TaxTMI Updates e-Newsletter
Dec 23,2023

Show cause notice must specify allegations to enable meaningful response - Cancellation of GST registration for fraud, wilful misstatement or suppression of facts - Retrospective cancellation requires disclosure of reasons - Suspension of registration pending adjudication - Restoration of GST registration where show cause notice and order are vitiated - Opportunity to be heard / fair hearing

Show cause notice must specify allegations to enable meaningful response - Opportunity to be heard / fair hearing - Whether the show cause notice sufficiently set out specific allegations to enable the petitioner to meaningfully reply. - HELD THAT: - The Court found that the SCN merely alleged cancellation on the ground that registration was obtained by means of fraud, wilful misstatement or suppression of facts, but did not specify the alleged fraud, misstatement or the facts said to have been suppressed. A show cause notice must clearly set out the allegations on the basis of which adverse action is proposed so as to enable a meaningful response; the SCN in the present case failed to meet that standard and was therefore vitiated. [Paras 7, 8]

SCN set aside for not disclosing specific allegations and denying a meaningful opportunity to respond.

Cancellation of GST registration for fraud, wilful misstatement or suppression of facts - Retrospective cancellation requires disclosure of reasons - Restoration of GST registration where show cause notice and order are vitiated - Whether the impugned order cancelling the petitioner's GST registration (with retrospective effect) was validly reasoned. - HELD THAT: - The impugned order merely referred to the SCN and did not furnish reasons for cancellation; further, registration was cancelled retrospectively from 23.05.2023 without any reasons being stated either in the SCN or in the order. For administrative action as serious as retrospective cancellation of registration, reasons must be recorded. In the absence of any stated reasons, the impugned order is vitiated and must be set aside. Consequentially, the Court directed immediate restoration of the petitioner's GST registration. [Paras 9, 10, 11, 12]

Impugned order cancelling registration (including retrospective effect) set aside; registration to be restored forthwith.

Suspension of registration pending adjudication - Cancellation of GST registration for fraud, wilful misstatement or suppression of facts - Whether the respondent is precluded from initiating fresh proceedings after the SCN and impugned order are set aside. - HELD THAT: - The Court clarified that setting aside the defective SCN and impugned order does not preclude the respondent from initiating or pursuing proceedings if non compliance or violation of law is established. The order restores the status quo but leaves open the respondent's right to commence or continue proceedings in accordance with law, subject to observance of procedural safeguards including adequate reasons and opportunity to be heard. [Paras 13]

Respondent permitted to initiate or pursue fresh proceedings if warranted; present relief does not bar lawful action in future.

Final Conclusion: The petition succeeds: the SCN and the impugned cancellation order are set aside for failure to disclose specific allegations and reasons, the petitioner's GST registration is restored forthwith, and the respondent remains free to initiate or pursue fresh proceedings in accordance with law.

Assessment passed against deceased - Non est in law - Notice to legal heirs - Opportunity of personal hearing - Setting aside assessment and remand for fresh adjudication

Assessment passed against deceased - Non est in law - Validity of the assessment order passed in the name of the deceased M.K. Girish - HELD THAT: - The Court observed that the impugned assessment order dated 01.03.2023 was passed against the deceased M.K. Girish after his death on 25.02.2021 and after intimation of death to the respondent. Proceedings and an assessment issued and concluded in the name of a dead person are non est in law. In view of this legal incapacity, the assessment order cannot stand and must be set aside. The Court therefore quashed the impugned assessment order on this ground. [Paras 4, 8, 9]

Impugned assessment order passed against the deceased is set aside as non est in law.

Notice to legal heirs - Opportunity of personal hearing - Setting aside assessment and remand for fresh adjudication - Treatment of earlier notices and further procedure to be followed with respect to the legal heirs - HELD THAT: - The respondent acknowledged that notices GST DRC-01A dated 06.07.2022 and GST DRC-01 dated 21.11.2022 were issued in the name of the deceased. The Court directed that the notice dated 06.07.2022 shall be construed as a notice to the petitioners as legal heirs as on date. The petitioners were given six weeks from receipt of certified copy of the order to file their reply. The matter was remitted to the respondent for fresh consideration, with a direction to pass appropriate orders after giving the petitioners opportunity for personal hearing. Thus, the Court set aside the prior assessment and remanded the matter for fresh adjudication in accordance with these directions. [Paras 5, 8]

Notice dated 06.07.2022 to be treated as notice to the legal heirs; petitioners to file reply within six weeks; respondent to reconsider and pass fresh orders after personal hearing.

Final Conclusion: The assessment order dated 01.03.2023 passed in the name of the deceased is quashed; the notice dated 06.07.2022 is treated as notice to the legal heirs who shall file a reply within six weeks and the respondent is directed to decide the matter afresh after affording personal hearing.

Quashing of show cause notice - vagueness of notice and want of material - mechanical issuance and lack of application of mind - requirement of material to initiate proceedings under Section 73 of the CGST Act - reservation of departmental right to initiate fresh proceedings in accordance with law

Show Cause Notice - vagueness - lack of material - application of mind - Section 73 of the CGST Act - Ex. P1 Show Cause Notice dated 29.09.2023 issued under Section 73 of the CGST Act is unsustainable and is quashed. - HELD THAT: - A plain reading of Ex. P1 shows that the notice does not disclose the factual basis, source or material on which the authority reached a prima facie conclusion of tax evasion. The notice fails to indicate which transactions are alleged to be doubtful or suppressed and therefore lacks sufficient particularity to enable a meaningful explanation or defence. Section 73 proceedings presuppose that the authority is acting because it 'appears' to it necessary to initiate action, which in turn requires some material, information or complaint to justify issuance of a show cause notice. The impugned notice appears to have been issued mechanically without application of mind or cogent material; accordingly it cannot be sustained. The Court, however, expressly leaves open the Department's statutory right to initiate proceedings afresh in accordance with law if material is available. [Paras 6, 7, 8]

Ex. P1 is set aside/quashed for being bereft of facts and materials; departmental right to initiate proceedings in accordance with law is reserved.

Final Conclusion: Writ petition allowed to the extent that the Show Cause Notice dated 29.09.2023 (Ex. P1) issued under Section 73 of the CGST Act is quashed for want of requisite material and for being vague and mechanically issued; no order as to costs and the Department may, if law permits, initiate proceedings afresh in accordance with law.

Detention, seizure and release of goods in transit under Section 129 - payment of tax and penalty as condition for release of detained goods - difference between delivery note and prescribed delivery challan - requirement of prescribed delivery challan under Rule 55 - e-way bill and documentation obligation for conveyance in transit - voluntariness of declaration and estoppel from challenging payment

Detention, seizure and release of goods in transit under Section 129 - difference between delivery note and prescribed delivery challan - requirement of prescribed delivery challan under Rule 55 - e-way bill and documentation obligation for conveyance in transit - Validity of detention and levy of tax and penalty under Section 129 where goods were accompanied only by a delivery note and not by the prescribed delivery challan - HELD THAT: - The Court examined Section 129 which mandates that goods transported in contravention of the Act and rules may be detained or seized and released on payment of applicable tax and penalty. Rule 55 prescribes the delivery challan as the authorised document for transportation of goods for reasons other than supply (including movement for approval) and Rule 138(A)(1) requires the person in charge to carry the invoice or bill of supply or delivery challan and the e-way bill or its number. The judgment distinguishes a delivery note (a mere accompanying document) from a prescribed delivery challan (a statutorily recognised document affecting inventory and declared as per rule 138). The record showed that at the time of interception the person in charge produced only a delivery note, which is neither prescribed nor a substitute for the delivery challan; the petitioner did not possess the valid delivery challan or the corroborative document (memo dated 30.12.2019) to substantiate movement on approval. The Court further noted that departmental circulars confirm there is no substitute for the prescribed delivery challan. In these circumstances non-possession of the prescribed delivery challan justified invocation of Section 129 and the imposition of tax and penalty as per law. [Paras 14, 17, 18, 20, 21]

Detention and seizure and consequent levy of tax and penalty under Section 129 was justified because the goods were accompanied only by an uncertified delivery note and not by the prescribed delivery challan as required under Rule 55 and Rule 138.

Payment of tax and penalty as condition for release of detained goods - voluntariness of declaration and estoppel from challenging payment - Whether the petitioner could challenge the levy and contend duress after making a written declaration and voluntarily agreeing to pay tax and penalty for release of goods - HELD THAT: - The record contained a written declaration by the petitioner acknowledging ownership of the goods and expressing readiness to pay tax and penalty. The STO's order and the release process record that the petitioner voluntarily agreed in writing and paid tax and penalty to secure release. The Court found the plea of coercion and signing under protest to be an afterthought not raised before the appellate authority and unsupported by contemporaneous record; accordingly, once the petitioner admitted ownership and accepted liability in writing and effected payment, he was estopped from later disputing the levy on grounds of duress without reasonable justification. [Paras 21, 22]

The petitioner, having voluntarily declared ownership and agreed to pay tax and penalty (and having done so), cannot subsequently challenge the levy on the basis of duress and is estopped from doing so.

Final Conclusion: The writ petition is dismissed. The High Court upheld the detention, seizure and the levy of tax and penalty under Section 129 because the goods were accompanied only by a delivery note and not the prescribed delivery challan as required by Rule 55/Rule 138, and because the petitioner had voluntarily declared ownership and agreed to pay the tax and penalty, estopping him from challenging the action.

Pre-deposit requirement for appeals to Appellate Tribunal - statutory right to second appeal - denial of statutory right due to non-constitution of tribunal - consistency in interim orders - balance of equities in interim relief - Article 226 writ jurisdiction

Pre-deposit requirement for appeals to Appellate Tribunal - consistency in interim orders - balance of equities in interim relief - Whether, pending constitution of the Appellate Tribunal, interim protection should be granted on deposit of 20% of the remaining disputed tax in addition to the 10% deposited before the first appellate authority, rather than requiring a 50% pre-deposit - HELD THAT: - The Court held that the executive failure to constitute the appellate tribunal cannot result in denial or penalisation of the statutory right of second appeal. The statutory scheme envisages a deposit of 10% before the first appellate authority and an additional 20% of the remaining disputed tax at the time of filing appeal to the Tribunal. Having noted inconsistent interim practices of this Court requiring 30% (i.e. 10% already deposited plus 20% additional) in several prior single-judge orders and contrasting orders directing 50% in other matters, the Court applied the principle of consistency and equality of treatment in interlocutory reliefs. Reliance was placed on precedents emphasising uniformity in grant of interim orders and that similarly situated litigants must receive identical treatment unless factual differences justify deviation. The Court further reasoned that requiring 50% would penalise assessees for the Government's inaction in constituting the Tribunal and upset the balance of equities between revenue protection and protection of litigants' rights. The Court nevertheless acknowledged that different or higher deposits could be directed in peculiar facts of a particular case when justified. Applying these principles, the Court preferred the line of orders granting interim relief on deposit of an additional 20% (over and above the earlier 10%) and stayed recovery of the balance subject to that deposit.

Interim relief granted on deposit of 20% of the disputed tax in addition to the earlier 10% deposit; recovery proceedings in respect of the balance stayed pending disposal of the writ petition.

Final Conclusion: The interim application is disposed of by directing the petitioner to deposit 20% of the disputed tax in addition to the earlier 10% deposit; subject to such deposit, recovery of the balance shall remain stayed till adjudication of the writ petition. Respondents to file counter-affidavit within four weeks; rejoinder within two weeks; matter listed after six weeks.

Cancellation of GST registration - non-furnishing of returns - extended time for filing of returns during COVID-19 - non-speaking order - post-decision hearing - revocation of cancellation under Section 30 of the C.G.S.T. Act, 2017 - allegation of fraudulent availment of input tax credit

Cancellation of GST registration - non-furnishing of returns - extended time for filing of returns during COVID-19 - non-speaking order - allegation of fraudulent availment of input tax credit - Impugned cancellation of the petitioner's G.S.T. registration set aside on the ground that the cancellation order relied on a show cause notice for non-filing of returns which had been cured by filing within the Government's extended time and the cancellation order is non-speaking and does not record the alleged fraudulent availment of input tax credit. - HELD THAT: - The cancellation order, on its face, refers to the show cause notice dated 02.07.2020 concerning continuous non-furnishing of returns. The petitioner has averred, and the record shows, that the show cause notice was issued during the peak COVID-19 period when the Government had extended filing timelines, and the petitioner filed the returns within those extended timelines. The impugned order does not deal with the fact that the default identified in the show cause notice was subsequently cured; it contains no reasons addressing the submissions or the intervening conduct of the petitioner and therefore is not a speaking order. Although the Department orally contended before the Court that proceedings were in reality based on an alleged fraudulent availment of input tax credit, the cancellation order itself contains no finding or reference to such an allegation, nor does it record any action taken on that purported ground during the more than three-year interval. For these reasons the cancellation cannot be sustained. [Paras 9, 10, 12, 16, 17]

Impugned cancellation order dated 25.08.2023 quashed and the petitioner's G.S.T. registration restored forthwith.

