TaxTMI Updates e-Newsletter
Dec 08,2020

Availability of statutory appellate remedy - Pre-deposit requirement for filing appeal under Section 107(6) of the Central Goods and Services Tax Act - Maintainability of writ petition when alternative remedy exists

Availability of statutory appellate remedy - Pre-deposit requirement for filing appeal under Section 107(6) of the Central Goods and Services Tax Act - Maintainability of writ petition when alternative remedy exists - Whether the writ petition challenging intimation and consequential demand could be entertained when an appeal under Section 107 of the Central Goods and Services Tax Act, 2017 is available but subject to the pre-deposit requirement. - HELD THAT: - The Court observed that the petitioner had been subjected to a show cause notice under Section 74 of the Madhya Pradesh GST Act which resulted in a final order dated 30.09.2020. It was not disputed that the final order is appealable under Section 107 of the Central Goods and Services Tax Act, 2017. Sub-sections (5) and (6) of Section 107 prescribe the form and verification of the appeal and mandate payment of the amount admitted and ten percent of the remaining tax in dispute as a pre-condition to filing the appeal. The Court treated this pre-deposit obligation as a legislative command and declined to circumvent it by converting or entertaining the matter as a writ petition. Consequently, the existence of the alternative statutory appellate remedy, coupled with the specific pre-deposit requirement, rendered the writ petition inappropriate for interference in the exercise of discretion by the High Court. [Paras 3, 4, 5]

Writ petition dismissed for want of maintainability as the statutory appellate remedy under Section 107(5)-(6) with its pre-deposit condition is available and must be availed.

Final Conclusion: The petition was dismissed in limine for non-entertainment; the petitioner may avail the appeal remedy under Section 107 of the Central Goods and Services Tax Act, 2017 after complying with the prescribed pre-deposit requirements.

Taxability of sum received under a Keyman insurance policy as perquisite - character of an insurance policy on assignment - retrospective effect of an explanatory amendment - clarificatory nature of statutory explanations

Taxability of sum received under a Keyman insurance policy as perquisite - character of an insurance policy on assignment - The surrender/encashment proceeds of the assigned Keyman insurance policy are taxable in the hands of the assesseee as a perquisite and the assignment does not convert the policy into an ordinary life insurance policy exempt under Section 10(10D). - HELD THAT: - The Court held that a Keyman insurance policy taken by an employer in favour of an employee remains a Keyman insurance policy notwithstanding endorsement of assignment, and amounts received under such policy are excluded from the exemption under Section 10(10D) by virtue of clause (b). The assesseee did not pay subsequent premiums and the surrender/encashment shortly after assignment was characterised as a colourable device to obtain tax advantage; the Tribunal and CIT(A) were held to have rightly treated the receipt as taxable perquisite. The court rejected the submission that assignment converts the contract into one solely between insurer and assesseee such that Section 10(10D) exemption would apply. [Paras 14, 15, 16, 21]

The addition made by the Revenue treating the difference arising on encashment as taxable perquisite is sustained; the appeal on this issue is dismissed.

Retrospective effect of an explanatory amendment - clarificatory nature of statutory explanations - Explanation 1 to Section 10(10D), as inserted and subsequently amended, is clarificatory in nature and must be read with the parent provision to give effect to the legislative intent, operating retrospectively to clarify that assigned policies remain Keyman policies. - HELD THAT: - The Court found that Parliament's insertion of Explanation 1 to Section 10(10D) was intended to clarify that a Keyman policy includes policies assigned during the term, and such explanatory provisions explain the meaning of the parent provision rather than create a new substantive tax liability. Consequently, the effect of the Explanation is not confined to years after its insertion and operates to cure the consequence of the earlier judicial view that assignment converts the policy into an ordinary policy. The Court therefore considered the decisions relying on a prospective-only application (including a concession before the Bombay High Court) to be misplaced and not applicable to the facts of this case. [Paras 16, 18, 20]

Explanation 1 is to be read as clarificatory and retrospective, and it supports the conclusion that amounts received under the assigned Keyman policy are taxable.

Final Conclusion: The appeal is dismissed; the questions are answered in favour of the Revenue and against the Assessee, confirming the taxability of the surrender/encashment proceeds of the assigned Keyman insurance policy for Assessment Year 2007-08.

Bad debt deduction under Section 36(1)(vii) - Business expenditure deduction under Section 37 - Writing off in accounts as condition for tax deduction - Provision for contingent or future liability

Bad debt deduction under Section 36(1)(vii) - Writing off in accounts as condition for tax deduction - Whether the amount shown as a provision in the books could be allowed as a bad debt deduction where the advance was not written off and continued to appear as receivable in the balance sheet. - HELD THAT: - The Court accepted the factual finding that the sum of Rs. 30 lakhs continued to appear in the assessee's balance sheet as a receivable and was shown as a 'provision for claims and compensation' rather than having been written off in the books. Relying on the Tribunal's conclusion and the accounting treatment adopted by the assessee, the Court held that mere creation of a provision for a contemplated future liability does not satisfy the requirement that the debt be written off in the accounts for claiming deduction as a bad debt. The Court observed that the correct approach is that the debt must be written off in the assessee's accounts to claim a deduction; in the absence of writing off and in the face of contradictory accounting entries, the deduction under Section 36(1)(vii) cannot be allowed. [Paras 9, 10]

Deduction as a bad debt under Section 36(1)(vii) denied because the advance was not written off and was still shown as receivable; mere provision does not qualify.

Business expenditure deduction under Section 37 - Provision for contingent or future liability - Whether the provision created for the advance could be allowed as a business expenditure under Section 37 where the liability was only intended and not actually incurred or written off in the accounts. - HELD THAT: - The Court held that the claim could not be allowed as a business expenditure under Section 37. It reasoned that a developer may claim such an expenditure in the year it is actually incurred or when the advance is written off and the right to refund is clearly waived. Here, the assessee neither paid the amount as compensation nor wrote off the advance; instead the balance-sheet treatment showed the amount as a receivable. Therefore, creating a book provision for a future, contingent liability, without reversal of the receivable or actual settlement, cannot be treated as an allowable business expenditure under Section 37. [Paras 8, 9]

Deduction under Section 37 refused because the expenditure was not actually incurred nor was the advance written off; mere provision for a contemplated liability is not allowable.

Final Conclusion: The writ appeal is dismissed; the claims for deduction-both as a bad debt under Section 36(1)(vii) and as business expenditure under Section 37-are rejected because the advance remained shown as receivable and was not written off or actually incurred, and the questions are answered against the assessee and in favour of the Revenue.

Rate of depreciation - classification of dumpers for depreciation - substantial question of law - precedential effect of a coordinate Bench decision

Rate of depreciation - classification of dumpers for depreciation - precedential effect of a coordinate Bench decision - substantial question of law - Whether the Appellate Tribunal erred in confirming the grant of depreciation at 30% on dumpers as against 15% allowed by the Assessing Officer, and whether that question constituted a substantial question of law warranting interference. - HELD THAT: - The Assessing Officer allowed depreciation on dumpers at 15%; the assessee obtained a higher rate of 30% from the Commissioner of Income Tax (Appeals), and the Income Tax Appellate Tribunal affirmed the CIT(A)'s decision. This Court noted that an identical question had been considered and decided against the Revenue by a coordinate Bench in Tax Appeal No. 414 of 2018 (Pr. Commissioner of Income Tax, Rajkot-1 v. Durga Construction Company) dated 1 May 2018. Applying that precedent and having regard to the sameness of the question, the Court held that the matter did not raise a substantial question of law justifying interference with the Tribunal's order. No separate re examination of the classification or applicable depreciation rate was undertaken by this Court in view of the coordinate Bench's decision; the appeal was therefore dismissed.

Appeal dismissed; the question was not a substantial question of law and the Tribunal's affirmation of 30% depreciation on dumpers was upheld in view of the coordinate Bench decision.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's confirmation of the CIT(A)'s grant of 30% depreciation on dumpers for A.Y. 2012-13 is upheld, the Court treating the question as resolved by a coordinate Bench and not constituting a substantial question of law.

Penalty under Section 271(1)(c) - concealment of income - furnishing inaccurate particulars - Explanation 1 to Section 271(1)(c) - bona fide claim/explanation - revised return and disclosure of income - penalty requires mens rea - Section 154 rectification

Penalty under Section 271(1)(c) - concealment of income - furnishing inaccurate particulars - bona fide claim/explanation - revised return and disclosure of income - penalty requires mens rea - Explanation 1 to Section 271(1)(c) - Section 154 rectification - Levy of penalty under Section 271(1)(c) restored by the Tribunal was not justified and the appeal of the assessee is to be allowed. - HELD THAT: - The Court held that imposition of penalty under Section 271(1)(c) requires either concealment of particulars of income or furnishing of inaccurate particulars and ordinarily also involves mens rea; the burden of proof lies on the Revenue. The assessee had filed audited financial statements and a revised return disclosing the foreign exchange gain and had claimed administrative and finance expenses as revenue expenditure; those particulars were on record and were not shown to be false. A mere claim which may be unsustainable in law or a difference of opinion between the Assessing Officer and the assessee as to allowability of an expenditure does not, by itself, constitute furnishing of inaccurate particulars. The Assessing Officer's approach in treating a "reduction of loss" (by disallowance) as hypothetical positive income on which tax was allegedly evaded was legally unsound; tax on the actual disclosed income had already been assessed and paid, and the method of computing an "assumed evaded tax" on the disallowed loss was inappropriate as a basis for penalty. The Tribunal erred in reversing the well-reasoned order of the first appellate authority and restoring the penalty; the subsequent enhancement by invoking Section 154 (rectification) to increase the penalty was also improper given the foundational error in treating disallowance as concealed income. Applying Explanation 1 did not arise because the authorities failed to establish that the assessee's explanation was false or that the assessee had not disclosed material facts and bona fides. [Paras 13, 14, 15, 16, 18]

The Tribunal's restoration of the penalty under Section 271(1)(c) is set aside; the penalty is deleted and the assessee's appeal is allowed.

Final Conclusion: The appeal is allowed. The order of the Income Tax Appellate Tribunal restoring penalty under Section 271(1)(c) is reversed and the deletion of the penalty by the Commissioner of Income Tax (Appeals) is upheld; no costs.

Jurisdiction to examine genuineness of receipts of a trust notwithstanding vesting of powers with the Commissioner under registration/approval provisions - Treatment of voluntary contributions as capitation fees - Deeming of trust receipts to the rigour of provisions governing charitable trusts and application of income application tests

Jurisdiction to examine genuineness of receipts of a trust notwithstanding vesting of powers with the Commissioner under registration/approval provisions - Deeming of trust receipts to the rigour of provisions governing charitable trusts and application of income application tests - Whether adjudicatory authorities other than the Commissioner can examine the genuineness of receipts of a trust despite statutory vesting of certain powers in the Commissioner. - HELD THAT: - The Court answered this question in favour of the assessee by following earlier Division Bench authority rendered in COMMISSIONER OF INCOME-TAX Vs. ADICHUNCHANGIRI MASAMSTANA MUTT and a subsequent Division Bench decision. Having regard to those precedents, the Court held that the Assessing Officer and appellate fora are not precluded from adjudicating the genuineness of receipts of the trust for the Assessment Year 2010-11 and that the claims must be considered under the legal framework applicable to charitable trusts. The Court applied the reasoning of the cited authorities and concluded that the substantial question framed on jurisdiction must be answered for the assessee.

