction under section 10AA of the Income-tax Act - voluntary (suo moto) transfer pricing adjustment - arm's length price determined by the assessee - proviso to computation under section 92C(4) not attracted where income is declared suo moto

Deduction under section 10AA of the Income-tax Act - voluntary (suo moto) transfer pricing adjustment - proviso to computation under section 92C(4) not attracted where income is declared suo moto - Assessee's entitlement to claim deduction under section 10AA on income arising from a voluntary transfer pricing adjustment offered by the assessee. - HELD THAT: - The Tribunal held that where the assessee itself computes arm's length price and offers additional income on a suo moto basis in its return, such income is business profit offered to tax and must be taken into account for computing deduction under section 10AA. The proviso in the computation provision dealing with disallowance of deduction applies where the arm's length price/income is determined by the Assessing Officer/TPO and results in enhancement of income; it does not apply to cases where the assessee has already declared the adjusted income. The Tribunal followed its earlier coordinate decisions (including the assessee's own bench decision and the Pune bench decision in Apoorva Systems) and the view of the jurisdictional High Court in iGate Global Solutions Ltd. that deductions under section 10A/10AA are allowable on income declared by the assessee on the basis of arm's length computation made by the assessee itself, since there is no subsequent enhancement by the authorities invoking the proviso to section 92C(4). Applying those precedents, the Tribunal directed that the deduction under section 10AA be allowed in respect of the voluntary transfer pricing adjustment. [Paras 5]

Deduction under section 10AA allowed in respect of the voluntary transfer pricing adjustment declared by the assessee; appeal partly allowed.

Final Conclusion: The Tribunal allowed the assessee's claim and directed that deduction under section 10AA be granted in respect of the voluntary transfer pricing adjustment for AY 2011-12; the appeal is partly allowed.

Recognition under section 80G - non-speaking order - remand for fresh consideration - opportunity of being heard - charitable purpose requirement for registration - generation of surplus and fee receipts not a ground to deny 80G

Non-speaking order - recognition under section 80G - Impugned order of the CIT(E) rejecting the application for recognition under section 80G is a non-speaking order. - HELD THAT: - The Tribunal found that the CIT(E)'s order did not specify which statutory condition under section 80G(5) was contravened and therefore failed to record reasons sufficient to enable understanding of the basis for refusal. The absence of articulated findings on the statutory conditions renders the order non-speaking and inadequate for appellate review. [Paras 6]

Order of the CIT(E) is set aside as non-speaking and cannot stand.

Generation of surplus and fee receipts not a ground to deny 80G - charitable purpose requirement for registration - recognition under section 80G - Whether generation of surplus and majority of receipts by way of fees justify denial of recognition under section 80G. - HELD THAT: - The Tribunal accepted the assessee's position that it exists for charitable purposes, as evidenced by registration under section 12AA. The mere generation of surplus and that most receipts are fees was held not to be a ground specified under section 80G(5) for refusal of recognition; therefore such observations in the impugned order do not constitute valid statutory reasons to deny 80G recognition. [Paras 6]

Generation of surplus and predominance of fee receipts are not valid statutory grounds to refuse recognition under section 80G.

Remand for fresh consideration - opportunity of being heard - recognition under section 80G - Whether the matter should be remitted to the CIT(E) for fresh consideration and a speaking order. - HELD THAT: - Having held the impugned order to be non-speaking and that the cited observations are not proper statutory grounds, the Tribunal directed that the application for 80G recognition be remanded to the CIT(E) for fresh adjudication. The CIT(E) is required to afford the assessee an opportunity of being heard and to record specific reasons linked to the statutory conditions while passing a fresh speaking order. [Paras 6]

Matter remanded to the CIT(E) for fresh consideration with direction to afford hearing and pass a reasoned speaking order on 80G recognition.

Final Conclusion: Impugned order of the CIT(E) rejecting grant of recognition under section 80G is set aside as non-speaking; the issue is remitted to the CIT(E) for fresh consideration and a reasoned order after affording the assessee an opportunity of being heard; appeal treated as allowed for statistical purposes.

Proviso to section 56(2)(vii)(b) - stamp duty value as on date of agreement - date of agreement fixing the amount of consideration - character of booking letter as an agreement for section 56(2)(vii)(b) purposes

Proviso to section 56(2)(vii)(b) - stamp duty value as on date of agreement - date of agreement fixing the amount of consideration - character of booking letter as an agreement for section 56(2)(vii)(b) purposes - Whether the proviso to section 56(2)(vii)(b) applies so that stamp duty value as on the date when the parties fixed the consideration (booking letter dated 2 August 2012) must be taken for computing deemed income under section 56(2)(vii)(b) instead of stamp duty value on date of registration/sale. - HELD THAT: - The Tribunal examined the documents relied upon by the assessee and held that the total consideration for the flat was mutually agreed between the parties at the time of booking (booking letter dated 2 August 2012) and that the term 'agreement' in the proviso is not confined to a document titled 'agreement' but includes the first document reflecting the parties' intention to fix the consideration. Applying the proviso to sub-clause (b) of section 56(2)(vii), the Tribunal concluded that where the date of agreement fixing consideration and the date of registration are not the same, the stamp duty value on the date of the agreement (i.e., the booking date) is to be taken for the purposes of sub-clause (b). The Tribunal rejected the Department's contention that the date of transfer of ownership (registration/execution of registered sale agreement) is decisive for determining stamp duty value under section 56(2)(vii)(b), observing that the provision does not require transfer of title for this purpose. The assessee's registered valuer report fixing stamp duty value in August 2012 was accepted as establishing the relevant stamp duty value on the date of agreement. [Paras 6, 7, 8]

The proviso to section 56(2)(vii)(b) applies; stamp duty value as on 2 August 2012 (date of booking/agreement fixing consideration) is to be taken and the addition made by the Assessing Officer under section 56(2)(vii)(b)(ii) is set aside; the assessee's appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the booking letter of 2 August 2012 constituted the agreement fixing the consideration and that, under the proviso to section 56(2)(vii)(b), the stamp duty value as on that date is to be taken for computing deemed income; the addition made by the Assessing Officer was set aside.

Section 68 - unexplained credits - Genuineness and creditworthiness of creditors - Proof of purchases and corresponding sales as a defence to addition - Profit element addition on unverifiable/bogus purchases - Acceptance without rejection of books of account

Section 68 - unexplained credits - Genuineness and creditworthiness of creditors - Proof of purchases and corresponding sales as a defence to addition - Acceptance without rejection of books of account - Whether the addition under Section 68 in respect of sundry creditors shown in the books could be sustained where the assessee furnished purchase documents, maintained stock records, sales were accepted and books were not rejected but some creditors were not fully verifiable before the Assessing Officer. - HELD THAT: - The Tribunal examined the material on record and the remand report and found that (a) the assessee's books of account were not rejected and export sales had been accepted by the AO; (b) the assessee maintained item-wise and quantity-wise stock and purchase records; (c) bills, freight particulars and ledger accounts showing payments in subsequent years were produced during remand proceedings; and (d) the AO in the remand report accepted that payments to the six sundry creditors were made in subsequent years by cheque/RTGS/NEFT or cash and there was no material on record to show that amounts so paid had returned to the assessee. In these circumstances the Tribunal held that making an addition of the entire outstanding amounts as income under Section 68 was not justified. The Tribunal applied the principle that where purchases correspond to accepted sales and books are not rejected, the assessee is entitled to have the transactions treated as genuine subject to appropriate quantification of any suspicious element. The Tribunal therefore declined to sustain the AO's disallowance in full, while observing that the assessee could not be wholly exonerated for not producing certain creditors or for dealing with parties maintaining inadequate records. [Paras 26, 27, 28]

Addition of the entire amounts held to be unsustainable; AO's and CIT(A)'s findings that all outstanding creditor amounts be charged to income under Section 68 set aside insofar as full addition was concerned.

