TaxTMI Updates e-Newsletter
Dec 04,2021

Anticipatory bail - survey and seizure - inquiry under the Central Goods & Services Tax Act, 2017 - presence required for inquiry - non-enforcement of arrest pending inquiry unless warranted

Anticipatory bail - inquiry under the Central Goods & Services Tax Act, 2017 - presence required for inquiry - non-enforcement of arrest pending inquiry unless warranted - Application for anticipatory bail in respect of summons issued under Section 70 of the Central Goods & Services Tax Act, 2017 was considered and disposed of with directions regarding appearance and non-enforcement of arrest during the inquiry. - HELD THAT: - The court noted that a survey and seizure operation in the father's case produced material suggesting the applicant was running a firm and that the alleged illegal claim of input tax credit was under scrutiny. The court recognised the necessity of the applicant's presence to enable completion of the ongoing inquiry by the GST authorities. Balancing the need to conduct the inquiry against the applicant's apprehension of arrest, the court directed that the applicant should appear pursuant to the summon dated 02.09.2021 and recorded the expectation that, subject to the applicant's cooperation, arrest would not be enforced unless there were cogent reasons justifying it. The order thus permits the inquiry to proceed while offering limited protection against immediate arrest, without adjudicating the merits of guilt or entitlement to bail on final hearing. [Paras 5, 6]

The anticipatory bail application is disposed of by directing the applicant to appear pursuant to the summon dated 02.09.2021, with the court expressing that, subject to cooperation, arrest should not be enforced unless justified by cogent reasons; inquiry to proceed.

Final Conclusion: Application for anticipatory bail disposed of with direction to the applicant to appear under the summon and an expectation that arrest will not be enforced, subject to cooperation and cogent reasons for arrest.

Confiscation of goods - fine in lieu of confiscation - release of goods during adjudication - provisional release - market value - liability to pay tax, penalty and charges - adjudication

Confiscation of goods - fine in lieu of confiscation - release of goods during adjudication - provisional release - adjudication - Section 130(2) permits release of goods on payment of a fine in lieu of confiscation while adjudication is pending, i.e., before a formal order of confiscation is passed. - HELD THAT: - Section 130(2) commands the officer adjudging confiscation to give the owner an option to pay a fine in lieu of confiscation. The statutory language - notably the reference to the "officer adjudging it" and the "owner of the goods" - indicates that the option is intended to be available prior to divestment of ownership by operation of a confiscation order. Section 130(7), by contrast, expressly deals with post-adjudicatory disposal of "confiscated goods" and therefore operates after title has vested in the Government. The absence of the words "provisional release" or an express reference to section 67(6) does not defeat the clear textual operation of section 130(2). The two-stage scheme (pre-adjudication under section 130(2) and post-adjudication under section 130(7)) is manifest from the language and purpose of the provision and permits release during the course of adjudication on payment of the fine specified under section 130(2). [Paras 24, 25, 26, 27, 30]

Section 130(2) authorises release of goods on payment of fine in lieu of confiscation during adjudication, prior to issuance of a confiscation order.

Fine in lieu of confiscation - liability to pay tax, penalty and charges - adjudication - To secure release under section 130(2) during adjudication, payment of the fine alone suffices; tax, penalty and other charges become liabilities that arise but are payable only after adjudication determines their quantum. - HELD THAT: - Section 130(3) states that where a fine in lieu of confiscation is imposed, the owner "shall, in addition, be liable to any tax, penalty and charges payable". The phrase "be liable" imports a possibility of attracting such obligations rather than an immediate, compulsory payment obligation at the release stage. Determination of tax, penalty and charges requires adjudication (including hearing) to ascertain quantum; compelling their immediate payment would permit coercive deprivation without adjudication and offend fairness. Accordingly, at the stage of release under section 130(2) the owner need pay only the fine; taxes, penalties and charges remain payable thereafter as determined by adjudication. [Paras 35, 36, 38, 39, 40]

Payment of the fine alone is sufficient to obtain release under section 130(2); tax, penalty and charges become liabilities that are payable following adjudication.

Market value - fine in lieu of confiscation - adjudication - The ceiling for the fine payable under section 130(2) is the "market value" of the goods as defined in section 2(73); maximum retail price (MRP) is not the statutory basis for fixing that fine. - HELD THAT: - The first proviso to section 130(2) caps the fine at the market value of the confiscated goods less tax. Section 2(73) defines "market value" as the amount a recipient must pay for goods of like kind and quality at the same commercial level between unrelated parties. That definition excludes MRP as the determinative criterion where other material exists to fix market value. If the invoice or other material prima facie supports a particular market value, the proper officer may tentatively adopt it; if disputed, the true market value is to be determined during adjudication where the taxpayer may contest the tentative valuation. The quantum is thus a question of fact to be ascertained in adjudication. [Paras 42, 43, 44, 45]

The fine under section 130(2) is to be calculated with reference to the "market value" (as defined in section 2(73)), and not the MRP; market value, if disputed, is to be determined through adjudication.

Final Conclusion: The review petition is dismissed. The Court holds that (i) section 130(2) permits release of goods on payment of a fine in lieu of confiscation while adjudication is pending; (ii) only the fine need be paid at the release stage, tax, penalty and charges becoming payable after adjudication; and (iii) the fine is to be computed by reference to the statutory concept of "market value" and not MRP.

Transitional input tax credit - technical glitches on GST common portal - extension of time for filing Form GST TRAN-1 - re-opening of portal and manual acceptance of Form TRAN-1 - right to property under Article 300A

Technical glitches on GST common portal - re-opening of portal and manual acceptance of Form TRAN-1 - extension of time for filing Form GST TRAN-1 - transitional input tax credit - Petitioner entitled to file Form GST TRAN-1 electronically or manually despite earlier inability due to portal glitches and respondents directed to accept and process the claim. - HELD THAT: - The Court accepted the petitioner's evidence of attempts to upload TRAN-1 (including screenshots and grievance records) and applied the reasoning of Super India Paper Products v. Union of India where similar difficulties caused by the GST portal were recognised and relief granted. The judgment notes that Notification No. 49/2019 acknowledged systemic inability of some users to upload TRAN-1 and that the credit in favour of an assessee constitutes property which cannot be arbitrarily denied. In reliance on those principles the Court allowed the writ and directed respondents to permit filing of Form TRAN-1 either electronically or manually and to process the petitioner's claim in accordance with law. The deadline prescribed in Super India Paper Products was modified for this petitioner and fixed as 15th December, 2021 for electronic or manual submission of TRAN-1. [Paras 4, 5]

Writ petition allowed; respondents directed to accept petitioner's Form GST TRAN-1 electronically or manually and process the transitional input tax credit claim, with the filing permitted up to 15th December, 2021.

Final Conclusion: The petition is allowed and the respondents are directed to enable filing of Form GST TRAN-1 (electronically or manually) and to process the petitioner's claim for transitional input tax credit, the last date for such filing being 15th December, 2021.

Filing of Form TRAN-1 - technical glitches on GST portal - transitional credit - acceptance of TRAN-1 electronically or manually - right to property under Article 300A

Filing of Form TRAN-1 - technical glitches on GST portal - acceptance of TRAN-1 electronically or manually - transitional credit - Petitioner's entitlement to file Form TRAN-1 despite alleged technical errors on the GST portal and to have transitional credit admitted by respondents. - HELD THAT: - The Court accepted the petitioner's grievance of inability to file Form TRAN-1 due to technical glitches on the GST common portal and applied the reasoning in earlier decisions (Super India Paper Products and SRC Aviation) which recognised that taxpayers who genuinely attempted to file TRAN-1 but were prevented by portal errors should not be deprived of the transitional credit. The Court noted that the credit in favour of an assessee constitutes property and cannot be taken away except by authority of law. In view of those precedents and the absence of a cogent ground to deny relief where filing was prevented by system inefficiency, the Court directed respondents to permit filing of TRAN-1 either by reopening the online portal or by accepting the form manually, and to process the claim in accordance with law. The Court adopted the operative relief granted in the cited precedents but fixed the final date for acceptance of TRAN-1 as 15th December, 2021. [Paras 4, 5]

Petition allowed; respondents directed to enable filing of Form TRAN-1 electronically or accept it manually and process the claim, with the last date for filing fixed as 15th December, 2021; petition and pending application disposed of.

Final Conclusion: Writ petition allowed in line with this Court's prior decisions; respondents directed to reopen the portal or accept TRAN-1 manually and process the petitioner's claim for transitional credit, subject to filing by 15th December, 2021.

Grant of bail in economic offences - Prima facie satisfaction for bail - Risk of tampering with evidence or witnesses - Nature and gravity of the offence - Custody period and seizure of documentary evidence - Conditions of bail and cancellation on violation

Grant of bail in economic offences - Prima facie satisfaction for bail - Custody period and seizure of documentary evidence - Risk of tampering with evidence or witnesses - Nature and gravity of the offence - Whether the petitioner, accused of offences under the OGST Act involving alleged passing of bogus ITC, should be released on bail - HELD THAT: - The Court applied settled principles governing bail in non bailable and economic offences, giving weight to the nature and gravity of the accusation, the character of the evidence, and the possibility of tampering with witnesses or abscondence. The prosecution case is document driven and extensive searches and seizures have been completed; seized documents and records are in custody of the Authority and the petitioner no longer has access to them. More than four months of custody have elapsed and co accused and bank details have been identified. The petitioner is a permanent resident of Rourkela and there is no material to show a present likelihood of absconding or that release would thwart investigation; vague apprehensions of influence or tampering were not supported by particulars. Having regard to these circumstances, the Court found no necessity for continued detention and was prima facie inclined to grant bail while observing that exact quantum and guilt would be determined in assessment and trial proceedings. [Paras 10, 11]

Petitioner released on bail, the Court reconsidered earlier rejection and found prima facie grounds for grant of bail in view of seized documentary evidence, passage of investigation stages, custody period, and low risk of abscondence or tampering absent specific material.

Conditions of bail and cancellation on violation - Risk of tampering with evidence or witnesses - Terms on which bail is to be granted and consequences of breach - HELD THAT: - The Court imposed specific conditions to address risks identified in the statutory and judicial tests for bail: furnishing bail bond with two sureties, prohibition on inducement, threat or promise to prosecution witnesses and tampering with evidence, prohibition on repeating similar activity, surrender of passport (or affidavit if none), and requirement to appear before the concerned Authority as required. The Court made clear that violation of any condition would invite cancellation of bail. [Paras 11]

Bail granted on specified conditions; breach of conditions will entail cancellation of bail.

Final Conclusion: Bail petition allowed. The petitioner is released on bail on furnishing the specified bond and complying with enumerated conditions; violation of conditions will result in cancellation of bail.

Delegation of powers and sub-delegation - proper officer and function assignment - sub-delegation under section 5(3) of the U.P. Goods and Services Tax Act, 2017 - adjudication under section 74 of the U.P. Goods and Services Tax Act, 2017 - distinction between officers of State tax and officers of Central tax - requirement of notification for entrustment of functions to Central officers

Proper officer and function assignment - adjudication under section 74 of the U.P. Goods and Services Tax Act, 2017 - Validity of the Deputy Commissioner's jurisdiction to issue notice, conduct proceedings and pass the adjudication order under section 74 for Financial Year 2018-2019. - HELD THAT: - Section 74 confers power to issue notices and determine tax, interest and penalty only on the "proper officer." Under section 2(91) a "proper officer" is the Commissioner or an officer of State tax assigned that function by the Commissioner. The Commissioner possesses power to sub-delegate functions to subordinate officers by virtue of section 5(3) read with the territorial and assignment scheme in section 4(2). The Office Orders dated 01.07.2017 and 19.11.2018 were issued by the Commissioner and expressly set out the function-jurisdiction (including adjudication under Section 74) and pecuniary limits among officers of ranks including Deputy Commissioner. There is no statutory requirement that the source provision (section 5(3)) must be recited in the delegating order or that a gazette notification is necessary for sub-delegation to officers of State tax. The Commissioner's exercise of sub-delegation by administrative office orders is a valid mode of creating function assignment in favour of officers of State tax. Consequently, the adjudication order passed by the Deputy Commissioner was made by a competent "proper officer." [Paras 24, 25, 26, 27, 30]

The Deputy Commissioner validly had jurisdiction as a "proper officer" to initiate and conclude adjudication under section 74 for Financial Year 2018-2019; the challenge to his inherent jurisdiction fails.

Distinction between officers of State tax and officers of Central tax - requirement of notification for entrustment of functions to Central officers - Whether decisions relied upon by the petitioner (relating to Customs/Central officers) render the Deputy Commissioner's adjudication invalid or require a notification under section 6 for State officers. - HELD THAT: - The Supreme Court authorities cited (concerning Customs officers and Revenue Intelligence) turned on a different statutory scheme in which officers who were not within the defined class of Customs officers required a further entrustment/notification under the statutory provision analogous to section 6. In contrast, under the U.P. Act officers of State tax derive function-jurisdiction from the Commissioner pursuant to sections 2(91), 4(2) and the general sub-delegation power in section 5(3). Section 6 (which empowers entrustment to officers appointed under the Central Act) applies only to officers of the Central Act and does not restrict sub-delegation by the Commissioner to officers of State tax. Accordingly, the cited decisions are distinguishable and do not invalidate the Commissioner's office orders or the Deputy Commissioner's exercise of jurisdiction. [Paras 34, 36, 37, 38, 39]

The precedents relied upon are distinguishable; section 6's notification requirement does not apply to officers of State tax, and therefore does not vitiate the Deputy Commissioner's adjudicatory power.

Final Conclusion: Writ petition dismissed. The adjudication order dated 07.08.2021 passed by the Deputy Commissioner for Financial Year 2018-2019 stands not vitiated for want of jurisdiction; petitioner remains free to challenge the merits before the statutory appellate forum within four weeks as permitted by the Court.

Attachment of input tax credit under Rule 86A - self-limiting nature of restriction under Rule 86A(3) - duty to consider representations - judicial direction to decide representations within a fixed time

Duty to consider representations - judicial direction to decide representations within a fixed time - Respondents' failure to consider the petitioner's representations against attachment and the appropriate remedy. - HELD THAT: - The petitioner filed representations dated 09.06.2021 and 04.10.2021 challenging the respondents' attachment of the petitioner's credit which had not elicited any response. The High Court, on admission, directed that the respondents must consider those representations and pass appropriate orders on merits and in accordance with law. The Court did not decide the substantive merits of the challenge to the attachment; instead it mandated fresh administrative consideration within a specified period to cure the procedural lapse of non-response. [Paras 9]

Respondents directed to consider the petitioner's representations and pass appropriate orders within forty five days from receipt of a copy of the order.

Attachment of input tax credit under Rule 86A - self-limiting nature of restriction under Rule 86A(3) - Whether the restriction imposed under Rule 86A is self-limiting and the question of cessation after one year was left for consideration. - HELD THAT: - The petitioner contended that the restriction imposed under Rule 86A is self-limiting and relied on sub rule (3) asserting the restriction ceases after one year. The Court noted these submissions and cited authorities relied upon by the petitioner, but did not adjudicate the substantive legal question on the merits. The matter of the applicability and effect of Rule 86A(3), including whether the restriction has ceased, was left open for the respondents to consider while disposing of the petitioner's representations in accordance with law. [Paras 5, 6, 9]

Substantive question regarding the self limiting effect of Rule 86A(3) not decided on merits and to be considered by the respondents while disposing of the representations.

Final Conclusion: Writ petition disposed at admission by directing respondents to consider the petitioner's representations dated 09.06.2021 and 04.10.2021 and pass appropriate orders on merits and in accordance with law within forty five days; no decision on the substantive question of the operation or expiry of the restriction under Rule 86A(3) was given.

Composite supply - Recipient of service (payor-test) - Intermediary (including subcontracting exclusion) - Export of services - five condition test - Place of supply - performance based v. recipient based service

Composite supply - Whether the specified transactions constitute a composite supply. - HELD THAT: - The Authority examined the contract which provides for installation/up gradation, training and ancillary time based activities (travelling, working hours, overtime) billed on agreed hourly rates. The components are multiple taxable supplies which, in the ordinary course of business, are naturally bundled - travelling and overtime being necessary to perform installation/up gradation or training - and one of them (installation/up gradation or training) is the principal supply. The appellant's contention that these are not separate supplies because the hourly breakdown is merely a billing methodology was rejected: the contract and invoices show distinct chargeable components. Applying the definition of composite supply, the transactions are composite supplies. [Paras 12]

The specified transactions are composite supplies.

Recipient of service (payor-test) - Whether the recipient of the service is SPA (the foreign principal) or the Indian customers. - HELD THAT: - Reading the definition of 'recipient' together with 'consideration', the Authority adopted the payor based test: where consideration is payable the person liable to pay is the recipient. SPA pays consideration to the appellant for services performed at the behest of SPA for its customers. The appellant's argument on punctuation and independent clauses was considered but the factual matrix - payment by SPA and contractual instruction from SPA - supports treating SPA as the recipient in terms of consideration paid. [Paras 13]

SPA (the foreign entity paying consideration) is the recipient of the service, not the Indian customer.

Intermediary (including subcontracting exclusion) - Whether the appellant qualifies as an 'intermediary' under the statute. - HELD THAT: - The statutory definition of 'intermediary' was analysed and distinguished from agent/broker concepts. The appellant performs the main services on its own account pursuant to a subcontract from SPA and does not merely arrange or facilitate the main supply between two third parties. The Authority took note of the CBIC clarification that subcontracting of services (part or whole) is excluded from the scope of intermediary services. Applying that clarification to the facts, where SPA subcontracts installation/up gradation and training to the appellant who actually performs the services, the appellant falls within the exclusion in the definition and is not an intermediary. [Paras 14]

The appellant is not an 'intermediary'; the services fall within the exclusion for supplies made on own account (subcontracted performance).

Export of services - five condition test - Place of supply - performance based v. recipient based service - Whether the specified transactions qualify as export of services. - HELD THAT: - Export of services requires satisfaction of all five statutory conditions. The Authority held that the appellant's services are performance based and performed in India at SPA's customers' sites; consequently the place of supply is not outside India under the relevant place of supply rules for performance based services. Although SPA was held to be the recipient (being the payor), the place of supply and other conditions were not met. The entities are separate legal persons and not 'merely establishments of a distinct person' under the explanation, but that alone does not satisfy the place of supply requirement. Reliance on erstwhile Service Tax rules or other AAAR decisions was rejected as not determinative for the statutory tests under IGST. On the facts and governing place of supply provisions, the conditions for export of services were not fulfilled. [Paras 15, 16]

The specified transactions do not qualify as export of services.

Final Conclusion: The appeal is partly allowed. The Advance Ruling is confirmed on (i) classification as composite supply and (ii) non qualification as export of services; the ruling is modified to hold (iii) SPA (the foreign payor) as the recipient of services, and (iv) the appellant is not an 'intermediary' in view of subcontracted performance and the CBIC clarification.