Substantial question on jurisdiction decided in favour of the assessee; adjudicatory authorities may not be precluded from examining genuineness of receipts.

Treatment of voluntary contributions as capitation fees - Application of precedential rulings reversing appellate findings sustaining taxation of trust receipts - Whether the Tribunal was correct in reversing the order of the Commissioner (Appeals) and holding that the voluntary contributions received by the trust amounted to capitation fees and were taxable. - HELD THAT: - Applying and following the Division Bench decisions relied upon by the assessee, the Court found that the substantial question of law framed on this point is answered in favour of the assessee. The High Court agreed with the reasoning of the earlier Division Bench authorities which led to the conclusion that the voluntary contributions, on the facts and circumstances of the case for Assessment Year 2010-11, could not be treated as capitation fees for taxing the trust. Consequently, the impugned Tribunal order was quashed insofar as it sustained taxation on that basis.

Tribunal's reversal holding voluntary contributions to be capitation fees set aside; order quashed in favour of the assessee.

Final Conclusion: Following earlier Division Bench precedents, the High Court answered the substantial questions of law in favour of the assessee for Assessment Year 2010-11 and quashed the Tribunal's order insofar as it upheld taxation of the voluntary contributions as capitation fees; the appeal is allowed.

Dispute Resolution Scheme under the Direct Tax Vivad Se Vishwas Act, 2020 - Filing of declaration in Form 1 and Form 2 and issuance of certificate in Form 3 - Requirement to withdraw appeal after receipt of Form 3 - Withdrawal of appeal on compliance with Scheme

Filing of declaration in Form 1 and Form 2 and issuance of certificate in Form 3 - Requirement to withdraw appeal after receipt of Form 3 - Withdrawal of appeal on compliance with Scheme - Whether the assessee's appeal before the Tribunal could be permitted to be withdrawn upon compliance with the Vivad Se Vishwas Scheme formalities. - HELD THAT: - The Tribunal recorded that the Scheme requires a declarant to file Form 1 and Form 2, for the Designated Authority to issue a certificate in Form 3 determining the amount payable, and thereafter to withdraw the appeal. The assessee filed the prescribed declarations in Form 1 and Form 2, obtained the certificate in Form 3 from the Designated Authority and placed copies on record. Having complied with the procedural requirements of the Scheme, the assessee was entitled to withdraw the appeal. The Tribunal therefore permitted withdrawal of the appeal and dismissed it as withdrawn. [Paras 4, 5]

Permission granted to withdraw the appeal and the appeal dismissed as withdrawn upon compliance with the Scheme.

Final Conclusion: The Tribunal allowed the assessee to withdraw the appeal because the assessee had complied with the Vivad Se Vishwas Scheme by filing Forms 1 and 2 and securing the certificate in Form 3; the appeal is dismissed as withdrawn.

Deductibility of interest on partners' capital - chargeability of interest on partners' capital under clause (v) of section 28 - disallowance of expenditure on diversion of funds for non-business purpose - notional addition versus disallowance of deduction - authenticity and evidentiary value of a partnership addendum

Deductibility of interest on partners' capital - disallowance of expenditure on diversion of funds for non-business purpose - notional addition versus disallowance of deduction - Whether the disallowance of interest claimed by the assessee on debit balances of capital accounts, on account of alleged diversion of interest bearing capital to another partnership firm and computed notionally, was sustainable. - HELD THAT: - The Tribunal held that the Revenue did not seek to bring any interest to tax in the hands of the assessee under clause (v) of section 28 as being due or received; instead the Assessing Officer disallowed the deduction claimed by the assessee on the theory that capital withdrawn from other firms and bearing interest had been diverted interest free to M/s Sai Prestige Development. The Tribunal rejected that basis. It observed that even if the assessee's capital in Sai Prestige Development originated from withdrawals from other firms, the investment in Sai Prestige Development was made for business purposes because any return from that firm (profits, remuneration or interest) would be chargeable to the assessee under the head "Profits and gains of business or profession." Consequently, the withdrawals were not shown to have been utilised for a non business purpose and the corresponding interest paid by the assessee on debit balances could not be disallowed on the ground of diversion to a non business purpose. The Tribunal further noted the correct legal position that interest on partners' capital is chargeable in the hands of a partner only when it is due or received, but emphasised that the impugned action was a disallowance of deduction, not a taxable notional addition, and found the Assessing Officer's approach untenable. Applying these principles to the facts, the Tribunal found no merit in the additions confirmed by the Commissioner (Appeals) and allowed the appeal. [Paras 7, 8]

The disallowance of interest was unsustainable and is deleted; the appeal is allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal and deleted the disallowance of interest made by the Assessing Officer and confirmed by the Commissioner (Appeals) for A.Y. 2016-17.

Section 154 rectification - mistake apparent on record - Section 40(a)(ia) disallowance - tax deduction at source - debatable question of law - verification of payees' returns

Section 154 rectification - mistake apparent on record - Section 40(a)(ia) disallowance - tax deduction at source - verification of payees' returns - Whether the Assessing Officer could invoke powers under Section 154 to disallow interest payments under Section 40(a)(ia) on the ground of a 'mistake apparent on record', without fresh verification of facts. - HELD THAT: - The Tribunal held that the question whether disallowance under Section 40(a)(ia) was leviable required consideration of debatable facts and legal contentions (including reliance on declarations such as Form 15G and whether recipients had declared the interest in their returns). Such matters cannot be resolved as a 'mistake apparent on record' in a Section 154 proceeding, because rectification under Section 154 is confined to errors visible on the face of the record that do not call for fresh factual or legal examination. The CIT(A)'s direction to verify recipients' returns and related declarations demonstrates that the issue was highly debatable and required enquiry, not summary rectification. Accordingly the AO's exercise of Section 154 to introduce the disallowance was improper. [Paras 8, 9]

Order passed under Section 154 to disallow interest under Section 40(a)(ia) was set aside; the matter could not be resolved as a mistake apparent on record and required verification.

Final Conclusion: The appeal is allowed; the order passed under Section 154 imposing disallowance under Section 40(a)(ia) is cancelled because the issue was highly debatable and not a mistake apparent on the record.

Taxable unit (foreign enterprise versus permanent establishment) - business profits - Article 7 of the Indo German DTAA - interest - Article 11 of the Indo German DTAA - effective connection of a debt claim with a permanent establishment - beneficial owner and treaty withholding cap - generalia specialibus non derogant (specific treaty articles prevail over general Article 7) - arm's length price adjustment for free services

Interest - Article 11 of the Indo German DTAA - business profits - Article 7 of the Indo German DTAA - generalia specialibus non derogant (specific treaty articles prevail over general Article 7) - Whether the interest income and related receipts could be taxed in India under Article 7 when they had already been taxed under Article 11. - HELD THAT: - Article 11 specifically governs interest and permits source taxation with a prescribed cap where the recipient is the beneficial owner. Article 7(7) provides that items dealt with separately in other Articles are not affected by Article 7. The exclusion in Article 11(5) applies only where the beneficial owner carries on business in the source state through a PE and the debt claim is effectively connected with that PE. On the facts there is no material establishing that the debt claim is effectively connected with any PE; the representative office's supporting role does not satisfy the threshold in Article 11(5). Because the entire related interest income has already been subjected to tax under Article 11, nothing additional survives to be taxed under Article 7; the treaty scheme does not permit double taxation of the same receipts under different Articles. Consequently the Assessing Officer's attempt to tax the same receipts under Article 7 is unsustainable, subject nonetheless to the taxability of the interest under Article 11 and any exemptions therein. [Paras 22, 23, 27, 30]

Interest income and related receipts already taxed under Article 11 cannot be additionally taxed under Article 7; the demands under Article 7 are unsustainable.

Effective connection of a debt claim with a permanent establishment - permanent establishment - Whether the debt claims were effectively connected with the alleged permanent establishment so as to invoke Article 11(5) and permit taxation under Article 7. - HELD THAT: - Article 11(5) requires both that the beneficial owner carries on business in the source state through a PE and that the debt claim be effectively connected with that PE. Merely rendering supporting or preparatory services by a representative office - such as information collection, facilitating due diligence, or follow up on repayments - does not demonstrate that the debt claim forms part of the assets of the PE or is effectively connected to it. The Assessing Officer produced no material to show such effective connection; at best there was a 'real relation' or contribution which is insufficient to trigger Article 11(5). Therefore the exclusion to Article 11 is not attracted on the facts of this case. [Paras 20, 21, 22, 31]

The debt claims are not effectively connected with the alleged PE; Article 11(5) is not attracted.

Taxable unit (foreign enterprise versus permanent establishment) - Whether the India representative office and the foreign head office constitute separate taxable units for the purpose of taxing the impugned receipts. - HELD THAT: - The legal position under the Act is that the taxable unit is the foreign enterprise (DZ Bank AG) and not its branch or PE in India. Although the Tribunal raised the question suo motu because the return was filed in the name of the representative office, the court proceeded on the substance that DZ Bank AG and its India representative office are one taxable unit for taxability in India. Given that conclusion, the same income could not lawfully be taxed twice in the hands of the same taxable subject under different treaty provisions. The point about filing and procedural consequences was considered academic in view of the Tribunal's substantive finding on treaty taxability. [Paras 8, 10, 28, 32]

The taxable unit is the foreign enterprise (DZ Bank AG); the artificial demarcation between head office and representative office does not justify double taxation of the same receipts.

Arm's length price adjustment for free services - transfer pricing and domestic law interaction with treaty relief - Whether an arm's length (ALP) adjustment should be made to attribute additional taxable income in India for free services rendered by the Indian representative office. - HELD THAT: - While domestic transfer pricing rules could, in theory, permit an ALP adjustment for services provided by an Indian establishment, on the facts the entire interest receipts had already been taxed in India on a gross basis under Article 11. An ALP adjustment that sought to attribute further income would result in taxable amounts in India exceeding the total revenue derived from India, which is impermissible. Given that incongruity, the Tribunal rejected making an ALP adjustment in this case and declined to enlarge the scope of the appeal to direct such adjustments. [Paras 24, 25, 26]

No ALP adjustment will be directed in respect of the representative office's free services on the facts, because the interest receipts have already been taxed under Article 11 and further adjustment would be incongruous.

Interest exemption for loans guaranteed by HERMES Deckung - subsidiary transactions take colour from principal transaction - Whether commitment fees and agency fees connected with loans guaranteed by HERMES Deckung are taxable in India when the principal interest is governed by Article 11. - HELD THAT: - Article 11(3)(b) exempts interest paid in consideration of a loan guaranteed by HERMES Deckung from Indian tax. Commitment and agency fees are integral to the loan arrangements and fall within the treaty definition of 'interest' as income from debt claims. A subsidiary transaction takes its character from the principal transaction; where the principal (interest) is within Article 11 and exempt or governed thereby, the subsidiary fees cannot be taxed separately under Article 7. The Assessing Officer's reliance on a PE to tax these receipts under Article 7 was therefore incorrect. [Paras 29, 30]

Commitment and agency fees related to the loans guaranteed by HERMES Deckung are governed by Article 11 and are not additionally taxable under Article 7.

