TaxTMI Updates e-Newsletter
Dec 09,2021

Detention of goods carrier under GST - notice under Section 129(3) of the Central Goods and Services Tax Act, 2017 and Tamil Nadu Goods and Services Tax Act, 2017 - interim release on deposit of disputed tax and partial penalty - remedy by appeal before the Appellate Commissioner under Section 107 of the CGST Act, 2017 and the TNGST Act, 2017

Detention of goods carrier under GST - interim release on deposit of disputed tax and partial penalty - Release of the detained goods vehicle on deposit of the disputed tax and a portion of the proposed penalty. - HELD THAT: - The High Court did not finally adjudicate the substantive correctness of the detention or the tax liability but directed an interim measure in view of prolonged detention since 13.10.2021. The petitioner was ordered to pay the disputed tax proposed in the notice and 50% of the proposed penalty within two weeks of receipt of the order; upon such payment the respondents are directed to release the goods vehicle. The order is an interim relief to facilitate release pending further adjudication by the appropriate authority. [Paras 6, 7]

If the petitioner deposits the disputed tax and 50% of the proposed penalty within two weeks, the respondents shall release the detained goods vehicle.

Notice under Section 129(3) of the Central Goods and Services Tax Act, 2017 and Tamil Nadu Goods and Services Tax Act, 2017 - remedy by appeal before the Appellate Commissioner under Section 107 of the CGST Act, 2017 and the TNGST Act, 2017 - Leave to pursue statutory appellate remedy before the Appellate Commissioner and further adjudication by the appropriate authority. - HELD THAT: - The Court left the substantive controversy for adjudication by the competent authority and expressly granted the petitioner liberty to pursue remedy on merits before the Appellate Commissioner under Section 107 of the CGST Act, 2017 and the TNGST Act, 2017. The appellate authority is to consider the matter on merits; the High Court's direction is limited to interim release upon specified payments and does not preclude fresh consideration by the Appellate Commissioner. [Paras 5, 6, 7]

The petitioner is permitted to prosecute the statutory appeal under Section 107 and the Appellate Commissioner shall consider the matter on merits.

Final Conclusion: Writ petition disposed by directing interim release of the detained vehicle on payment of the disputed tax and 50% of the proposed penalty within two weeks; substantive issues left to be adjudicated by the appropriate authority and the petitioner granted liberty to appeal to the Appellate Commissioner under Section 107.

Release of seized goods - seizure and assessment under GST - burden of proof of ownership and entitlement to goods - payment of tax for release of goods - application under Section 129(1)(c) of the G.S.T. Act, 2017 - FORM GST MOV-08

Release of seized goods - burden of proof of ownership and entitlement to goods - payment of tax for release of goods - Claim of starvation does not entitle petitioner to immediate release of seized goods without compliance with statutory procedure; petitioner must establish entitlement and comply with GST requirements including payment of tax where applicable. - HELD THAT: - The Court held that mere assertions of hardship or starvation by the petitioner do not provide a basis for releasing seized goods outside the statutory scheme. It is the petitioner's responsibility to produce specific documents demonstrating ownership or interest in the goods and to follow the procedures under the applicable GST law for release. The order notes that the statutory framework allows release of goods on compliance, including payment of tax due, and that equitable pleas of hardship cannot substitute for compliance with statutory requirements. The Court therefore did not grant immediate relief on the basis of starvation alone and declined to override the statutory process.

Petition seeking release on ground of starvation rejected; petitioner must establish entitlement and comply with statutory requirements for release.

Application under Section 129(1)(c) of the G.S.T. Act, 2017 - FORM GST MOV-08 - seizure and assessment under GST - Petitioner permitted to approach the detaining authority by making the statutory application for release under Section 129(1)(c) read with the C.G.S.T. Act, 2017 using FORM GST MOV-08; authority directed to consider and decide the application in accordance with law. - HELD THAT: - The Court directed that the appropriate course for the petitioner is to move the authority concerned (respondent no.3) by filing the prescribed application under Clause (c) of Sub-section (1) of Section 129 of the G.S.T. Act, 2017 read with the C.G.S.T. Act, 2017, including use of FORM GST MOV-08 and accompanying compliance. The authority is required to consider such application and decide it in accordance with law. This direction effectively remands the matter to the detaining authority for fresh consideration rather than adjudicating the substantive entitlement to release on merits in the writ petition.

Petitioner directed to file application under Section 129(1)(c) using FORM GST MOV-08; detaining authority to consider and decide afresh in accordance with law.

Final Conclusion: Writ petition disposed. No immediate release granted on plea of starvation; petitioner to file the statutory application under Section 129(1)(c) (FORM GST MOV-08) and the detaining authority (respondent no.3) to consider and decide the application in accordance with law.

Parts of goods of headings 8901-8907 attract concessional rate under Sr. No. 252 of Notification No. 01/2017 - Concessional rate applies when imported goods are used as parts in vessels classified under headings 8901, 8902, 8904-8907 - Classification of marine engines under headings 8407/8408 and spare parts under 8409 subject to ultimate use - Items not conforming to "parts of marine engines" excluded from concessional entry - Taxability of repair and maintenance as composite supply depends on predominant element - Circular No. 52/26/2018 GST clarifies applicability of Sr. No. 252 to marine engines for fishing vessels

Parts of goods of headings 8901-8907 attract concessional rate under Sr. No. 252 of Notification No. 01/2017 - Classification of marine engines under headings 8407/8408 and spare parts under 8409 subject to ultimate use - Circular No. 52/26/2018 GST clarifies applicability of Sr. No. 252 to marine engines for fishing vessels - Marine engines of headings 8407/8408 and their spare parts of heading 8409 are chargeable to GST at 5% under Sr. No. 252 when used as parts of fishing vessels classified under heading 8902. - HELD THAT: - The authority accepted that the engines are imported under HSN 8407/8408 and parts under 8409 and that fishing vessels are classifiable under heading 8902. Sr. No. 252 of Notification No. 01/2017 covers "parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907" and therefore parts that are incorporated in fishing vessels fall within the concessional entry. The AAR applied its earlier reasoning in M/s MAN Energy Solutions India Pvt. Ltd., holding that marine diesel engines and parts are covered by Sr. No. 252 only when used in the manufacture of goods falling under those vessel headings. The Circular No. 52/26/2018 GST confirming that marine engines for fishing vessels attract the concessional rate was held to be applicable. Consequently, where the impugned goods are used as parts of fishing vessels (HSN 8902), they attract GST at the concessional rate specified by Sr. No. 252. Goods which do not conform to the character of "parts of marine engines" are not covered by Sr. No. 252 and will be taxable under their own tariff classification. [Paras 5]

Marine engines of headings 8407/8408 and parts under 8409 used as parts of fishing vessels (heading 8902) are covered by Sr. No. 252 and attract the concessional GST rate; items not conforming to "parts of marine engines" remain outside the entry.

Parts of goods of headings 8901-8907 attract concessional rate under Sr. No. 252 of Notification No. 01/2017 - Concessional rate applies when imported goods are used as parts in vessels classified under headings 8901, 8902, 8904-8907 - Items not conforming to "parts of marine engines" excluded from concessional entry - Whether the concessional rate under Sr. No. 252 applies when marine engines and parts are supplied for use in vessels used for defence, patrolling, flood relief and rescue (headings 8901, 8904-8907). - HELD THAT: - The AAR applied the same legal principle as with fishing vessels: Sr. No. 252 covers parts of goods of headings 8901, 8902, 8904-8907. Therefore, marine engines and parts will attract the concessional rate when they are supplied for use in ships/vessels falling under those headings, irrespective of the purpose (defence, patrolling, flood relief, rescue). The authority reiterated that items which do not conform to the nature of "parts of marine engines" are not covered by Sr. No. 252 and must be taxed according to their own tariff classification. [Paras 5]

GST at the concessional rate under Sr. No. 252 applies to marine engines and parts when supplied for use in vessels classified under headings 8901, 8902, 8904, 8905, 8906, 8907 (including vessels used for defence, patrolling, flood relief and rescue); non conforming items are excluded.

Taxability of repair and maintenance as composite supply depends on predominant element - Tax rate applicable to repair and maintenance of fishing vessels depends on whether the contract is a composite supply and the predominant element. - HELD THAT: - The authority recorded the settled position that repair and maintenance services are treated as composite supplies and the taxability depends on the predominant element of the contract; where service is predominant, repair and maintenance attract the rate applicable to services (e.g., 18% under the relevant entry). The determination requires examination of the contracts with vendors to ascertain the predominant element. [Paras 3]

Repair and maintenance of fishing vessels may attract service rates if the service element predominates; applicability must be assessed from the contract terms.

Final Conclusion: The Advance Ruling holds that marine engines (HSN 8407/8408) and their spare parts (HSN 8409) attract the concessional GST rate under Sr. No. 252 of Notification No. 01/2017 C.T.(Rate) when used as parts of vessels classified under headings 8901, 8902, 8904, 8905, 8906 and 8907 (including fishing, defence, patrolling, flood relief and rescue vessels); items not constituting "parts of marine engines" fall outside the concessional entry and are taxable under their own tariff headings, and repair/maintenance taxability depends on the predominant element of the contract.

Supply - Agreement to sell vs Agreement of sale - Time of supply - Delivery and appropriation of goods - Passing of property and risk - Goods perishing before sale - Admissibility of advance ruling "in relation to" supply

Supply - Delivery and appropriation of goods - Passing of property and risk - Whether mere acceptance of joint custody of goods without rights and privileges of ownership amounts to a "supply" under Section 7 of the GST Act. - HELD THAT: - The Authority examined the inclusive definition of "supply" under the GST Act together with provisions on time and place of supply and invoice issuance. For goods, supply envisages movement or transfer of possession (actual or constructive) from one person to another and is linked to delivery and issuance of invoice. The terms of the contract showed numerous conditions precedent to transfer - payment of instalments, acceptance of quality, appropriation to the contract - and the Federation retained control (including rights to seize or re sell). The insurance policy in the Federation's name and conduct of the parties (no certificate of sale, no invoice or delivery note for the third and fourth instalments) indicate that neither property nor risk had passed to the applicant prior to the fire. Joint custody under a double lock, where control and rights of ownership remain with the supplier, was held to be symbolic and not constitutive of delivery or transfer of property. Consequently, mere joint custody without fulfilment of contractual conditions and without issuance of invoice does not constitute supply under Section 7. [Paras 8, 9]

Taking joint custody of Tendupatta by the applicant does not amount to supply of the goods if the invoice is not issued and conditions for transfer of property/ risk are not satisfied.

Goods perishing before sale - Agreement to sell vs Agreement of sale - Time of supply - Whether goods destroyed by fire before delivery under an agreement to sell can constitute a "supply" under Section 7 of the GST Act after their destruction. - HELD THAT: - The Authority applied the Sale of Goods Act principles to the facts: the transaction was for future goods and, absent unconditional appropriation to the contract, property and risk do not pass to the buyer. Section 8 of the Sale of Goods Act provides that where specific goods perish before the risk passes, the agreement is avoided. The GST law requires the subject matter of supply to exist; non existent or destroyed goods cannot be the subject of supply. Time of supply (earlier of invoice issuance or receipt of payment) had not occurred before the perishance; consequently, there could be no taxable supply after destruction of the goods. [Paras 8, 9]

Goods that are the subject matter of an agreement to sell and that are destroyed before sale cannot constitute a "supply" under Section 7 of the GST Act after their destruction.

Final Conclusion: The Authority ruled that (i) mere joint custody of goods without transfer of ownership, appropriation, delivery or issuance of invoice does not amount to supply under the GST Act, and (ii) goods destroyed before they became the subject of sale cannot be treated as supply after destruction; the ruling is subject to statutory provisos for advance rulings.

Supply - Services by an employee to the employer in the course of or in relation to his employment - Tolerating an act - Schedule II clause 5(e) - Activities or transactions specified in Schedule III - Input Tax Credit - availability and blocked credits - Value of supply between related persons - Rule 28 valuation - Pure agent - Rule 33 (GST Rules) - Canteen services treated as "restaurant service" (notification interpretation)

Supply - Tolerating an act - Schedule II clause 5(e) - Services by an employee to the employer in the course of or in relation to his employment - GST applicability on notice pay recovered by employer from employee in lieu of notice period - HELD THAT: - The Authority held that when an employer accepts a shorter notice period and recovers notice pay, the employer is tolerating the employee's act or situation and therefore the transaction falls within clause 5(e) of Schedule II and is a supply liable to GST. The Authority rejected the applicant's contention that clause 1 of Schedule III (services by an employee to the employer) excludes such recovery, observing that Schedule III's clause 1 pertains to services by the employee (not employer-provided relief of an employee's act) and that the factual scenario involves tolerance of an act by the employer which attracts Schedule II. Prior Service Tax decisions on analogous facts were noted but distinguished as not being directly determinative of GST treatment.

GST is applicable on notice pay recovered by the employer in lieu of notice period.

Supply - Business - activities incidental or ancillary to main business - Pure agent - Rule 33 (GST Rules) - GST applicability on premium of group medical insurance recovered at actuals from non-dependent parents of employees and from retired employees - HELD THAT: - The Authority concluded that recovery of such premiums by the applicant is a supply within the ambit of Section 7 because the activity is in connection with or incidental or ancillary to the applicant's business. The Authority observed that if the applicant had acted as a pure agent under Rule 33, GST would not attach; however, as the applicant did not establish that it acted as the insurer's agent, the recoveries constitute the applicant's supply and are liable to GST.

Premium recovered by the applicant from non-dependent parents and retired employees is a supply and liable to GST.

Supply - Services by an employee to the employer in the course of or in relation to his employment - Value of supply between related persons - Rule 28 valuation - Canteen services treated as "restaurant service" (notification interpretation) - GST treatment and valuation of nominal recoveries from employees for canteen facilities - HELD THAT: - The Authority held that canteen services provided by the employer to employees are supplies by the employer (not services by an employee) and therefore fall within the scope of Section 7. The employer-employee relationship makes them related-party transactions; consequently the value of such supply must be determined under Rule 28 rather than by the nominal amount recovered. The Authority further considered notifications treating canteen services as restaurant service and the related restrictive rules on claiming ITC (addressed separately).

Recovery from employees for canteen facilities is a taxable supply; valuation is to be determined under Rule 28, not by the nominal recovered amount.

Supply - Business - activities incidental or ancillary to main business - Input Tax Credit - availability - GST applicability on telephone charge recoveries from employees (over and above BSNL fixed rental) - HELD THAT: - The Authority found that provision of telephones and recovery of excess charges from employees is an activity incidental or ancillary to the applicant's business and thus constitutes a supply under Section 7. Accordingly, amounts recovered from employees towards telephone charges are taxable and the applicant is liable to pay GST on such recoveries.

GST is applicable on telephone charges recovered from employees.

Input Tax Credit - availability and blocked credits - Canteen services treated as "restaurant service" (notification interpretation) - Value of supply between related persons - Rule 28 valuation - Availability of Input Tax Credit (ITC) in respect of premiums (Question II), canteen services (Question III) and telephone charges (Question IV) - HELD THAT: - The Authority ruled categorically on ITC: (A) ITC in respect of insurance premium paid to the insurer is available to the applicant to the extent of the applicant's further taxable supply (subject to Section 17(5) conditions); (B) ITC in respect of canteen services is not available in view of the notification interpretation that treats canteen as restaurant service attracting a mandatory reduced rate without ITC; (C) ITC is available on telephone charges paid to BSNL because such supplies are taxable supplies of the applicant and are not listed as blocked credits under Section 17.

ITC: available for insurance premiums to the extent of further taxable supply; not available for canteen services; available for telephone charges.

Activities or transactions specified in Schedule III - Supply - Value of supply between related persons - Rule 28 valuation - GST liability where canteen services are provided free of cost to employees - HELD THAT: - The Authority rejected the applicant's submission that free provision of canteen services to employees falls under paragraph 1 of Schedule III. It observed that paragraph 1 covers services by an employee to the employer, whereas free canteen provision is a supply from employer to employee. Even if no consideration is charged, the transaction is a supply and taxable; its value is to be determined under Rule 28 as a related-party transaction.

Free canteen services provided by the employer to employees are taxable supplies and valued under Rule 28.

Input Tax Credit - availability and blocked credits - Canteen services treated as "restaurant service" (notification interpretation) - Availability of ITC on inputs and input services used to provide free canteen services to employees - HELD THAT: - Relying on the notification regime and its explanation that canteen services fall within 'restaurant service' attracting a mandatory reduced rate without ITC, the Authority held that the applicant is not eligible to claim ITC on goods and services used for providing canteen services, whether charged nominally or provided free.

ITC is not available on inputs and input services used for providing canteen services to employees.

Final Conclusion: The Authority ruled that (1) notice pay recovered from employees is a taxable supply under Schedule II clause 5(e); (2) premiums recovered for non-dependent parents and retired employees are supplies liable to GST (not being pure-agent transactions); (3) recoveries for canteen facilities and telephone charge recoveries are taxable supplies, with valuation of employer-employee canteen supplies governed by Rule 28; and (4) ITC is available for insurance premiums to the extent of further taxable supply, is not available for canteen services (per the notification treatment), and is available for telephone charges paid to BSNL.