Classification under HSN/Customs Tariff Act - narrow woven fabrics - Chapter Note 5 of Chapter 58 - requirement of selvedges on both edges - width not exceeding 30 cm - classification determines applicable GST rate

Narrow woven fabrics - Chapter Note 5 of Chapter 58 - requirement of selvedges on both edges - classification under HSN/Customs Tariff Act - classification determines applicable GST rate - Whether the product manufactured by the appellant is classifiable under Tariff Heading 58063990 as narrow woven fabrics. - HELD THAT: - The classification of the goods for GST purposes is to be determined by reference to the Customs Tariff Act, 1975 and the HSN rules, including chapter notes. Chapter Note 5 of Chapter 58 defines "narrow woven fabrics" by three alternative descriptions; relevantly the product must be of width not exceeding 30 cm and provided with selvedges (flat or tubular) on both edges. The GAAR had expressed doubt whether the appellant's product possessed selvedges and therefore classified it under a different heading. The Appellate Authority examined the record, including the appellant's submissions and sample, and found that the width was within the prescribed limit and that the selvedges are formed in the weaving process. Applying the chapter note and HSN headings, the Authority concluded that the product meets the definition of narrow woven fabrics and therefore falls within CTH No. 58063990 rather than CTH No. 5407.10.19. The Authority also noted that once classification under the Customs Tariff Act is determined, the applicable GST rate follows from the notified schedule. [Paras 16, 17, 23, 24, 25]

The product is classifiable under Tariff Heading 58063990 as narrow woven fabrics and not under CTH 5407.10.19; the applicable GST is 5% (2.5% CGST + 2.5% SGST) or 5% IGST.

Final Conclusion: The Advance Ruling GUJ/GAAR/R/99/2020 dated 14.10.2020 is modified: the appellant's narrow woven fabric of polypropylene yarn (width not exceeding 30 cm) provided with selvedges on both edges is classifiable under Tariff Heading 58063990 and attracts GST at 5%.

Rectification under Section 102 of the CGST Act, 2017 and Section 102 of the KGST Act, 2017 - typographical error / mistake apparent on record - correction of name of authorised representative - correction of constitution of the applicant - Advance Ruling Authority

Rectification under Section 102 of the CGST Act, 2017 and Section 102 of the KGST Act, 2017 - correction of name of authorised representative - typographical error / mistake apparent on record - The authorised representative's name in the earlier ruling is corrected from Sri. Sridharan Bhat to Sri. Shivaram Bhat. - HELD THAT: - The Authority examined the applicant's GST registration certificate and the letter of authorization authorizing Sri. Shivaram Bhat and found that the incorrect naming in the earlier order was a typographical mistake apparent on the record. The applicant did not seek personal hearing and requested rectification. In view of the documentary evidence produced and the nature of the error as apparent on the face of the record, the Authority accepted the rectification request and corrected the name in the earlier ruling. [Paras 3, 4]

Name of the authorised representative stands corrected as "Sri. Shivaram Bhat" at page 1 and para 7 of page 3 of Order No. KAR ADRG 62/2021 dated 29/10/2021.

Rectification under Section 102 of the CGST Act, 2017 and Section 102 of the KGST Act, 2017 - correction of constitution of the applicant - typographical error / mistake apparent on record - The constitution of the applicant in the earlier ruling is corrected from "Private Limited Company" to "Partnership Firm". - HELD THAT: - On perusal of the GST registration certificate and the material on record, the Authority concluded that the description of the applicant's constitution in the earlier order was a clerical/typographical error apparent on the face of the record. The applicant's plea for rectification was allowed and the Authority rectified the mistake in the earlier ruling accordingly. [Paras 3, 4]

Constitution of the applicant stands corrected as "Partnership Firm" at para 6 of page 2 of Order No. KAR ADRG 62/2021 dated 29/10/2021.

Final Conclusion: The Authority allowed the rectification application and has corrected the two typographical mistakes in its earlier ruling (Order No. KAR ADRG 62/2021 dated 29/10/2021): the authorised representative's name is amended to Sri. Shivaram Bhat and the constitution is amended to Partnership Firm.

Waste to Energy plants/devices - classification under HSN 8402 (84021990) - concessional GST rate under entry 234 of Notification No.1/2017-CT (Rates) - applicable GST rate change effective from 1-10-21

Waste to Energy plants/devices - classification under HSN 8402 (84021990) - Whether the five boilers supplied by the applicant qualify as 'Waste to Energy' devices and the appropriate HSN classification. - HELD THAT: - The Authority accepted the applicant's factual submissions that the five boilers are designed to use agro-waste, biomass and similar wastes as fuel and that coal, lignite or petcoke cannot be used. On the basis of the technical specifications and the nature of fuels described, the Authority held that the heat energy produced from such fuels places the boilers within the category of 'Waste to Energy Devices'. Applying the Tariff, the Authority found that the boilers fall under heading 8402 and specifically merit classification at 84021990 (other steam or other vapour generating boilers). [Paras 14, 15]

The five boilers qualify as 'Waste to Energy' devices and are classifiable under HSN 8402, sub-heading 84021990.

Concessional GST rate under entry 234 of Notification No.1/2017-CT (Rates) - applicable GST rate change effective from 1-10-21 - The GST rate leviable on the five boilers classified as Waste to Energy devices. - HELD THAT: - Having classified the boilers as Waste to Energy devices falling within the scope of entry 234 of Notification No.1/2017-CT (Rates), the Authority applied the statutory notifications governing concessional rates. The Authority recorded the applicable rates in temporal sequence in accordance with the notifications relied upon and the effective date of change in rates. [Paras 16]

GST at 5% (CGST 2.5% + SGST 2.5%) is leviable up to 30-9-21; GST at 12% is leviable with effect from 1-10-21.

Final Conclusion: The Authority ruled that the five specified boilers are 'Waste to Energy' devices classifiable under HSN 8402 (84021990) and are subject to GST at 5% up to 30-9-21 and at 12% with effect from 1-10-21.

Input Tax Credit - blocked credits under Section 17(5) of the CGST Act - operation and maintenance services of vessels as eligible input services - hiring/rental of vessels as element of a taxable composite supply - composite supply of port and terminal handling services

Input Tax Credit - operation and maintenance services of vessels as eligible input services - blocked credits under Section 17(5) of the CGST Act - Entitlement to ITC on services procured for operation and maintenance of Diving Support Vessels (DSVs) used in providing port and terminal handling services. - HELD THAT: - On examination of the contracts and invoices, the Authority found that the supplies by contractors in respect of the DSVs (Relsagar and Reldarshan) were not mere repair/maintenance of vessels nor purchases of vessels, but contracts for manning, operation and maintenance integral to enabling discharge of cargo from SPMs into subsea pipelines and other offshore operations. The Authority gave primacy to the substance of the contracts over the SAC codes quoted in invoices and held that these services are requisite input services used in the course or furtherance of M/s Sikka's outward composite supply of port and terminal handling services. Since Section 17(5)(aa) (blocked credit in respect of vessels as goods) and Section 17(5)(ab) (blocked credit for repair and maintenance relating to vessels) did not apply to the facts - as the dispute concerns services procured from contractors integral to transportation/discharge operations rather than acquisition or mere repair of vessels - the bar in Section 17(5) was held inapplicable. The Authority therefore concluded that ITC is admissible on operation and maintenance services of the DSVs. [Paras 28, 31, 32, 34, 35]

M/s Sikka is entitled to avail ITC on services procured for operation and maintenance of the DSVs Relsagar and Reldarshan.

Input Tax Credit - hiring/rental of vessels as element of a taxable composite supply - composite supply of port and terminal handling services - blocked credits under Section 17(5) of the CGST Act - Entitlement to ITC on services procured for hiring, and for operation and maintenance of Security Patrol Vessels (SPVs) used in providing port and terminal handling services. - HELD THAT: - The Authority examined the contracts for SPVs (Eagle, Chetak, Calypso Fortune, ML Noorani) and concluded that, despite invoice SAC codes describing rental or maintenance, the contracts in substance supplied security and patrolling services (including pollution monitoring) with crew, which enable M/s Sikka to perform its contractual and statutory obligations and to supply its composite port and terminal services. The services were therefore held to be requisite input services used in the course or furtherance of business. The Authority found that Section 17(5)(b)(i) (restriction on credit for renting/hiring of vessels) could not be invoked to block credit because the inward supplies were used as elements of M/s Sikka's outward composite taxable supply; likewise, the blocked-credit provisions for vessels or for repair and maintenance did not apply on the facts. Consequently, ITC was held admissible on the hiring, operation and maintenance services of the SPVs. [Paras 28, 33, 34, 35]

M/s Sikka is entitled to avail ITC on services procured for hiring, operation and maintenance of the SPVs Eagle, Chetak, Calypso Fortune and ML Noorani.

Final Conclusion: The Authority ruled that M/s Sikka Ports & Terminals Limited may avail input tax credit on the operation and maintenance services of the specified Diving Support Vessels and on the hiring, operation and maintenance services of the specified Security Patrol Vessels, holding that the contested Section 17(5) blocked-credit provisions do not apply to these service contracts which are integral inputs to the assessee's composite port and terminal handling supply.

Classification of goods under HSN - Medicaments versus tobacco substitutes - Section Notes to Chapter 30 (exclusion of preparations intended to assist smokers to stop smoking) - HSN 2402 - cigarettes of tobacco substitutes - Applicability of GST rates and Compensation Cess on cigarettes of tobacco substitutes

Classification of goods under HSN - Medicaments versus tobacco substitutes - Section Notes to Chapter 30 (exclusion of preparations intended to assist smokers to stop smoking) - Whether the applicant's product is classifiable as an Ayurvedic medicament under HSN 30049011 - HELD THAT: - The Authority examined the product description, manufacturing process, composition and the applicant's submissions and found no case made out that the goods are Ayurvedic medicines manufactured in accordance with the authoritative books specified in the First Schedule to the Drugs and Cosmetics Act. The Section Note to Chapter 30 excludes "preparations ... intended to assist smokers to stop smoking" from Chapter 30; the Authority held that this exclusion (being part of the Customs Tariff Act) precludes classification of the subject herbal smokes under HSN 30049011. The Authority also applied the test of common parlance and market perception, observing that purchasers would regard the product as a cigarette without tobacco/nicotine rather than as an ayurvedic medicament, and therefore the applicant's proposed classification at HSN 3004 does not apply to the goods. [Paras 10]

The product is not classifiable as an Ayurvedic medicament under HSN 30049011.

HSN 2402 - cigarettes of tobacco substitutes - Classification of goods under HSN - Applicability of GST rates and Compensation Cess on cigarettes of tobacco substitutes - Whether the applicant's product is classifiable as "cigarettes of tobacco substitutes" under HSN 2402 and the consequent tax treatment - HELD THAT: - The Authority accepted the applicant's own submissions and test report showing absence of nicotine and characterised the goods as cigarettes without tobacco/nicotine, i.e., tobacco substitute cigarettes. Applying the General Rules for the Interpretation of the Customs Tariff Act and relying on Section and Chapter Notes and the Explanatory Notes, the Authority found a specific entry at HSN 2402 90 10 for "Cigarettes of tobacco substitutes." The Authority therefore classified the subject goods under that entry and referred to the relevant notifications which prescribe the GST rates and compensation cess for that entry. [Paras 11, 12, 13]

The product is classifiable under HSN 2402 90 10 as cigarettes of tobacco substitutes and is therefore taxable as such.

Applicability of GST rates and Compensation Cess on cigarettes of tobacco substitutes - Classification of goods under HSN - Rate of tax and cess applicable on the product after classification as cigarettes of tobacco substitutes - HELD THAT: - Having classified the goods under HSN 2402 90 10, the Authority applied the notified tax provisions. It recorded that the entry appears at Sr. No. 14 of Schedule IV to Notification No. 1/2017 CT (R) (liable to CGST @14%) and that Compensation Cess is leviable on cigarettes of tobacco substitutes as per Notification No. 1/2017 Compensation Cess (R). On that basis the Authority determined the applicable tax on inter state and intra state supplies. [Paras 13, 14]

Inter state supplies attract IGST at the applicable rate together with Compensation Cess; intra state supplies attract CGST and SGST at the applicable rates together with Compensation Cess (as specified in the notifications for HSN 2402 90 10).

Final Conclusion: The Authority ruled that the applicant's goods are not Ayurvedic medicaments under Chapter 30 but are classifiable as "cigarettes of tobacco substitutes" under HSN 2402 90 10; accordingly, inter state supplies shall attract IGST and intra state supplies shall attract CGST and SGST, each along with the notified Compensation Cess for cigarettes of tobacco substitutes.

Health care services by a clinical establishment - exemption under Notification No. 12/2017 - entry at Sr. No. 74 - authorised medical practitioner - preventive health check-up as diagnostic service - tie-up with other hospitals does not alter scope of supply

Health care services by a clinical establishment - exemption under Notification No. 12/2017 - entry at Sr. No. 74 - authorised medical practitioner - preventive health check-up as diagnostic service - tie-up with other hospitals does not alter scope of supply - Whether the lump-sum consideration received for the applicant's 20-year "Diamond Plan" for providing healthcare services is exempt from GST under Sr. No. 74 of Notification No. 12/2017-C.T. (Rate). - HELD THAT: - The Authority found that the core supply under the Diamond Plan comprises health care services by a clinical establishment and is delivered under a recognised system of medicine (Allopathy) through an authorised medical practitioner. The compulsory annual preventive health check-up offered under the plan qualifies as services of diagnosis and thus falls within the definition of health care services. The fact that some services may be rendered through empanelled or tie-up hospitals does not change the nature of the supply; outsourced or affiliated diagnostic services remain part of the healthcare service provided by the applicant. The Authority also relied on CBIC guidance that amounts retained by hospitals as part of charges for healthcare services (including payments to consultants or provision of ancillary services) are exempt where the overall supply is healthcare. Applying these principles, the lump-sum payment for the multi-year plan was held to be consideration for healthcare services covered by Sr. No. 74 of Notification No. 12/2017 and therefore exempt from GST. [Paras 11, 12, 13, 14]

The supply of services under the Diamond Plan by M/s. Divyajivan Healthcare LLP is healthcare services exempt from GST under Sr. No. 74 of Notification No. 12/2017-C.T. (Rate).

Final Conclusion: Advance ruling: the lump-sum consideration received by the applicant for the Diamond Plan is for healthcare services by a clinical establishment through an authorised medical practitioner and is exempt from GST under Sr. No. 74 of Notification No. 12/2017-C.T. (Rate).

Input tax credit - blocked credit under Section 17(5)(d) CGST Act - construction of immovable property - plant and machinery excludes land - non obstante clause in Section 17(5) - intent and purposive reading of statutory language ('for' vs 'used') - role of the GST Council in policy interpretation

Input tax credit - blocked credit under Section 17(5)(d) CGST Act - construction of immovable property - plant and machinery excludes land - non obstante clause in Section 17(5) - Whether GST borne by the applicant on lease premium paid for transfer of lease rights in industrial land is eligible as input tax credit. - HELD THAT: - The Authority examined Section 16(1) CGST Act entitlement to input tax credit but held that Section 17(5), beginning with a non obstante clause, overrides Section 16(1). The Authority construed Section 17(5)(d) to bar input tax credit in respect of goods or services received by a taxable person 'for' construction of an immovable property (other than plant or machinery). It emphasised that the statutory explanation excludes land from the definition of 'plant and machinery', and read this exclusion as an expression of legislative intent to deny credit for services pertaining to land used for construction. The Authority treated the wording 'for' as indicating purpose (i.e., lease received for the purpose of construction of factory/administrative structures) and held that this plain meaning operates to block credit. The Authority also relied on the GST Council's consideration of the issue and applied the Council's position as a guiding policy factor. Taken together - (i) the exclusion of land from 'plant and machinery', (ii) the purposive reading of 'for' in Section 17(5)(d), (iii) the statutory non obstante provision overriding Section 16(1), and (iv) the GST Council's stance - the Authority concluded that the GST borne on the lease/assignment of land is not available as input tax credit. [Paras 11, 12, 13, 16]

GST paid by M/s J M Chemicals on the lease/assignment of the industrial plot is blocked from input tax credit under Section 17(5)(d) CGST Act and is ineligible for availment.

Final Conclusion: The Authority ruled that the GST paid on the assignment/lease premium for the industrial land is blocked under Section 17(5)(d) CGST Act and therefore cannot be claimed as input tax credit, having regard to the exclusion of land from 'plant and machinery', the purposive reading of the word 'for', and the GST Council's position.

Transfer of assessment under Section 127(2) of the Income tax Act - Reasoned order requirement for transfer - Judicial scrutiny of reasons for transfer - Territorial jurisdiction of the Assessing Officer - Personal hearing before transfer - Pending criminal or quasi criminal proceedings not by itself justifying transfer

Transfer of assessment under Section 127(2) of the Income tax Act - Reasoned order requirement for transfer - Judicial scrutiny of reasons for transfer - Pending criminal or quasi criminal proceedings not by itself justifying transfer - Personal hearing before transfer - Validity of the order dated 10/08/2021 under Section 127 transferring the petitioner's assessment to Bengaluru - HELD THAT: - The Court held that although the statutory procedure under Section 127(2) required issuance of notice and opportunity of personal hearing (which were afforded), the impugned order failed the statutory requirement of recording adequate and reasonable reasons for transfer. The order merely narrated facts without explaining why, on the material before the authority, the petitioner's assessment-where both the assessee and the firm are assessed in Mumbai-ought to be centralised to Bengaluru. The existence of a pending matter before the Additional Chief Metropolitan Magistrate in Bengaluru was held not to be, by itself, a sufficient or permissible ground for transferring the assessment. For these reasons the transfer was quashed; however the Court directed the petitioner to cooperate with the Revenue, attend for recording of statements and furnish documents as required, subject to reasonable notice. [Paras 6, 7, 8, 9]

Order dated 10/08/2021 transferring the petitioner's case to Bengaluru quashed for failure to record adequate reasons; petitioner directed to cooperate with revenue authorities and comply with requests for documents and attendance.

Final Conclusion: Writ petition allowed: transfer order under Section 127 dated 10/08/2021 set aside for lack of reasoned decision; petitioner must, nonetheless, cooperate with the Bengaluru authorities and comply with reasonable requests for documents and attendance.

Re-opening of assessment under Section 148 - escapement of income and proviso to Section 147 - change of opinion doctrine - tangible material as basis for reassessment - mandatory waiting period following Asian Paints judgment

Re-opening of assessment under Section 148 - change of opinion doctrine - tangible material as basis for reassessment - Validity of the notice dated 27/03/2019 issued under Section 148 for AY 2014-2015. - HELD THAT: - The Court examined the reasons recorded for re-opening and found that the Assessing Officer relied on the partnership deed, audited accounts and Form No.3CD to contend that one partner was an HUF and therefore payments to that partner were not deductible. Those materials, including Form No.3CD which disclosed the HUF as a partner and the interest paid, were available on record at the time the original assessment under Section 143(3) was completed. The Court held that the reassessment was founded on a mere change of opinion rather than on any fresh or tangible material demonstrating escapement of income. Since reopening within four years requires tangible material beyond impermissible change of opinion, the notice was invalid. The Court expressly declined to decide the substantive question whether an HUF can be a partner under the Indian Partnership Act or the correctness of the Respondent's view under Section 184, because the re-opening itself failed for lack of a permissible foundation. [Paras 4, 5, 7]

Notice dated 27/03/2019 under Section 148 quashed for being based on impermissible change of opinion and lacking tangible material.