Final Conclusion: The Tribunal allowed the appeal: the interest income and related commitment/agency fees in issue, having been subjected to tax under Article 11 of the Indo German DTAA (and where applicable exemptions under Article 11 apply), could not be additionally taxed under Article 7; Article 11(5) was not attracted because the debt claims were not effectively connected with any PE; no ALP adjustment was directed; questions about return filing nomenclature and reassessment in the head office's name were rendered academic by these treaty findings.

Addition under section 68 as unexplained cash credit - Share capital issued by adjustment / issuance of shares in lieu of purchase of shares - No cash inflow / notional entries / no real credit of cash - Onus to establish identity, capacity and genuineness of shareholders

Addition under section 68 as unexplained cash credit - Share capital issued by adjustment / issuance of shares in lieu of purchase of shares - No cash inflow / notional entries / no real credit of cash - Onus to establish identity, capacity and genuineness of shareholders - Whether the credit to share capital and share premium could be treated as unexplained cash credit under section 68 where shares of the assessee were allotted against purchase of shares of other companies by way of adjustment and no cash actually passed - HELD THAT: - The Tribunal found as a factual conclusion that the assessee issued its own shares at premium to certain companies in lieu of the shares held by those companies and the transactions were recorded by journal entries without any inflow of cash or credit to the cash account. The Assessing Officer made an addition under section 68 on the ground that directors of the share-applicant companies did not appear and thus the primary onus was not discharged. The Tribunal-CIT(A) deleted the addition after considering documentary evidence and applying the jurisdictional High Court's decision in Jatia Investment Co., which holds that where no cash passes and entries are not reflective of real cash receipt, there is no real credit of cash and section 68 is not attracted. The Appellate Tribunal concurred: the facts here align with Jatia Investment Co., and the Revenue's reliance on V.I.S.P. (P) Ltd. was misplaced because that decision concerned different facts (a bogus trading liability). The CIT(DR) did not controvert the finding that no cash passed. On these findings and authorities, section 68 did not apply and the addition was rightly deleted.

Addition under section 68 deleted; order of Ld. CIT(A) confirmed.

Final Conclusion: Revenue's appeal dismissed; the order of Ld. CIT(A) deleting the addition under section 68 in respect of share capital and share premium for 2008-09 is confirmed.

Section 263 revisional jurisdiction - Erroneous and prejudicial to the interests of revenue - Section 80P deduction for co-operative banks - Distinction between co-operative society and co-operative bank - Plau sible view test for exercise of revisional power (Malabar Industries principle)

Section 263 revisional jurisdiction - Erroneous and prejudicial to the interests of revenue - Section 80P deduction for co-operative banks - Plau sible view test for exercise of revisional power (Malabar Industries principle) - Distinction between co-operative society and co-operative bank - Validity of invoking revisional jurisdiction under section 263 in respect of disallowance of deduction claimed under section 80P in relation to interest from NABARD bonds - HELD THAT: - The Tribunal held that the Principal Commissioner of Income Tax erred in invoking section 263 because the Assessing Officer had taken a plausible view in allowing deduction under section 80P in respect of interest earned from NABARD bonds. The PCIT relied on the Supreme Court decision in Totgar's Co-operative Sales Society Ltd., but that authority concerned a society providing credit facilities to members and was distinguishable from a co-operative bank. The Tribunal accepted the assessee's contention and followed the ratio of the Gujarat High Court in CIT v. Baroda Peoples Co-operative Bank Ltd., which recognises that income from permissible investments made by a co-operative bank (including interest on securities) can be attributable to the business of banking and eligible for deduction under section 80P(2)(a)(i). Applying the Malabar Industries principle, since the AO's view was tenable and not shown to be erroneous or prejudicial to the interests of revenue, the prerequisite twin conditions for exercise of revisional jurisdiction under section 263 were not satisfied. Accordingly the exercise of power under section 263 was held to be bad in law and quashed. [Paras 7]

The invocation of revisional jurisdiction under section 263 was quashed and the appeal allowed as the AO's allowance of section 80P deduction was a plausible view and not erroneous or prejudicial to the interests of revenue.

Final Conclusion: Delay in filing the appeal was condoned and, on the merits, the order under section 263 was quashed because the Assessing Officer's grant of deduction under section 80P for interest from NABARD bonds was a plausible view; appeal allowed.

Reopening of assessment - reason to believe - first proviso to section 147 - failure to disclose fully and truly all material facts - notice under section 148 - notice under section 143(2) mandatory for framing assessment under section 143(3) - section 292BB estoppel does not cure absence of mandatory notice - reasons recorded for reopening

Notice under section 143(2) mandatory for framing assessment under section 143(3) - section 292BB estoppel does not cure absence of mandatory notice - notice under section 148 - Validity of reassessment framed under section 147/143(3) where no notice under section 143(2) was issued after notice under section 148 and the assessee did not file a fresh return pursuant to the section 148 notice. - HELD THAT: - The Tribunal upheld the finding of the CIT(A) that issuance of a notice under section 143(2) is mandatory before framing an assessment under section 143(3). The assessee had replied to the section 148 notice by requesting that the original return be treated as the return pursuant to section 148; the AO nevertheless proceeded without issuing a section 143(2) notice. Reliance on the precedents of the Supreme Court and the Calcutta High Court established that failure to issue the mandatory section 143(2) notice vitiates the assessment and that section 292BB cannot validate proceedings where the statutory precondition of issuing the notice has not been complied with. In these circumstances the AO lacked jurisdiction to complete the reassessment without issuing the mandatory notice, and the revenue's contrary reliance on a Madras High Court decision was disapproved as being inconsistent with binding higher authority. [Paras 6, 7, 8, 9]

The reassessment was invalid for want of a notice under section 143(2); grounds 2 and 3 of the revenue's appeal are dismissed.

First proviso to section 147 - failure to disclose fully and truly all material facts - reason to believe - reasons recorded for reopening - Whether the reopening beyond four years was validly authorised by reasons demonstrating that income escaped assessment due to the assessee's failure to disclose fully and truly all material facts. - HELD THAT: - Where an original assessment under section 143(3) has been completed and more than four years have elapsed, the proviso to section 147 requires the AO to have reason to believe not only that income has escaped assessment but that such escapement resulted from the assessee's failure to disclose fully and truly all material facts. The recorded reasons must disclose this failure on their face and cannot be supplemented later. In the present case the reasons for reopening repeated an earlier audit objection and did not allege or explain any failure by the assessee to disclose material facts; the very same discrepancy had been addressed by the assessee to the predecessor AO by reconciliation and explanation years before reopening. Because the essential condition precedent in the first proviso was not reflected in the reasons recorded, the AO lacked jurisdiction to reopen the concluded assessment beyond four years. [Paras 10, 11, 12, 16, 17]

The reopening beyond four years is without jurisdiction for want of reasons showing failure to disclose fully and truly all material facts; ground 1 of the revenue's appeal fails.

Final Conclusion: All legal grounds urged by the revenue (grounds 1 to 3) are dismissed for the reasons stated; the remaining grounds are academic. The revenue's appeal is dismissed.

Valuation of closing stock at lower of cost or net realisable value - allowability of write off of obsolete / stale stock as deduction - application of accounting standards (AS 2) and Section 145A to inventory valuation - prudence and bona fide accounting treatment for change in valuation - treatment of exceptional/extraordinary items in profit & loss account

Valuation of closing stock at lower of cost or net realisable value - allowability of write off of obsolete / stale stock as deduction - application of accounting standards (AS 2) and Section 145A to inventory valuation - Whether the Commissioner (Appeals) was justified in deleting the assessing officer's disallowance of the write off of stale/obsolete stock of Rs. 11,99,41,682/- for computation of income in A.Y.2012 13. - HELD THAT: - The Tribunal upheld the view of the CIT(A) that the write off related to perishable food stocks which had become stale owing to prolonged labour unrest and stoppage of the subsidiary's manufacturing operations, and that the assessee had followed the recognised accounting principle of valuing closing stock at the lower of cost or net realisable value in accordance with AS 2 and Section 145A. The AO's suspicion that the write off was opportunistic (deferred from earlier years to offset current profits) was rejected on facts: the write off was supported by item wise details, factual evidence of production disruption and export complaints, the books of account were not rejected, and the write off was shown as an exceptional item in the P&L. The Tribunal also noted that even if the stocks had been written off in earlier years, it would only increase carried forward losses and not alter tax liability for the year under appeal. Reliance on authoritative decisions recognising valuation at cost or NRV, the principle of prudence, and allowance of bona fide reductions in stock value supported deletion of the addition. On these grounds the Tribunal declined to interfere with the CIT(A)'s deletion of the disallowance. [Paras 3, 4]

Deletion of the assessing officer's disallowance of the stock write off of Rs. 11,99,41,682/- was upheld and the revenue's appeal dismissed.

Final Conclusion: The Tribunal dismissed the revenue appeal and sustained the CIT(A)'s deletion of the addition, holding that the assessee's write off of stale perishable stock in A.Y.2012 13 was a bona fide, AS 2/Section 145A compliant valuation adjustment and therefore allowable for computing income.

Deletion of additions on proof of genuine sale of assets - unexplained deposits treated as income from undisclosed sources - onus of assessee to explain source of cash deposits - adverse inference for non-filing of purchasers' ITRs - verification by revenue and duty to controvert appellate evidence - application of Orissa Corporation principle on burden of proof - exemption under section 54F

Deletion of additions on proof of genuine sale of assets - unexplained deposits treated as income from undisclosed sources - onus of assessee to explain source of cash deposits - adverse inference for non-filing of purchasers' ITRs - application of Orissa Corporation principle on burden of proof - Addition of Rs. 1,73,27,000/- treated as unexplained cash deposits in bank account in respect of sale of paintings to Shri Parveen Goyal and Shri Rakesh is unsustainable and is to be deleted. - HELD THAT: - The Tribunal found on the record that the cash deposits related to sale proceeds of paintings, ownership of the paintings was verifiable from a prior order under section 132(5) and the assessee produced confirmations, affidavits, PANs and bank statements of the four purchasers. The Assessing Officer did not controvert these materials with any evidence in the remand report. The CIT(A) had accepted identical evidence in favour of two purchasers (Mohd. Laiq Ahmed and Shri Ishrafil) and deleted additions in their cases; the Department's appeal in those matters was dismissed for low tax effect. The Tribunal held that where the revenue, having been put on notice of the purchasers' identities and tax status, does not pursue or produce evidence to contradict the purchasers' confirmations and bank corroboration, the assessee is regarded as having discharged the onus of explanation (applying the principle in Orissa Corporation). The CIT(A)'s partial sustainment of addition solely because copies of two purchasers' ITRs were not filed was held to be unsustainable when the Assessing Officer could and should have verified those records through the concerned AOs but did not do so. Accordingly, the documentary evidence on record, uncontroverted by the AO, established that the impugned receipts were genuine sale proceeds and section 68 could not be invoked to treat them as unexplained income. [Paras 12]

The addition of Rs. 1,73,27,000/- is deleted.