Refund of excess interest paid on account of utilisation of electronic credit ledger - retrospective amendment to Section 50 of the CGST Act - interest payable on net cash tax liability - condonation of delay in filing appeal under Section 107 - refund procedure under Section 54 read with Rule 89

Condonation of delay in filing appeal - appeal period under Section 107(1) - Whether the appeal, filed after the three-month statutory period, was liable to be dismissed or whether delay should be condoned. - HELD THAT: - The Commissioner (Appeals) examined receipt date of the impugned order and the filing date of the appeal and applied Section 107(1) and proviso in Section 107(4). The appellate authority accepted that the appeal was filed beyond the normal three-month period but found that the appellant had shown sufficient cause for delay and that the excess delay (21 days beyond the permissible one-month extension) could be condoned. The statutory framework permits condonation of delay for up to one further month if sufficient cause is shown; the authority exercised that discretion in favour of the appellant after noting the appellant's explanation and correspondence. [Paras 7]

Delay in filing the appeal was condoned and the appeal was admitted for adjudication on merits.

Refund of excess interest paid on account of utilisation of electronic credit ledger - retrospective amendment to Section 50 of the CGST Act - interest payable on net cash tax liability - refund procedure under Section 54 read with Rule 89 - Whether the appellant was entitled to refund of interest paid in excess because interest after retrospective amendment to Section 50(1) is payable only on the portion of tax discharged through the electronic cash ledger. - HELD THAT: - The authority examined the administrative instruction dated 18.09.2020 and the retrospective amendment effected by Section 112 of the Finance Act, 2021 which substitutes the proviso to Section 50(1), and noted notification bringing the amendment into force. The substituted proviso deems that interest for delayed returns is payable only on the portion of tax paid by debiting the electronic cash ledger (net cash tax liability). The appellant had, prior to issuance of the instruction and amendment, paid interest on tax discharged partly through the electronic credit ledger. Applying the amended proviso (deemed effective from 01.07.2017), the authority concluded that interest paid in respect of tax discharged through the electronic credit ledger exceeded the actual interest liability and was therefore refundable. The authority also relied on the statutory entitlement to seek refunds under Section 54(1) read with Rule 89(1) and found the appellant's refund application to fall within the prescribed form and grounds. [Paras 11, 12, 13]

Impugned order rejecting the refund was set aside; the appellant is entitled to refund of interest paid in excess and the matter is remitted to the adjudicating authority to process the refund in accordance with the CGST Act, rules and applicable guidelines.

Final Conclusion: The appeal was admitted by condoning the delay and the impugned order rejecting the refund has been set aside; the appellant is entitled to refund of interest paid in excess for the period July-2017 to March-2018 and the adjudicating authority is directed to process the refund claim in accordance with law and applicable procedures.

Reopening assessment - Income escaping assessment - Proviso to Section 147 - limitation after four years unless failure to disclose fully and truly all material facts - Failure to disclose fully and truly all material facts - Change of opinion not a ground for reopening - Transfer pricing disclosure and Form 3CEB considered in original assessment

Failure to disclose fully and truly all material facts - Proviso to Section 147 - limitation after four years unless failure to disclose fully and truly all material facts - Change of opinion not a ground for reopening - Transfer pricing disclosure and Form 3CEB considered in original assessment - Validity of the notice issued under Section 148 read with Section 147 for AY 2004-2005 in the absence of a clear case of failure to disclose fully and truly all material facts. - HELD THAT: - The Court applied the proviso to Section 147 and held that reopening after the four-year period requires that the Assessing Officer demonstrate that income escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The reasons recorded for reopening (communication dated 4th July 2011) did not identify any specific material fact which the petitioner failed to disclose. The petitioner had disclosed the technical know how fees, royalties and technical assistance fees in its annual report and in Form 3CEB; the Transfer Pricing Officer had considered these transactions and passed an order which was taken into account in the original assessment under Section 143(3). While precedents permit inference of nondisclosure from the reasons, such an inference must be cogent and clear; absent that, the assumption of jurisdiction is impermissible. The Court concluded that the recorded reasons amounted to a mere change of opinion and therefore did not constitute a valid foundation for reopening the assessment. [Paras 6, 8, 9, 10]

The notice dated 23rd March 2011 issued under Section 148 and the consequential notices and orders impugned in the petition were held to be issued after an invalid assumption of jurisdiction and were quashed and set aside; petition allowed.

Final Conclusion: The petition was allowed; the Court quashed the impugned notice under Section 148 and the consequential notices and orders for AY 2004-2005 on the ground that the reasons did not demonstrate any failure by the assessee to disclose fully and truly all material facts and amounted to impermissible change of opinion.

Re-opening of assessment after four years under the proviso to Section 147 of the Income-tax Act - failure to disclose fully and truly all material facts necessary for assessment - assessment completed under Section 143(3) - effect of subsequent appellate orders on the validity of reasons for reopening - absence of fresh tangible material to warrant reopening - deduction under Section 80IA/80HHA and reliance thereon as a reason for reassessment

Re-opening of assessment after four years under the proviso to Section 147 of the Income-tax Act - failure to disclose fully and truly all material facts necessary for assessment - assessment completed under Section 143(3) - Validity of notice issued under Section 148 for AY 1997-98 where reopening is proposed after four years from the end of the assessment year. - HELD THAT: - Where an assessment under Section 143(3) has been completed for the relevant assessment year, reopening after the expiry of four years is permissible only if there is a reason to believe that income chargeable to tax has escaped assessment by reason of the assessee's failure to disclose fully and truly all material facts necessary for assessment. The reasons recorded in the impugned notice do not identify any particular material fact which the assessee failed to disclose fully and truly. In the absence of such a specific disclosure failure, the proviso to Section 147 is not satisfied and the notice issued after four years is invalid. [Paras 4]

Notice dated 30/03/2004 for AY 1997-98 is invalid and must be set aside for failure to identify non-disclosure of material facts.

Effect of subsequent appellate orders on the validity of reasons for reopening - deduction under Section 80IA/80HHA and reliance thereon as a reason for reassessment - Whether reliance on an assessment/order for AY 2001-02 (where claim under Section 80IA was rejected) can constitute valid grounds for reopening assessment for AY 1997-98 after that order was overturned on appeal. - HELD THAT: - The assessing authority relied on the order for AY 2001-02 rejecting the claim under Chapter VIA as a basis to form a reason to reopen AY 1997-98. However, the order relied upon was set aside on appeal: CIT(A) allowed the deduction and the ITAT dismissed the Revenue's appeal, and that decision has attained finality. Once the foundational order relied upon for reopening has been negatived and rendered ineffective by subsequent appellate orders, it cannot sustain the reason to believe necessary to reopen the earlier assessment. [Paras 7, 8]

Reopening based on the order for AY 2001-02 is unavailable where that order has been reversed on appeal and has attained finality; the notice is therefore unsustainable on this ground.

Absence of fresh tangible material to warrant reopening - Whether any new tangible material was discovered to justify reopening the assessment for AY 1997-98. - HELD THAT: - Prior to passing the original assessment for AY 1997-98, the assessee had been called upon for details and had furnished particulars, after which deductions under Chapter VIA (including Section 80IA) were allowed. There is no indication that any new tangible material was discovered subsequently which could form the basis for reopening. In absence of fresh tangible material, the jurisdiction to reopen is not established. [Paras 9]

No fresh tangible material was shown to justify reopening; the assessment cannot be validly reopened on that basis.

Final Conclusion: Writ petition allowed; impugned notice dated 30/03/2004 and the consequential proceedings for AY 1997-98 quashed for failure to satisfy the proviso to Section 147, absence of fresh material, and because the relied-upon order for AY 2001-02 has been set aside on appeal. Petition disposed of with no order as to costs.

Reopening of assessment under Section 148 - proviso to Section 147 - failure to disclose material facts - block assessment under Chapter XIV-B - bar on inclusion of block-assessed income in regular assessment (Section 158BA(2))

Reopening of assessment under Section 148 - proviso to Section 147 - failure to disclose material facts - Validity of the notice dated 30th March, 2004 under Section 148 for Assessment Year 1997-98 - HELD THAT: - The reasons for reopening relied upon the allegation that deductions under Sections 80HH/HHA/I/IA had not been properly examined in the regular assessment. The court held that where a notice under Section 148 is issued after four years, the proviso to Section 147 requires that the assessee must have failed to disclose fully and truly all material facts; the reasons must specify the material fact alleged to have been omitted. The reasons on record did not identify any specific material fact not disclosed by the petitioner. On that ground alone the notice lacked the requisite foundation and had to be set aside.

Notice under Section 148 was invalid for failing to identify any material fact allegedly not disclosed and is set aside.

Block assessment under Chapter XIV-B - bar on inclusion of block-assessed income in regular assessment (Section 158BA(2)) - Whether reopening was permissible where the same deductions had already been disallowed in block assessment proceedings - HELD THAT: - The court noted that during block assessment for the period 1st April, 1995 to 5th January, 2002 the deductions claimed by the petitioner were disallowed by an order dated 30th January, 2004. On the date the impugned notice was issued, the income alleged to have escaped assessment had already been dealt with in the block assessment. Section 158BA(2) (and the scheme of Chapter XIV-B) precludes including income assessed in a block assessment in regular assessment for earlier years. Reliance was placed on the court's earlier reasoning that once block assessment brings income to tax, the assessing officer cannot have a fresh reason to believe that the same income has escaped assessment for the relevant year.

Reopening was impermissible because the block assessment order had already disallowed the same deductions and statutory bar under Chapter XIV-B prevented subjecting that income to regular assessment.

Final Conclusion: Writ petition allowed; the notice dated 30th March, 2004 under Section 148 is quashed and set aside and the petition disposed of, with no order as to costs.

Transfer pricing comparability - Arm's length price - Use of comparables and filtering criteria in transfer pricing - Estimate and fair value exercise - Role of fact-finding authorities in transfer pricing - Perverse finding

Transfer pricing comparability - Use of comparables and filtering criteria in transfer pricing - Perverse finding - The ITAT was justified in directing exclusion of Motilal Oswal Investment Advisors Pvt. Ltd. from the set of comparables. - HELD THAT: - The High Court held that ITAT's conclusion to exclude Motilal Oswal from the comparable set was a finding of fact. Determination of appropriate comparables for arriving at arm's length price is an exercise dependent on factual materials and application of filters (such as related party transactions, turnover, employee cost and segmental revenue). The court observed that selection or rejection of comparables is essentially an estimate of fair value by fact-finding authorities (TPO/DRP/ITAT) based on available public-domain data and the assessee's Transfer Pricing Analysis, and that the revenue failed to demonstrate any perversity in ITAT's factual conclusion. Accordingly, the appellate challenge did not raise a substantial question of law on this point. [Paras 2, 3]

ITAT's exclusion of Motilal Oswal as a comparable upheld; no perversity shown.

Transfer pricing comparability - Arm's length price - Estimate and fair value exercise - The ITAT was correct in holding that IDFC India Advisors Ltd. was not functionally comparable to the assessee for Rule 10B(2) purposes. - HELD THAT: - The court reiterated that functional comparability determinations rest on factual appraisal of activities and available data. It observed that the process of identifying comparables requires application of recognised filters and factual scrutiny by the TPO/ITAT, and that such determinations amount to an exercise of estimate rather than a pure question of law. The Revenue did not demonstrate that ITAT's factual conclusion regarding IDFC was perverse or based on incorrect legal principles, and therefore no substantial question of law arose from that finding. [Paras 2, 3]

ITAT's conclusion that IDFC India Advisors Ltd. was not comparable is sustained.

Transfer pricing comparability - Use of comparables and filtering criteria in transfer pricing - Role of fact-finding authorities in transfer pricing - The ITAT was justified in directing the AO/TPO not to consider ICRA Online Ltd. as a comparable. - HELD THAT: - The High Court held that ITAT's direction to exclude ICRA Online was a factual determination within the province of the fact-finding authorities. Selection of comparables involves application of statutory rules and filters to public-domain data and the assessee's analysis; it is fundamentally an evaluative exercise of estimate and factual judgment. The Revenue failed to show that ITAT's decision was perverse or legally erroneous. Thus the challenge did not disclose any substantial question of law warranting interference. [Paras 2, 3]

ITAT's direction to exclude ICRA Online as a comparable is affirmed.

Final Conclusion: The appeal is dismissed; ITAT's factual findings on comparability and exclusion of the cited companies are not shown to be perverse and do not raise substantial questions of law, the selection of comparables being an evaluative estimate entrusted to fact-finding authorities.

Reasonable opportunity of being heard - special audit under Section 142(2A) of the Income Tax Act - proviso to Section 142(2A) - speaking order requirement - principles of natural justice

Reasonable opportunity of being heard - special audit under Section 142(2A) of the Income Tax Act - proviso to Section 142(2A) - Whether the petitioner was afforded the reasonable opportunity of being heard required before directing a special audit under Section 142(2A). - HELD THAT: - The Court examined the materials on record, including the communications and the petitioner's replies, and applied the principle that the proviso to Section 142(2A) mandates that the assessee be given a reasonable opportunity of being heard before directing a special audit. Reliance was placed on the Supreme Court's exposition in Rajesh Kumar that hearing need not be elaborate but must be afforded. The record shows issuance of the show cause communication, the petitioner's detailed objections through the e-portal and subsequent communications culminating in approval and appointment of the special auditor. The Court found that objections were filed and considered and that substantial opportunity was afforded in accordance with the proviso.

The requirement of giving a reasonable opportunity of hearing under the proviso to Section 142(2A) was satisfied; no interference warranted.

Speaking order requirement - principles of natural justice - Whether the order approving initiation of special audit was vitiated for lack of a speaking order setting out reasons. - HELD THAT: - The petitioner contended that a speaking order explaining the reasons for directing a special audit is required. The Court observed that the Supreme Court in Rajesh Kumar recognised that the hearing under the provision need not be elaborate and that Parliament inserted the proviso to ensure opportunity of hearing. Given that the petitioner admitted adequate opportunity had been afforded and the record indicates consideration of objections, the Court did not accept that absence of detailed reasons rendered the action vitiated. The Court held that the existence of a hearing and consideration of objections satisfied the statutory requirement and that the contention of non-application of mind or total absence of reasons was contrary to the documentary record.

Absence of an elaborate speaking order did not vitiate the approval of special audit where reasonable opportunity was granted and objections considered; challenge dismissed.

Final Conclusion: The writ petition was dismissed; the Court held that the proviso to Section 142(2A) was complied with, the petitioner was given a reasonable opportunity and objections were considered, and therefore the approval of special audit did not merit interference.

Faceless assessment procedure - requirement to serve draft assessment order and show cause notice under section 144B - Non compliance of the procedural mandate in section 144B rendering assessment non est - Violation of principles of natural justice in faceless assessment - Assessment passed without jurisdiction where statutory procedure is not followed - High Court writ jurisdiction despite availability of alternative remedy where there is failure of statutory procedure or natural justice

Faceless assessment procedure - requirement to serve draft assessment order and show cause notice under section 144B - Violation of principles of natural justice in faceless assessment - Validity of the assessment order dated 20.04.2021 in view of alleged non service of draft assessment order and show cause notice under the faceless assessment regime. - HELD THAT: - The Court examined the statutory scheme under section 144B, which mandates electronic service of draft assessment orders and, where a variation prejudicial to the assessee is proposed, service of a show cause notice to afford opportunity to the assessee. The faceless regime contemplates authenticated electronic delivery (registered account, registered e mail or mobile app) and creates a statutory consequence under subsection (9) that assessments made after 01.04.2021 not in accordance with the procedure are non est. On the material before the Court the draft assessment order alleged to have been served on 12.04.2021 does not appear on the Department's portal and no authenticated proof of its electronic service was produced. The earlier notices and opportunities under section 143(2)/142(1) do not substitute for the specific requirement of service of a draft order and show cause when a prejudicial variation is proposed. In the virtual faceless regime the trail of electronic communication is readily discoverable; absence of such trail thus negatived the respondent's contention of compliance. For these reasons the assessment was held to be vitiated by failure to follow the statutory procedure and by breach of principles of natural justice. [Paras 17, 18]

Impugned assessment order dated 20.04.2021 (and consequential demand/ proceedings) quashed for non compliance with the procedure under section 144B and violation of principles of natural justice.

Non compliance of the procedural mandate in section 144B rendering assessment non est - High Court writ jurisdiction despite availability of alternative remedy where there is failure of statutory procedure or natural justice - Permissibility of remand and further proceedings by revenue following quashment of the assessment. - HELD THAT: - Having quashed the assessment for statutory non compliance, the Court permitted the revenue to proceed afresh in accordance with section 144B. The order directs strict adherence to the faceless assessment procedure - including issuance of prior draft assessment order/show cause, service by authenticated electronic means, opportunity to file responses and, if sought, personal hearing - and observes that the statutory remedy of appeal does not preclude High Court intervention where there is manifest failure to follow statutory procedure or breach of natural justice. The Court left open the departmental right to re assess strictly following the prescribed procedure. [Paras 19]

Revenue permitted to proceed with fresh assessment under section 144B after serving prior draft assessment order/show cause and affording the petitioner opportunity to respond (including personal hearing, if requested).

Final Conclusion: Writ petition allowed: the assessment order dated 20.04.2021 and consequential demand/proceedings are quashed for failure to comply with the faceless assessment procedure under section 144B and breach of natural justice; revenue is liberty to re proceed strictly in accordance with section 144B, affording the petitioner the mandated electronic service of draft/show cause and opportunity to respond (including personal hearing if claimed).