Revocation of cancellation under Section 30 of the C.G.S.T. Act, 2017 - statutory time for decision on revocation - post-decision hearing - Pending revocation application and subsequent departmental correspondence calling for personal hearing after cancellation to be looked into by the Commissioner; the post-decision personal hearing letter loses efficacy upon allowance of the petition and the Commissioner directed to examine whether issuing that letter was warranted. - HELD THAT: - The petitioner had filed an application for revocation under Section 30 of the C.G.S.T. Act, 2017 which, by statute, calls for a decision within one month; no decision has been rendered. Separately, a letter dated 05.12.2023 calling for a personal hearing was issued after the cancellation order and, on the material placed before the Court, amounts to post-decision hearing which is impermissible. The Court has directed that the Commissioner, Ranga Reddy Commissionerate, take note of the letter and examine whether issuance of that personal hearing letter post the cancellation order was warranted; on allowance of this writ the said letter automatically loses efficacy pending that exercise. [Paras 13, 15, 18]

Commissioner directed to examine the legality and propriety of the letter dated 05.12.2023 and to decide the pending revocation application as per law; the personal hearing letter, if issued post-cancellation, loses efficacy in light of this order.

Final Conclusion: The writ petition is allowed: the cancellation order dated 25.08.2023 is quashed for being non-speaking and unsustainable in view of returns filed within the COVID-19 extension; the petitioner's GST registration is restored forthwith; the Commissioner is directed to examine the post-decision personal hearing letter and to decide the pending revocation application in accordance with law; no order as to costs.

Taxability of manpower supply services - impact of Supreme Court decision in C.C., C.E. & S.T., Bangalore [Adjudication] v. Northern Operating Systems Pvt. Ltd. on retrospective liability - closure of proceedings under Section 73(6) of the Central Goods and Services Tax Act, 2017 - show cause notice under Section 73(8) of the Central Goods and Services Tax Act, 2017 and conditional waiver of penalty - deposit of tax and interest pending adjudication - interim stay of recovery/adjudicatory proceedings

Show cause notice under Section 73(8) of the Central Goods and Services Tax Act, 2017 and conditional waiver of penalty - deposit of tax and interest pending adjudication - interim stay of recovery/adjudicatory proceedings - Stay of further proceedings pursuant to the show cause notice dated 29.09.2023 was granted. - HELD THAT: - The petitioner had, following the Apex Court ruling on the taxability of manpower supply services, undertaken an internal investigation and paid certain sums as tax and interest which led the authorities earlier to close proceedings under the provision allowing closure while leaving other liabilities open. Subsequently the authorities issued communications quantifying additional liability and, after representations by the petitioner, issued the show cause notice dated 29.09.2023 under the relevant provision offering payment within 30 days without penalty. The petitioner sought writ relief and pointed to an interim order in a similar High Court matter. Respondents accepted notice. On these facts and the material placed before the Court, further proceedings in pursuance of the show cause notice were stayed by the Court.

Proceedings pursuant to the show cause notice dated 29.09.2023 are stayed.

Final Conclusion: The High Court granted an interim stay of further action pursuant to the show cause notice dated 29.09.2023; other substantive questions regarding tax liability were not finally decided.

Grant of amendment to pleadings - Stay of recovery pending further hearing - Recording of impugned administrative order - Consequence of non functioning adjudicatory tribunal on alternative remedies

Grant of amendment to pleadings - Draft amendment in the petition was permitted and directed to be carried out forthwith. - HELD THAT: - The High Court allowed the petitioner to amend its petition by granting the draft amendment and directed that the amendment be carried out immediately. The order records the grant without further condition or qualification and requires implementation of the amendment forthwith. [Paras 1]

Draft amendment granted and to be carried out forthwith.

Stay of recovery pending further hearing - Recording of impugned administrative order - Consequence of non functioning adjudicatory tribunal on alternative remedies - The court recorded the impugned order and stayed the initiation of recovery dated 04.10.2023 until the next hearing; notice was issued returnable on 07.12.2023. - HELD THAT: - The Court took the impugned order on record after noting that the office of the Superintendent had initiated recovery of penalty pursuant to that order. The bench observed that although a Tribunal is constituted, it is not yet functioning and that Competent Authorities had commenced recovery proceedings while querying whether an appeal or stay had been filed or granted. In light of these circumstances the Court stayed the recovery steps initiated on 04.10.2023 until the next date of hearing and issued notice returnable on the specified date. [Paras 3, 4, 5, 6, 7]

Order dated 04.10.2023 initiating recovery is stayed until the next date; notice returnable on 07.12.2023.

Final Conclusion: The petitioners' draft amendment was allowed to be carried out immediately; the Court recorded the impugned order, stayed the recovery steps initiated on 04.10.2023 until the next hearing, and issued notice returnable on 07.12.2023.

Principal officer - service of notice under Section 2(35)(b) of the Income tax Act - vicarious criminal liability of company officers under Section 278 B - punishment for non payment of TDS under Section 276 B - issuance of process by Magistrate requires application of mind - quashing of prosecution for non compliance with mandatory procedural condition

Principal officer - service of notice under Section 2(35)(b) of the Income tax Act - vicarious criminal liability of company officers under Section 278 B - The petitioner, an independent non executive director, could not be treated as a principal officer and prosecuted under Sections 276 B and 278 B of the Income tax Act in the absence of service of the notice contemplated by Section 2(35)(b). - HELD THAT: - The Income tax Act treats a person as a principal officer under clause (b) of Section 2(35) only where he is connected with the management or administration of the company and the Assessing Officer has served on him a notice of his intention to treat him as such. The record in this case does not show that the mandatory notice was served on the petitioner; the Department's assertion of having sent notices to the company and its directors is not supported by evidence of delivery to the petitioner. Non compliance with the statutory notice requirement is a jurisdictional and mandatory condition precedent to initiating prosecution against a person falling under clause (b), and its absence vitiates the prosecution. The Court therefore declines to consider other grounds since failure to comply with Section 2(35)(b) goes to the root of the matter. [Paras 11, 12, 14, 16]

Prosecution of the petitioner under Sections 276 B and 278 B cannot be sustained for want of service of the notice under Section 2(35)(b) and is quashed qua the petitioner.

Issuance of process by Magistrate requires application of mind - quashing of prosecution for non compliance with mandatory procedural condition - The learned Magistrate's order issuing process against the petitioner was liable to be quashed because it was passed without applying mind to the statutory requirement of service of notice under Section 2(35)(b). - HELD THAT: - An order issuing process is not a mere formality; the Magistrate must consider whether mandatory statutory conditions for initiating prosecution have been satisfied. The order dated 18 February 2014 reflects that the Magistrate did not take into account the requirement of service of notice under Section 2(35)(b) before issuing process. Issuance of process without such scrutiny risks summoning an innocent person to trial and, where mandatory conditions have not been complied with, the order can be set aside. Accordingly, the impugned orders issuing fresh summons and process were quashed qua the petitioner. [Paras 15, 17]

The Magistrate's issuance of process without applying mind to the mandatory notice requirement is quashed and set aside in so far as it relates to the petitioner.

Final Conclusion: The petition is allowed: the Criminal Case No. 52/SW/2014 and the orders dated 18 February 2014 and 21 July 2022 are quashed and set aside insofar as they relate to the petitioner on the ground that the mandatory notice under Section 2(35)(b) was not served and the Magistrate issued process without applying his mind.

Short term capital gains - reopening of assessment under Section 148A - reliance on AIR/AIS information without specification of positive material - duty of assessing officer to confront assessee with particulars - computation and payment pursuant to court undertaking

Reliance on AIR/AIS information without specification of positive material - duty of assessing officer to confront assessee with particulars - Validity of the Assessing Officer's reliance on aggregated AIS information to treat part of the purchase consideration as unexplained and to proceed as if two properties were purchased. - HELD THAT: - The Court found that the notice and the material on which the Assessing Officer relied did not specifically state that the assessee had purchased two properties for Rs.70,00,000; the AIS entry alone recording values does not substitute for positive, particularised information identifying a second property. The Assessing Officer accepted the assessee's production of sale deed, purchase deed, loan documents and bank statements showing consideration of Rs.35,00,000 and sources thereof, but in the impugned order proceeded to treat Rs.35,00,000 as unexplained by referring to an alleged second purchase without pointing to any document or specifics of such purchase. The Court held that an assessee cannot be required to prove a negative and that if the Revenue possessed positive information about a second purchase it was incumbent on the Assessing Officer to apply his mind to that material and confront the assessee with it before recording a finding of undisclosed capital gain or unexplained investment. Reliance on AIS alone, without specification or confrontation, was therefore unsustainable in the circumstances. [Paras 2, 3, 5]

Impugned findings treating the Rs.35,00,000 as unexplained (on the basis of an alleged second property/purchase) were quashed and set aside.

Short term capital gains - computation and payment pursuant to court undertaking - Direction for fresh computation of income and payment of assessed capital gain following the assessee's undertaking. - HELD THAT: - The petitioner undertook before the Court to pay the actual capital gain as determined on a computation to be furnished by the Assessing Officer within the time stipulated and not to raise a limitation plea under the relevant provision. Accepting this undertaking, the Court directed the Assessing Officer to provide a computation of income within four weeks of upload of the order and ordered that the petitioner shall pay the amount so computed within four weeks thereafter. The Court further permitted the assessee, after payment, to challenge the computation by such legal remedies as may be available, but made clear that the undertaking to pay and not to plead limitation was the basis for entertaining the petition. [Paras 6, 7, 9]

Assessing Officer to furnish computation within four weeks; petitioner to pay the computed amount within four weeks of receipt, subject to subsequent challenge by appropriate proceedings.

Final Conclusion: The High Court quashed the Assessing Officer's finding that the Rs.35,00,000 purchase consideration was unexplained insofar as it rested on unparticularised AIS entries suggesting a second purchase, directed the Assessing Officer to furnish a computation of income within four weeks, and, on the assessee's undertaking to pay the capital gain and not to raise limitation, ordered payment of the computed amount within a further four weeks while preserving the assessee's right to legally challenge the computation thereafter.

Correction of challan - refund under Direct Tax Vivad Se Vishwas Act, 2020 - finality of Form 3 and Form 5 under VsV - interest under Section 244A - court direction for implementation of settlement under VsV

Correction of challan - refund under Direct Tax Vivad Se Vishwas Act, 2020 - Direction to correct the challan credited to the incorrect PAN and to give effect to that correction by refunding the amount to the assessee - HELD THAT: - The respondents conveyed that the assessee's challan of Rs. 25 lakhs for AY 2003-04 was deposited against an incorrect PAN and, on the assessee's request, the challan details have been corrected so that credit can be given. Although Form 3 and Form 5 under the VsV scheme are said to be final, the revenue accepted that the refund can be made if the Court so directs. The Court directed the concerned authority to take steps to correct the challan and to make the consequential refund of the said amount, completing the exercise within three weeks of receipt of the order. [Paras 3, 6]

The respondents are directed to correct the challan and to refund the credited amount to the assessee within three weeks.

Refund under Direct Tax Vivad Se Vishwas Act, 2020 - court direction for implementation of settlement under VsV - Proceedings under the Direct Tax Vivad Se Vishwas Act, 2020 shall be progressed from the stage at which they are presently positioned - HELD THAT: - The Court observed that the matter under the 2020 Act is positioned at the stage of acceptance of Form-3. In view of the directions given for correction of the challan and consequential refund, the Court disposed of the writ petition by directing the concerned authority to proceed with the VsV process as per law from the stage it currently occupies. [Paras 5]

The authority is directed to progress the VsV proceedings from their present stage in accordance with law.

Interest under Section 244A - finality of Form 3 and Form 5 under VsV - Interest under Section 244A will not be paid on the refund amount, as recorded on the basis of the assessee's statement - HELD THAT: - The revenue communicated that interest under Section 244A would not be allowed because the delay in issuing the refund was attributable to the assessee and the matter is settled under the VsV scheme. The assessee's counsel, on instructions, stated that the assessee would accept correction of the challan and receipt of the Rs. 25 lakhs without claiming interest. The Court recorded that statement and accordingly did not direct payment of interest. [Paras 3, 7]

No interest under Section 244A shall be paid; the assessee's waiver in this regard is recorded.

Final Conclusion: Writ petition disposed: the respondents shall correct the challan and refund the credited amount to the assessee within three weeks; the VsV proceedings shall be continued from the current stage; the assessee's statement foregoing interest under Section 244A is recorded and no interest is directed to be paid.

Condonation of delay - Deduction for liquidated damages - Findings of fact and appellate interference - Substantial question of law

Condonation of delay - Decision on merits despite delay - Application for condonation of delay of 430 days in re-filing the appeal was considered and allowed. - HELD THAT: - The Court acknowledged the length of the delay but exercised its discretion to condone the delay because it intended to decide the appeal on merits. The application for condonation was disposed of by permitting the re-filing and proceeding to adjudicate the substantive appeal. [Paras 2, 3, 4]

Delay of 430 days in re-filing the appeal is condoned and the application is disposed of.