Exemption under section 54F - deletion of additions on proof of genuine sale of assets - Assessee is entitled to benefit of exemption under section 54F consequent to deletion of the impugned addition; AO directed to allow the exemption as per law. - HELD THAT: - Because the Tribunal set aside the additions treating the receipts as genuine capital receipts from sale of paintings, the Tribunal directed that the Assessing Officer grant the relief under section 54F in accordance with law and on the basis of the assessee's submissions regarding investment of capital gains. The direction follows as a consequential relief once the addition representing alleged undisclosed income is deleted. [Paras 12]

AO to grant exemption under section 54F as per law consequent to deletion of the addition.

Final Conclusion: The appeal is allowed: the Tribunal deletes the entire addition of Rs. 1,73,27,000/- in respect of the alleged unexplained cash deposits received as sale proceeds of paintings and directs the Assessing Officer to grant the benefit of section 54F as per law.

Deduction under section 80IB(10) - requirement of audit report in Form No.10CCB - estimation of profits for deduction purposes - power under section 80IA(10) to determine "reasonable profit" - inapplicability of section 80IA(8) proviso to section 80IB(10) - estimation without rejecting books of account

Deduction under section 80IB(10) - requirement of audit report in Form No.10CCB - Assessee's entitlement to deduction under section 80IB(10) for the project in A.Y. 2009-10 in view of filing/audit formalities. - HELD THAT: - The Tribunal recorded that the assessee had furnished audited books, audit report in Form 3CD and a copy of Form No.10CCB (signed on 23.09.2009). The ld. CIT(A) observed that Rule 12(2) had dispensed with the absolute requirement of filing Form No.10CCB with the return and that the assessee had furnished the Form within the prescribed date; accordingly the ld. CIT(A) held the assessee eligible for deduction under section 80IB(10). The Tribunal accepted that none of the qualifying conditions under section 80IB(10) were disputed by the authorities and that the Assessing Officer had not pointed out any defect in the audited books or sales invoices; on a holistic view the Tribunal found the assessee entitled to the deduction under section 80IB(10). [Paras 6, 7, 15, 16]

Assessee entitled to claim deduction under section 80IB(10) for A.Y. 2009-10; requirement relating to Form No.10CCB did not disentitle the assessee where audit report and Form were on record within prescribed time.

Estimation of profits for deduction purposes - power under section 80IA(10) to determine "reasonable profit" - inapplicability of section 80IA(8) proviso to section 80IB(10) - estimation without rejecting books of account - Validity of Assessing Officer's and ld. CIT(A)'s estimation/re estimation of average profit for restricting deduction under section 80IB(10). - HELD THAT: - The Assessing Officer computed an "ordinary" profit rate of 16.02% based on two prior years and, treating the higher current-year profit as excessive, disallowed a portion of the claimed deduction; alternatively he disallowed the whole claim. The Assessing Officer invoked the provisions permitting computation on a "reasonable basis" (as appearing in section 80IA(9)/80IA(10)/80IA(8) proviso) to estimate profits. The ld. CIT(A) re-estimated average profit at 38.40% by reference to additional years and sustained a reduced deduction. The Tribunal held that the statutory scheme and object of section 80IB(10) differ from section 80IA; powers under section 80IA(8)/80IA(10) could not be used to curtail benefits under section 80IB(10) unless expressly applicable. Further, where the books were audited, sales invoices and opening stock (said to be sold in the year) were not impugned, the Assessing Officer could not validly estimate average profit on no evidence base or without demonstrating defects in the books or opening stock. On that basis the Tribunal concluded that both the AO's estimation and the CIT(A)'s re-estimation were not in accordance with law and deleted the addition sustained by the ld. CIT(A). [Paras 11, 12, 14, 15, 16]

Estimation/re-estimation of average profit by AO and ld. CIT(A) for restricting deduction under section 80IB(10) is not sustainable; addition upheld by ld. CIT(A) (Rs. 15,62,791/-) deleted.

Final Conclusion: The Tribunal allowed the appeal for A.Y. 2009-10: the assessee is entitled to deduction under section 80IB(10) (Form No.10CCB and audit material on record), and the additions made by estimating/re estimating average profits (including the addition of Rs. 15,62,791/- sustained by the ld. CIT(A)) were deleted as not in accordance with law.

Possession after expiry of lease - Section 58B(4) - duty to remove goods after cancellation of licence - Cancellation of licence under the Bonded Warehouse Scheme - Status quo order confined to period of lease - Writ jurisdiction and abuse of process

Possession after expiry of lease - Status quo order confined to period of lease - Whether the Single Judge's observation that the lessor was in possession of the warehouse and was granted liberty to take steps for gainful use was impermissible and affected the appellant's rights in the pending civil suit. - HELD THAT: - The Court held that once the lease expired on 31.03.2020 the licensee ceased to have a legal right to remain in possession and the status quo order obtained in the civil suit could not validate possession beyond the lease period. While the Single Judge's remarks were made in the course of verifying compliance and may touch the pending suit, they merely recorded the legal consequence of expiry of the lease and the consequent loss of possessory right by the licensee. The appellant, having invoked writ jurisdiction based on an interim order in a suit where Customs was not a party, cannot complain of that observation. The Single Judge's finding about the lessor being in possession thus stands. [Paras 10, 11, 13, 17, 18]

Observation upheld; the lessor is deemed in possession after lease expiry and the Single Judge's remark cannot be assailed in the intra-court appeal.

Section 58B(4) - duty to remove goods after cancellation of licence - Cancellation of licence under the Bonded Warehouse Scheme - Whether cancellation/non-renewal of the bonded warehouse licence on account of absence of a subsisting lease was valid and whether the licensee was obliged to remove goods under Section 58B(4). - HELD THAT: - The Court confirmed that a licence for a bonded warehouse cannot be continued if the licensee does not possess a valid possessory title or right of possession over the premises. The Customs authority, acting under the Bonded Warehouse Scheme and the Customs Act provisions, was justified in refusing renewal where the lease had expired. Section 58B(4) mandates removal of warehoused goods within seven days of cancellation (unless an extension is permitted by the proper officer); no extension was shown to have been granted here, so possession of the vacant warehouse is to be treated as reverting to the owner. The regulatory role of the licensee as agent of Customs for custody of imported goods supports the requirement that only premises with valid possession be licensed as bonded warehouses. [Paras 3, 14, 15, 16, 17]

Cancellation/non-renewal of the licence was valid; the licensee was duty-bound to remove the goods in accordance with Section 58B(4).

Writ jurisdiction and abuse of process - Whether the appellant's invocation of writ jurisdiction on the basis of the interim order in the civil suit constituted an abuse of process and whether matters like arrears of rent were entertainable in writ proceedings. - HELD THAT: - The Court found that the appellant multiplied litigation by pursuing remedies in different forums and sought to litigate civil issues such as arrears of rent and possessory rights in writ jurisdiction where they could not be adjudicated. The proper course would have been to implead the Customs Department in the civil suit or seek relief in the appropriate forum. Such invocation of writ jurisdiction on the basis of a status quo order in a civil suit, without bringing all interested parties before that court, amounted to abuse of process and did not merit interference in the intra-court appeal. [Paras 12, 19]

Appellant's recourse to writ jurisdiction was an abuse of process; civil issues like arrears of rent were not maintainable in the writ petition and the appeal disclosed no merit.

Final Conclusion: The intra-court writ appeal is dismissed. The Single Judge's observations that the lessor was in possession following expiry of the lease and that the licence could not be continued were upheld; cancellation/non-renewal under the Bonded Warehouse Scheme and the obligation to remove goods under Section 58B(4) were affirmed, and the appellant's resort to writ jurisdiction was held to be an abuse of process.

Certificate of Origin - jurisdiction of State Forest Departments - exclusive domain of Union in foreign trade policy - Sale of Goods Act - condition versus warranty - arbitrariness and discriminatory treatment - Article 14 - verification of procurement and custody documents

Certificate of Origin - Sale of Goods Act - condition versus warranty - Validity of refusal by Principal Chief Conservator of Forests to issue Certificate of Origin unless the petitioner converted purchased Red Sanders logs into value added product form as per the agreement dated 18.03.2013. - HELD THAT: - The court held that once property in the goods and delivery had passed to the petitioner in 2013, the successor State authorities could not enforce a seller-imposed stipulation effectively compelling conversion of the goods into a particular form before allowing the buyer to seek export facilitation. Applying the principles of the Sale of Goods Act regarding conditions and warranties, the obligation in the agreement to convert into value added product form cannot be used thereafter by the State Forest Departments to create an impediment to issuance of Certificate of Origin, particularly after the Union (DGFT) relaxed its policy to permit export in log form w.e.f. 24.10.2013. Where procurement and custody documents are genuine and delivery completed, the State cannot refuse COO on the ground that the buyer did not modify the form of the goods. [Paras 51, 52, 53, 54, 55]

Refusal to issue Certificate of Origin on the ground that the petitioner had not converted logs into value added product form is not sustainable; the State authorities cannot enforce that term to deny COO.

Jurisdiction of State Forest Departments - exclusive domain of Union in foreign trade policy - Whether Principal Chief Conservator of Forests can decide or condition issuance of Certificate of Origin by reference to whether DGFT will grant an export licence in log form. - HELD THAT: - The court observed that foreign trade policy and grant of export licences fall within the exclusive competence of the Union and DGFT (Entry 41, List I). State Forest authorities must confine themselves to verifying procurement and custody documents and issuing Certificate of Origin when those documents are genuine. It is not within their jurisdiction to pre-judge or condition COO on the likelihood of DGFT granting an export licence in a particular form. The DGFT itself indicated that issuance of export licence follows receipt of COO and NOC processes, not that PCCF must decide export form. [Paras 59, 62, 63, 64, 65]

State PCCFs cannot usurp or fetter the DGFT's domain by refusing COO on the ground that export licence in log form may not be granted; their role is limited to verification of procurement/custody and issuance of COO where appropriate.

Verification of procurement and custody documents - arbitrariness and discriminatory treatment - Article 14 - Whether respondents acted arbitrarily or discriminated against the petitioner in refusing COO and whether relief by issuance of COO with costs is warranted. - HELD THAT: - The PCCFs had certified the genuineness of the permits and of the stacked stock (recorded in the impugned order). Despite that, they declined COO insisting on conversion to value added product form, while a similarly placed entity was later granted COO for log form. The court found this conduct vexatious, arbitrary and discriminatory, constituting a violation of Article 14. Reliance on irrelevant considerations and transgression into DGFT's field amounted to improper fettering of discretion and capricious administrative action. Authorities acting in public interest must not raise frivolous or technical objections; where conduct is arbitrary and discriminatory, equitable relief including costs is appropriate. [Paras 72, 73, 82, 84, 85]

Proceedings refusing COO are declared arbitrary and violative of Article 14; respondents directed to issue COO forthwith and costs awarded against them.

Final Conclusion: Writ petition allowed. Proceedings Ref.No.16795/2019/Prod.1 dated 06.12.2019 declared arbitrary and violative of Article 14; respondents 3 and 4 directed to forthwith issue Certificate of Origin for the petitioner's genuine stock of Red Sanders wood stored in Telangana without insisting on conversion into value added product form, and to pay costs to the petitioner.