Filing of revised return under Section 139(5) - electronic filing requirement for income tax returns - effect of NCLT sanctioned demerger on tax returns - mandamus to accept and process revised return - DALMIA POWER principle on revised returns filed after corporate restructuring - software limitations affecting statutory compliance and relief

Filing of revised return under Section 139(5) - electronic filing requirement for income tax returns - effect of NCLT sanctioned demerger on tax returns - DALMIA POWER principle on revised returns filed after corporate restructuring - Whether the respondent was obliged to accept and process the petitioner's revised return for AY 2018-19 filed physically after sanction of a demerger by the NCLT when electronic filing within the statutory time had become impossible - HELD THAT: - The Court found that the scheme of arrangement effecting the demerger was sanctioned by the NCLT on 17.03.2020 with retrospective appointed date 01.04.2017, after the original return for AY 2018-19 had been filed. Because the NCLT order post dated the statutory period for filing a revised return under Section 139(5), the petitioner could not file the revised return electronically within the time prescribed. Relying on the legal principle recognised in DALMIA POWER, the Court observed that revised returns occasioned by such judicial or statutory events (like a sanctioned demerger) fall within the category where the operation of Section 139(5) cannot be applied to defeat the filing; the original return would not survive in such circumstances. The respondent's refusal to accept the petitioner's physically filed revised return solely on the ground that it was not filed electronically, without affording the petitioner an opportunity to electronically file thereafter or to have the submitted physical revised return processed, was impermissible. The Court also noted that when the revenue functionaries operate an electronic/faceless regime, they must address software limitations and permit reasonable remedy where such limitations prevent compliance within statutory time, particularly where the law (as clarified by higher authority) mandates acceptance of a revised return in similar circumstances. On these grounds the Court concluded that the assessment completed without processing the revised return was liable to be quashed and the revenue directed to permit processing of the revised return and to allow electronic filing within a short reasonable time or, failing that, take into account the already filed physical copy. [Paras 9, 10, 11, 12]

The respondent erred in not accepting/processing the revised return filed after the NCLT sanction; the assessment is quashed and the respondent must process the revised return, permitting electronic filing within a reasonable time (minimum two weeks) or, alternatively, consider the physical copy already filed.

Final Conclusion: The petition is allowed: the assessment order dated 07.05.2021 under Section 143(3) read with Section 144B is quashed and set aside; respondent is directed to process the petitioner's revised return for AY 2018-19 and to permit electronic filing within a reasonable period (minimum two weeks) or to consider the physical revised return already submitted.

Disallowance under section 40(a)(ia) - bank/credit-card commission - TDS obligation - bogus purchases / accommodation entries - burden of proof and documentary verification of purchases - delayed payment of EPF/ESIC - disallowance under read together provisions - admission of additional grounds by the Tribunal - allowability of share issue/IPO expenses as revenue (working capital) - amortisation under section 35D vis a vis revenue treatment under section 37 - book profit computation under section 115JB - allowability of Education Cess as business expenditure under section 37

Disallowance under section 40(a)(ia) - bank/credit-card commission - TDS obligation - Deletion of addition made under section 40(a)(ia) in respect of bank/credit card commissions - HELD THAT: - The Tribunal upheld the Commissioner(A)'s deletion of the disallowance where bank/merchant acquirer deducted commissions at source before remitting net proceeds to the assessee and the assessee had no occasion or capacity to deduct TDS prior to 01.01.2013. The Tribunal applied the coordinate bench reasoning (following the Jurisdictional High Court decision relied upon) that penal disallowance provisions require strict construction and cannot be invoked where the bank acted as an independent payer and there was no loss of revenue or failure of the bank to discharge its statutory obligations. In view of no change in law or material facts, the Revenue's appeal on this ground was dismissed. [Paras 5, 6, 7, 8]

The deletion of the section 40(a)(ia) disallowance in respect of bank/credit card commissions is confirmed; Revenue's ground dismissed.

Bogus purchases / accommodation entries - burden of proof and documentary verification of purchases - Addition on account of alleged bogus diamond purchases disallowed for the years in appeal - HELD THAT: - The Tribunal declined to interfere with the Commissioner(A)'s conclusion that the Assessing Officer had not produced cogent material to displace the assessee's documentary evidence. The assessee had produced bank payment records, confirmations, PANs, returns, VAT/IEC/establishment registrations and suppliers' stock registers, and there was a retraction by the alleged entry operator. The Tribunal found the CIT(A)'s appreciation of quantitative records, payments through banking channels and lack of independent material by the AO to be satisfactory and therefore sustained the deletion of the addition for A.Y. 2013 14 and A.Y. 2014 15. [Paras 9, 10, 11, 15, 16]

The additions on account of alleged bogus purchases are not sustained; the CIT(A)'s relief is affirmed for the years in appeal.

Delayed payment of EPF/ESIC - disallowance under read together provisions - Revenue's appeal against deletion of addition for delayed EPF/ESIC payment allowed - HELD THAT: - Relying on a subsequent coordinate bench decision considered squarely applicable, the Tribunal allowed the Revenue's appeal on the issue of disallowance arising from delayed payment of statutory contributions (EPF/ESIC). The order records that the precedent was applicable to the facts and therefore the Revenue's ground in this respect succeeds. [Paras 17]

Revenue's appeal on the delayed payment of EPF/ESIC disallowance is allowed.

Admission of additional grounds by the Tribunal - Admission of the assessee's additional grounds (IPO expenses, revenue treatment, book profit and education cess) for consideration by the Tribunal - HELD THAT: - Applying the Apex Court's authority on the Tribunal's plenary powers to consider questions of law arising from facts on record, the Tribunal exercised its discretion to admit the assessee's additional grounds. The Tribunal noted that such grounds raise questions of law relevant to correct assessment and therefore admitted them for decision. [Paras 19, 20]

The additional grounds filed by the assessee are admitted.

Allowability of share issue/IPO expenses as revenue (working capital) - amortisation under section 35D vis a vis revenue treatment under section 37 - Share issue/IPO expenses mostly treated as revenue expenditure and allowed, limited capital portion to be treated under section 35D - HELD THAT: - The Tribunal analysed the object and application of the funds raised by the IPO. Finding that approximately 92% of proceeds were applied to working capital (inventory procurement and general corporate purposes) and only a portion related to capital works (showrooms), it applied established authorities holding that expenses incurred to augment funds for working capital are revenue in nature. Consequently 92% of the share issue expenses were held allowable under section 37 as revenue expenditure, while the portion attributable to capital expenditure is to be treated under section 35D (amortisable). The Tribunal directed the AO to give effect accordingly. [Paras 22, 23, 33, 34, 35]

Majority of IPO/share issue expenses (proportionate to working capital use) are allowed as revenue expenditure; the capital related portion is to be governed by section 35D.

Book profit computation under section 115JB - IPO expenditure to be considered in computation of book profit under section 115JB as per jurisdictional High Court authority - HELD THAT: - The Tribunal directed the Assessing Officer to compute book profit under section 115JB after considering the IPO expenditure in accordance with the Explanation to section 115JB and the treatment of the share capital receipt in the finalised accounts. The Tribunal recorded that the question was directly covered by the jurisdictional High Court decision relied upon and remitted computation to the AO. [Paras 34]

Assessee's claim regarding inclusion of IPO expenditure in computation of book profit under section 115JB is allowed for assessment computation purposes.

Allowability of Education Cess as business expenditure under section 37 - Education Cess held to be allowable as deduction under section 37 - HELD THAT: - The Tribunal examined statutory definitions and CBDT Circular No. 91/58/66 ITJ(19), and authoritative decisions distinguishing 'cess' from 'tax' where cess proceeds are earmarked for a specific fund. Noting that Education Cess proceeds are not credited to the Consolidated Fund and that the legislature expressly includes cess where intended (e.g., in section 115JB explanations), the Tribunal concluded that Education Cess is not of the nature required to be disallowed under section 40(a)(ii) and does not fall under sections 30-36 or capital/personal expenses. Relying on multiple coordinate bench and High Court precedents, the Tribunal allowed the deduction under section 37. [Paras 43, 46, 49, 51, 55]

Education Cess payable on income tax is allowable as business expenditure under section 37.

Final Conclusion: The Tribunal dismissed the Revenue appeal in ITA No. 6649/Del/2017 and partly allowed Revenue in ITA No. 6650/Del/2017: (i) deletions of additions for bank/credit card commissions and alleged bogus purchases are sustained; (ii) Revenue's appeal succeeds on delayed EPF/ESIC disallowance; (iii) the assessee's additional grounds on IPO/share issue expenses and education cess are admitted and decided in the assessee's favour (majority of IPO expenses treated as revenue and allowed, capital portion to be governed by section 35D; IPO expenditure to be considered in computing book profit under section 115JB; Education Cess allowable under section 37).

Reopening of assessment under section 147 of the Income-tax Act - reasons to believe - reliance on third party statements and necessity of cross examination - burden under section 68 - identity, creditworthiness and genuineness of share application money - borrowed or stale satisfaction

Reopening of assessment under section 147 of the Income-tax Act - reasons to believe - borrowed or stale satisfaction - Validity of initiation of reassessment proceedings under section 147/148 - HELD THAT: - The Tribunal examined the material on which the Assessing Officer recorded reasons for reopening and found that the information relied upon was not generated from the search or post search enquiries in the Kuber group but comprised earlier statements and investigation wing material. The AO's factual averments (e.g., classification of an investor as a jama kharchi company) were contrary to the commission report and other records. The AO had not conducted independent enquiries under section 142(1) nor provided the opportunity to cross examine persons whose statements formed the basis of the belief. Having regard to these defects, the Tribunal held that the AO's satisfaction was tainted as being borrowed/stale and that the reopening could not be sustained in the facts of the case. [Paras 18, 19, 21, 22]

Reopening under section 147/148 held invalid in the circumstances and the reassessment cannot be sustained.

Reliance on third party statements and necessity of cross examination - burden under section 68 - identity, creditworthiness and genuineness of share application money - Sustainability of addition under section 68 based on investigation wing statements without cross examination and without independent verification - HELD THAT: - The AO made additions treating share application money as unexplained credits relying primarily on statements of third parties (entry operators) and reports of the investigation wing. The assessee produced share application forms, confirmations, bank statements, ITRs and MCA data to discharge the initial onus under section 68. The Tribunal noted that none of the third party statements specifically named the assessee or the investor companies as having deposited the impugned sums, and that the assessee repeatedly sought cross examination which was not granted. Following precedent of the Tribunal in sister Kuber Group matters where similar facts led to deletion, the Tribunal found the AO's reliance on uncorroborated third party statements without affording cross examination and without independent enquiries to be unsustainable, rendering the addition unjustified. [Paras 23, 24]

Addition of Rs. 1,90,00,000 under section 68 deleted; assessment and CIT(A) orders set aside insofar as they sustain that addition.

Final Conclusion: The appeal is partly allowed: the reassessment and the addition made under section 68 in respect of share application money are set aside and the Assessing Officer is directed to delete the addition, following the Tribunal's reasoning and consistent decisions in related Kuber Group matters.

Addition under section 68 relating to share capital and share premium - onus on assessee to prove identity, creditworthiness and genuineness of shareholders - requirement of credit entry in the books of account in the previous year for invocation of section 68 - remand for fresh adjudication and verification of records

Addition under section 68 relating to share capital and share premium - requirement of credit entry in the books of account in the previous year for invocation of section 68 - onus on assessee to prove identity, creditworthiness and genuineness of shareholders - remand for fresh adjudication and verification of records - Whether the deletion of addition made by the AO in respect of share capital and share premium could be sustained or whether the matter required fresh adjudication by the CIT(A) to examine credit entries and evidentiary proof under section 68 - HELD THAT: - The Tribunal noted that the AO made additions after proceeding under section 144 and observed issuance of share capital and share premium in the balance sheet. The assessee produced confirmation letters but two confirmations lacked details and bank statements were not placed on record. The Tribunal held that for the purposes of section 68 it is essential that the amounts be shown as credited in the books of account in the relevant previous year; the CIT(A) had deleted the addition without verifying the existence of credit entries in the assessee's books and without necessary documentary proof. The Tribunal further relied on the ITAT, Panaji remand which recorded that additional evidences filed before that Bench were material and necessary for fair adjudication. In view of absence of clear proof as to when amounts were credited and lack of verification by the CIT(A), the Tribunal directed that the matter be remanded to the CIT(A) to examine afresh whether shares were issued at a premium and whether amounts were credited in earlier years; if amounts are found credited in earlier years the addition may be deleted, otherwise the assessee must discharge the onus to establish identity, creditworthiness and genuineness to the satisfaction of the CIT(A) in accordance with section 68. The CIT(A) is to decide de novo after affording opportunity of hearing and verifying requisite parameters under section 68. [Paras 5, 7, 8, 9]

Matter remanded to the CIT(A) for fresh adjudication to verify credit entries and evidentiary support in respect of share capital and share premium and to decide in accordance with section 68; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal remanded the controversy regarding addition of share capital and share premium to the CIT(A) for fresh de novo adjudication to verify when amounts were credited in the assessee's books and to apply the tests of identity, creditworthiness and genuineness under section 68; the appeal is disposed of for statistical purposes.

Income under section 56(2)(vii)(b)(ii) - stamp duty value as deemed consideration - obligation to refer valuation to Valuation Officer under section 50C(2) - transfer completed by execution of registered agreement to sell - third proviso to section 56(2)(vii)

Transfer completed by execution of registered agreement to sell - income under section 56(2)(vii)(b)(ii) - Whether the provisions of section 56(2)(vii)(b) apply to the assessee on account of the registered agreement for purchase of the under construction flat - HELD THAT: - The Tribunal held that the execution and registration of the agreement to sell completed the 'transfer' for the purposes of the Act and thereby attracted the charge under section 56(2)(vii)(b). Subsequent events, including alleged fraud by the builder, non delivery of possession and sub judice proceedings, do not affect applicability of section 56(2)(vii)(b) once the registered agreement effects a transfer as defined in section 2(47). The assessee's contention that an under construction flat not delivered to him falls outside the scope of section 56(2)(vii) was therefore rejected. [Paras 8]

Provisions of section 56(2)(vii)(b) apply upon execution and registration of the agreement; the assessee's plea based on non delivery or fraud is rejected.

Obligation to refer valuation to Valuation Officer under section 50C(2) - stamp duty value as deemed consideration - third proviso to section 56(2)(vii) - Whether the Assessing Officer was obliged to refer the dispute over stamp valuation to a Valuation Officer before making an addition under section 56(2)(vii)(b)(ii) - HELD THAT: - The Tribunal observed that the assessee had specifically disputed the stamp valuation and furnished reasons, thereby invoking the third proviso to section 56(2)(vii) read with section 50C(2). Under that proviso the Assessing Officer was statutorily obligated to refer the valuation to a Valuation Officer rather than summarily adopting the stamp valuation. The AO had, however, taken the stamp duty value as the FMV and made the addition without making the mandatory reference. That procedure defeated the statutory mandate and vitiated the addition. In view of this infirmity the Tribunal set aside the assessment on this point and directed fresh adjudication with due compliance with the requirement to refer valuation and after affording the assessee a reasonable opportunity of being heard. [Paras 7, 8]

Addition set aside and matter remanded to the Assessing Officer to refer valuation to a Valuation Officer and re-adjudicate in accordance with law after giving the assessee opportunity of being heard.

Final Conclusion: The appeal is allowed for statistical purposes: the Tribunal upheld that section 56(2)(vii)(b) applies on execution and registration of the agreement but set aside the addition because the Assessing Officer failed to refer the disputed stamp duty valuation to a Valuation Officer as mandated, and remitted the matter for fresh adjudication in accordance with law.

Reassessment under section 147 - reason to believe - mere change of opinion - tangible material - reopening of assessment - audit objection - power to review vis-a -vis power to reassess

Reopening of assessment - reason to believe - mere change of opinion - tangible material - reassessment under section 147 - audit objection - power to review vis-a -vis power to reassess - Whether the reassessment initiated under section 147 for A.Y. 2007-08 was valid - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the Assessing Officer lacked jurisdiction to reopen the assessment because the reasons recorded show no fresh information or tangible material coming to the AO's notice after completion of the original assessment; instead the AO re-examined the same accounts, computations and working papers that were available at the time of the s.143(3) assessment and sought to substitute his view for that of his predecessor. The Tribunal applied the legal principle that reassessment under section 147 requires objective "reason to believe" founded on new or fresh material and cannot be based on a mere change of opinion or a fresh application of mind to the same material, relying on the ratio in Kelvinator and subsequent High Court and Supreme Court authorities. The fact that the reopening followed an audit objection, which was on record and not denied by the AO, further reinforced that no new material justified reassessment. In these circumstances reopening was held to be a disguised review and therefore bad in law. [Paras 5, 6]

Reopening of the assessment under section 147 was invalid and the reassessment order dated 12.03.2013 is quashed.

Reopening of assessment - adjudication of merits - Whether the CIT(A) erred in not adjudicating the merits of the additions after quashing the reassessment - HELD THAT: - The Tribunal observed that once the reassessment order itself was quashed for want of jurisdiction, there remained no occasion for the CIT(A) to adjudicate the merits of the additions made by the AO in the reassessment. Consequently, the CIT(A)'s decision to confine itself to the validity of reopening did not amount to error requiring interference. [Paras 7]

No error; the CIT(A) was not required to decide the merits after quashing the reassessment.

General grounds not pressed - Disposition of remaining and general grounds of appeal - HELD THAT: - The Tribunal recorded that Grounds 5 and 6 were general in nature and not pressed by the revenue and therefore were dismissed. [Paras 8]

Grounds 5 and 6 dismissed as not pressed.

Final Conclusion: The revenue's appeal is dismissed; the reassessment order dated 12.03.2013 for A.Y. 2007-08 is quashed as the reopening under section 147 was based on a mere change of opinion and lacked fresh tangible material, and there was no occasion for the CIT(A) to adjudicate the merits thereafter.