Mandatory waiting period following Asian Paints judgment - Validity of the Assessment Order and notice of demand dated 09/12/2019 which were passed before the expiry of the four week period prescribed by this Court's Asian Paints decision. - HELD THAT: - The officer who passed the assessment filed an affidavit stating unawareness of the Asian Paints judgment and tendered an apology for passing the assessment before the mandatory four week period elapsed. The affidavit was taken on record and the apology accepted. Counsel for the Revenue stated that the Assessment Order and notice of demand be treated as withdrawn. The Court recorded this position and did not proceed to adjudicate the assessment order on merits in view of the withdrawal. [Paras 1]

Assessment Order and notice of demand dated 09/12/2019 treated as withdrawn/considered withdrawn.

Final Conclusion: The petition is allowed: the notice under Section 148 dated 27/03/2019 and the subsequent order disposing objections are quashed for being founded on an impermissible change of opinion without tangible material; the Assessment Order and demand dated 09/12/2019 have been treated as withdrawn.

Disallowance under Section 43B for provision written back - treatment of contingent liability for tax deduction - foreign exchange fluctuation - revenue recognition and deduction - characterisation of receipt from sale of land as capital gain v. business income - deletion of disallowance for obsolete stock write off, plant shifting expenses and upfront bank fees claimed in revised computation

Disallowance under Section 43B for provision written back - treatment of contingent liability for tax deduction - Deletion of the assessing officer's disallowance under Section 43B in respect of provision for leave encashment written back was correctly upheld. - HELD THAT: - The tribunal re examined the factual matrix and the assessee's consistent practice of obtaining actuarial valuation to ascertain incremental leave encashment liability. It found that the final statements and the computation were in compliance with statutory requirements and that the liability remained contingent and had not crystallised into an allowable deduction while computing total income. On that factual appraisal the tribunal upheld the CIT(A)'s deletion of the disallowance, and the High Court found no substantial question of law in that conclusion.

The deletion of the disallowance in respect of leave encashment written back is upheld.

Foreign exchange fluctuation - revenue recognition and deduction - Deletion of the disallowance on account of foreign exchange fluctuation was correctly upheld. - HELD THAT: - The tribunal examined the profit and loss accounts and the factual material and applied the ratio in Commissioner of Income Tax, Delhi v. Woodward Governor India (P) Ltd. to hold that the CIT(A)'s deletion of the disallowance was justified. The High Court found no error in the tribunal's approach or conclusion.

The deletion of the disallowance for foreign exchange fluctuation is upheld.

Deletion of disallowance for obsolete stock write off - deletion of disallowance for plant shifting expenses - deletion of disallowance for upfront bank fees claimed in revised computation - Deletion by the CIT(A) of disallowances for obsolete stock written off, expenses for shifting the Chennai plant, and upfront fees paid to ICICI Bank (claimed in revised computation) was correctly upheld. - HELD THAT: - The tribunal considered these three connected issues together, reviewed the factual material and the reasoning of the CIT(A), and recorded an elaborate finding affirming the deletions. The High Court, on perusal of the tribunal's analysis and fact finding, concluded there was no substantial question of law in the tribunal's approach or conclusions. [Paras 15]

The deletions of the disallowances relating to obsolete stock, plant shifting expenses and upfront bank fees are upheld.

Characterisation of receipt from sale of land as capital gain v. business income - Sale of the factory land at Guindy, Chennai gave rise to capital gains and not business profit; the tribunal correctly upheld the CIT(A)'s conclusion. - HELD THAT: - The tribunal re examined the assessing officer's findings and the CIT(A)'s reversal, applied the principle in CIT v. G. Venkataswami Naidu that the nature of gain (capital or revenue) depends on the facts and circumstances, and concluded on the material before it that the sale resulted in capital gain. The High Court found the tribunal's factual appraisal and application of law unimpeachable and held that no substantial question of law arose.

The characterisation of the sale proceeds as capital gain is affirmed.

Final Conclusion: All the tribunal's findings on the contested disallowances and on the characterisation of the land sale were upheld; the revenue's appeal is dismissed and the interim stay petition is also dismissed.

Bar of prosecution under Section 293 of the Income tax Act - non obstante clause in Section 138(2) of the Income tax Act prohibiting disclosure of seized material - protection afforded to acts done in good faith under search and seizure provisions of the Income tax Act - police power under Section 91 Cr.P.C. to summon documents

Bar of prosecution under Section 293 of the Income tax Act - protection afforded to acts done in good faith under search and seizure provisions of the Income tax Act - Registration of FIR and prosecution of income tax officers for acts done in the course of authorised search and seizure are barred by the Income tax Act. - HELD THAT: - The court construed Section 293 as a two fold statutory bar: (i) no suit in a civil court to set aside or modify any proceeding taken or order made under the Act; and (ii) no prosecution, suit or other proceeding shall lie against the Government or any officer of the Government for anything in good faith done or intended to be done under the Act. Search and seizure were carried out by the petitioners under Section 132(4) of the Act and consequent acts fall within the protective ambit of Section 293. Reliance on the Apex Court's treatment of Section 293 in CIT v. Parmeshwari Devi Sultania establishes that proceedings which in substance impugn or seek to question acts or proceedings under the Act are barred. Applying that principle, the registration of the FIR in Crime No.52 of 2017 against officers who performed authorised search and seizure was unsustainable and the FIR was liable to be quashed. [Paras 15, 16, 19]

The FIR registered against the petitioners for acts done in the course of search and seizure is barred by Section 293 and is unsustainable.

Non obstante clause in Section 138(2) of the Income tax Act prohibiting disclosure of seized material - police power under Section 91 Cr.P.C. to summon documents - A police notice under Section 91 Cr.P.C. seeking production of documents seized under the Income tax Act cannot override the statutory bar on disclosure in Section 138(2) and is contrary to law. - HELD THAT: - Section 138(2) begins with a non obstante clause that, subject to orders of the Central Government, directs that no information or document shall be furnished or produced by a public servant in respect of such matters. Read conjunctively with the search and seizure powers under Section 132, the scheme prevents compulsory disclosure of seized material to other authorities. The police notice dated 13.04.2017 (and subsequent communications seeking the seized diary and details of officers) sought production of the diary which was seized during authorised proceedings; such issuance was inconsistent with the statutory bar and, in the circumstances of this case, rendered the notice and further steps contrary to law. [Paras 12, 14, 16, 17]

The police notice under Section 91 Cr.P.C. seeking the seized diary was contrary to the non obstante prohibition in Section 138(2) and could not be given effect.

Maintainability of writ despite FIR against unknown persons - Writ petition by the income tax officers was maintainable despite the FIR being registered against unknown persons because subsequent police actions targeted the petitioners and sought material and identities. - HELD THAT: - Although the FIR initially named unknown persons, the subsequent issuance of the Section 91 notice and communications expressly directed at the petitioners, and the demand for the seized diary and details of officers, demonstrated that the investigation had moved to impugn the petitioners' official acts. In those circumstances the petitioners could legitimately invoke constitutional writ jurisdiction to challenge the proceedings and notices that unlawfully sought to subject them to investigation or disclosure in contravention of statutory protections. [Paras 9, 18]

The writ petition was maintainable because later police actions and notices effectively targeted the petitioners despite the FIR being initially against unknown persons.

Judicial relief in quashing proceedings rendered without authority of law - The FIR and all further proceedings pursuant thereto were quashed and petitioners were entitled to consequential benefits. - HELD THAT: - On the combined application of Sections 132, 138(2) and 293 of the Income tax Act, and having found the registration of the FIR and the police notices to be contrary to law, the court exercised its writ jurisdiction to quash Crime No.52 of 2017 and all further proceedings arising therefrom. The quashing was warranted because the registration and subsequent actions were rendered without authority by statutory bars and protections applicable to authorised income tax search and seizure operations. [Paras 16, 17, 20]

Crime No.52 of 2017 and all proceedings pursuant thereto are quashed; petitioners entitled to consequential benefits.

Final Conclusion: The writ petition is allowed: the FIR in Crime No.52 of 2017 and all further proceedings arising therefrom are quashed as being barred by the Income tax Act (notably Sections 138(2) and 293) and the petitioners are entitled to consequential relief.

Deduction under Section 80P(2)(a)(vi) - co-operative society engaged in collective disposal of labour - registration as "Miscellaneous Society" under state co-operative law - deduction under Section 80P(2)(a)(iii) - marketing of agricultural produce - remand to Tribunal for fresh consideration

Deduction under Section 80P(2)(a)(vi) - co-operative society engaged in collective disposal of labour - registration as "Miscellaneous Society" under state co-operative law - entitlement to deduction under Section 80P(2)(a)(vi) where the society was registered as a "Miscellaneous Society" and alleged to be engaged in collective disposal of members' labour - HELD THAT: - The Court recorded that the parties placed reliance on and accepted the decision in Peravoor Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham v. Commissioner of Income Tax and, following the principle laid down therein, answered the questions relating to Section 80P(2)(a)(vi) against the assessee and in favour of the Revenue. The High Court therefore upheld the Tribunal's conclusion that the society could not be treated as a co-operative society engaged in the collective disposal of labour for the purpose of claiming the deduction under Section 80P(2)(a)(vi), having regard to its registration as a "Miscellaneous Society" and the precedent relied upon by the parties.

Questions on entitlement under Section 80P(2)(a)(vi) decided against the assessee and in favour of the Revenue, following Peravoor Range precedent.

Deduction under Section 80P(2)(a)(iii) - marketing of agricultural produce - remand to Tribunal for fresh consideration - eligibility for deduction under Section 80P(2)(a)(iii) (marketing of agricultural produce) was not finally adjudicated and was remitted to the Tribunal - HELD THAT: - The Court observed that the Tribunal had noted grounds under Section 80P(2)(a)(iii) but had not recorded a finding on the assessee's entitlement under that provision. The High Court declined to decide the substantive question itself to avoid encroaching on factual determinations, noting that an independent examination could require evaluation of pure facts (for example, whether toddy vending by members amounts to marketing of agricultural produce). For these reasons the Court remitted substantial question no.3 to the Tribunal for fresh consideration and disposal in accordance with law.

Substantial question on Section 80P(2)(a)(iii) remitted to the Tribunal for reconsideration.

Final Conclusion: For the Assessment Years 2009-10, 2010-11 and 2011-12 the High Court, following the Peravoor Range decision, rejected the claim for deduction under Section 80P(2)(a)(vi) and answered those questions in favour of the Revenue; the question of entitlement under Section 80P(2)(a)(iii) (marketing of agricultural produce) was not decided on merits and has been remitted to the Tribunal for fresh consideration.

Treatment of annual license fee as capital or revenue expenditure - deductibility under section 37 of the Income-tax Act - consistency in departmental stand and impermissibility of changing position merely because SLP is filed in another case - role of res judicata and expectation of uniformity in tax administration

Treatment of annual license fee as capital or revenue expenditure - deductibility under section 37 of the Income-tax Act - consistency in departmental stand and impermissibility of changing position merely because SLP is filed in another case - Addition disallowing annual license fee as capital expenditure and treating it as non-allowable under section 37 was not justified and was deleted. - HELD THAT: - The agreement pursuant to which the annual license fee was paid was executed in 2006 and the assessee had been claiming and the Revenue had accepted the payments as revenue expenditure in earlier assessment years. The Assessing Officer disallowed the fee in the year under appeal solely because the Department had filed Special Leave Petitions in other cases on an identical issue. The Tribunal held that, absent any change in facts or law for the year under consideration, a unilateral change in the Department's stance merely because SLPs were filed in other matters could not justify retrospective disallowance. The Tribunal relied on the principle that, while res judicata as such may not strictly apply in tax proceedings, consistency and certainty require the Revenue to maintain a uniform position unless there is a relevant change in facts or law. On these grounds the addition was found unjustified and deleted. [Paras 8]

Addition disallowing the annual license fee deleted and the ground of the assessee allowed.

Final Conclusion: The Tribunal allowed the appeal by deleting the addition made for disallowance of the annual license fee for AY 2014-15, holding that the Revenue could not change its earlier accepted position merely because SLPs were filed in other cases; consequential and academic grounds were not adjudicated.

Revisional jurisdiction under section 263 of the Income tax Act - Limited scrutiny under CASS and scope of AO's enquiry - Requirement to demonstrate assessment order is erroneous and prejudicial to the interest of Revenue - Binding effect of CBDT circular limiting scope of scrutiny - Obligation to consider and deal with submissions/evidence placed before the revisional authority

Revisional jurisdiction under section 263 of the Income tax Act - Limited scrutiny under CASS and scope of AO's enquiry - Requirement to demonstrate assessment order is erroneous and prejudicial to the interest of Revenue - Whether the Pr. CIT rightly exercised revisional jurisdiction under section 263 by holding the assessment order erroneous and prejudicial to the interest of Revenue in a case selected for limited scrutiny where TDS was deducted and deposited and the AO had sought and verified TDS details. - HELD THAT: - The Tribunal held that the case was selected for limited scrutiny under CASS and the scope of the Assessing Officer's enquiry was accordingly confined. The AO had issued notices seeking reconciliation/details of TDS, the assessee furnished the required reconciliation and documents and the Departmental Representative conceded that TDS had been deducted and deposited. The Pr. CIT in his section 263 order did not indicate how the assessment order was erroneous or how such alleged error was prejudicial to the Revenue, nor did he deal with the submissions and TDS evidence placed before him. In these circumstances, the initiation of revisional proceedings and the consequent order under section 263 were held to be legally unsustainable. The Tribunal further relied on coordinate-bench precedents establishing that where scrutiny is limited under CASS (and in consonance with relevant CBDT guidance), the AO cannot be faulted for not enquiring beyond the limited scope, and a revisional order cannot be founded on such impermissible expansion. Applying these principles to the facts, the Tribunal concluded that the Pr. CIT had erred in assuming jurisdiction under section 263 and that the revisionary proceedings and order were null in law. [Paras 4, 5, 6]

Assumption of revisional jurisdiction by the Pr. CIT under section 263 and the consequent order quashed; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, quashed the initiation of revisionary proceedings and the order passed by the Pr. CIT under section 263 as bad in law, and restored the position that the assessment order was not shown to be erroneous or prejudicial to the Revenue in the limited scrutiny proceedings.

Fiscally transparent entity - benefits of DTAA to partners - fees for technical services - independent personal services - permanent establishment / fixed base - interest on refund of tax deducted under section 195 - remand for fresh examination of agreements in light of Supreme Court precedent

Fiscally transparent entity - benefits of DTAA to partners - fees for technical services - independent personal services - Taxability of payments made to a Polish limited partnership law firm under India-Poland DTAA and domestic law - HELD THAT: - The Tribunal found that the Polish law firm was a limited partnership treated as fiscally transparent under Polish domestic law and therefore not taxable in its own right in Poland. Article 3(1)(e), Article 1(1) and Article 4(1) of the India-Poland DTAA require that treaty benefits apply only to persons who are liable to tax in the contracting State; where domestic law treats a partnership as fiscally transparent, the partners - not the partnership - are the persons liable to tax and thus are the appropriate claimants of treaty benefits. The income in question is therefore to be examined in the hands of the partners. Paragraph 4 of Article 13 excludes payments that fall within Article 15; since the partners are taxable in Poland and the partnership has certified absence of a permanent establishment/fixed base in India, Article 15 (Independent Personal Services) applies and the receipts are not taxable in India unless the narrow conditions in Article 15 (fixed base or stay exceeding 183 days) are satisfied. No evidence was produced to establish a permanent establishment or fixed base in India; accordingly the payments were not taxable in India as fees for technical services under Article 13 or under section 9(1)(vii).

Payments to the Polish partnership were not taxable in India; the partnership being fiscally transparent, the income is taxable in the partners' hands in Poland and, absent a fixed base or 183 day presence, falls under Article 15 and is not chargeable in India.

Interest on refund of tax deducted under section 195 - Entitlement to interest on refund of TDS deposited under protest under section 195 - HELD THAT: - Following the Supreme Court decision relied on by the assessee and CBDT Circular No. 11/2016, the Tribunal held that where excess tax has been deposited under section 195, the deductee is entitled to interest on the refund under the provisions governing refund of income tax. The Revenue did not controvert these authorities or the applicability of interest in the facts of the case.

Deductee is entitled to interest on refund of tax deposited under section 195; declaration for refund with interest is allowed.

Remand for fresh examination of agreements in light of Supreme Court precedent - application of DTAA in light of Supreme Court precedent - Taxability of payments made to Zintro Inc. (USA) - need for fresh adjudication - HELD THAT: - The CIT(A) had treated certain payments to Zintro as royalties/technical fees relying on a Karnataka High Court decision. The Tribunal observed that the Karnataka High Court view underpinning that conclusion has been overtaken by the Supreme Court decision in Engineering Analysis Centre of Excellence (P) Ltd. The Tribunal therefore found it appropriate to remit the matter to the CIT(A) for fresh consideration: the CIT(A) is directed to examine the end user agreement and the nature of services rendered in light of the DTAA and the principles laid down by the Supreme Court, affording the assessee an opportunity of hearing.

Issue remanded to the CIT(A) for fresh consideration and decision on whether payments to Zintro constitute royalty/FTS or otherwise taxable under the DTAA, in accordance with the Supreme Court's jurisprudence.

Final Conclusion: Appeals partly allowed: (a) payments to the Polish limited partnership held not taxable in India as FTS and entitled to treaty treatment in the partners' hands; (b) deductee granted interest on refund of excess TDS under section 195; and (c) issue relating to payments to Zintro Inc. remanded to the CIT(A) for fresh examination in light of Supreme Court authority.

Notional/hypothetical income - estimation of income by applying presumed rate (6% entry fee) - entry operator / accommodation entries - rule of consistency in successive assessment years - real income v. hypothetical income

Notional/hypothetical income - estimation of income by applying presumed rate (6% entry fee) - entry operator / accommodation entries - real income v. hypothetical income - rule of consistency in successive assessment years - Whether the addition of Rs. 14,53,800/- by applying 6% on investments, treating the assessee as an entry operator and estimating notional income, was justified for A.Y. 2014-2015. - HELD THAT: - The Tribunal found that the Assessing Officer treated the assessee as an entry operator and applied a presumed rate of 6% on unlisted investments to estimate income, but did not place independent material on record to show that the investments generated real income or that the assessee had behaved inconsistently in other years. The Tribunal noted that no similar estimation was made in the preceding or subsequent assessment years and that the Revenue did not controvert this position. Applying the principle in CIT v. Excel Industries Ltd., the Tribunal held that hypothetical or notional income cannot be taxed where it is not shown to be real, and that a consistent view taken in favour of the assessee in earlier years should not be lightly disturbed absent convincing reasons or material change. Consequently, in the absence of evidence demonstrating that the alleged entry fees had in fact accrued or that the investments represented accommodation entries yielding real income, the estimation by applying 6% was not justified and was contrary to the requirement that income must be real and substantiated before being assessed. [Paras 8, 9]

Addition of Rs. 14,53,800/- by applying 6% on investments treating the assessee as an entry operator is set aside and deleted for A.Y. 2014-2015; appeal allowed.

Final Conclusion: Appeal allowed: the Tribunal deleted the notional addition computed as 6% entry fee on investments for A.Y. 2014-2015, holding that taxation of hypothetical income was not warranted and that the rule of consistency militated against reopening the issue in absence of convincing material.

