TaxTMI Updates e-Newsletter
Dec 06,2021

Blocking of Input Tax Credit - expiry of restriction after one year under Rule 86(3A) of the CGST Rules - power to lift blockage of Input Tax Credit - impleadment of DGGI East, Kolkata - adjudication on affidavits

Blocking of Input Tax Credit - expiry of restriction after one year under Rule 86(3A) of the CGST Rules - power to lift blockage of Input Tax Credit - Validity of the order dated 16th January, 2020 blocking the petitioner's Input Tax Credit. - HELD THAT: - The respondents conceded, and the court applied, the statutory position under Rule 86(3A) of the CGST Rules that a restriction on availment of Input Tax Credit loses effect after the one year period specified therein. In view of that legally admitted position and the provisions of Rule 86(3A), the order dated 16th January, 2020 which imposed the blockage no longer remains valid. The authority concerned is directed to lift the blockage immediately if it has not already done so.

The blocking of Input Tax Credit dated 16th January, 2020 is no longer valid and the authority shall lift the blockage forthwith.

Impleadment of DGGI East, Kolkata - Whether DGGI East, Kolkata should be impleaded in the writ petition. - HELD THAT: - The court observed that DGGI East, Kolkata had undertaken the blocking action and was not impleaded. In order that all relevant parties are before the court and may be heard, DGGI East, Kolkata is to be impleaded as respondent No.6 and the department is to act accordingly.

DGGI East, Kolkata is impleaded as respondent No.6 and the department shall act in accordance with the order.

Adjudication on affidavits - Adjudication of the remaining aspects of the petition during the pendency of the investigation. - HELD THAT: - The court held that the other parts of the petition could not be finally adjudicated in the present hearing and required evidentiary material by way of affidavits from the respondents. The respondents were directed to file affidavits in opposition within three weeks, and the petitioners were granted one week thereafter to file replies. A date for final hearing was fixed five weeks hence, with parties to be ready with short written notes of argument.

Remaining challenges are remitted for consideration on affidavits filed by the respondents and replies by the petitioners in accordance with the timetable fixed by the court.

Final Conclusion: The court held that the January 16, 2020 blockage of Input Tax Credit has ceased to be valid under Rule 86(3A) and must be lifted; DGGI East, Kolkata is impleaded as respondent No.6; and the balance of the petition is directed to be decided on affidavits filed by the respondents and replies by the petitioners in the timetable fixed, with final hearing to follow.

Maintainability of writ petition - availability of alternative statutory remedy - appeal under Section 107 of the CGST Act - challenge to assessment under Section 73(1) of the CGST Act - exercise of writ jurisdiction

Maintainability of writ petition - availability of alternative statutory remedy - appeal under Section 107 of the CGST Act - Writ petition challenging assessment order under Section 73(1) CGST Act is not maintainable in view of availability of an appeal under Section 107 of the CGST Act. - HELD THAT: - The impugned order in original was passed under Section 73(1) of the CGST Act and the assessee has a statutory right to prefer an appeal under Section 107. The petitioner's grievance that the assessee is compelled to make payment can be agitated before the appellate authority created by the statute. Where an alternative efficacious remedy is provided by the Act, the High Court will not ordinarily exercise writ jurisdiction to entertain a challenge to an order which is amenable to statutory appeal. Consequently, there is no case made out for entertaining the writ petition and the petition is liable to be dismissed. [Paras 6, 7]

Writ petition dismissed; petitioner directed to pursue remedy by way of appeal under Section 107 of the CGST Act; no order as to costs; connected miscellaneous petitions dismissed.

Final Conclusion: The High Court dismissed the writ petition for want of maintainability because the statutory appellate remedy under Section 107 of the CGST Act was available to challenge the assessment order passed under Section 73(1); the petitioner was directed to pursue the statutory appeal and no costs were awarded.

Confiscation proceedings under Section 130 of the Central Goods and Services Tax Act, 2017 - Interim relief under Article 226 against exercise of statutory power - Prima facie satisfaction of the Proper Officer as basis for initiation of confiscation proceedings - Sufficiency of invoice and e-way bill during transportation of goods - Availability of alternative statutory remedy

Interim relief under Article 226 against exercise of statutory power - Prima facie satisfaction of the Proper Officer as basis for initiation of confiscation proceedings - Availability of alternative statutory remedy - Whether interim relief staying proceedings under Section 130 could be granted. - HELD THAT: - The Court refused to grant interim relief. It held that courts should be slow to exercise extraordinary writ jurisdiction under Article 226 where statutory powers under Section 130 are invoked, since interference would tend to disturb the scheme and purport of the statute. Where the Proper Officer has recorded a prima facie satisfaction to proceed (based on facts such as the driver's statement, enquiries at the supplier's premises and other circumstances), and where an alternative remedy under the statute is available, interim protection of the sort sought is inappropriate. On the facts, the officer conducted a hearing and expressed satisfaction of intention to evade tax; in those circumstances the petition for interim stay was rejected. [Paras 6, 7, 8, 9]

Interim relief was refused and the petition for stay of proceedings under Section 130 was rejected.

Sufficiency of invoice and e-way bill during transportation of goods - Prima facie satisfaction of the Proper Officer as basis for initiation of confiscation proceedings - Whether presence of a physical invoice and an e-way bill defeated the initiation of confiscation proceedings under Section 130. - HELD THAT: - The Court held that invoices and e-way bills are not talismans that automatically negate suspicion of tax evasion. Where other facts - for example, the driver's statement that goods were loaded from places different from the invoice address, the supplier's business premises being closed, and lack of corroboration with local accounts - give rise to a prima facie satisfaction of evasion, the officer is entitled to issue notices under Section 130 and proceed with confiscation enquiries. Thus the mere production of invoice and e-way bill did not preclude initiation of proceedings on the material before the officer. [Paras 3, 4, 8]

The availability of invoice and e-way bill did not, on the material placed before the officer, preclude initiation of proceedings under Section 130.

Final Conclusion: Writ petition seeking interim relief against notices issued under Section 130 of the CGST Act was dismissed; the Court declined to stay the confiscation proceedings or order release of goods and vehicle, affirming that prima facie satisfaction of the Proper Officer and the availability of statutory remedies preclude grant of extraordinary interim relief.

Breach of principles of natural justice - non-speaking order requiring reasons - service of show cause notice and opportunity of hearing - independence of Section 129 and Section 130 of the CGST Act - remand for fresh adjudication with reasoned order - provisional release upon deposit of tax and penalty - writ jurisdiction where statutory remedy exists but there is violation of natural justice

Breach of principles of natural justice - service of show cause notice and opportunity of hearing - Impugned order dated 15.09.2021 under Section 130 is vitiated for want of service of notice and denial of opportunity of hearing to the owner of the goods. - HELD THAT: - The Court found that show cause proceedings and the order under FORM GST MOV-11 were directed only to the driver and not served on the petitioner, the owner of the goods, and that no opportunity of hearing was afforded to the petitioner. Relying on precedents treating failure to give notice and hearing as fatal, the Court held that such omission constitutes a breach of the principles of natural justice warranting judicial interference despite the existence of a statutory appellate remedy. [Paras 21]

Impugned order quashed for breach of natural justice; petition allowed on this ground.

Non-speaking order requiring reasons - requirement to record reasons when invoking Section 130 at threshold - Order under FORM GST MOV-11 lacks requisite reasons and is therefore unsustainable. - HELD THAT: - Applying the jurisprudence that quasi judicial orders must state reasons and that invocation of Section 130 at the threshold requires material and recorded satisfaction, the Court noted the absence of a reasoned order explaining which clause of Section 130 was attracted and why confiscation/redemption fine was imposed. A non-speaking order without application of mind cannot be sustained. [Paras 18, 21]

Impugned order set aside for being non-speaking and not reflecting required application of mind.

Remand for fresh adjudication with reasoned order - The matter is to be remitted to the adjudicating authority for fresh consideration after issuance of show cause notice and affording reasonable opportunity of hearing; authority to pass a reasoned order. - HELD THAT: - Rather than decide merits on the record, the Court restored the matter to respondent No.3 to issue notice under Section 130 afresh, afford the petitioner a hearing and pass a reasoned adjudication in accordance with law, so as to enable effective contestation and judicial review of the consequent order. [Paras 22]

Matter remitted to respondent No.3 for fresh adjudication after service of notice and affording hearing; requirement to pass a reasoned order.

Provisional release upon deposit of tax and penalty - Conveyance and goods were ordered to be released as the petitioner had deposited the tax and penalty. - HELD THAT: - Having recorded that the petitioner had deposited the amount determined as tax and penalty, the Court directed the competent authority to release the conveyance and goods within seven days from receipt of the order subject to the final outcome of Section 130 proceedings, thus protecting the petitioner during remand. [Paras 23]

Conveyance and goods to be released within seven days subject to final adjudication, since tax and penalty have been paid.

Final Conclusion: Writ petition allowed: the order dated 15.09.2021 under FORM GST MOV-11 is quashed for failure to serve show cause notice and for being non speaking; the matter is remitted to respondent No.3 to initiate fresh Section 130 proceedings after serving notice and affording hearing, to pass a reasoned order; meanwhile, since tax and penalty have been deposited, the goods and conveyance shall be released within seven days.

Quashing of ex parte assessment order - violation of principles of natural justice - right to fair opportunity of hearing - remand for fresh adjudication on merits - requirement of speaking order - deposit as pre-condition for interim relief - stay of coercive recovery pending fresh decision

Quashing of ex parte assessment order - violation of principles of natural justice - Impugned order dated 23.02.2021 in form DRC-07 is quashed. - HELD THAT: - The Court concluded that the order under challenge was ex parte and passed in breach of the principles of natural justice because the petitioner was not afforded sufficient time or opportunity to represent its case, and the order did not disclose sufficient reasons to show how the amount was determined. On this short ground of procedural infirmity the order was held to be bad in law and therefore liable to be set aside. The Court emphasised that an ex parte order which entails civil consequences must disclose reasons and comply with the right of hearing before it can be sustained.

Impugned DRC-07 order dated 23.02.2021 quashed.

Remand for fresh adjudication on merits - right to fair opportunity of hearing - requirement of speaking order - deposit as pre-condition for interim relief - stay of coercive recovery pending fresh decision - Matter remitted to the Assessing Authority for fresh decision on merits after affording opportunity and subject to specified interim conditions. - HELD THAT: - The Court remanded the case to the Assessing Authority to decide the matter afresh on merits after complying with principles of natural justice and passing a speaking order assigning reasons. Interim directions were issued: the Court recorded the petitioner's statement that ten per cent of the demand had already been deposited and required an additional ten per cent deposit within four weeks if not already made; bank accounts, if attached in relation to these proceedings, were to be de-frozen immediately; no coercive steps were to be taken during pendency; the petitioner was to appear before the Assessing Authority on the specified date and to cooperate without seeking unnecessary adjournments; and the Assessing Authority was directed to decide the matter expeditiously, preferably within two months of appearance. The deposit and other interim measures were made without prejudice to the parties' substantive rights, with refund if the deposit proved excessive.

Case remitted for fresh adjudication with directions for hearing, speaking order, specified deposits and interim protection against coercive recovery; liberty preserved to challenge future orders.

Final Conclusion: The writ petition is disposed by quashing the impugned ex parte DRC-07 order dated 23.02.2021 (relating to 2019-20) and remitting the matter to the Assessing Authority for fresh adjudication on merits after affording adequate opportunity and passing a speaking order; interim protective directions and conditional deposits as recorded are imposed, and all substantive issues are left open.

Supply - inter-State supply - place of supply - supplier - levy and collection of IGST - export of goods - Entry 7 of Schedule III of the CGST Act, 2017 - territorial scope of IGST/CGST

Supplier - place of supply - inter-State supply - levy and collection of IGST - supply - Whether the appellant's out-and-out transactions effected prior to 01.02.2019 were exigible to IGST. - HELD THAT: - The authority held that the appellant, having issued invoices and being located in India, is the supplier within the meaning of the statute. The place of supply for movement of goods is the location where movement terminates for delivery, which in the facts here is outside India. Clause (a) of Section 7(5) treats a supply where the supplier is in India and the place of supply is outside India as a supply in the course of inter-State trade or commerce. Section 5 levies IGST on all inter-State supplies unless an exemption or other provision applies. There is no exclusion in Section 5 for goods not physically within India. Accordingly, supplies by the appellant to a buyer outside India, where the appellant is the supplier and place of supply is outside India, were covered by the IGST charging provisions for the relevant prior period and therefore IGST was payable for the period 01.07.2017 to 31.01.2019. [Paras 10, 11, 15]

IGST was payable on the appellant's transactions from 01.07.2017 to 31.01.2019.

Entry 7 of Schedule III of the CGST Act, 2017 - supply - territorial scope of IGST/CGST - Whether the insertion of Entry 7 in Schedule III renders such transactions non-taxable from 01.02.2019 and whether that insertion operates retrospectively. - HELD THAT: - Paragraph 7 of Schedule III - treating as neither supply goods moved from a place in the non-taxable territory to another place in the non-taxable territory without entering India - was inserted by the Amendment Act and notified to come into force from 01.02.2019. Schedule III transactions are to be treated neither as supply under Section 7(2). The amendment and its commencement notification demonstrate clear legislative intent that the provision operates from 01.02.2019, and it cannot be given retrospective effect to periods prior to that date. Therefore transactions of the character described fall outside the ambit of supply with effect from 01.02.2019 but not for the prior period. [Paras 11]

Such transactions are not supplies and not taxable with effect from 01.02.2019; the amendment is not retrospective.

Final Conclusion: The advance ruling is confirmed insofar as it held that the appellant was liable to pay IGST on the described out-and-out foreign trading transactions for the period 01.07.2017 to 31.01.2019; transactions of the same character ceased to be taxable from 01.02.2019 following insertion of Entry 7 in Schedule III of the CGST Act, 2017, which is not retrospective.

Common parlance test - Classification under Customs Tariff/HSN - Specific tariff entry preferred over general/residuary entry (Rule 3(a)) - Interpretation of exemption entry: 'served for consumption' as excluding ready-to-eat products - Determination of taxable rate by reference to GST notifications after tariff classification

Classification under Customs Tariff/HSN - Specific tariff entry preferred over general/residuary entry (Rule 3(a)) - Common parlance test - Whether the appellant's product (fried, different shapes and sizes Papad) is classifiable as 'Papad' under Tariff Item 1905 90 40 or under the residuary heading 2106 and the consequent GST rate. - HELD THAT: - The authority applied the rules of classification under the Customs Tariff Act, 1975 (HSN) and the common parlance/user test to determine identity. The Tribunal accepted that the impugned product is made from cereal/pulse flours (wheat, rice, starch, corn, etc.), produced by forming dough and producing thin wafer-like items which become crispy on roasting/frying and are used as an accompaniment to Indian meals. The court held that shape alone does not alter the commodity's character and that the product known in trade (including by the popular name 'Fryums') retains the essential characteristics of papad. Applying the interpretative rule that a specific heading prevails over a general/residuary heading (Rule 3(a) and related authorities), the product falls within the specific Tariff Item 1905 90 40 ('Papad'). Having so classified the goods under CTH 1905, the applicable GST rate is to be derived from the GST notifications corresponding to that heading. [Paras 42, 43, 48, 49]

The product 'fried different shapes and sizes Papad' is classifiable under Tariff Item 1905 90 40 and not under the residuary heading 2106; classification under the specific heading is preferred.