Refund of Extra Duty Deposit - finalisation of provisional assessment - application of Board circulars directing early finalisation of provisional assessment - interest on delayed refund under Section 27A of the Customs Act - fixation of interest rate by Government notification - increased interest and recovery from officer for delay in refund

Refund of Extra Duty Deposit - finalisation of provisional assessment - application of Board circulars directing early finalisation of provisional assessment - Assessee entitled to refund of EDD retained by Customs for imports (year 2004) on account of non-finalisation of provisional assessment despite Board instructions. - HELD THAT: - The court accepted the Single Judge's finding that the Department had no justification for delaying finalisation of the provisional assessments relating to the 2004 imports and for retaining the EDD when Board Circular No.11/2001 and the Board instruction dated 16.7.2007 required early finalisation. The Department's contention that a pending investigation justified the prolonged non-finalisation was not supported by material on record and was held not to be a valid reason to withhold refund. The learned Single Judge's direction for refund was affirmed as a lawful exercise of judicial review where statutory instructions and administrative inaction resulted in the importer's funds being unnecessarily locked with the Department. [Paras 2, 3, 8, 9]

Refund of the EDD relating to the 2004 Bills of Entry must be made to the assessee.

Interest on delayed refund under Section 27A of the Customs Act - fixation of interest rate by Government notification - Assessee entitled to interest on the delayed refund at the rate fixed by notification under Section 27A, from the date of application for refund. - HELD THAT: - The court noted that Section 27A provides for payment of interest on refunds and that the Central Government, by Notification 75/2003-Cus.(N.T.) dated 12.9.2003, fixed the rate at 6% per annum. In view of the delay in refunding the EDD since the assessee's application dated 17.12.2007, interest at 6% from that date until actual refund was held payable. The Single Judge's award of interest in terms of Section 27A and the notification was upheld. [Paras 6, 10, 11]

Interest at 6% per annum is payable from 17.12.2007 until actual refund.

Increased interest and recovery from officer for delay in refund - If refund is not made within the Court-prescribed period, higher interest and recovery from the responsible officer may be imposed. - HELD THAT: - The court directed that the refund be made within four weeks and provided that failure to do so would attract interest at an increased rate of 9% to be paid by the Department. Further, the court ordered that any excess interest arising from such delay would be recovered from the officer responsible for the further delay. This remedial measure was imposed to ensure compliance and accountability where departmental inaction prolongs withholding of an importer's funds. [Paras 11]

If refund is delayed beyond four weeks, interest at 9% will be payable and excess interest shall be recovered from the officer concerned.

Final Conclusion: The Writ Appeal is dismissed. The Department is directed to refund the EDD relating to the 2004 imports forthwith with interest at 6% from 17.12.2007 until actual refund; failure to refund within four weeks will attract interest at 9% and recovery of excess interest from the responsible officer.

Imposition of condition of re-export on redemption - Option to pay fine in lieu of confiscation under Section 125 - Scope of adjudicatory power of customs authorities - Liability for demurrage on goods detained due to official action

Imposition of condition of re-export on redemption - Option to pay fine in lieu of confiscation under Section 125 - The condition that goods redeemed under Section 125 may be released only for re-export is not permissible and is liable to be set aside. - HELD THAT: - The Tribunal and this Court followed earlier authorities and held that Section 125, which provides an option to pay a fine in lieu of confiscation, does not empower adjudicating authorities or appellate authorities to impose a condition of re-export as a term of redemption. The Court accepted the legal proposition that officers and tribunals, being creatures of statute, must act within the scope of the statutory provision and cannot add a condition of re-export where the statute does not permit it. Accordingly the direction in the appellate order requiring re-export as a condition of redemption was held to be unjustified and set aside. [Paras 8]

Set aside the condition of re-export imposed while allowing redemption under Section 125; goods to be released without that condition.

Liability for demurrage on goods detained due to official action - Scope of adjudicatory power of customs authorities - Demurrage/storage charges claimed against the importer for goods remaining in customs custody during litigation were not sustainble in the circumstances and were quashed. - HELD THAT: - The Court found that the goods remained on Customs premises during the course of adjudication and appellate proceedings, and that the department's communication refusing waiver was founded on an incorrect factual premise. The Additional Solicitor General conceded that there was no merit in sustaining the demurrage in the present case. Taking a fair view, the Court held that any demurrage imposed on the assessee would be treated as quashed and directed release of the goods to the importer without conditions. [Paras 8]

Demurrage, if any, quashed and set aside; goods to be released to the assessee forthwith without condition.

Scope of adjudicatory power of customs authorities - No further punitive action would be taken against the departmental officer who had made the incorrect factual representation; the Court adopted a lenient view. - HELD THAT: - Although the Court had earlier summoned the concerned Deputy Commissioner to file an affidavit and show cause for a potentially incorrect factual stance, on hearing the matter and receiving an apologetic affidavit and submissions by the ASG, the Court chose not to initiate proceedings against the officer. The Court recorded a lenient approach towards the officer's conduct in the circumstances of the case. [Paras 8]

No action taken against the officer; lenient view recorded.

Final Conclusion: The Revenue's appeal is dismissed. The appellate condition requiring re-export as part of redemption under Section 125 is set aside; any demurrage claimed is quashed and the goods are directed to be released to the assessee forthwith. No further action to be taken against the departmental officer.

Eligibility for concessional rate of duty under Notification No. 21/2002 (Sl. No. 265) - classification versus entitlement to a beneficial notification - extended period of limitation for wilful suppression and mis-statement under Sections 28(1)/28(4) of the Customs Act, 1962 - remand for de novo adjudication on merits

Eligibility for concessional rate of duty under Notification No. 21/2002 (Sl. No. 265) - classification versus entitlement to a beneficial notification - Whether the imported catalytic converter assemblies are entitled to the concessional basic customs duty under Sl. No. 265 of Notification No. 21/2002 - HELD THAT: - The Tribunal accepted that the disputed items were classifiable under CTH 8421 and that GIR 2(b) supported such classification, but held that classification alone does not determine entitlement to a benefit under Notification No. 21/2002 which grants concession to a particular item. The Bills of Entry and invoices showed a cumulative/assembly description for the imported items and no breakup of component pricing; the adjudicating authority had not recorded logical findings on alleged mismatches and other allegations in the Show Cause Notice. Given these circumstances, the Tribunal declined to express an opinion on the merits of entitlement and remitted the matter to the Original Authority for a de novo decision on merits, directing that relevant case law may be considered and that the appellant shall cooperate and furnish necessary details. The Tribunal therefore remitted the question of eligibility for the concessional rate for fresh adjudication rather than deciding it on the record before it. [Paras 8, 10, 11]

Remitted to the Original Authority for de novo adjudication on merits; Tribunal did not express opinion on entitlement.

Extended period of limitation for wilful suppression and mis-statement under Sections 28(1)/28(4) of the Customs Act, 1962 - Whether the extended period of limitation was rightly invoked against the appellant - HELD THAT: - The Tribunal examined the Show Cause Notice which recorded specific reasons alleging wilful suppression and mis statement of description of imported goods, contradictions between invoices and declarations, and conduct that misled Customs over a period. On that basis the Tribunal concluded that the requirements for invoking the extended period under Sections 28(1)/28(4) were satisfied. Consequently, there was no justification to interfere with the impugned order insofar as the extended period of limitation was invoked. [Paras 9]

Upheld the invocation of the extended period of limitation.

Final Conclusion: Appeal partly allowed by remanding the question of entitlement to concessional duty for de novo adjudication by the Original Authority within six months; appeal partly dismissed in respect of invocation of extended limitation which is upheld.

Scheme of Arrangement by way of Amalgamation - dispensing with convening of meetings of shareholders - convening of meetings of unsecured creditors - absence of secured creditors and effect on convening meetings - appointed date for amalgamation - service of notice on statutory authorities

Scheme of Arrangement by way of Amalgamation - dispensing with convening of meetings of shareholders - absence of secured creditors and effect on convening meetings - convening of meetings of unsecured creditors - Directions for convening/dispensing with meetings in relation to Transferor Company No. 1 (PJS Energy Private Limited). - HELD THAT: - The Tribunal noted the company particulars and the affidavits of consent of all equity shareholders showing 100% voting share and the absence of secured creditors. Consequently, convening of the meeting of shareholders was dispensed with. As there are unsecured creditors, the Tribunal directed that a meeting of unsecured creditors be convened by video-conferencing on the specified date and time with a quorum of 10. [Paras 3, 13, 21]

Shareholders' meeting dispensed with; no secured-creditors' meeting required; meeting of unsecured creditors to be convened on 16.01.2021 by video-conference with quorum 10.

Scheme of Arrangement by way of Amalgamation - dispensing with convening of meetings of shareholders - absence of secured creditors and effect on convening meetings - convening of meetings of unsecured creditors - Directions for convening/dispensing with meetings in relation to Transferor Company No. 2 (Adidev Coal Private Limited). - HELD THAT: - The Tribunal recorded the affidavits of consent of both equity shareholders representing 100% voting share and the absence of secured creditors; accordingly, convening of the shareholders' meeting was dispensed with. Since unsecured creditors exist, the Tribunal directed convening their meeting by video-conference on the specified date and time with a quorum of 4. [Paras 4, 14, 21]

Shareholders' meeting dispensed with; no secured-creditors' meeting required; meeting of unsecured creditors to be convened on 16.01.2021 by video-conference with quorum 4.

Scheme of Arrangement by way of Amalgamation - dispensing with convening of meetings of shareholders - dispensing with convening of meetings of unsecured creditors - absence of secured creditors and effect on convening meetings - Directions for convening/dispensing with meetings in relation to Transferor Company No. 3 (Goodbridge Construction Private Limited). - HELD THAT: - The Tribunal observed that affidavits evidence consent of both equity shareholders (100% voting) and that all unsecured creditors have given affidavits of consent; there are no secured creditors. Therefore, convening of both the shareholders' meeting and the unsecured creditors' meeting was dispensed with. [Paras 5, 15, 21]

Shareholders' meeting dispensed with; no secured-creditors' meeting required; unsecured-creditors' meeting dispensed with as consents placed on record.

Scheme of Arrangement by way of Amalgamation - dispensing with convening of meetings of shareholders - absence of secured creditors and effect on convening meetings - convening of meetings of unsecured creditors - Directions for convening/dispensing with meetings in relation to Transferor Company No. 4 (Iskcon Industrial Consultancy Private Limited). - HELD THAT: - The Tribunal recorded affidavits of consent from all equity shareholders (100% voting) and noted there are no secured creditors. Because unsecured creditors exist, the Tribunal directed that their meeting be convened by video-conference on the specified date and time with a quorum of 9. [Paras 6, 16, 21]

Shareholders' meeting dispensed with; no secured-creditors' meeting required; meeting of unsecured creditors to be convened on 16.01.2021 by video-conference with quorum 9.

Scheme of Arrangement by way of Amalgamation - dispensing with convening of meetings of shareholders - absence of secured creditors and effect on convening meetings - absence of unsecured creditors - Directions for convening/dispensing with meetings in relation to Transferor Company No. 5 (S K Y Gases Private Limited). - HELD THAT: - The Tribunal noted affidavits of consent from all equity shareholders (100% voting) and that the company has neither secured nor unsecured creditors. In view of these facts, convening of meetings of shareholders, secured creditors and unsecured creditors was dispensed with as not required. [Paras 7, 17, 21]

Shareholders' meeting dispensed with; no meetings required for secured or unsecured creditors.