Profit element addition on unverifiable/bogus purchases - Genuineness and creditworthiness of creditors - If full addition is not warranted, whether the proper remedy is to restrict the addition to the profit element embedded in the unsubstantiated purchases and, if so, the quantum to be adopted. - HELD THAT: - Applying precedents and considering the facts - low gross profit rate shown by the assessee, accepted sales, non-rejection of books, production of some creditors and evidence of payments in subsequent years - the Tribunal concluded that the fair course was to tax the profit margin embedded in the unsubstantiated purchases rather than add the entire purchase amounts. Taking into account the totality of facts and the assessee's low GP, the Tribunal fixed a notional GP rate of 16% to be applied on the disputed purchase amount of Rs. 3,05,34,283/-, thereby arriving at a restricted addition representing the profit element. The Tribunal directed the AO to adopt this GP rate and compute the addition accordingly, thereby reducing the addition made by AO and confirmed by CIT(A). The Tribunal explained that precedents dealing with loans/advances under Section 68 were distinguishable where those involved cash loans and no corresponding sales or where books were rejected. [Paras 32, 34]

Addition restricted to profit element by directing the AO to adopt a gross profit rate of 16% on purchases of Rs. 3,05,34,283/-, resulting in a reduced addition; appeal partly allowed.

Final Conclusion: The Tribunal partially allowed the appeal for A.Y. 2014-15: it held that the AO/CIT(A) could not sustain addition of the entire sundry-creditor balances to the assessee's income under Section 68 where sales were accepted and books not rejected, but directed that the addition be restricted to the profit element by applying a gross profit rate of 16% on the disputed purchases; appeal partly allowed and matter remitted to AO for computation accordingly.

Characterisation of punitive/overloading charges as compensatory - allowability of compensatory charges under section 37 - disallowance under section 14A read with Rule 8D limited to investments yielding exempt income - requirement of Assessing Officer's satisfaction under section 14A and Rule 8D

Characterisation of punitive/overloading charges as compensatory - allowability of compensatory charges under section 37 - Deletion of addition of railways 'punitive' charges by treating them as compensatory and allowable under section 37 - HELD THAT: - The Tribunal examined whether charges labelled by the Railways as 'punitive' for overloading of wagons are penal (and therefore not allowable) or compensatory in nature and deductible under section 37. Relying on the factual matrix that overloading arose from lack of weightment infrastructure and that the Railways routinely levies additional freight for excess carriage (permitted by Railway Notification), the Tribunal followed coordinate-bench precedents which hold such payments to be additional freight/compensatory rather than punitive. The Tribunal applied the settled principle that substance prevails over nomenclature and that where the statutory scheme and notifications show the impost to be commercial/compensatory and not a penalty for violation of law, Explanation to section 37(1) is not attracted. Having found the issue covered in favour of the assessee by earlier coordinate-bench decisions, the Tribunal found no infirmity in the CIT(A)'s deletion of the addition.

Addition deleted; revenue's ground dismissed and no interference with CIT(A) order.

Disallowance under section 14A read with Rule 8D limited to investments yielding exempt income - requirement of Assessing Officer's satisfaction under section 14A and Rule 8D - Validity of disallowance made under section 14A read with Rule 8D and scope of investments to be considered for computing disallowance - HELD THAT: - The Tribunal considered whether the AO correctly computed and made disallowance under section 14A r.w. Rule 8D by taking broader investments rather than restricting computation to investments that yielded exempt income. Following the coordinate-bench reasoning and the jurisdictional High Court rulings, the Tribunal held that: (i) section 14A and Rule 8D require the AO to record a satisfaction based on the assessee's accounts before invoking the provisions; (ii) only those investments which have given rise to income that does not form part of total income (i.e., investments yielding exempt income) are to be considered in the numerator for computation under Rule 8D(2)(ii) and consequently for Rule 8D(2)(iii); and (iii) the AO cannot aggregate all investments including those which did not yield exempt income. The Tribunal found the CIT(A)'s direction to the AO for recomputation in line with these principles to be justified and concluded that the disallowance sustained by the AO was not sustainable.

Addition under section 14A r.w. Rule 8D deleted/recomputation directed; revenue's ground dismissed and CIT(A) order upheld.

Final Conclusion: The Revenue's appeal is dismissed in full; the Tribunal upholds the CIT(A)'s deletion of the additions relating to railways overloading charges and the disallowance under section 14A read with Rule 8D.

Reason to believe - borrowed satisfaction - section 147 jurisdiction to reopen - validity of notice under section 148 - service vs issue of notice - limitation for issuance of notice under section 149 - time limit for completion of reassessment under section 153(2) - section 292BB deemed service - Rule 27 ITAT Rules

Service vs issue of notice - validity of notice under section 148 - limitation for issuance of notice under section 149 - time limit for completion of reassessment under section 153(2) - section 292BB deemed service - Whether the reopening notice dated 31.03.2016 and subsequent assessment dated 11.12.2017 were within the statutory limitation prescribed by Sections 149 and 153(2) of the Act. - HELD THAT: - The Tribunal held that issuance of notice under section 148 within the outer limit fixed by section 149 (i.e. on 31.03.2016) vested jurisdiction in the Assessing Officer to reopen the assessment. However, the time for completion of assessment/reassessment under section 153(2) runs from the end of the financial year in which the notice under section 148 was served on the assessee. As the notice was served by e-mail on 22.09.2016, the relevant financial year ended 31.03.2017 and the AO had to complete reassessment within nine months thereafter (i.e. by 31.12.2017). The reassessment was completed on 11.12.2017, which was within the period prescribed by section 153(2). The Tribunal therefore reversed the Appellate Authority's reliance on Benarasi Debi and followed the principle in R.K. Upadhyaya v. Shanbhai P. Patel that issuance within the period under section 149 confers jurisdiction while the completion period under section 153(2) is measured from service; section 292BB was considered in the record but not decisive on this point. [Paras 5]

The issuance (31.03.2016) and later service (22.09.2016) of the section 148 notice resulted in a valid reopening and the assessment framed on 11.12.2017 was within the time prescribed by section 153(2) and therefore valid.

Reason to believe - borrowed satisfaction - section 147 jurisdiction to reopen - Rule 27 ITAT Rules - Whether the reasons recorded by the Assessing Officer to reopen the assessment satisfy the legal requirement of 'reason to believe' under section 147 or whether the reopening was based on vague information/borrowed satisfaction and therefore void. - HELD THAT: - Admitting the alternate ground under Rule 27, the Tribunal examined the reasons recorded by the AO. The recorded reasons merely recited that the Investigation Wing had conducted an enquiry and described a general modus operandi of entry operators, without identifying any accounts, operators, dates or facts linking the investigation to the assessee. The Tribunal applied the settled law that 'reason to believe' must disclose a live link between tangible material and the belief that income has escaped assessment; mere reproduction of an investigation report or general information amounts at best to a 'reason to suspect' and is insufficient. The AO had not applied independent mind, had not conducted any preliminary enquiry to link the information to the assessee, and relied on a borrowed satisfaction. Consequently the jurisdictional fact necessary for exercise of section 147 was absent and the reopening was quashed. [Paras 20, 21, 22]

The reasons recorded are vague and constitute borrowed satisfaction; the Assessing Officer lacked the requisite 'reason to believe' under section 147, so the reopening and consequent reassessment are null and are quashed on this alternate ground.

Final Conclusion: The revenue's appeal fails. Although the Tribunal held that the notice issued on 31.03.2016 and the assessment of 11.12.2017 were within the limitation prescribed by sections 149 and 153(2), the reopening was nevertheless quashed on the alternate and admitted ground that the Assessing Officer's reasons did not disclose a valid 'reason to believe' (being vague and based on borrowed satisfaction); the reassessment order is therefore annulled.