Interpretation of exemption entry: 'served for consumption' as excluding ready-to-eat products - Determination of taxable rate by reference to GST notifications after tariff classification - Whether Entry No. 96 of Notification No. 02/2017-CT (Rate) (exempting 'Papad, by whatever name it is known, except when served for consumption') covers the appellant's ready-to-eat fried product, and if not, the applicable GST rate. - HELD THAT: - The authority examined the exemption entry and construed the phrase 'served for consumption' to mean products which are already fit to be consumed without undergoing any further process; the entry therefore covers papad supplied in ready-to-cook/unfried form that require roasting or frying before consumption. The appellant's product is sold already fried with masala and is ready to eat; it thus falls outside Entry No. 96. Once the product was classified under CTH 1905, the Authority observed that CTH 1905 is included in Schedule III entry No. 16 of Notification No. 1/2017-CT (Rate) and accordingly attracts GST at 18% (9% CGST + 9% SGST). [Paras 45, 46, 49]

Entry No. 96 (exemption) does not apply to the appellant's ready-to-eat fried papad; the product is chargeable to GST at 18% under the relevant notification entry for CTH 1905.

Final Conclusion: The Advance Ruling of the Gujarat AAR is modified: the appellant's fried products of different shapes and sizes are papad classifiable under Tariff Item 1905 90 40 and, being ready-to-eat (excluded from the exemption entry), are taxable at 18% (9% CGST + 9% SGST) as per the GST notifications.

Advance Ruling - Maintainability of application before Authority for Advance Ruling - Summons inquiry under Section 70(1) of the CGST Act - Judicial proceeding - Proceedings barred by Section 98(2) of the CGST Act - Use of advance ruling to nullify ongoing inquiry

Maintainability of application before Authority for Advance Ruling - Summons inquiry under Section 70(1) of the CGST Act - Proceedings barred by Section 98(2) of the CGST Act - Application to Authority for Advance Ruling was not maintainable because Revenue had already initiated summons/inquiry proceedings in July 2021. - HELD THAT: - The applicant's own declaration and submissions established that Revenue officers visited the factory in July 2021, drew panchnama, recorded statements and issued a summons dated 9-7-21 under Section 70(1) CGST Act. Section 70(2) CGST Act treats such inquiry as a judicial proceeding within the meaning of the Indian Penal Code provisions referred to, and the Authority found that the inquiry therefore constituted a 'proceeding' within the ambit of Section 98(2) CGST Act. On this basis the Authority held that an application for an advance ruling cannot be used to nullify or pre-empt an inquiry already initiated by Revenue under Section 70(1), and that the subject application was consequently non-maintainable and inadmissible. [Paras 6, 7, 8]

Application rejected as non-maintainable and inadmissible; Authority cannot entertain advance ruling while summons/inquiry under Section 70(1) is pending.

Final Conclusion: The Authority dismissed the advance ruling application as non-maintainable because a summons/inquiry under Section 70(1) CGST Act had been initiated earlier, which is a judicial proceeding falling within the prohibition in Section 98(2) and therefore precludes adjudication by the Advance Ruling Authority.

Exemption for one-time upfront lease premium - applicability of notification 12/2017 serial no. 41 under heading 9972 - scope of the expression "upfront amount" in lease premium - taxability of lease premium payable by instalments

Exemption for one-time upfront lease premium - applicability of notification 12/2017 serial no. 41 under heading 9972 - Whether the lease premium payable to RIADA for a 30-year lease is exempt from GST under serial no. 41 of notification 12/2017. - HELD THAT: - The Advance Ruling authority examined the three cumulative conditions for the exemption: (i) the amount must be a one-time upfront payment, (ii) the lease must be for thirty years or more, and (iii) the lessor must be a State Government industrial development corporation/undertaking. It found that the lease tenure (30 years) and the status of RIADA as a State-established corporation satisfy conditions (ii) and (iii). The determinative question is whether the payment qualifies as a one-time upfront amount. The authority accepted the common meaning of "upfront" as an amount paid beforehand, i.e., prior to and as a condition of receiving the service. Having regard to the facts, the applicant received allotment and the service (possession/use of the industrial plot) after payment of the first instalment; subsequent premium payments are scheduled instalments over five years rather than a single one-time upfront payment. Because the payments (other than the initial instalment) are not one-time upfront payments, they do not meet the exemption criterion in the notification.

The lease premium paid by instalments does not qualify as the one-time upfront amount exempted under serial no. 41 of notification 12/2017, and therefore is not exempt from GST under that notification.

Scope of the expression "upfront amount" in lease premium - taxability of lease premium payable by instalments - Whether premium instalments payable after allotment constitute an "upfront amount" for the purpose of the exemption and thereby escape GST. - HELD THAT: - The authority interpreted "upfront amount" in ordinary parlance as payment made beforehand or prior to the event. It noted that the exemption contemplates a one-time upfront levy payable in respect of granting long-term lease. In the present lease, although the overall premium obligation arises on allotment, the agreed contractual mechanism permits payment in ten instalments over five years. Since the allotment and receipt of the leased plot occurred upon payment of the initial instalment, the later instalments are not payments made beforehand of the entire premium and thus do not fall within the exemption's concept of an upfront one-time payment. Consequently, such instalments are taxable.

Future instalment payments made after allotment do not constitute the "upfront amount" and are therefore not covered by the exemption; they are liable to GST.

Final Conclusion: The Advance Ruling holds that, although the lease tenure and lessor qualify under the notification, the premium payable by instalments after allotment does not amount to the one-time upfront payment exempted under serial no. 41 of notification 12/2017 and is therefore not exempt from GST.

Classification of composite supply and principal supply - composite supply treated as principal supply under Section 8(a) of the CGST Act - definition of "job work" under Section 2(68) of the CGST Act - definition of "manufacture" under Section 2(72) of the CGST Act - applicability of CBIC Circular No. 52/26/2018 (para 12.3) on bus body building - distinction between supply of goods and supply of services in vehicle body building

Definition of "job work" under Section 2(68) of the CGST Act - definition of "manufacture" under Section 2(72) of the CGST Act - distinction between supply of goods and supply of services in vehicle body building - Whether the body building activity on the chassis provided by the principal amounts to a manufacturing service attracting 18% GST. - HELD THAT: - The Authority examined the factual matrix and statutory definitions. The applicant procured and used its own inputs for fabrication, and invoices indicate transfer of ownership of the chassis to the applicant and onward supply of the fabricated body by the applicant. The Authority contrasted the definition of "job work" (treatment or process on goods belonging to another) with the definition of "manufacture" (processing resulting in a new product with distinct name, character and use). Chapter note 6 to Chapter 87 treating building or fitting of bodies on chassis as manufacture supports that the activity, as undertaken by the applicant, has the character of supply of goods (manufacture) rather than job work/service. Consequently the dominant character of the transaction is supply of the fabricated body, not a service of job work. [Paras 14, 15, 18, 20]

No; the body building activity, as performed by the applicant on facts presented, does not amount to a manufacturing service attracting 18% GST.

Applicability of CBIC Circular No. 52/26/2018 (para 12.3) on bus body building - classification of composite supply and principal supply - composite supply treated as principal supply under Section 8(a) of the CGST Act - Whether the CBIC clarification in para 12.3 of Circular No. 52/26/2018 (which treats fabrication on chassis provided by the principal as service attracting 18%) applies to the applicant's activity. - HELD THAT: - The Authority considered the circular which distinguishes two situations: (a) body builder building on own chassis and supplying the bus (28%), and (b) fabricating on chassis provided by the principal where the activity may be a service (18%). The circular's para 12.3 addresses the situation in 12.2(b) where significant part of the transaction is service (job work) and the principal provides the chassis. On the facts, however, the applicant procures and consumes the inputs and documentation indicates transfer/ownership and supply of the fabricated body by the applicant. Applying the composite supply concept and Section 8(a), the Authority found the principal supply to be the body of the vehicle (goods) with fitting/mounting ancillary; thus the circular's para 12.3 is not attracted to the applicant's transactions. [Paras 12, 13, 14, 18, 20]

No; the CBIC clarification in para 12.3 of Circular No. 52/26/2018 does not apply to the applicant's case on the facts presented.

Final Conclusion: The Advance Ruling holds that, on the facts stated, the applicant's activity constitutes supply of the fabricated vehicle body (principal supply of goods) rather than a job work/manufacturing service chargeable at 18%; accordingly the CBIC circular para 12.3 is not applicable to the applicant's transactions.

Determination of liability to pay tax - scope of advance ruling under Section 97 of the GST Acts - advance ruling - reverse charge mechanism - double taxation - applicability of notification

Determination of liability to pay tax - scope of advance ruling under Section 97 of the GST Acts - reverse charge mechanism - double taxation - Whether the question seeking relief from reverse charge liability, where tax on past transactions was paid by the supplier under forward charge, falls within the scope of a valid application under Section 97 of the GST Acts. - HELD THAT: - The Authority examined the applicant's principal contention that requiring the recipient to pay tax under reverse charge after the supplier had already paid tax under forward charge would amount to double taxation. The Authority noted that an advance ruling under Section 97 is confined to determining the liability to pay tax on supplies, and such rulings are intended to address questions about prospective transactions and the legal position, not to adjudicate grievances about past transactions or to pronounce on the validity or sustainability of a liability already admitted by the applicant. The applicant expressly accepted that, as per the notification, the principal liability was on the recipient under reverse charge and sought relief on grounds of double taxation and revenue neutrality arising from past payments by the supplier. The Authority held that this amounts to a challenge to the validity or sustainability of the liability in respect of completed transactions, which is beyond the remit of an advance ruling. Consequently, the question as posed does not fall within the scope of Section 97 and cannot be entertained by the Authority. [Paras 8, 9, 10]

Application not covered within the scope of Section 97 of the CGST Act; Authority cannot rule on the question and the application is disposed of.

Final Conclusion: The Authority dismissed the application as outside the scope of Section 97 of the GST Acts, holding that an advance ruling cannot be sought to challenge the sustainability of a liability in respect of past transactions where the applicant admits the liability; the ruling is subject to statutory provisions for validity and challenge.

Anticipatory bail under Section 438 CrPC - offences under Section 132 of the CGST Act (wrongful availment of input tax credit and issuance of invoices without supply) - power of arrest under Section 69 of the CGST Act - non cognizable and bailable nature of offences under the CGST Act (except specified offences punishable under clause (i)) - compounding of offences under Section 138 of the CGST Act - custodial interrogation not warranted for document based tax offences - Article 21 - right to life and personal liberty (bail as rule, jail as exception)

Anticipatory bail under Section 438 CrPC - offences under Section 132 of the CGST Act (wrongful availment of input tax credit and issuance of invoices without supply) - power of arrest under Section 69 of the CGST Act - Article 21 - right to life and personal liberty (bail as rule, jail as exception) - Grant of anticipatory bail to the petitioner accused of offences under clauses (b) and (c) of Section 132 of the CGST Act - HELD THAT: - The Court analysed the scheme of the CGST Act, noting that clauses (b) and (c) of Section 132 relate to issuance of invoices without supply and availing input tax credit without supply, and that where the amount involved exceeds Rs. 5 crore such offences are cognizable and non bailable under sub section (5). The Court observed that offences under the Act are in many respects compoundable under Section 138 and that custodial interrogation is not warranted where the evidence is documentary. Applying settled principles protecting personal liberty under Article 21 and the salutary jurisprudence that bail is the rule and jail the exception, the Court held that economic character of the offence does not automatically preclude bail, and that the gravity of the offence must be assessed having regard to statutory sanctions and the facts. Considering the petitioner's submissions, the documentary nature of the evidence, the petitioner's health and apprehension of arrest, and the competing interest of ensuring an unhampered investigation, the Court concluded that anticipatory bail ought to be granted while safeguarding investigative interests. [Paras 44, 55, 56, 58, 59]

Anticipatory bail granted; petitioner to be released on bail upon arrest subject to furnishing bond and compliance with conditions.

Conditions of anticipatory bail - custodial interrogation not warranted for document based tax offences - cooperation with investigation and prohibition on tampering - Terms and conditions to be imposed while granting anticipatory bail - HELD THAT: - To balance the liberty of the accused and the integrity of the investigation, the Court imposed tailored conditions. These included furnishing a personal bond with two solvent sureties, surrender of passport (or affidavit if none), prohibition on leaving India without permission, cooperation with the investigation and attendance as and when summoned, prohibition on inducing or threatening witnesses, continuous operability of mobile number, disclosure of location via a Google Maps PIN to the Investigating Officer/Apprehending Authority, and an undertaking to commit no offence while on bail. The Court recorded that breach of any condition would entitle the Investigating Officer/Apprehending Authority to move for cancellation of the anticipatory bail. [Paras 55, 56, 59, 60, 61]

Specific stringent conditions imposed as part of anticipatory bail (personal bond with two sureties; surrender passport or file affidavit; cooperate and appear when summoned; no inducement/threat to witnesses; provide operational mobile number; drop Google Maps PIN; commit no offence). Breach may lead to cancellation application.

Final Conclusion: Anticipatory bail under Section 438 CrPC is allowed in favour of the petitioner accused of offences under clauses (b) and (c) of Section 132 of the CGST Act; release on arrest is subject to furnishing a personal bond with two solvent sureties and compliance with specified conditions (including surrender of passport or affidavit, cooperation with investigation, no inducement/threat to witnesses, provision and operation of mobile number, sharing of location via Google Maps PIN, and abstaining from further offences); breach of conditions may prompt cancellation proceedings.

Supply - principle of mutuality - deeming of association and members as distinct persons - business (provision of facilities or benefits to members) - exemption under entry 77 - threshold of Rs. 7,500/- per month per member - interpretation of exemption notifications against assessee - treatment of sinking/repair/election/education funds - treatment of statutory or nil-rated charges in computing exemption threshold - distinction between supply of goods and supply of services (water supply) - input tax credit exclusion for construction/repairs to extent of capitalization

Supply - principle of mutuality - deeming of association and members as distinct persons - business (provision of facilities or benefits to members) - Liability to pay GST on contributions received from members. - HELD THAT: - The Authority held that activities undertaken by the housing society for maintenance and upkeep constitute 'services' and fall within the scope of 'supply' under the CGST Act. The amended provision deeming activities/transactions between a person (other than an individual) and its members as supplies, and treating the person and its members as distinct persons, settles the mutuality issue under GST. The definition of 'business' expressly includes provision by a club, association or society of facilities or benefits to its members for a subscription; contributions by members are consideration for those services. Consequently, the principle of mutuality as relied upon by the applicant does not negate GST liability in view of the amendment to Section 7. [Paras 5]

The applicant is liable to pay GST on contributions received from its members.