Deductibility of prior period expenses - Accrual of expense on receipt of refund - Tax treatment of discounts linked to duty refunds

Accrual of expense on receipt of refund - Deductibility of prior period expenses - Tax treatment of discounts linked to duty refunds - Whether the discount allowed to a customer that related to sales in financial year 2014-15 but was payable upon receipt of a duty refund received in the impugned year is deductible in assessment year 2016-17. - HELD THAT: - The Tribunal noted the undisputed contractual arrangement: the assessee agreed to grant discounts to the customer linked to refund of special additional duty and to pay such discounts when the assessee received the refund from the department. Although part of the discount related to sales made in financial year 2014-15, the refund of duty (which gave rise to the obligation to grant the discount) was received during the impugned assessment year. On these facts the Tribunal held that the obligation to grant the discount accrued in the year in which the refund was received and the discount was actually allowed to the customer in that year. The Assessing Officer disallowed the amount treating it as a prior period expense and the CIT(A) confirmed that view; the Tribunal found both authorities failed to appreciate the accrual position established by the contractual arrangement and the timing of the refund. Applying this factual and legal analysis, the Tribunal concluded that the discount was deductible in the impugned year when the liability accrued and the discount was given. [Paras 8]

Addition disallowing the discount is deleted and the deduction is allowed in assessment year 2016-17.

Final Conclusion: The appeal is allowed: the Tribunal held that discounts linked to duty refunds accrued and were deductible in the year in which the refund was received and the discount was allowed, and directed deletion of the addition.

Deductibility of interest under section 36(1)(iii) of the Income tax Act - Interest on borrowed capital for acquisition of stock in trade - Capitalization of borrowing costs versus immediate deduction - Application of the matching principle and Accounting Standard 7 - Meaning of 'paid' under mercantile system of accounting - Genuineness of business borrowing

Deductibility of interest under section 36(1)(iii) of the Income tax Act - Interest on borrowed capital for acquisition of stock in trade - Capitalization of borrowing costs versus immediate deduction - Meaning of 'paid' under mercantile system of accounting - Whether interest on loans borrowed by a developer for purchase of land and project cost (treated as stock in trade in books) is deductible under section 36(1)(iii) in the year of payment or is required to be capitalized and disallowed in that year. - HELD THAT: - The Tribunal held that section 36(1)(iii) permits deduction of interest paid on capital borrowed for the purpose of business in the year in which such interest is paid, except where the interest relates to capital borrowed for acquisition of an asset which is to be capitalized until the asset is put to use. The assessee, being in the business of development and having treated the acquired land and project cost as current assets/stock in trade in its books, had borrowed capital for its business and claimed interest in the year of payment. The Tribunal applied the reasoning of the authorities relied upon by the assessee, including Taparia Tools Ltd , and the decision of the Gujarat High Court in Torrent Pharmaceuticals Ltd , to the effect that once borrowing is genuine and the interest is 'paid' or 'incurred' under the mercantile system, the interest is allowable in the year of payment even if the asset is recorded in the balance sheet, unless the statutory exception of capitalization for acquisition of an asset legitimately applies. The AO's finding that the borrowed funds related to land and project cost did not, in the circumstances of this case, mandate denial of deduction because the acquired asset had the character of stock in trade on acquisition and the assessee followed mercantile accounting; moreover, the Tribunal accepted that borrowing was genuine and not colorable. Having regard to the nature of business, the accounting treatment adopted by the assessee, and the settled principles that permit deduction when interest is paid or incurred under mercantile accounting, the Tribunal sustained the CIT(A)'s deletion of the disallowance. [Paras 5, 8, 9]

Deletion of the disallowance under section 36(1)(iii) upheld; interest claimed in the year of payment allowed.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal upholds the CIT(A)'s deletion of the proportionate interest disallowance for AY 2015 16 and allows the assessee's claim of interest under section 36(1)(iii) in the year of payment.

Depreciation under section 32(1)(ii) of the Income-tax Act - right to collect annuity as an intangible asset - allowability of provision for periodic maintenance as a business expense under section 37(1) - treatment of provision in computation of book profits under section 115JB - ascertained liability versus contingent/unascertained liability - matching principle and mercantile (accrual) system of accounting

Depreciation under section 32(1)(ii) of the Income-tax Act - right to collect annuity as an intangible asset - Whether depreciation is allowable on the cost/right to receive annuity arising from a BOT/annuity concession agreement. - HELD THAT: - The Tribunal accepted that the assessee, having borne the investment for construction and development of the project and having obtained an exclusive contractual right to receive annuity during the concession period, acquired a valuable commercial/intangible right. Following the reasoning of the Special Bench in Progressive Constructions Ltd. and the Tribunal's earlier decision in Rajahmundry Expressway Ltd., the investment made to obtain the right to recoup costs by way of annuity/toll charges constitutes an intangible asset within the ambit of section 32(1)(ii), and is therefore eligible for depreciation. The Tribunal found no infirmity in the CIT(A)'s reliance on those precedents and affirmed deletion of the disallowance. [Paras 2]

Disallowance of depreciation on the right to collect annuity deleted; Revenue's ground dismissed.

Allowability of provision for periodic maintenance as a business expense under section 37(1) - treatment of provision in computation of book profits under section 115JB - ascertained liability versus contingent/unascertained liability - matching principle and mercantile (accrual) system of accounting - Whether the provision made for periodic maintenance (amortised over five years) is allowable as a deduction under section 37(1) and whether such provision must be added back in computing book profits under section 115JB. - HELD THAT: - The Tribunal noted that the concession agreement imposed a contractual, periodic maintenance obligation on the assessee, and that the assessee prepared a technical valuation report establishing the basis and quantum of the provision. Applying the mercantile (accrual) system and the matching principle, and following authoritative decisions including the Supreme Court's guidance in Rotork Controls and Tribunal precedents, the Tribunal held that the provision was for an ascertained liability determinable by a reasonable scientific method and historical data, and not an unascertained/contingent liability. Consequently the provision was deductible under section 37(1) and was not liable to be added back in computing book profits under section 115JB. The departmental contention that the liability crystallised only in a later year was rejected as inconsistent with accrual accounting and the contractual obligation. [Paras 3]

Addition of the provision for periodic maintenance disallowed; provision allowed as deduction under normal provisions and not required to be added in computation of book profits under section 115JB.

Final Conclusion: Following established precedents and on the facts that the assessee held an exclusive contractual right to receive annuity and had a scientifically determined contractual obligation for periodic maintenance accounted on an accrual basis, the Tribunal upheld the CIT(A)'s deletion of the disallowances: depreciation on the annuity/right allowed, and the provision for periodic maintenance allowed both under normal provisions and for computation of book profits; all Revenue appeals dismissed.

Partition of joint family property - Allocation of share in Hindu undivided family - Reappreciation of evidence on appeal - Benami transaction (denial and burden) - Application to implead under Order 1 Rule 10(2) CPC - Application to produce additional documents under Order 41 Rule 27 CPC

Application to implead under Order 1 Rule 10(2) CPC - Necessary party for partition suit - Impleading of the plaintiff's sister as respondent No.5 was permitted. - HELD THAT: - The appellant sought to implead his sister as a necessary party on the ground that she derives interest in the suit schedule property and was omitted by oversight. Although there was delay, the objection to necessity was not pressed; the proposed respondent did not dispute that she is a daughter of the common ancestors. The Court found that, in a suit for partition and separate possession, the sister was a proper party whose absence could affect the final adjudication. In these circumstances the Court held that the appellant had made out sufficient grounds to allow the application for impleading under Order 1 Rule 10(2) read with Section 151 CPC and directed that she be added as respondent No.5. [Paras 22, 23]

I.A.No.1/2013 is allowed and the proposed respondent is impleaded as respondent No.5.

Application to produce additional documents under Order 41 Rule 27 CPC - Relevance of documents created during pendency of appeal - The application to permit production of gift deeds executed during the pendency of appeal was rejected. - HELD THAT: - The appellant sought to place on record gift deeds executed by defendants during the pendency of the appeal, alleging collusion to defeat his rights. The Court considered whether those later documents were necessary for adjudication of the core controversy-whether the suit schedule property is joint family property. The Court held that the gravamen of the suit was to determine joint family title based on facts and documents predating the suit and that the subsequently created gift deeds were not germane to that primary issue. On that basis the Court declined to permit production of the additional documents under Order 41 Rule 27 read with Section 151 CPC. [Paras 24, 25]

I.A.No.2/2019 is dismissed.

Partition of joint family property - Allocation of share in Hindu undivided family - Reappreciation of evidence on appeal - Benami transaction (denial and burden) - The Trial Court's dismissal of the partition suit was reversed and the plaintiff was held entitled to 1/5th share in the suit schedule property. - HELD THAT: - On reappreciation of the oral and documentary evidence the High Court found material shortcomings in the Trial Court's treatment of key evidence. Documents and testimony (including the agreement to sell in the father's name, the bank passbook entry showing an advance payment, the legal notice admitting use of the father's retirement benefits, and witness evidence as to construction and occupation) supported the plaintiff's case that the site purchase and construction involved family funds and contributions by the plaintiff and his father. The Court further observed that the mere registration of the sale deed in the mother's name did not automatically establish exclusive title or a benami transaction so as to defeat claims of family members, particularly where the agreement to sell was in the father's name and other family conduct and admissions pointed to joint ownership. The Court concluded that the Trial Court had failed to properly consider the totality of oral and documentary evidence and the conduct of the parties, warranting interference and reversal of the decree. [Paras 41, 42, 44, 45, 46]

Appeal allowed; impugned judgment and decree set aside and plaintiff declared entitled to 1/5th share in the suit schedule property; decree to be drawn accordingly.

Final Conclusion: The appeal is allowed: the Trial Court decree is set aside; the plaintiff is declared entitled to 1/5th share in the suit schedule property; application to produce additional documents is dismissed and application to implead the sister is allowed.

Proportionality analysis - Merchanting Trade Transactions - reasonable restriction under Article 19(6) - legitimate state interest - suitability stage - necessity stage - balancing stage - MTTs analogous to imports/exports - FEMA regulatory powers - deference to RBI regulatory expertise - FTP prohibitions determine MTT permissibility

Proportionality analysis - legitimate state interest - suitability stage - necessity stage - balancing stage - MTTs analogous to imports/exports - FEMA regulatory powers - FTP prohibitions determine MTT permissibility - deference to RBI regulatory expertise - Validity of Clause 2(iii) of the 2020 MTT Guidelines impugned as infringing Articles 14, 19(1)(g) and 21 - HELD THAT: - The Court applied an integrated four pronged proportionality test (legitimacy, suitability, necessity, balancing) to assess Clause 2(iii). Legitimacy: the aim-ensuring adequate domestic supplies of PPE during the pandemic-was held to be a legitimate and sufficiently important state interest (para 29). Suitability: the RBI's historical practice of linking MTT permissibility to the FTP and the characterisation of merchanting in international practice (IMF guidance) support the conclusion that MTTs are analogous to imports/exports and implicate foreign exchange; accordingly linking MTT permissibility to FTP prohibitions is a suitable means to further the aim (paras 30-36, 42-44). Necessity: the Court found the prohibition of MTTs in PPE necessary because MTTs, though goods do not enter India, reduce global availability and implicate Indian foreign exchange; a ban on exports alone would not regulate utilisation of Indian foreign exchange and prevent facilitation of global hoarding (paras 45-47). Balancing/deference: having regard to the RBI's statutory role under FEMA to regulate foreign exchange and the special nature of the RBI as an expert regulatory body, the Court gave deference to the RBI and UOI policy choice while subjecting the measure to proportionality; the restriction was not found to have a disproportionate impact on the appellant's rights (paras 50-56, 57). On these grounds the impugned Clause 2(iii) was held to be constitutionally valid under Articles 14, 19(1)(g) read with Article 19(6), and 21 (para 58). [Paras 45, 47, 50, 57, 58]

Clause 2(iii) of the 2020 MTT Guidelines is a proportionate measure and is valid under Articles 14, 19(1)(g) and 21; the appeal is dismissed.

Final Conclusion: The Supreme Court dismissed the appeal, upholding Clause 2(iii) of the 2020 MTT Guidelines as a proportionate and constitutionally valid restriction in furtherance of the legitimate state aim of ensuring adequate domestic supplies of PPE during the pandemic; the Court deferred to the RBI's regulatory role under FEMA while subjecting the measure to proportionality review.

Purging of Bill of Entry in ICEGATE - waiver of late fee under Section 46(3) of the Customs Act and Regulation 4(3) of the Bill of Entry Regulations - exercise of administrative discretion in bona fide cases during COVID-19 lockdowns - imposition of fine contrary to statutory scheme - release of goods subject to payment of customs duty and taxes

Purging of Bill of Entry in ICEGATE - waiver of late fee under Section 46(3) of the Customs Act and Regulation 4(3) of the Bill of Entry Regulations - Validity of demanding late fee for a second Bill of Entry filed after the earlier Bill of Entry was erased from the ICEGATE portal - HELD THAT: - The Court found that the practice of 'purging' a Bill of Entry from the ICEGATE portal arises from system architecture and is not provided for in the Customs Act, 1962 nor in the Bill of Entry (Electronic Integrated Declaration and Paperless Processing) Regulations, 2018. Where an earlier Bill of Entry was erased from the electronic system and a fresh Bill of Entry was filed after the importer could not respond to departmental queries-circumstances which occurred during the second wave COVID-19 lockdowns-the mere filing of a second Bill of Entry on account of such erasure does not, by itself, justify imposition of late fee charges. The Court treated the factual context of lockdown-related disruption as material to the exercise of discretion under Section 46(3) and Regulation 4(3), and held that the levy could not be sustained where purging (an extraneous system event) prevented regularisation of the original filing. [Paras 15]

Demand of late fee solely because a second Bill of Entry was filed after the earlier entry was erased from ICEGATE is not justified.

Exercise of administrative discretion in bona fide cases during COVID-19 lockdowns - waiver of late fee under Section 46(3) of the Customs Act and Regulation 4(3) of the Bill of Entry Regulations - Whether the respondents ought to have exercised discretion to grant waiver of late fee in the facts of this case - HELD THAT: - Having regard to the circumstances pleaded and documentary material showing the first Bill of Entry was filed and thereafter erased from the ICEGATE system, and taking into account the nationwide disruptions caused by the second wave of COVID-19 (including regional lockdowns where the importer was located), the Court held this to be a fit case for exercise of discretion in favour of the petitioner. The Court observed that administrative instructions and standing orders call for judicious exercise of powers to avoid undue hardship to bona fide importers, and that the respondents should have granted relief rather than mechanically imposing late charges on an importer prevented from regularising the original filing. [Paras 15]

The respondents ought to have exercised their discretion to waive late fee in the petitioner's favour in the circumstances.

Imposition of fine contrary to statutory scheme - release of goods subject to payment of customs duty and taxes - Correctness of characterising the demand as a fine and the consequent relief including release of goods - HELD THAT: - The Court noted that the impugned communication demanded a sum described as a 'fine' rather than a late fee under the statutory scheme. Such characterization was held to be contrary to the scheme of the Customs Act and the Bill of Entry Regulations. In view of the foregoing conclusions, the Court quashed the impugned demand and directed immediate release of the goods in the respondents' custody on the petitioner making payment of the requisite customs duty and applicable taxes within ten days from receipt of the order. The direction preserves the respondents' right to collect lawful duties and taxes while denying the impugned levy. [Paras 15, 16]

Impugned demand (characterised as a fine) quashed; goods to be released subject to payment of applicable customs duty and taxes within ten days.

Final Conclusion: Writ petition allowed: the impugned demand for late fee/fine is quashed; respondents to release the goods forthwith upon the petitioner paying the requisite customs duty and applicable taxes within ten days of receipt of the order; no costs.

Proper Officer - seizure of goods and documents - jurisdiction of Investigating Officer of DRI - binding effect of Supreme Court judgments on government officials

Proper Officer - seizure of goods and documents - jurisdiction of Investigating Officer of DRI - Seizures made by officers who are not 'Proper Officer' under the Customs Act, 1962 are contrary to the law as enunciated by the Supreme Court in Canon India and amount to impermissible exercise of power. - HELD THAT: - The Court recorded that Section 110 of the Customs Act contemplates seizure by a 'Proper Officer', a statutory term that denotes a Customs officer assigned functions by the Board. The Investigating Officer of the DRI, not being a Customs officer or a 'Proper Officer' for purposes of Section 110, lacks authority to effect seizures. The Court noted that the Supreme Court's decision in Canon India (reported as 2021 SCC OnLine SC 200) clearly lays down this principle, and observed with concern that despite this binding pronouncement officials continue to effect seizures without jurisdiction, generating repetitive litigation. Acting on these findings, the Court directed dissemination of the Canon India judgment to the respondents and required the Principal Commissioner of Customs to circulate the judgment among concerned departmental officials and to convene a meeting to ensure implementation of the Supreme Court's observations and compliance with binding precedents.

Registry to send the Supreme Court judgment in Canon India to the respondents electronically; Principal Commissioner of Customs, ICD Patparganj to circulate the judgment to concerned officials and convene a meeting to ensure compliance with the Supreme Court's directions.

Binding effect of Supreme Court judgments on government officials - Government officials are bound to apply and implement binding Supreme Court rulings and to be sensitised about their legal obligations to prevent harassment and avoid repetitive litigation. - HELD THAT: - The Court emphasised that judgments of Courts are binding on Government officials acting in their official capacity and observed that failure to apply binding Supreme Court dicta causes unnecessary litigation and harassment to citizens. To address this, the Court directed institutional steps-sending and circulating the relevant Supreme Court judgment and holding a meeting of officers to sensitise them to the binding nature and implementation of the judgment.