Revisionary jurisdiction under section 263 - Explanation 2 to section 263 - Erroneous and prejudicial to the interests of revenue - Inadequate enquiry versus lack of enquiry - Requirement of the Commissioner to conduct verification before remitting for fresh enquiry - Finality of assessment and impermissibility of substitution of opinion

Revisionary jurisdiction under section 263 - Explanation 2 to section 263 - Erroneous and prejudicial to the interests of revenue - Inadequate enquiry versus lack of enquiry - Requirement of the Commissioner to conduct verification before remitting for fresh enquiry - Finality of assessment and impermissibility of substitution of opinion - Validity of the Principal CIT's exercise of revisional jurisdiction under section 263 in setting aside the assessment framed under section 143(3) in respect of claimed long term capital gains from sale of shares. - HELD THAT: - The Tribunal found that the Assessing Officer had issued a detailed show cause notice specifically querying the genuineness of the long term capital gains from sale of shares of M/s Jackson Investment Ltd., called for and considered documentary evidence (contract notes, bank statements, demat statements, share transfer letters) and, after considering judicial precedents, accepted the assessee's claim in the assessment order dated 29.11.2017. The Principal CIT invoked section 263 (relying on material from the Investigation Wing and Explanation 2) on the ground that the AO had not made proper enquiries and directed fresh examination. Applying binding and coordinate jurisprudence, the Tribunal held that Explanation 2 does not confer unfettered power to the CIT to substitute his view for that of the AO or to remit the matter for further enquiry without the CIT himself forming and recording a clear, non debatable finding that the AO's order is unsustainable in law. Where the AO has made enquiries and reached a plausible reasoned view on the basis of material on record, the CIT must conduct such verification or inquiry as is necessary to demonstrate that the AO's view is erroneous and prejudicial to revenue before exercising revisional power; mere disagreement or a preference for more exhaustive enquiries by the CIT is insufficient. On the facts, the Tribunal found that the Principal CIT did not undertake independent verification to establish error and prejudiciality but merely remitted the matter, amounting to substitution of opinion and an impermissible exercise of jurisdiction. Following relevant decisions of the High Courts and coordinate Benches, the Tribunal held the s.263 order to be without jurisdiction and quashed it. [Paras 6, 11, 12, 13]

Impugned order passed by the Principal CIT under section 263 quashed; assessment framed under section 143(3) is restored and the assessee's appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the Principal Commissioner's invocation of section 263 was unsustainable because the Assessing Officer had conducted specific enquiries and recorded a reasoned view; the CIT failed to conduct independent verification to show the AO's order was erroneous and prejudicial, and thus the revisional order setting aside the assessment was quashed.

Disqualification of directors under Section 164(2) of the Companies Act, 2013 - vacation of office under Section 167(1) of the Companies Act, 2013 - deactivation/reactivation of Director Identification Number (DIN) - publication of list of disqualified directors by the Registrar of Companies - requirement of enquiry to attribute default to specific directors

Deactivation/reactivation of Director Identification Number (DIN) - disqualification of directors under Section 164(2) of the Companies Act, 2013 - vacation of office under Section 167(1) of the Companies Act, 2013 - Validity of deactivation of DIN and publication of list of disqualified directors by the Registrar of Companies - HELD THAT: - The Court followed the earlier decision of the First Bench in Meethelaveetil Kaitheri Muralidharan (cited) and held that the Rules governing allotment and cancellation/deactivation of DIN do not permit deactivation of a DIN by reason of disqualification under Section 164(2). Deactivation would be contrary to the scheme of Section 164(2) read with Section 167(1) because a director disqualified for defaults by one company may still need to retain the DIN to file documents and to discharge obligations in relation to that defaulting company. Accordingly, publication of the list of disqualified directors and deactivation of DIN in the notifications under challenge were quashed, and the DINs were ordered to be reactivated in accordance with the precedent relied upon.

Publication of the list of disqualified directors and deactivation of DIN quashed; DINs to be reactivated as per the earlier First Bench judgment.

Publication of list of disqualified directors by the Registrar of Companies - requirement of enquiry to attribute default to specific directors - Extent of Registrar of Companies' power to proceed against directors after quashing of publication/deactivation - HELD THAT: - While quashing the impugned publication and deactivation, the Court made clear (following the First Bench) that the Registrar of Companies remains free to initiate action regarding disqualification, provided such action is preceded by an enquiry to determine attribution of default to particular directors. The Court permitted the ROC to undertake proceedings to decide responsibility for defaults, subject to the observations and conclusions in the earlier authority, thereby leaving open administrative and adjudicatory remedies available to the ROC within the statutory scheme.

ROC may initiate action to determine disqualification after conducting an enquiry to attribute default to specific directors.

Final Conclusion: The writ petitions are allowed by following the First Bench decision in Meethelaveetil Kaitheri Muralidharan's case: the impugned publications and deactivation of DINs are quashed and DINs are to be reactivated, while leaving it open to the Registrar of Companies to proceed with enquiries to attribute defaults to specific directors.

Scheme of Arrangement by way of Demerger - Application under sections 230-232 of Companies Act, 2013 for sanction of scheme of arrangement - dispensing with convening of meetings of shareholders, secured creditors and unsecured creditors - consent affidavits as basis for dispensing with meetings - appointed date - service of notice on statutory authorities and disclosure to Income Tax Authorities

Dispensing with convening of meetings of shareholders, secured creditors and unsecured creditors - consent affidavits as basis for dispensing with meetings - Scheme of Arrangement by way of Demerger - Whether convening of meetings of shareholders, secured creditors and unsecured creditors in respect of the proposed scheme of demerger could be dispensed with for the applicant companies. - HELD THAT: - The Tribunal recorded that both applicant companies filed certificates from chartered accountants listing shareholders and creditors and placed on record affidavits of consent. For Applicant Company No.1 both equity shareholders (100% voting share), the sole secured creditor (100% voting share) and unsecured creditors holding 98.97% in total value gave consent affidavits. For Applicant Company No.2 all five equity shareholders (100% voting share), the sole secured creditor (100% voting share) and unsecured creditors holding 96.97% in total value gave consent affidavits. In view of these consents, and having considered the documents and submissions, the Tribunal dispensed with convening the meetings of shareholders, secured creditors and unsecured creditors in respect of the proposed scheme of demerger for the respective companies. [Paras 7, 8, 10]

Convening of meetings of shareholders, secured creditors and unsecured creditors is dispensed with for both applicant companies on the basis of the consents placed on record.

Appointed date - service of notice on statutory authorities and disclosure to Income Tax Authorities - filing timeline - Directions as to appointed date, service of notices on statutory authorities and timeline for filing the petition for approval of the scheme. - HELD THAT: - The Scheme specifies the appointed date as 1 April 2019, subject to directions of the Tribunal. The Tribunal directed that notice of the application be served on the Regional Director, Registrar of Companies, Official Liquidator and Income Tax Department. Notices to Income Tax Authorities must disclose sufficient details (such as PAN, ward and assessing officers) to enable timely and proper reply. The Tribunal further directed that the petition for approval of the scheme of arrangement be filed within seven days from the date of the order. [Paras 9, 10]

Appointed date recorded as 01st April, 2019 (subject to Tribunal directions); notices to specified statutory authorities to be served with requisite disclosure to Income Tax Authorities; petition for approval to be filed within seven days.

Final Conclusion: The application under the Companies Act, 2013 for the proposed scheme of demerger is allowed on the terms recorded: meetings of members and creditors are dispensed with on the basis of consents filed; the appointed date is 01.04.2019 (subject to directions); statutory notices are to be served and the petition for sanction of the scheme is to be filed within seven days.

Scheme of arrangement and amalgamation - Sanction of scheme under sections 230-232 of the Companies Act, 2013 - Transfer and vesting of assets and liabilities under section 232(3) - Reduction of share capital and cancellation of shares - Securities premium account adjustment - Continuity of employees on amalgamation - Filing of certified copy with Registrar of Companies and dissolution of transferor companies - Preservation of rights of tax authorities to recover dues - Compliance with Regional Director's observations regarding filing and payment of differential fee - Official Liquidator's report and payment towards auditor's remuneration

Scheme of arrangement and amalgamation - Sanction of scheme under sections 230-232 of the Companies Act, 2013 - Sanction of the composite scheme of arrangement and amalgamation among the seven petitioner companies. - HELD THAT: - After considering the scheme, statutory compliances, reports and replies from statutory authorities, and the valuation and accounting certifications placed on record, the Tribunal found the scheme prima facie beneficial and not detrimental to shareholders. No material objections were raised by statutory authorities that warrant refusal. The Tribunal therefore sanctioned the scheme appended as annexure A1 and approved the terms contained therein. [Paras 3, 8, 9, 10]

The company petition is allowed and the scheme of arrangement and amalgamation is sanctioned.

Transfer and vesting of assets and liabilities under section 232(3) - Continuity of employees on amalgamation - Effect of the scheme on transfer of properties, liabilities and employment continuity. - HELD THAT: - The Tribunal directed that all properties, rights and interests of the transferor companies shall, pursuant to section 232(3), without further act or deed be transferred to and vest in the transferee company. All liabilities, obligations and duties of the transferor companies shall also transfer to the transferee company. Employees in service immediately before the effective date shall become employees of the transferee company without break or interruption. Pending proceedings by or against transferor companies shall continue by or against the transferee company. [Paras 6, 11]

Assets, liabilities, proceedings and employee services shall stand transferred to the transferee company as per the sanctioned scheme.