Exemption under entry 77 - threshold of Rs. 7,500/- per month per member - interpretation of exemption notifications against assessee - Whether exemption under entry 77 applies only to the first Rs. 7,500/- and whether excess amount is taxable only on differential or on entire contribution. - HELD THAT: - Entry 77 provides exemption for contributions 'up to' Rs. 7,500 per month per member for sourcing goods/services for common use. The Authority, following the statutory notification and the clarificatory position taken by CBIC (and observing that a challenged High Court decision is stayed), concluded that if a member's contribution exceeds Rs. 7,500, the member is not eligible for the exemption and the entire contribution is taxable. Exemption notifications are strictly construed in favour of the revenue. [Paras 5]

If the monthly contribution exceeds Rs. 7,500 per member, GST is leviable on the entire contribution amount.

Treatment of sinking/repair/election/education funds - deposit proviso to definition of consideration - Taxability of amounts collected towards Sinking Fund, Building Repair Fund and Election & Education Fund. - HELD THAT: - Although the applicant characterized such collections as deposits for future uncertain expenditure, the Authority found that these amounts are collected as per bye laws and statutory procedures, become the property of the society on collection, and are not shown or treated as refundable deposits. The proviso that a deposit is not consideration until applied does not operate in favour of the applicant in absence of evidence of refundable deposits or compliance with deposit formalities. Prior rulings of this Authority treating sinking fund contributions as taxable were also noted. Accordingly, such fund collections are treated as consideration for supply and are taxable. [Paras 5]

Amounts collected towards sinking fund, building repair fund and election & education fund are liable to GST.

Treatment of statutory or nil-rated charges in computing exemption threshold - exemption under entry 77 - threshold of Rs. 7,500/- per month per member - Whether supplies exempted or charged at nil rate are to be included in the value for computing the Rs. 7,500 threshold under entry 77. - HELD THAT: - Entry 77 expressly excludes in clause (b) activities which are exempt from levy of GST. The Authority observed that charges collected by the society on account of statutory dues (for example property tax, electricity charges) that are not subject to GST would be excluded while calculating the threshold limit of Rs. 7,500 per month per member. Thus, amounts representing exempt or nil rated supplies/statutory levies are not to be included in computing the Rs. 7,500 limit. [Paras 5]

Supplies or charges which are exempt or nil rated (including statutory levies) are excluded in computing the Rs. 7,500 per month per member threshold under entry 77.

Distinction between supply of goods and supply of services (water supply) - entry 99 - goods notification inapplicable where service is rendered - Whether contributions for supply of potable and treated (flush) water fall under entry 99 of Notification No.2/2017 (HSN 2201) attracting nil rate. - HELD THAT: - Notification No.2/2017 pertains to goods. The Authority found that the applicant is not selling water as goods but is rendering the service of supplying water (potable and treated) to members through storage, pumping and treatment systems, and charges relate to the service/process rather than sale of goods. Consequently, entry 99 of the goods notification is not applicable to the society's supply of water services. [Paras 5]

Entry 99 of Notification No.2/2017 (HSN 2201) is not applicable; the society's supply of water is a service and not covered by that nil rated goods entry.

Input tax credit exclusion for construction/repairs to extent of capitalization - Section 17(5) - works contract and immovable property - Eligibility to claim input tax credit on heavy repairs and maintenance not capitalized in books of account. - HELD THAT: - Section 17(5) bars ITC in respect of works contract services and goods/services used in construction, renovation, repairs to the extent of capitalization. The Authority noted that major repairs that extend the useful life of an asset are to be capitalized and ITC is not available to the extent of such capitalization. In absence of detailed facts demonstrating that the repair expenditure does not produce benefits to be capitalized, the Authority held ITC will not be available to the extent the expenditure is capitalized; minor repairs charged to expense may remain eligible subject to other conditions of Section 16. [Paras 5]

ITC on heavy repairs and maintenance is not available to the extent such expenditure is required to be capitalized under Section 17(5) and its explanation; eligibility for non capitalized minor repairs remains subject to facts and Section 16 conditions.

Final Conclusion: The Authority ruled that the housing society's collections from members constitute taxable supplies of services to distinct persons (society and members) and are liable to GST; where monthly contribution exceeds Rs. 7,500 the entire amount is taxable; sinking/repair/election/education fund collections are taxable; exempt or nil rated statutory charges are excluded when computing the Rs. 7,500 threshold; water supplied by the society is a service not covered by the goods nil rate entry; and input tax credit on repair/maintenance is disallowed to the extent such expenditure must be capitalized.

Exemption of compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 - Binding effect of CBDT clarificatory circulars on tax authorities - Applicability of RFCTLARR Act provisions to enactments in the Fourth Schedule (including the National Highways Act, 1956) - Rectification under section 154 - maintainability of claim based on subsequent clarification

Exemption of compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 - Binding effect of CBDT clarificatory circulars on tax authorities - Whether compensation received on compulsory acquisition by NHAI is exempt from income-tax under section 96 of the RFCTLARR Act as clarified by CBDT Circular No.36/2016 and therefore not taxable as capital gains or interest under the Income-tax Act, 1961. - HELD THAT: - The Tribunal accepted that section 96 of the RFCTLARR Act exempts income-tax on awards or agreements (except those under section 46) and that CBDT Circular No.36/2016 clarified that such exemption extends to compensation for acquisition under the RFCTLARR Act irrespective of whether the land is agricultural or non agricultural. The Court relied on the principle that Board circulars which are clarificatory and provide administrative relief are binding on income tax authorities and may be given effect even if issued after filing of return. Applying the Circular to the facts - where the assessee received compensation for land acquired by NHAI and claimed exemption by rectification - the Tribunal held that the compensation fell within the exemption declared by the RFCTLARR Act as clarified by the CBDT circular and therefore was not taxable under the Income-tax Act.

Assessee's claim that the compensation is exempt under section 96 of the RFCTLARR Act, as clarified by CBDT Circular No.36/2016, is accepted and the compensation is not taxable under the Income-tax Act.

Applicability of RFCTLARR Act provisions to enactments in the Fourth Schedule (including the National Highways Act, 1956) - Whether the provisions of the RFCTLARR Act - in particular the First Schedule (determination of compensation) - apply to acquisitions made under the National Highways Act, 1956, and the limited applicability of section 24 of the RFCTLARR Act to NH Act acquisitions. - HELD THAT: - The Tribunal followed the reasoning in the High Court decision considered by the CIT(A) that, due to subsequent ordinances and the Removal of Difficulties Order, the First, Second and Third Schedules of the RFCTLARR Act were made applicable to enactments in the Fourth Schedule (including the NH Act) with effect from 01.01.2015. It was also noted that section 24 of the RFCTLARR Act was not made applicable to acquisitions under the NH Act by the amended/substituted provisions; accordingly certain procedural provisions (section 24) do not apply, but the First Schedule's compensation provisions operate as applied to NH Act cases from the date specified. Applying that framework to the facts, the Tribunal treated the CBDT clarification and the governmental orders as establishing the RFCTLARR compensation regime's applicability for the purpose of tax exemption.

First Schedule compensation provisions of the RFCTLARR Act apply to NH Act acquisitions with effect from 01.01.2015 as per governmental orders; section 24 of the RFCTLARR Act was not applied to NH Act acquisitions, but this does not preclude the exemption under section 96 as clarified by CBDT.

Rectification under section 154 - maintainability of claim based on subsequent clarification - Whether the assessee's rectification application under section 154 filed after the return (filed before issuance of the CBDT circular) was maintainable when filed by an authorised representative and whether the delay in disposal by the assessing officer affected relief. - HELD THAT: - The Tribunal noted that the rectification request was filed after issuance of the clarificatory Circular and that the CIT(A) addressed the substantive merits. The assessee had furnished power of attorney (or was represented) and the CIT(A) decided the matter on merits, which the Tribunal treated as acceptance of maintainability. Although the assessing officer issued his order beyond the six month period, the Tribunal allowed the appeal on the substantive ground of exemption under the RFCTLARR Act as clarified by CBDT circular, thereby granting the relief sought in the rectification. The Tribunal therefore did not deny relief on procedural grounds concerning signature or alleged time bar but resolved the dispute on merits.

Rectification claim filed through authorised representative was treated as maintainable and, on the merits (in view of the CBDT clarification and applicability of RFCTLARR exemption), the assessee is entitled to the relief claimed.

Final Conclusion: Appeals allowed: the compensation received on compulsory acquisition by NHAI is exempt from income tax in view of section 96 of the RFCTLARR Act as clarified by CBDT Circular No.36/2016; the RFCTLARR compensation regime (First Schedule) applies to NH Act acquisitions with effect from 01.01.2015 as per governmental orders; the rectification under section 154 filed by the assessee's authorised representative was treated as maintainable and relief granted on merits.

Section 153C jurisdiction to assess any other person - incriminating material requirement for initiation under Section 153C - onus on Assessing Officer to establish seized records belong to other person - addition under Section 69 for unexplained investment - natural justice - right of assessee to cross examine adverse witness - preferential weight to documentary evidence over uncorroborated oral statement - presumption under Section 292C as to ownership of seized documents

Section 153C jurisdiction to assess any other person - incriminating material requirement for initiation under Section 153C - onus on Assessing Officer to establish seized records belong to other person - Validity of proceedings and assessment framed under Section 153C in respect of assessee for the seized documents found at premises of third parties - HELD THAT: - The Tribunal examined the seized loose papers and documents recovered from premises of Sagar Group and others and found documents (sale letter, power of attorney, partnership deed and related papers) bearing the assessee's name and showing his direct connection with the land transaction. The presence of a signed sale letter, power of attorney in favour of the assessee and partnership deed (showing contribution/retirement details) were held to be sufficient cogent material to constitute incriminating record attributable to the assessee. On that basis the Assessing Officer was within jurisdiction to issue notice and proceed under Section 153C; therefore the precedents relied upon by the assessee were held inapplicable to the facts of this case. The Tribunal concluded that the initiation and conduct of proceedings under Section 153C were justified. [Paras 8, 9, 10, 11]

Proceedings under Section 153C were validly initiated and sustained; ground challenging jurisdiction dismissed.

Addition under Section 69 for unexplained investment - natural justice - right of assessee to cross examine adverse witness - preferential weight to documentary evidence over uncorroborated oral statement - Sustainability of addition of alleged 'on money' of Rs. 8,50,000 made to assessee's income on basis of seller's statement - HELD THAT: - The addition rested solely on the sworn statement of the seller, who alleged a higher total consideration and receipt of cash. The assessee consistently denied any cash payment and relied on the registered sale deed showing consideration of Rs. 40,00,000/-. The AO did not provide the assessee an opportunity to cross examine the seller and produced no corroborative material or evidence that the seller himself had been assessed for undisclosed income. The Tribunal applied the principle that documentary evidence (registered deed) carries greater weight than an uncorroborated oral statement and that denial of cross examination offends natural justice. In these circumstances the addition under Section 69 was held to be based on surmise and conjecture and liable to be deleted. [Paras 13, 14, 15, 16, 17]

Addition of alleged 'on money' deleted; ground in favour of assessee allowed.

Final Conclusion: Appeal partly allowed: initiation of proceedings under Section 153C upheld, but the addition of alleged 'on money' (treated as unexplained investment) sustained by lower authorities is deleted for lack of corroborative evidence and denial of opportunity to cross examine.

Unexplained investment under section 69 - dumb document - requirement of corroborative evidence for additions based on seized loose papers - reliability of books of account audited under section 44AB - additions cannot be based on surmise or conjecture - estimation of disallowance - business purpose of travelling and conveyance expenses

Unexplained investment under section 69 - dumb document - requirement of corroborative evidence for additions based on seized loose papers - reliability of books of account audited under section 44AB - additions cannot be based on surmise or conjecture - Deletion of addition made by the Assessing Officer on account of alleged unexplained investment in stock based on consignment memos seized during search. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals)'s finding that the addition founded on differences between values in seized consignment memos and books of account was not supported by tangible or corroborative evidence. The assessee explained, and his post-search statement recorded, that consignment memos were inflated for insurance purpose; the books of account were regular, supported by vouchers and audited under section 44AB without adverse remarks, and no unaccounted purchase bills, unaccounted sales or supplier/payment corroboration were found during search. Relying on settled authorities that additions cannot be made on mere surmise, conjecture or on loose papers that are 'dumb documents' unless corroborated, the Tribunal concluded that the consignment memos alone did not constitute admissible basis for addition and therefore confirmed deletion of the addition. The Tribunal noted that Revenue failed to produce contrary tangible evidence despite extensive search and proceedings, and that the AO's comparison of insured values with book stock was erroneous where insurance-related inflation was satisfactorily explained. [Paras 5]

Addition of Rs. 2,58,59,522/- (and related deletion in A.Y. 2015-16) deleted; findings of Commissioner (Appeals) confirmed.

Estimation of disallowance - business purpose of travelling and conveyance expenses - Whether travelling and conveyance expenses disallowable at 25% or limited to 10%. - HELD THAT: - The Assessing Officer made a 25% disallowance by estimation treating part of travelling and conveyance expenses as personal. The Commissioner (Appeals) reduced the disallowance to 10% and treated the expenses as incurred for business purposes to a large extent. The Tribunal found no reason to interfere with this exercise of estimation and the appellate authority's moderation of the disallowance, accepting that the addition was inherently an estimate and that the lower disallowance was justified on the material before the authorities. [Paras 6]

Disallowance restricted to 10%; the Assessing Officer's 25% addition is not sustained.

Final Conclusion: The Revenue's appeal is dismissed; the Commissioner (Appeals)'s deletions and modification of disallowance are confirmed.

Stay of recovery of disputed tax demand - pre-deposit of 20% of disputed demand as condition for stay - adjustment of refunds against outstanding tax demand without invoking Section 245 procedure - failure to provide pre-decisional hearing before adjustment of refunds - office memorandum regime governing stay and pre-deposit (29th February, 2016 read with 25th August, 2017) - entitlement to refund of amounts adjusted in excess of permissible pre-deposit

Pre-deposit of 20% of disputed demand as condition for stay - stay of recovery of disputed tax demand - office memorandum regime governing stay and pre-deposit (29th February, 2016 read with 25th August, 2017) - Respondents were not entitled to adjust refunds in excess of the 20% pre-deposit required for grant of stay and must normally seek only 20% pre-deposit pending first appeal. - HELD THAT: - The Court applied the established administrative mandate in the Office Memorandums (29th February, 2016 read with 25th August, 2017) that, save in cases falling under paragraph 4(B), the Assessing Officer shall normally grant stay of recovery of disputed demand on payment of 20% of the disputed demand. In the present facts the respondents adjusted amounts far exceeding 20% without recording reasons justifying departure under paragraph 4(B) and without deciding the petitioner's stay application. The Court held that such recovery in excess of 20% was inconsistent with the office memorandum regime and the requirement that reasons be recorded where a higher pre-deposit is sought, and therefore the excess adjustments could not be sustained. [Paras 8]

Adjustment of refunds in excess of the 20% pre-deposit was impermissible and the petitioner is entitled to restitution of the excess.