Deduction for liquidated damages - Findings of fact and appellate interference - Substantial question of law - Whether the respondent/assessee was entitled to deduction in AY 2008-09 for liquidated damages (including amount provided in AY 2007-08) and whether any substantial question of law arises for the High Court's consideration. - HELD THAT: - The Assessing Officer disallowed the portion of the deduction corresponding to the sum provided in the preceding year but allowed the additional amount actually paid in the year under dispute. The CIT(A) examined documentary material, recorded findings of fact that liquidated damages had been suffered to the extent of the provisions made in AY 2007-08, and supplied tabulated particulars of purchase orders and deductions by BSNL and MTNL. The Tribunal sustained the CIT(A)'s findings. The High Court found nothing on record to show the CIT(A)'s findings were perverse and, in view of the factual findings upheld by the Tribunal, concluded that no substantial question of law arose for its consideration. [Paras 15, 16, 17, 18, 19]

The Tribunal's affirmance of the CIT(A)'s factual findings is upheld; no substantial question of law is found and the appeal is closed.

Final Conclusion: The application for condonation of delay is allowed to enable adjudication on merits; on the substantive appeal (AY 2008-09) the High Court finds the CIT(A)'s factual findings, as sustained by the Tribunal, not vitiated and, accordingly, no substantial question of law arises-the appeal is dismissed/closed.

Transactional Net Margin Method - Profit Level Indicator (PLI) - arm's length price - transfer pricing comparable - functional comparability - allocation of employee costs - segmental accounts

Profit Level Indicator (PLI) - Transactional Net Margin Method - allocation of employee costs - segmental accounts - arm's length price - Tribunal's rejection of the Profit Level Indicator computed by the Assessing Officer and validation of the PLI computed by the assessee under TNMM - HELD THAT: - The dispute concerned benchmarking of building design services under TNMM using the ratio of operating profit to total cost as the PLI. The Tribunal found as a fact that the assessee had maintained segmental and project-wise accounts such that employees deployed on AE and non-AE work were identifiable and salary costs were recorded project-wise. The TPO's allocation of salary and other operating costs on the basis of turnover was predicated on perceived opaqueness; the Tribunal concluded that this view was unsustainable because the record showed identifiable employee deployment and no legal requirement for hourly worksheets where salaries were not paid hourly. Given these findings of fact, the Tribunal accepted the assessee's computed PLI (11.52%) as being higher than the average of its selected comparables (9.23%) and thus properly reflective of arm's length results. The High Court held that the Tribunal's factual findings and approach were correct and required no interference. [Paras 15, 16, 18, 19, 20]

Tribunal rightly accepted the assessee's PLI computed under TNMM and rejected the AO/TPO's turnover-based allocation of employee costs; no interference.

Transfer pricing comparable - functional comparability - Tribunal's rejection of M/s Korus Engineering Solutions Pvt. Ltd. as a comparable for benchmarking - HELD THAT: - The DRP had accepted Korus as a comparable without undertaking a detailed functional analysis. The Tribunal examined publicly available information and found the functional profile of Korus to be sketchy and deficient for meaningful comparison: Korus's activities (engineering services to steel industry across conceptualization to commissioning, consultancy for greenfield plants, technology upgradation and expansion) did not establish functional parity with the assessee. Because the DRP did not demonstrate how Korus was functionally comparable and the available material was inadequate, the Tribunal concluded that Korus could not be retained as a comparable. The High Court agreed with the Tribunal's factual finding and approach and declined to interfere. [Paras 21, 22, 23]

Tribunal correctly rejected Korus as a comparable due to inadequate/sketchy functional information; no interference.

Final Conclusion: The appeal is dismissed; the Tribunal's factual findings upholding the assessee's PLI computation under TNMM and rejecting Korus as a comparable are sustained for AY 2012-13; no substantial question of law arises.

Reopening of assessment under Section 148 - chargeability of capital gains based on date of receipt - operation of Section 50C in computation of capital gains - protective assessment - principles of natural justice

Reopening of assessment under Section 148 - chargeability of capital gains based on date of receipt - principles of natural justice - Validity of the notice dated 31.03.2022 under Section 148 and the consequent assessment order dated 29.03.2022 for AY 2017-18 - HELD THAT: - The Court held that the re-opening and assessment for AY 2017-18 were unsustainable because the petitioner admitted that the entire sale consideration was received on 16.12.2015. Receipt of the sale consideration on that date renders the income chargeable to AY 2016-17 and not AY 2017-18; merely executing a sale deed later by the power of attorney holder does not create a fresh liability for AY 2017-18. Having accepted the petitioner's stand (both orally and by affidavit), the Court found the impugned notice and assessment liable to be set aside. The Court also noted the contention regarding issuance of a show-cause/draft assessment and natural justice, and disposed the proceedings by setting aside the impugned notice and order. [Paras 7, 8, 9]

Impugned notice dated 31.03.2022 and assessment order dated 29.03.2022 for AY 2017-18 set aside.

Operation of Section 50C in computation of capital gains - protective assessment - chargeability of capital gains based on date of receipt - Proceedings in respect of AY 2016-17 to be examined by the appellate authority with regard to date of receipt and computation of capital gains - HELD THAT: - The Court observed that the Revenue contested valuation and invoked market value under Section 50C while asserting a larger capital gain, and that assessment/appeal for AY 2016-17 is pending. Given the petitioner's admission that consideration was received on 16.12.2015, the Court left open the question of taxability for AY 2016-17 and directed that the appellate authority consider the issue of receipt of sale consideration and compute capital gains for AY 2016-17 accordingly. The Court recognised that assessments for both years had been framed, in part, to protect revenue interest, but refused to sustain the reassessment for AY 2017-18 where the petitioner had admitted receipt earlier. [Paras 9]

Appellate authority shall decide the pending appeal for AY 2016-17 taking into account the receipt of sale consideration; respondents remain free to initiate proceedings if the petitioner later takes a different stand.

Final Conclusion: Writ petition allowed; notice dated 31.03.2022 and assessment order dated 29.03.2022 for AY 2017-18 set aside. The appellate authority is directed to consider the question of receipt of sale consideration and computation of capital gains in the pending appeal for AY 2016-17; respondents may act if the petitioner alters her stand in future.

Proviso to Section 28(v) - adjustment where deduction disallowed under clause (b) of Section 40 - disallowance under Section 40(b)(iv) - interest in excess of 12% on partner's capital - separate legal personality of a firm and its partners - revision under Section 264 of the Income Tax Act - reopening under Section 148 read with Section 147 - effect of settlement under the Vivad Se Vishwas Scheme on appeals

Proviso to Section 28(v) - adjustment where deduction disallowed under clause (b) of Section 40 - disallowance under Section 40(b)(iv) - interest in excess of 12% on partner's capital - separate legal personality of a firm and its partners - Whether the petitioner could invoke the proviso to Section 28(v) to reduce his income on account of the firm's disallowance under Section 40(b)(iv). - HELD THAT: - The Court examined the statutory scheme where amounts due to a partner from a firm are charged to tax under Section 28(v) but qualified by the proviso which adjusts income to the extent such amounts were not allowed as deductions under clause (b) of Section 40. The Court held that the disallowance made in the hands of the firm under Section 40(b)(iv) (which relates to interest exceeding 12% per annum) does not alter the nature of income received by the partner. Emphasising that a firm and its partners are distinct taxable entities, the Court accepted the Revenue's position that disallowance of expenditure in the case of one entity does not entitle the recipient-entity to a corresponding deduction beyond what the recipient actually received and was chargeable to tax. Applying this principle to the facts, the Court upheld the reassessment which disallowed part of the interest in the hands of the petitioner and rejected the contention that the proviso mandated deletion of that addition. [Paras 12, 13, 15, 17, 23]

Proviso to Section 28(v) did not entitle the petitioner to delete the addition; the disallowance in the firm's assessment under Section 40(b)(iv) does not compel revision of the petitioner's income.

Revision under Section 264 of the Income Tax Act - reopening under Section 148 read with Section 147 - effect of settlement under the Vivad Se Vishwas Scheme on appeals - Whether the petitioner's application under Section 264 to revise the assessment could be entertained after reassessment and subsequent settlement under the Vivad Se Vishwas Scheme. - HELD THAT: - The Court noted that the assessment originally completed on 30.11.2016 was subsequently revised by the reassessment order dated 30.12.2019 (under Section 147 read with Section 143(3)), and that the petitioner's appeal against the reassessment became infructuous after he settled the dispute under the Vivad Se Vishwas Scheme. The petitioner's Section 264 application did not clearly specify which order was sought to be revised and, in any event, the earlier order had been superseded by the reassessment. In these circumstances the Court found no scope to interfere with the impugned rejection of the Section 264 application. [Paras 18, 19, 20, 21, 22]

Section 264 revision application was not maintainable in the circumstances; the impugned order rejecting the application was upheld.

Final Conclusion: The writ petition is dismissed; the impugned order rejecting the Section 264 application is upheld and there is no interference with the reassessment or its consequences. No costs.

Substantial question of law - appeal under Section 260A - concurrent findings of fact - decision based on no evidence - reliance on coordinate bench precedent - deference to Tribunal's factual findings

Substantial question of law - appeal under Section 260A - concurrent findings of fact - deference to Tribunal's factual findings - reliance on coordinate bench precedent - Whether the tax appeal involves a substantial question of law warranting admission under Section 260A and interference with the Tribunal's deletion of the addition. - HELD THAT: - The High Court examined the Tribunal's order and the Revenue's contentions against established tests for a 'substantial question of law' as developed by higher courts. The court emphasised that an appeal under Section 260A lies only where a substantial question of law is involved and must be formulated; concurrent findings of fact by the Tribunal are not ordinarily open to interference. A question of law is substantial if it is of general public importance, directly and substantially affects the parties' rights, is not settled by higher precedent, is open to debate, or if the findings are based on no evidence or involve misapplication of legal principles. Applying these principles to the present facts, the Court found no such substantial question: the Tribunal's reliance on a coordinate-bench decision and its factual conclusions did not raise a debatable legal issue or a finding demonstrably vitiated by no evidence or erroneous application of law. Consequently, the appeals did not satisfy the statutory threshold for admission under Section 260A. [Paras 4, 10, 11]

The appeals do not involve any substantial question of law and are dismissed.

Final Conclusion: The High Court dismissed the tax appeal for AY 2017-18, holding that the case does not raise any substantial question of law under Section 260A and therefore does not warrant interference with the Tribunal's order; no costs.

Deduction under section 11(1)(d) read with section 11(5) - earmarking of funds versus application of funds - treatment of corpus donation credited to income and subsequently transferred to specific fund - condonation of delay for pandemic and demise of authorised representative

Condonation of delay for pandemic and demise of authorised representative - Delay in filing the appeal of 550 days and the application for condonation of delay. - HELD THAT: - The Tribunal examined the explanation for delay that the global COVID-19 pandemic and the death of the trust's CA/authorised representative impeded access to the e-filing portal and awareness of the appellate order. The reason was found to be genuine and not wilful or wanton. Having accepted the appellants' explanation as sufficient in the interest of justice, the Tribunal exercised its discretion to condone the delay and proceeded to decide the appeal on merits. [Paras 6]

Delay of 550 days condoned.

Deduction under section 11(1)(d) read with section 11(5) - treatment of corpus donation credited to income and subsequently transferred to specific fund - earmarking of funds versus application of funds - Whether the donation credited to the Income & Expenditure account and subsequently transferred to the Milan Mandir Building Fund qualifies for exclusion from total income under the said provisions. - HELD THAT: - The Tribunal considered the claim that the donation was received for a specific purpose (Milan Mandir Building Fund), was credited initially to the Income & Expenditure account and thereafter transferred to the specific fund account, and was invested in a scheduled bank in accordance with the statutory mandate. The Assessing Officer and the CIT(A) had treated the transfer as mere earmarking and took a restrictive view, also expressing doubts based on signatures on accounts. The Tribunal found those reservations unjustified on the materials on record, accepted that the donation had been applied/transferred for the specific purpose and invested appropriately, and therefore held that the amount should not have been included in the total income. [Paras 9, 10]

Addition disallowing the donation deleted and the appeal allowed on merits.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and allowed the appeal on merits by holding that the donation received for a specific fund, credited to the accounts and thereafter transferred and invested for that purpose, was not exigible to tax and the addition made by the Assessing Officer was deleted.

Deduction under section 80 GGA of the Income tax Act - Effect of subsequent withdrawal of approval/notification under section 35 AC on deductibility - Requirement of material evidence to establish bogus donation/accommodation entry

Deduction under section 80 GGA of the Income tax Act - Explanation to section 35 AC and Explanation 1 to section 80 GGA(2)(bb) - Denial of deduction based solely on subsequent withdrawal of approval/notification - Allegation of bogus accommodation entry and need for supporting material - Allowability of deduction claimed under section 80 GGA in respect of donation to Navjeevan Charitable Trust - HELD THAT: - The Tribunal found on the record that the assessee made the donation in the relevant year and that Navjeevan Charitable Trust was approved under section 35 AC at the time of payment. The statutory scheme, including the Explanation to section 35 AC and Explanation 1 to section 80 GGA(2)(bb), expressly provides that deduction shall not be denied merely because the approval or notification was subsequently withdrawn. The Assessing Officer and the CIT(A) denied the deduction on the basis of the later withdrawal of the notification and made allegations of involvement in bogus accommodation entries, but no material was placed on record to substantiate those allegations. Since the impugned disallowance was founded merely on the subsequent withdrawal of approval/notification and there is no supporting material to prove that the donation was a sham, the Tribunal set aside the denial and held that the deduction must be allowed. [Paras 7, 8, 9, 10, 11]

Deduction under section 80 GGA allowed; impugned order denying the deduction set aside.