Reduction of share capital and cancellation of shares - Securities premium account adjustment - Reduction of the transferee company's equity share capital, cancellation of reduced shares and adjustment of securities premium account. - HELD THAT: - The Tribunal ordered reduction of the transferee company's equity share capital from the stated pre-reduction level to the reduced level and directed the corresponding reduction in the securities premium account upon payment of the consideration per share. Shareholders holding reduced shares were directed to surrender share certificates to enable cancellation. The directions implement the accounting and capital adjustments contemplated by the sanctioned scheme. [Paras 11]

The reduction of equity capital, adjustment of securities premium and cancellation of surrendered share certificates are approved and directed to be carried out.

Filing of certified copy with Registrar of Companies and dissolution of transferor companies - Allotment to non-dissenting members - Post-sanction procedural steps including filing with ROC, allotment to non-dissenting members and dissolution of transferor companies. - HELD THAT: - The Tribunal directed that within thirty days of receipt of the order a certified copy be delivered to the Registrar of Companies for registration; upon such delivery the transferor companies shall be dissolved and the ROC shall consolidate files. The transferee company is directed to allot shares to members who have not given valid notices of dissent as per the scheme without further application. [Paras 11]

Required filings, allotments to non-dissenting members and consequential dissolution and consolidation with the ROC are directed to be carried out.

Preservation of rights of tax authorities to recover dues - Whether sanction of the scheme affects the rights of Income-tax authorities to recover statutory dues. - HELD THAT: - The Tribunal observed that sanctioning the scheme does not extinguish lawful claims of tax authorities. It accepted the transferee company's undertaking to satisfy demands as finally determined by competent forums and noted authorities remain free to proceed against the transferee company in accordance with law. The Tribunal relied on settled precedents and earlier orders indicating that tax authorities retain their recovery rights notwithstanding sanction. [Paras 7]

The rights of Income-tax authorities to recover dues as determined by competent forums are preserved and unaffected by the sanction.

Compliance with Regional Director's observations regarding filing and payment of differential fee - Directive concerning compliance with the Regional Director's observations on filing amended memorandum and payment of fees for increased authorized capital. - HELD THAT: - The Regional Director noted that clause in the scheme excluding payment of further fees for increased authorized capital is contrary to statutory requirements and sought directions for the transferee company to file amended memorandum and make applicable payments to ROC. The transferee company submitted an undertaking to comply with the RD's report. The Tribunal accordingly directed the transferee company to file the revised memorandum and articles with ROC and make requisite payments of the differential fee (if any) after setting off fees paid by transferor companies. [Paras 7, 11]

Transferee company to comply with RD's observations by filing amended MOA/AOA and making requisite payments of differential fee, if any.

Official Liquidator's report and payment towards auditor's remuneration - Acceptance of the Official Liquidator's report and fixation of payment towards the auditor who inspected transferor companies. - HELD THAT: - The Official Liquidator placed on record a report by chartered accountants who inspected the transferor companies and made observations about statutory compliance and contingent liabilities. The Official Liquidator sought to take that report on record and fix remuneration payable to the investigating auditor. The Tribunal directed the transferor companies jointly to pay the Official Liquidator a sum for payment of fees payable towards that auditor. [Paras 7]

The Official Liquidator's report is taken on record and the transferor companies are directed to make the prescribed payment for the auditor's remuneration.

Final Conclusion: The Tribunal, having considered the scheme, statutory reports and submissions, sanctioned the composite scheme of arrangement and amalgamation and issued consequential directions including capital reduction and securities premium adjustment, transfer and vesting of assets and liabilities, employee continuity, allotment to non-dissenting members, compliance with Regional Director's observations, acceptance of the Official Liquidator's report with payment for the investigating auditor, and directed filing of certified copy with the Registrar of Companies resulting in dissolution of the transferor companies; tax authorities' rights to recover dues remain preserved.

Maintainability of Section 7 application under IBC - assignment of debt and right of assignee to initiate CIRP - effect of interim orders of High Court on proceedings before Adjudicating Authority - application of the Limitation Act to IBC proceedings (Section 238A) - duty of Adjudicating Authority to consider limitation suo motu and call for rectification under Section 7(5) - rectification of defects in Form 1 and opportunity to amend pleadings

Maintainability of Section 7 application under IBC - assignment of debt and right of assignee to initiate CIRP - effect of interim orders of High Court on proceedings before Adjudicating Authority - Application under Section 7 of the IBC filed by the assignee (Pegasus/SIB) is maintainable and the Adjudicating Authority's dismissal of the petition on the ground of pending High Court proceedings was erroneous. - HELD THAT: - The Tribunal held that the Adjudicating Authority erred in dismissing the Section 7 petition by treating interim orders in writ proceedings against State Bank of India as a bar to the Financial Creditor (assignee) pursuing CIRP, particularly where South Indian Bank (and its assignee) were not parties to those writ petitions. The petition concerned not only consortium term loan claims but also an independent overdraft facility outside the consortium; therefore the existence of High Court interim orders against SBI did not automatically preclude the assignee from maintaining the Section 7 application. The Adjudicating Authority's broad statement that it could not pass orders in respect of the High Court's jurisdiction or interim orders was insufficient and it failed to apply itself to the record and documents (including Form 1 particulars) which showed separate bases to proceed. For these reasons the Adjudicating Authority's conclusion on maintainability could not be sustained and the Company Petition was restored for fresh consideration. [Paras 13, 14, 19, 21, 28]

Impugned order dismissing CP(IB) No.144/BB/2017 is set aside; the Section 7 application is held to be maintainable and the Company Petition is restored to the file of the Adjudicating Authority.

Application of the Limitation Act to IBC proceedings (Section 238A) - duty of Adjudicating Authority to consider limitation suo motu and call for rectification under Section 7(5) - rectification of defects in Form 1 and opportunity to amend pleadings - The question of limitation was not finally decided and is remitted to the Adjudicating Authority for consideration after permitting the Financial Creditor to rectify and supplement the Form 1/annexures to address limitation and proof of debt. - HELD THAT: - The Tribunal observed that the Adjudicating Authority failed to decide the limitation issue despite parties raising it. Under Section 3 of the Limitation Act and the requirements of Section 7(5) of the Code, the Adjudicating Authority must satisfy itself about prima facie default and limitation; where the application or annexures are deficient it should call upon the applicant to rectify defects before rejecting the petition. Since Section 238A (bringing Limitation Act provisions to bear on IBC) came into effect after filing, fairness requires permitting the assignee to amend the application and produce documents addressing existence of debt and relevant acknowledgements or repayments. The matter is therefore remitted for fresh adjudication on limitation and admission after the applicant is allowed to rectify defects and both parties are heard. [Paras 26, 27, 28]

Limitation and completeness of the Section 7 application remitted to the Adjudicating Authority; Financial Creditor to be permitted to rectify Form 1 and file documents, after which the Adjudicating Authority shall decide admissibility and limitation with opportunity to both parties to be heard.

Effect of interim orders of High Court on proceedings before Adjudicating Authority - assignment of debt and right of assignee to initiate CIRP - I.A. No.69 of 2019 (challenge to maintainability) filed by the Corporate Debtor is dismissed and the Adjudicating Authority's reliance on High Court interim orders to require the assignee to seek clarification was incorrect. - HELD THAT: - The Tribunal found that the Adjudicating Authority had allowed I.A. 69/2019 on the basis that issues pending before the High Court (in writ petitions against SBI) justified dismissal of the Section 7 petition and required the assignee to await High Court clarification. The Tribunal held this approach untenable because the writ proceedings did not make SIB or its assignee parties and because the Section 7 petition also pleaded an overdraft outside the consortium. Consequently I.A. 69/2019 was dismissed and the Company Petition restored. [Paras 11, 14, 20, 28]

I.A. 69 of 2019 is dismissed; the Adjudicating Authority's order which had allowed the I.A. and dismissed the Company Petition is set aside.

Final Conclusion: The impugned order of the Adjudicating Authority is set aside; I.A. 69/2019 is dismissed; CP(IB) No.144/BB/2017 is restored. The Section 7 application is held maintainable but the question of limitation and completeness of Form 1 is remitted to the Adjudicating Authority, which shall permit the Financial Creditor to rectify defects and file supporting documents and thereafter decide admissibility (including limitation) after hearing both parties.