Adjustment of refunds against outstanding tax demand without invoking Section 245 procedure - failure to provide pre-decisional hearing before adjustment of refunds - entitlement to refund of amounts adjusted in excess of permissible pre-deposit - The adjustments were made without following the procedure under Section 245 and without providing notice or pre-decisional hearing, and the respondents were directed to verify facts and refund excess adjustments within four weeks. - HELD THAT: - The Court found that refunds had been adjusted against outstanding demand without invoking the procedural safeguards of Section 245 - namely issuance of notice and opportunity of pre-decisional hearing - and therefore such adjustments, to the extent they exceeded the permissible pre-deposit, were liable to be refunded. The Court directed the respondents to verify the factual assertions in the writ petition and, if found correct, to refund the amounts adjusted in excess of 20% of the disputed demand for Assessment Year 2018-19 within four weeks. [Paras 9, 10]

Respondents to verify the petitioner's claims and, if established, refund the excess adjustments within four weeks.

Final Conclusion: Writ petition disposed: respondents held bound by the office memorandum regime to seek only 20% pre-deposit for stay (unless reasons justify higher pre-deposit) and directed to verify the petitioner's claims and refund any amounts adjusted in excess of 20% for Assessment Year 2018-19 within four weeks.

Slump sale - transfer of undertaking as a going concern - treatment of excluded assets in slump sale - application of precedent in assessee's own case - deletion of disallowance under section 50B

Application of precedent in assessee's own case - deletion of disallowance under section 50B - Tribunal's deletion of the disallowance for the assessment years 2006-07 and 2007-08 by relying on the assessee's earlier decision was proper. - HELD THAT: - The High Court held that the Tribunal was justified in following the Tribunal's earlier decision in the assessee's own case (1994-95), which had been upheld by a Division Bench of this Court. There was no material on record to show that that binding decision had been reversed or modified. In those circumstances the Tribunal correctly applied the concluded legal position in favour of the assessee and deleted the disallowance under Section 50B for the years in question. The appeal raising a substantial question of law was therefore dismissed.

Appeal dismissed; substantial question of law answered against the revenue and Tribunal's deletion of the disallowance upheld.

Slump sale - transfer of undertaking as a going concern - treatment of excluded assets in slump sale - Excluded assets consisting of bank balances and outstanding insurance claims did not prevent the transfer from being a slump sale of the undertaking as a going concern. - HELD THAT: - Relying on the Tribunal's analysis, the Court accepted that land, buildings, plant and machinery, raw material, licences, trademarks and employees connected with the fertilizer and fibre businesses were transferred to the purchaser as an integrated going concern. The mere exclusion of certain items such as cash in bank and pending insurance claims did not defeat the characterisation of the transaction as a slump sale where the sale consideration was fixed as a lump sum for the undertaking and no separate values were ascribed to individual assets. Consequently the transaction qualified as a slump sale for tax purposes and the deletions made by the Tribunal on that basis were sustainable.

Transaction held to be a slump sale notwithstanding excluded assets; Tribunal's conclusion sustained.

Final Conclusion: The High Court dismissed the revenue's appeal, holding that the Tribunal rightly deleted the disallowance under Section 50B for AY 2006-07 and 2007-08 by applying the assessee's earlier, upheld decision; the transaction qualified as a slump sale despite certain excluded assets.

Validity of notice under Section 148 - Service of notice and mode of service - Power of attorney/authorization for authorised representative - Effect of defective service on reopening assessment - Prospective application of Section 292BB

Validity of notice under Section 148 - Service of notice and mode of service - Power of attorney/authorization for authorised representative - Effect of defective service on reopening assessment - Notice issued under Section 148 was not validly served on the assessee or its authorised representative, vitiating the reopening. - HELD THAT: - The Tribunal found as a factual matter that the assessing officer did not send the Section 148 notice to the registered office by registered post or speed post, did not effect affixture at the registered office, and no copy of the notice was served on the assessee before completion of assessment. The Tribunal also recorded absence of any power of attorney in favour of Shri Anand Sharma, the person on whom service was allegedly effected, and held that service on Shri Chandan could not be treated as valid since he was neither an employee nor an authorised agent and the material on record (including affixed stamp of a third party) negatived valid service. On these findings the Tribunal set aside the assessment for want of valid service, concluding that defective or non-existent service of the re-opening notice invalidated the proceedings.

Assessment order set aside for want of valid service of the Section 148 notice.

Prospective application of Section 292BB - Section 292BB could not be given retrospective effect to validate the defective service in the present case. - HELD THAT: - The Court accepted the Tribunal's view that Section 292BB, inserted in 2008, could not be applied retrospectively to cure the defective service which led to invalid reopening. The Tribunal's reliance on the decision in CIT Vs. Chetan Gupta that Section 292BB does not have retrospective effect was noted and adopted. On that basis the contention that Section 292BB required factual defects in service to be ignored was rejected.

Section 292BB not applied to validate the defective service; contention based on Section 292BB rejected.

Final Conclusion: The High Court dismissed the revenue's appeal, upholding the Tribunal's factual finding of invalid service of the Section 148 notice and agreeing that Section 292BB could not be given retrospective effect to cure that defect; consequently the assessment under challenge was set aside.

Arm's Length Price - Transfer Pricing - Transaction Net Margin Method - Comparability of uncontrolled enterprises - Capacity Utilization Adjustment - Working Capital Adjustment - Aggregation of royalty with manufacturing transaction - Section 133(6) powers to collect information

Arm's Length Price - Transfer Pricing - Transaction Net Margin Method - Comparability of uncontrolled enterprises - Determination of ALP for the manufacturing segment remitted to Assessing Officer / TPO for fresh determination. - HELD THAT: - The Tribunal found that the DRP's treatment of comparables and its conclusions did not adequately analyse the assessee's submissions or the functional similarity of the comparables relied upon by the assessee. Given these deficiencies, and conflicting findings in the DRP order regarding functional comparability, the Tribunal set aside the AO's order insofar as ALP for manufacturing is concerned and remanded the matter to the AO/TPO for fresh determination of ALP after affording the assessee an opportunity of being heard. The remand requires the AO/TPO to reconsider selection and treatment of comparables and to determine the mean margin afresh in light of the Tribunal's observations. [Paras 13]

ALP determination for the manufacturing segment is remanded to the AO/TPO for fresh adjudication.

Capacity Utilization Adjustment - Section 133(6) powers to collect information - Adjustment for under utilized capacity to be considered afresh and the TPO/AO directed to exercise powers under section 133(6) to collect requisite data. - HELD THAT: - The Tribunal held that settled law requires that capacity utilization adjustments be considered where justified and that the TPO is obliged to use statutory powers to obtain capacity and cost data of comparables (including actual and installed capacity, breakup of fixed and variable costs, and product wise profitability). If information is lacking, adjustments may also be made to the tested party. In the circumstances of this case, the Tribunal found it appropriate to remit the issue to the AO/TPO to carry out the exercise of allowing adjustment for under utilized capacity after obtaining and sharing relevant information and affording the assessee an opportunity to respond. [Paras 13]

Capacity utilization adjustment remanded for verification and fresh consideration; AO/TPO to collect necessary data under section 133(6).

Working Capital Adjustment - Comparability of uncontrolled enterprises - Working capital adjustment must be allowed by the AO/TPO; DRP's direction to treat finance cost as non operating is not a substitute for granting working capital adjustment. - HELD THAT: - While the DRP had directed that finance cost of comparables be treated as non operating, the Tribunal clarified that such a direction cannot substitute for a substantive working capital adjustment. On the facts, the Tribunal directed the AO/TPO to allow working capital adjustment and to undertake appropriate consideration of finance costs and comparability in computing margins for the tested party and comparables as part of the remand proceedings. [Paras 8, 13]

AO/TPO directed to allow working capital adjustment and reconsider margins accordingly.

Aggregation of royalty with manufacturing transaction - Arm's Length Price - Whether royalty payment can be aggregated with the manufacturing international transaction remitted for fresh consideration. - HELD THAT: - The Tribunal observed that the DRP segregated the royalty transaction and applied CUP for royalty, excluding royalty from operating cost under TNMM, but the issue whether the royalty is integrally linked to the manufacturing transaction (or linked with other segments such as trading) was not properly examined. The Tribunal directed that this question be reconsidered by the AO/TPO in the remand, including verification of whether reimbursement of costs by the licensor occurred and the proper treatment of royalty for ALP determination. [Paras 11, 13]

Aggregation of royalty with manufacturing transaction to be re examined by AO/TPO on remand.

Limitation on adjustment to expenses attributable to international transactions - Adjustment in respect of the manufacturing segment should be restricted to the extent of expenses attributable to international transactions as reflected in the P&L, subject to directions on remand. - HELD THAT: - The DRP noted that an adjustment cannot exceed the amount of expenses debited in the profit and loss account arising from international transactions. Accordingly, the DRP directed that if, after giving effect to the DRP's directions, the TNMM adjustment exceeds the cost debited in respect of international transactions (other than royalty), the AO should restrict the adjustment to that expense amount. The Tribunal left this quantification and application to the AO/TPO in the remand proceedings. [Paras 12]

Any ALP adjustment in the manufacturing segment to be capped at the extent of P&L debits attributable to international transactions, subject to remand implementation.

Final Conclusion: The Tribunal set aside the assessment order insofar as determination of ALP in the manufacturing segment is concerned and remanded the issues (comparables, capacity utilization adjustment, working capital adjustment, and aggregation of royalty) to the Assessing Officer / TPO for fresh adjudication after exercising powers to collect relevant information and after affording the assessee an opportunity of being heard; the appeal is treated as allowed for statistical purposes.

Deduction of interest on loans under section 43B(e) on payment basis - Nexus between borrowed funds and business application - Allowability of deduction despite absence of prior provision in books of account - Precedential application of Associated Pigment Ltd. and Chemicals & Plastics India Ltd. on s.43B

Nexus between borrowed funds and business application - Loans from Canara Bank were utilized for the purpose of the assessee's business and therefore interest relating to those loans is in principle allowable as a business deduction. - HELD THAT: - The Tribunal recorded and accepted the finding of the CIT(A) that the loans in question had been availed for the purposes of the assessee's business and that the amounts remained invested in the business during the intervening period. The Assessing Officer's contrary conclusion, based on remarks in a bank stock-audit report, was held to be insufficient to rebut the balance-sheet evidence and the CIT(A)'s factual finding. On this basis the Tribunal rejected the Revenue's challenge to nexus and treated the interest as arising from business borrowing admissible in principle under the Act. [Paras 8]

Finding of nexus upheld and the Assessing Officer's objection on utilisation for non business purposes rejected.

Deduction of interest on loans under section 43B(e) on payment basis - Allowability of deduction despite absence of prior provision in books of account - Precedential application of Associated Pigment Ltd. and Chemicals & Plastics India Ltd. on s.43B - Interest on the loan is deductible in the assessment year 2015-16 on actual payment basis under section 43B(e) notwithstanding that no provision for such interest was made in the books in the earlier years to which the liability related. - HELD THAT: - The Tribunal applied the plain mandate of section 43B(e) that certain deductions, including interest on loans from banks and financial institutions, are allowable only on actual payment in the year in which payment is made. It followed the CIT(A)'s reliance on authoritative decisions, including Associated Pigment Ltd. (Calcutta High Court) and Chemicals & Plastics India Ltd. (Madras High Court), which hold that section 43B permits deduction on payment even where no provision was made in the earlier year's books and even where the amount was not separately charged to the profit and loss account. The Assessing Officer's interpretation, which would introduce a 'double test' requiring prior book provision as a precondition to a 43B claim, was rejected as contrary to the statutory text and settled precedent. In the facts of the case the assessee had actually paid the disputed sums in the year under appeal and the CIT(A)'s conclusion to allow the deduction under section 43B(e) was affirmed. [Paras 9, 10]

Deduction under section 43B(e) allowed on payment basis despite absence of prior provision; Assessing Officer's disallowance set aside.

Final Conclusion: The Tribunal upheld the CIT(A)'s findings that the loans were used for business purposes and that interest paid in the year is deductible under section 43B(e) even though no prior provision was made in the books; the Revenue's appeal is dismissed.

Classification of rental income as income from house property versus business income - systematic or organized activity test for treating letting as business - treatment of leased assets as business assets - rendering of amenities or services to lessees as determinative factor - main objects clause not conclusive to determine nature of income - statutory deduction under section 24

Classification of rental income as income from house property versus business income - systematic or organized activity test for treating letting as business - rendering of amenities or services to lessees as determinative factor - main objects clause not conclusive to determine nature of income - statutory deduction under section 24 - Whether rental income from letting out warehouses is assessable under the head 'Income from House Property' or under 'Income from Business or Profession'. - HELD THAT: - The Tribunal held that the assessee's rental receipts must be assessed under the head 'Income from House Property' and not as business income. The decision rests on factual findings that the assessee's main objects relate to warehousing and supply chain solutions and not to owning, developing and letting properties as a systematic business; the Assessing Officer relied only on incidental clauses in the memorandum and on the fact that rent was the sole source of income without adducing evidence of organized letting activity. Crucially, the assessee did not provide amenities or services to tenants nor treat the leased assets as business assets in a manner establishing a systematic commercial enterprise. The Tribunal applied the principle that the characterisation of letting depends on facts of each case and that object clauses are not conclusive, relying on the Apex Court's guidance that mere inclusion of letting in the objects or receipt of rental as primary income does not automatically convert the activity into business; consequently the statutory 30% deduction under section 24 applicable to income from house property was to be allowed and the Assessing Officer's approach of taxing the receipts as business income was set aside. [Paras 7, 8, 9, 10]

Rental income assessed as 'Income from House Property'; AO directed to accept assessee's declaration under that head and allow the deductions applicable thereto; Revenue's appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal holding that on the facts the receipts from letting of warehouses are income from house property and not business income, since the assessee did not carry out letting as a systematic business nor provide amenities, and the objects clause alone was not conclusive.