Respondents to be supplied with the Supreme Court judgment and to take corrective measures, including circulation and convening a meeting, to ensure adherence to the binding precedent.

Final Conclusion: Notice issued; court declined to quash or order immediate release in this order but directed transmission and departmental circulation of the Supreme Court judgment in Canon India, and directed respondents to convene a meeting to ensure implementation of that binding precedent; matter listed on 29.10.2021.

Liability for aiding and abetting - penalty under Section 112(a) of the Customs Act - agency and deeming liability under Section 147(3) of the Customs Act - extraterritorial application of the Customs Act - fraud, forgery and collusion as basis for confiscation and penalty

Liability for aiding and abetting - penalty under Section 112(a) of the Customs Act - agency and deeming liability under Section 147(3) of the Customs Act - fraud, forgery and collusion as basis for confiscation and penalty - Whether penalty under Section 112(a) could be imposed on the foreign exporter M/s Seville Products Limited through its Indian representative for abetting importers in under invoicing and evasion of customs duty. - HELD THAT: - The Tribunal found that the appellant, though incorporated in Dubai, was present and active in India through its Indian representative, who coordinated bookings, transmitted invoices and assisted in collecting the differential amount in cash. The adjudicating authority relied on documentary material and statements establishing two sets of invoices, receipt of true transaction values in statements of account, destruction of parallel invoices, admissions by the importer and conduct amounting to collusion and forgery. Applying the deeming concept under Section 147(3) the representative's acts rendered the appellant liable for purposes of the Act. The Tribunal distinguished authorities relied on by the appellant (including Canon India) on facts, observing those cases did not involve fraud, forgery and abetment; and noted the proceedings against the appellant were for imposition of penalty (not a Section 28(4) demand). Concluding that fraud vitiated the transactions and that aiding and abetting was established, the Tribunal upheld the penalty imposed under Section 112(a). [Paras 11, 12, 17, 18]

Penalty under Section 112(a) upheld against the appellant through its Indian representative; appeals dismissed.

Final Conclusion: The Tribunal dismissed the appeals and upheld imposition of penalty under Section 112(a) on M/s Seville Products Limited through its Indian representative, finding established collusion, forgery and aiding and abetting of importers to evade customs duty for the period 2012-13.

Conversion of free shipping bill to drawback shipping bill - amendment of shipping bills under Section 149 of the Customs Act, 1962 - reasonable time / three years limitation for seeking amendment under Section 149 - Board Circular No. 36/2010-Cus dated 23.09.2010 permitting conversion where failure was beyond exporter's control - inadvertent omission to claim drawback

Conversion of free shipping bill to drawback shipping bill - amendment of shipping bills under Section 149 of the Customs Act, 1962 - Board Circular No. 36/2010-Cus dated 23.09.2010 permitting conversion where failure was beyond exporter's control - inadvertent omission to claim drawback - Rejection of the request for conversion of free shipping bills to drawback shipping bills was not sustainable insofar as shipping bills falling within a reasonable period and supported by documentary/sample evidence. - HELD THAT: - The Tribunal held that Section 149 of the Customs Act permits amendment of shipping bills and Board Circular No. 36/2010-Cus allows conversion of free shipping bills into drawback shipping bills where the exporter failed to file drawback shipping bills for reasons beyond its control. The appellant produced samples, purchase orders and other documents which a committee examined and reported as matching descriptions and codes; the omission to file drawback shipping bills was found to be an inadvertent omission by the earlier merchandiser and remedied promptly upon discovery. Applying the statutory power to amend and the Circular, and having regard to the documentary and sample verification carried out by the committee, the Tribunal concluded that the Adjudicating Authority's refusal to allow conversion for the shipments properly supported was without substance and set aside that part of the order. [Paras 10, 12, 15]

Request for conversion is allowed in respect of shipping bills within the permissible period; the impugned rejection in respect of those shipping bills is set aside.

Reasonable time / three years limitation for seeking amendment under Section 149 - conversion of free shipping bill to drawback shipping bill - Application of a three-year reasonable time-limit for seeking amendment under Section 149 and remand for verification of shipping bills beyond that period. - HELD THAT: - Relying on earlier Tribunal precedent, the Tribunal held that although Section 149 prescribes no statutory limitation, an application for amendment should be made within a reasonable time; the Tribunal considered three years from the date the right to apply accrues as a workable limitation for such procedural amendments. The appellant's application dated 23.11.2017 related to shipping bills for 2013-14 to 2016-17; accordingly, shipping bills falling outside the three-year period when computed from 23.11.2017 are not eligible for conversion and require specific verification. The matter was therefore remanded to the Adjudicating Authority solely to determine which shipping bills (if any) fall beyond the three-year limitation and to proceed accordingly. [Paras 13, 14, 15]

Tribunal applies a three-year reasonable period for amendment; shipping bills beyond three years from 23.11.2017 are not eligible for conversion and the question of those bills is remanded to the Adjudicating Authority for determination.

Final Conclusion: The appeal is allowed: the impugned order is set aside insofar as it refused conversion of free shipping bills to drawback shipping bills within the three year period measured from the application dated 23.11.2017; the Adjudicating Authority is directed to identify and deal with any shipping bills found to fall beyond that three year period.

Applicability of anti-dumping duty based on nominal thickness and tolerance under BIS - Construction of "nominal thickness" in tariff notifications - Extended period of limitation and suppression under Section 28(4) of the Customs Act - Reliance on physical examination and self-assessment for levy of duty

Applicability of anti-dumping duty based on nominal thickness and tolerance under BIS - Construction of "nominal thickness" in tariff notifications - Reliance on physical examination and self-assessment for levy of duty - Whether anti-dumping duty under Notification No. 48/2014-Customs (ADD) is attracted where actual measured thickness of imported clear float glass is between 3.73 mm and 3.86 mm despite nominal thickness categories and tolerance in BIS 14900:2000. - HELD THAT: - The Tribunal accepted the factual finding that the actual measured thickness of the imported glass is between 3.73 mm and 3.86 mm. It agreed with earlier adjudicating orders that nominal thickness, as used in commercial practice and not defined in BIS, denotes an approximate or numeric designation and cannot be read so as to enlarge the scope of the Notification by adding a positive tolerance to an actual measurement to reach the nominal band. The departmental case relied solely on adding the positive tolerance from BIS to the declared/actual thickness (3.8 + 0.3 = 4.1 mm) to treat the goods as falling within the 4 mm to 12 mm nominal band; there was no evidence that the goods were of 4.1 mm actual thickness. Where goods were examined at import and found to correspond with the declared description and thickness and were cleared by customs, it was not permissible to retrospectively extend the tolerance to bring the goods within the Notification. The Tribunal found such a construction to be impermissibly liberal and inconsistent with the statutory/notification limits, and held that tolerance could not be unilaterally applied by the department to convert a measured thickness below 4 mm into one within the 4-12 mm band for the purpose of imposing anti-dumping duty. [Paras 6, 7, 8, 9]

Anti-dumping duty is not attracted on the imported clear float glass where actual measured thickness is between 3.73 mm and 3.86 mm; the demand based on adding BIS tolerance to the measured thickness is unsustainable.

Extended period of limitation and suppression under Section 28(4) of the Customs Act - Reliance on physical examination and self-assessment for levy of duty - Whether invocation of the extended period of limitation under Section 28(4) of the Customs Act was permissible on the facts of this case. - HELD THAT: - The Tribunal endorsed earlier findings that the goods had been declared properly in the bills of entry, physically examined by customs officers with thickness verified, and cleared without any detection of misdeclaration. In those circumstances there was no material to show suppression of facts, wilful misstatement or collusion by the importer which would justify invocation of the extended period. The adjudicating authorities that declined to invoke extended limitation on the facts of prior examination and clearance were followed. [Paras 7, 8, 9]

Invocation of the extended period under Section 28(4) was not justified; extended limitation could not be invoked against the appellant.

Final Conclusion: The appeal is allowed; the demand of anti-dumping duty (and the invocation of extended limitation) set aside and consequential relief granted.

Absolute confiscation under Section 111(b) - penalty under Section 112(b) - onus of proving licit possession under Section 123 - town seizure - reliability of statement of co-accused - use of call detail records as corroborative evidence - confiscation under Section 119 of the Customs Act

Absolute confiscation under Section 111(b) - onus of proving licit possession under Section 123 - town seizure - Whether the confiscation of the majority of the seized gold bars (those bearing foreign markings) is sustainable. - HELD THAT: - The Tribunal found that although the case was a town seizure and the allegation of importation through Bangladesh was not established, the seized gold bars (11 out of 13) bore foreign markings and the person from whose possession they were seized, Mr. M.K. Bajpai, failed to discharge the statutory onus under Section 123 to show licit possession. The Tribunal accepted that the presumption of smuggling as to route was not proved, but concluded that failure to satisfy the onus in the statutory scheme justified absolute confiscation under Section 111(b) in respect of those foreign marked bars. The Tribunal therefore upheld confiscation of the 11 bars while distinguishing the town seizure character and the absence of proof of cross border route. [Paras 21, 22]

Confiscation of 11 gold bars (those bearing foreign markings) upheld under Section 111(b).

Confiscation under Section 111(b) - MMTC marking - Whether the two gold bars bearing MMTC (Indian) marking are liable to confiscation. - HELD THAT: - The Tribunal found that two of the seized bars bore MMTC (an Indian brand) markings and there was no material to establish these two bars were smuggled or otherwise illicit. Having regard to the onus under Section 123 and the absence of incriminating material linking these two bars to smuggling, the Tribunal set aside their confiscation and directed their return to Mr. M.K. Bajpai (or payment of sale value if already disposed). [Paras 21, 22]

Confiscation of the two MMTC marked gold bars set aside; directed to be returned or sale value refunded to Mr. M.K. Bajpai.

Penalty under Section 112(b) - reliability of statement of co-accused - use of call detail records as corroborative evidence - Whether penalty under Section 112(b) can be sustained against Mr. Girish Agarwal based on the evidence on record (statement of co accused and CDRs). - HELD THAT: - The Tribunal held that the material against Mr. Girish Agarwal consisted essentially of the statement of the co accused and CDRs which, while raising suspicion, did not contain conversation details or independent corroboration to establish active complicity. Nothing incriminating was recovered from his residence or business, and he had denied ownership and any employer-employee relationship. Applying the principle that a statement of a co accused and bare CDRs without conversational details cannot alone sustain penal liability, the Tribunal concluded no case for penalty under Section 112(b) was made out against Mr. Agarwal and set aside the penalty. [Paras 21, 22]

Penalty under Section 112(b) on Mr. Girish Agarwal is set aside.

Penalty under Section 112(b) - mitigation for carrier of small means - Whether penalty under Section 112(b) as imposed on Mr. M.K. Bajpai is appropriate and, if not, what adjustment is warranted. - HELD THAT: - The Tribunal accepted that Mr. Bajpai was a carrier, of small means, and that the reliability of his statement recorded during investigation was doubtful with allegations of coercion. While he failed to discharge the onus under Section 123 as to licit possession (supporting confiscation of the foreign marked bars), the Tribunal concluded that the punitive monetary penalty previously imposed was excessive in the circumstances. Exercising adjudicatory discretion, the Tribunal reduced the penalty on Mr. Bajpai to a moderated sum in recognition of his role as a carrier and his means. [Paras 21, 22]

Penalty under Section 112(b) on Mr. M.K. Bajpai reduced to a reduced amount (as directed by the Tribunal).

Section 111(d) not attracted - Whether confiscation under Section 111(d) is attracted on the facts of this case. - HELD THAT: - The Tribunal explicitly held that Section 111(d) was not attracted on the facts. That statutory limb was therefore not applied to justify confiscation. [Paras 21]

Section 111(d) is not attracted on the facts of the case.

Final Conclusion: The Tribunal modified the impugned order: upheld absolute confiscation of 11 foreign marked gold bars under Section 111(b); set aside confiscation of two MMTC marked bars and directed their return (or sale value) to Mr. M.K. Bajpai; set aside the penalty under Section 112(b) on Mr. Girish Agarwal; and reduced the penalty under Section 112(b) on Mr. M.K. Bajpai to a lower amount, with consequential reliefs ordered.

Prohibition of import of goods infringing registered Intellectual Property Rights under Rule 6 - Suspension of clearance under Rule 7(1)(a) v. Rule 7(1)(b) - Requirement of right-holder to join proceedings within time-limits under Rule 7 - Rejection and re-determination of transaction value under Section 14 - Deductive method of valuation (joint market survey and back-calculation) - Confiscation for non-conformity with entry and for breach of prohibition under Section 111(d), (l) and (m) - IPR infringement by use of registered device marks (three stripes, Trefoil, Puma form strip) - Redemption fine under Section 125(1) - Mutual exclusivity of penalties under Section 114A and Section 112 (proviso to Section 114A)

Prohibition of import of goods infringing registered Intellectual Property Rights under Rule 6 - IPR infringement by use of registered device marks (three stripes, Trefoil, Puma form strip) - Import of the seized goods was prohibited under Section 11 read with Rule 6 because registered IPRs were infringed. - HELD THAT: - Rule 6 deems import of goods to be prohibited if registered IPRs are violated. The goods, though bearing some unregistered marks (e.g., 'Man' and 'Horse'), also bore registered device marks and brand indicia (three stripes/Trefoil and Puma form strip) which, on examination and reports by right-holders, were found to infringe their IPRs. Rule 6 makes no exception where goods also carry other non-registered marks; infringement of any registered IPR suffices to render import prohibited. The Tribunal accepted the binding Delhi High Court findings regarding Puma and Adidas device marks and concluded the imported goods violated registered IPRs and were therefore prohibited imports under Rule 6 read with Section 11. [Paras 17]

Goods found to infringe registered IPRs were prohibited imports under Section 11 read with Rule 6.

Suspension of clearance under Rule 7(1)(a) v. Rule 7(1)(b) - Requirement of right-holder to join proceedings within time-limits under Rule 7 - Suspension and seizure proceeded under Rule 7(1)(a) (registered right-holders) and not under Rule 7(1)(b) (customs-initiated suspension where IPR not registered). - HELD THAT: - Rule 7(1)(a) applies where a registered right-holder's notice exists or where the IPR is registered with Customs; Rule 7(1)(b) applies where Customs acts on its own initiative and the right-holder is not registered. In this case the IPR cell confirmed that Nike, Puma and Adidas were registered with Customs before the suspension/seizure. The sequence of warehousing, re-examination, reference to the IPR cell and confirmation of registrations establishes that the matter falls under Rule 7(1)(a) rather than Rule 7(1)(b). [Paras 21]

Proceedings correctly proceeded under Rule 7(1)(a); the contention that Rule 7(1)(b) applied was rejected.

Requirement of right-holder to join proceedings within time-limits under Rule 7 - Right-holders joined the proceedings within the statutory time and the proceedings were not vitiated for failure to comply with timeline or bond requirements. - HELD THAT: - Rule 7(3) requires the right-holder to join proceedings within ten working days of suspension (with possible extension). Records show Adidas and Nike representatives joined the same day correspondence was sent and Puma joined within the prescribed period. Rule 7(3) does not mandate execution of a consignment-specific bond within ten days; bond obligations arise under other rules but cannot be read into the time-limit for joining. Accordingly, the right-holders complied with the joining requirement and the proceedings were not vitiated on this ground. [Paras 22]

Right-holders joined within the time prescribed by Rule 7; proceedings are valid.

Rejection and re-determination of transaction value under Section 14 - Deductive method of valuation (joint market survey and back-calculation) - Rejection of declared transaction value and re-determination of assessable value by deductive method was correct in the facts of this case. - HELD THAT: - Section 14 permits rejection of declared value where circumstances justify it. The appellant's director admitted that goods imported differed from those declared and suggested a joint market survey to ascertain market price. The survey was conducted with appellant's participation; margins for retailer and importer and post-importation costs were deducted and the cum-duty price worked backwards to determine assessable value. The appellant did not contest the valuation during adjudication and had waived requirement for show cause notice and hearing; there is no evidence the admissions were under duress. Given the admitted mismatch between declared and imported goods and the appellant's active participation in the valuation exercise, rejection of invoice value and re-determination by deductive method was upheld. [Paras 23, 24]

Rejection of declared value and re-determination of assessable value by deductive method was valid.

Confiscation for non-conformity with entry and for breach of prohibition under Section 111(d), (l) and (m) - Confiscation under Section 111(d), (l) and (m) of the Customs Act was justified for counterfeit goods and for goods not conforming to the Bill of Entry or declared value. - HELD THAT: - Section 111(d) covers goods imported contrary to prohibitions (such as those under Section 11/Rule 6); once items were found to infringe registered IPRs they became prohibited and liable to confiscation under Section 111(d). Goods that were not included in the entry or were in excess or did not correspond in value or particulars with the entry fall within clauses (l) and (m). The appellant admitted the goods were different from those declared, and right-holder reports supported counterfeit findings. Accordingly, confiscation of counterfeit goods under Section 111(d) and (l), and confiscation of other goods under Section 111(l) and (m) was proper. [Paras 26, 27]

Confiscation under the cited clauses of Section 111 was correct.