Disallowance under Section 14A read with Rule 8D - Application of Rule 8D formula - Investment from non-interest-bearing funds - Strategic group investments and business expediency - Nexus between expenditure and exempt income - Taxability of dividends from foreign subsidiaries - Reliance on South Indian Bank Ltd. ratio - Mechanical application of accounting formula versus factual inquiry

Disallowance under Section 14A read with Rule 8D - Application of Rule 8D formula - Reliance on South Indian Bank Ltd. ratio - Validity of the disallowance computed by the Assessing Officer under Section 14A read with Rule 8D for AY 2014-15 - HELD THAT: - The Tribunal examined the Assessing Officer's application of the Rule 8D formula and the factual materials relied upon by the assessee showing sizable non-interest-bearing funds and the vintage and purpose of investments. The Tribunal applied the Supreme Court's ratio in South Indian Bank Ltd. holding that where investments in exempt-yielding securities are substantially covered by non-interest-bearing funds and no nexus is established between interest expenditure and exempt income, disallowance under Section 14A cannot be sustained. The Tribunal found that most investments were strategic, made in earlier years from capital/reserves or specific non-interest-bearing instruments, and that foreign-subsidiary dividends were taxable (and thus outside Section 14A). The Assessing Officer's computation was described as a mechanical application of the Rule 8D formula without establishing requisite nexus; reliance on formulaic computation alone was rejected. On these findings, the Tribunal upheld the CIT(A)'s deletion of the disallowance. [Paras 16, 21, 24, 27, 28]

The disallowance under Section 14A read with Rule 8D as computed by the Assessing Officer is deleted; the Tribunal declines to interfere with the CIT(A)'s order.

Investment from non-interest-bearing funds - Strategic group investments and business expediency - Nexus between expenditure and exempt income - Taxability of dividends from foreign subsidiaries - Whether administrative/other expenditure and interest were incurred 'in relation to' earning exempt income so as to attract disallowance - HELD THAT: - The Tribunal accepted the assessee's evidence that investments producing dividend income were made for business expansion of group concerns and out of non-interest-bearing funds (capital, reserves, or specific non interest-bearing instruments). The Tribunal noted that the assessee had demonstrated flow of funds, earlier-year investments, and that certain dividends (from foreign subsidiaries) were taxable and hence not within Section 14A's scope. It held that the assessee specifically identified items of expenditure and explained that they were not incurred for earning exempt income; no independent finding by the AO established a direct nexus. Consequently, the mere computation of a proportionate administrative disallowance under Rule 8D without establishing nexus was improper. [Paras 14, 16, 24, 27]

The addition on account of administrative expenses and interest as related to exempt income is not sustained and is deleted.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal upholds the CIT(A)'s deletion of the disallowance under Section 14A read with Rule 8D for AY 2014-15, finding that the investments were largely made from non-interest-bearing and strategic business funds and that the AO's mechanical application of Rule 8D without establishing nexus was unsustainable.

Addition on account of bogus/accommodation purchases - onus of proof for genuineness of purchases - estimation of profit margin on unproved purchases - use of industry profit benchmarks (Task Group report for Diamond Sector) - precedential restriction of additions in diamond trading to a 2% profit margin

Addition on account of bogus/accommodation purchases - estimation of profit margin on unproved purchases - use of industry profit benchmarks (Task Group report for Diamond Sector) - precedential restriction of additions in diamond trading to a 2% profit margin - Whether additions made by treating certain purchases as bogus should be upheld and, if so, the appropriate percentage of profit to be applied on unproved purchases. - HELD THAT: - The Tribunal found that the assessee failed to prove the trail of goods despite furnishing purchase bills and other documents, and therefore the purchases could not be accepted as fully genuine; accordingly, the claim for complete deletion of the addition was rejected. However, having regard to the nature of the business (trading and export of polished diamonds and diamond jewellery), the Task Group report for the Diamond Sector indicating trading margins in the range of 1%-3%, and the Tribunal's own precedents in similar fact situations, the Tribunal held that the appropriate means of estimating the profit element on unproved purchases is to apply a uniform rate of 2%. For AY 2010-11 the AO had estimated suppressed profit margin at 25% and the CIT(A) had reduced it to 12.5%; the Tribunal further reduced the addition and directed computation on the basis of 2% of the unproved purchases. The same reasoning was applied mutatis mutandis to AYs 2011-12 and 2012-13 given identical nature of transactions and findings, and the Revenue appeals were dismissed while the assessee's appeals were partly allowed to the extent indicated. [Paras 6, 9, 10, 11, 12]

The disallowance on account of alleged bogus purchases is sustained in principle but restricted to 2% of the unproved purchases for each of AYs 2010-11, 2011-12 and 2012-13; Revenue appeals dismissed and assessee appeals partly allowed.

Reopening of assessment - violation of principles of natural justice - issues left open for adjudication - Allegations of violation of principles of natural justice and challenge to reopening of assessment were not adjudicated at this stage and are left open for consideration if required later. - HELD THAT: - The assessee had raised grounds challenging the validity of reassessment and alleging breach of natural justice. No submissions were advanced before the Tribunal on these grounds; the Tribunal expressly refrained from commenting on them at this stage and left these grounds open for adjudication at a later stage if necessary. [Paras 7]

Grounds relating to alleged violation of natural justice and validity of reopening are left open for adjudication and were not decided.

Final Conclusion: For AYs 2010-11, 2011-12 and 2012-13 the Tribunal upheld that certain purchases could not be accepted as proved but, applying industry benchmarks and precedent, restricted the taxable profit element on such unproved purchases to 2%; the Revenue appeals are dismissed and the assessee appeals are partly allowed. Challenges to reopening and alleged breach of natural justice remain undecided and are left open for future consideration.

Disallowance under section 14A - Requirement of recording satisfaction by Assessing Officer under section 14A(2) - Rule 8D(2)(iii) apportionment of indirect/administrative expenses - Apportionment of interest expenditure under section 14A - Exclusion of strategic/subsidiary investments for computation of average investment - Adjustment to book profit under section 115JB - Admission of additional grounds under Rule 11 of the ITAT Rules

Disallowance under section 14A - Requirement of recording satisfaction by Assessing Officer under section 14A(2) - Rule 8D(2)(iii) apportionment of indirect/administrative expenses - Validity of the Assessing Officer's invocation of Rule 8D following the assessee's suo moto disallowance and adequacy of AO's recorded satisfaction. - HELD THAT: - The Tribunal held that the AO had properly proceeded under section 14A read with Rule 8D after the assessee failed to demonstrate a reasonable basis for its suo moto disallowance. The AO specifically examined the assessee's working, recorded that the basis for the assessee's figure was unclear and rejected the claim that no expenditure was incurred; the AO's reasons in para 3.2 were held to supply the requisite satisfaction so that application of Rule 8D was not invalid for want of recording satisfaction. The Tribunal therefore rejected the assessee's contention that the AO had not complied with the mandatory requirement to record satisfaction before applying Rule 8D, and found no illegality in the AO initiating disallowance proceedings once the assessee did not satisfactorily explain its own suo moto disallowance. [Paras 6, 10]

The AO's invocation of section 14A read with Rule 8D was valid because the AO recorded adequate satisfaction after the assessee failed to justify its suo moto disallowance.

Rule 8D(2)(iii) apportionment of indirect/administrative expenses - Exclusion of strategic/subsidiary investments for computation of average investment - Adjustment to book profit under section 115JB - Whether investment in the subsidiary could be excluded while computing average investment for disallowance under Rule 8D and the consequent effect on adjustment under section 115JB. - HELD THAT: - Following the Supreme Court decision in Maxopp Investment Ltd. and the Delhi High Court guidance, the Tribunal held that the CIT(A)'s exclusion of subsidiary/strategic investments from the base for computing the administrative-expense disallowance was not sustainable. The Tribunal set aside that part of the CIT(A) order and directed the AO to recompute disallowance by including the subsidiary investment in the average investment. The Tribunal observed that the issue as to exclusion was covered by binding higher-court authority and accordingly ruled against the assessee on this point; the corresponding adjustment to book profit under section 115JB is to follow the recomputed disallowance. [Paras 13]

The CIT(A)'s exclusion of subsidiary investment is set aside; the AO is directed to recompute disallowance under Rule 8D (and corresponding adjustment under section 115JB) including the subsidiary investment in the average investment.

Apportionment of interest expenditure under section 14A - Disallowance under section 14A - Whether the disallowance of interest expenditure under section 14A was justified where loans were raised for specific business purposes and there was no material to show diversion of borrowed funds to make investments yielding exempt income. - HELD THAT: - The Tribunal accepted the assessee's case that borrowings were taken for specific business purposes and projects and that no direct interest cost was incurred for earning exempt income. The AO did not produce evidence to show that borrowed funds were diverted to make the investments in question; audit of the facts showed that total investment at the end of the year was not higher than the previous year and that sale proceeds funded purchases. On these facts, the Tribunal found no basis for apportioning interest to exempt-income investments and upheld the CIT(A)'s deletion of the disallowance of interest expenditure under section 14A. [Paras 14]

The disallowance of interest expenditure under section 14A is deleted because the loans were for specific business purposes and no material established diversion of borrowed funds to the investments.

Admission of additional grounds under Rule 11 of the ITAT Rules - Admissibility and treatment of the assessee's additional ground seeking deduction of Education Cess. - HELD THAT: - The Tribunal admitted the additional ground under Rule 11 consistent with prior orders in the assessee's earlier years and applicable precedent permitting consideration of questions of law arising from facts on record. For consistency it directed the AO to consider the assessee's claim regarding deduction of Education Cess in the same terms as ordered by this Tribunal in the earlier year. [Paras 16, 17]

The additional ground is admitted; the AO is directed to consider the deduction claim in accordance with the Tribunal's earlier decision in the assessee's case.

Final Conclusion: The cross appeals are partly allowed. The Tribunal upheld the AO's exercise of jurisdiction under section 14A/Rule 8D as validly initiated, deleted the apportionment of interest (finding no diversion of borrowed funds), but set aside the CIT(A)'s exclusion of subsidiary investment and directed recomputation of the Rule 8D disallowance (with corresponding adjustment under section 115JB) including the subsidiary investment; the assessee's additional ground on Education Cess is admitted and remitted to the AO for consideration in line with the Tribunal's earlier direction.

Application of Section 40A(3) in respect of cash payments for purchases - Scope and exceptions under Rule 6DD read with proviso to Section 40A(3) - Genuineness of payment and identity of payee as criteria to exclude transactions from Section 40A(3) - Business expediency as relevant consideration under Section 40A(3) - Disallowance under Section 40A(3) where payments facilitate use of unaccounted money

Application of Section 40A(3) in respect of cash payments for purchases - Genuineness of payment and identity of payee as criteria to exclude transactions from Section 40A(3) - Business expediency as relevant consideration under Section 40A(3) - Scope and exceptions under Rule 6DD read with proviso to Section 40A(3) - Whether cash payments made by the assessee to its group suppliers are liable to disallowance under Section 40A(3) despite proof of genuineness, identity of payees and commercial justification - HELD THAT: - The Tribunal accepted the factual findings that (a) large-volume purchases were made from two group concerns, (b) the identity of the recipients was established and not disputed, (c) the supplier entities acknowledged receipt and reflected the amounts in their books and bank accounts, and (d) the business arrangement (suppliers collecting counter receipts) was intended to reduce interest/overdraft burden and maintain banking limits of the supplier group companies. Applying the ratio of Attar Singh Gurmukh Singh , the Tribunal held that Section 40A(3) is not to be read in isolation but along with Rule 6DD and the proviso; genuine and bona fide transactions where identity of payee and genuineness of payment are proved, and where business expediency is shown, fall outside the rigour of the provision. The Tribunal reviewed later authorities and High Court decisions recognising that Rule 6DD is not exhaustive and that the proviso and business expediency considerations permit relief where cash payments are bona fide. On facts the Tribunal found the transactions to be at arm's length, the gross profits declared healthy, no invocation of Section 40A(2)(b), and that the cash so received reached the suppliers' bank accounts; consequently the requirement underlying Section 40A(3) (to prevent unaccounted/black-money transactions) was not implicated. The Tribunal therefore deleted the disallowance under Section 40A(3).

Cash payments made to the group suppliers for AY.2015-16, being genuine with payee identity established and supported by business expediency and contemporaneous accounting, are excluded from disallowance under Section 40A(3); the addition is deleted.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal upholds the CIT(A)'s deletion of the Section 40A(3) disallowance for AY.2015-16 on findings of genuineness, identity of payees and commercial justification, applying the proviso to Section 40A(3) read with Rule 6DD and relevant precedent.

Reopening of assessment beyond four years under Section 147 - failure to disclose fully and truly all material facts - extended period of limitation and applicability of the first proviso to Section 147 - Explanation 1 to Section 147 - production of account books or other evidence and scope of disclosure of primary facts - duty to disclose primary facts and limits on duty to disclose inferred facts - quashing of reassessment as void ab initio where failure to disclose is not established

Reopening of assessment beyond four years under Section 147 - failure to disclose fully and truly all material facts - Explanation 1 to Section 147 - production of account books or other evidence and scope of disclosure of primary facts - extended period of limitation and applicability of the first proviso to Section 147 - Validity of reopening assessment after four years and consequent validity of reassessment where Revenue relies on alleged fresh material but has not established failure by the assessee to disclose fully and truly all material facts. - HELD THAT: - The Tribunal examined whether the reopening under Section 147 after expiry of four years was sustainable. The assessee had during original assessment responded to specific queries under section 142(1), furnishing primary documents - names and addresses of shareholders, PANs, bank statements, income tax return acknowledgements and confirmations of investment - and no further queries were raised by the Assessing Officer prior to completion of assessment. Relying on the Supreme Court decision in NDTV vs. DCIT, the Tribunal held that the benefit of the extended six year period under the first proviso to Section 147 is available to Revenue only if it establishes that the assessee failed to disclose fully and truly all primary material facts necessary for assessment. Explanation 1 does not negate the requirement that primary facts must be disclosed; it only prevents the assessee from hiding particular primary entries when documents have been produced. On the material on record the Tribunal found that primary facts were disclosed and that any further investigation could and should have been pursued by the Assessing Officer during the original assessment by asking for more information. The ld. CIT(A) accepted existence of purported fresh material but did not identify any failure by the assessee to disclose primary facts; the Tribunal therefore concluded that Revenue failed to establish the prerequisite failure required to invoke the extended limitation and that reopening was void ab initio. [Paras 9, 11, 12]

Reopening under Section 147 was unsustainable for lack of established failure to disclose primary facts; reassessment order quashed as void ab initio and consequential order of the CIT(A) quashed on this legal ground.

Final Conclusion: The assessee's cross appeal is partly allowed: the reassessment initiated beyond four years was quashed for want of proof of failure to disclose primary material facts; consequentially the CIT(A)'s order upholding the reassessment is quashed. The Revenue's appeal is dismissed as infructuous.

Approval under section 80G - charitable purpose versus religious purpose - expenditure on religious activities - compliance with section 80G(5B) percentage limit

Charitable purpose versus religious purpose - approval under section 80G - Whether the assessee trust was carrying out only religious activities so as to disentitle it from approval under section 80G. - HELD THAT: - Tribunal examined the trust deed, activities carried out and the accounts. The trust, though operating a temple, also undertakes health check-up camps, yoga camps, distribution of food to poor, library services and is constructing an old age home; these activities are reflected in record and went unrebutted by Revenue. The Tribunal found the lower authority's conclusion that the trust was carrying out solely religious activities to be contrary to materials on record and inconsistent with the objects and expenditures demonstrated by the assessee. Reliance was placed on precedents recognizing that institutions carrying out public utility activities alongside religious functions do not lose charitable character where the income or assets are not applied wholly or substantially for a particular religion.

Assessee is not running only for religious purposes; denial of approval on that ground was erroneous and approval under section 80G is not precluded on this basis.

Expenditure on religious activities - compliance with section 80G(5B) percentage limit - approval under section 80G - Whether expenditure of religious nature during the year exceeded the 5% threshold under section 80G(5B), thereby disqualifying the trust from approval. - HELD THAT: - The Tribunal assessed the receipts and expenditures as presented in the income and expenditure account and balance sheet. Total receipts for the year were taken as the sum of income shown in the accounts and corpus receipts, and the religious expenditures (prasadam and poshak) were compared against that aggregate. Applying the same measure used by the Tribunal, religious expenditure amounted to 4.10% of total receipts for F.Y. 2016-17, which is below the 5% ceiling stipulated by section 80G(5B). The Tribunal rejected the CIT(E)'s adverse conclusion based on the figures on record and noted that the Revenue did not rebut the assessee's claim.

Assessee did not violate the 5% limit in section 80G(5B); denial of approval on this ground was incorrect.

Final Conclusion: Both grounds advanced by the CIT(Exemption) for refusing approval under section 80G were unsustainable on the materials: the trust carries out charitable activities in addition to religious functions, and religious expenditure for F.Y. 2016-17 did not exceed the 5% threshold; appeal allowed and approval under section 80G directed to be granted.

Mis-declaration - suppression of facts - classification of goods - extended period of limitation under Section 28(1) of the Customs Act, 1962 - binding effect of prior adjudication / finality of earlier orders - revenue-neutrality - MODVAT credit

Binding effect of prior adjudication / finality of earlier orders - classification of goods - Whether the Tribunal erred in failing to take into account earlier adjudications in favour of the assessee holding the same product to be classified under CTH 3824.90. - HELD THAT: - The Court found that earlier adjudications - including the Commissioner (Appeals) order dated 06.10.2005 and the Tribunal's orders of 22.02.2005 and 13.12.2016 in related proceedings - had attained finality between the parties and held the product to be classified under CTH 3824.90. The impugned Tribunal order under challenge reproduced paragraph 42.3 of the Commissioner (Appeals) order but did not assign independent reasons for departing from or re-examining those earlier findings. Because the prior findings on classification and the absence of mis-declaration had become final, the Tribunal should have considered the show-cause proceedings in that light; classification under CTH 3824.90 therefore did not require re examination. [Paras 9, 10, 12]

The Tribunal erred in not treating the prior final adjudications holding classification under CTH 3824.90 as conclusive; those earlier findings operate between the parties.

Mis-declaration - suppression of facts - extended period of limitation under Section 28(1) of the Customs Act, 1962 - Whether the extended period of limitation under Section 28(1) could be invoked in view of the absence of mis-declaration or suppression which had been earlier adjudicated in favour of the assessee. - HELD THAT: - The Court held that the Commissioner (Appeals) had earlier recorded a finding of absence of mis-declaration or suppression of facts - a finding which attained finality. In the absence of mis declaration or suppression, the legal basis for invoking the extended period under Section 28(1) did not exist. The Tribunal's impugned order did not furnish independent reasons to show that mis declaration or suppression had been established afresh; accordingly the extended limitation could not be invoked to sustain the show-cause notice dated 30.01.2004. [Paras 11, 12]

Section 28(1) could not be invoked once the absence of mis declaration/suppression had attained finality; the extended period was not available to the Department on the material before the Tribunal.