Presumptive taxation under section 44AD - presumptive taxation under section 44AE - claim of depreciation - addition by Assessing Officer - deletion of additions by Commissioner (Appeals) - assessment to be made on the basis of claims in the return

Presumptive taxation under section 44AD - presumptive taxation under section 44AE - claim of depreciation - addition by Assessing Officer - Whether depreciation could be added by the Assessing Officer when the assessee, though showing depreciation in the balance sheet, had not claimed depreciation in the computation of income and had adopted presumptive taxation under sections 44AD and 44AE. - HELD THAT: - The Tribunal noted that the assessee offered income under the presumptive schemes: 8% of gross receipts under section 44AD for contract income and the prescribed amount under section 44AE for two tipper lorries for the period of use. The Assessing Officer made additions on account of depreciation by taking figures from the balance sheet. The assessee's return and the computation of total income, however, did not claim depreciation; the reflection of depreciation in the balance sheet did not amount to a claim in the return. The CIT(A) confirmed the additions on the basis that a person availing presumptive taxation is not eligible to claim depreciation, but did not notice that no depreciation had been claimed. Since the AO's addition proceeded on an erroneous assumption that depreciation was claimed, and that factual error was not corrected by the CIT(A), the Tribunal held the additions to be unjustified and directed deletion. The determinative finding was that additions cannot be sustained where there is no claim of depreciation in the return and the addition springs from an incorrect assumption by the AO. [Paras 8]

Additions of depreciation made by the Assessing Officer and confirmed by the CIT(A) are deleted because the assessee did not claim depreciation in the return while opting for presumptive taxation.

Final Conclusion: Appeal allowed: the Tribunal set aside the confirmation of depreciation additions and directed deletion, holding that the Assessing Officer's addition was based on an erroneous assumption that depreciation had been claimed despite the assessee having adopted presumptive taxation and not claiming depreciation in the return.

Reopening of assessment - Reason to believe - Borrowed satisfaction - Section 153C ousts Section 147/148 where seized documents belong to a third person - Unexplained investment - Unexplained cash credit under clause 68 - Burden on Revenue to establish investment before invoking s.69/69B - Curability of defects under section 292B

Reopening of assessment - Reason to believe - Borrowed satisfaction - Section 153C ousts Section 147/148 where seized documents belong to a third person - Validity of notices issued under section 148 for A.Y. 2008-09 and A.Y. 2009-10 (challenge that notices were void as based on third party material/borrowed satisfaction or because earlier proceedings under s.153C had been withdrawn). - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officers and the chronology of events. It found that the AOs recorded reasons and obtained requisite approvals before issuing notices under section 148 and that copies of the reasons were furnished to the assessee with objections considered and disposed of by speaking orders. The Tribunal further held that the pre-amendment requirement for invoking section 153C - that seized documents must belong to a third person - was not satisfied on the material before the AO, so proceedings under section 153C could not properly be invoked; accordingly invoking section 148 thereafter was permissible. On the question of borrowed satisfaction, the Tribunal concluded that the AOs had applied their mind in the present cases and issued notices within time under section 149. For these reasons the challenges to the validity of the notices under section 148 were dismissed. [Paras 18, 19, 29]

Notices under section 148 for A.Y. 2008-09 and A.Y. 2009-10 were valid; grounds challenging issuance of notices are dismissed.

Unexplained investment - Burden on Revenue to establish investment before invoking s.69/69B - Curability of defects under section 292B - Sustainability of additions of Rs. 10,63,37,500 made in each year as unexplained investment/unexplained payments (ground nos. 4(a)-4(c) for A.Y. 2008-09 and 3(a)-3(c) for A.Y. 2009-10). - HELD THAT: - The Tribunal found a material contradiction between the basis for reopening (receipt by the appellant purportedly not recorded in its books) and the basis on which additions were made (assessment treating appellant as having made unaccounted payments/investments). The AO failed to establish that the appellant had made any investment in the years under consideration; audited financials and purchase deeds showed the lands in issue had been purchased in earlier years and recorded in the books. The Tribunal held that the onus rests on the Revenue to establish investment in the relevant year before invoking s.69/69B and that the AO's approach could not be treated as a curable mistake under section 292B. In consequence the additions on the basis of unexplained investment/payments were held to be unsustainable and deleted. [Paras 31, 32, 34, 35, 37]

Additions of Rs. 10,63,37,500 for each of A.Y. 2008-09 and A.Y. 2009-10 on account of unexplained investment/unaccounted payments are deleted; corresponding grounds are allowed.

Unexplained cash credit under clause 68 - Reopening of assessment - Sustainability of addition of Rs. 1,50,00,000 in A.Y. 2008-09 on account of unexplained unsecured loans/cash credit (grounds 5(a) & 5(b)). - HELD THAT: - The Tribunal noted that the statement of reasons for reopening did not refer to any escapement related to the unsecured loans nor indicate how those credits represented escaped income. The notice under section 148 was issued on the basis of alleged unaccounted receipts for land, and the AO made additions on a different issue without first making any addition on the core issue for which reopening was effected. On the merits the assessee had furnished confirmations, ITRs and bank evidence showing loans were from identified persons and routed through banking channels; the creditors had been subject to search and their assessments under s.153A had been completed. Given the lack of nexus between the reasons for reopening and the cash credit addition, the Tribunal deleted the addition of Rs. 1,50,00,000. [Paras 40, 41, 44]

Addition of Rs. 1,50,00,000 under section 68 for A.Y. 2008-09 is deleted; grounds 5(a) and 5(b) are allowed.

Final Conclusion: For A.Y. 2008-09 and A.Y. 2009-10 the Tribunal upheld the validity of the reassessment notices under section 148 but found the substantive additions unsustainable: the unexplained investment/additions of Rs. 10,63,37,500 in each year were deleted, and the unexplained cash credit addition of Rs. 1,50,00,000 for A.Y. 2008-09 was deleted. The appeals are partly allowed in the terms recorded.

Reopening of assessment on 'reason to believe' - accommodation entries - borrowing of reasons from other proceedings - reassessment quashed for lack of independent reasons - addition by treating purchases as deemed income on account of bogus purchases - deletion of addition sustained as percentage of purchases - application of coordinate Bench precedent

Reopening of assessment on 'reason to believe' - accommodation entries - borrowing of reasons from other proceedings - reassessment quashed for lack of independent reasons - Validity of assumption of jurisdiction to reopen assessment for the year under challenge on the basis of information/ lists received from other proceedings and decisions in coordinate cases. - HELD THAT: - The Tribunal held that the Assessing Officer had relied upon information and conclusions drawn in assessments of other taxpayers (i.e., borrowed reasons and lists of accommodation-entry recipients) rather than recording independent reasons to form a belief that income had escaped assessment in the appellant's case. The coordinate-Bench decisions dealing with identical facts were examined and followed, showing that where the entries related to a different assessment year and the AO's reasons are derived from other files without independent verification, the assumption of jurisdiction is vitiated. On this basis the reassessment initiated was held to be bad in law and liable to be quashed. [Paras 12, 14]

Assumption of jurisdiction to reopen the assessment was held invalid and reassessment proceedings were quashed.

Addition by treating purchases as deemed income on account of bogus purchases - deletion of addition sustained as percentage of purchases - application of coordinate Bench precedent - Sustainability of the addition made by treating purchases as bogus and levying an addition equal to 20% of purchases. - HELD THAT: - On the merits the Tribunal applied earlier orders of coordinate Benches which had considered identical facts and had deleted similar additions. The Revenue did not bring material distinguishing those precedents or cogent evidence to uphold the addition. The Tribunal noted that the lower authorities had not produced sufficient justification to treat the purchases as bogus or to sustain a punitive percentage addition, and therefore followed the coordinate decisions deleting the addition. [Paras 13]

Addition sustained by the lower authorities was deleted and the appeal on this ground was allowed.

Final Conclusion: The appeal is allowed: the reassessment was quashed for lack of independent reasons and the additions treated as deemed income on account of alleged bogus purchases (including the 20% addition) were deleted, following coordinate Bench precedents.

Reopening of concluded assessments under section 153A after search - requirement of incriminating material/nexus with seized material for making additions in non abated assessments - eligibility for deduction under section 80IB(10) - developer versus contractor - characterisation of receipts as long term capital gain vis a vis business income - assessment of profit on unsold/partly completed units in housing projects

Requirement of incriminating material/nexus with seized material for making additions in non abated assessments - reopening of concluded assessments under section 153A after search - Whether additions/disallowances under proceedings initiated after search can be sustained in respect of concluded/non abated assessment years where no incriminating material was found during the search. - HELD THAT: - The Tribunal reviewed precedents of High Courts and coordinate benches and applied the principle that reopening and making additions in respect of assessments concluded prior to search (non abated assessments) under the post search provision is permissible only where there is incriminating material found in the search or such seized material bears a nexus to the additions sought to be made. In the present case returns for A.Ys. 2008 09 to 2012 13 stood filed and the time for issuance of notices under the regular scrutiny provision had expired before the search; the assessing officer did not point to any incriminating material seized during the search that supported the disallowances or additions. Applying the settled line of authority favouring the assessee where two reasonable constructions exist, the Tribunal held that additions for the concluded years could not be sustained in absence of incriminating material and that the assessments could not be reopened merely by calling for documents post search. [Paras 15, 21, 22, 23, 24]

Additions/disallowances made for A.Ys. 2008 09 to 2012 13 were deleted for want of any incriminating material found in the search; A.Y. 2013 14 differed on facts because limitation to issue scrutiny notice had not expired on date of search.

Eligibility for deduction under section 80IB(10) - developer versus contractor - assessment of profit on housing project by treating assessee as developer - Whether the assessee is a developer entitled to deduction under section 80IB(10) for the 'Palace Orchard' housing project or merely a contractor/land dealer so as to disqualify the deduction for A.Ys. 2008 09 to 2014 15. - HELD THAT: - On the material - project approvals, coloniser's licence, completion certificate, agreements with buyers (including clause preserving possession with builder till completion), accounting treatment and the Tribunal's earlier decision in the assessee's own case for A.Y. 2009 10 - the factual matrix showed the assessee undertook development of a group housing project and sold completed residential units (sale deeds executed to facilitate finance notwithstanding). Reliance was placed on several coordinate Tribunal and High Court decisions holding that separate sale and construction agreements or sales during construction do not ipso facto convert a developer into a contractor where the totality of facts shows a housing project developed by the assessee. Applying those authorities, the Tribunal concluded the assessee satisfied conditions of section 80IB(10) and allowed the deduction for the years under consideration. [Paras 25, 26, 27, 28, 29]

Deduction under section 80IB(10) allowed for the 'Palace Orchard' project; the assessee held to be a developer for A.Ys. 2008 09 to 2014 15.

Characterisation of receipts as long term capital gain vis a vis business income - Whether the gain on sale of certain plots treated by the Assessing Officer as business income should instead be taxed as long term capital gain for A.Y. 2011 12. - HELD THAT: - The Tribunal examined accounting treatment and facts: the lands in question were shown in the balance sheet as assets (investments/fixed assets) and were not reflected as stock in trade. The accounting position in regularly maintained books was treated as an important indicator of the assessee's intention. No material established that the lands were held as stock in trade. On this basis the Tribunal held the receipts were properly characterised as long term capital gains and not business income. [Paras 31, 32, 33, 34, 35]

The gain on sale of the said lands is long term capital gain; the addition treating it as business income is set aside.

Assessment of profit on unsold/partly completed units in housing projects - allowability of deduction under section 80IB(10) upheld on appeal - Whether the Assessing Officer was justified in making an addition on account of assumed profit from unsold units and whether the revenue's appeal against deletion of the section 80IB(10) disallowance for A.Y. 2010 11 should succeed. - HELD THAT: - For A.Y. 2010 11 the Tribunal applied its earlier findings on the eligibility for section 80IB(10) and the fact that the assessee itself had credited sale consideration/profit in its books for unsold units. The Assessing Officer's assumption of a sale price and corresponding profit was not justified where the assessee had accounted for the sales and the units were eligible for the section 80IB(10) deduction. Consequently the deletion of the addition relating to profit on unsold units was sustained and the revenue's challenge to the allowance of deduction was dismissed. [Paras 36, 37, 38, 39, 40]

Revenue's appeal dismissed; addition on account of profit from unsold units deleted and the section 80IB(10) deduction for A.Y. 2010 11 upheld.

Final Conclusion: Appeals of the assessee for A.Ys. 2008 09 to 2012 13 allowed by deleting additions made post search for want of incriminating material; deduction under section 80IB(10) allowed for the 'Palace Orchard' project for A.Ys. 2008 09 to 2014 15; gain on sale of specified lands held to be long term capital gain; revenue's appeal for A.Y. 2010 11 dismissed.

Maintainability of company petition - abuse of process of law - constructive res judicata - subjudice and comity of courts - pendency of higher court appeal

Maintainability of company petition - abuse of process of law - constructive res judicata - pendency of higher court appeal - Disposition of the interlocutory application seeking dismissal of the main company petition - HELD THAT: - The IA was filed by respondents in the main company petition seeking dismissal on grounds including that the allegations were frivolous, barred by constructive res judicata, constituted an abuse of process and that identical issues were pending on appeal before the Supreme Court. The petitioners opposed the IA, contending it was misconceived and that the main petition raised independent claims under the Companies Act. After hearing both parties, the Tribunal noted the pendency of proceedings and, having regard to the order passed in the main petition C.P. No. 10/GB/2021, found it appropriate to dispose of the interlocutory application in the light of that order.

The interlocutory application (Comp. Act) IA No. 1/2021 is disposed of in view of the order passed in the main petition C.P. No. 10/GB/2021.

Final Conclusion: The Tribunal disposed of IA (Comp. Act) 1/2021 seeking dismissal of the company petition, concluding that the interlocutory application is dealt with and disposed of in light of the order already passed in the main petition.

Failure to afford reasonable opportunity under Section 420 of the Companies Act, 2013 - ex parte interim relief and maintenance of status quo - requirement of notice under Rule 37 of the NCLT Rules, 2016 - maintainability of petition under Sections 241 and 242 of the Companies Act, 2013 - waiver of eligibility requirement under Section 244 - locus standi to file company petition - remand for de novo consideration

Failure to afford reasonable opportunity under Section 420 of the Companies Act, 2013 - ex parte interim relief and maintenance of status quo - requirement of notice under Rule 37 of the NCLT Rules, 2016 - remand for de novo consideration - Whether the ex parte interim order dated 21.02.2020 directing maintenance of status quo should be set aside for want of compliance with principles of natural justice and NCLT procedural rules - HELD THAT: - The Appellate Tribunal found that the impugned ex parte interim order was passed without affording the opposite party a reasonable opportunity of being heard as envisaged by Section 420 of the Companies Act, 2013 and without issuance of notice as required under Rule 37 of the NCLT Rules, 2016. The Tribunal did not traverse the merits of the underlying contentions as to maintainability or substance of the petition; rather, it confined itself to procedural infirmity in issuance of the ex parte order. In view of that procedural defect, the impugned order was set aside and the matter remitted for a fresh hearing, directing the National Company Law Tribunal to hear the parties and pass a de novo order after completing pleadings and giving opportunity to raise all factual and legal pleas, uninfluenced by observations in the present appeal.