Re assessment proceedings under section 147 - jurisdictional challenge - Jurisdictional objection to initiation of reassessment proceedings - HELD THAT: - The appellant had challenged the jurisdiction of the Assessing Officer and the approval by the Pr. CIT to initiate reassessment proceedings. However, in view of counsel's submissions that merits determination would render consideration of jurisdiction unnecessary, the Tribunal did not adjudicate the jurisdictional ground and left the question open for consideration. [Paras 12]

Jurisdictional ground kept open for future consideration.

Final Conclusion: The appeal is allowed on merits by restoring the deduction under section 80 GGA for the donation made to Navjeevan Charitable Trust; the challenge to jurisdiction in relation to the reassessment proceedings was not decided and is left open.

Undisclosed income - penalty under section 271AAB - search under section 132 - estimation of income - penalty not leviable on estimation

Undisclosed income - penalty under section 271AAB - search under section 132 - Validity of imposition of penalty under section 271AAB on ad hoc additional income disclosed after search - HELD THAT: - The Tribunal held that section 271AAB applies only to 'undisclosed income' as defined in the Act, which requires nexus to money, bullion, jewellery or entries or transactions found in the course of search or to false expense entries discovered because of the search. Merely offering ad hoc or lump sum additional income in the return following a search, without any material or incriminating documents linking that amount to items or entries covered by the statutory definition, does not convert such disclosure into 'undisclosed income'. The Assessing Officer failed to point to seized material or documentary nexus connecting the additional disclosure to items contemplated by the definition. Reliance on co ordinate bench decisions endorsing the same legal proposition was upheld. For these reasons the Tribunal found the levy of penalty under section 271AAB(1)(b) to be unsustainable. [Paras 8, 9, 10]

Penalty imposed under section 271AAB(1)(b) on the ad hoc disclosure deleted.

Estimation of income - penalty not leviable on estimation - Whether penalty under section 271AAB can be imposed in respect of an addition made by estimation - HELD THAT: - The Tribunal applied the settled principle that penalty cannot be levied where the addition/disallowance arises solely from an estimate made by the Assessing Officer. The agricultural income addition was made on estimation and treated as unexplained cash credit; in these circumstances the imposition of penalty was held to be impermissible as a matter of law. Consequently the penalty levied under section 271AAB(1)(c) in respect of the estimated addition was set aside. [Paras 11, 12]

Penalty imposed under section 271AAB(1)(c) in respect of the estimated addition deleted; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, deleted the penalties levied under section 271AAB(1)(b) and 271AAB(1)(c), and directed that the penalty be deleted; the appeal is allowed.

Revision under Section 263 of the Income-tax Act - scope of notice in revision proceedings - natural justice - non-deduction of tax at source and disallowance under Section 40(a)(ia) - obligation to inquire into TDS liability under Section 194C

Revision under Section 263 of the Income-tax Act - scope of notice in revision proceedings - natural justice - non-deduction of tax at source and disallowance under Section 40(a)(ia) - obligation to inquire into TDS liability under Section 194C - Whether the Principal Commissioner of Income Tax could issue a subsequent notice expanding the grounds of revision under Section 263 after the assessee had responded to an earlier notice and satisfied the PCIT on that earlier basis - HELD THAT: - The Tribunal held that Section 263 contains no specific prohibition preventing the Principal Commissioner from addressing other aspects of an assessment order discovered on perusal of records during revision proceedings. Once it was found that the Assessing Officer had not made plausible inquiries regarding non-deduction of TDS under Section 194C and had therefore not considered disallowance under Section 40(a)(ia), the PCIT was entitled to issue further notice and take a view on that omitted aspect. The fact that the assessee had satisfied the PCIT on the basis mentioned in the first notice did not preclude the PCIT from initiating or pursuing an alternative ground of revision arising from the same assessment record. The Tribunal also noted there was no breach of natural justice in issuing the second notice, and the second notice was not time-barred under Section 263. [Paras 7]

The Principal Commissioner validly issued a subsequent notice expanding the scope of Section 263 proceedings and set aside the assessment; no interference warranted.

Final Conclusion: Appeal dismissed; the order of the Principal Commissioner under Section 263 was held valid insofar as he addressed the omission to inquire into non-deduction of TDS under Section 194C and consequent disallowance under Section 40(a)(ia), and the second notice was not time-barred.

Revision under section 263 of the Income Tax Act - jurisdictional error and order prejudicial to the interest of revenue - verification of cash deposits during demonetisation - Statement of Financial Transactions reporting under section 285BA - due application of mind

Revision under section 263 of the Income Tax Act - verification of cash deposits during demonetisation - jurisdictional error and order prejudicial to the interest of revenue - Statement of Financial Transactions reporting under section 285BA - due application of mind - Whether the Principal Commissioner was justified in invoking section 263 to set aside the assessment on the ground that the Assessing Officer failed to verify cash deposits during the demonetisation period, thereby passing an erroneous order prejudicial to the revenue - HELD THAT: - The Tribunal found on the material on record that the Assessing Officer had issued multiple notices under section 142(1) and the assessee had furnished extensive replies, bank statements, SFT returns filed under section 285BA (containing date wise and person wise transaction details) and bank certificates showing denomination wise deposits. The assessee also produced the HDFC current account statement which showed no cash deposits, contrary to the PCIT's assertion. The PCIT's initiation of revision proceedings was based on a partial examination of records and on the allegation that certain cash deposits were not verified; however the Tribunal held that the AO had in fact made necessary enquiries and that the foundational ingredients for invoking section 263 - namely an order that is both erroneous and prejudicial to the interests of the revenue - were not established. The Tribunal noted that revision under section 263 is impermissible where there is no jurisdictional error or where the order has been passed after due application of mind, and relied on the principle as stated in Malabar Industrial Co. Ltd.-Vs-CIT to that effect. For these reasons the Tribunal concluded that the PCIT's order was unsustainable and was liable to be quashed. [Paras 9, 10]

Revision order passed by the Principal Commissioner under section 263 set aside; appeal allowed

Final Conclusion: The Tribunal quashed the PCIT's revision order under section 263, holding that the Assessing Officer had conducted requisite enquiries, the alleged non verification of cash deposits was factually incorrect, and the jurisdictional prerequisites for invoking section 263 were not satisfied; the assessee's appeal is allowed.

Document Identification Number (DIN) requirement - validity of communications under CBDT Circular No. 19 of 2019 - manual communication in exceptional circumstances - communications not in conformity with the Circular treated as invalid and deemed never issued - effect of absence of DIN on DRP directions and consequent assessment order

Document Identification Number (DIN) requirement - validity of communications under CBDT Circular No. 19 of 2019 - communications not in conformity with the Circular treated as invalid and deemed never issued - Validity of DRP directions and the consequent assessment order where the DRP directions did not quote a DIN in their body - HELD THAT: - The Tribunal examined the DRP directions dated 07.06.2022 and found that the body of those directions did not mention any DIN; a separate intimation dated 17.06.2022 communicated a DIN thereafter. The CBDT Circular No. 19 of 2019 mandates that system-generated DIN be quoted in the body of communications, with a narrowly prescribed exception for manually issued communications only upon recorded reasons and prior written approval; paragraph 4 of the Circular declares communications not conforming with paragraphs 2 and 3 to be invalid and deemed never issued. Reliance was placed on coordinate judicial decisions (including Brandix Mauritius Holdings Ltd. and High Court decisions) holding that subsequent or separate generation/communication of a DIN does not cure the absence of the DIN in the body of the original communication where the prescribed format and exceptional safeguards are not satisfied. The Revenue did not demonstrate any exceptional circumstances or compliance with paragraph 3 of the Circular. Applying these principles, the Tribunal concluded that the DRP directions lacking the DIN in their body were invalid, and an assessment order passed pursuant to such invalid directions is vitiated and deemed never to have been issued. Because the assessment was set aside on this preliminary legal ground, the Tribunal did not adjudicate the merits of the additions. [Paras 7, 10]

DRP directions without the DIN in the body are invalid under CBDT Circular No. 19/2019; the consequent assessment order is deemed never to have been issued and is set aside; additional grounds allowed.

Final Conclusion: The Tribunal set aside the assessment order for AY 2019-20 because the DRP directions did not quote the DIN in their body and the Revenue failed to establish compliance with the Circular's limited exceptions; the appeal is accordingly partly allowed and the Tribunal did not decide the substantive additions.

Characterisation of payments as royalty - use of, or the right to use, any copyright (royalty under DTAA/Article 12(3)) - non-exclusive, non-transferable licence / EULA distinction from licence under Copyright Act - application of Engineering Analysis Centre precedent - scope of explanation 2(v) to section 9(1)(vi) of the Income tax Act - arm's length principle in transfer pricing objections to royalty classification

Characterisation of payments as royalty - use of, or the right to use, any copyright (royalty under DTAA/Article 12(3)) - non-exclusive, non-transferable licence / EULA distinction from licence under Copyright Act - application of Engineering Analysis Centre precedent - Receipts from Volvo group Indian entities cannot be characterised as 'royalty' under the Income tax Act and the India Sweden DTAA for the relevant years - HELD THAT: - The Tribunal applied the legal principles declared by the Supreme Court in Engineering Analysis Centre and subsequent High Court authority, holding that where the arrangement merely grants access to software hosted and executed abroad by a group entity and confers no proprietary interest or rights to reproduce or exploit the software (i.e., a non exclusive, non transferable right of access under EULA type terms), there is no transfer of copyright within the meaning of Article 12(3) of the DTAA or Explanation 2(v) to section 9(1)(vi). The authorities below had characterised the payments as royalty by treating the access and shared facilities as conferring rights in the copyright; the Tribunal found this approach contrary to the ratio in Engineering Analysis Centre which distinguishes between a licence that transfers an interest in rights under section 14 of the Copyright Act and restrictive EULAs that merely permit use/access without parting with copyright. Although the DRP emphasised arm's length/TP factors and the need for cost/benefit justification, the determinative legal question was the nature of the right conferred by the agreements between the group entities. Applying the precedent, the Tribunal concluded that the impugned receipts were for access to standard facilities and end user services and did not amount to payments for the use of, or the right to use, copyright; accordingly they were not taxable as royalty in India.

The findings of the assessing authorities treating the receipts as 'royalty' are set aside; the receipts are not taxable as royalty for the relevant assessment years.

Final Conclusion: Appeals allowed; the Tribunal set aside the orders treating the impugned receipts as royalty for A.Y. 2014-15 and A.Y. 2015-16, following the Supreme Court's ratio in Engineering Analysis Centre that access under non exclusive, non transferable arrangements does not amount to transfer of copyright attracting royalty taxation.

Seizure and disposal of seized goods - Interpretation and application of Section 110 of the Customs Act - disposal under subsection (1A)/(1B)/(1D) - Requirement of subjective satisfaction and recording of reasons before disposal under Section 110(1A) - Requirement of notice and opportunity under Section 124 before confiscation - State as bailee - obligation to preserve seized property pending final adjudication - Article 300A - deprivation of property save by authority of law - Article 14 - reasonableness, non-arbitrariness and fairness in exercise of executive power - Right to restitution or payment of market value where seized property has been illegally disposed - CBEC instructions (F. No. 711/4/2006-Cus.(AS) dated 14.02.2006) - notice to owner before sale of seized goods

Interpretation and application of Section 110 of the Customs Act - disposal under subsection (1A)/(1B)/(1D) - Requirement of subjective satisfaction and recording of reasons before disposal under Section 110(1A) - CBEC instructions (F. No. 711/4/2006-Cus.(AS) dated 14.02.2006) - notice to owner before sale of seized goods - Validity of disposal/sale of the petitioners' seized gold jewellery prior to adjudication and without notice - HELD THAT: - The Court held that Section 110 and its sub sections must be read together and that the Central Government's notification specifying gold under Section 110(1A) does not, by itself, permit immediate disposal without a recorded subjective satisfaction that one of the eventualities in Section 110(1A) (perishability, hazardous nature, depreciation, storage constraints or other relevant considerations) actually exists in the particular case. Such satisfaction must be factually present, recorded and communicated to the owner before disposal; mere issuance of the notification cannot justify unilateral, summary disposal. The Court found no reasons recorded to justify hurried disposal of the petitioners' gold on 1 June 2018, and observed that subsection (1D) was not invoked correctly (application was made to a Magistrate instead of the Commissioner (Appeals)). The Court also relied on Board instructions emphasising notice to the owner before sale of seized goods and comparable precedents holding that gold is not perishable/hazardous so as to justify disposal without notice. In consequence the Assistant Commissioner's disposal/sale of the petitioners' gold prior to service of show cause notice and prior to adjudication was illegal, arbitrary and contrary to the procedure contemplated by the Act and Board instructions. [Paras 33, 34, 35, 41, 51]

The disposal/sale of the petitioners' seized gold jewellery prior to adjudication and without adequate recorded reasons and notice was illegal, arbitrary and void ab initio.