MODVAT credit - revenue-neutrality - Whether the demand could be sustained notwithstanding that any differential duty would be neutralised by the assessee's entitlement to MODVAT credit (revenue-neutral situation). - HELD THAT: - The Court observed that the Tribunal failed to consider the revenue neutral character of the case. Relying on the principle that where the exercise is revenue neutral the assessee could not be said to have an incentive to evade duty, the Court found that the Assesssee's entitlement to MODVAT credit meant there was no loss to the Revenue. That aspect was not addressed by the Tribunal and militated against sustaining the differential duty demand. [Paras 11, 12]

The Tribunal erred in upholding the differential duty without considering the revenue neutrality arising from the assessee's entitlement to MODVAT credit.

Final Conclusion: The substantial questions of law were answered in favour of the assessee. The CESTAT order dated 13.12.2016 in Appeal No. C-723/2005 is set aside, the show cause notice dated 30.01.2004 is dropped, Customs Appeal No.1/2019 is allowed and the parties shall bear their own costs.

Amendment of shipping bills under proviso to Section 149 - Correction of drawback serial number based on export documents - Entitlement to differential drawback where documents existing at time of export support amendment - Requirement of documentary evidence in possession of proper officer for amendment - Certificate of non availment of Cenvat credit as supporting documentary evidence

Amendment of shipping bills under proviso to Section 149 - Requirement of documentary evidence in possession of proper officer for amendment - Amendment of shipping bills was permissible under the proviso to Section 149 where the amendment is supported by documentary evidence that existed at the time of export and was in the possession of the proper officer. - HELD THAT: - The appellate tribunal found that the Joint Commissioner rejected the amendment request without reasons, while the Commissioner (Appeals) held that amendment was barred because the documents relied upon were not existing or not in the possession of the proper officer. The record, however, showed that export invoices and packing lists contained the correct HS Code and were basic documents available and examinable by the officer at the time of filing shipping bills. The incorrect drawback serial number in the shipping bills was inadvertent. Therefore the amendment sought was based on documents that existed at the time of export and were in the possession (or were the kind of documents in possession) of the proper officer, bringing the case squarely within the proviso to Section 149 permitting such amendments.

Amendment of the shipping bills allowed under the proviso to Section 149.

Correction of drawback serial number based on export documents - Entitlement to differential drawback where documents existing at time of export support amendment - Certificate of non availment of Cenvat credit as supporting documentary evidence - Appellant entitled to correction of drawback serial number and consequent differential drawback where invoices/packing lists and certificate of non availment of Cenvat credit supported the claim. - HELD THAT: - The tribunal observed that the correct classification (HS Code 74199930) was reflected in the export invoices and packing lists whereas the shipping bills inadvertently recorded an incorrect drawback serial number. The appellant also furnished a certificate certifying non availment of Cenvat credit, which was on record and existed at the time of export. Given that the amendment sought was documentary and corroborated by records available at export, the appellant was entitled to have the drawback serial number corrected and to claim the differential drawback corresponding to the correct serial number.

Correction of drawback serial number permitted and appellant entitled to differential drawback.

Final Conclusion: Impugned orders rejecting amendment of shipping bills are set aside; appeals allowed and amendment of shipping bills with consequential differential drawback granted to the appellant.

Status quo - interim stay - jurisdiction of the Tribunal under insolvency proceedings vis-a -vis remedies under the SARFAESI Act - possession and availability of alternate remedy - exercise of discretion to refuse interim relief where prompt adjudication is possible

Interim stay - status quo - possession and availability of alternate remedy - Whether interim relief in the form of a stay of the NCLT order directing parties to maintain status quo should be granted - HELD THAT: - The High Court refused to grant interim relief. The Court noted that the petitioner has itself approached the NCLT by way of an application to vacate the status quo order and that the NCLT has listed that application for adjudication. The petitioner asserted that it has already taken possession of the subject properties; on that basis, the Court found that continuation of the direction to maintain status quo was unlikely to cause grave or irreparable loss to the petitioner. Given that the Tribunal will consider the petitioner's application and has directed completion of pleadings, the High Court exercised its discretion not to intervene by staying the NCLT order and expected the Tribunal to consider the petitioner's jurisdictional plea when the matter is heard. [Paras 5, 6]

Application for interim relief (stay) rejected; notice issued in writ petition with matter to be heard on merits.

Final Conclusion: The High Court declined to stay the NCLT's order directing maintenance of status quo and rejected the petitioner's application for interim relief, recording that the petitioner's application to the Tribunal is pending and that no grave or irreparable harm would be caused by continuing the status quo; the petition proceeds on notice.

Impleadment as proforma respondent - maintainability of interlocutory application - director status recorded by Form 32 - natural justice / opportunity of hearing - liberty to file fresh petition under the Companies Act, 2013

Impleadment as proforma respondent - maintainability of interlocutory application - director status recorded by Form 32 - natural justice / opportunity of hearing - Application for impleading the applicant as a proforma respondent in Company Petition No. 14/241/242/GB/2019 - HELD THAT: - The Tribunal examined the applicant's claim that he is a Director entitled to be impleaded and noted that the respondents produced a Form 32 filed with the RoC in 2005 showing the applicant's resignation. The applicant's explanation that he was unaware of removal as Director was not found convincing. The Bench declined to adjudicate the underlying dispute about the applicant's status on the IA, observing that impleadment should not be granted without ascertaining the veracity of the competing allegations and the applicant's true status. The Tribunal therefore treated the IA as not maintainable for the limited purpose of impleading the applicant on the existing record and rejected the prayer to implead. The Tribunal clarified it was not expressing any final view on the substantive allegations or on whether the applicant is a director or shareholder, and instead granted the applicant liberty to initiate a fresh petition under the Companies Act, 2013 if eligible. [Paras 14, 16, 18, 19, 20]

Prayer to implead the applicant as a proforma respondent is rejected; applicant granted liberty to file a fresh petition under the Companies Act, 2013, if otherwise eligible.

Final Conclusion: The application to implead the applicant as a proforma respondent in CP No. 14/241/242/GB/2019 is dismissed on the record; no final determination made on the applicant's substantive status as Director or shareholder, and the applicant is given liberty to file an appropriate petition under the Companies Act, 2013.

Condonation of delay - writ jurisdiction under Article 226 - special statute / self-contained code - certificate issued under Section 28A of the SEBI Act read with Section 222 of the IT Act - inapplicability of Section 226 remedy where recovery certificate under Section 222 exists - remand for consideration by competent authority with exclusion of pendency period for limitation

Condonation of delay - Application to condone delay of 129 days in filing the appeal. - HELD THAT: - The Court examined the affidavit explaining the delay and found the reasons satisfactory. On that basis the Court exercised its discretion to condone the delay and allowed the interlocutory application seeking condonation.

Delay of 129 days in filing the appeal was condoned and the application I.A. CAN 1 of 2018 was allowed.

Writ jurisdiction under Article 226 - special statute / self-contained code - certificate issued under Section 28A of the SEBI Act read with Section 222 of the IT Act - inapplicability of Section 226 remedy where recovery certificate under Section 222 exists - Whether the High Court should entertain a writ under Article 226 to quash attachment and freezing of bank accounts pursuant to a SEBI recovery certificate issued under Section 28A of the SEBI Act read with Section 222 of the IT Act. - HELD THAT: - The Court held that the recovery certificate before it was issued under Section 28A of the SEBI Act read with Section 222 of the IT Act, and therefore the statutory regime invoked is a special, self-contained code. Section 226 remedies of the Income tax Act apply where no certificate under Section 222 has been drawn; they are not the appropriate provision where a recovery certificate under Section 222 exists. Given these features and the availability of an alternative statutory remedy, the Court declined to exercise extraordinary jurisdiction under Article 226 to interfere with the attachment. The Court also distinguished the Karnataka High Court decision relied upon by the appellant on the factual basis that in that case no certificate under Section 222 had been drawn.

Writ petition seeking quashing of the SEBI attachment was not entertained; the appeal against the Single Bench's dismissal was dismissed.

Remand for consideration by competent authority with exclusion of pendency period for limitation - Whether the appellant should be permitted to seek relief before the competent authority and how limitation should be computed for such an application. - HELD THAT: - Although the Court refused to exercise Article 226 jurisdiction, it restored to the appellant the liberty to move the competent authority under the relevant statute for lifting the attachment and de-freezing the accounts. The Court directed that, while considering such application on merits, the authority should endeavour to exclude from limitation the period during which the writ petition was pending before this Court and until receipt of the certified copy of the judgment, thereby instructing the authority to compute limitation after excluding that pendency period.

Appellant permitted to file appropriate application before the competent authority; authority to consider the application on merits and endeavour to exclude the period during which the writ petition was pending (and until receipt of certified copy) while computing limitation.

Stay application - Disposition of the stay application filed along with the appeal. - HELD THAT: - Given the dismissal of the appeal, the ancillary stay application had no independent life to survive; there was no basis to continue the interim relief sought.

The stay application I.A. CAN 2 of 2018 was dismissed as infructuous.

Final Conclusion: Delay in filing the appeal was condoned; the High Court declined to exercise Article 226 jurisdiction to set aside a SEBI/Section 222 recovery certificate on the facts, observing that the SEBI Act and the recovery certificate regime form a special, self-contained code; the appellant was permitted to apply to the competent authority for de freezing, with the authority directed to consider the application on merits and to endeavour to exclude the period of pendency of the writ while computing limitation; the stay application was dismissed as moot.

Implementation of approved resolution plan - time limits under Section 12 of the Insolvency and Bankruptcy Code, 2016 - condonation/exclusion of time on account of pending litigation - transfer and distribution of upfront infusion under an approved resolution plan - role of Committee of Creditors and Resolution Professional in implementation and monitoring - judicial supervision to direct implementation and fix timelines

Implementation of approved resolution plan - time limits under Section 12 of the Insolvency and Bankruptcy Code, 2016 - condonation/exclusion of time on account of pending litigation - judicial supervision to direct implementation and fix timelines - Court directed completion of implementation of the NCLT/NCLAT approved resolution plan within a specified short timeline, having regard to statutory time limits under Section 12 and earlier indulgences. - HELD THAT: - The Court observed that the corporate insolvency resolution process must be completed within the periods mandated by Section 12 of the IBC and that further delay would defeat the object of the statutory time limit. Although time had earlier been condoned in view of protracted litigations between the parties, the approved resolution plan (approved by NCLT and upheld by NCLAT) must now be implemented without further delay. In view of continued vacillation and partial steps taken by the successful resolution applicant, the Court exercised supervisory power to direct all concerned parties, including the Implementation and Monitoring Committee, the Committee of Creditors and the resolution professional, to complete implementation within four weeks and warned that any lapse would be viewed seriously. The determinative reasoning was that continued delay is contrary to the statutory scheme and the spirit of maximisation of value enshrined in the Code. [Paras 9, 10, 11]

Implementation of the approved resolution plan to be completed within four weeks from the date of the order; parties and IMC directed to ensure implementation and warned of serious consequences for non compliance.

Transfer and distribution of upfront infusion under an approved resolution plan - role of Committee of Creditors and Resolution Professional in implementation and monitoring - Court directed immediate transfer of the upfront infusion deposited by the successful resolution applicant to the corporate debtor's bank account and its subsequent distribution to lenders as per the approved resolution plan upon implementation. - HELD THAT: - On the status report, it was recorded that an upfront cash amount had been remitted to a custodian bank and was available for disbursement. The Court found the response that funds would not be transferred until other steps were completed to be inconsistent with the DVI's own communications and therefore ordered the upfront amount to be transferred forthwith into the corporate debtor's designated bank account. The Court further directed that upon implementation of the approved plan the deposited amount shall be transferred to the respective lenders/financial creditors in accordance with the approved plan or as mutually agreed. This direction was given to effectuate the approved plan and to prevent further delay in realisation of value for stakeholders. [Paras 6, 7, 10]

Rs. 500 crore upfront amount (deposited by the successful resolution applicant) to be transferred to the corporate debtor's bank account immediately and thereafter disbursed to lenders as per the approved resolution plan on implementation.

Final Conclusion: The appeal is disposed of by directing immediate and time bound implementation of the NCLT/NCLAT approved resolution plan: the upfront infusion already deposited must be transferred to the corporate debtor's account and thereafter distributed to lenders as per the plan, and all concerned (IMC, COC, resolution professional and the successful resolution applicant) must complete implementation within four weeks, non compliance being viewed seriously.

Financial debt - acknowledgment in balance sheet attracting Section 18 of the Limitation Act, 1963 - maintainability of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - financial creditor

Financial debt - financial creditor - Corporate Debtor owed a financial debt to the Appellant and the Appellant is a financial creditor for the amounts advanced. - HELD THAT: - The correspondence between the parties, specifically the letter dated 10.10.2011 (treated as MoU) and the clause providing that if the marketing arrangement is terminated the Corporate Debtor shall repay the amounts advanced with interest, establish that the advances were made as financial assistance for project development. The Corporate Debtor repeatedly acknowledged receipt of the advances in its balance sheets and in correspondence (including the letter of 01.02.2012), and the admitted commercial character of the transaction (advance for development with obligation to repay) falls within the definition of financial debt under the I&B Code (including clause (f) of Section 5(8) capturing transactions having the commercial effect of a borrowing). The Adjudicating Authority erred in treating the arrangement as mere business sharing and in concluding there was no financial debt. [Paras 11, 12, 18, 19, 21]

Amount advanced by the Appellant to the Corporate Debtor constituted a financial debt and the Appellant is a financial creditor.

Acknowledgment in balance sheet attracting Section 18 of the Limitation Act, 1963 - The acknowledgments of the advance in the Corporate Debtor's balance sheets attract Section 18 of the Limitation Act, 1963 and renew the period of limitation. - HELD THAT: - The Corporate Debtor's balance sheets for the years specified expressly recorded the receipt of the advances (noting refund of advances of Rs. 40.75 crores and reference to refund if directed by BIFR). The Supreme Court's precedent, as applied in Asset Reconstruction Company (India) Limited v. Bishal Jaiswal, establishes that such disclosures in balance sheets, prepared as mandated under the Companies Act, can amount to an acknowledgment for the purposes of Section 18 and thereby give rise to a fresh limitation period. Each balance sheet containing the acknowledgment thereby renewed limitation, and the Section 7 petition filed after the later acknowledgments is within time. [Paras 13, 14, 19, 23, 24]

The balance-sheet entries constituted acknowledgments under Section 18, renewing limitation and extending time for filing the Section 7 petition.

Maintainability of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - limitation - The Section 7 application was not time-barred and the Adjudicating Authority erred in rejecting it; the Appeal is allowed and the Adjudicating Authority's order is set aside. - HELD THAT: - Considering (a) that the advances constituted financial debt, (b) the respondent's own acknowledgments in balance sheets which attract Section 18 and renew limitation, and (c) the respondent's post-suit pleadings denying liability (which operated as a denial after 12.07.2017), the petition filed in 2020 was within the renewed limitation period. The Adjudicating Authority's reliance on the absence of a formally executed MoU and on an earlier date of alleged default (01.09.2012) overlooked the material balance-sheet acknowledgments and the confirmed terms in the 10.10.2011 letter. On these grounds the Adjudicating Authority's rejection of the Section 7 application was incorrect. The matter is remitted for consequential orders, including moratorium, to be passed by the Adjudicating Authority within the period directed by this Court. [Paras 20, 21, 22, 23, 25]

Section 7 petition was maintainable; the Adjudicating Authority's order dismissing it is set aside and the Appeal is allowed.

Final Conclusion: The Tribunal held that the amounts advanced by the Appellant were financial debt acknowledged in the Corporate Debtor's balance sheets (thereby attracting Section 18 of the Limitation Act) and that the Section 7 petition was therefore within time; the Adjudicating Authority's dismissal is set aside and the matter is remitted for consequential orders, including moratorium, to be passed by the Adjudicating Authority within the period directed.

Eligibility of promoter as resolution applicant where corporate debtor is an MSME - effect of Section 240-A amendment relieving promoters of MSME from clauses (c) and (h) of Section 29A - disqualification under Section 29A(e) - effect of reactivation of DIN by Court order - power of Resolution Professional/Committee of Creditors to prescribe entry-level net-worth criteria under Section 25(2)(h) - permissibility of allowing submission of net-worth proof at plan stage where EOI was rejected for want of such proof

Eligibility of promoter as resolution applicant where corporate debtor is an MSME - effect of Section 240-A amendment relieving promoters of MSME from clauses (c) and (h) of Section 29A - Promoter of a Corporate Debtor classified as an MSME need not be treated as ineligible under Section 29A merely because of the general disqualifications in that provision, and promoters of an MSME may be allowed an opportunity to submit a resolution plan. - HELD THAT: - This Tribunal reiterated the principle in Saravana Global that where the Corporate Debtor is an MSME the legislature intended to encourage promoters to file viable and feasible resolution plans and, in exceptional circumstances, promoters need not compete with other resolution applicants. The Amendment by insertion of Section 240-A shows Parliament's intention that clauses (c) and (h) of Section 29A shall not apply to resolution applicants in respect of MSMEs, and this legislative purpose supports allowing the promoter of an MSME an opportunity to be considered for a resolution plan. [Paras 21, 22, 29, 32]

The Tribunal held that, given the Corporate Debtor's MSME status, the promoter-appellant is entitled to be considered and need not be excluded from presenting a resolution plan on the basis that promoters of MSMEs should compete with other applicants.

Disqualification under Section 29A(e) - effect of reactivation of DIN by Court order - Reactivation of the appellant's DIN pursuant to the Madras High Court order removed the disqualification under Section 29A(e), and the Adjudicating Authority's observation of disqualification was quashed. - HELD THAT: - The appellant produced and relied upon the High Court judgment directing reactivation of his DIN. The Tribunal found that the Registrar of Companies was obliged to comply with that order and that the Adjudicating Authority failed to consider the effect of the High Court's directions. Consequently, the Tribunal concluded that the appellant does not fall within the disqualification of Section 29A(e) in view of the High Court order and set aside the Adjudicating Authority's finding to the contrary. [Paras 20, 30]

The Tribunal held that the appellant is not disqualified under Section 29A(e) because his DIN stood reactivated by the Madras High Court's directions, and the Adjudicating Authority's contrary observation is quashed.

Power of Resolution Professional/Committee of Creditors to prescribe entry-level net-worth criteria under Section 25(2)(h) - permissibility of allowing submission of net-worth proof at plan stage where EOI was rejected for want of such proof - Although the COC prescribed an entry-level net-worth criterion and the Resolution Professional rejected the EOI for non-compliance, the Tribunal permitted the appellant to furnish the net-worth certificate at the plan submission stage for consideration by the Resolution Professional. - HELD THAT: - The Tribunal acknowledged that the COC had fixed eligibility criteria (including minimum net worth) under the procedure for inviting EOIs and that the Resolution Professional recorded rejection on that ground. However, the appellant had averred willingness to provide a net-worth certificate at the time of submission of the resolution plan and had pleaded that prior disqualification prevented earlier submission. Balancing the Code's object of value maximization and the MSME-related relaxation, the Tribunal exercised its discretion to allow the appellant to submit the net-worth certificate to the Resolution Professional for consideration rather than permanently excluding him on the basis of the earlier provisional rejection. [Paras 16, 17, 31]

The Tribunal directed that the appellant be permitted to file/submit the net-worth certificate and that the Resolution Professional shall consider the same; the earlier rejection on net-worth ground is set aside to that extent.