Article 137 of the Limitation Act - Section 7 of the Insolvency and Bankruptcy Code, 2016 - Section 238A of the I&B Code and application of the Limitation Act - Section 22 of the SICA (suspension of legal proceedings during enquiry) - registration of reference before BIFR - continuing cause of action of a guarantee until satisfaction - assignment of debt and rights of assignee - acknowledgement of liability resetting limitation - Regulation 19(7) of the BIFR Regulations - effect of a reference declined to be registered

Article 137 of the Limitation Act - Section 7 of the Insolvency and Bankruptcy Code, 2016 - Section 22 of the SICA (suspension of legal proceedings during enquiry) - continuing cause of action of a guarantee until satisfaction - Section 238A of the I&B Code and application of the Limitation Act - The Section 7 application filed by SASF on 12.03.2019 was not barred by limitation. - HELD THAT: - The Tribunal applied Article 137 of the Limitation Act (as extended to I&B Code proceedings by Section 238A) and examined exclusion under Section 22 of SICA. The first reference (filed 02.03.2001) was registered, taken up and dismissed on 25.06.2002; therefore the period from filing of that reference until its dismissal is to be excluded under Section 22. The second reference was filed on 21.02.2003 and remained pending until repeal of SICA on 01.12.2016; the period from registration of the second reference until repeal is likewise excluded. Consequently, only the interval between dismissal of the first reference and filing of the second (241 days) and the period from repeal (01.12.2016) to filing of the Section 7 application (12.03.2019) (831 days) are to be counted for limitation, totaling 1,072 days, which is within three years from the date of invocation of the corporate guarantee (03.12.2001). The Tribunal further held that a corporate guarantee creates a continuing cause of action until satisfaction and that assignee (SASF) steps into the shoes of the original lender; therefore the claim was live and the Section 7 petition timely. [Paras 6, 7, 8, 11]

Section 7 petition admitted on 12.03.2019 was within limitation and not barred.

Registration of reference before BIFR - Regulation 19(7) of the BIFR Regulations - effect of a reference declined to be registered - Section 22 of the SICA (suspension of legal proceedings during enquiry) - Whether a reference that was dismissed as time-barred could be treated as never made for the purpose of exclusion under Section 22 - the Tribunal held it could not. - HELD THAT: - Regulation 19(3)-(6) show that a reference, once received and found in order, is registered and assigned a serial number; only a reference declined to be registered at scrutiny is deemed not to have been made under Regulation 19(7). In this case the first reference was registered as Case No.160/2001, taken up and dismissed on merits as time-barred; it was not merely declined at scrutiny. Consequently Regulation 19(7) does not apply and the period from filing of the first reference (02.03.2001) until its dismissal (25.06.2002) falls within the scope of Section 22 and must be excluded when computing limitation. [Paras 7]

The registered and dismissed first reference must be treated as having suspended legal proceedings under Section 22; it is not to be treated as never made.

Acknowledgement of liability resetting limitation - coextensive liability of guarantor - assignment of debt and rights of assignee - An acknowledgment of liability by the principal borrower and the coextensive nature of guarantor's liability operate in favour of the assignee; such acknowledgement binds the guarantor and assists limitation computation in favour of the creditor. - HELD THAT: - The Tribunal observed that the liability of the guarantor is coextensive with that of the principal borrower; an acknowledgement by the principal borrower (letter dated 20.12.2016) is binding on the guarantor. The corporate guarantee continues until satisfaction of its terms and the assignee (SASF) succeeds to the rights of the original lender (IDBI). These principles support the view that limitation did not run against SASF so as to bar the Section 7 petition, and that the guarantor could be proceeded against in the same manner as the principal borrower. [Paras 10]

Acknowledgement by the principal borrower and coextensive liability of the guarantor bind the guarantor and do not prevent the Section 7 claim by the assignee.

Final Conclusion: The appeal is dismissed. The Tribunal upheld the Adjudicating Authority's admission of the Section 7 application by SASF against the corporate guarantor, concluding the petition was within limitation after excluding periods under Section 22 of SICA; other pleas raised by the appellant were rejected and no costs ordered.

Corporate Insolvency Resolution Process - simultaneous CIRP against the principal debtor and the corporate guarantor - territorial jurisdiction and consolidation of proceedings under Section 60(2) and (3) of the Insolvency and Bankruptcy Code, 2016 - liability of guarantor and principal debtor under the contract of guarantee - adjustment of claims between concurrent CIRPs

Simultaneous CIRP against the principal debtor and the corporate guarantor - territorial jurisdiction and consolidation of proceedings under Section 60(2) and (3) of the Insolvency and Bankruptcy Code, 2016 - liability of guarantor and principal debtor under the contract of guarantee - adjustment of claims between concurrent CIRPs - Admissibility of an application under Section 7 of the IBC against a corporate guarantor where a CIRP against the principal borrower on the same claim is already pending. - HELD THAT: - The Tribunal held that the IBC does not prohibit initiation or maintenance of CIRP proceedings against both the principal borrower and its corporate guarantor for the same debt. Paragraph 32 of Piramal was examined and distinguished as addressing simultaneous proceedings against two guarantors, not against a principal borrower and its guarantor; Piramal did not notice the substituted text of Section 60(2)-(3). The amended scheme brought by Section 60(2)-(3) (as substituted by Act 26 of 2018) contemplates that proceedings relating to a corporate guarantor shall be filed before, or transferred to, the Adjudicating Authority dealing with the corporate debtor so that both proceedings are before the same Tribunal. Reliance on the Insolvency Law Committee and the decision in Ramakrishnan supports that guarantor liability can be the subject of CIRP and that adjustments between concurrent CIRPs can be effected when amounts are realized; the Court rejected the proposition that a claim in the guarantor's CIRP must be treated as not due merely because a claim is pursued in the borrower's CIRP. Practical consolidation and adjustment (including appointment of same IRP/RP) are appropriate to avoid double recovery and to enable necessary adjustments between proceedings. [Paras 13, 16, 17, 19, 20]

Application under Section 7 against the corporate guarantor is maintainable despite a pending CIRP against the principal borrower; the Adjudicating Authority was directed to admit the application and the same IRP/RP was requested to be appointed in both proceedings.

Final Conclusion: The appeal is allowed; the Impugned Order rejecting admission of the Section 7 application against the corporate guarantor is quashed and set aside, the application is restored and the Adjudicating Authority is directed to admit it and proceed, with the same IRP/RP being appointed in both CIRP matters to facilitate adjustment between the proceedings.

Limitation under Article 137 of the Limitation Act - time of accrual of cause of action for Section 7 proceedings - recovery certificate does not revive a time-barred debt for initiation of CIRP - continuing wrong versus completed injury in limitation law - Adjudicating Authority's duty to suo motu consider limitation under Section 3 of the Limitation Act

Limitation under Article 137 of the Limitation Act - time of accrual of cause of action for Section 7 proceedings - Application under Section 7 of IBC was time barred as the cause of action accrued on classification of accounts as NPA and not from later proceedings - HELD THAT: - The Tribunal applied the settled position that Article 137 governs applications under Sections 7 and 9 of the Code and that the "right to sue" accrues when a default occurs. Where the account was classified as NPA in November 1997, the limitation period began to run from that default and could not be extended merely by subsequent suits or proceedings. Reliance on authoritative Supreme Court decisions (including the principles in B.K. Educational Services, Gaurav Dave and Jignesh Shah) led to the conclusion that proceedings such as suits or OAs do not revive or extend the limitation for an independent Section 7 application; time can be extended only as provided in the Limitation Act. Applying these principles to the facts, the Tribunal held the Section 7 application filed in 2018 was hopelessly barred by limitation and therefore liable to be quashed. [Paras 14, 15, 16, 22, 23]

Section 7 application dismissed as time barred and impugned admission quashed

Recovery certificate does not revive a time-barred debt for initiation of CIRP - continuing wrong versus completed injury in limitation law - Issuance of Debt Recovery Certificates did not constitute a fresh trigger to reset limitation for filing a Section 7 application - HELD THAT: - The Tribunal considered the respondent's contention that the right to sue was triggered by issuance of DRT recovery certificates in 2017. On analysis of Vashdeo R. Bhojwani and related authorities, the Tribunal concluded that those decisions do not support treating a recovery certificate as creating a new date of accrual where the underlying default had already caused the limitation clock to run. The recovery certificate may record or crystallise the claim, but where the injury was complete upon default (and the limitation had already begun), issuance of recovery certificates does not revive a cause of action so as to permit an otherwise time barred IBC petition. [Paras 17, 18, 19, 20, 21]

Debt Recovery Certificates did not revive the right to initiate CIRP; limitation defence upheld

Adjudicating Authority's duty to suo motu consider limitation under Section 3 of the Limitation Act - Adjudicating Authority was obliged to examine limitation suo motu and should have rejected the application if it was time barred - HELD THAT: - The Tribunal held that where limitation is apparent on the face of the record, the Adjudicating Authority is bound to consider applicability of the Limitation Act (Section 3) on its own motion. The impugned order failed to record adequate reasons on limitation, and the Authority ought to have evaluated whether the debt in default fell within the prescribed period before admitting the Section 7 application. In the present case that statutory duty was not discharged, contributing to the erroneous admission of a time barred petition. [Paras 9, 22]

Admission set aside for failure of the Adjudicating Authority to consider limitation suo motu

Final Conclusion: Appeal allowed; impugned admission order under Section 7 quashed and set aside as time barred. Respondent/Financial Creditor to bear fees and CIRP expenses; IRP/RP to hand back management and documents to directors and present particulars of expenses for recovery by the Adjudicating Authority.