Impugned ex parte interim order set aside for want of compliance with principles of natural justice and Rule 37; matter remitted for de novo consideration after affording parties opportunity to be heard.

Maintainability of petition under Sections 241 and 242 of the Companies Act, 2013 - waiver of eligibility requirement under Section 244 - locus standi to file company petition - Whether the appellant's challenge to the maintainability of the petition and the respondent's eligibility under Section 244 should be adjudicated at this stage - HELD THAT: - The Tribunal expressly refrained from deciding the substantive question of maintainability, the respondent's locus standi, or whether a waiver under Section 244 should be granted. Those matters, going to the root of the petition, were neither finally adjudicated nor decided on merits in this appeal. Instead, because the ex parte order was procedurally flawed, the Appellate Tribunal remitted the main petition to the NCLT for fresh adjudication where these issues are to be raised and determined after the parties have been heard and pleadings completed.

Maintainability, locus and waiver issues remitted to the NCLT for fresh consideration; no decision on merits in the present appeal.

Final Conclusion: The appeal is allowed to the extent that the ex parte interim order dated 21.02.2020 is set aside for contravention of principles of natural justice and Rule 37; the Company Petition is remitted to the NCLT for de novo disposal after giving both parties full opportunity to be heard, and the Tribunal has not decided on the substantive questions of maintainability, locus or waiver under Section 244.

Classification as Financial Service Provider (Non-Banking Financial Company) - Applicability of Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers) Rules, 2019 - Scope of Central Government notification under section 227 - asset-size threshold for notified categories - Eligibility to initiate CIRP of Financial Service Providers - role of Appropriate Regulator and Administrator - Maintainability of Section 7 petition against a Financial Service Provider not in notified category

Classification as Financial Service Provider (Non-Banking Financial Company) - Whether the corporate respondent (AKJ Fincap Limited) is a financial service provider / NBFC. - HELD THAT: - The Tribunal recorded that the respondent holds a certificate issued by the Reserve Bank of India recognizing it as an NBFC/financial service provider and the Financial Creditor itself admitted the respondent's total assets as per the latest balance sheet. On the basis of the RBI certificate and the parties' affidavits, the Tribunal concluded that the corporate respondent is a financial service provider (NBFC). [Paras 25]

AKJ Fincap Limited is a Financial Service Provider / NBFC.

Applicability of Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers) Rules, 2019 - Scope of Central Government notification under section 227 - asset-size threshold for notified categories - Eligibility to initiate CIRP of Financial Service Providers - role of Appropriate Regulator and Administrator - Whether the Rules and Central Government notification under section 227 apply to the respondent and the legal consequences flowing therefrom for initiation of CIRP. - HELD THAT: - The Tribunal examined the Notification issued under section 227 and the 2019 Rules, noting that the Central Government had specified categories of financial service providers to which those Rules apply. The Notification expressly limits the class of NBFCs covered to those with assets of Rs. 500 crore or more (as per last audited balance sheet) and contemplates initiation and conduct of insolvency proceedings of the notified category by the appropriate regulator through an Administrator. The Tribunal held that these Rules operate to restrict CIRP initiation for financial service providers in the notified categories and to vest the initiating power, for such entities, in the appropriate regulator and the statutory mechanism prescribed by the Rules. [Paras 26]

The 2019 Rules and the Notification under section 227 apply only to those categories of Financial Service Providers expressly notified (e.g., NBFCs with assets of Rs. 500 crore or more) and prescribe initiation by the appropriate regulator through the Administrator.

Maintainability of Section 7 petition against a Financial Service Provider not in notified category - Whether the Section 7 petition filed by the Financial Creditor against AKJ Fincap Limited is maintainable. - HELD THAT: - Having found that the respondent is an NBFC and that the Notification and Rules restrict the insolvency process for financial service providers to notified categories and provide that the appropriate regulator initiates such proceedings, the Tribunal considered the admitted asset size of the respondent (well below the notified Rs. 500 crore threshold). The Financial Creditor had not followed the procedure mandated for financial service providers and had proceeded under Section 7 directly. The Tribunal concluded that the petition under Section 7 was filed without following the due process required for insolvency proceedings of a financial service provider and therefore was not maintainable. [Paras 26, 27, 28, 29]

The Section 7 application by the Financial Creditor against AKJ Fincap Limited is rejected for non-compliance with the statutory regime applicable to Financial Service Providers.

Final Conclusion: The Tribunal found AKJ Fincap Limited to be an NBFC/financial service provider and that the Central Government notification and the 2019 Rules confine the special insolvency procedure to notified categories (NBFCs with assets of Rs. 500 crore or more) to be initiated by the appropriate regulator; since the respondent's assets are below that threshold and the Financial Creditor did not follow the statutory procedure for financial service providers, the Section 7 petition is rejected (no costs), without prejudice to the applicant's right to pursue other remedies before competent forums.

Financial Creditor - Financial Debt - Equity Investment vs Loan - Put Option / Shareholder Exit Rights - Internal Rate of Return (IRR) not equivalent to interest

Financial Creditor - Financial Debt - Equity Investment vs Loan - Internal Rate of Return (IRR) not equivalent to interest - Whether GVFL's claim arising from acquisition of shares and exercise of the 'put option' constitutes a financial debt and whether GVFL is a financial creditor under the IBC, 2016. - HELD THAT: - The Tribunal examined the definitions of financial creditor and financial debt under the IBC and held that a shareholder is distinct from a lender. GVFL's payment was for purchase of equity shares in HBT Mehsana and conferred shareholder rights such as board nomination, voting and veto rights, which are not rights of a financial creditor. The money paid to acquire shares was not disbursed as consideration for the time value of money and therefore cannot be characterised as a financial debt. The presence of an exit mechanism labelled as a 'put option' in a shareholder agreement does not convert an equity investment into a borrowing. Further, the Tribunal held that the asserted Internal Rate of Return (IRR) is an investor's expected return (relating to dividends and capital appreciation) and is not equivalent to interest payable on a loan. Applying these principles, the claim based on acquisition of shares and exercise of the put option cannot be treated as a financial debt and GVFL is not a financial creditor for the purposes of initiating proceedings under Section 7 of the IBC. [Paras 8, 9, 10, 11]

GVFL is not a financial creditor and the claim does not constitute a financial debt under the IBC; thus the Section 7 petition is not maintainable on that ground.

Put Option / Shareholder Exit Rights - Financial Debt - Maintainability of CP No. CP(IB)-4129/2018 and related Company Petitions filed under Section 7 when the claim arises from shareholder rights. - HELD THAT: - On the finding that the asserted claim is not a financial debt, the Tribunal allowed the maintainability applications filed by the corporate debtor. The Tribunal applied the same reasoning to three other company petitions concerning similarly structured investments in separate SPVs, observing that the outcome in HBT Mehsana is applicable to MA 2411/2019, MA 2413/2019 and MA 2414/2019. Consequently, the Section 7 petitions based on the asserted put/exit rights were found not maintainable and were dismissed. [Paras 12, 13]

MA 2412/2019 (in CP(IB)-4129/2018) is allowed and CP(IB)-4129/2018 is dismissed as not maintainable; MA 2411/2019, MA 2413/2019 and MA 2414/2019 (in CP(IB)-4128/2018, CP(IB)-4130/2018 and CP(IB)-4131/2018) are likewise allowed and those Company Petitions are dismissed as not maintainable.

Final Conclusion: The Section 7 petitions filed by GVFL based on purchase of equity and exercise of contractual exit rights do not disclose a financial debt; GVFL is not a financial creditor under the IBC, and the petitions (CP(IB)-4128/2018, CP(IB)-4129/2018, CP(IB)-4130/2018 and CP(IB)-4131/2018) are dismissed as not maintainable.

Duties of Interim Resolution Professional - Verification of claims with reference to books of account - Maintainability of claim in insolvency proceedings - Prohibition on using CIRP to perpetuate fraud

Verification of claims with reference to books of account - Duties of Interim Resolution Professional - Maintainability of claim in insolvency proceedings - Prohibition on using CIRP to perpetuate fraud - The application seeking a direction to the Resolution Professional to accept the appellants' claim in full is not maintainable and was correctly dismissed by the Adjudicating Authority. - HELD THAT: - The Adjudicating Authority recorded that the appellants could substantiate payments of only Rs. 15,29,057 in the corporate debtor's books of account, a position verified by the Resolution Professional in exercise of duties under Section 18 to collect and collate information and verify claims against accounting entries. Payments allegedly made in cash to a third party (Mr. Rohit) were unsupported by entries in the corporate debtor's books and the appellants admitted that ex-directors were fraudulent. The RP admitted a claim consistent with the books after applying interest, a computation which the Authority found not arbitrary. Given that the CIR process cannot be used to perpetuate fraud, the Adjudicating Authority rightly declined to direct the RP to accept the full claim and dismissed the application. [Paras 8]

Application dismissed; Adjudicating Authority's dismissal upheld and appeal found devoid of merits.

Final Conclusion: The appeal is dismissed for lack of merit; the Adjudicating Authority correctly refused to direct the Resolution Professional to accept the full claim, and no costs are awarded.

Adequacy of show cause notice - natural justice - enquiry worthiness - quashment of complaint - standing of the noticee

Adequacy of show cause notice - natural justice - quashment of complaint - standing of the noticee - Validity of the show cause notice and accompanying complaint dated 24.12.2018 and whether they should be quashed for want of minimum material particulars. - HELD THAT: - The Court held that the challenge to the impugned notice and complaint on the ground that they lack minimum material particulars and are too vague to enable a proper reply is not made out. The adequacy of a notice must be judged in context, including its accompaniments; here the complaint accompanied the notice and supplies substantial particulars running into multiple pages with specific roles attributed to each petitioner. The petitioners are not strangers to the affairs of the company; they had participated in cognate proceedings and their statements were recorded, and the noticee company's earlier proceedings on related transactions were on record. The Court accepted that the notice and complaint could have been more concrete, but held that the material supplied is sufficient to meet minimum requirements of notice and to permit the petitioners to file a meaningful reply. The Court observed that the petitioners remain free to obtain further information from the company or from the respondents, who as State instrumentalities are expected to act fairly, and that any arguable vagueness can be clarified without delay. Reliance on prior decisions supporting the principle of adequate notice was acknowledged, but the Court concluded those principles do not compel quashing on the facts here where the complaint and prior proceedings furnish necessary particulars. The Court also noted earlier judicial outcomes in related litigation against the company and directors, and treated those as supporting the sustenance of the impugned proceedings. The writ petitions were dismissed while keeping open all contentions, and the petitioners were granted a limited period to respond to the notice.

Writ petitions dismissed; impugned notice and complaint not quashed; petitioners granted four weeks to submit reply and may seek further clarifications or additional time from the respondents.

Final Conclusion: The petitions seeking quashment of the show cause notice and accompanying complaint dated 24.12.2018 are dismissed. Petitioners are permitted four weeks to file their replies; respondents may grant additional time or furnish clarifications. The Court's observations are confined to the writ disposal and shall not influence the respondents' adjudicatory opinion on enquiry worthiness.

Show cause notice - adjudication - issuance of show cause notice prior to completion of investigation - right to be heard - reply and participation in adjudication process - denial of waiver under Proviso to Section 73(1) of the Finance Act,1994

Show cause notice - reply and participation in adjudication process - right to be heard - Whether the writ court was correct in refusing to quash the impugned show cause notice and directing the appellants to file a reply and participate in adjudication. - HELD THAT: - The High Court declined to interfere at the stage of a show cause notice and held that mere issuance of such notice does not warrant quashing where the petitioners have the remedy of filing a reply and participating in the adjudicatory process. The court observed that it would refrain from expressing any view on the merits and left the parties to make submissions before the adjudicating authority, directing that the petitioners be heard physically or by video conference before any order is passed. The appellate court found no infirmity in the Single Judge's approach in preserving the adjudicatory process and the petitioners' right to be heard while declining pre-emptive judicial interference. [Paras 5, 6, 8, 10, 11]

The Single Judge's order refusing to quash the show cause notice and directing the appellants to file a reply and be heard is confirmed.

Issuance of show cause notice prior to completion of investigation - adjudication - Whether issuance of the show cause notice before completion of investigation invalidates the proceedings. - HELD THAT: - The court held that issuance of a show cause notice prior to completion of an investigation is not impermissible where sufficient material exists to justify issuance. It is for the revenue to decide whether adequate material is available to issue the notice; the assessee cannot contend that investigation must be complete before a notice is drawn. Accordingly, the contention that the notice is vitiated because it was issued while investigation was pending was rejected as devoid of substance. [Paras 9]

The contention that the show cause notice is invalid because it was issued before completion of investigation is rejected.

Final Conclusion: Writ appeal dismissed. The appellants are permitted to file a reply within 30 days of receipt of the order; on receipt, the adjudicating authority shall decide the matter on merits and in accordance with law within three months, after affording the appellants an opportunity of hearing either physically or via video conference.

Deletion of extraneous findings recorded by an appellate authority - remand for fresh verification of refund claims - verification of refund claims and satisfaction of the proper officer under Section 11B - requirement of debit entry in Cenvat register as condition for refund - application of Cenvat Credit Rules and Notification No.27/2012 for refund claims

Deletion of extraneous findings recorded by an appellate authority - Whether paras 8.3 and 9 of the Commissioner (Appeals) order, containing findings on matters not before the Commissioner (Appeals), should be expunged from the order. - HELD THAT: - The Tribunal found that paras 8.3 and 9 recorded findings in respect of issues that were not before the Commissioner (Appeals) and that the appellants sought deletion of those specific paragraphs while accepting the remand itself. In the interest of justice the Tribunal agreed that those paragraphs were extraneous to the scope of the appeal before the Commissioner (Appeals) and should be deleted, while upholding the remainder of the remand order. The Tribunal therefore ordered deletion of paras 8.3 and 9 and retained the balance of the Commissioner (Appeals) order which remanded the refund claims to the adjudicating authority for consideration in accordance with law and documents on record. [Paras 4]

Paras 8.3 and 9 of the Commissioner (Appeals) order are deleted; the remainder of the remand order is upheld.

Remand for fresh verification of refund claims - verification of refund claims and satisfaction of the proper officer under Section 11B - requirement of debit entry in Cenvat register as condition for refund - application of Cenvat Credit Rules and Notification No.27/2012 for refund claims - Whether the remand to the adjudicating authority for verification of the refund claims should be sustained and what the scope of that verification is. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) remand of the refund claims to the adjudicating authority for fresh consideration in accordance with law and the documents submitted. The Tribunal emphasised that the adjudicating authority must verify correctness and record satisfaction in accordance with the statutory scheme, having regard to the requirement that refund claims be examined under the statutory provisions governing refunds (including the need to satisfy requirements such as debit entries in the Cenvat register and fulfilment of conditions under the Cenvat Credit Rules and the impugned Notification). The Tribunal referred to the principle in Mafatlal Industries regarding the necessity for verification under Section 11B and held that the Assistant Commissioner must cause due verification and record satisfaction before allowing any refund. [Paras 4]

The remand to the adjudicating authority is upheld; the Assistant Commissioner must verify the refund claims, ensure statutory conditions (including debit entries in the Cenvat register and compliance with applicable rules and notification) are met, and record satisfaction before granting refund.