Directions to Resolution Professional to consider resolution plan of erstwhile director/promoter of MSME corporate debtor - The Resolution Professional and the Adjudicating Authority orders rejecting the appellant's plan and application were quashed and the Resolution Professional was directed to consider the appellant's resolution plan. - HELD THAT: - Having held that the appellant's DIN had been reactivated and that the Corporate Debtor was an MSME (entitling promoters to an opportunity to submit viable plans), and having permitted the filing of net-worth proof, the Tribunal concluded that the Adjudicating Authority's order dismissing the appellant's application and the Resolution Professional's order rejecting the appellant's EOI must be set aside. The Tribunal therefore directed the Resolution Professional to consider the appellant's resolution plan in accordance with the Code and these observations. [Paras 35, 36]

The Tribunal quashed and set aside the Adjudicating Authority's order and the Resolution Professional's rejection, and directed the Resolution Professional to consider the appellant's resolution plan.

Final Conclusion: Appeal allowed: the Tribunal set aside the Adjudicating Authority's and Resolution Professional's orders rejecting the appellant's application and EOI, held that the appellant is not disqualified under Section 29A(e) in view of the Madras High Court's reactivation of his DIN, recognized the Corporate Debtor's MSME status entitling the promoter to be considered, permitted submission of net-worth proof at the plan stage, and directed the Resolution Professional to consider the appellant's resolution plan.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - prohibition on transferring, encumbering or disposing of assets of the corporate debtor during CIRP - auction of attached goods during pendency of corporate insolvency resolution process - binding effect of Supreme Court precedent on proceedings during moratorium

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - auction of attached goods during pendency of corporate insolvency resolution process - Application for permission to auction goods attached prior to commencement of CIRP was correctly rejected in view of the moratorium declared on commencement of CIRP. - HELD THAT: - The Adjudicating Authority declared moratorium by its order dated 15.01.2019. Although the goods were attached on 31.01.2018, the Application for permission to auction those goods was filed on 12.07.2019 after the insolvency commencement date. Section 14(1) prohibits, subject to its sub sections, transfer, encumbrance or disposal of any assets of the corporate debtor on and after the insolvency commencement date. The Tribunal applied the binding reasoning of the Supreme Court in Anand Rao Korada v. Varsha Fabrics Pvt. Ltd., which held that once CIRP has commenced and moratorium is declared, proceedings for auction of assets of the corporate debtor ought not to proceed. The Adjudicating Authority therefore did not err in rejecting the prayer to auction the attached goods during pendency of CIRP; the appellant has an admitted claim filed in Form B but that does not entitle continuation of recovery measures contrary to the moratorium. [Paras 4, 5, 6, 7, 8]

The Adjudicating Authority rightly rejected the application to auction the attached goods in view of the moratorium; the appeal is without merit.

Final Conclusion: The appeal is dismissed; the rejection of the application to auction the attached goods during the pendency of CIRP is upheld.

Limitation under Section 61 of the Insolvency and Bankruptcy Code, 2016 - effect of Rule 50 of the NCLT Rules, 2016 on computation of limitation - exclusion of limitation period by Supreme Court order in Suo Motu Writ Petition (Civil) No.3/2020 - application of Section 12 of the Limitation Act to appeals - requirement of due diligence by aggrieved party under the IBC timeline

Exclusion of limitation period by Supreme Court order in Suo Motu Writ Petition (Civil) No.3/2020 - Whether the Supreme Court's order excluding the period from 15.03.2020 to 02.10.2021 saves the Appeals filed on 20.09.2021 from being barred by limitation. - HELD THAT: - The impugned NCLT order was delivered on 20.07.2018, well before 15.03.2020. Excluding the period from 15.03.2020 to 02.10.2021 therefore does not relieve the appellant of accounting for the period between 20.07.2018 and 14.03.2020 during which delay accrued. Consequently, the Supreme Court direction excluding the pandemic period does not render the Appeals timely in the present facts. [Paras 13]

The Supreme Court exclusion of 15.03.2020-02.10.2021 does not assist the appellant; delay prior to 15.03.2020 remains unexcused.

Limitation under Section 61 of the Insolvency and Bankruptcy Code, 2016 - effect of Rule 50 of the NCLT Rules, 2016 on computation of limitation - application of Section 12 of the Limitation Act to appeals - requirement of due diligence by aggrieved party under the IBC timeline - Whether non-receipt of a free certified copy under Rule 50 suspends or delays the commencement of the limitation period prescribed by Section 61 of the IBC, and whether the Appeals filed are within time. - HELD THAT: - Section 61(2) prescribes a 30-day limitation (with a possible extension of 15 days) for appeals under the IBC and omits any language that limitation runs from when an order is made available. Rule 50 is procedural and obliges the Registry to send a free certified copy, but it cannot be read as elongating or suspending the statutory limitation under Section 61. Section 12 of the Limitation Act permits exclusion of time requisite for obtaining a copy of the order; however, that principle does not permit a construction that parties may indefinitely delay filing by awaiting a free copy. The jurisprudence requires an aggrieved party under the IBC to exercise due diligence: if the party applies for a certified copy, the period for limitation will be computed with regard to the time requisite for obtaining that copy (or otherwise the date of pronouncement and rules of the Limitation Act), and a party cannot indefinitely postpone invocation of limitation by not seeking the copy promptly. Applying these principles to the facts (where the appellant alleges applying for a certified copy only after a prolonged interval), the Appeals were filed beyond the permissible period and are time-barred. [Paras 14, 24, 31, 32]

Non-receipt of a free copy under Rule 50 does not suspend commencement of limitation under Section 61; the Appeals are barred by limitation and are dismissed.

Final Conclusion: The panel dismissed the Appeals as barred by time: the Supreme Court pandemic exclusion did not cure pre-15.03.2020 delay, Rule 50 does not suspend Section 61 limitation, and the appellant failed to establish timely commencement or sufficient cause for condonation.

Power of the liquidator to cancel or conduct multiple rounds of auction - no vested right in the highest bidder until completion of sale on payment - interpretation of Clauses 11, 12 and 13 of Schedule I of the IBBI (Liquidation Process) Regulations, 2016 - duty of the liquidator under Regulation 33(3) regarding collusion - validity of auction terms conferring absolute discretion to accept, reject or cancel bids

Power of the liquidator to cancel or conduct multiple rounds of auction - interpretation of Clauses 11, 12 and 13 of Schedule I of the IBBI (Liquidation Process) Regulations, 2016 - Whether the liquidator was entitled to cancel the e-auction and conduct further rounds of auction to maximise realisation. - HELD THAT: - The Tribunal held that Clause 1(11) of Schedule I expressly authorises the liquidator to conduct multiple rounds of auctions to maximise realisation and promote creditors' interests, which implies competency to hold successive auctions and, where appropriate, to cancel an auction prior to completion. Regulation 33(3) is a non-exhaustive constraint (prohibiting sale where there is reason to believe collusion) but does not confine the liquidator's ability to cancel or repeat auctions where maximisation is warranted. Reading Clause 12 in isolation (which contemplates invitation to provide balance consideration on close of auction) frustrates Clause 11 unless the power to cancel is read into the scheme; accordingly the liquidator's invocation of cancellation was within the regulatory framework and competence conferred by Schedule I and Regulation 33 read together. Steps taken by the liquidator in compliance with the Adjudicating Authority's prior directions were ordered reversed subject to the outcome of the appeal. [Paras 11, 16, 18, 21]

The liquidator was entitled to cancel the auction and initiate further auctions under the combined operation of Clause 11 of Schedule I and Regulation 33, and the liquidator's actions in that regard were permissible.

No vested right in the highest bidder until completion of sale on payment - interpretation of Clauses 12 and 13 of Schedule I of the IBBI (Liquidation Process) Regulations, 2016 - Whether a highest bidder acquires a vested right to enforce completion of sale upon being declared highest bidder but before payment in full and execution of sale deed. - HELD THAT: - Relying on settled principles reflected in precedent and the scheme of Schedule I, the Tribunal reiterated that there is no concluded contract until the bid is accepted and the full payment contemplated by Clause 13 is made. Clause 12 (inviting balance consideration on close of auction) does not by itself conclude the sale; the sale stands completed only on payment of the full amount under Clause 13 and execution of the certificate of sale or deed. Consequently a highest bidder - including a sole bidder who bid at reserve price - acquires no vested right to compel acceptance of the auction prior to fulfilment of the payment and completion formalities, and may not demand enforcement of the auction in its favour. [Paras 12, 13, 15, 17, 20]

The highest bidder does not acquire a vested right to enforce the auction until full payment and completion as provided in Clause 13; therefore no enforceable right arose prior to cancellation.

Validity of auction terms conferring absolute discretion to accept, reject or cancel bids - duty of the liquidator under Regulation 33(3) regarding collusion - Whether auction terms conferring absolute discretion on the liquidator to accept, reject, adjourn or cancel bids are inconsistent with Schedule I or otherwise impermissible. - HELD THAT: - The Tribunal found that terms in the sale notice reserving to the liquidator the right to accept or reject bids, adjourn/postpone/cancel the e-auction or withdraw assets at any stage without assigning reasons cannot be read as being in violation of Schedule I. Such contractual terms operate within and are consistent with the regulatory scheme which empowers the liquidator to adopt measures (including multiple auctions) to maximise realisations while also imposing limited duties such as not proceeding where collusion is suspected under Regulation 33(3). The notice provisions, including Clause 3(k) and Clause 5(m), simply reflect the liquidator's regulatory competence and do not impermissibly fetter stakeholder rights. [Paras 9, 11, 21]

Auction terms reserving absolute discretion to the liquidator are not inconsistent with Schedule I and are permissible within the regulatory framework, subject to the liquidator's duties under Regulation 33(3).

Final Conclusion: The appeal is allowed: the impugned NCLT order is set aside; the Tribunal held that the liquidator had competence under Schedule I and Regulation 33 to cancel the auction and conduct fresh auctions, that the highest bidder had no vested right until full payment and completion under Clause 13, and that the auction terms reserving discretion to the liquidator were not in violation of the Liquidation Process Regulations; steps taken in compliance with the impugned order are reversed and the liquidator may initiate a fresh auction process.

Appointment of independent chartered accountant for reconciliation - directions to liquidator to cooperate - sharing of costs equally - time bound compliance - enforcement of prior tribunal order

Appointment of independent chartered accountant for reconciliation - enforcement of prior tribunal order - Appointment of independent Chartered Accountants to reconcile accounts between the applicant and the corporate debtor in terms of the earlier tribunal direction. - HELD THAT: - The Tribunal recalled its earlier direction (recorded in its order dated 28.05.2019) that both parties appoint an independent Chartered Accountant to reconcile their accounts. The applicant nominated M/s Thomas VM and Co.; the liquidator did not propose any firm. The Tribunal therefore exercised its power under Section 60(5) read with the NCLT Rules and appointed M/s Thomas VM and Co. and, because no firm was suggested by the liquidator, appointed GC Chopra & Co. to carry out the reconciliation and file a report. The appointment was made to give effect to and enforce the earlier tribunal direction and to ensure reconciliation proceeds despite the absence of a nominee from the liquidator. [Paras 13, 16]

Mr. Thomas VM and Co. and GC Chopra & Co. are appointed as independent Chartered Accountants to reconcile the accounts and furnish a report to the Tribunal.

Time bound compliance - Whether the reconciliation exercise must be completed within a specified time-frame. - HELD THAT: - Having appointed the firms, the Tribunal fixed a time-bound mandate to ensure prompt conclusion of the reconciliation. The report was directed to be furnished to the Tribunal within four weeks from the date of the order, imposing a clear deadline for the appointed professionals to complete the reconciliation and submit their findings. [Paras 16]

The Chartered Accountants shall furnish their reconciliation report to the Tribunal within four weeks from the date of the report.

Sharing of costs equally - directions to liquidator to cooperate - Allocation of the cost of the reconciliation and obligation of the parties to cooperate with the appointed accountants. - HELD THAT: - The Tribunal specified the cost payable to the Chartered Accountants and allocated the financial burden equally between the applicant and the liquidator. The liquidator was directed to cooperate with the appointed accountants in the reconciliation exercise. The order thereby ensures both cost-sharing and mandatory cooperation to facilitate completion of the task. [Paras 16, 17]

The cost payable to the Chartered Accountants is fixed and shall be shared equally by the applicant and the respondent; the respondent (liquidator) is directed to cooperate with the accountants.

Final Conclusion: The Tribunal appointed M/s Thomas VM and Co. and GC Chopra & Co. as independent Chartered Accountants to reconcile the accounts between the parties, fixed the fee and directed equal sharing of costs, imposed a four week timeline for the report and directed the liquidator to cooperate; the application is disposed of accordingly.

Anticipatory bail - pre-arrest bail under Section 438 Cr.P.C. - economic offences as a distinct class - custodial interrogation - tampering with evidence and witnesses - cooperation with investigation as a bail condition - grant of bail subject to conditions - relevance of earlier anticipatory bail and seized documentary evidence

Pre-arrest bail under Section 438 Cr.P.C. - economic offences as a distinct class - relevance of earlier anticipatory bail and seized documentary evidence - custodial interrogation - tampering with evidence and witnesses - Grant of pre-arrest bail in ECIR No.02/GWZO/2020 registered by the Enforcement Directorate - HELD THAT: - The Court applied the established principles governing anticipatory (pre-arrest) bail including the special caution applicable to economic offences, but observed that grant of relief depends on the nature and gravity of accusations, likelihood of tampering with evidence or intimidating witnesses, risk of fleeing justice and other relevant factors. The court recorded that the present ECIR originated from FIR No.5(3) 2018 and that documentary evidence central to the case had already been seized in the earlier investigation; the petitioner had earlier obtained anticipatory bail in August 2019 in relation to that FIR which remains operative. The petitioner, a public figure with deep societal roots, had appeared before the ED on summons and undertook to cooperate and produce documents. Given the passage of time since the events (2008-2009), the seizure of the documentary evidence, the prior progress of investigation (including examination of witnesses), and absence of any tangible evidence that the petitioner is a flight risk or would tamper with evidence at this late stage, the Court found custodial interrogation unnecessary and concluded that exceptional circumstances warranted grant of pre-arrest bail in the present proceedings. [Paras 10, 11, 12]

Pre-arrest bail granted in relation to ECIR No.02/GWZO/2020; custodial interrogation found unnecessary in the circumstances.

Cooperation with investigation as a bail condition - grant of bail subject to conditions - tampering with evidence and witnesses - Imposition of conditions upon grant of pre-arrest bail - HELD THAT: - The Court exercised its discretion to attach conditions to the bail it granted. Conditions were framed to secure continued cooperation with the investigation, to prevent tampering with evidence or influencing witnesses, to ensure the petitioner's availability for proceedings and to guard against absconding. Specific obligations included execution of a personal bond with sureties, presentation for interrogation and production of documents when required, prohibition on tampering or influencing witnesses, and deposit of the petitioner's passport with the ED (subject to leave to the ED). The Court further preserved the ED's remedy to seek cancellation of bail on breach of conditions. [Paras 13]

Bail granted subject to specified conditions including personal bond with sureties, cooperation with investigation, non-tampering, and surrender of passport.

Final Conclusion: The petition for pre-arrest bail in ECIR No.02/GWZO/2020 is allowed; the petitioner is to be released on bail forthwith if arrested in that case, subject to the conditions imposed by the Court, and with liberty to the Enforcement Directorate to move the Court for cancellation of the order on breach of those conditions.

Special Court cognizance without committal - Stand alone offence under the Prevention of Money Laundering Act - Double jeopardy / Article 20(2) of the Constitution and Section 300 Cr.P.C. - Compulsion against self incrimination / Article 20(3) and statements under Section 50 PMLA

Special Court cognizance without committal - Whether the Special Court could proceed under the PMLA only after committal by a Magistrate in terms of Section 209 Cr.P.C. - HELD THAT: - The court held that Section 44(1)(b) of the PMLA does not import the committal procedure under Section 209 Cr.P.C. The expression 'without the accused being committed' in the PMLA must be read to permit the Special Court to take cognizance on a complaint by an authorized authority even in the absence of formal production or committal of the accused; it does not mean committal in the technical sense of Section 209 Cr.P.C. Consequently the Special Court need not await a magistrate's committal under Section 209 Cr.P.C. before taking cognizance under the PMLA. [Paras 6]

Argument that committal under Section 209 Cr.P.C. was required fails; Special Court may take cognizance under Section 44(1)(b) without magistrate committal.

Stand alone offence under the Prevention of Money Laundering Act - Double jeopardy / Article 20(2) of the Constitution and Section 300 Cr.P.C. - Whether prosecution under Section 4 of the PMLA amounts to double jeopardy in view of earlier prosecution by CBI under IPC and Prevention of Corruption Act. - HELD THAT: - The court found that offence under Section 4 of the PMLA is independent and distinct, centring on activities connected with 'proceeds of crime' (such as acquisition of immovable property from such proceeds). Prosecution for predicate offences under the IPC and Prevention of Corruption Act arising from the same factual matrix does not render prosecution under the PMLA a second prosecution for the same offence. Article 20(2) and Section 300 Cr.P.C. apply only where the accused is prosecuted a second time for the same offence; that factual condition is not satisfied here. The court relied on the reasoning in coordinate bench decisions that PMLA offences are stand alone. [Paras 7]

Double jeopardy challenge fails; prosecution under Section 4 PMLA is not barred by earlier CBI prosecutions for related predicate offences.

Compulsion against self incrimination / Article 20(3) and statements under Section 50 PMLA - Whether statements recorded under Section 50 PMLA during investigation attract the protection of Article 20(3) and are inadmissible as compelled testimony. - HELD THAT: - Applying the principles in Kathi Kalu Oghad and the cited Delhi High Court ruling, the court held that Article 20(3) protection against being compelled to be a witness applies only if the person was in the character of an accused at the time the statement was made or the statement was the result of compulsion. Merely being questioned or summoned under Section 50 during investigation, when the person has not been shown as an accused, does not automatically invoke Article 20(3). Even if Article 20(3) were available, the prosecution could rely on other evidence. The petitioners' statements recorded under Section 50 were therefore not immune from use on the ground asserted. [Paras 8, 9, 10]

Article 20(3) does not bar use of statements made under Section 50 PMLA where the person was not an accused at the time or where there is no compulsion; the challenge on this ground fails.

Final Conclusion: The impugned order sustaining proceedings under Section 4 of the PMLA contains no infirmity on the grounds raised; the writ petition is dismissed.