Requirement of notice and opportunity under Section 124 before confiscation - State as bailee - obligation to preserve seized property pending final adjudication - Article 300A - deprivation of property save by authority of law - Article 14 - reasonableness, non-arbitrariness and fairness in exercise of executive power - Right to restitution or payment of market value where seized property has been illegally disposed - Effect of illegal disposal on petitioners' constitutional and statutory rights and appropriate remedy - HELD THAT: - The Court held that where seized property has been disposed of in breach of statutory procedure and constitutional guarantees, the owner is entitled to restitution or compensation. Until final confiscation, the State stands in a bailee like position with an obligation to preserve the property intact and take reasonable care so it may be returned if adjudication so requires. Disposal contrary to Section 110/124 and without notice or recorded reasons amounts to deprivation of property under Article 300A and violates Article 14. Relying on precedent, the Court observed that where illegal disposal prevents restoration of the specific property, the owner is entitled to claim return of equivalent property or market value. Applying these principles, and having found the disposal illegal while noting the Revisional Authority had directed re export on payment of redemption fine, the Court directed restoration to the petitioners of equivalent gold (1028 grams) or payment of the market value as on date, with deduction of the redemption fine and penalties upheld by the Revisional Authority if monetary compensation is paid. [Paras 47, 48, 49, 55, 58]

The petitioners are entitled to restitution: respondents must restore equivalent gold or pay the market value of 1028 grams of gold as on date; if money is paid, the redemption fine and penalties directed by the Revisional Authority shall be deducted.

Final Conclusion: The Court declared the Assistant Commissioner's disposal/sale of the petitioners' seized gold jewellery to be illegal and unconstitutional; directed the respondents within three weeks to restore equivalent gold (1028 gms) to the petitioners or to pay the market value thereof as on date, with deduction of the redemption fine and penalties upheld by the Revisional Authority if monetary compensation is made.

Civil contempt - wilful disobedience of court directions - stay of proceedings pursuant to the show cause notice - independent criminal prosecution during pendency of adjudication - sanction for prosecution by an authority lacking power under the Act - suppression of judicial orders in criminal complaint - standard of proof in contempt proceedings (quasi criminal, beyond reasonable doubt)

Civil contempt - wilful disobedience of court directions - stay of proceedings pursuant to the show cause notice - suppression of judicial orders in criminal complaint - Respondents committed civil contempt by initiating and prosecuting a criminal complaint arising from the same file which had been stayed by this Court and by omitting to place on record prior favourable judicial orders. - HELD THAT: - The order dated 12.04.2021 expressly stayed proceedings pursuant to the Show Cause Notice dated 26.09.2019 arising from file No. F.No. DRI/HQ-GI/338/VI/ENQ-2/INT-NIL/2019. The complaint filed before the learned Chief Metropolitan Magistrate is founded on the very SCN and main file which were subject to the stay. The sanction letter dated 30.01.2023 bears the same file number and the complaint reproduces the narrative of the SCN while deliberately omitting to disclose the orders in favour of the petitioner (including the CESTAT order dated 13.11.2019, the Division Bench judgment dated 01.06.2020 and the review order dated 26.05.2023). Although adjudication and criminal proceedings can, in general, be launched concurrently, the Court distinguished those authorities on the facts: the SCN and the main file were 'under a cloud' by prior orders in favour of the petitioner, and hence the categorical stay could not be so evaded. The pattern of instituting successive proceedings after adverse judicial orders, together with the omission to place material favourable orders before the criminal court, supports the conclusion that respondents deliberately sought to overreach the stay and harass the petitioner. The Court applied the established standard that contempt jurisdiction is quasi criminal and requires proof beyond reasonable doubt, but found on the record sufficient basis to proceed with contempt: the filing of the complaint pursuant to the stayed file and the material non disclosure amounted to a patent breach of the directions dated 12.04.2021. [Paras 26, 27, 28, 32, 34]

Respondents are found guilty of committing civil contempt for deliberate breach of the Court's directions dated 12.04.2021; notice issued to respondents to show cause on 14.02.2024 why they should not be punished under the Contempt of Courts Act.

Sanction for prosecution by an authority lacking power under the Act - independent criminal prosecution during pendency of adjudication - The sanction for prosecution accorded by respondent appears to be vulnerable because DRI officers are not proper authorities to initiate proceedings under the Customs Act as explained by the Supreme Court in Canon India. - HELD THAT: - The Court noted the Supreme Court's dictum in Canon India that officers of the DRI, not being customs officers, cannot be entrusted with functions of customs officers absent valid statutory power. Having regard to that ratio, the sanction dated 30.01.2023, which emanates from the same main file and was used to institute the complaint, 'appears to be hit' by Canon India. While the Court recognised the general principle that adjudication and criminal proceedings may be independent and simultaneous, it held that the particular sanction relied upon here is suspect in law because it was granted by an authority whose competence to do so is doubtful under the controlling precedent. [Paras 33]

The sanction accorded under the impugned process appears to be invalid in view of the Canon India ratio that DRI officers are not proper authorities to initiate proceedings under the Customs Act.

Final Conclusion: The Court found that respondents deliberately and repeatedly overreached the stay issued on the SCN arising from the main DRI file, committed civil contempt by instituting a complaint based on the stayed file while suppressing favourable judicial orders, and observed that the sanction underpinning the complaint appears vulnerable in law; notice was issued to the respondents to show cause on 14.02.2024.

Penalty for knowingly carrying smuggled goods under the Customs Act - Admissibility and weight of statements recorded under Section 108 of the Customs Act, 1962 - Confession recorded during investigation as basis for imposition of penalty - Knowledge and mala fide conduct in carriage of concealed contraband - Confiscation of smuggled goods as concomitant to penalty proceedings

Penalty for knowingly carrying smuggled goods under the Customs Act - Confession recorded during investigation as basis for imposition of penalty - Knowledge and mala fide conduct in carriage of concealed contraband - Admissibility and weight of statements recorded under Section 108 of the Customs Act, 1962 - Validity of imposition of penalties under Section 112 of the Customs Act, 1962 on the appellants for carriage of smuggled gold. - HELD THAT: - The Tribunal examined the circumstances of interception, recovery and the statements recorded during investigation. The yellow metal in biscuit form was recovered from the fuel chamber of the intercepted vehicle after a mechanical search; no licit documents were produced to justify importation, possession or carriage. Voluntary statements recorded under Section 108, in which the appellants admitted prior knowledge of the concealed consignment and participation at the direction of a third party, were relied upon as establishing knowledge and mala fides. The appellants' initial denials followed by post-recovery admissions were held to demonstrate culpability. In these circumstances the adjudicating authority's exercise of discretion to impose penalties under Section 112 to meet the ends of justice and deter such conduct was found to be justified and free from infirmity. [Paras 9, 11, 12]

Penalties under Section 112 imposed on the appellants are upheld.

Final Conclusion: The impugned order imposing penalties on the appellants is affirmed and the appeals are dismissed.

Refund of IGST - maintainability of appeal under the Customs Act, 1962 - refund of unutilised input tax credit under Section 54(3) of the CGST Act, 2017 - invocation of Section 28 of the Customs Act, 1962 for recovery of erroneously refunded amount - CBEC circular on threshold for filing appeals and recurring-issue exception

Refund of IGST - maintainability of appeal under the Customs Act, 1962 - The appeal filed under the Customs Act, 1962 challenging refund of IGST is not maintainable. - HELD THAT: - The Tribunal found that the refund in dispute relates to IGST paid at the time of export and not to Customs duty. Since the subject-matter of the dispute is a refund of IGST, it does not fall within the jurisdictional scope of the Customs Act, 1962. The appeal, therefore, cannot be maintained under the Customs Act which governs refund of Customs duty and not IGST refunds. [Paras 9]

Appeal not maintainable under the Customs Act, 1962 and therefore liable to be dismissed.

Refund of unutilised input tax credit under Section 54(3) of the CGST Act, 2017 - invocation of Section 28 of the Customs Act, 1962 for recovery of erroneously refunded amount - CBEC circular on threshold for filing appeals and recurring-issue exception - Section 54(3) of the CGST Act, 2017 is not attracted to the facts; no other litigation exists and the CBEC circular threshold/recurrence contentions do not sustain the Revenue's appeal. - HELD THAT: - The Revenue relied on Section 54(3) CGST Act to contend that refund of unutilised input tax credit is barred where exported goods are subject to export duty. The Tribunal held that the present dispute is a refund of IGST and not a claim of unutilised input tax credit under Section 54(3), and consequently that provision is inapplicable. The Revenue's reliance on recovery proceedings under Section 28 of the Customs Act was premised on an erroneous classification; Section 28 is not operative where the refund relates to IGST. The respondent's argument invoking the CBEC circular (F.No.390/Misc./30/2023-JC dated 02.11.2023) that appeals are not maintainable where revenue involved is below the specified threshold was considered; the Revenue's submission that the recurring-issue exception excludes the circular was examined but the Tribunal found no other pending litigation concerning the respondent and, on that footing, accepted the respondent's position. [Paras 5, 10, 11]

Section 54(3) CGST Act does not apply; recovery under Section 28 Customs Act is not justified in respect of the IGST refund; Revenue's appeal dismissed.

Final Conclusion: The appeal is dismissed: the dispute concerns refund of IGST (not Customs duty or unutilised ITC under Section 54(3) CGST Act), the appeal is not maintainable under the Customs Act, 1962, and the Revenue's contentions including invocation of recovery under Section 28 and the recurring-issue exception to the CBEC circular do not sustain the appeal.

Acceptability of laboratory test report - drawal and preservation of samples as per BIS 1405-2010 - reliability of delayed testing of samples - determination of iron content on Wet Metric Ton (WMT) basis - classification for export duty based on Fe content - right to opportunity / supply of contested test report

Acceptability of laboratory test report - drawal and preservation of samples as per BIS 1405-2010 - reliability of delayed testing of samples - right to opportunity / supply of contested test report - The CRCL (Customs) laboratory test report relied upon by the department is not acceptable for finalising the assessment. - HELD THAT: - The Tribunal found that the CRCL report was supplied to the appellant only in the second round of litigation and was not provided earlier, thereby denying the appellant an opportunity to contest or seek retesting. The Tribunal recorded that the CRCL samples and their storage did not appear to adhere to BIS procedures (BIS 1405-2010 and related Board circular), including that samples were kept in plastic bags rather than air tight containers and that testing was carried out after an inordinate delay causing doubt as to moisture evaporation and resultant Fe determination. The Tribunal referred to binding precedents which discredit test reports based on samples drawn or tested contrary to prescribed standards or after significant delay, and held that the CRCL report was cryptic, lacked necessary protocols, and therefore could not form the basis for assessment or classification for export duty. [Paras 8, 9, 10]

The CRCL test report is rejected as unreliable and not acceptable for assessment purposes.

Determination of iron content on Wet Metric Ton (WMT) basis - classification for export duty based on Fe content - The Fe content for classification and levy of export duty must be determined on Wet Metric Ton (WMT) basis and the load port/discharge port test reports adhering to BIS standards are to be accepted for assessment. - HELD THAT: - Applying the law laid down by the Supreme Court in Union of India v. Gangadhar Narsinghdas Agarwal and subsequent High Court and Tribunal authorities, the Tribunal held that the percentage of iron must be related to the weight of the goods at the relevant time of export (WMT), inclusive of impurities and moisture, and that where reputable load port and discharge port laboratories have tested samples in accordance with BIS standards and their results are in near harmony, those reports are decisive. In the present case the contractual (load port) and discharge port CIQ reports, tested as per BIS, recorded Fe below 58% on dry basis and moisture levels which, when converted by the universally accepted formula to WMT basis, support classification under the nil duty entry relied upon by the appellant. Consequently, the CRCL dry basis determination could not be used to reclassify the exports and impose export duty. [Paras 12, 13, 14, 19]

Assessments must be finalised on WMT basis accepting the load port/discharge port BIS compliant reports; the department's dry basis CRCL determination cannot be used to attract export duty.

Final Conclusion: The Tribunal set aside the impugned order of the Commissioner (Appeals), rejected the Customs Laboratory (CRCL) report as unreliable, accepted the load port/discharge port BIS compliant test reports and the legal position that Fe content must be determined on Wet Metric Ton basis, and allowed the appeal with consequential relief.