Scheme of Arrangement by way of Amalgamation - dispensing with convening of meetings of shareholders - absence of secured creditors and effect on convening meetings - convening of meetings of unsecured creditors - Directions for convening/dispensing with meetings in relation to Transferor Company No. 6 (Iskcon Finance Company Private Limited). - HELD THAT: - The Tribunal accepted affidavits of consent from all equity shareholders (100% voting) and noted absence of secured creditors. Because unsecured creditors exist, it directed convening their meeting by video-conference on the specified date and time with a quorum of 3. [Paras 8, 18, 21]

Shareholders' meeting dispensed with; no secured-creditors' meeting required; meeting of unsecured creditors to be convened on 16.01.2021 by video-conference with quorum 3.

Scheme of Arrangement by way of Amalgamation - dispensing with convening of meetings of shareholders - absence of secured creditors and effect on convening meetings - convening of meetings of unsecured creditors - Directions for convening/dispensing with meetings in relation to Transferee Company (AJ Energy Private Limited, referred as Transferor Company No. 7 in filings). - HELD THAT: - The Tribunal noted affidavits of consent from all equity shareholders (100% voting) and absence of secured creditors; accordingly, shareholders' meeting was dispensed with. As unsecured creditors exist, their meeting was directed to be convened by video-conference on the specified date and time with a quorum of 15. The Scheme specifies an appointed date of 01.04.2019 subject to Tribunal directions. [Paras 9, 19, 20, 21]

Shareholders' meeting dispensed with; no secured-creditors' meeting required; meeting of unsecured creditors to be convened on 16.01.2021 by video-conference with quorum 15; appointed date fixed as 01.04.2019 subject to directions.

Service of notice on statutory authorities - Scheme of Arrangement by way of Amalgamation - Requirement to serve notice of the application on statutory authorities. - HELD THAT: - The Tribunal directed that the application and notices be served on the Regional Director (MCA), Registrar of Companies, Official Liquidator and the Income Tax Department, specifying that notices to the Income Tax Authorities should disclose sufficient assessment details to enable timely and proper replies. [Paras 22]

Notice to be served on Regional Director (MCA), Registrar of Companies, Official Liquidator and Income Tax Department with requisite disclosure to Income Tax Authorities.

Final Conclusion: The application under sections 230-232 for approval of the Scheme of Amalgamation is allowed on the terms recorded: meetings of shareholders were dispensed with where consents existed, meetings of unsecured creditors were directed as specified (or dispensed with where consents/absence of creditors existed), the appointed date is 01.04.2019 subject to Tribunal directions, and service of notice on the prescribed statutory authorities was ordered.

Role of a resolution professional / claims management consultant limited to inviting, vetting and verifying claims - interpretation of a tripartite subordination agreement - effect of an "event of default" on subordinated debt - conflict between contractual clauses and precedence of one clause over another - voidness of contract terms inconsistent with public policy or statutory prohibition under Section 28 of the Indian Contract Act, 1872

Role of a resolution professional / claims management consultant limited to inviting, vetting and verifying claims - whether the Claims Management Consultant (R1), acting akin to a Resolution Professional, exceeded its mandate by re-admitting and then rejecting the Applicant's claim and by interpreting and adjudicating competing contractual contentions - HELD THAT: - The Tribunal held that the function of R1 under the Resolution Framework mirrors the limited role of a resolution professional under IBC: to invite, collect, vet and verify claims and to prepare an updated list of creditors. After initially admitting the Applicant's claim on the basis of the documents, R1 revisited and rejected the claim following representations by debenture holders and proceeded to interpret the Subordination Agreement. The Bench found that such conduct amounted to undertaking an adjudicatory role beyond the mandate of mere verification and best-estimate admission/revision. Reliance on rival creditors' submissions to interpret and extinguish the Applicant's debt took R1 into the realm of adjudication, contrary to the settled principle that claim verification processes are not forums for determining substantive rival rights which are reserved for judicial/adjudicatory authorities.

R1 exceeded its jurisdiction in adjudicating the claim; its reversal of admission on the basis of interpreting the Subordination Agreement was not within its mandate and is liable to be set aside.

Interpretation of a tripartite subordination agreement - effect of an "event of default" on subordinated debt - conflict between contractual clauses and precedence of one clause over another - whether Clause 2.2 of the Subordination Agreement operated to extinguish the Applicant's subordinated debt upon occurrence of an Event of Default, notwithstanding Clause 2.1(ii), and which clause prevails - HELD THAT: - On construing the Subordination Agreement as a whole, the Tribunal found Clause 2.1(ii) expressly contemplates that the Subordinated Debt shall subsist even if bankruptcy, insolvency or liquidation occurs, albeit remaining subordinated and not due and payable until Debenture Holders' claims are satisfied. Clause 2.2, which purports to extinguish the subordinated debt upon an Event of Default, was held to be in apparent tension with Clause 2.1(ii). The Bench applied the contractual construction principle that the clauses must be read together and where survivability of debt is expressly contemplated in an earlier clause, an isolated later clause cannot be read to effect total cessation inconsistent with that contemplation. The Tribunal also observed that the Subordination Agreement is a tripartite document applicable as between the parties to it and that the logical effect is subordination of payment rights (not extinction of the debt) until debenture holders are paid in full. The Tribunal further noted that the Escrow Agreement and related project documents contemplate repayment of subordinated debt in certain events, reinforcing that the debt subsists.

Clause 2.1(ii) prevails over Clause 2.2; Clause 2.2 does not operate to extinguish the Applicant's subordinated debt upon the Event of Default asserted by R1.

Voidness of contract terms inconsistent with public policy or statutory prohibition under Section 28 of the Indian Contract Act, 1872 - whether Clause 2.2 is void under Section 28 of the Indian Contract Act insofar as it extinguishes the Applicant's rights to enforce its debt - HELD THAT: - The Applicant contended Clause 2.2 extinguishes enforcement rights and is contrary to Section 28 of the Indian Contract Act. The Tribunal did not need to make a formal declaration of voidness under Section 28 as a primary basis for decision. Instead, on construction it concluded that the contractual scheme indicates continuation (albeit subordinated) of the Applicant's debt under Clause 2.1(ii), and therefore the claim could not be rejected outright on the basis of Clause 2.2. The Tribunal emphasised public interest in protecting creditors' rights where thousands of investors might be affected and observed that a beneficial interpretation favouring total extinguishment in favour of debenture holders would unfairly destroy the Applicant's rights.

The Tribunal declined to sustain an outright extinguishment of the Applicant's debt under Clause 2.2 and treated the Applicant's rights as subsisting; it did not rely solely on a finding of voidness under Section 28 to reach its conclusion.

Reinstatement of claims after unlawful rejection in claims verification process - relief to be granted in consequence of R1's excess of jurisdiction and erroneous rejection of the claim - HELD THAT: - Given that R1 had initially admitted the Applicant's claim on the basis of submitted documents and later reversed that admission by applying an isolated reading of Clause 2.2, the Tribunal found that the reversal was in excess of R1's mandate and inconsistent with the correct contractual construction. Having set aside R1's adjudicatory action, the Bench directed reinstatement of the Applicant's claim for inclusion in the list of creditors, observing that the question of distribution and final determination of competing claims would be dealt with by the appropriate fora in due course.

The rejection of the Applicant's claim dated 06.11.2019 and subsequent letters is set aside and R1 is directed to reinstate the Applicant's claim in the list of creditors.

Final Conclusion: The application is allowed in part. The Tribunal set aside R1's rejection of the Applicant's claim and directed reinstatement of the claim on the list of creditors, holding that R1 exceeded its limited mandate by adjudicating contractual rights and that on proper construction the subordinated debt subsists subject to subordination; no costs were imposed and interim prayers for stay/restraining orders were not granted.

Dispensing with convening of meetings - Consent affidavits as basis for dispensing meetings - Scheme of Amalgamation - Appointed date - Service on statutory authorities

Dispensing with convening of meetings - Consent affidavits as basis for dispensing meetings - Scheme of Amalgamation - Dispensation of convening meetings of shareholders, secured creditors and unsecured creditors of the applicant companies pursuant to the proposed Scheme of Amalgamation. - HELD THAT: - The Tribunal recorded that the board resolutions approving the Scheme were placed on record and that affidavits of consent from the equity shareholders of each applicant company were filed showing 100% voting share. Where a company had no secured creditors, the Tribunal held that convening a meeting of secured creditors did not arise. For unsecured creditors, the Tribunal accepted the certificates and affidavits placed on record showing the requisite consenting proportions (Transferor Company No.1: 15 of 18 unsecured creditors holding 97% of debt; Transferor Companies No.2, No.3 and No.4: sole unsecured creditor with 100% of debt; Transferee Company: 38 of 66 unsecured creditors holding 94.6% of debt). On that basis the Tribunal dispensed with convening the meetings of shareholders and, where applicable, secured and unsecured creditors for the respective companies and directed that notices and meetings need not be convened. [Paras 15, 16]

Meetings of shareholders and, where relevant, secured and unsecured creditors of the applicant companies are dispensed with in respect of the proposed Scheme, on account of the consent affidavits and certifications placed on record.

Appointed date - Service on statutory authorities - Approval of the appointed date specified in the Scheme and directions for service of notice on statutory authorities. - HELD THAT: - The Tribunal noted that the Scheme specifies the appointed date as 1st April 2019, subject to directions of the Tribunal. The Tribunal further directed that notice of the application shall be served on the Regional Director, Registrar of Companies, Official Liquidator, Income Tax Department (with disclosure of sufficient details for response) and any other sectoral regulators as required. These directions were given in the exercise of the Tribunal's supervisory role to ensure statutory authorities are informed and able to file objections or replies as appropriate. [Paras 15, 17]

The appointed date in the Scheme is fixed as 1st April 2019 subject to the Tribunal's directions, and the applicants are directed to serve notice of the application on the specified statutory authorities.

Final Conclusion: The joint application for sanction of the Scheme of Amalgamation is allowed on the terms recorded: meetings as specified are dispensed with where consent affidavits have been filed, the appointed date is 1 April 2019 subject to directions, and the applicants are to serve the statutory authorities as directed; the application is disposed of.

Restoration of company name struck off under the Companies Act, 2013 - Discretion under Section 252(1) to restore a struck off company where it is just to do so - Proof of company being in operation as ground for restoration - Restoration subject to filing outstanding statutory documents and payment of prescribed fees - Imposition of conditional payment to Prime Minister's Relief Fund as part of restoration

Proof of company being in operation as ground for restoration - Discretion under Section 252(1) to restore a struck off company where it is just to do so - The Company was in operation at the time of striking off and restoration of its name on the register is justified under the statutory discretion vested in the Adjudicating Authority. - HELD THAT: - The Tribunal considered the materials placed on record by the appellant-audited financial statements for 2017 18 and 2018 19, bank statements showing transactions and a closing balance as on the date of striking off, income tax returns for relevant assessment years, EPF challan certificate and GST returns for the months preceding the strike off. On the basis of these documents the Tribunal found that the company could not be characterised as defunct and that the statutory condition for exercising discretion under Section 252(1) was satisfied. Having concluded that it was 'just' to restore the company's name, the Tribunal held restoration to be permissible in the interest of stakeholders. [Paras 11]

Appeal allowed insofar as the Tribunal found the company to have been in operation and that restoration of its name is justified.