Grant of bail under Section 439 Cr.P.C. read with Section 65 of the PMLA - Application of twin conditions under Section 45(1) PMLA - Standard for subjective satisfaction that the accused is not guilty and is not likely to commit an offence while on bail - Maintainability of a Cr.P.C. bail petition in proceedings under PMLA - Relevance of economic-offence considerations in bail adjudication - Presumption of validity of statutory amendment pending constitutional challenge

Grant of bail under Section 439 Cr.P.C. read with Section 65 of the PMLA - Standard for subjective satisfaction that the accused is not guilty and is not likely to commit an offence while on bail - Relevance of economic-offence considerations in bail adjudication - Petitioner entitled to be enlarged on bail - HELD THAT: - The court examined the materials placed by the prosecution (statements under Section 50(3) PMLA, bank statements and seized documents) and found they gave rise to strong suspicion but did not amount to concrete material sufficient to form the subjective satisfaction required by amended Section 45(1)(ii) PMLA that the accused is guilty. There were no criminal antecedents and no material to conclude the petitioner was likely to commit an offence if released. Economic nature of the alleged offence, though relevant, could not alone justify continued detention; the court must consider nature of accusations, evidence, and other bail factors. On the facts before it, the court was satisfied there were reasonable grounds to believe the petitioner is not guilty and is not likely to offend while on bail, and therefore bail should be granted subject to conditions and safeguards to protect investigation and trial. [Paras 46, 47, 50, 51, 56]

Petitioner to be released on bail subject to conditions because the court is satisfied that there are reasonable grounds to believe he is not guilty and is not likely to commit an offence while on bail.

Maintainability of a Cr.P.C. bail petition in proceedings under PMLA - Application of Section 65 PMLA - Petition under Section 439 Cr.P.C. in a PMLA prosecution is maintainable - HELD THAT: - Section 65 of the PMLA permits application of Cr.P.C. provisions insofar as they are not inconsistent with the PMLA. No provision of the PMLA was found to be inconsistent with Section 439 Cr.P.C. in the present context. Accordingly, a bail petition under Section 439 Cr.P.C. could be entertained in respect of an offence prosecuted under the PMLA. [Paras 52, 53, 54]

High Court may entertain a petition under Section 439 Cr.P.C. in a PMLA prosecution where Section 65 PMLA does not render Section 439 Cr.P.C. inconsistent.

Application of twin conditions under Section 45(1) PMLA - Presumption of validity of statutory amendment pending constitutional challenge - Amended Section 45(1) PMLA (post-Act 13/2018) applies and its twin conditions must be satisfied before bail; on the facts the court was satisfied with those conditions - HELD THAT: - The court noted that the Supreme Court in Nikesh Tarachand Shah struck down the twin conditions as then worded but the legislature amended Section 45(1) by Act 13/2018. The amendment remains in force pending any order of the Supreme Court staying it, and is entitled to a presumption of validity. Therefore the court applied the amended twin conditions: (i) notice/opportunity (procedural requirement) and (ii) subjective satisfaction that the accused is not guilty and will not commit an offence while on bail. The court found the notice requirement satisfied and, on evaluation of material, concluded the subjective satisfaction under sub-clause (ii) was also met in the present case. [Paras 22, 23, 48, 49, 50]

Amended Section 45(1) applies; the court was satisfied both procedural and substantive twin conditions were fulfilled and thus granted bail.

Final Conclusion: The High Court allowed the petition and directed release of the petitioner on bail under the ECIR subject to conditions to safeguard the investigation and trial; the court found the amended twin conditions of Section 45(1) PMLA applicable and, on the material before it, was satisfied that the petitioner need not remain in custody pending trial.

Manufacture and sale of goods - works contract service - declared service under Section 66E - determination of value of service portion in the execution of a works contract (Rule 2A(i)) - abatement method for works contract value (Rule 2A(ii)(A)) - pre-dominant character test - no double levy where transaction is charged as excisable clearance

Manufacture and sale of goods - works contract service - pre-dominant character test - Whether supply of Ready Mix Concrete with ancillary pumping and laying amounts to a taxable Works Contract service or is predominantly a manufacture and sale of excisable goods. - HELD THAT: - The Tribunal found that the appellant is primarily a manufacturer of Ready Mix Concrete (RMC) and that transportation, pumping and laying at the buyer's site arise from the peculiarity and short shelf-life of RMC and are integral to delivery. The department had accepted and collected excise duty on the full sale value (including charges for pumping and laying), and the contractual label of 'works contract' (used for VAT purposes) cannot change the true nature of the transaction. Applying the pre-dominant character test and following binding precedents cited in the judgment, the Tribunal held that the composite activity is excisable manufacture and sale, not a Works Contract service liable to service tax. [Paras 11, 12, 13, 14]

Supply of RMC with pumping and laying is predominantly manufacture and sale of goods and not chargeable as Works Contract service.

Determination of value of service portion in the execution of a works contract (Rule 2A(i)) - abatement method for works contract value (Rule 2A(ii)(A)) - If Works Contract service were held to apply, the correct method for determining the service portion of the contract value and the correctness of the department's computation. - HELD THAT: - The Tribunal held that where the value of goods and service portion are identifiable, Rule 2A(i) requires deduction of the value of goods from the gross amount to arrive at the service portion. The record shows a specific bifurcation of charges (with pumping/laying charges separately identifiable). Therefore the department ought to have taken only the service portion for levy. Further, even if Rule 2A(ii) were to apply, clause (A) (original works) would permit only 40% of the gross to be chargeable (i.e., 60% abatement). The impugned order wrongly applied the quantification, resulting in an incorrect computation of service tax liability. [Paras 15, 16, 17]

Value for any service tax liability must be determined by deducting value of goods under Rule 2A(i); alternatively at most 40% of gross value is chargeable under Rule 2A(ii)(A). The department's computation was incorrect.

No double levy where transaction is charged as excisable clearance - limitation and extended period - Whether extended period for demand is sustainable in view of the appellant having paid excise duty and the interpretational nature of the dispute. - HELD THAT: - The Tribunal noted that the appellant had paid excise duty on the entire transaction (including pumping and laying charges) and that the dispute is essentially interpretational with precedent supporting the appellant's view. There was no suppression or mis-declaration to justify invocation of the extended period. Given the factual record and bona fide belief supported by authorities, the extended period demand was held to be unsustainable. [Paras 18]

Extended period demand is not sustainable; limitation cannot be invoked against the appellant in the circumstances.

Final Conclusion: The appeal is allowed. The supply of RMC with pumping and laying is held to be predominantly a manufacture and sale of goods and not taxable as Works Contract service; in any event, where service portion is chargeable its value must be determined under Rule 2A(i) (or, if inapplicable, at most 40% under Rule 2A(ii)(A)), and the extended period demand is unsustainable. The impugned order is set aside with consequential relief as per law.

Maintainability of appeal - monetary limits on appeals - substantial question of law - constitutional validity - ultra vires of notification/instruction/order/circular

Maintainability of appeal - monetary limits on appeals - substantial question of law - constitutional validity - ultra vires of notification/instruction/order/circular - Revenue's appeal is maintainable before the Tribunal despite monetary limits prescribed by the Government's policy. - HELD THAT: - The Tribunal considered Circular No. 390/MISC/116/2017-JC dated 22.08.2019 read with Instructions F. No. 390/MISC/163/2010-JC dated 17.8.2011 and examined whether the present controversy falls within the exceptions to the monetary ceiling. Paragraph 4 of the Circular preserves appeals where the issue involves a substantial question of law as described in para 1.3 of the 17.8.2011 Instructions. Para 1.3 confines such exceptions to cases where (a) the constitutional validity of a provision is challenged or (b) a notification/instruction/order/circular is held illegal or ultra vires. The factual and legal question in this appeal concerns liability to pay service tax on testing charges for services rendered in India to a foreign client, which does not engage either of the two categories specified in para 1.3. Consequently, the mere presence of a substantial question of law, absent challenge to constitutional validity or a finding of ultra vires, does not override the monetary bar. As the amount involved is less than Rs. 50 lakhs, the appeal is not maintainable and must be dismissed under the monetary limits policy. [Paras 7, 8, 9]

The Revenue's appeal is not maintainable before the Tribunal because the matter does not fall within the para 1.3 exceptions and the amount involved is below Rs. 50 lakhs; the appeal is dismissed on monetary limits.

Final Conclusion: The appeal filed by the Revenue is dismissed as not maintainable under the Government's monetary limits policy, since the issue does not concern constitutional validity or the ultra vires character of a notification/instruction/order/circular and the amount involved is below the prescribed threshold.

CENVAT Credit - inputs used in fabrication of supporting structures of capital goods - eligibility for credit on structural materials - capital goods - use test - distinguishable on facts

CENVAT Credit - inputs used in fabrication of supporting structures of capital goods - eligibility for credit on structural materials - The Tribunal was justified in dismissing the Department's appeal without interfering with the finding that the items claimed as inputs were used for fabrication of supporting structures of capital goods. - HELD THAT: - The High Court accepted the concurrent factual findings of the Commissioner and the CESTAT that the iron, steel and related items were used in the fabrication of identifiable capital goods which were in turn used for manufacture of excisable goods. The court observed that the CBEC circular of 2nd December, 1996 supported the Respondent's case and that, on the facts, the decision in Saraswati Sugar Mills was distinguishable. The Tribunal had examined the issue in detail and applied the relevant precedents and the use test; there was no reason for interference with its conclusion that the inputs were used for fabrication of supporting structures of capital goods and thus eligible for credit under the applicable rules. [Paras 14, 16, 17]

The CESTAT was justified in dismissing the Department's appeal and in upholding allowance of CENVAT credit for the inputs used in fabrication of supporting structures of capital goods.

Capital goods - use test - inputs used in fabrication of supporting structures of capital goods - The Tribunal was right in law in allowing CENVAT Credit on the disputed goods used for fabrication of supporting structures for capital goods, notwithstanding arguments that such supporting structures embodied to earth may not constitute 'goods'. - HELD THAT: - Applying the use test, and relying on contemporaneous authority and the CBEC circular, the High Court held that where structural items are fabricated into identifiable capital goods employed in manufacture, they qualify as capital goods (or as inputs for such capital goods) for the purpose of claiming credit. The court distinguished Saraswati Sugar Mills on the factual basis that there the structures did not go into components of specified machines, whereas in the present case the materials were used in fabrication of identifiable capital goods integral to the manufacturing process. [Paras 13, 14, 17]

The CESTAT was right in law to allow CENVAT credit on the goods used for fabrication of supporting structures for capital goods.

Capital goods - inputs used in fabrication of supporting structures of capital goods - eligibility for credit on structural materials - The Tribunal was correct in holding that the fabrication goods used for supporting structures constitute capital goods for which CENVAT Credit was allowable. - HELD THAT: - The High Court endorsed the Tribunal's conclusion that the fabrication goods formed part of identifiable capital goods within the meaning and purpose of the CENVAT regime when such goods are fabricated and used in the manufacturing unit. The court noted consistency of this view with Supreme Court and High Court precedents applying the use test and with the CBEC circular, and found no error in treating the disputed fabrication goods as capital goods eligible for credit. [Paras 15, 16, 17]

The Tribunal was right to treat the fabrication goods used for supporting structures as capital goods eligible for CENVAT Credit.

Final Conclusion: Appeals dismissed. The High Court upheld the CESTAT's allowance of CENVAT credit on structural/fabrication materials used in forming identifiable capital goods for manufacture of excisable goods, distinguishing Saraswati Sugar Mills on facts; no order as to costs.

Waiver of show cause notice under Section 11A(2B) of the Central Excise Act, 1944 (unamended) - payment of differential duty and interest prior to issuance of show cause notice - extended period of limitation - penalty under Rule 26 of the Central Excise Rules, 2002 - confiscation as a precondition for imposition of penalty under Rule 26

Waiver of show cause notice under Section 11A(2B) of the Central Excise Act, 1944 (unamended) - payment of differential duty and interest prior to issuance of show cause notice - extended period of limitation - Whether the unamended sub-section (2B) of Section 11A of the Central Excise Act, 1944 applies to the period March 2008 to January 2010 and whether the Adjudicating Authority erred in denying waiver of show cause notice. - HELD THAT: - The Tribunal observed that the period in dispute (March 2008 to January 2010) falls within the regime governed by the unamended Section 11A(2B). The Adjudicating Authority had quoted and applied the amended provision (post-Finance Act, 2011) which is not applicable retrospectively to the period in question. Under the unamended sub-section (2B), a person who pays the duty on the basis of his own ascertainment or ascertained by a Central Excise Officer before service of notice and informs the Central Excise Officer in writing is entitled to non-issuance of notice in respect of that duty, subject to the proviso permitting the officer to determine any short payment. The Tribunal found that the appellant had paid the differential excise duty along with interest, with only a disputed minor difference in interest calculation remaining, and therefore the matter requires reconsideration under the correct (unamended) provision. In view of this fundamental error of law in applying the amended provision, the Tribunal remanded the matter to the Adjudicating Authority for de novo consideration and passing of a fresh order in light of the unamended Section 11A(2B). All other issues were kept open for reconsideration by the Adjudicating Authority. [Paras 9, 10, 11]

Adjudicating Authority erred in applying the amended provision; matter remanded for fresh adjudication under the unamended Section 11A(2B) and de novo order.

Penalty under Rule 26 of the Central Excise Rules, 2002 - confiscation as a precondition for imposition of penalty under Rule 26 - Whether penalties imposed on Shri R.K. Jain and Shri Nitin Angre under Rule 26 of the Central Excise Rules, 2002 are sustainable. - HELD THAT: - The Tribunal found on the material before it that the appellants (individuals) had no knowledge of the OMCs' subsequent dosing and branding of the fuels and that there was no proposal for confiscation of goods. Considering these facts and the absence of requisite culpability or the statutory preconditions for invoking Rule 26, the penalties imposed on the individuals were held to be unsustainable. The Tribunal therefore set aside the penalties levied on Shri R.K. Jain and Shri Nitin Angre. [Paras 12]

Penalties imposed under Rule 26 on the two individual appellants are set aside; their appeals are allowed.

Final Conclusion: The appeal of the company is allowed by way of remand to the Adjudicating Authority to reconsider and pass a de novo order applying the unamended Section 11A(2B) for the period March 2008 to January 2010; penalties imposed under Rule 26 on the two individual appellants are quashed and their appeals are allowed.

Cenvat credit on input services - Input Service Distributor registration - Admissibility of common / shared intra-group services as input services - Remand for issuance of a speaking order

Cenvat credit on input services - Input Service Distributor registration - Admissibility of common / shared intra-group services as input services - Whether the appellant was required to obtain Input Service Distributor registration for credit taken on services received at its Mumbai office and whether specified services were admissible as Cenvat credit in respect of the manufacturing unit. - HELD THAT: - The Tribunal examined the service arrangements, the nature and usage of services and the facts that the assessee had a single manufacturing division at Dahej with a marketing office at Mumbai and that shared intra-group services were charged to the appellant under platform recovery. Revenue did not produce evidence showing existence of more than one manufacturing unit of the appellant. On the material before it the Tribunal held that, in these circumstances, there was no requirement for ISD registration for the Mumbai office which had transferred credit to the factory. The Tribunal further considered the nature and use of specific services listed and recorded findings in respect of various heads of services (legal services, chartered accountant services, insurance surveyor services, maintenance/repair of office, manpower supply to factory, membership subscriptions essential for manufacture, storage/warehousing up to place of removal, banking/financial services related to procurement, IT and other services used for procurement/production/quality control etc.) and held that those services, as found in paragraph 4.1 of the order, fall within the inclusive definition of input services and are admissible for Cenvat credit. The Tribunal allowed the appeal E/12070/2016 partially by permitting credit as specified in its findings at paragraph 4.1. [Paras 4]

ISD registration not required for the Mumbai office in the facts of this case; Cenvat credit in respect of the specified services in paragraph 4.1 is admissible and appeal E/12070/2016 is allowed partially as indicated.

Cenvat credit on input services - Remand for issuance of a speaking order - Whether the assessment/impugned order had recorded categorical findings on the nature, usage and allocation of the services listed in appeal E/10987/2016 and whether the matter required fresh adjudication. - HELD THAT: - The Tribunal found that for appeal E/10987/2016 the adjudicating authority had not made categorical findings as to the nature of each disputed service, the place or purpose of their use, or the basis for distribution of expenses on a fixed percentage basis. The statement of the assessee's witness did not clarify usage or allocation of services to the factory. Because the record and the impugned order lacked the required specific findings, the Tribunal was constrained to remit the matter to the original adjudicating authority for consideration and for issuance of a reasoned speaking order dealing separately with each head of service contested for Cenvat credit. [Paras 4]

Appeal E/10987/2016 is remanded to the original adjudicating authority for fresh consideration and for issuance of a speaking order addressing each challenged service head separately.

Final Conclusion: The appeals are disposed of by (i) allowing appeal E/12070/2016 partially by permitting Cenvat credit on the services found admissible in paragraph 4.1 and holding that ISD registration was not required on the facts, and (ii) remanding appeal E/10987/2016 to the adjudicating authority for a speaking order dealing separately with each disputed service.

Refund of penalty - refund of interest under Section 11AB - Rule 173Q of the Central Excise Rules, 1944 - compound levy scheme - binding precedent under Article 141

Refund of interest under Section 11AB - compound levy scheme - Whether the interest deposited by the appellant under Section 11AB is refundable. - HELD THAT: - The Tribunal recorded that in none of the Orders in original there was an order for recovery of interest under Section 11AA/11AB and that charging of interest had been kept in abeyance pursuant to supervisory directions. Applying the principle that the compound levy scheme is a separate and complete code (as held by the Hon'ble Supreme Court in Hans Steel Rolling Mills), the Deputy Commissioner's direction to deposit interest was without authority of law. The Commissioner (Appeals) correctly held that the deposited interest was refundable for want of jurisdiction to impose such interest in the facts of the case, and the Tribunal endorses that conclusion. [Paras 5, 9]

Refund of the interest deposited under Section 11AB is admissible and was correctly allowed.

Refund of penalty - Rule 173Q of the Central Excise Rules, 1944 - binding precedent under Article 141 - compound levy scheme - Whether the penalty deposited under Rule 173Q is refundable where the appellant was operating under the compound levy scheme and subsequent proceedings were dropped. - HELD THAT: - The Tribunal noted the binding Supreme Court decision that penalty under Rule 173Q is not imposable where an assessee operates under the compound levy scheme, that this precedent binds subordinate authorities under Article 141, and that the Commissioner (Appeals) erred in denying refund on the ground that the appellant had not separately appealed earlier Orders in original. Given the binding ratio that Rule 173Q has no application in the compound levy context, the Tribunal held that the penalty paid under Rule 173Q was refundable. The Adjudicating Authority is directed to refund the penalty within sixty days from receipt of the Tribunal's order. [Paras 9, 10]

Penalty deposited under Rule 173Q is refundable; the impugned order is modified and refund directed.

Final Conclusion: The appeal is allowed: the deposited interest under Section 11AB is refundable and the penalty paid under Rule 173Q is held refundable in view of the binding Supreme Court precedent on the compound levy scheme; the Adjudicating Authority is directed to refund the penalty within sixty days.

Re-credit of duty - clandestine removal - area based exemption - suppression of fact - finality of adjudication/settlement under SVLDR - non-entitlement to re-credit for goods cleared clandestinely

Re-credit of duty - clandestine removal - area based exemption - non-entitlement to re-credit for goods cleared clandestinely - Re-credit of duty paid subsequently is not admissible where finished goods were clandestinely cleared without payment of duty by mis-declaring them while operating under an area-based exemption notification. - HELD THAT: - The Tribunal found as an undisputed fact that the appellant cleared finished goods under the guise of waste coal without payment of duty, thereby contravening conditions of the area-based exemption notification. Although duty was paid subsequently, the clearance at the time was clandestine and effected by mis-declaration. The adjudicating authority's finding that the conditions of the notification were breached leads to denial of the re-credit claimed under the scheme. The Tribunal applied this determinative reasoning to hold that re-credit is not available in respect of duty paid on goods clandestinely removed.