Violation of Regulation 12(1)(iv) of CIER,2010 - verification of IEC, identity and address - Violation of Regulation 12(1)(v) of CIER,2010 - exercise of due diligence in information submitted - Violation of Regulation 12(1)(x) of CIER,2010 - obligation to abide by the Act, rules and notifications - Intentional misconduct versus mere negligence - Revocation of courier registration as available relief for contravention of CIER,2010

Violation of Regulation 12(1)(iv) of CIER,2010 - verification of IEC, identity and address - Violation of Regulation 12(1)(v) of CIER,2010 - exercise of due diligence in information submitted - Violation of Regulation 12(1)(x) of CIER,2010 - obligation to abide by the Act, rules and notifications - Respondent contravened Regulations 12(1)(iv), 12(1)(v) and 12(1)(x) of CIER,2010 by repeatedly using a single Aadhaar/GSTIN for multiple Bills of Entry and failing to verify KYC, IEC and addresses. - HELD THAT: - The Tribunal found no denial that the same Aadhaar/GSTIN number was repeatedly used across many Bills of Entry for different consignors and consignees, and that KYC documents and IEC details did not match the BOEs. Verification by the jurisdictional commissionerate established that many addresses were fictitious and PODs forged, showing failure to deliver to declared consignees. The record includes admissions that KYC records were not properly maintained and that the GSTIN field was set to the Aadhaar number. On these facts the respondent failed to verify antecedents, IEC correctness, identity and address using reliable independent documents, and did not exercise due diligence to ascertain correctness and completeness of information submitted to the proper officer. The respondent thereby breached the listed obligations in Regulations 12(1)(iv), (v) and (x). [Paras 13, 16, 18, 19, 20]

Respondent held to have contravened Regulations 12(1)(iv), 12(1)(v) and 12(1)(x) of CIER,2010.

Intentional misconduct versus mere negligence - The misconduct was intentional and not merely a software error or lack of due diligence. - HELD THAT: - The Tribunal relied on statements of the software developer and project manager that the fields "GSTIN Type" and "GSTIN Number" were kept constant with the Aadhaar number as directed by the respondent, and that the courier company had the ability to edit the XML prior to upload. Admissions in the record that KYC were not properly maintained and that the respondent did not notify customs of the recurring Aadhaar usage corroborate active involvement. Consequently, the pattern of misuse, corroborated admissions and developer evidence led the Tribunal to conclude the acts were deliberate rather than inadvertent software mistakes or mere negligence. [Paras 14, 15, 16]

Findings conclude intentional misconduct by the respondent; plea of software error rejected.

Revocation of courier registration as available relief for contravention of CIER,2010 - Whether revocation of the courier licence is warranted and whether the penalty imposed by the adjudicating authority was proportionate. - HELD THAT: - The Regulations authorise revocation of registration and forfeiture of security for failure to comply with the Regulations or misconduct. Although the adjudicating authority imposed a monetary penalty, the Tribunal found the penalty disproportionate given the established intentional diversion of imported goods and misuse of consignees' identities. Having held the violations proved and intentional, the Tribunal accepted the department's appeal and directed revocation of the respondent's courier licence as an appropriate and proportionate consequence under the Regulations. [Paras 21, 22, 23]

The departmental appeal is allowed; the adjudicating authority's order is set aside insofar as it imposed only a penalty, and the respondent's courier registration is revoked.

Final Conclusion: The Tribunal held that M/s. Air Logix Solutions intentionally misused a single Aadhaar/GSTIN for multiple Bills of Entry, failed to verify KYC/IEC and addresses in breach of Regulations 12(1)(iv), (v) and (x) of CIER,2010, rejected the plea of software error as a defence, set aside the original order that had imposed only a penalty, allowed the department's appeal and revoked the respondent's courier registration.

Validity of auction sale under the SARFAESI Act - Effect of moratorium under the Insolvency and Bankruptcy Code on a completed SARFAESI sale - Requirement under Section 89(4) of the Registration Act for forwarding sale certificate - Characterisation of immovable property as asset of the corporate debtor in liquidation

Validity of auction sale under the SARFAESI Act - Effect of moratorium under the Insolvency and Bankruptcy Code on a completed SARFAESI sale - The auction sale of the subject properties had been concluded prior to declaration of moratorium and is valid. - HELD THAT: - The Court recorded that the appellant purchaser completed payment and obtained the sale certificate on 19.08.2019 and that, at the hearing before this Court, the Liquidator and the erstwhile director/promoter conceded that the auction sale stood concluded before the moratorium was declared on 20.08.2019. No defect was shown in the issuance or forwarding of the sale certificate in terms of the established law. The Court relied upon the principle affirmed in Esjaypee Impex Pvt. Ltd. concerning the handing over of a duly validated sale certificate and the consequent registration formalities, and noted that no contrary factual or legal infirmity was demonstrated by the respondents. In light of these findings, the sale was treated as having been completed prior to commencement of the Corporate Insolvency Resolution Process and unaffected by the moratorium. [Paras 2, 4]

Sale concluded before moratorium; sale treated as valid.

Characterisation of immovable property as asset of the corporate debtor in liquidation - Requirement under Section 89(4) of the Registration Act for forwarding sale certificate - The two properties sold at auction do not constitute assets of the Corporate Debtor in liquidation and the NCLT order directing them to be treated as such is set aside. - HELD THAT: - Given the accepted factual position that the auction sale had been completed before the moratorium and in the absence of any established defect in compliance with the registration-related requirement of forwarding the sale certificate, the Court held that the properties cannot be treated as liquidation assets of the Corporate Debtor. Consequently, the Adjudicating Authority's order treating the properties as assets of the Corporate Debtor was rendered invalid to that extent. The Court therefore allowed the appeal insofar as the two Howrah properties are concerned and set aside the impugned order related to those properties. [Paras 4, 5]

Properties excluded from corporate debtor's liquidation estate; impugned order set aside insofar as those properties.

Final Conclusion: The appeal is allowed in respect of the two Howrah properties: the auction sale was held to have been concluded before the moratorium, the sale is valid, and the properties do not form part of the corporate debtor's liquidation assets; the impugned orders are set aside to that extent and pending applications stand disposed of.

Effect of stay of Corporate Insolvency Resolution Process - powers and duties of the Resolution Professional during stay - reinstatement of ex-management upon stay of CIRP - jurisdiction of the Adjudicating Authority where matter is pending before higher Court - continuation of day-to-day management as going concern

Effect of stay of Corporate Insolvency Resolution Process - reinstatement of ex-management upon stay of CIRP - Whether the Adjudicating Authority was correct in directing the Resolution Professional to hand over management of the Corporate Debtor to the ex-management in view of the interim stay of CIRP by the Hon'ble Supreme Court. - HELD THAT: - The Tribunal held that the Adjudicating Authority erred in treating the interim stay of the CIRP as automatically entitling the ex-management to be handed back the control of the corporate debtor. The judgment in Ashok Kumar Tyagi was examined and does not support a proposition that a stay of CIRP results in restoration of pre-admission management; the stay of admission is distinguishable from quashing of admission. Granting management back to persons against whom CIRP was initiated risks diminution and misuse of assets and would be detrimental to creditors. While the Resolution Professional must refrain from taking further steps in the CIRP during the stay, he remains responsible for managing day-to-day affairs so that the corporate debtor continues as a going concern until the appellate process is finally determined. [Paras 11, 13]

Direction to hand over management to the ex-management was unjustified and set aside.

Jurisdiction of the Adjudicating Authority where matter is pending before higher Court - powers and duties of the Resolution Professional during stay - continuation of day-to-day management as going concern - Whether the Adjudicating Authority ought to have entertained and decided IA No.2403 of 2023 (and IA No.964 of 2023) while the related civil appeal was pending before the Hon'ble Supreme Court. - HELD THAT: - The Tribunal found that, given the pendency of Civil Appeal No.2662 of 2022 before the Hon'ble Supreme Court which had earlier passed an interim order staying the CIRP, the Adjudicating Authority should have exercised restraint and refrained from issuing directions that effectively dealt with the core consequences of the stay. Although the RP cannot proceed with CIRP steps while the stay subsists, the Adjudicating Authority should not have passed the impugned directions and parties ought to be relegated to seek appropriate relief before the Supreme Court. Meanwhile, the RP, not being discharged, remains the officer to ensure running of the corporate debtor as a going concern in the absence of a lawful management in place. [Paras 14, 16]

The applications should not have been entertained; the Adjudicating Authority's order is set aside and the parties are left free to approach the Hon'ble Supreme Court.

Final Conclusion: Appeals allowed; order dated 30.05.2023 (IA Nos.2403/2023 and 964/2023) set aside. Parties permitted to seek appropriate relief before the Hon'ble Supreme Court; each party to bear its own costs.

Priority of insolvency resolution process costs - treatment of operational creditors and related parties under a resolution plan - commercial wisdom of Committee of Creditors - redetermination of CIRP costs - withholding payments pending outcome of avoidance proceedings and appropriation - adjudicating authority's power to direct pursuit of avoidance applications by the CoC

Treatment of operational creditors and related parties under a resolution plan - commercial wisdom of Committee of Creditors - Classification in paragraph 3.3.2 of the Resolution Plan discriminating between employees with dues upto Rs.10 lakh and those with dues exceeding Rs.10 lakh is not violative of Section 30(2) and is sustainable. - HELD THAT: - The Tribunal examined admitted employee claims, the admitted liquidation value (stated as 'nil' for employees), and the Resolution Plan clause allocating a capped amount for employee claims with differential treatment for continuing employees whose dues exceed the stated threshold. Reliance on the Supreme Court's reasoning that related parties need not be treated pari passu with other creditors supports the proposition that differential treatment of a related party does not by itself contravene Section 30(2). As the amount to employees under the Plan is not shown to be less than what would be payable on liquidation, and the distinction arises from CoC's commercial decision, the classification falls within CoC's commercial wisdom and cannot be impugned on the ground of discrimination under Section 30(2)(b). [Paras 11, 12, 13, 15]

No fault found with the differential treatment of employees/related parties in paragraph 3.3.2; the clause is not violative of Section 30(2)(b).

Priority of insolvency resolution process costs - redetermination of CIRP costs - commercial wisdom of Committee of Creditors - Direction in paragraph 6.2 empowering the CoC to redetermine CIRP cost after approval of the Resolution Plan is unsustainable and is set aside. - HELD THAT: - CIRP costs include costs incurred by the RP in running the business as a going concern. Section 28 lists specific actions requiring prior CoC approval; it was not demonstrated that the RP's determination of CIRP cost required CoC approval under Section 28. Where the Plan (and the RP's determination) already addressed CIRP cost and the RP obtained and placed an audit report before the CoC (which later approved an audited figure), there was no legal basis for the Adjudicating Authority to direct a post-approval redetermination by the CoC. Consequently, paragraph 6.2 of the impugned order, directing such redetermination, is set aside. [Paras 16, 18, 19, 20]

Paragraph 6.2 set aside; CoC redetermination of CIRP cost after Plan approval is not warranted.

Withholding payments pending outcome of avoidance proceedings and appropriation - priority of insolvency resolution process costs - Direction in paragraph 6.5 to withhold amounts payable to promoters/KMPs pending adjudication of avoidance applications is modified to permit RP to keep the determined amount in FDR until avoidance liability is adjudicated. - HELD THAT: - Determination and payment of CIRP cost is conceptually distinct from recovery proceedings against promoters/KMPs under avoidance provisions. The Tribunal held that amounts payable to promoters/KMPs as CIRP cost should be determined by the RP and, rather than outrightly withholding, such amounts may be preserved in a Fixed Deposit Receipt (FDR) in favour of the promoters/KMPs to earn interest. The FDRs are to be released only after adjusting amounts found recoverable by the Adjudicating Authority in avoidance applications. The Adjudicating Authority is also urged to expeditiously decide pending avoidance applications to avoid prolonged withholding. [Paras 21, 22]

Paragraph 6.5 modified: RP to keep amounts payable to promoters/KMPs in FDRs; release after adjustment for any amounts found recoverable in avoidance proceedings; Adjudicating Authority to expeditiously decide avoidance applications.

Adjudicating authority's power to direct pursuit of avoidance applications by the CoC - withholding payments pending outcome of avoidance proceedings and appropriation - Direction in paragraph 9 that the CoC shall pursue the avoidance application and distribution of recoveries is sustainable and does not warrant interference. - HELD THAT: - Post-approval of a Resolution Plan, the Adjudicating Authority retains power to issue directions regarding the conduct and pursuit of avoidance applications and the appropriation/distribution of recoveries. The Tribunal found that assigning responsibility to the CoC to pursue the pending avoidance application under Sections 43, 45, 49 and 66 and directing distribution of proceeds in accordance with Section 53 is a permissible exercise of the Adjudicating Authority's powers. [Paras 23, 24]

Paragraph 9 upheld: CoC may be directed to pursue avoidance applications and proceeds to be distributed as directed by the Adjudicating Authority.

Final Conclusion: Appeal partly allowed: paragraph 6.2 of the impugned order set aside; paragraph 6.5 modified to require amounts payable to promoters/KMPs (as determined by the RP) to be kept in FDRs and released after adjustment for any recovery ordered in avoidance proceedings; Adjudicating Authority directed to expeditiously decide pending avoidance applications; paragraph 9 directing CoC to pursue avoidance applications is upheld. Parties to bear their own costs.