Works contract service not taxable prior to 01.06.2007 - binding effect of Supreme Court decision in Larsen & Toubro Ltd. - classification of composite contracts as works contract - obligation of a Tribunal to follow a coordinate bench - remand for verification of Cenvat credit versus final adjudication - voluntary registration not estopping application of substantive law - quashing of show cause notice and appellate order as without jurisdiction

Works contract service not taxable prior to 01.06.2007 - binding effect of Supreme Court decision in Larsen & Toubro Ltd. - classification of composite contracts as works contract - Service tax was not leviable on the petitioner's works contract services for the period prior to 01.06.2007 and the Appellate Tribunal's contrary conclusion was without jurisdiction. - HELD THAT: - The Court held that the petitioner's services were admittedly and undisturbedly in the nature of a works contract. The Supreme Court's decision in Larsen & Toubro Ltd. establishes that indivisible composite works contracts were not subject to service tax prior to 01.06.2007 because the charging provisions did not lawfully extend to the service element of such contracts until the statutory amendment. Applying that ratio, and noting that coordinate Tribunals and High Courts have followed the same principle (and that a Coordinate Bench of the Tribunal had allowed the petitioner's other appeal on identical facts), the High Court found that the Appellate Tribunal in Appeal No. ST/107/2009 erred in upholding a demand for service tax for October, 2005 to March, 2006. The Tribunal's conclusion ran contrary to the binding precedent and thus lacked jurisdiction to sustain the demand for the pre-01.06.2007 period. The Court therefore quashed the Tribunal's order to that extent. [Paras 6, 7, 9]

The Tribunal's order upholding service tax for the period prior to 01.06.2007 is quashed as contrary to Larsen & Toubro Ltd. and therefore without jurisdiction; the petitioner was not liable to pay service tax for October, 2005 to March, 2006.

Obligation of a Tribunal to follow a coordinate bench - remand for verification of Cenvat credit versus final adjudication - voluntary registration not estopping application of substantive law - quashing of show cause notice and appellate order as without jurisdiction - The Appellate Tribunal erred in refusing to follow the Coordinate Bench decision and in remanding the matter for verification of Cenvat credit instead of giving effect to the legal position; hence the remand and the resultant appellate order and show cause notice were quashed. - HELD THAT: - The Court found that the Tribunal improperly brushed aside the Coordinate Bench decision (which had allowed a co extensive appeal of the petitioner) by treating it as an unrelated Mumbai bench order despite the record showing the Coordinate Bench decision applied to the petitioner. The Tribunal's remand to verify whether Cenvat credit was reversed was held to be a procedural step that could not supplant the substantive legal position that works contracts were not taxable prior to 01.06.2007. Further, the revenue's contention that voluntary registration under the head of commercial/industrial construction services precluded reliance on Larsen & Toubro Ltd. was rejected: voluntary registration does not confer jurisdiction to sustain a demand contrary to the substantive law. For these reasons the Court set aside the Tribunal's remand and ordered quashing of the appellate order and the underlying show cause notice. [Paras 3, 6, 7, 9]

The Tribunal's refusal to follow the Coordinate Bench and its remand to verify Cenvat credit were erroneous; the remand, the Tribunal's appellate order and the show cause notice are quashed.

Final Conclusion: Writ petition allowed. The Appellate Tribunal's order in Service Tax Appeal No. ST/107/2009 and the Show Cause Notice dated 12.03.2007 are quashed and set aside to the extent that service tax was demanded for the period October, 2005 to March, 2006; no refund is permitted in view of the petitioner's stated undertaking; rule made absolute, no order as to costs.

Rectification of clerical/typographical error - time limit for refund of CENVAT credit in respect of export of services - prospective application of amendment to refund time limit - transitional application of amended notification - reckoning of relevant date for refund - date of receipt of foreign exchange v. end of quarter in which foreign exchange received

Rectification of clerical/typographical error - Typographical error in the final order to be corrected by reading the date 27.04.2016 as 27.07.2016. - HELD THAT: - The Tribunal examined the records and accepted the appellant's submission that paragraph 10 of the final order incorrectly recorded the date of receipt of foreign exchange as 27.04.2016 instead of 27.07.2016. The departmental representative also conceded that a typographical error existed. The Tribunal accordingly directed that the date in paragraph 10 be read as 27.07.2016, thereby rectifying the clerical mistake on the record. [Paras 2, 4]

The typographical error is rectified and the date 27.04.2016 in paragraph 10 shall be read as 27.07.2016.

Time limit for refund of CENVAT credit in respect of export of services - prospective application of amendment to refund time limit - transitional application of amended notification - reckoning of relevant date for refund - date of receipt of foreign exchange v. end of quarter in which foreign exchange received - Whether the Larger Bench decision in Span Infotech (India) Pvt Ltd supports treating the one year from receipt date limitation as applicable so as to make the appellant's refund claim time barred or within time after rectification. - HELD THAT: - The Tribunal analysed the effect of the amendment (Notification No. 14/2016) which altered the time limit for claiming refund to one year from the date of receipt of foreign exchange. The Larger Bench in Span Infotech (India) Pvt Ltd held that the amended notification could not be given retrospective benefit where it was not advantageous to the assessee, and therefore, in transitional situations exports made prior to the amendment but claims filed after the amendment would be governed by the unamended provision (end of the quarter in which foreign exchange was received). In the present case the exports, receipt of foreign exchange and filing of refund claims occurred after the amendment; hence the Larger Bench ratio on retrospective applicability is not attracted. Even after correcting the typographical date to 27.07.2016, the Tribunal found that the appellant's refund application was filed after the one year period from the date of receipt of foreign exchange and therefore remained time barred. The Tribunal concluded that Span Infotech (India) Pvt Ltd does not assist the appellant and that rectification of the date does not render the refund claim within the prescribed time limit. [Paras 3, 4]

The Span Infotech (India) Pvt Ltd ratio is inapplicable; the amended one year limitation applies and, even after rectification of the date, the refund claim is beyond the time limit.

Final Conclusion: The application for rectification is allowed to the limited extent of reading the date 27.04.2016 in paragraph 10 of the final order as 27.07.2016; however, the Tribunal held that the Larger Bench decision in Span Infotech (India) Pvt Ltd does not aid the appellant and that, even after rectification, the refund claim is time barred and no relief on merits is available.

Refund of service tax paid under mistake of law - limitation for refund applications under Section 11B - relevant date for refund - payment versus appellate or court order - mistake of law remedy confined to statutory provisions - recovery of amounts refunded and Article 265 of the Constitution

Limitation for refund applications under Section 11B - relevant date for refund - payment versus appellate or court order - The applicable relevant date for filing an application for refund and the effect of payments made prior to issuance of show cause notice. - HELD THAT: - The Court examined Section 11B and its Explanation (B) and held that where a payment is made erroneously the relevant date for filing an application for refund is the date of payment, whereas where duty becomes refundable as a consequence of a judgment, order or direction of an appellate authority or Court the relevant date is the date of such judgment, decree, order or direction. In the present case the payments for which refund is sought were made on 31.03.2007 and 23.05.2007, both prior to the show-cause notice dated 06.11.2007 and long prior to the original order dated 02.03.2012; the original order dealt only with liability after 18.04.2006. The Court therefore treated the relevant date as the date of payment and applied the statutory one-year limitation for filing a refund application under Section 11B. [Paras 4, 5, 6]

The refund claims in question are governed by the date of payment as the relevant date and are subject to the one-year limitation under Section 11B; the legal answer on limitation is in favour of the Revenue.