Restoration subject to filing outstanding statutory documents and payment of prescribed fees - Imposition of conditional payment to Prime Minister's Relief Fund as part of restoration - Restoration of the company's name is ordered subject to specified conditions including filing of outstanding statutory documents, payment of applicable late fees and other charges, and payment to the Prime Minister's Relief Fund. - HELD THAT: - While setting aside the ROC's public notice of striking off, the Tribunal conditioned restoration upon the company's compliance with statutory formalities. The ROC's consent to restoration was recorded subject to the company filing all pending documents and paying late filing fees as prescribed. The Tribunal expressly ordered restoration to be effected only after completion of these formalities and additional payment to the Prime Minister's Relief Fund as directed, thereby making restoration conditional rather than automatic. [Paras 12]

Restoration ordered on compliance with filing of outstanding documents, payment of all applicable fees and charges, and payment to the Prime Minister's Relief Fund.

Final Conclusion: The appeal is allowed: the ROC's strike off notice is set aside and the company's name is ordered restored to the Register, subject to filing all outstanding statutory documents, payment of late and other applicable fees and charges, and payment to the Prime Minister's Relief Fund, after which the Registrar shall restore the name as if it had not been struck off.

Dispensation of meetings under Section 230 of the Companies Act, 2013 - 90% value consent threshold for dispensing with meetings of creditors - proviso to Section 230(4) - objection by persons holding not less than 5% of shareholding - appointment of Chairman and Scrutinizer for creditors' meeting - notice and publication requirements under Companies (Compromises, Arrangements, Amalgamations) Rules, 2016 - permissible voting modes (in person, proxy, postal ballot, electronic means) - conduct of meetings through Video Conferencing or other audio-visual means due to Covid-19 - statutory auditor's certification of accounting treatment under Section 133 of the Companies Act, 2013

Dispensation of meetings under Section 230 of the Companies Act, 2013 - 90% value consent threshold for dispensing with meetings of creditors - Whether meetings of the members, secured and unsecured creditors of the Transferor Company may be dispensed with - HELD THAT: - The Tribunal found that 100% of the shareholders and 98.84% in value of the unsecured creditors of the Transferor Company had filed affidavits consenting to the Scheme and to dispensation of meetings. Applying the statutory threshold under Section 230(9), the Tribunal concluded that calling the meetings of members and unsecured creditors of the Transferor Company was unnecessary. There being no secured creditors, convening a meeting of secured creditors did not arise. Accordingly the Tribunal dispensed with the meetings of shareholders, secured creditors and unsecured creditors of the Transferor Company. [Paras 17, 18]

Meetings of the Transferor Company's shareholders, secured creditors and unsecured creditors are dispensed with.

Dispensation of meetings under Section 230 of the Companies Act, 2013 - 90% value consent threshold for dispensing with meetings of creditors - proviso to Section 230(4) - objection by persons holding not less than 5% of shareholding - Whether meetings of the members, secured and unsecured creditors of the Transferee Company may be dispensed with - HELD THAT: - The record showed 100% of the shareholders and 100% of the secured creditors of the Transferee Company had filed affidavits consenting to the Scheme. However, unsecured creditors of the Transferee Company had given affidavits amounting to 83.69% in value only, which is below the 90% threshold in Section 230(9). The Tribunal therefore dispensed with meetings of shareholders and secured creditors of the Transferee Company but held that the meeting of unsecured creditors could not be dispensed with and must be convened. [Paras 17, 19, 20]

Meetings of the Transferee Company's shareholders and secured creditors are dispensed with; the meeting of its unsecured creditors must be convened.

Notice and publication requirements under Companies (Compromises, Arrangements, Amalgamations) Rules, 2016 - permissible voting modes (in person, proxy, postal ballot, electronic means) - appointment of Chairman and Scrutinizer for creditors' meeting - conduct of meetings through Video Conferencing or other audio-visual means due to Covid-19 - What procedural directions govern the convening and conduct of the unsecured creditors' meeting of the Transferee Company - HELD THAT: - The Tribunal directed that the unsecured creditors' meeting of the Transferee Company be held on the specified date and place, with individual notices to be sent 30 days in advance and publication in specified newspapers, in compliance with the Companies Act and the Companies (Compromises, Arrangements, Amalgamations) Rules, 2016. The Tribunal appointed a Chairman and a Scrutinizer for the meeting and fixed their fees, required furnishing of copies of the Scheme free of charge to creditors, allowed voting by in person, proxy, postal ballot or electronic means as applicable, and authorised holding the meeting by Video Conferencing or other audiovisual means if physical meetings are not feasible due to Covid-19, with preservation of raw unedited footage for verification. The Tribunal also required affidavit evidence of service and compliance before the meeting and directions to send statutory notices to Government and regulatory authorities. [Paras 20]

The Tribunal issued detailed directions governing notice, publication, appointment of officials, voting methods, alternative VC conduct, preservation of records and regulatory notices for the unsecured creditors' meeting.

Final Conclusion: The Company Application is disposed of by (a) dispensing with the meetings of shareholders, secured creditors and unsecured creditors of the Transferor Company; (b) dispensing with the meetings of shareholders and secured creditors of the Transferee Company but directing convenance of the meeting of its unsecured creditors; and (c) issuing procedural directions concerning notice, publication, appointment of Chairman and Scrutinizer, voting modes, Covid-19 compatible conduct and compliance filings in accordance with the Companies Act, 2013 and applicable Rules.

Approval of Resolution Plan under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 - Compliance with Section 30(2) and Regulations 37, 38, 38(1A) and 39(4) of the CIRP Regulations - Effect of pending interim applications on approval and distribution - Binding effect of an approved resolution plan on the corporate debtor and stakeholders - Non-waiver of statutory obligations and requirement to obtain statutory approvals

Approval of Resolution Plan under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 - Compliance with Section 30(2) and Regulations 37, 38, 38(1A) and 39(4) of the CIRP Regulations - The Resolution Plan submitted by Reliance Digital Platform & Project Services Limited complies with the requirements of Section 30(2) of the Code and relevant CIRP Regulations and is to be approved. - HELD THAT: - The Tribunal examined the Resolution Plan against the statutory requirements in Section 30(2) and the mandatory contents under Regulations 37, 38, 38(1A) and 39(4). Reliance's plan provided for priority payment of CIRP costs, proposals for treatment of operational and financial creditors, declarations required under Regulation 38 and Form H under Regulation 39(4), and the Resolution Applicant was found not to be ineligible under Section 29A. The Tribunal applied the limited scope of judicial review as explained by the Apex Court in K. Sashidhar and CoC of Essar Steel, concluding that its role was confined to satisfying itself that the plan meets the statutory criteria and does not trespass upon the commercial decision of the CoC which had approved the plan with 100% voting. On that basis the Tribunal held the Plan meets Section 30(2) and the cited Regulations and allowed the application to approve the Plan.

Resolution Plan approved as meeting the requirements of Section 30(2) and the cited Regulations; application allowed.

Effect of pending interim applications on approval and distribution - Pending interim applications challenging certain claims do not bar approval of the Resolution Plan, but distribution shall remain subject to the outcome of those applications. - HELD THAT: - The Tribunal noted that certain interim applications (IA Nos. 1960 of 2019 and 3055 of 2019) challenging admission/recognition of creditor claims were pending. Relying on the principle that all claims should ordinarily be decided by the RP prior to a plan taking effect (as emphasised in Essar Steel), the Tribunal nevertheless held that pendency of these applications would not preclude approval of a plan unanimously approved by the CoC. The Tribunal directed that distribution to creditors (financial or operational) be subject to orders in the respective interim applications and ordered the Infused Resolution Amount to be kept in an interest-bearing deposit in a nationalised bank until disposal of those applications.

Approval granted despite pendency of related IAs; distribution subject to outcomes of those IAs and funds kept in deposit pending their disposal.

Binding effect of an approved resolution plan on the corporate debtor and stakeholders - Non-waiver of statutory obligations and requirement to obtain statutory approvals - The approved Resolution Plan is binding on the corporate debtor and all stakeholders, does not operate as waiver of statutory obligations, and any statutory waivers or permits must be obtained from the competent authorities. - HELD THAT: - The Tribunal declared that upon its approval the Resolution Plan shall become effective immediately and form part of the order, binding upon the corporate debtor, its employees, members, creditors (including governmental authorities), guarantors and other stakeholders. It refused to grant the general concessions/waivers sought in the Plan and observed that any waiver or statutory permission required under other laws must be obtained from the appropriate authorities and will be considered on merits. The Tribunal also directed amendment and filing of MoA/AoA as necessary and required the RA to obtain all statutory approvals for implementation.

Plan binding on all stakeholders; statutory obligations unaffected and any waivers/permits subject to approval by competent authorities.

Cessation of moratorium under Section 14 upon approval - The moratorium under Section 14 of the Code ceases to have effect from the date of this order. - HELD THAT: - Having approved the Resolution Plan and declared it effective, the Tribunal directed that the moratorium under Section 14 shall cease with effect from the date of the order, enabling implementation of the Plan and takeover of the corporate debtor in accordance with the terms approved.

Section 14 moratorium ceases to have effect from the date of the order.

Supervision of implementation and reporting obligations - The Resolution Professional and the Monitoring Committee shall supervise implementation and report to the Adjudicating Authority periodically; records to be forwarded to IBBI. - HELD THAT: - The Tribunal required the Applicant and the Monitoring Committee to supervise implementation of the Resolution Plan, directed periodic status filings (preferably quarterly) to the Authority, and ordered that all records relating to the CIRP and the Plan be forwarded to the IBBI along with a copy of the Order for information. These directions ensure oversight of implementation without modifying the commercial terms approved by the CoC.

RP and Monitoring Committee to supervise implementation, file periodic status reports, and forward CIRP records to IBBI.

Final Conclusion: The Tribunal allowed the Section 30(6) application and approved the Resolution Plan of Reliance Digital Platform & Project Services Limited as compliant with Section 30(2) and relevant Regulations; the Plan is effective immediately and binding on all stakeholders, distributions are subject to the outcome of pending interim applications, statutory obligations and any required approvals remain unaffected, the Section 14 moratorium ceases, and supervision and reporting directions were given for implementation.

Maintainability of Section 9 application - mandatory ten-day notice period under Section 9 - effect of notification increasing minimum amount of default - prospective operation of delegated legislation - right to sue versus right of forum

Maintainability of Section 9 application - mandatory ten-day notice period under Section 9 - The Section 9 application was not premature and was maintainable despite contentions that it was filed before expiry of the mandatory ten-day period after service of Form 3 demand notice. - HELD THAT: - The Tribunal found on the material placed that the Demand Notice in Form 3 was sent to the corporate debtor on 25.02.2020 and no reply disputing the debt was received within the statutory ten-day period. On this factual foundation the Tribunal held that the operational creditor had exhausted the statutory remedy under Section 8 and was entitled to file the Section 9 application. The contention that the application was not maintainable because the ten-day period had not elapsed was rejected as unsupported by the record; the application IBA/34/KOB/2020 was therefore in order and IA/175/KOB/2020 challenging maintainability was dismissed. [Paras 2, 27, 28]

Section 9 application was maintainable; IA/175/KOB/2020 challenging maintainability dismissed.