Final Conclusion: With deletion of paras 8.3 and 9, the Commissioner (Appeals) remand is upheld; the matters are remitted to the adjudicating authority for verification and decision in accordance with law, and the appeals are disposed of accordingly.

Confirmation of assessment on the basis of erroneous returns - self-assessment and its effect on liability - power to examine unpaid tax and to proceed under Section 22(6a) of the TNVAT Act, 2006 - revisional remedy under Section 84 of the TNVAT Act, 2006 - remand for fresh verification of inter state sales

Confirmation of assessment on the basis of erroneous returns - self-assessment and its effect on liability - Whether the assessment could be confirmed solely on the basis of the returns which incorrectly included VAT turnover in CST returns. - HELD THAT: - The Court examined the electronic returns filed under both the TNVAT Act, 2006 and the CST Act, 1956 and noted that the turnover declared in the TNVAT returns was reflected in the CST returns while no tax was assessed under CST as there were no inter state sales claimed. The petitioner had declared and undertaken to pay tax under the TNVAT self assessment regime. The Court held that a typographical or clerical mistake in the returns could not automatically sustain confirmation of demand without verification of whether inter state sales in fact occurred. The impugned assessment confirmed on the basis of the entries in the returns therefore could not stand without further inquiry into the factual position concerning inter state transactions. [Paras 12, 13]

Confirmation of assessment dated 22.09.2021 on the sole basis of the erroneous returns was quashed and cannot be sustained without further inquiry.

Power to examine unpaid tax and to proceed under Section 22(6a) of the TNVAT Act, 2006 - remand for fresh verification of inter state sales - revisional remedy under Section 84 of the TNVAT Act, 2006 - Whether the assessing officer may, notwithstanding the petitioner having sought revision, exercise jurisdiction under Section 22(6a) of the TNVAT Act, 2006 to verify if any tax remained unpaid and proceed accordingly, and what remedial course should follow. - HELD THAT: - The Court observed that because the petitioner had applied for revision under Section 84, nothing prevented the Officer from invoking the power under Section 22(6a) to verify whether any tax was due. There were no records to show that inter state sales had in fact been effected. In view of these circumstances, the Court found it appropriate to quash the impugned assessment and remit the matter to the respondent for examination of the factual question whether inter state sales occurred and whether revision or further action under Section 22(6a) is warranted. The Court directed that if no inter state sales are found, the respondent shall drop the proceedings notwithstanding any delay, and that the petitioner shall be heard before any order is passed. The exercise was to be completed within thirty days. [Paras 14, 15, 16]

Matter remitted to the respondent to examine under Section 22(6a) whether tax remained unpaid and to pass appropriate orders after hearing the petitioner; if no inter state sales are found, proceedings shall be dropped.

Final Conclusion: The impugned assessment order dated 22.09.2021 is quashed; the matter is remitted to the respondent to verify whether inter state sales occurred and, exercising jurisdiction under Section 22(6a) of the TNVAT Act, 2006, to pass appropriate orders after hearing the petitioner within thirty days, and to drop proceedings if no inter state sales are found.

Condonation of delay - revisional jurisdiction under Central Sales Tax and Value Added Tax enactments - adjournment and opportunity to be heard - remand for fresh consideration - decision on merits uninfluenced by earlier observations - avoidance of hyper-technical rejections

Condonation of delay - Application to condone delay in filing the appeal was allowed. - HELD THAT: - The Court considered the affidavit filed in support of the application for condonation and was satisfied with the reasons furnished. In consequence, the delay of 94 days in presenting the instant appeal was excused and the interlocutory application seeking condonation was permitted.

The application for condonation of delay is allowed.

Revisional jurisdiction under Central Sales Tax and Value Added Tax enactments - adjournment and opportunity to be heard - remand for fresh consideration - decision on merits uninfluenced by earlier observations - avoidance of hyper-technical rejections - Whether the revisional authority was justified in dismissing the revision for non-production of records and refusing adjournment, and whether the matter should be remanded for fresh consideration. - HELD THAT: - The revisional authority dismissed the revision on the ground that, after adjournment was sought on the second date of hearing, the appellants' partner could not produce books of account or relevant documents and the request for adjournment was refused. The Single Bench declined to interfere with that approach; however, this Division Bench emphasised that while authorities should ensure collection of legally leviable taxes, they should avoid rejecting claims on technical or hyper-technical grounds where a short accommodation might permit examination on merits. Noting that the partner may have been unable adequately to represent the matter and that most documents were said to be on record, the Court did not adjudicate the merits but held that a further opportunity should be afforded to enable production of materials and a decision on merits.

The appeal is allowed in part; the matter is remitted to the revisional authority for a fresh hearing and decision on merits within the procedural direction that the appellants appear (in person or by authorised representative) within 30 days, shall not seek adjournment, place all materials before the authority, and the revisional authority shall decide uninfluenced by earlier observations.

Final Conclusion: The order condoning the delay is allowed; the appeal against dismissal of the revision is allowed by way of remand for a fresh merit hearing before the revisional authority on the terms and directions stated by the Court.

Stay of recovery - interim relief pending constitution of tribunal - absence of forum due to non-appointment of presiding member - limited temporal stay without adjudication on merits - permission for alternative modes of service

Stay of recovery - interim relief pending constitution of tribunal - absence of forum due to non-appointment of presiding member - Grant of interim stay of the impugned recovery notice qua specified financial years until appointment of President or Member of the Tribunal, with an additional two weeks after such appointment to take up the matter. - HELD THAT: - The Court, noting that the Tribunal lacked a presiding member and that the petitioners had a pending second appeal with a stay application before the Tribunal, intervened in exceptional circumstances to protect the litigants from coercive recovery. Without adjudicating the merits of classification or prior orders of the Tribunal, and expressly without endorsing past orders waiving pre-deposit or remanding matters, the Court stayed the impugned recovery notice dated 29.05.2021 in respect of Financial Years 2011-2012 and 2013-14 until the Tribunal is reconstituted. The stay is temporal and limited to the absence of the forum; it does not bind or influence the Tribunal's eventual consideration on merits. An additional two weeks after appointment of the President or Member is allowed for the petitioners to seek listing or pursue their stay application before the Tribunal. [Paras 4]

Impugned recovery notice dated 29.05.2021 qua Financial Years 2011-2012 and 2013-14 stayed until appointment of President or Member of the Tribunal, with two additional weeks thereafter; stay is without prejudice to Tribunal's merit adjudication.

Permission for alternative modes of service - Permitting direct service by Speed Post and e-mode in addition to regular mode of service. - HELD THAT: - In the course of disposing the petition, the Court authorised over-and-above regular service, direct service through Speed Post as well as electronic mode to ensure effective communication of the order and proceedings in circumstances where the Tribunal's functioning is disrupted. This is an ancillary procedural direction to facilitate service. [Paras 6]

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

Final Conclusion: The petition is disposed of by granting a limited interim stay of the specified recovery notice for Financial Years 2011-2012 and 2013-14 until the Tribunal is reconstituted (with two weeks thereafter to seek listing), the stay being without prejudice to the Tribunal's consideration on merits; direct service by Speed Post and e-mode is permitted.

Power under Section 84 to rectify error apparent on the face of the record - mandatory mode of disposal of a Section 84 application - distinction between remedy by way of appeal and remedy by way of revision - prohibition on departing from statutory procedure

Power under Section 84 to rectify error apparent on the face of the record - mandatory mode of disposal of a Section 84 application - distinction between remedy by way of appeal and remedy by way of revision - Whether the assessing authority was obliged to dispose of the petitioner's representation filed under Section 84 on merits and in accordance with law, instead of issuing a notice advising the petitioner to file a regular appeal, and whether the revisional authority erred in rejecting the revision filed against that notice. - HELD THAT: - The Court examined Section 84 which vests power in the assessing, appellate and revising authorities to rectify any error apparent on the face of the record within five years and prescribes the consequences and procedural consequences of such rectification. Once a representation invoking Section 84 is filed, it must be disposed of in the manner provided by that section; the authority cannot decline to decide the representation on its merits by issuing a consolatory or advisory notice that the aggrieved party should instead file an appeal. In the present case the assessing authority, upon receipt of the Section 84 representation dated 07.12.2020, issued a notice dated 07.01.2021 which merely advised the petitioner to file a regular appeal under the appeal provisions; no adjudication on the Section 84 application was made. Because the Act does not contemplate an appeal against a mere notice issued in response to a Section 84 application, the petitioner was justified in approaching the revisional authority under Section 54. The revisional authority, however, rejected the revision on the ground that the remedy lay by way of appeal, thereby failing to appreciate that the impugned issuance by the assessing authority was a procedural refusal to entertain a statutory remedy and required disposal under Section 84. Accordingly the Court found both the notice issued by the assessing authority and the order rejecting the revision unsustainable and liable to be quashed, and directed remand to enable the assessing authority to consider and decide the Section 84 application on merits within a specified time. [Paras 14, 15, 16, 17, 18]

The notice dated 07.01.2021 issued by the assessing authority and the revisional order dated 15.03.2021 rejecting the revisions are quashed; the Section 84 applications dated 07.12.2020 are remitted to the assessing authority to be considered and decided on merits and in accordance with law within thirty days.

Final Conclusion: Impugned orders of the assessing and revising authorities are quashed; the matter is remitted to the assessing authority to decide the petitioner's Section 84 representations on merits within thirty days, with liberty to pursue statutory remedies thereafter.

Taxable turnover - total turnover - turnover - inclusion of CST turnover in VAT turnover - filing of returns under Rule 7 - deductions under Rule 8 - principles of natural justice

Inclusion of CST turnover in VAT turnover - taxable turnover - filing of returns under Rule 7 - Whether turnover arising from interstate sales under the CST Act must be included in the "taxable turnover" for determining the due date for filing returns under Section 21 of the TNVAT Act read with Rule 7 of the TNVAT Rules. - HELD THAT: - The Court held that the relevant expression for fixing the due date under Rule 7 is "taxable turnover", which means the turnover on which a dealer is liable to pay tax as determined after making permissible deductions from "total turnover". For the purpose of filing returns under the proviso to Rule 7(1) (and the amended Rule 8), the date of filing depends on the dealer's "taxable turnover" in the preceding year. The Court found that "taxable turnover" under Section 2(38) of the TNVAT Act can include only that turnover on which tax is leviable under the TNVAT Act as determined after permitted deductions; it does not permit inclusion of CST turnover merely because CST procedure may adopt TNVAT machinery. The overlap between the CST Act and the TNVAT Act is procedural only; there is no statutory basis to fold CST turnover into TNVAT "taxable turnover" for fixing the filing date under Rule 7. Consequently the Assessing Officer's conclusion that CST turnover must be included for determining the applicable earlier filing date was unsustainable. [Paras 42, 46, 47, 48]

CST turnover is not to be included for the purpose of determining "taxable turnover" under Section 21 of the TNVAT Act and for fixing the due date for filing returns under Rule 7; the impugned inclusion was quashed.

Deductions under Rule 8 - taxable turnover - turnover - Whether the deductions provided by Rule 8 of the TNVAT Rules are relevant for determining the due date for filing returns under the proviso to Rule 7(1) or Rule 7(9). - HELD THAT: - The Court observed that Rule 8 prescribes the procedure for assessment and specifies the manner in which permissible deductions are to be made from "total turnover" to arrive at "taxable turnover" for assessment purposes. However, Rule 8(1) and Rule 8(2) relate to computation of taxable turnover for payment of tax and post-assessment adjustments; they are not the operative basis for determining the statutory due date in the proviso to Rule 7(1) or the timelines under Rule 7(9). The Court therefore held that Rule 8 is not relevant to alter or determine the filing due date under Rule 7 in the manner adopted by the Assessing Officer. [Paras 43, 44, 45, 46]

Rule 8 deductions are part of the assessment procedure and do not operate to determine or alter the due date for filing returns under Rule 7; reliance on Rule 8 to justify inclusion or dating was misplaced.

Final Conclusion: The impugned assessment order was quashed; the writ petition is allowed on the ground that CST turnover cannot be included for determining taxable turnover or the due date for filing returns under Section 21 read with Rule 7 of the TNVAT Act/Rules, and Rule 8 deductions do not determine the filing date.

Entry tax - Refund of tax collected pursuant to invalid law - Article 301 - freedom of trade and commerce - Article 304(a) - prohibition on discriminatory taxation - Prematurity of writ for refund pending determination of discrimination or illegality - Effect of Constitutional Bench decision in Jindal Stainless on validity of State entry tax

Entry tax - Refund of tax collected pursuant to invalid law - Prematurity of writ for refund pending determination of discrimination or illegality - Effect of Constitutional Bench decision in Jindal Stainless on validity of State entry tax - Maintainability of writ seeking refund of entry tax paid for 2001-2002 when validity of levy and question of discriminatory classification of the goods remain to be determined - HELD THAT: - The Court held that following the Constitutional Bench judgment in Jindal Stainless and the subsequent order of the Supreme Court upholding the validity of the Tamil Nadu Entry Tax Act, a right to refund of entry tax paid will arise only after a determination that the goods in question (ingots) are not liable to the levy or that the levy is discriminatory in classification. In view of the pending batch of proceedings addressing whether specific categories of goods are liable or discriminated against, a writ petition for a mandamus to compel refund is premature. The Single Judge's direction that the appellant wait for the outcome of the higher proceedings was affirmed; liberty was reserved to pursue refund if a favourable decision is rendered in the pending matters. [Paras 8]

Writ appeal dismissed as premature; appellant granted liberty to seek refund if a favourable decision is rendered in the pending batch of writ petitions.

Final Conclusion: The appeal is dismissed on the ground of prematurity because the Supreme Court has upheld the validity of the Entry Tax Act and the appellant's right to refund can arise only after an authoritative determination that the particular goods were not lawfully taxable or were subject to discriminatory classification; liberty reserved to seek refund if and when such a determination is rendered.