Finality of CoC approval of resolution plan - timelines of CIRP and limits on reopening process - judicial review of commercial wisdom of CoC - unsustainability of sending approved plan back to CoC for reconsideration - setting aside of consequential CoC actions - remand to Adjudicating Authority for fresh decision on approval of resolution plan

Finality of CoC approval of resolution plan - unsustainability of sending approved plan back to CoC for reconsideration - timelines of CIRP and limits on reopening process - Validity of the Adjudicating Authority's order directing the Resolution Professional to convene the CoC to consider the impact of the Rainbow judgment and related consequential actions - HELD THAT: - This Tribunal recalled its earlier finding that once the CoC has approved a resolution plan the matter cannot be sent back to invite fresh plans or be reopened merely because subsequent offers or judgments emerge; the CIRP scheme contains strict timelines and the commercial wisdom of the CoC in approving a plan must be respected. The impugned order of the Adjudicating Authority which directed the RP to convene the CoC to appraise members of the Rainbow judgment and its implications improperly prolonged the process contrary to the Tribunal's earlier direction and was therefore unsustainable. Consequential actions taken pursuant to that order, including the CoC meeting of 13.12.2023 and its minutes, were set aside as having no legal effect. [Paras 9]

Impugned order directing recall to CoC and consequent actions set aside; CoC meeting and minutes conducted pursuant to that order are quashed.

Remand to Adjudicating Authority for fresh decision on approval of resolution plan - timelines of CIRP and limits on reopening process - Disposition of the application for approval of the Resolution Plan (I.A. No. 851 of 2020) following setting aside of the impugned order - HELD THAT: - Having set aside the order that returned the matter to the CoC, the Tribunal directed that the Adjudicating Authority must proceed to decide I.A. No. 851 of 2020 on merits after hearing the parties. The Tribunal emphasised expedition, noting a hearing date was already fixed and directing the Adjudicating Authority to endeavour to decide the application as expeditiously as possible, preferably within one month of the fixed date, while expressly declining to express any opinion on the merits of the plan. [Paras 10, 11]

Matter remitted to the Adjudicating Authority to decide I.A. No. 851 of 2020 expeditiously (preferably within one month of the fixed date); no opinion expressed on merits.

Final Conclusion: The appeal is allowed: the Adjudicating Authority's order directing the matter back to the CoC and all consequential actions are set aside; the Adjudicating Authority is directed to decide I.A. No. 851 of 2020 expeditiously after hearing the parties, with no opinion expressed on the merits.

Production of accused under Section 267 CrPC - Effect of grant of bail where bail bond is not executed - Judicial custody and custody for purposes of production - Consequences of non-execution of bail bond

Production of accused under Section 267 CrPC - Judicial custody and custody for purposes of production - Scope and applicability of an order under Section 267 CrPC for production of an accused who was then in custody of another court - HELD THAT: - The High Court examined the CBI's challenge to the Special Judge's refusal to grant a production order under Section 267 CrPC for respondent No.1. The Court noted the factual background that respondent No.1 was then in custody in connection with proceedings before the PMLA Special Court and that the Special Judge had allowed only interrogation through jail authorities subject to orders of the Special PMLA Court. The Court observed that when the impugned order was passed there existed no bail order in favour of respondent No.1 and that the question of production for purposes of the CBI investigation arises against the legal status of the accused's custody as determined by the courts having him in charge. The application was disposed of by reference to the changed circumstances (subsequent grant of bail), rather than by directing production itself. [Paras 16, 17, 18, 23]

The challenge to the Special Judge's order was disposed of without ordering production; the Court recorded that production/ interrogation in the circumstances must be assessed in light of the accused's custody status and the orders of the courts in whose custody he is held.

Effect of grant of bail where bail bond is not executed - Consequences of non-execution of bail bond - Legal effect of a bail order granted by a Division Bench where the accused has not executed the bail bond, and allocation of responsibility to the trial court - HELD THAT: - The Court found that the Division Bench granted bail to respondent No.1 on 5.12.2023 but that the bail bond had not been executed as of the date of the hearing. Relying on the principles embodied in the procedure for effecting release on bail, the Court observed that an accused is not released on bail unless the bail bond of the accused and surety are obtained in terms of the bail order. Given this position and the subsequent grant of bail, the High Court held that the trial Court is the appropriate forum to determine the consequences flowing from the bail order, including the legal effect of non-execution of the bail bond and any incidental directions relating to custody or production for investigation. [Paras 21, 22, 23]

The High Court directed that the trial Court shall determine the consequences of the Division Bench's bail order, including the effect of non-execution of the bail bond, and disposed of the CBI's application accordingly.

Final Conclusion: The High Court disposed of the CBI's application challenging the Special Judge's order without directing production; noting that bail was subsequently granted by the Division Bench but the bail bond remained unexecuted, the Court directed the trial Court to determine the consequences of the bail order, including the effect of non-execution of the bail bond.

Prolonged custody and infringement of Article 21 - house arrest constitutes custody - bail where trial completion is unlikely and incarceration has exceeded a substantial part of the prescribed sentence - harmonisation of statutory bail restrictions with constitutional jurisdiction - maximum punishment under the Prevention of Money-Laundering Act as relevant to bail assessment - grant of interim bail pending petition

House arrest constitutes custody - prolonged custody and infringement of Article 21 - House arrest is to be treated as custody for purposes of computing period of incarceration and assessing infringement of Article 21. - HELD THAT: - The Court rejected the contention that the period of house arrest should be excluded from custody for computation of total period of incarceration, holding that house arrest amounts to arrest and materially curtails personal liberty. The reasoning recognises that any form of state-imposed restraint depriving a person of freedom engages Article 21 and must be included when assessing whether prolonged custody has occurred. [Paras 6, 7]

House arrest counted as part of custody and relevant to Article 21 analysis.

Bail where trial completion is unlikely and incarceration has exceeded a substantial part of the prescribed sentence - harmonisation of statutory bail restrictions with constitutional jurisdiction - maximum punishment under the Prevention of Money-Laundering Act as relevant to bail assessment - grant of interim bail pending petition - Bail was granted because the trial was unlikely to be completed within a reasonable time and the period of incarceration already undergone exceeded a substantial part of the maximum prescribed sentence under the PMLA. - HELD THAT: - Applying the principle that constitutional jurisdiction to grant bail can be harmonised with statutory restrictions, the Court relied on the proposition that where there is little prospect of trial completion in reasonable time and the accused has undergone a substantial part of the prescribed sentence, bail may be granted to safeguard Article 21. The Court found the petitioner had been in custody/house arrest for over five years and eight months in a case where the maximum sentence is seven years, thereby exceeding a substantial part of the prescribed punishment and making the likelihood of timely trial completion bleak. On that basis the Court exercised its constitutional jurisdiction to grant interim bail during the pendency of the petition. [Paras 7, 8, 9, 10]

Petitioner released on interim bail during pendency of the petition subject to specified conditions.

Final Conclusion: The High Court held that house arrest constitutes custody for Article 21 purposes and, applying the principle that prolonged incarceration in cases where trial completion is unlikely and custody exceeds a substantial part of the prescribed sentence justifies bail, granted the petitioner interim bail during the pendency of the petition subject to furnishing bond, supervision conditions and restrictions on movement.

Jurisdiction determined by territorial location of the assessee - limitation under Section 73(1) and proviso relating to extended period for suppression or willful misstatement - mixed question of fact and law on limitation - liability of a statutory body under Section 58 of the Wakf Act, 1955 for default by Mutawalli - claim of exemption under Mega Exemption Notification No. 25/2012 ST

Jurisdiction determined by territorial location of the assessee - Validity of the impugned proceedings insofar as jurisdiction of the Principal Commissioner, Hyderabad (respondent No.3). - HELD THAT: - The Court found that jurisdiction under Rule 3 of the Service Tax Rules, 1994 is determined with reference to the location of the assessee and the related properties. Though jurisdiction prior to 02.06.2014 lay with the Principal Commissioner, Visakhapatnam, the petitioner did not dispute that the petitioner and the properties fell within the territorial limits of respondent No.3 by the date of institution of proceedings; the petitioner failed to substantiate its technical objection with any rule or binding precedent. On that basis the Court held there was no discrepancy in the jurisdiction of respondent No.3 to initiate and continue the proceedings impugned before this Court and declined to entertain writ review on that ground. [Paras 8, 12]

The contention that respondent No.3 lacked jurisdiction is rejected and is not a ground for judicial review in this petition.

Limitation under Section 73(1) and proviso relating to extended period for suppression or willful misstatement - mixed question of fact and law on limitation - Whether the show cause notice and consequent demand are time-barred and whether the proviso to Section 73(1) (extended period) was rightly invoked. - HELD THAT: - The Court observed that limitation under Section 73(1) engages mixed questions of fact and law and that tax liability arises distinctively for each assessment period; a part of the cause of action being time-barred does not automatically vitiate the remainder of periods within limitation. The factual question whether there was willful misstatement or suppression to invoke the extended five-year period requires fact-finding. Consequently the Court declined to decide these contentious factual questions under writ jurisdiction and indicated that the appellate forum is the proper forum to examine the limitation and proviso contentions on the materials. [Paras 9, 10, 12]

Limitation and invocation of the proviso to Section 73(1) are treated as mixed questions of fact and law for determination in appeal; not decided on merits in this writ petition.

Liability of a statutory body under Section 58 of the Wakf Act, 1955 for default by Mutawalli - claim of exemption under Mega Exemption Notification No. 25/2012 ST - Whether the Telangana State Waqf Board is disentitled from assessment or whether exemption claims and the Board's asserted non-liability were established in writ proceedings. - HELD THAT: - The Court noted that under the Wakf Act the Board exercises superintendence over managers and that Section 58 contemplates liability of the Board in case of default by a mutawalli. The petitioner, being a statutory body, could not sustain a categorical plea of no concern without placing substantive material to support exemption or non-liability. The Court found no material before it to uphold the claimed exemption or to absolve the Board, and therefore left these contentions open for the appellate authority to consider on evidence and submissions. [Paras 11, 12]

The Board's plea of non-liability and claimed exemption is not accepted on the record before this Court; these issues remain open for adjudication in appeal.

Final Conclusion: Writ petition dismissed for want of tenable grounds for judicial review; the petitioner's right to pursue statutory appeal is preserved and the appellate authority is directed to examine the contested issues independently and uninfluenced by the observations in this order.

Liability for service tax on sale and renting of space for advertising - agency payment of service tax and double recovery prohibition - extended period of limitation under proviso to Section 73 of the Finance Act, 1994 - requirement to prove fraud, collusion, wilful misstatement or suppression to invoke extended limitation - status of a statutory State undertaking and absence of intent to evade tax

Liability for service tax on sale and renting of space for advertising - agency payment of service tax and double recovery prohibition - status of a statutory State undertaking and absence of intent to evade tax - Whether the appellant was liable to pay service tax on sale/renting of space for advertising from 01.05.2006 onwards and whether the tax already paid by the contractor/agent precluded fresh demand against the appellant. - HELD THAT: - The Tribunal found that the appellant is a statutory corporation and not an advertising agency, and that the appellant had engaged M/s Pisces Communications Pvt. Ltd. by tender to use advertising space on buses. The record included an affidavit of the contractor and copies of challans evidencing deposit of service tax by the contractor amounting to the admitted sum. Having regard to the payment of service tax by the agent, the demand of service tax, interest and penalties sought to be recovered again from the appellant was held not sustainable. On these facts the impugned demand, interest and penalties were set aside. [Paras 6, 7]

Demand of service tax, interest and penalties set aside insofar as the tax was shown to have been deposited by the contractor; liability not sustainable against the appellant on that basis.

Extended period of limitation under proviso to Section 73 of the Finance Act, 1994 - requirement to prove fraud, collusion, wilful misstatement or suppression to invoke extended limitation - status of a statutory State undertaking and absence of intent to evade tax - Whether the department could invoke the extended period of limitation to recover service tax for the period 2004-05 to 2008-09. - HELD THAT: - The Tribunal held that to invoke the extended period the Revenue must establish fraud, collusion, wilful misstatement or suppression with intent. The appellant, being a State undertaking, could not be presumed to have the requisite intent to evade tax merely because the department entertained a different view. The period under dispute (2004-05 to 2008-09) and issuance of the show cause notice on 21.10.2009 rendered the substantial portion of the demand time-barred. Reliance was placed on earlier Tribunal reasoning that extended limitation cannot be invoked without evidence of intentional suppression; accordingly the penalties and major portion of the demand could not be sustained. [Paras 6, 7]

Major portion of the demand and the penalties were barred by limitation and therefore could not be sustained.

Final Conclusion: Appeal allowed. The impugned order is set aside: demands, interest and penalties not sustainable on the facts (tax shown to be paid by the contractor) and, in any event, the substantial portion of the demand is barred by limitation; consequential relief to follow as per law.

Exemption of health care services by clinical establishments - business support service - service tax liability on amounts retained by hospitals from doctors' fees - proportionate reversal under Rule 6(3A) of the Cenvat Credit Rules - application of Rule 6(3) where reversal has been made - reversal of Cenvat credit amounts to non availment of credit - procedural lapse of intimation under Rule 6(3A) - limitation / time bar

Service tax liability on amounts retained by hospitals from doctors' fees - exemption of health care services by clinical establishments - business support service - Amount retained by the appellant from doctors' fees as infrastructure support is not liable to service tax. - HELD THAT: - The Tribunal held that the arrangement between hospitals and consulting doctors is for joint provision of health care services with shared obligations and revenue sharing, not a provision of business support services to doctors. Applying the negative list/clinical establishment exemption, the retained share forms part of the consideration for health care services provided to patients and cannot be separately taxed as a business support service. The Tribunal relied on earlier CESTAT precedents (including Sir Ganga Ram Hospital and related decisions) and noted departmental acceptance of the principal decision; accordingly the demand under the head of business support service was held unsustainable. [Paras 4]

Demand of service tax on the amount retained from doctors' fees is set aside.