Re-credit disallowed; appellant not entitled to re-credit of the duty paid in respect of clandestinely removed goods.

Suppression of fact - finality of adjudication/settlement under SVLDR - clandestine removal - Prior adjudication finding suppression/fraud attained finality on settlement/withdrawal under the SVLDR scheme and precludes re-opening the question of suppression in the present re-credit proceedings. - HELD THAT: - The Tribunal noted that separate proceedings alleging clandestine removal and suppression of fact were initiated and adjudicated against the appellant, and that the appellate proceedings before the Tribunal were withdrawn in consequence of settlement under the SVLDR scheme. The adjudication upholding suppression/fraud therefore attained finality in the earlier order. In view of that finality, the appellant's contention that there was no suppression of fact could not be allowed to sustain entitlement to re-credit. The Tribunal treated the earlier adjudication as conclusively establishing the malafide contravention relevant to the present claim.

Finding of suppression/fraud having attained finality by earlier adjudication/settlement, appellant cannot claim re-credit based on re litigation of that issue.

Final Conclusion: The impugned order upholding denial of re-credit of duty paid on clandestinely removed goods is affirmed and the appeal is dismissed.

Stay of coercive recovery pending constitution of the adjudicatory forum - interim relief where Tribunal is non-functional for want of Presiding Member - limited interim protection without adjudication on merits - leave to re-list after constitution of Presiding Member with additional time to parties - permitted modes of service including Speed Post and electronic service

Stay of coercive recovery pending constitution of the adjudicatory forum - interim relief where Tribunal is non-functional for want of Presiding Member - limited interim protection without adjudication on merits - Whether coercive recovery could be stayed pending appointment of the Presiding Member or President of the Tribunal - HELD THAT: - The Court intervened as an exceptional measure because the Tribunal lacked a presiding member and hence could not adjudicate the petitioners' pending application for interim relief. Without entering into the merits of the underlying tax classification dispute or endorsing prior Tribunal orders regarding pre-deposit or remand, the Court granted limited interlocutory protection to prevent prejudice to the petitioners while there is no functional forum. The stay is expressly limited in scope and duration: coercive recovery pursuant to the impugned recovery notice dated 11.10.2021 is restrained until the appointment of either the President or a Member of the Tribunal, and the stay is without any ruling on the merits, which the Tribunal shall consider afresh when constituted. The Court also permitted the petitioners an additional two weeks after such appointment to enable them to pursue the matter before the Tribunal. [Paras 11, 12]

Impugned recovery notice dated 11.10.2021 stayed until appointment of President or Member of the Tribunal; petitioners granted two weeks thereafter.

Permitted modes of service including Speed Post and electronic service - Permissibility of direct service in addition to regular mode of service - HELD THAT: - To ensure effective communication and avoid delay while the Tribunal is non-functional, the Court authorised direct service of processes through Speed Post and by electronic means in addition to the regular mode of service. This direction is procedural and intended to facilitate onward proceedings once the Tribunal is constituted. [Paras 14]

Direct service permitted through Speed Post and electronic mode in addition to regular service.

Final Conclusion: The High Court, exercising exceptional interim jurisdiction because the Tribunal lacked a presiding member, restrained coercive recovery under the impugned notice dated 11.10.2021 until the Tribunal is reconstituted and granted the petitioners two weeks thereafter to pursue their stay application; the Court expressly declined to adjudicate the merits, and authorised Speed Post and electronic service in addition to regular service.

Principles of natural justice - compliance with court directions - opportunity of personal hearing - frivolous litigation and abuse of process - alternative remedy by appeal to Appellate Commissioner

Compliance with court directions - compliance with court directions - Whether the impugned assessment order was vitiated by non-furnishing of the report directed by the earlier order of this Court. - HELD THAT: - The Court found that although the earlier order of 03.09.2014 directed that a report be furnished to the petitioner, the impugned order under challenge was not based on that report. Consequently, non-compliance with the earlier direction regarding furnishing of the report did not render the impugned order open to challenge on that ground. The petitioner therefore could not impugn the assessment order on the basis that the report had not been furnished prior to passing of the impugned order. [Paras 12]

Non-furnishing of the report directed by the earlier order did not vitiate the impugned order; the challenge on that ground fails.

Principles of natural justice - opportunity of personal hearing - frivolous litigation and abuse of process - Whether the impugned order was a non-speaking order passed without affording the petitioner an opportunity of hearing or in breach of principles of natural justice. - HELD THAT: - The Court recorded that the petitioner had been afforded opportunities to file replies and to appear for personal hearing, but failed to take advantage of those opportunities and instead urged closure of the file on the ground that the report had not been furnished. The Court treated the petitioner's repeated writ petitions as attempts to scuttle proceedings and characterised them as frivolous. On that basis the contention that the impugned order was non-speaking or passed in breach of natural justice was rejected. [Paras 13, 14]

The impugned order was not vitiated for want of hearing or as a non-speaking order; the petitioner's challenge on natural justice grounds is rejected.

Alternative remedy by appeal to Appellate Commissioner - Appropriate remedy and further course of action following dismissal of the writ petition. - HELD THAT: - Having dismissed the writ petition as devoid of merit, the Court granted the petitioner liberty to pursue the statutory alternate remedy by filing an appeal before the Appellate Commissioner within thirty days from receipt of the order. The Court directed that, upon such filing after compliance with the pre-deposit provisions of the TNVAT Act, 2006, the Appellate Commissioner is to consider and decide the appeal on merits and in accordance with law within four weeks from receipt of a copy of this order. [Paras 16]

Petition dismissed; petitioner granted liberty to prefer an appeal to the Appellate Commissioner within 30 days, with the Appellate Commissioner directed to decide the appeal within four weeks if filed.

Final Conclusion: The writ petitions are dismissed as lacking merit: the impugned order was not vitiated by non-furnishing of the earlier-directed report nor by denial of hearing; liberty granted to the petitioner to file an appeal before the Appellate Commissioner within thirty days, who shall decide the appeal on merits in accordance with law within four weeks.

Rectification of order - rectification under Section 84 of the TNVAT Act, 2006 - opportunity of personal hearing - application by assessee for rectification - alternate remedy before Appellate Deputy Commissioner (ST) - remand for fresh consideration

Rectification under Section 84 of the TNVAT Act, 2006 - opportunity of personal hearing - application by assessee for rectification - Rectification order dated 12.10.2021 passed without affording personal hearing to the petitioner was improper and required reconsideration after hearing and production of documents. - HELD THAT: - The petitioner filed an application for rectification under Section 84 on 01.10.2021 which was received by the respondent on 06.10.2021; the respondent proceeded to pass the impugned rectification order on 12.10.2021 without calling upon the petitioner to furnish documents or granting a personal hearing. The Court observed that, although the proviso to Section 84(1) permits personal hearing where there is a proposal to enhance tax, the circumstances of an application filed by an assessee required that the respondent call for relevant documents and afford an opportunity of personal hearing before deciding the rectification application. The absence of such opportunity and failure to seek documents rendered the rectification order unsustainable. The Court therefore directed fresh consideration of the application after the petitioner furnishes documents and is afforded personal hearing. [Paras 14, 15]

Writ petition allowed; respondent directed to pass appropriate orders after giving personal hearing and considering documents to be furnished by the petitioner, within the time-frame specified by the Court.

Final Conclusion: The impugned rectification order is set aside to the extent indicated; the respondent is directed to afford personal hearing, accept documents from the petitioner within fifteen days and pass appropriate orders after reconsideration within thirty days of receipt of this order; no costs.

Waiver of pre-deposit under Section 148 of the Negotiable Instruments Act - pre-deposit as the general rule and waiver as an exception - application of Surinder Singh Deswal regarding minimum 20% pre-deposit - presumption under Section 139 and its rebuttal - liability of persons "in charge and responsible for conducting the business" under Section 141

Waiver of pre-deposit under Section 148 of the Negotiable Instruments Act - application of Surinder Singh Deswal regarding minimum 20% pre-deposit - Whether the petitioners are entitled to waiver or reduction of the minimum pre-deposit required by Section 148 in the facts of these cases - HELD THAT: - The court applied the settled principle that the amended Section 148 creates a general rule of pre-deposit (minimum 20% of the compensation awarded) and waiver is an exception requiring special reasons, as explained in Surinder Singh Deswal. The petitioners' contentions - that the cheque exceeded the actual liability, that the cheques were given as security and misused, and that they lack means to make the pre-deposit - were considered but not found to warrant an exception. The trial court's findings (ledger accounts, debit notes, vouchers and balance confirmations, admissions of signatures, evidence of day-to-day participation by the petitioners, explanation for the amount discrepancy and rebuttal of the ''security'' defence) were noted and held to be matters for appeal, not for re-appreciation at the pre-deposit stage. Bank statement balances alone were held insufficient to establish inability to pay; business continuance and prudent management were relevant. Reliance on certain authorities addressing the quantum of cheque or directorial liability was held not to assist at the waiver stage since those questions are to be tested on appeal. In the result, no special reasons were found to displace the statutory rule of pre-deposit and the earlier direction for pre-deposit (as modified on remand) was to stand subject to extension of time. [Paras 17, 18, 19, 23, 25]

No case made out for waiver of the minimum pre-deposit; criminal revision petitions dismissed and time for making the pre-deposit extended by thirty days

Final Conclusion: The petitions seeking waiver or reduction of the statutory pre-deposit under Section 148 were dismissed for lack of special reasons; the rule of pre-deposit (minimum 20%) as explained in Surinder Singh Deswal was applied and the time for compliance was extended by thirty days.

Presumption under Section 139 of the Negotiable Instruments Act - onus to rebut presumption by the drawer - statement under Section 313 Cr.P.C. not substantive evidence to rebut presumption - quasi criminal nature of proceedings under Section 138 of the Negotiable Instruments Act - validity of cheque where signature is undisputed despite differences in body writing

Presumption under Section 139 of the Negotiable Instruments Act - onus to rebut presumption by the drawer - Presumption that a cheque was issued for discharge of a debt or liability arises upon proof of issuance and dishonour, and the onus shifts to the drawer to rebut it. - HELD THAT: - The Court held that once issuance of the cheque and its dishonour were proved, the statutory presumption in Section 139 operates and the accused/petitioner was required to rebut that the cheque was not issued for discharge of any debt or liability. The petitioner did not adduce any defence evidence and only recorded a statement under Section 313 Cr.P.C.; therefore there was nothing on record to rebut the presumption. In these circumstances the trial and appellate Courts rightly drew the presumption of liability and convicted the petitioner under Section 138. [Paras 9, 10, 11]

The presumption under Section 139 applied and, having not rebutted it by adducing evidence, the petitioner failed to discharge the onus; conviction was sustainable.

Statement under Section 313 Cr.P.C. not substantive evidence to rebut presumption - quasi criminal nature of proceedings under Section 138 of the Negotiable Instruments Act - A statement recorded under Section 313 Cr.P.C., without adducing defence evidence, is not substantive evidence to rebut the statutory presumption and cannot by itself negate the presumption that a cheque was issued for consideration. - HELD THAT: - Relying on authority and established principle, the Court observed that proceedings under Section 138 are quasi criminal and proof is by preponderance of probabilities. The petitioner's lone statement in Section 313 did not constitute substantive evidence to explain incriminating circumstances or rebut the presumption under Section 139. Absence of defence evidence meant the presumption remained unrebutted and supported conviction. [Paras 11, 12]

The Section 313 statement without supporting defence evidence did not rebut the presumption; therefore it did not vitiate the conviction.

Validity of cheque where signature is undisputed despite differences in body writing - Differences in body writing or filling in of a signed cheque do not invalidate the cheque or negate liability where the signature is not disputed. - HELD THAT: - The Court noted there was no evidence that the body writing was by a different person, and even if difference in hand existed, such difference is immaterial when the drawer's signature is undisputed. A signed blank cheque voluntarily handed over may be filled by the payee, but liability under Section 138 remains unless the drawer adduces evidence to the contrary. Hence the petitioner's belated contention on body writing could not be entertained to displace the presumption of liability. [Paras 13, 14]

Difference in body writing did not invalidate the cheque nor absolve the petitioner of liability where signature was not disputed.

Effect of absence of written agreement on proof of debt - Absence of a written loan agreement or documentary proof of cash advance does not automatically negate the complainant's case where issuance of the cheque and dishonour are proved and the presumption under Section 139 is unrebutted. - HELD THAT: - The Court accepted that no written document was produced to prove the loan, but held that lack of documentary evidence regarding the deceased husband's finances or taxation did not erase the loanee's obligation to repay when the cheque issuance was established and no contrary evidence was led. The widow's lack of knowledge of financial particulars was not fatal to the prosecution's case. Therefore, the absence of a written agreement did not undermine the conclusion of liability. [Paras 6, 9]

Non production of a written loan document did not vitiate the prosecution case where the cheque issuance and dishonour were proved and the presumption remained unrebutted.

Final Conclusion: The revision petition was dismissed. The High Court upheld the conviction and sentence awarded under Section 138 of the Negotiable Instruments Act, finding no infirmity in the trial and appellate Courts' conclusions that the presumption under Section 139 applied, was not rebutted by the petitioner, and that differences in body writing or absence of a written loan agreement did not negate liability.

Proclamation under Section 82 Cr.P.C. and statutory 30-day period - proclaimed person and service of process - effect of subsequent appearance and grant of bail in proceedings under Section 138 of the Negotiable Instruments Act - quashing of FIR registered under Section 174-A IPC as abuse of process

Proclamation under Section 82 Cr.P.C. and statutory 30-day period - proclaimed person and service of process - Proclamation proceedings declaring the petitioners as proclaimed persons were invalid for failure of proper service and for not giving the statutory minimum period of thirty days from affixation/publication. - HELD THAT: - The Court compared the address in the Section 138 complaint and the petition, and the zimni orders annexed to the petition, and found the address in the complaint to be incorrect and that the petitioners were not served. The proclamation dated 09.03.2018 fixed a date of 30.04.2018, but the affidavit of service shows affixation on 23.04.2018; therefore the petitioners were not given the statutory minimum period of thirty days from the date of publication/affixation. Reliance was placed on precedents holding that the thirty-day period must run from publication/affixation and that mere adjournment does not remedy the defect; accordingly the proceedings declaring the petitioners proclaimed persons were bad on this ground.

Proclamation proceedings held invalid for defective service and failure to give the statutory thirty-day period.

Effect of subsequent appearance and grant of bail in proceedings under Section 138 of the Negotiable Instruments Act - quashing of FIR registered under Section 174-A IPC as abuse of process - The petitioners' subsequent appearance in the Section 138 proceedings and grant of bail regularised the default arising from the proclamation and removed the basis for the FIR under Section 174-A IPC. - HELD THAT: - The Court noted that the petitioners had subsequently joined the Section 138 proceedings and obtained bail, and relied on coordinate authority holding that when an FIR under Section 174-A IPC is registered solely because of an order declaring accused as proclaimed persons in connected proceedings, the accused's later appearance and regularisation by bail dissipates the ground for the 174-A registration. In such circumstances continuation of proceedings under Section 174-A would amount to an abuse of process.

Subsequent appearance and grant of bail in the Section 138 proceedings condoned the default and negated the foundation for the 174-A FIR.

Quashing of FIR registered under Section 174-A IPC as abuse of process - The FIR registered under Section 174-A IPC and all consequential proceedings were quashed subject to a condition imposed by the Court. - HELD THAT: - Applying the conclusions that the proclamation was invalid and that the petitioners' appearance and bail regularised the default, the Court held that the FIR registered on account of the proclamation was illegal. In exercise of its inherent powers under Section 482 Cr.P.C. the Court quashed FIR No. 125 dated 20.10.2018 and all subsequent proceedings, but made the quashment conditional on payment to the complainant as a measure of restitution and to prevent abuse of process.

FIR No. 125 dated 20.10.2018 and all consequential proceedings quashed, subject to the payment condition imposed by the Court.

Final Conclusion: The petition under Section 482 Cr.P.C. is allowed: the proclamation declaring the petitioners proclaimed persons was invalid for defective service and failure to allow the statutory thirty-day period; the petitioners' subsequent appearance and grant of bail in the Section 138 NI Act proceedings regularised the default and removed the basis for the 174-A IPC FIR; accordingly FIR No. 125/2018 and consequential proceedings are quashed, subject to the petitioners paying the specified amount to the complainant as directed.

Abuse of process of court - relitigation - writ jurisdiction under Article 226 of the Constitution of India - remittal for limited purpose of seeking interim stay - requirement of full disclosure under court rules - exercise of discretion to allow withdrawal on terms including costs

Abuse of process of court - relitigation - writ jurisdiction under Article 226 of the Constitution of India - Whether the present writ petitions are maintainable or constitute an abuse of the process of the Court by relitigation of the same order already the subject of earlier proceedings - HELD THAT: - The Court found that the order of 01.03.2021 passed by the Tribunal had already been the subject-matter of earlier writ proceedings and that this Court had, by order dated 26.10.2021, remitted the matter to the Tribunal only for the limited purpose of enabling parties to seek an interim stay and to prefer an appeal. The Tribunal thereafter granted an interim abeyance for two weeks to enable filing of an appeal. The present writ petitions were filed challenging the same order despite those earlier proceedings and the limited remittal; the petitions therefore amounted to an attempt to re-litigate the same cause of action and to circumvent the appellate process. Citing the principle that a writ remedy is equitable and must not be invoked in a manner that amounts to repeated proceedings or forum-shopping, the Court concluded that the petitions constituted an abuse of process of court. [Paras 5, 6, 8]

The writ petitions are an abuse of process by relitigation and not maintainable in the present form.

Remittal for limited purpose of seeking interim stay - requirement of full disclosure under court rules - exercise of discretion to allow withdrawal on terms including costs - Whether the petitioners may be permitted to withdraw the writ petitions and on what terms, having regard to their conduct and the requirements of court rules - HELD THAT: - Although the Court regarded the filing of the present petitions as an abuse, it noted that dismissal would have the incidental effect of confirming the Tribunal order where other parties were involved. The Court also observed that the petitioners had failed to make the specific declaration required by Rule 174 of the Gujarat High Court Rules, 1993 regarding prior proceedings. Exercising its discretion, the Court permitted withdrawal of the writ petitions but imposed exemplary costs to mark the impropriety of the petitioners' conduct and to deter forum-shopping. The prescribed payment was split between the Gujarat State Legal Services Authority and the respondent as compensation. [Paras 7, 8, 9]

Petitions permitted to be withdrawn on payment of costs of Rs.1,00,000 each, half to the Gujarat State Legal Services Authority and half to respondent No.1; petitions disposed of as withdrawn.

Final Conclusion: The High Court held that the present writ petitions amounted to abuse of process by relitigation of a matter already subject to limited remittal for seeking interim stay; nonetheless the Court allowed withdrawal of the petitions on payment of costs (Rs.1,00,000 each, split between the Gujarat State Legal Services Authority and respondent No.1) and disposed of the petitions as withdrawn.