IPR infringement by use of registered device marks (three stripes, Trefoil, Puma form strip) - Presence of registered device marks (three stripes/Trefoil and Puma form strip) on shoes sufficed to establish IPR infringement despite presence of other unregistered marks; EU authority was persuasive but Delhi High Court precedent binding. - HELD THAT: - The appellant relied on an EU General Court judgment to challenge distinctiveness of three parallel stripes; the Tribunal found the Delhi High Court decisions on Puma and Adidas device marks binding and controlling for the bench. Photographs showed the lines at the characteristic angled orientation used by Adidas, and Puma form strip and other registered indicia were found to be present. The Tribunal held that infringement of registered IPRs is determinative even if goods also have non-registered marks, and accepted the departmental and right-holder technical findings that the device marks were infringed. [Paras 28]

Goods bearing the registered device marks were held to infringe IPR and liable accordingly.

Redemption fine under Section 125(1) - Redemption fine of Rs. 15,000 under Section 125(1) in respect of non-counterfeit goods was reasonable and upheld. - HELD THAT: - The Tribunal noted that the original authority allowed redemption of certain non-counterfeit goods upon payment of a redemption fine equal to approximately 1% of the value and found the amount reasonable in view of the facts and circumstances, including admitted mis-declaration and reassessed value determined by joint survey. [Paras 29]

Redemption fine under Section 125(1) was reasonable and sustained.

Mutual exclusivity of penalties under Section 114A and Section 112 (proviso to Section 114A) - Simultaneous imposition of penalties under Section 114A and Section 112 is not sustainable; penalty under Section 114A is set aside. - HELD THAT: - Section 114A contains a proviso that where a penalty has been levied under that section, no penalty shall be levied under Section 112 or Section 114. The original order imposed penalties under both Section 114A and Section 112. The Tribunal held the two penalties to be mutually exclusive in the present statutory matrix and set aside the penalty imposed under Section 114A while leaving the remaining penalty under Section 112 intact. [Paras 30, 31]

Penalty under Section 114A set aside; concurrent penalty under Section 112 preserved.

Final Conclusion: The appeal is partly allowed: the Tribunal upheld the seizure, valuation, confiscation (for counterfeit and mis-declared goods), and the redemption fine, but set aside the penalty imposed under Section 114A while leaving the remaining penalties and orders intact.

Residuary jurisdiction under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - overriding effect of Section 238 of the Insolvency and Bankruptcy Code, 2016 on instruments - termination of contract for pre-moratorium defaults as distinct from insolvency-triggered termination - invocation of performance bank guarantees consequent to termination

Termination of contract for pre-moratorium defaults as distinct from insolvency-triggered termination - application of Government extension order in Covid-19 context - Termination of Work Order No. 1 was not in violation of the provisional extension letter dated 30.03.2020 or the Government order dated 08.06.2020. - HELD THAT: - The provisional extension letter of 30.03.2020 extended time up to 30.06.2020 expressly "without prejudice" to the Corporation's right to recover compensation and required completion within the extended period. The Corporate Debtor had been in default well before 19.02.2020, having failed to complete the work within the original contractual period and remaining only 76% complete by 11.06.2020; nothing shows clauses permitting termination were altered. The Government order of 08.06.2020 granted six months' relief only to contractors not in default prior to 19.02.2020; the Corporate Debtor was a defaulter prior to that date and therefore not entitled to the benefit of that order. Applying these facts, the termination of Work Order No. 1 was valid and not barred by the extension letter or the Government order. [Paras 16, 19, 20]

Termination of Work Order No. 1 was valid and not in breach of the provisional extension or the Government order.

Application of Government extension order in Covid-19 context - termination of contract for pre-moratorium defaults as distinct from insolvency-triggered termination - Termination of Work Order No. 2 was not in violation of the Government order dated 08.06.2020. - HELD THAT: - Work Order No. 2 involved defaults predating 19.02.2020, including prolonged cessation of work from May 2019 to February 2020 and lack of substantive progress despite final notice. The Government order's six-month extension applied only to awardees not in default prior to 19.02.2020; as the Corporate Debtor was a pre-19.02.2020 defaulter, it could not claim the protection of that order. Accordingly, termination under the contract clauses was not barred by the Government order. [Paras 21, 23]

Termination of Work Order No. 2 did not contravene the Government order and was permissible.

Residuary jurisdiction under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - overriding effect of Section 238 of the Insolvency and Bankruptcy Code, 2016 on instruments - The Adjudicating Authority lacked jurisdiction under Section 60(5)(c) to set aside the terminations as being barred by Sections 14 and 238 of the IBC; Sections 14 and 238 did not render the terminations void in the present facts. - HELD THAT: - The Court applied the Supreme Court's guidance in Tata Consultancy Services Ltd. to test whether the contractual disputes had a nexus with the insolvency process. The record shows repeated defaults by the Corporate Debtor predating the CIRP and termination notices that arose from those contractual breaches rather than insolvency. The Appellant was availing construction services (not recovering property or supplying essential goods/services as contemplated by Section 14), and there is no indication termination was motivated by insolvency or would cause the corporate death of the Corporate Debtor. Consequently, the residuary jurisdiction under Section 60(5)(c) cannot be invoked where the dispute arises dehors the insolvency and where the termination is for pre-existing contractual defaults. The Adjudicating Authority therefore erred in holding the work orders inconsistent with Section 20 or prohibited by Section 238 and in treating Section 14 as applicable. [Paras 24, 31, 32, 33]

Adjudicating Authority had no jurisdiction to invalidate the terminations under Sections 14 or 238; the terminations were not rendered void by IBC provisions.

Invocation of performance bank guarantees - termination of contract for pre-moratorium defaults as distinct from insolvency-triggered termination - The invocation of the performance bank guarantees by the Corporation was not illegal. - HELD THAT: - Because the terminations of the work orders were held valid and not prohibited by the moratorium or by Section 238, the consequent invocation of bank guarantees followed from valid contractual termination. The Appellate Tribunal concluded that the Adjudicating Authority's directions setting aside invocation were erroneous; there was no unlawfulness in encashment arising from IBC in the present factual matrix. [Paras 34, 35]

Invocation of the bank guarantees was lawful and not liable to be set aside.

Final Conclusion: The impugned order of the Adjudicating Authority setting aside the terminations and the invocation of bank guarantees is set aside. The Appellant's terminations of the two work orders and the consequent invocation of performance bank guarantees were valid on the facts; the Adjudicating Authority lacked jurisdiction under Section 60(5)(c) to entertain these contractual disputes as arising from insolvency. Appeal allowed with no order as to costs.

Default under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Interest Bearing Maintenance Security (IBMS) - permitted uses and misuse - Financial Debt - amounts collected from allottees deemed to have commercial effect of borrowing - admission of corporate insolvency resolution process (CIRP) - appointment of Interim Resolution Professional and moratorium under Section 14 of the IBC

Default under Section 7 of the Insolvency and Bankruptcy Code, 2016 - The Section 7 application by the association satisfies statutory requirements and is maintainable. - HELD THAT: - The Tribunal applied the tripartite threshold for admission in a Section 7 petition: (a) the applicants as Financial Creditors in a class possess the requisite mandate (the association members hold 327 units thereby meeting the first proviso requirement); (b) there exists a default under the agreement between parties; and (c) the application is complete with no disciplinary proceedings pending against the proposed Insolvency Professional. The record (including Form 2) and pleadings established that the association qualifies as Financial Creditor in a class and that the application was complete, enabling admission under Section 7.

Section 7 petition held maintainable and admitted.

Interest Bearing Maintenance Security (IBMS) - permitted uses and misuse - default under the agreement executed between the parties - There was a substantive default by the Corporate Debtor in relation to IBMS and other dues as per the terms of the agreement. - HELD THAT: - Clause 11.2 of the parties' agreement limits IBMS to securing maintenance bills and related charges, and contemplates refund or transfer to the maintenance agency/society. The Tribunal found that the Corporate Debtor admitted utilising the corpus to construct and upgrade amenities (clubhouse, restaurant, swimming pool, theatre and other infrastructure) which falls outside the permitted use set out in the clause. Having regard to the contractual stipulations and the Corporate Debtor's own admissions, the Tribunal concluded that a breach of clause 11.2 and consequent default existed. The Tribunal also noted unpaid common area electricity and defect/deficiency liabilities pleaded by the Financial Creditor as further instances of non payment.

Default under the agreement established; second condition for admission under Section 7 satisfied.

Financial Debt - amounts collected from allottees deemed to have commercial effect of borrowing - definition of Financial Debt (Section 5(8)(f) explanation) - Amounts raised from allottees (IBMS) qualify as Financial Debt for purposes of the Code. - HELD THAT: - The Tribunal relied on the statutory explanation to Section 5(8)(f) which deems amounts raised from an allottee under a real estate project to have the commercial effect of a borrowing. That statutory deeming provision thus brings the IBMS and similar sums within the definition of Financial Debt, supporting the Financial Creditor's entitlement to initiate CIRP for non repayment.

IBMS and related amounts constitute Financial Debt under the Code.

Appointment of Interim Resolution Professional and moratorium under Section 14 of the IBC - IRP appointed and moratorium declared upon admission of the Section 7 petition. - HELD THAT: - On admission, the Tribunal appointed the Resolution Professional proposed by the Financial Creditor and directed the IRP to take charge, publish the public announcement and call for claims. The moratorium under Section 14 was declared to operate from the date of the order until completion of the CIRP, restraining institution or continuation of suits, transfer or disposal of assets, enforcement of security interests and recovery of property occupied by the Corporate Debtor, while preserving supply of essential goods/services as required by the Code.

Proposed IRP appointed; moratorium under Section 14 declared and operative.

Final Conclusion: The Tribunal admitted the Section 7 petition filed by the association, holding that the applicants qualify as Financial Creditors in a class, that IBMS and other dues amounted to Financial Debt and that the Corporate Debtor committed default by misusing the IBMS and failing to discharge other liabilities. CIRP is initiated, the proposed Interim Resolution Professional is appointed, and moratorium under the Code is declared.

Default under the Insolvency and Bankruptcy Code, 2016 - operational debt - admission of an application under Section 9 of the IBC, 2016 - threshold of Rs. 1,00,000 for triggering the Code - corporate insolvency resolution process (CIRP) initiation - moratorium under Section 14 of the IBC, 2016 - appointment of Interim Resolution Professional

Default under the Insolvency and Bankruptcy Code, 2016 - operational debt - admission of an application under Section 9 of the IBC, 2016 - threshold of Rs. 1,00,000 for triggering the Code - The application under Section 9 was admitted on the basis that a default had occurred and was admitted by the Corporate Debtor for an amount exceeding the statutory threshold. - HELD THAT: - The Tribunal recorded the Corporate Debtor's specific admission of an undisputed debt of Rs. 9 Lakhs which exceeds the statutory minimum for invocation of the Code. Relying on the scheme of the IBC and the principle in Innoventive Industries Ltd. that the adjudicating authority must admit a Section 9 application once satisfied that a default has occurred, the Bench held that there was no need to probe contested allegations raised by the Corporate Debtor where an admission of liability for an amount above the threshold had been made. Consequently the Tribunal concluded that default existed and the requirements for admission under Section 9(5) were met. [Paras 21, 22, 24, 25]

Section 9 application admitted as default was established and admitted by the Corporate Debtor.

Corporate insolvency resolution process (CIRP) initiation - moratorium under Section 14 of the IBC, 2016 - appointment of Interim Resolution Professional - CIRP was ordered and moratorium declared; an Interim Resolution Professional was appointed and operational directions issued. - HELD THAT: - Having admitted the Section 9 application and recorded default, the Tribunal proceeded to initiate the CIRP and declared the moratorium in terms of Section 14, specifying the statutory prohibitions that follow upon such declaration. The Bench appointed an Interim Resolution Professional in the absence of a proposer named by the Operational Creditor, directed filing of requisite consents and disclosures by the IRP, and ordered the Operational Creditor to deposit an amount to cover IRP expenses subject to adjustment by the Committee of Creditors. Administrative directions were given for communication of the order to relevant authorities. [Paras 25, 26, 27, 28]

CIRP initiated; moratorium declared; IRP appointed and directions given for compliance and deposit to meet IRP expenses.

Final Conclusion: The Tribunal admitted the Section 9 application on account of an admitted default exceeding the statutory threshold, initiated the corporate insolvency resolution process, declared the moratorium under Section 14 of the IBC, 2016, appointed an Interim Resolution Professional and issued consequential administrative directions.

Power under Rule 11 of the NCLT Rules, 2016 - inherent powers and availability of alternate statutory remedy - recall/review of admission order in corporate insolvency resolution process - service of notice under the Insolvency and Bankruptcy Code

Power under Rule 11 of the NCLT Rules, 2016 - inherent powers and availability of alternate statutory remedy - recall/review of admission order in corporate insolvency resolution process - Maintainability of an application under Rule 11 seeking setting aside/recall of ex-parte order and admission order of CIRP where an alternate remedy under the IBC is available. - HELD THAT: - The Tribunal held that Rule 11, being an exercise of inherent powers, cannot be invoked to recall or review orders for which a specific and effective statutory remedy is available under the Insolvency and Bankruptcy Code. Reliance upon precedents emphasising that review powers must be conferred by statute or necessary implication was accepted, and the Tribunal noted that permitting invocation of Rule 11 to bypass the prescribed procedure would be impermissible. Consequently, an application under Rule 11 seeking to set aside an admission order of CIRP was not maintainable where alternate remedies under the IBC existed. [Paras 7, 8]

Application under Rule 11 to recall/review the ex-parte and admission orders is not maintainable because an alternate remedy under the IBC is available and inherent power cannot be used to bypass the statutory procedure.

Service of notice under the Insolvency and Bankruptcy Code - recall/review of admission order in corporate insolvency resolution process - Whether the impugned ex-parte order dated 08.02.2019 and admission order dated 10.04.2019 could be set aside on the grounds urged by the Corporate Debtor, including non-service and being kept in the dark. - HELD THAT: - On examination of the application and records, the Tribunal found that both the ex-parte order and the admission order were passed after careful consideration of facts and credible evidence, including satisfaction of proper service of notices under section 8 of the Code and service of the main petition and subsequent hearing dates. The Tribunal rejected the Corporate Debtor's contentions that it was not served or kept unaware, observing that the orders were not susceptible to recall on those factual grounds in the present proceedings. [Paras 6]

The Tribunal concluded that the ex-parte and admission orders were passed after due consideration and proper service; the factual contentions of non-service or concealment were rejected.

Final Conclusion: The application under Rule 11 was dismissed as devoid of merits: Rule 11 cannot be used to recall/admit review of CIRP admission orders where statutory remedies exist under the IBC, and the Tribunal found the impugned ex-parte and admission orders were passed after due consideration and proper service.

Appropriation of refund against confirmed demand - pre-deposit by availing cenvat credit - acceptance of cenvat credit for Section 35F pre-deposit - refund payable from date of sanction where appropriation invalidated by appellate/quasi-judicial order - entitlement to interest on delayed refund

Appropriation of refund against confirmed demand - pre-deposit by availing cenvat credit - acceptance of cenvat credit for Section 35F pre-deposit - entitlement to interest on delayed refund - Whether the appellant is entitled to interest on the refund from the date of sanction where the sanctioned refund was appropriated against a demand that was the subject of an appeal in which the pre-deposit by availing cenvat credit was subsequently held acceptable. - HELD THAT: - The Tribunal found that the refund had been appropriated against a demand that was under challenge before the Commissioner (Appeals) because the Commissioner (Appeals) treated the pre-deposit (made through cenvat credit) as not acceptable and required payment in cash. The Gujarat High Court later quashed the communications of the Commissioner (Appeals) and held that pre-deposit by availing cenvat credit shall be accepted for the purpose of Section 35F, thereby validating the appellant's pre-deposit and the appeal before the Commissioner (Appeals). In consequence, the demand could not properly have been adjusted against the sanctioned refund and the refund ought to have been paid on the date of its sanction. Since the refund was payable on the date of sanction, the appellant was held entitled to interest for the period from the date of sanction until actual payment. The impugned orders rejecting interest were set aside and the appeals allowed with consequential relief. [Paras 6]

Appeals allowed; impugned orders set aside and appellant entitled to interest on the refund from date of sanction until payment.

Final Conclusion: The Tribunal allowed the appeals, set aside the orders rejecting interest, and directed that the appellant is entitled to interest on the refund from the date of sanction until actual payment, in view of the Gujarat High Court's holding that pre-deposit by availing cenvat credit was acceptable and the appropriation was therefore improper.

Deposit made under protest - pre-deposit under section 35F of the Central Excise Act - refund under Section 142 of the CGST Act - distinction between deposit and duty paid - non-appropriation by Revenue and restitution of deposit upon setting aside demand

Deposit made under protest - pre-deposit under section 35F of the Central Excise Act - distinction between deposit and duty paid - non-appropriation by Revenue and restitution of deposit upon setting aside demand - Refundability of the portion of amounts paid during investigation (Rs. 15 Lakhs of the claimed Rs. 21 Lakhs) which were not treated as pre-deposit under section 35F and were retained by the Department after the demand was set aside. - HELD THAT: - The Tribunal held that amounts paid during the course of investigation are deposits made under protest and not payments of duty unless specifically appropriated by the Revenue. The Board's Circular No.984/08/2014, relied on by the Department, clarifies that amounts in excess of mandatory pre-deposit are not to be treated as pre-deposit under section 35F; nonetheless the appellant's wider payments during investigation (aggregate Rs.66 Lakhs) included an amount which could not properly be treated as duty where the demand itself was subsequently set aside. The Tribunal followed the principle in EBIZ . Com Pvt. Ltd. v. CCE that the Revenue acts as custodian of such deposits and, once the demand is vacated, cannot unjustly retain the deposit. The pre-deposit portion (Rs.44 Lakhs) had been refunded; the remaining Rs.15 Lakhs formed part of the appellant's monies for which there was no liability and therefore had to be refunded. The Commissioner (Appeals) was found to be wrong in characterising that sum as duty and in invoking section 11B. [Paras 6, 8]

Rs. 15 Lakhs, paid during investigation and not appropriated as duty, must be refunded to the appellant; the rejection of this portion was set aside.