Registration under Central Sales Tax Act - authority's power to amend or cancel registration - no power to keep an order in abeyance or review its own registration order - effect of Taxation Laws (Amendment) Act, 2017 on CST registrations - automatic deregistration under a taxation enactment - permissibility of concurrent registration under GST and CST - writ of mandamus for activation of registration certificate

No power to keep an order in abeyance or review its own registration order - authority's power to amend or cancel registration - Whether the authority under section 7 of the CST Act can keep an earlier grant or amendment of registration in abeyance or review its own order by seeking guidance from a higher authority. - HELD THAT: - The Court followed the reasoning in Gaurav Contracts Company v. State of Gujarat and held that the notified authority empowered under section 7 must exercise the powers vested in it independently and cannot refuse to act on the ground of seeking guidance from a superior officer. Sub section (4)(a) permits amendment by the authority which granted the certificate, but there is no provision empowering that authority to review or keep in abeyance its own order. An officer notified to decide applications under section 7 must be competent to discharge those duties without referral; keeping approvals in abeyance on the pretext of obtaining guidance reflects lack of competence and cannot be countenanced. [Paras 10]

The practice of keeping a granted amendment in abeyance or purportedly reviewing it by seeking higher guidance is impermissible; the impugned letters taking that stance cannot be sustained.

Effect of Taxation Laws (Amendment) Act, 2017 on CST registrations - automatic deregistration under a taxation enactment - Whether amendment of the definition of 'goods' by the Taxation Laws (Amendment) Act, 2017 operates to render CST registrations of dealers not dealing in the specified goods automatically inactive or cancelled. - HELD THAT: - The Court observed that cancellation or deregistration under the CST Act is governed by express provisions (sub section (4)(b) and sub section (5) of section 7) and that there is no concept of an 'inactive' registration under the CST Act. Unlike the GVAT Act, where section 27A expressly provided for automatic deregistration of certain dealers, the amendments made to the CST Act by the Taxation Laws (Amendment) Act, 2017 do not provide for automatic cancellation or deactivation of registration certificates. Where the legislature intends automatic deregistration it does so expressly; absence of such a provision in the CST Act means registrations do not become inactive by operation of that amendment. [Paras 11]

Amendment of the definition of 'goods' by the 2017 amendment does not automatically render CST registrations of dealers not dealing in the specified commodities inactive or cancelled.

Permissibility of concurrent registration under GST and CST - registration under Central Sales Tax Act - Whether a dealer registered under the Goods and Services Tax enactments can also be registered under the CST Act for commodities falling within the amended definition of 'goods' to claim benefits under section 8 of the CST Act. - HELD THAT: - The Court held that the amendment to section 2(d) of the CST Act restricted 'goods' to commodities not covered by GST for the present, and dealers dealing in such commodities are required to be registered under the CST Act to avail reduced rates under section 8. A dealer may concurrently deal in commodities covered by both regimes and it is permissible to hold separate registrations under the GST Act and the CST Act for respective goods. Therefore, registration under the GST Act does not preclude registration under the CST Act for commodities falling within the CST definition. [Paras 12]

A dealer registered under the GST enactments can also be registered under the CST Act in respect of commodities within the amended definition of 'goods' and may hold concurrent registrations where appropriate.

Final Conclusion: The petitions were disposed of in view of the binding decisions of the Apex Court and this Court's earlier conclusions; the impugned letters quashing approved online amendments (as in Gaurav Contracts) cannot be sustained, and petitioners were at liberty to withdraw their petitions or approach the Court in case of difficulties.

Set-off of entry tax against sales tax - refund of excess entry tax under Section 11 of the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 - applicability of Section 4 for proportionate reduction in liability - burden of proof on the assessee to establish excess entry tax by production of books of account

Refund of excess entry tax under Section 11 of the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 - applicability of Section 4 for proportionate reduction in liability - set-off of entry tax against sales tax - Whether excess entry tax paid by the dealer, after allowing set-off against sales tax, is refundable under the Entry Tax Act - HELD THAT: - The Court held that the Division Bench decision in the Kivraj Motors appeal established that, where Section 4 is applicable to give proportionate reduction in liability, any excess entry tax paid is refundable under Section 11. Applying that legal position to the present facts, the impugned order rejecting the petitioner's claim could not be sustained as a matter of law. The Court quashed the respondent's rejection and directed that the assessing officer, with the aid of the petitioner, verify the entries and calculate any excess entry tax available with the Government and refund the same within three months. The determinative reasoning is that entry tax and sales tax interact through the set-off mechanism in Section 4, and where entry tax paid exceeds the sales tax liability, Section 11 entitles the dealer to a refund subject to verification. [Paras 23, 24, 25]

Impugned order rejecting refund quashed; assessing officer directed to verify and refund any excess entry tax in accordance with Sections 4 and 11

Burden of proof on the assessee to establish excess entry tax by production of books of account - procedure for verification and computation of excess entry tax - Whether the petitioner must prove payment of excess entry tax and the manner in which excess is to be ascertained - HELD THAT: - The Court recorded that the burden to establish that excess entry tax was in fact paid rests on the petitioner. The assessing officer may ascertain the excess only after the petitioner produces relevant books of account and other records showing entry tax paid and corresponding sales tax set off for the relevant periods. The Court directed that the assessing officer, aided by the petitioner's records, compute the excess entry tax for each assessment year and refund any amount found due. Thus, entitlement to refund is conditional upon factual proof and verification. [Paras 24, 25]

Petitioner must produce books of account to establish excess entry tax; assessing officer to compute and refund any verified excess

Final Conclusion: Writ petition allowed in part: the order rejecting the claim for refund of excess entry tax is quashed; petitioner may produce accounts and, upon verification by the assessing officer, any excess entry tax (after set-off under Section 4) shall be computed and refunded under Section 11 within three months.

Sale for consideration - void sale - payment of price as essential to a sale - proof of consideration - collateral challenge to void document - limitation for declaration - benami

Sale for consideration - payment of price as essential to a sale - proof of consideration - void sale - Whether the sale deeds dated 10th April 1981 effected any transfer of the appellant's undivided half share in the suit properties. - HELD THAT: - The Court applied the principle in Section 54 Transfer of Property Act that a sale of immovable property must be for a price and that payment (or a promise to pay) is an essential element of a valid sale. The material on record showed that the respondents failed to adduce any evidence that the purchasers (the minor sons and the wife of Sudarshan Kumar) had paid or had the means to pay the consideration recorded in the sale deeds. The Trial Court and the District Court specifically found absence of evidence about payment and earning capacity of the purchasers; the High Court did not disturb that factual finding but only observed that the consideration amounts were not exorbitant. The Supreme Court held that, in the absence of proof of payment or a contractual promise to pay, the instruments of 10th April 1981 are void and do not effect any transfer of the appellant's one half share. A document void for want of consideration may be ignored in collateral proceedings and need not be separately challenged by a declaratory prayer through amendment. [Paras 14, 15, 16]

The sale deeds dated 10th April 1981 are void for want of consideration and do not divest the appellant of his undivided half share.

Collateral challenge to void document - limitation for declaration - Whether the plaints required an amendment and a specific declaratory prayer to challenge the validity of the sale deeds, and whether such declaratory relief was barred by limitation. - HELD THAT: - The unamended plaints contained specific pleadings that the sale deeds of 10th April 1981 were sham and without consideration, and the claim for injunction was founded on title asserted by the appellant. The Court held that a document which is void need not be specially challenged by a declaration in amendment because the plea of invalidity can be set up and proved in collateral proceedings. Consequently, the fact that a declaration was formally added later does not attract the bar of limitation when the original plaint already pleaded the voidness of the instruments. [Paras 13, 16]

Amendment to seek a declaration was unnecessary for adjudicating the pleaded contention that the sale deeds were void; the bar of limitation to the declaratory relief did not arise.

Proof of consideration - benami - Whether the earlier findings that the appellant and Sudarshan Kumar were joint owners had become final and the consequence of that finding for title. - HELD THAT: - The District Court had found that Sudarshan Kumar failed to prove remittances or that he alone paid the purchase price of the original 1976 transactions, and the High Court did not disturb the finding that the appellant and Sudarshan Kumar were joint owners. That conclusion stands as final insofar as it was not challenged by the respondents in these appeals. Given that the subsequent sale deeds of 1981 are void for want of consideration, the appellant's undivided half share remains subsisting and the decree of the District Court granting joint possession is sustainable. [Paras 12, 17]

The finding of joint ownership stands final; since the 1981 sale deeds are void, the appellant retains his undivided half share and the District Court's decree restoring joint possession is restored.

Final Conclusion: The appeals are allowed; the High Court's judgment is set aside, the decree of the District Court restoring joint possession and holding the 10th April 1981 sale deeds void for want of consideration is restored, and there will be no order as to costs.

Quashing of criminal proceedings - Section 138 Negotiable Instruments Act - inherent powers under Section 482 Cr.P.C. - presumption that a cheque is in discharge of a legal liability - factual disputes requiring trial - trial court's cognizance and issuance of process

Quashing of criminal proceedings - Section 138 Negotiable Instruments Act - factual disputes requiring trial - Whether the complaint under Section 138 of the Negotiable Instruments Act ought to be quashed at the threshold. - HELD THAT: - The High Court declined to quash the complaint under Section 138 of the Negotiable Instruments Act because the controversy principally raised contested questions of fact which require adjudication after evidence is led. The court emphasised that exercise of inherent powers to quash is inappropriate where disputes as to material facts exist and trial is the proper forum to test the allegations and defences. The court noted that even where defenses or documents raise suspicion or doubt, those matters do not justify summary termination of proceedings, since the complainant must be permitted to adduce evidence and the accused can rebut the presumption during trial. The determinative reasoning is that factual controversies cannot be resolved on a petition under Section 561-A Cr.P.C. and the learned Magistrate's order issuing process should not be set aside on the present record. [Paras 10, 11, 14, 16]

The petition to quash the complaint under Section 138 N.I. Act was dismissed and the complaint was not quashed at the threshold.

Presumption that a cheque is in discharge of a legal liability - factual disputes requiring trial - Whether reliance on documentary materials annexed to the petition (letters and receipts) justified quashing the complaint without trial. - HELD THAT: - The court examined the documents relied upon by the petitioners, including a letter dated 27.11.2000 and a money receipt dated 30.11.2000, and found that those documents did not compel a conclusion that there was no liability or that the cheque was obtained by coercion. The court observed that the receipt post-dated the cheque and the letter referred to additional claims, so their true import and context must be tested at trial. Accordingly, the High Court refused to undertake a fact-sensitive appraisal of those documents in exercise of inherent jurisdiction, leaving their probative value to the trial court. [Paras 8, 9, 10]

Documents annexed to the petition did not warrant quashing the complaint; their significance must be determined at trial.

Trial court's cognizance and issuance of process - inherent powers under Section 482 Cr.P.C. - Whether the order dated 12.03.2001 taking cognizance and issuing process was without application of mind and liable to be set aside. - HELD THAT: - The High Court found no illegality in the magistrate's order taking cognizance after perusal of the complaint and accompanying statements. The court held that the petitioners' contention that the magistrate's order lacked application of mind was without substance. Given that the magistrate performed the requisite preliminary scrutiny, there was no basis in the present petition to interfere with the cognizance or issuance of process. [Paras 13, 15]

The challenge to the cognizance and issuance of process was rejected; no interference with the impugned order.

Final Conclusion: The petition under Section 561-A Cr.P.C. challenging the complaint under Section 138 N.I. Act and the magistrate's order was dismissed; the court declined to quash the proceedings and directed that contested factual matters and the significance of documents be determined by the trial court.

Jurisdiction of disciplinary committee where report is part of judicial record - professional misconduct of a chartered accountant - locus standi to file a complaint under the professional regulatory framework - maintainability of parallel proceedings and abuse of process of court - judicial scrutiny and finality of a court-accepted expert report

Jurisdiction of disciplinary committee where report is part of judicial record - judicial scrutiny and finality of a court-accepted expert report - Whether the Disciplinary Committee of the Institute of Chartered Accountants of India could take cognizance of a complaint disputing a report that had been appointed by and placed before the Karnataka High Court and accepted as part of its judicial proceedings. - HELD THAT: - The Court held that Respondent No.3 was appointed by the Karnataka High Court and his report of 25.11.2014 formed part of the judicial record and was considered by that Court when sanctioning the scheme of amalgamation. Once the report passed judicial scrutiny and was accepted by the Karnataka High Court, the Disciplinary Committee rightly refrained from reopening or adjudicating the correctness of that report. The Committee concluded it had no jurisdiction to take cognizance of matters that were part of sub judice judicial proceedings and could act only if directed by the High Court. The appellate court agreed with this analysis and found no error in the ICAI's dismissal of the complaint on jurisdictional grounds. [Paras 3, 4, 5, 6, 8]

Complaint dismissed by ICAI for want of jurisdiction to adjudicate a report that had been considered and accepted by the Karnataka High Court; the High Court's sanction precluded the Disciplinary Committee from re-adjudicating the report.

Locus standi to file a complaint under the professional regulatory framework - maintainability of parallel proceedings and abuse of process of court - Whether the Appellant had locus to file the complaint and whether instituting the ICAI complaint amounted to an impermissible attempt to relitigate matters already adjudicated by the Karnataka High Court. - HELD THAT: - The Court examined the factual matrix and prior orders of the Karnataka High Court and Division Bench which had dismissed recall/review attempts and recorded that the entities challenging the merger lacked locus. The Division Bench had expressly found that the recurrent litigation was speculative and an abuse of process. The appellate court found that the grounds in the ICAI complaint substantially overlapped with those already rejected by the Karnataka High Court, and that the Appellant (and its counsel) had no nexus with the companies concerned. The Court concluded that the complaint amounted to an attempt to re-agitate issues already adjudicated and was part of a pattern of vexatious litigation; accordingly the Appellant lacked requisite connection and locus to maintain the complaint. [Paras 5]

Appellant lacked locus to file the complaint and pursuing the complaint before ICAI was an improper attempt to relitigate matters already decided by the Karnataka High Court; the conduct amounted to abuse of process.

Maintainability of proceedings where complainant has record of repetitive speculative litigation - judicial discretion to impose costs for abuse of process - Whether the appeal against dismissal of the writ petition challenging ICAI's order should be dismissed and whether costs should be imposed. - HELD THAT: - Having upheld that the Disciplinary Committee properly dismissed the complaint and that the Appellant lacked locus and had engaged in repetitive speculative litigation, the Court concluded the Single Judge's dismissal of the writ petition bore no infirmity. The appellate court noted the Appellant's repeated defaults in depositing costs imposed in earlier matters and found it appropriate to dismiss the appeal and impose costs. The Court ordered deposit of costs to be paid to the Delhi State Legal Services Authority and required reporting compliance. [Paras 6, 7, 11]

Appeal dismissed for lack of merit and costs of Rs. 50,000 ordered to be deposited by the Appellant with the Delhi State Legal Services Authority within eight weeks.

Final Conclusion: The appeal is dismissed. The Disciplinary Committee correctly declined jurisdiction to reopen a report that had been appointed by and accepted on judicial scrutiny by the Karnataka High Court; the Appellant lacked locus and its complaint was an improper re-litigation of matters already adjudicated. Costs of Rs. 50,000 were imposed to be deposited with the Delhi State Legal Services Authority.