Refund of service tax paid under mistake of law - mistake of law remedy confined to statutory provisions - Whether an erroneous payment made by the assessee (including a mistake of law) permits a remedy outside the statutory mechanism or whether the remedy is confined to the statute. - HELD THAT: - Relying on this Court's earlier decision and the Constitution Bench authority in Mafatlal Industries Ltd., the Court held that where a mistake (of law or fact) is committed by the assessee the remedy lies only under the statute. Consequently, the legal contention that refund should be permissible outside the statutory framework because the payment was made under a mistake of law was rejected. The Court accordingly answered the stated question of law in favour of the Revenue. [Paras 7]

Mistake of law by the assessee does not furnish an independent equitable remedy; relief, if any, must be sought under the statutory provisions, and on that legal point the Court rules in favour of the Revenue.

Recovery of amounts refunded and Article 265 of the Constitution - Whether the Revenue may recover amounts already refunded to the assessee as tax due. - HELD THAT: - Although the Court answered the question of law in favour of the Revenue on limitation and the statutory remedy, it observed that the amounts have already been refunded to the assessee by the original authority. The Court referred to the principle that a levy not exigible under the taxing statute cannot be recovered by equitable doctrines and noted that service tax on foreign agency commission was not leviable as Business Auxiliary Service prior to 18.04.2006. In that factual and legal context the Court concluded that the Revenue is incapable of recovering the refunded amounts as tax due under Article 265 of the Constitution, and therefore must be restrained from attempting recovery. [Paras 7, 8]

Although the legal question is answered for the Revenue, the Revenue is restrained from recovering the amounts already refunded because the levy was not exigible prior to 18.04.2006 and such sums cannot be recovered as tax due.

Final Conclusion: The Court answered the question of law in favour of the Revenue on limitation and on the principle that mistakes by the assessee must be remedied under the statute; however, having regard to the fact that the amounts were refunded and that the service tax was not leviable prior to 18.04.2006, the Court restrained the Revenue from recovering the amounts refunded. Parties to bear their respective costs.

Rectification of mistake - mistake apparent on record - final order - rejection of refund claim - adjustment/appropriation of refund - burden of proof of service/communication - review of order

Rectification of mistake - mistake apparent on record - final order - review of order - Application by the Revenue for rectification of the Tribunal's final order dated 29.01.2020 was placed for consideration. - HELD THAT: - The Tribunal examined whether the earlier order suffered from any mistake apparent on the face of the record warranting rectification. The Tribunal recorded that the order dated 29.01.2020 was passed after due consideration of written and oral submissions of both parties. The Revenue's contention that written submissions taken on record had not been decided was considered and rejected. The Tribunal concluded that the Revenue was, in substance, seeking a review of the order rather than correction of a demonstrable error, and that review is not permissible in the guise of rectification. Accordingly, no mistake apparent on record was found which would justify rectification. [Paras 5, 7]

Application for rectification dismissed as amounting to an impermissible review; no mistake apparent on record in the final order.

Rejection of refund claim - adjustment/appropriation of refund - burden of proof of service/communication - Whether the Revenue established that the refund in question had been appropriately adjusted/appropriated and that such adjustment was communicated to the appellant. - HELD THAT: - The Tribunal considered the Revenue's plea that refund sanctioning and adjustments in 2005 resulted in rejection of the refund claims for the months in issue and that those adjustments could not now be claimed. The Tribunal noted that the appellant stated non-receipt of the refund order and that the Revenue did not produce proof of service or communication of any adjustment. The Tribunal took on record correspondence relied upon by the appellant (including the letter dated 10.08.2007) which indicated that sums had been debited/adjusted by the appellant and that no show-cause notice was issued for appropriation. The Revenue's assertion that the refund was rejected on different grounds and that the matter had been dealt with earlier was found not to be supported by evidence of communication to the appellant. In the absence of proof of communication/notification by the Revenue, the alleged adjustment/appropriation could not be treated as established. [Paras 6]

Revenue failed to prove that the refund was duly adjusted/communicated to the appellant; the Tribunal's findings accepting the appellant's contentions on these aspects were upheld.

Final Conclusion: The Revenue's application for rectification of the Tribunal's final order dated 29.01.2020 was rejected: the Tribunal found no mistake apparent on the record and held that the Revenue had not proved communication or lawful appropriation of the refund, rendering the rectification application meritless.

Reopening of assessment without recording reasons to believe - reliance on Tax Audit report as sole basis for initiation of reassessment - admissibility of evidence produced at appellate stage - revenue neutrality of assessment

Reopening of assessment without recording reasons to believe - reliance on Tax Audit report as sole basis for initiation of reassessment - Validity of reopening assessment and recall of earlier order where reassessment was initiated solely on the basis of a Tax Audit report without recording reasons to believe. - HELD THAT: - The Court held that initiation of proceedings and recall of the earlier deemed assessment could not properly be undertaken merely on the basis of the Tax Audit report without recording any 'reasons to believe'. The judgment emphasises that the Tax Audit report, though forming the basis for inquiry, did not obviate the statutory requirement to record reasons to believe before reopening under the Act. The Tribunal and Appellate Authority found that no reasons were recorded and accordingly the reassessment exercise was procedurally vitiated. The Court was not satisfied that the Department had shown why proceedings could be validly initiated absent such recorded reasons.

Reopening and reassessment initiated solely on the basis of the Tax Audit report without recording 'reasons to believe' was procedurally improper and unsupported.

Admissibility of evidence produced at appellate stage - Whether the first Appellate Authority was correct in admitting and accepting evidence (affidavits and documents regarding transportation) produced by the dealer at the appellate stage. - HELD THAT: - The Court accepted the view of the Appellate Authority and the Tribunal that the assessee had controverted the findings of the Tax Audit report by producing relevant affidavits and documents regarding transportation of goods. The appellate acceptance of that evidence was treated as legitimate in the circumstances, and no fault was found in allowing the appeal on that basis. The judgment notes that the evidentiary material presented before the first appellate forum sufficiently answered the audit report's conclusions.

Acceptance of the assessee's evidence at the appellate stage was proper and justified the appellate allowance of the appeal.

Revenue neutrality of assessment - Legality of the Tribunal's finding that the exercise was revenue neutral because tax payable in respect of purchases from unregistered dealers had been paid. - HELD THAT: - The Court recorded that the Tribunal had found the exercise to be revenue neutral, noting that tax in respect of the purchases from unregistered dealers had already been paid by the dealer. The High Court found no ground to regard that factual-conclusion as perverse or erroneous. In the absence of perversity or a substantial question of law arising from this finding, interference was not warranted.

The Tribunal's finding of revenue neutrality was not shown to be perverse or erroneous and did not give rise to a substantial question of law.

Final Conclusion: The revision is dismissed: the reassessment initiated solely on the basis of the Tax Audit report without recording reasons to believe was procedurally improper, the appellate admission of the assessee's evidence was rightly accepted, and the Tribunal's finding of revenue neutrality is not vitiated.

Service of notice - method of service under Rule 77 - opportunity of hearing - decision on merits - mandate of Rule 68(4) - setting aside ex-parte order for improper service - remand for fresh hearing

Decision on merits - mandate of Rule 68(4) - setting aside ex-parte order for improper service - Validity of the Tribunal's setting aside of the appellate order dated 31.7.2009 without recorded reasons. - HELD THAT: - The Court examined the appellate order dated 31.7.2009 and the subsequent ex-parte order of the Tribunal dated 3.3.2020. It found that the Tribunal's impugned order did not accord the revisionist an opportunity to be heard and that the appellate order did not reflect adjudication on the merits as required by the legal mandate for deciding appeals. In these circumstances the High Court concluded that the Tribunal's order could not stand and interference was warranted. The Court allowed the revisions, set aside the Tribunal's order dated 3.3.2020, and directed that the appeals before the Tribunal be decided afresh after affording the revisionist an opportunity of hearing in accordance with law.

Revisions allowed; Tribunal's order dated 3.3.2020 set aside and appeals remitted for fresh decision after hearing the revisionist.