Refund under Section 142 of the CGST Act - distinction between deposit and duty paid - Whether Rs. 6 Lakhs shown as closing balance in ER-1 for June, 2017 which was not carried forward via TRAN-1 to the GST regime is refundable in cash under Section 142 of the CGST Act. - HELD THAT: - The Tribunal observed that the closing balance of Rs.6 Lakhs in ER-1 as on June 30, 2017 (immediately prior to GST commencement on July 1, 2017) was not carried forward to GST through FORM TRAN-1 and thus effectively remained as cash with the Department. In terms of Section 142 of the CGST Act, such balance cannot be treated as transferred credit and must be refunded in cash to the assessee. The adjudicating authority's denial for want of proof of debit into the credit ledger was therefore incorrect in law. [Paras 7, 8]

Rs. 6 Lakhs shown as closing ER-1 balance for June, 2017 and not transferred to GST is refundable in cash under Section 142 of the CGST Act.

Final Conclusion: The Tribunal allowed the appeal, setting aside the rejection of the refund claim of Rs.21 Lakhs: Rs.15 Lakhs (deposit made during investigation and not appropriated as duty) and Rs.6 Lakhs (closing ER-1 balance of June, 2017 not transferred to GST) are to be refunded to the appellant.

Rectification of mistake - frivolous application - costs for frivolous or vexatious proceedings - judicial ethics - per incuriam - binding precedent - letter patent appeal

Rectification of mistake - frivolous application - judicial ethics - binding precedent - Application under Rule on Miscellaneous (ROM) for rectification of the Tribunal's order dismissed as frivolous and an order for payment of costs imposed. - HELD THAT: - The application filed as a ROM was not a true rectification petition but was framed like an appeal memo challenging the Bench for alleged failure to consider or give findings. The applicant relied on certain authorities not placed on record and invoked the notion of orders being per incuriam without there being any finding of non-consideration of binding precedent. The Tribunal observed that certain cited Division Bench decisions and other judgments were not applicable to the facts and that challenging a single member order as per incuriam (instead of seeking a Larger Bench) was contrary to judicial propriety. Having regard to prior Triunal authority condemning such practices, the ROM was found to be frivolous and an abuse of process. In view of these conclusions, the application for rectification was rejected and a cost was considered appropriate to deter similar unethical conduct.

ROM application dismissed; applicant directed to pay costs of Rs. 10,000 to the Government Treasury within one month.

Final Conclusion: ROM application seeking rectification of the Tribunal's order dismissed as frivolous; costs of Rs. 10,000 imposed on the applicant to be paid to the Government Treasury within one month.

Power to rectify mistake apparent on the face of the record - Section 32 power to set aside ex parte order - Section 29(6) limitation for fresh assessment after setting aside ex parte order - limitation to exercise rectification power - principles of natural justice - moulding of relief under Article 226 and remand to assessing authority - debateable question not amenable to rectification proceedings

Power to rectify mistake apparent on the face of the record - limitation to exercise rectification power - Validity of the order dated 21.06.2017 passed under Section 31 to rectify the order dated 22.02.2014. - HELD THAT: - The Court held that the assessing authority's reasoning in the order dated 21.06.2017 - that the order dated 22.02.2014 was time barred and therefore amounted to a mistake apparent on the face of the record - was legally untenable. Applying the language and scheme of Section 32 read with Section 29(6), the Court found no mistake apparent in the order dated 22.02.2014: the application under Section 32 to set aside the second ex parte order was filed within the 30 day period prescribed by Section 32(1) and had to be decided on merits; limitation under Section 29(6) for framing a fresh assessment arises only upon allowance of such an application and is governed by the temporal rules in Section 29(6) and its provisos. An interpretation that treated the surviving period for framing a fresh assessment as a bar to entertaining a timely Section 32 application would render the statutory scheme unworkable and lead to absurd results. For these reasons the Court found the order of rectification to be unjustified. [Paras 42, 43, 44, 45, 46]

The order dated 21.06.2017 under Section 31 was quashed insofar as it purported to rectify the order dated 22.02.2014; no mistake apparent on the face of the record was found.

Section 32 power to set aside ex parte order - Section 29(6) limitation for fresh assessment after setting aside ex parte order - Proper construction of Section 29(6) in relation to successive ex parte assessment orders and applications under Section 32. - HELD THAT: - The Court construed Section 29(6) and its provisos to hold that (a) the limitation to make a fresh assessment after an order is set aside operates with reference to the date on which the ex parte order was set aside; (b) the first proviso extends the period where the setting aside occurs on or after 1 October of the assessment year; and (c) the second proviso is clarificatory, applying the same rule to second or subsequent ex parte orders. Consequently, the limitation to frame a fresh (third or subsequent) assessment arises only after the assessing authority allows the Section 32 application and is governed by Section 29(6) read with its provisos; it does not operate to disable the assessing authority from considering an otherwise timely Section 32 application. [Paras 35, 36, 37, 38, 41]

Section 29(6) does not impose a time bar on entertaining a timely application under Section 32; the time for making a fresh assessment following allowance of a Section 32 application is governed by Section 29(6) and its provisos as construed.

Moulding of relief under Article 226 and remand to assessing authority - limitation to exercise rectification power - Effect of the High Court's order dated 21.02.2017 (in Writ Tax No.97 of 2017) directing fresh proceedings on whether that direction created or revived a new period of limitation for the assessing authority to act. - HELD THAT: - The Court observed that the writ court, exercising its power under Article 226, quashed the impugned ex parte orders for breach of natural justice and directed the assessing authority to pass fresh orders after giving notice. Such a direction is a valid exercise of the High Court's inherent powers to mould relief and is consistent with the statutory appellate/administrative scheme (notably Section 55(5)(b)(ii)). Where the original orders were quashed for procedural defect (lack of opportunity) but jurisdiction was otherwise intact, remand with direction to proceed afresh is permissible and does not leave the taxpayer better off than if it had pursued statutory remedies. Consequently, the writ court's direction to permit fresh proceedings meant that the assessing authority could act thereafter without being defeated by the limitation argument advanced by the petitioner. [Paras 24, 25, 26, 27, 28]

The High Court's direction to remit for fresh proceedings validly attached to the order it quashed and did not, in the circumstances, render subsequent fresh proceedings invalid on limitation grounds.

Debateable question not amenable to rectification proceedings - power to rectify mistake apparent on the face of the record - Whether a debatable or contestable question can be corrected by proceeding under the rectification power invoked (Section 31). - HELD THAT: - Applying established authority, the Court reiterated that rectification for a 'mistake apparent on the face of the record' is confined to glaring, self evident errors and does not permit re examination of debatable questions which require inquiry or argument. The assessing authority's invocation of rectification to challenge the correctness of the order dated 22.02.2014 on grounds that involved legal interpretation and limitation was therefore impermissible. The Court held that the matters raised by the assessing authority involved disputed questions of law and fact not amenable to summary rectification. [Paras 33, 42, 46]

Rectification under Section 31 cannot be used to revisit debatable questions; the assessing authority's use of Section 31 in this case was inappropriate.

Final Conclusion: The impugned order dated 21.06.2017 passed under Section 31 of the U.P. VAT Act, 2008 (insofar as it purported to rectify or set aside the order dated 22.02.2014), is quashed. The writ petition is allowed.

Taxability of goods from date of statutory insertion - rectification of apparent error on the face of the record - limitation period for rectification applications - exclusion of period of interim stay for computation of limitation - prohibition on recovery pending adjudication of rectification application

Taxability of goods from date of statutory insertion - rectification of apparent error on the face of the record - limitation period for rectification applications - exclusion of period of interim stay for computation of limitation - Whether the petitioners could be held liable to pay tax for 'Chewing Tobacco' for Assessment Year 2007-2008 and whether their rectification applications filed under Section 84 are time-barred. - HELD THAT: - The Court recorded that 'Chewing Tobacco' was inserted in the Second Schedule of the TNVAT Act with effect from 12.07.2011 and therefore became a taxable item only from that date. The petitioners contended that for Assessment Year 2007-2008 the product was not a scheduled taxable item and that an excess tax had been computed. The respondents relied on the five year limitation for rectification under Section 84, calculated from the order passed in 2009. The Court held that the interim stay granted in the batch of writ petitions from 15.09.2011 to 03.10.2019 must be excluded when computing the limitation period. With that exclusion, the rectification applications filed on 15.07.2021 and 19.07.2021 fall within the five year period prescribed by Section 84. Consequently there was an apparent error on the face of the record requiring adjudication of the rectification applications before any recovery could be lawfully effected. [Paras 19, 20, 21]

The rectification applications are not time-barred; the question of tax liability for 'Chewing Tobacco' for Assessment Year 2007-2008 must first be considered in those applications and recovery cannot proceed pending such consideration.

Prohibition on recovery pending adjudication of rectification application - rectification of apparent error on the face of the record - Whether the impugned communications to banks for recovery could be sustained pending disposal of the rectification petitions. - HELD THAT: - The Court found that the Assistant Commissioner had issued communications to banks for recovery despite the rectification petitions being pending and not yet decided. Given that the rectification petitions were within time and raised the legal position that 'Chewing Tobacco' became taxable only from 12.07.2011, the Court held that the recovery orders could not be justified until the rectification applications are decided after taking into account the legal and factual contentions raised by the petitioners. The Court quashed the impugned orders and remitted the matters to the first respondent for determination of the rectification petitions. [Paras 22, 23]

The impugned orders to effect recovery from the petitioners' bank accounts are quashed and the matters are remitted to the first respondent to decide the rectification petitions first; further action, if any, to follow the outcome of those petitions.

Final Conclusion: The impugned bank-recovery communications are quashed and the matters are remitted to the Assistant Commissioner to decide the petitioners' rectification applications, bearing in mind that 'Chewing Tobacco' was made taxable only from 12.07.2011 and that the period of interim stay must be excluded in computing limitation; further action, if any, may be taken after disposal of the rectification petitions. No order as to costs.

Compounding of offence under Section 147 of the Negotiable Instruments Act - Acceptance of settlement where compensation awarded by court has been realised by complainant - Quashing of conviction and acquittal after compounding - Exercise of judicial power in terms of Damodar S. Prabhu v. Sayed Babalal H. on compounding post-conviction - Award of litigation costs where complainant recovered the amount sued for

Compounding of offence under Section 147 of the Negotiable Instruments Act - Exercise of judicial power in terms of Damodar S. Prabhu v. Sayed Babalal H. on compounding post-conviction - Acceptance of settlement where compensation awarded by court has been realised by complainant - Whether the offence punishable under Section 138 of the Negotiable Instruments Act could be compounded under Section 147 after convictions by the courts below where the complainant has received the compensation awarded by the trial court and consents to compounding. - HELD THAT: - The Court noted that the respondent-complainant had received the entire compensation amount awarded by the trial court and, on instructions, expressed no objection to compounding. Relying on the principle affirmed in Damodar S. Prabhu v. Sayed Babalal H. that courts have power under Section 147 to compound the offence even after recording of conviction by lower courts, this Court found no impediment to accept the settlement and exercise its power to compound. The factual matrix showed full realisation of the award by the complainant and a clean instruction of no objection, which grounded the exercise of the compounding power under Section 147 and justified quashing of the convictions consequent to compounding. [Paras 8, 9]

The offence was compounded under Section 147 of the Act and, consequent to compounding, the impugned convictions and sentences recorded by the courts below were quashed and set aside and the accused was acquitted.

Award of litigation costs where complainant recovered the amount sued for - Judicial discretion to impose costs on accused who occasioned unnecessary litigation - Whether the accused should be directed to pay litigation costs to the complainant despite compounding and acquittal. - HELD THAT: - Although the dispute was compounded and the accused acquitted, the Court observed that the complainant had been unnecessarily compelled to institute and pursue criminal proceedings to recover his money. In exercise of its discretion, the Court ordered the accused to pay a reasonable litigation cost to the complainant to compensate for being dragged into litigation, and stipulated payment within a time frame, with the consequence of penal and contempt proceedings for non-payment. [Paras 9]

The accused was directed to pay litigation costs of Rs. 25,000 to the complainant within four weeks, failing which he would be liable to penal consequences and contempt proceedings.

Final Conclusion: The Court compounded the offence under Section 147 of the Negotiable Instruments Act, quashed and set aside the convictions and sentences recorded by the trial and appellate courts, acquitted the accused, vacated interim orders and discharged bail bonds, and directed the accused to pay litigation costs to the complainant within four weeks.

Presumption under Section 139 of the Negotiable Instruments Act - Foundational facts required to invoke the presumption - Rebuttal of presumption on preponderance of probabilities - Requirement to prove specific legal debt or liability for offence under Section 138 - Appellate interference with acquittal - scope confined to cases where view below is not a reasonable and possible view

Requirement to prove specific legal debt or liability for offence under Section 138 - Presumption under Section 139 of the Negotiable Instruments Act - Foundational facts required to invoke the presumption - Rebuttal of presumption on preponderance of probabilities - Whether the appellant proved that the cheques were issued for a specific legal debt or liability (Panaji bus stand) and whether the presumption under Section 139 operated in its favour - HELD THAT: - The complaint expressly pleaded that the three dishonoured cheques related only to dues for Panaji bus stand. The complainant failed to place cogent foundational material demonstrating that the amounts of the cheques corresponded to a specific, provable debt pertaining solely to Panaji bus stand. Witnesses produced by the appellant were discredited on cross examination and documentary exhibits (including statements of outstanding dues and Exh.66 C) showed amounts inconsistent with the totals of the cheques. The Court held that the presumption under Section 139 arises only after foundational facts are proved by the complainant; here those foundational facts were not established and, in fact, the complainant's own evidence and documents were used to rebut the presumption on the touchstone of preponderance of probabilities. The presumption therefore did not survive and conviction could not be sustained on the material placed before the Magistrate. [Paras 16, 17, 18, 19, 20]

The appellant failed to prove that the cheques were issued for a specific enforceable debt relating only to Panaji bus stand and the presumption under Section 139 stood rebutted; conviction under Section 138 could not be sustained.

Appellate interference with acquittal - scope confined to cases where view below is not a reasonable and possible view - Whether the appeal against the acquittal should be allowed in view of the material on record and the standard of appellate review - HELD THAT: - The Court reaffirmed the settled principle that an appellate court should not overturn an order of acquittal merely because an alternative view was possible; interference is permissible only if the view adopted by the trial court was not a reasonable and possible one. Applying this test, the Court found that the Magistrate's conclusion - that the complaint concerned only Panaji bus stand and that the appellant's evidence did not establish the precise debt corresponding to the cheques - was a reasonable and possible view in light of the documentary and oral evidence and their cross examination. Consequently, the stringent test for reversing an acquittal was not satisfied and the appeal could not be allowed. [Paras 8, 9, 29, 30]

The Magistrate's view was a reasonable and possible one; the appellant failed the stringent test required to overturn an acquittal, and the appeal is dismissed.

Final Conclusion: The appeal against acquittal is dismissed: the appellant failed to prove that the cheques represented a specific, provable debt relating only to Panaji bus stand and the presumption under Section 139 was rebutted on the material; the Magistrate's acquittal was a reasonable and possible view and cannot be disturbed.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Duty to put incriminating evidence under Section 313 Cr.P.C. - Service of statutory demand notice and deemed service by registered post - Revisional jurisdiction of the High Court - Reduction of sentence with default imprisonment

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Whether the accused was rightly convicted under Section 138 NI Act for issuance of a cheque in discharge of debt or liability. - HELD THAT: - The courts below have found that the accused drew and delivered the cheque to the complainant in discharge of a loan, the cheque was presented within the prescribed period and was returned for insufficiency of funds, statutory notice was sent and the accused failed to make payment within the statutory period. The statutory presumption under Section 139 (read with Section 118) obliges the court to presume existence of liability once the factual foundation is established; the accused bore the burden to rebut it by adducing reasonably probable evidence, which he did not do. The trial and appellate courts' concurrent appreciation of PW 1 and PW 2 evidence, non disowning of the cheque or signature, and absence of any probative rebuttal by the accused sustain the conviction under Section 138. [Paras 16, 17, 19, 24]

Conviction under Section 138 NI Act is upheld.

Duty to put incriminating evidence under Section 313 Cr.P.C. - Whether the trial court's examination of the accused under Section 313 Cr.P.C. was defective for not showing the impugned cheque and related documents to the accused. - HELD THAT: - The court considered the contention that incriminating documents were not shown to the accused during his Section 313 examination. The record indicates that material particulars, including evidence of PW 1 and PW 2 referring to the cheque number, were put to the accused in his Section 313 answers (questions No. 2 and 4) and the accused replied by denying the evidence. Given that the accused did not advance any plausible defence or produce rebuttal evidence and did not disown the cheque or his signature during cross examination, the omission relied upon did not prejudice the accused or vitiate the trial. [Paras 9, 14, 16, 23]

No infirmity in the Section 313 Cr.P.C. examination has been established; the accused was not prejudiced.

Service of statutory demand notice and deemed service by registered post - Whether the statutory demand notice was validly served to sustain prosecution under Section 138 NI Act. - HELD THAT: - The notice was dispatched by registered post to the accused's known address and returned unserved with postal endorsement that the addressee was out of station. The court applied established principles that where a notice is correctly addressed and dispatched by post it is deemed to have been served unless the drawer knew the addressee lived elsewhere or the address was incorrect. Authorities cited support a liberal construction to prevent a drawer from evading notice; in the present facts the courts rightly treated the notice as having been given and not invalidated by its non receipt. [Paras 21, 22]

Service of the statutory notice is valid and sufficient for the purposes of Section 138.