Effect of notification increasing minimum amount of default - prospective operation of delegated legislation - right to sue versus right of forum - The Notification dated 24.03.2020 raising the minimum amount of default to Rs. 1 crore is prospective in operation and does not retrospectively bar initiation of CIRP in respect of defaults that arose prior to the notification. - HELD THAT: - Having examined Section 4 and the notification, and after considering NCLAT and Supreme Court precedents on prospective versus retrospective operation of delegated legislation and changes of forum, the Tribunal concluded that the notification contains no express or necessarily implied retrospective intent. Applying the principle that a change in procedural or forum-related law ordinarily operates retrospectively only as to forum but delegated legislation affecting substantive rights requires clear expression to be retrospective, the Tribunal held the notification to be prospective. Consequently, an application based on a default that occurred on 06.07.2019 and where the demand notice was served before 24.03.2020 could not be ousted by the notification. [Paras 10, 22, 24, 26]

Notification dated 24.03.2020 is prospective; it does not displace Section 9 proceedings in respect of defaults that arose prior to 24.03.2020.

Final Conclusion: The IA challenging maintainability is dismissed: the Section 9 application was filed after expiry of the statutory ten-day period following service of the demand notice and the Notification of 24.03.2020 raising the minimum default threshold is prospective and does not bar proceedings in respect of defaults antecedent to the Notification.

Relief under Sabka Vishwas (Legacy Dispute Resolution) Scheme - tax dues - amount in arrears - deduction of pre-deposit or deposit after calculation - voluntary payment versus deposit/pre-deposit - proviso to Section 124(2) - application of the Scheme by the Designated Committee

Relief under Sabka Vishwas (Legacy Dispute Resolution) Scheme - tax dues - deduction of pre-deposit or deposit after calculation - proviso to Section 124(2) - Relief under Section 124 must be calculated on the tax dues as defined in the Scheme and any amount paid as pre-deposit or deposit is to be deducted only after the relief is calculated. - HELD THAT: - The Court held that the Scheme requires the relief to be computed on the statutory notion of tax dues in the categories set out in Section 124(1). The proviso to Section 124(2) makes sense only if the calculation of relief is first performed on the tax dues and thereafter any pre-deposit or deposit is deducted when issuing the statement of amount payable. A contrary approach-deducting deposits before applying the relief-would render the proviso meaningless and effectively allow administrative circulars to override the statutory scheme. Accordingly, Board circulars cannot supplant the statutory sequence of (i) calculating relief on tax dues and (ii) then adjusting any pre-deposits or deposits. [Paras 7]

Calculation of relief must be on the tax dues as defined in the Scheme; deduction of pre-deposits/deposits follows that calculation.

Amount in arrears - voluntary payment versus deposit/pre-deposit - appropriation - Payments already made and appropriated towards the tax liability, which are not deposits made "without prejudice", do not qualify as deposits/pre-deposits for the purpose of deduction under Section 124(2); the 'amount in arrears' is the balance outstanding after such appropriation. - HELD THAT: - The Court examined the definition of amount in arrears under the Scheme and found that where a declarant has paid part of the liability (not as a deposit or pre-deposit made while contesting liability), that payment constitutes satisfaction/appropriation of part of the duty. Such payments cannot be treated as deposits or pre-deposits that are to be adjusted only after calculating relief on the full claimed liability. In the present case the petitioner had already paid and been appropriated an amount, leaving a residual amount in arrears which alone falls to be considered for relief under Section 124(1)(c). [Paras 9, 10]

Voluntary payments already appropriated are not deposits/pre-deposits for the Scheme; relief under Section 124(1)(c) applies to the remaining amount in arrears.

Application of the Scheme by the Designated Committee - Relief under Sabka Vishwas (Legacy Dispute Resolution) Scheme - The Designated Committee correctly applied the Scheme to the petitioner's case and its computation of the amount payable was upheld. - HELD THAT: - Applying the statutory sequence-computing relief on the amount in arrears and then adjusting for amounts already paid-the Court found that the petitioner's residual arrears fell within Section 124(1)(c) and that the Designated Committee properly granted relief at the applicable rate. The petitioner's contention that the relief should have been computed on the entire original demand before adjusting for amounts paid was rejected because the payments had been appropriated and thus reduced the arrears. [Paras 10, 11]

Designated Committee's computation and grant of relief was lawful; petition dismissed.

Final Conclusion: The Court dismissed the writ petition, holding that relief under the Scheme must be calculated on the statutory tax dues/amount in arrears and only thereafter adjusted for amounts already paid; payments already appropriated do not qualify as deposits/pre-deposits for the purpose of the Scheme, and the Designated Committee correctly applied the Scheme.

Quantification of tax liability - final versus provisional quantification - corrective quantification relating back to original quantification - eligibility under SVLDRS-2019 - apparent departmental mistake - equity and fairness in grant of statutory relief

Quantification of tax liability - final versus provisional quantification - corrective quantification relating back to original quantification - eligibility under SVLDRS-2019 - apparent departmental mistake - Whether the revised quantified demand communicated on 27.12.2019 could be treated as substituting the earlier quantified demand of 20.05.2019 so as to render the assessee eligible to apply under SVLDRS-2019. - HELD THAT: - The Court found as an admitted fact that an initial quantification was communicated on 20.05.2019 and later found to be erroneous by the Department, which by communication dated 27.12.2019 reduced the quantified demand. The Scheme SVLDRS-2019 permitted assessees to apply only where liability had been quantified prior to 30.06.2019, and the petitioners applied within the Scheme period after receiving the corrected quantification. The Court held that where an earlier communication had been a final quantification according to the Department but contained an apparent and glaring error (namely inclusion of transactions beyond the period of investigation), a subsequent departmental correction does not operate to displace the fact of earlier quantification for the purpose of scheme eligibility. The revised figure communicated on 27.12.2019 was to be treated as substituting the earlier quantification communicated on 20.05.2019 and therefore as relating back to that earlier quantification, rather than as a new quantification made after the cut-off. Depriving the assessee of scheme benefit on account of the Department's own error would be unfair and unreasonable; accordingly the reason given for rejecting the application as ineligible on the ground of quantification after the cut-off was set aside and the application held to be within time and liable to be processed. [Paras 9, 11, 13, 14, 15]

The revised quantification dated 27.12.2019 was held to substitute and relate back to the quantification of 20.05.2019, making the petitioners' application under SVLDRS-2019 within time and requiring the Department to process the application and communicate forms for deposit.

Final Conclusion: Petition allowed; the departmental ground for rejecting the SVLDRS application (that quantification was not finally communicated before the cut-off) is set aside, the application is to be treated as within time and processed, and the petitioners shall be furnished the necessary forms to make the deposit under the Scheme.

Relevancy of statements recorded under Section 14 and admissibility under Section 9D of the Central Excise Act (procedure for admitting statements) - clandestine removal (misdescription of goods to evade duty) - use of dummy/front companies to effect clandestine clearances - flow back of sale proceeds (receipt of sale consideration through third party accounts) - standard of proof in Central Excise adjudication - preponderance of probabilities - principles of natural justice in adjudication (supply of relied upon documents and right to cross examination)

Relevancy of statements recorded under Section 14 and admissibility under Section 9D of the Central Excise Act (procedure for admitting statements) - principles of natural justice in adjudication (right to cross examination) - Admissibility of statements recorded during investigation - HELD THAT: - The Bench applied the statutory scheme that statements recorded under Section 14 are relevant in adjudicatory/quasi judicial proceedings only insofar as Section 9D is satisfied. The authority held that where makers of statements were not examined before the adjudicating authority and/or not subject to examination in chief and cross examination before that authority, such statements cannot be relied upon. Consequently six of the eighteen recorded statements which were not cross examined during denovo proceedings are inadmissible; only twelve statements that were actually cross examined before the adjudicating authority could be considered. The Tribunal rejected the contention that long delay or prior investigative statements alone suffice; procedural compliance with Section 9D and opportunity to test evidence by cross examination is mandatory. [Paras 8, 10, 18, 19]

Statements not examined/cross examined before the adjudicating authority under Section 9D are not admissible; only twelve cross examined statements could be considered.

Clandestine removal (misdescription of goods to evade duty) - standard of proof in Central Excise adjudication - preponderance of probabilities - Whether the department proved clandestine manufacture, transportation and sale of resins by the assessee - HELD THAT: - Applying the civil standard of preponderance of probabilities, the Tribunal examined the available pieces of evidence relied upon by Revenue (seized barrels and sample analysis, transporter statements, private books, purchasers' statements, and alleged flow back). Many purchaser and transporter statements were negated on cross examination; given Section 9D only admissible statements could be relied on, and several key witnesses either repudiated earlier statements or were not cross examined. On the totality of admissible evidence the Bench found that the Department had not established with the requisite preponderance that the transporters and purchasers corroborated clandestine transportation and sale by the assessee. The technical Member emphasised that retractions on cross examination undermine the evidentiary value of earlier statements, and therefore the chain establishing transportation and sale remained unproved. [Paras 11, 16, 19, 21, 22]

Revenue did not establish clandestine transportation and sale of the goods to a reasonable degree of certainty on admissible evidence; that part of the case fails.

Use of dummy/front companies to effect clandestine clearances - relevancy of contemporaneous private records and bank accounts as corroborative evidence - Whether M/s Kalyan Chemicals and M/s Prasad Chemicals were dummy firms used by the assessee - HELD THAT: - The Tribunal found that the evidence as to the existence and operation of M/s Kalyan Chemicals and M/s Prasad Chemicals as concerns created and used at the instance of the assessee was established. Two employees (M. Kalyana Chakravarthy and V.B.S. Durga Prasad) affirmed their investigative statements on cross examination, admitted their roles in maintaining bills and accounts, and identified documents showing bills and related records prepared at the behest of the Managing Director. The Technical Member's reasoning (which the Bench records) points to documentary and testimonial material tying the proprietorships to the assessee's control. The majority concluded that creation and use of these entities as non independent fronts was established and not effectively countered. [Paras 18, 19, 21, 46]

The Tribunal accepts that M/s Kalyan Chemicals and M/s Prasad Chemicals were dummy/front concerns created and used at the instance of the assessee.

Flow back of sale proceeds (receipt of sale consideration through third party accounts) - relevancy of bank records and counterfoils as corroborative evidence - Whether the flow back of sale proceeds to the assessee was established - HELD THAT: - The evidence included bank deposit counterfoils, demand draft applications, private ledgers and some account statements indicating deposits into accounts of employees and withdrawals/DDS. The Tribunal found that while there was some evidence of deposits and DD counterfoils, the material was insufficient to establish, to the required preponderance, that sale proceeds flowed back to the assessee. The Technical Member detailed documentary links and large deposits in employee accounts, but the majority concluded that such evidence did not satisfactorily prove flow back to the assessee. [Paras 20, 42, 44]

Evidence of flow back (cash/DD) is present to some extent but is not sufficient to establish, on balance of probabilities, that sale proceeds flowed back to the assessee.

Final Conclusion: Applying Section 9D and the civil standard of proof, the Tribunal found the admissible evidence insufficient to establish clandestine transportation and sale of resins by the assessee or a proved flow back of sale proceeds, although the use of two dummy concerns was established; accordingly the impugned adjudication order is set aside and the appeals are allowed with consequential relief.