Service of notice - method of service under Rule 77 - opportunity of hearing - Legality of the Tribunal proceeding to decide the appeals despite service having been effected on tenants contrary to the prescribed method. - HELD THAT: - The Court accepted the revisionist's contention that notices of hearing had been served on tenants/occupiers and not in the manner prescribed by Rule 77. Because proper service in accordance with the rules was not shown and the revisionist was consequently not heard before the Tribunal passed the impugned order, the Court held that the Tribunal proceeded without valid service and without affording the revisionist the required opportunity of hearing. For these procedural infirmities the Tribunal's order was liable to be set aside and the matter remanded for fresh adjudication after valid service and hearing.

Proceedings set aside on ground of improper service; matter remitted to Tribunal to decide afresh after valid service and hearing.

Final Conclusion: The revisions are allowed in favour of the assessee; the Tribunal's ex-parte order dated 3.3.2020 is set aside for lack of proper service and failure to afford hearing, and the Tribunal is directed to decide the appeals afresh after affording the revisionist an opportunity of hearing in accordance with law.

Prima facie case - financial hardship - statutory right of appeal - power to pass interim order with regard to payment of the amount during the pendency of the appeal under proviso to section 55(6) - stay of recovery / pre-deposit direction

Prima facie case - financial hardship - stay of recovery / pre-deposit direction - Whether the Tribunal was justified in directing deposit of 10% of the disputed tax without considering the assessee's pleaded prima facie case and financial hardship - HELD THAT: - The Court held that both the appellate authority and the Tribunal failed to record and consider the revisionist's plea of a prima facie case and the demonstrated financial hardship before directing a deposit. The provision empowering an appellate forum to pass interim orders about payment during the pendency of an appeal must be exercised after explicit consideration of the factors relied upon by the appellant; a mechanical or unexamined deposit direction negates the statutory right of appeal where financial inability and a prima facie case are shown. Consequently the Tribunal's order directing deposit of 10% of the disputed tax was set aside to the extent that it imposed that deposit without such consideration.

The Tribunal's direction to deposit 10% of the disputed amount is set aside because the Tribunal and the appellate authority did not consider the pleaded prima facie case and financial hardship.

Power to pass interim order with regard to payment of the amount during the pendency of the appeal under proviso to section 55(6) - statutory right of appeal - stay of recovery / pre-deposit direction - Relief to be granted and consequent direction to the appellate authority following setting aside of the deposit direction - HELD THAT: - Having set aside the deposit requirement, the Court directed that the appeal before the appellate authority (Appeal No. SAH1/0068/2020, Year 2016-17, Section 28 (2)(ii)) be heard and decided expeditiously without insisting on any pre-deposit. The Court remitted the matter to the appellate authority for fresh decision on the appeal, instructing disposal preferably within four months from production of a copy of the order, thereby preserving the appellant's right to have the merits and interim relief considered afresh in light of the pleaded prima facie case and financial hardship.

The revision is allowed; the appellate authority is directed to hear and decide the appeal expeditiously, preferably within four months, without insisting on any pre-deposit.

Final Conclusion: Revision allowed. The Tribunal's order requiring a 10% deposit is set aside for failure to consider the assessee's prima facie case and financial hardship; the appellate authority is directed to hear and decide the appeal for Year 2016-17 afresh and expeditiously without insisting on any pre-deposit.

Appeal against rectification order - Maintainability of appeal where rectification is in favour of the applicant - Merger of assessment order with subsequent rectification - Infructuous appeal - Right to challenge original assessment order

Appeal against rectification order - Maintainability of appeal where rectification is in favour of the applicant - Infructuous appeal - Appeal against the rectification order dated 31.07.1995 was not maintainable when the rectification had been allowed in favour of the assessee, rendering the appeal infructuous. - HELD THAT: - The Court found that the Assessing Authority allowed the rectification as prayed by the assessee. Where a rectification is granted in favour of the party who sought it, an appeal against that rectification is rendered infructuous and is not maintainable. The bench observed that since the rectification did not adversely affect the assessee but corrected the assessment as requested by it, there was no reason for the assessee to file an appeal against that rectification. The Tribunal and the Appellate Authority were therefore justified in treating the appeal as infructuous. [Paras 3, 4, 7]

Appeal against the rectification order was not maintainable and was rightly treated as infructuous.

Merger of assessment order with subsequent rectification - Right to challenge original assessment order - The rectification order dated 31.07.1995 did not merge with the original assessment order dated 31.03.1995. - HELD THAT: - The Court held that merger of the original assessment with a subsequent order occurs only when an appellate order is passed on merits; mere rectification at the instance of the assessee does not merge with the original assessment. The rectification in this case was recorded to correct an apparent error on the face of the record and was allowed at the request of the dealers; it did not extinguish or supplant the original assessment so as to preclude a separate challenge to the original order. Consequently, the assessee could (and ought to have) challenged the original assessment order itself if aggrieved. [Paras 7, 8, 9]

The rectification order did not merge with the original assessment order; the original assessment remained open to challenge.

Right to challenge original assessment order - Maintainability of indirect challenge by attacking rectification - Assessee cannot indirectly assail the legality of the original assessment by making a tangent challenge to a rectification order which does not address the legality of the original tax imposition. - HELD THAT: - The Court observed that the rectification order did not discuss the legality of imposing local sales tax on the inter-State sales; therefore the assessee could not, by attacking the rectification, effectively litigate the substantive correctness of the original assessment. The proper course for the assessee was to have filed an appeal against the original assessment within the prescribed period. In the absence of such a direct challenge, the Court refused to permit an indirect or collateral attack on the original assessment via the rectification proceedings. [Paras 9, 10]

Assessee cannot assail the original assessment by a collateral challenge to the rectification order; the proper remedy was a direct appeal against the original assessment.

Final Conclusion: The Revision Petition is dismissed. The Court answered the questions of law against the assessee, holding that the rectification granted in the assessee's favour did not merge with the original assessment, that an appeal against such a rectification was infructuous and not maintainable, and that the assessee could not indirectly challenge the original assessment through the rectification proceedings.

Refund with interest for use and retention of money - quantification and commencement date of interest - liability of a public authority for arbitrary or discriminatory inaction - contractual breach versus restitution/compensatory interest - limits of an "as is where is" clause in tendered allotments

Quantification and commencement date of interest - refund with interest for use and retention of money - Interest on the principal excess paid by Asiatic Steel is payable from the date the principal was remitted, not from the date of allotment. - HELD THAT: - The Court examined the sequence of payments and communications and concluded that the principal consideration in foreign currency was remitted on 22/24.03.1995; therefore the High Court erred in directing interest from 08.11.1994 when Asiatic Steel had not paid the principal on that date. The Court affirmed the principle that retention and use of money by a public authority can attract interest as compensation, but corrected the period for which interest is to be computed to commence from the actual date of remittance of the principal consideration. The Court left intact the High Court's direction as to interest otherwise, subject only to this modification of the commencement date. [Paras 41]

Interest on the principal shall be calculated from 22.03.1995 (date of payment) to 19.05.1998; the High Court's order is modified accordingly.

Liability of a public authority for arbitrary or discriminatory inaction - contractual breach versus restitution/compensatory interest - limits of an "as is where is" clause in tendered allotments - The Board's inaction and failure to respond to demands for refund rendered its conduct arbitrary and justified granting of refund with interest as compensation for retention of monies. - HELD THAT: - After reviewing contemporaneous correspondence, board minutes and the conduct vis-a -vis other similarly placed bidders, the Court held that the Board failed to offer any meaningful justification for withholding the amounts and adopted a discriminatory stance by forcing parties to litigate. Although the dispute arose in a contractual context, the Court found that the public authority's deliberate silence and failure to act fairly warranted restitutionary relief in the form of refund with interest; the 'as is where is' inspection clause did not permit the Board to allocate land of no utility and evade responsibility when it failed to make the plot usable within a reasonable time. [Paras 36, 37]

The High Court's conclusion that refund plus interest was justified by the Board's conduct is upheld; the Board's arbitrary inaction disentitles it from resisting interest on the retained amounts.

Final Conclusion: The appeal is dismissed subject to modification that interest on the refunded principal shall run from the actual date of remittance of the principal (22.03.1995) to 19.05.1998; the High Court's order directing refund with interest otherwise is affirmed, the Board having acted arbitrarily in withholding the amounts.