Revisional jurisdiction of the High Court - Reduction of sentence with default imprisonment - Whether this Court should interfere with concurrent findings of conviction and whether sentence requires modification. - HELD THAT: - Applying revisional restraint, the High Court declined to re appreciate concurrent findings of the trial and sessions courts absent any glaring miscarriage of justice. While upholding the conviction, the court exercised its supervisory power to modify the sentence: reducing substantive sentence to a fine (to be paid to the complainant) while retaining default imprisonment as a consequence for non payment, and directing deposit of the fine within a specified period failing which default imprisonment shall follow. [Paras 24, 25]

Concurrent conviction is not interfered with; sentence modified to a fine with default custody provision and directions for realization.

Final Conclusion: The High Court upheld the accused's conviction under Section 138 NI Act, rejected the challenge to the adequacy of the Section 313 Cr.P.C. examination and the contention of non service of notice, but in exercise of its supervisory jurisdiction reduced the substantive sentence to a fine (with default imprisonment preserved) and directed payment to the complainant within a specified time.

Double jeopardy / bar to second trial under Section 300 Cr.P.C. - Maintainability of fresh complaint where earlier acquittal on merits - Cognizance after condonation of delay under the Negotiable Instruments Act - Requirement of opportunity to accused before taking cognizance

Double jeopardy / bar to second trial under Section 300 Cr.P.C. - Maintainability of fresh complaint where earlier acquittal on merits - Whether the trial court was precluded from entertaining and proceeding with a fresh complaint under Section 138 NI Act in NI 09 of 2017 where the same cause of action between the same parties had earlier been fully tried in CR 23(NI) of 2013 and the accused had been acquitted. - HELD THAT: - The High Court noted that in CR 23(NI) of 2013 the accused stood trial, evidence was led and the learned CJM, by judgment dated 11.04.2016, acquitted the accused on merits including the finding that the complaint was premature and that the accused had repaid the loan. That acquittal remained in force notwithstanding the complainant's subsequent actions. In those circumstances the Court held that entertaining a fresh complaint in respect of the same cause of action between the same parties amounted to permitting a second trial which is barred by Section 300 Cr.P.C. The fact that the earlier acquittal included the ground of prematurity did not permit the complainant to relitigate the same allegations against the same accused by instituting a fresh proceeding so as to evade the finality of the earlier judgment. Consequently the order of the CJM taking cognizance on the fresh complaint was erroneous and liable to be set aside. [Paras 5, 18, 19]

Impugned order of 25.03.2019 proceeding with NI 09 of 2017 was set aside and the criminal revision allowed as the fresh complaint was barred by Section 300 Cr.P.C.

Cognizance after condonation of delay under the Negotiable Instruments Act - Requirement of opportunity to accused before taking cognizance - Whether the learned CJM committed error in condoning delay and taking cognizance of the fresh complaint without affording the accused an opportunity to file objections or be heard on the question of condonation. - HELD THAT: - The record shows that the learned CJM condoned delay and took cognizance of the fresh complaint (order dated 09.03.2017) without providing opportunity to the accused to file a written objection; the petitioner specifically sought such opportunity but the trial court declined to re-open the question. While the Sessions Judge had earlier declined to interfere with the condonation in revision, the High Court found that, in view of the prior full trial and acquittal, the very act of entertaining the fresh complaint (including condoning delay and taking cognizance without giving opportunity) was vitiated by the bar against a second trial. The Court therefore treated the proceedings on the fresh complaint as erroneous and disposed of the revision by setting aside the impugned order. [Paras 8, 9, 10, 18, 19]

The condonation and subsequent taking of cognizance without affording the accused the opportunity to be heard was rendered erroneous in light of the bar on a second trial; the impugned orders are set aside.

Final Conclusion: Criminal Revision allowed; impugned order dated 25.03.2019 in NI 09 of 2017 set aside as the fresh complaint related to the same cause of action for which the accused had already been fully tried and acquitted; lower court record to be sent down.

Effect of attachment subsequent to creation of equitable mortgage - priority and efficacy of SARFAESI sale over subsequent attachments - rateable distribution under Section 73 of the Code of Civil Procedure - mandatory conditions for claiming participation in rateable distribution

Effect of attachment subsequent to creation of equitable mortgage - priority and efficacy of SARFAESI sale over subsequent attachments - Whether an attachment effected after creation of an equitable mortgage can impair the Bank's rights arising from a SARFAESI sale and the title of the auction purchaser. - HELD THAT: - The court accepted the petitioner Bank's contention that the equitable mortgage and consequent SARFAESI sale precede the subsequent attachment in the suit. The Bank had obtained equitable mortgage when title deed was deposited on 7.10.2005 and the attachment in the suit was effected thereafter. The court relied on binding precedents holding that an attachment effected subsequent to the creation of an equitable mortgage does not affect the mortgagee's rights or the confirmed SARFAESI sale; such attachment falls to ground on confirmation of the sale. Because the Bank neither held possession nor title after auction transfer to the purchaser, the subsequent attachment could not defeat the SARFAESI proceedings or the purchaser's title and therefore could not be the basis for directing the Bank to deposit the auction proceeds into the court. [Paras 6, 8]

Attachment subsequent to creation of equitable mortgage does not affect the SARFAESI sale or the auction purchaser's title; Ext.P7 directing deposit of auction proceeds on that basis was unsustainable.

Rateable distribution under Section 73 of the Code of Civil Procedure - mandatory conditions for claiming participation in rateable distribution - Whether the decree-holder's claim for rateable distribution under Section 73 CPC was maintainable in the circumstances of the case. - HELD THAT: - The court examined the requirements for claiming rateable distribution and noted the mandatory nature of the conditions: the execution application must be filed to the court which holds the assets before the assets came into the custody of that court; the assets must be held by the court; both the attaching creditor and the decree-holder must hold decrees for payment of money against the same judgment-debtor; and all other conditions under Section 73 must be fulfilled. The learned Munsiff failed to ensure that these conditions were met in the present case. Since the decree-holder did not satisfy the mandatory preconditions for participation in rateable distribution, the application under Section 73 could not be allowed. [Paras 7, 8]

The conditions for claiming rateable distribution under Section 73 CPC were not satisfied; the learned Munsiff erred in allowing the application on that ground.

Final Conclusion: The petition is allowed; Ext.P7 order (and consequential communication Ext.P8) directing the Bank to deposit the SARFAESI auction proceeds into court is set aside because (i) the subsequent attachment could not affect the equitable mortgage and confirmed SARFAESI sale, and (ii) the decree-holder failed to satisfy the mandatory conditions for rateable distribution under Section 73 CPC.

Liability of signatories to a dishonoured cheque under Section 138 of the Negotiable Instruments Act - exemption under the second proviso to Section 141 of the Negotiable Instruments Act - necessity of impleading the juridical person (the Corporation) as distinct from its officers - quashing of criminal proceedings under Section 482 Cr.P.C.

Liability of signatories to a dishonoured cheque under Section 138 of the Negotiable Instruments Act - Proceedings against the signatories who signed the dishonoured cheque (applicant nos. 1 and 2) were not liable to be quashed at the stage of this petition. - HELD THAT: - The record shows applicant nos. 1 and 2 admitted signing the cheque on behalf of the Corporation and there is a prima facie case against them. At this pre-trial stage the court declined to draw a final factual conclusion in their favour and observed that defences available to them can be raised at trial. The application insofar as applicant nos. 1 and 2 sought quashment of proceedings was therefore dismissed. [Paras 6, 14]

Application dismissed as regards applicant nos. 1 and 2; prima facie case remains and prosecution may proceed.

Exemption under the second proviso to Section 141 of the Negotiable Instruments Act - The second proviso to Section 141 did not apply on the facts pleaded and no exemption thereunder was established by the applicants. - HELD THAT: - The second proviso exempts from prosecution a person nominated as a Director by virtue of holding specified Government or controlled financial-corporation office. The applicants bore the burden of proving that they were officers of the Central/State Government or of a Government-controlled financial corporation and that their directorship arose by virtue of such office. The record does not show those conditions were satisfied; instead it indicates the applicants were officers of the Corporation itself. As the requisite foundation for the proviso was not discharged, the court declined to grant relief under that proviso while leaving open the applicants' right to raise such objections before the trial court. [Paras 9, 10, 11, 12, 13]

Applicability of the second proviso to Section 141 not established; no interference granted on that ground at this stage.

Necessity of impleading the juridical person (the Corporation) as distinct from its officers - quashing of criminal proceedings under Section 482 Cr.P.C. - Proceedings against applicant no. 3 (Bhikari Singh) and against Yogesh Shukla in his individual capacity were quashed for want of specific allegations and unnecessary impleading respectively. - HELD THAT: - The complaint contained no specific allegation against Bhikari Singh beyond his status as Chairman; consequently prosecution against him could not be sustained. Yogesh Shukla, the Managing Director, was needlessly impleaded when the Corporation, a separate juridical person, sufficed for prosecution against the signatories. There was no occasion in law to treat the Managing Director as personally liable in the absence of specific allegations creating an offence against him. On these grounds the Court granted quashment of the complaint insofar as it proceeded against Bhikari Singh and Yogesh Shukla individually. [Paras 8, 15, 16, 17, 18]

Proceedings quashed against applicant no. 3 (Bhikari Singh) and against Yogesh Shukla in his individual capacity; complaint must no longer be prosecuted against them.

Final Conclusion: The petition under Section 482 Cr.P.C. is partly allowed: proceedings are quashed as against Bhikari Singh and Yogesh Shukla individually, while the application seeking quashment as to the signatory-applicants is dismissed and prosecution against them may proceed; the question of exemption under the second proviso to Section 141 was not established and remains open for consideration at trial.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Sections 118 and 139 of the Negotiable Instruments Act - Rebuttal on the touchstone of preponderance of probabilities - Territorial jurisdiction - Scope of revisional jurisdiction - Forcible issuance and forged signature defence - Arbitration clause not invoked

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Sections 118 and 139 of the Negotiable Instruments Act - Rebuttal on the touchstone of preponderance of probabilities - Forcible issuance and forged signature defence - Concurrent findings of guilt under Section 138 upheld as the presumption arising under Sections 118 and 139 was not rebutted on preponderance of probabilities. - HELD THAT: - The Magistrate found, on appreciation of oral and documentary evidence, that the applicants had not placed material to rebut the statutory presumption that the cheques were issued for a legal debt or liability. The defence asserted before the trial was that the cheques were forcibly obtained and that one partner's signature was forged, but no evidence was adduced to support either contention. The Sessions Court confirmed these findings, and this Court, on revision, found no reason to disturb the concurrent conclusion that the presumption under Sections 118 and 139 remained unrebutted. The Court further noted that the respondent had admittedly paid advances and that it was for the applicants to show satisfaction of any liability; given the nature of the defence actually taken at trial and the evidence (or lack thereof) led in support, the applicants failed to discharge the onus required to rebut the presumption. [Paras 6, 18, 22, 23, 24]

Conviction under Section 138 affirmed; presumption under Sections 118 and 139 not rebutted and no interference warranted.

Scope of revisional jurisdiction - Claim that the Sessions Court denied opportunity of oral argument was rejected and did not vitiate the impugned order. - HELD THAT: - The applicants contended they were not permitted to advance oral arguments before the Sessions Court, relying on the roznama and an affidavit. The Sessions Court's record and its judgment indicate that counsel for the applicants was heard. This Court held that the affidavit disputing the court record could not be used to overturn the finding that the applicants had an opportunity to be heard, and therefore there was no ground for revisional interference on this basis. [Paras 9, 12]

No merit in the contention of denial of oral argument; revisional interference on this ground is unwarranted.

Territorial jurisdiction - Objection as to territorial jurisdiction was not maintainable where no such objection was raised before the Magistrate and earlier Supreme Court rulings did not affect pending complaints. - HELD THAT: - The applicants argued that the complaint was filed in a forum without territorial jurisdiction to harass them. The Court observed that the objection to jurisdiction was not taken before the Magistrate and therefore the Sessions Court correctly refused to accept it. Further, the Court noted that the subsequent pronouncement in Dashrath Rupsingh Rathod did not affect complaints already filed and pending, and earlier precedents relied upon by the applicants were distinguishable. Consequently, the objection to territorial jurisdiction did not warrant interference in revision. [Paras 10, 13, 26]

Territorial jurisdiction objection insufficient; no interference in revisional jurisdiction.

Arbitration clause not invoked - Applicants' failure to invoke the arbitration clause or initiate civil proceedings on the question of quality of iron ore undermines their contention that there was no ascertainable legal liability related to the cheques. - HELD THAT: - Although the contract contained a provision for analysis and an arbitration clause, the applicants did not invoke arbitration or commence civil proceedings to challenge the respondent's claim about quality or return of the iron ore. The Court observed that the applicants' defence at trial was limited to forcible issuance and forgery, and they did not advance a case showing that the respondent had returned the iron ore or that liabilities had been satisfied. In that factual and procedural setting, the challenge that there was no ascertainable legal debt connected to the cheques could not be entertained in revision. [Paras 16, 19, 20, 24]

Failure to invoke contractual remedy/ arbitration or to lead evidence showing satisfaction of liability precludes revisional acceptance of the contention that no legal debt existed.

Applicability of precedents - Decisions relied upon by the applicants (Basalingappa and M/s. Jinarj Paper Udyog) were held not to assist their case on the facts before the Court. - HELD THAT: - The Court examined the authorities placed before it. Basalingappa was distinguished on facts because that case involved an impermissible insistence on negative evidence, which the Supreme Court corrected; but in the present matter the factual matrix differed and the accused here had not led evidence to support their specific defences. The M/s. Jinarj Paper Udyog decision on territorial jurisdiction was rendered before the Supreme Court's later pronouncement in Dashrath Rupsingh Rathod and therefore did not advance the applicants' position. Accordingly, the cited precedents did not justify interference with the concurrent findings. [Paras 11, 25, 26]

Authorities relied upon are inapplicable to the facts; do not warrant revisional interference.

Final Conclusion: The revision petition is dismissed; the concurrent findings of the Magistrate and Sessions Court convicting the applicants under Section 138 are upheld and no ground for interference in revisional jurisdiction is established.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Sections 118 and 139 of the Negotiable Instruments Act - Probable defence / rebuttal on preponderance of probabilities - Service of statutory notice under Section 138 - Limited scope of revisional jurisdiction under Section 397 CrPC

Offence under Section 138 of the Negotiable Instruments Act - Dishonour of cheque for insufficiency of funds - Accused guilty of offence punishable under Section 138 of the Negotiable Instruments Act. - HELD THAT: - The court examined the evidence and concluded that the complainant advanced money to the accused and the accused issued the cheque in question to discharge that liability, which was presented and dishonoured for insufficiency of funds. Bank witnesses corroborated presentation and return memo; the complainant produced the cheque and related bank memos. The defence denial did not dislodge the complainant's evidence. On the totality of evidence the courts below correctly found the ingredients of Section 138 established and convicted the accused. [Paras 7, 12, 14, 19, 28]

Conviction under Section 138 upheld.

Presumption under Sections 118 and 139 of the Negotiable Instruments Act - Onus shifting to the drawer to rebut presumption - Standard to rebut: preponderance of probabilities / probable defence - Statutory presumption under Ss. 118 and 139 applied and accused failed to rebut it. - HELD THAT: - The court held that issuance of the cheque and signatures were not denied, invoking the presumption under Sections 118 and 139 that the cheque was issued for discharge of debt or liability, thereby shifting the onus to the accused. The judgment applied settled law that the accused must raise a probable defence on preponderance of probabilities; mere suggestions or uncorroborated assertions by the defence were insufficient to rebut the presumption. Authorities cited support that a rebuttal requires positive material tilting probabilities in favour of the drawer, which was not furnished here. [Paras 22, 23, 24]

Presumption stood unrebutted; onus on accused not discharged.

Service of statutory notice under Section 138 - Appropriate proof of notice and effect of non-collection - Service of the statutory notice was sufficient and accused failed to avail opportunity to make payment. - HELD THAT: - Evidence showed the legal notice was sent by registered post and the postman gave intimation at the accused's house; the notice remained uncollected and was endorsed unclaimed. The father of the accused admitted receipt of notice yet did not return the money. The court found the notice was validly sent and that the accused did not act to collect it or make payment within stipulated time, satisfying the statutory requirement prior to prosecution. [Paras 15, 16, 19, 20]

Notice held to be properly served/issued and requirement for prosecution fulfilled.

Limited scope of revisional jurisdiction under Section 397 CrPC - Interference only for miscarriage of justice or legal error - High Court declined to interfere in revisional jurisdiction as no glaring error or miscarriage of justice was shown. - HELD THAT: - The court observed that concurrent findings of the trial and appellate courts were based on correct appreciation of evidence. Relying on law that revisional power is supervisory and not appellate, the High Court refused to re-appreciate evidence absent any material irregularity or failure of justice pointed out by the defence. The defence failed to demonstrate such grounds; accordingly the revisional petition was dismissed. [Paras 25, 26, 27]

No interference in revision; concurrent convictions to be upheld.

Final Conclusion: Revision petition dismissed; impugned convictions and sentences under Section 138 of the Negotiable Instruments Act affirmed, accused directed to surrender to serve sentence if not already served and bail bonds cancelled.