Proportionate reversal under Rule 6(3A) of the Cenvat Credit Rules - application of Rule 6(3) where reversal has been made - procedural lapse of intimation under Rule 6(3A) - reversal of Cenvat credit amounts to non availment of credit - Non compliance with the procedural intimation under Rule 6(3A) does not sustain a demand under Rule 6(3) where the assessee has in fact reversed and paid the amount prescribed under Rule 6(3A) with interest. - HELD THAT: - The Tribunal found on record that the appellant had reversed and paid the amount computed under Rule 6(3A) (with interest). It applied consistent precedent that reversal of Cenvat credit with interest operates as non availment of credit and that the procedural requirement to intimate the option under Rule 6(3A) is procedural; failure to comply with that procedure, by itself, does not oblige application of the alternate notional payment under Rule 6(3)(i). The Tribunal followed a line of authority (including Cranes & Structural Engineers, Pi Industries, Jost's Engineering and other decisions) holding that proportionate reversal cures the substantive position and precludes recovery under Rule 6(3)(i); accordingly the demand and penalties predicated on 5%/6%/10% were set aside while maintaining the reversal already made. [Paras 5]

Demand under Rule 6(3)(i)/Rule 6(3) is not sustainable where proportionate reversal under Rule 6(3A) has been paid; procedural lapse of intimation does not by itself disentitle the appellant to this position.

Limitation / time bar - Limitation was not finally decided and is left open for consideration. - HELD THAT: - Although limitation was raised by the appellant, the Tribunal expressly refrained from adjudicating the question of time bar since the case was decided on merits. The Tribunal recorded that it need not go into limitation and left that aspect open. [Paras 7]

Limitation/time bar issue left open and not decided.

Final Conclusion: The impugned order is set aside; the demand of service tax on amounts retained from doctors' fees and the demand under Rule 6(3) (5%/6%/10%) are held unsustainable in view of the exemption and the proportionate reversal paid under Rule 6(3A); the appeal is allowed, while the question of limitation is left open.

Invocation of extended period - suppression of facts - show cause notice - ST-3 returns as basis for demand - works contract service versus manpower recruitment or supply agency service - sub-contractor liability where main contractor discharged tax - manufacture under Section 2(f) of the Central Excise Act

Invocation of extended period - suppression of facts - show cause notice - ST-3 returns as basis for demand - Validity of invoking the extended period for the second show cause notice issued for the same period on the basis of the same ST-3 returns - HELD THAT: - The Tribunal found that the earlier show cause notice dated 17.10.2012 (invoking extended period) was issued on the basis of the appellant's ST-3 returns for August 2007 to March 2011 and that the figures and the declaration of certain amounts as 'exempted services' were available to the Department at that time. The subsequent SCN dated 22.04.2013 relied on the same ST-3 returns and the same set of facts but sought to invoke the extended period on the ground of suppression. Following the principle in Nizam Sugar Factory and related precedents, the Court held that where the Department had knowledge of the relevant material facts when the first SCN was issued, a later SCN based on the same facts cannot be treated as involving suppression so as to sustain invocation of the extended period. The Tribunal therefore concluded that the second SCN was time barred and unsustainable. [Paras 5, 6, 8]

Second show cause notice invoking the extended period is not sustainable and is time barred; SCN set aside.

Manufacture under Section 2(f) of the Central Excise Act - sub-contractor liability where main contractor discharged tax - works contract service versus manpower recruitment or supply agency service - Effect of contemporaneous treatment of the activities as manufacture and of conflicting departmental positions and litigation on the appellant's bonafide in not discharging tax - HELD THAT: - The Tribunal noted that the appellant and the main contractors treated the fabrication and welding activities as falling under 'manufacture' (with a letter from the customer stating so), and that the work orders concerned fabrication at site (including shipbuilding and metro rail related work). The question whether sub-contractors were liable when main contractors discharged tax was the subject of conflicting Board circulars and continuing litigation during the relevant period. These circumstances, together with the fact that the main contractors had been issued demands and in some cases availed of settlement schemes, supported the conclusion that the appellant acted on a bona fide view and that the classification/characterisation issue was interpretational and contested. The Tribunal treated these factual and legal circumstances as reinforcing the conclusion that the Department could not treat the later SCN as disclosing suppression of facts. [Paras 2, 7]

Appellant's conduct regarded as bona fide in light of contemporaneous classification as 'manufacture' and ongoing litigation on sub-contractor liability; this factual/legal context supports setting aside the later SCN.

Final Conclusion: The second show cause notice dated 22.04.2013, issued invoking the extended period on the basis of the same ST-3 returns and facts already available to the Department, is time barred and set aside; the appeal is allowed with consequential relief, if any.

Refund of service tax in respect of transportation charges for export - strict compliance with conditions of exemption notification - procedural infraction versus substantive right to refund - acceptance of Chartered Accountant's certificate as proof of correlation - binding effect of Board circular clarifying documentary difficulty

Refund of service tax in respect of transportation charges for export - procedural infraction versus substantive right to refund - acceptance of Chartered Accountant's certificate as proof of correlation - strict compliance with conditions of exemption notification - Rejection of refund claim for non-production of lorry receipts while seeking refund of service tax paid on transportation charges utilised for export - HELD THAT: - The Tribunal found that the department itself furnished details of the transportation charges in the show cause notice and the appellant produced a Chartered Accountant's certificate correlating the transportation charges with the shipping bills. There was no dispute as to utilisation of the services or payment of the charges. The non-production of lorry receipts was held to be a procedural infraction; in such circumstances the substantive right to refund could not be denied. The Tribunal relied on the principle that a Board circular issued to address practical difficulties in producing lorry receipts and permitting CA certification is binding on the department; consequently the notification's conditions should not be applied to defeat a refund where the documentary difficulty has been addressed by an acceptable alternative proof. The Tribunal also observed that the Commissioner (Appeals) had taken a similar view for a different period in the appellant's case, and the department could not take a contrary stand in the present period. Applying these conclusions to the facts, the Tribunal set aside the impugned order and allowed the appeals with consequential relief. [Paras 8, 9, 10, 11]

The rejection of the refund claim for non-production of lorry receipts is not justified; the appellant is eligible for refund and the impugned order is set aside.

Final Conclusion: Appeals allowed; refund of service tax claimed on transportation charges utilised for export is to be granted, the impugned order being set aside, with consequential relief if any.

Clandestine manufacture and clandestine clearances - SSI exemption under Notification No. 08/2003-CE - assignment deed treated as afterthought - relevant date and limitation under Section 11A - extended five years for suppression, fraud and collusion - admissions as evidence under Section 52 of the Indian Evidence Act - penalty liability and double jeopardy - ex parte proceedings

Assignment deed treated as afterthought - SSI exemption under Notification No. 08/2003-CE - Admissibility of the assignment deed dated 27.11.2010 and entitlement to SSI exemption in respect of goods bearing brands 'REAL' and 'NICE'. - HELD THAT: - The adjudicating authorities found that the assignment deed relied upon by the appellants was not brought to the attention of investigators at the time of search and bears notarization dated after the searches; it was therefore held to be an afterthought. The departmental verification from the trademarks portal during the investigation continued to record a third party as brand owner. In the absence of contemporaneous documentary proof and in view of the after-the-event notarization, the Tribunal finds no infirmity in treating the brands as third party brands. Consequently the sale value of products of those brands was excluded while reckoning value for SSI exemption under Notification No. 08/2003-CE and the exemption was rightly denied. [Paras 4]

The assignment deed is inadmissible as an afterthought and SSI exemption was correctly denied.

Relevant date and limitation under Section 11A - extended five years for suppression, fraud and collusion - clandestine manufacture and clandestine clearances - Whether the demand for the period from 01.04.2010 to 09.07.2010 is barred by limitation or saved by invocation of extended five year period on account of suppression/fraud/collusion. - HELD THAT: - The record shows admissions by the appellants and seizure of 'kacchi parchis' corroborating unaccounted clearances. Given the non retracted admissions and recovered documents, the Tribunal accepts the finding of suppression, fraud and collusion which permits invocation of the extended five year limitation. The show cause notice dated 09.07.2015 was held to be within the extended period computed from the relevant date (date of filing of return) in accordance with the prescribed method of reckoning under Section 11A. The Tribunal therefore upholds the adjudicating authority's conclusion that the demand is not time barred. [Paras 4]

Demand for the said period is not barred by limitation; extended five year period was rightly invoked.

Admissions as evidence under Section 52 of the Indian Evidence Act - Whether the recorded admissions and recovered 'kacchi parchis' constitute sufficient proof of clandestine clearances and obviate further proof by the department. - HELD THAT: - All appellants made admissions during investigation about clearing goods without proper invoices and about sales on 'kacchi parchis'; these admissions were not retracted. The seized 'kacchi parchis' corroborated those admissions. The Tribunal applied the principle that admissions are strong evidence under Section 52 of the Indian Evidence Act and concluded that, in the absence of any rebuttal, the burden lay on appellants to falsify the allegations. No corroborative documentary evidence was produced by appellants to challenge the admissions or the website extracts relied upon by the department. [Paras 4]

Recorded admissions and seized documents sufficiently prove clandestine clearances; department need not adduce further proof.

Penalty liability and double jeopardy - Legality of imposition of penalties on the firms and on the proprietors and whether such imposition amounts to double jeopardy. - HELD THAT: - The Commissioner (Appeals) and the adjudicating authority examined the imposition of penalties and held that penalties upon the firm and upon the proprietors were imposed under different provisions. The Tribunal accepted the findings recorded in the impugned order (paras 27 to 29) and found no merit in the plea of double jeopardy where penalties are levied under distinct statutory provisions. The proportionality/contention regarding maximum penalty under Rules 25 and 26 was considered but the Tribunal accepted the departmental conclusion given the proven suppression and admissions. [Paras 4]

Penalties imposed on firms and proprietors are legally sustainable and do not constitute double jeopardy.

Ex parte proceedings - Validity of proceeding ex parte against Shri Ramchand Matta (proprietor of M/s. Matta Paint House). - HELD THAT: - The adjudicating authority recorded that despite four opportunities for personal hearing, Shri Ramchand Matta failed to appear while other respondents joined proceedings. In consequence, the authority proceeded ex parte against him. The Tribunal did not find fault with this course of action in the absence of appearance or explanation by the concerned proprietor. [Paras 4]

Proceeding ex parte against Shri Ramchand Matta is valid.

Final Conclusion: The Tribunal upheld the impugned adjudication: the assignment deed was treated as an afterthought and SSI exemption rightly denied; recorded admissions and seized documents sufficed to prove clandestine clearances, permitting invocation of the extended five year limitation; penalties imposed on firms and proprietors were sustained and ex parte action against the non appearing proprietor was valid. Consequently, all three appeals are dismissed.

Penalty equal to duty evaded under Section 11AC - discretion of adjudicating authority in imposition of penalty under Section 11AC - non-application of interim stay to reduce penalty liability - wrongful availment of CENVAT credit and recovery under Section 11A

Penalty equal to duty evaded under Section 11AC - discretion of adjudicating authority in imposition of penalty under Section 11AC - non-application of interim stay to reduce penalty liability - Whether the adjudicating authority erred in imposing a reduced penalty instead of penalty equal to the duty evaded/credit wrongfully availed under Section 11AC. - HELD THAT: - The Tribunal found that the Commissioner confirmed recovery of the wrongfully availed CENVAT credit under Section 11A but imposed a penalty substantially less than the amount of duty evaded. The Commissioner reasoned that the period during which the issue was subject to an interim stay could be excluded in fixing the penalty. The Tribunal held that Section 11AC prescribes penalty in relation to the amount of duty evaded and does not permit exclusion of any period of interim stay to reduce the penalty. The wording of Section 11AC is clear, leaving no scope for such exclusion or for a discretion to impose a lesser penalty once the provision is invoked. The Tribunal relied on the ratio of the Supreme Court decisions cited in the appeal (Dharmendra Textile Processors , Rajasthan Spinning and Weaving Mills , Stesalit Limited ) as supporting the proposition that equal penalty is required when Section 11AC is invoked. Consequently the reduced penalty could not be sustained and had to be enhanced to equal the amount of duty evaded/credit wrongfully availed confirmed under Section 11A.

The impugned order is modified by enhancing the penalty imposed under Section 11AC to an amount equal to the duty evaded/credit wrongfully availed; appeal allowed to that extent.

Final Conclusion: Penalty imposed under Section 11AC set aside insofar as it was less than the duty evaded; penalty enhanced to equal the amount of duty evaded/credit wrongly availed confirmed under the adjudication.

Vicarious liability under Section 141 of the Negotiable Instruments Act - requirement of specific averments in complaint to show a person was in charge of and responsible for conduct of company's business - strict construction of penal provisions - power of High Court under Section 482 CrPC to quash criminal complaint

Vicarious liability under Section 141 of the Negotiable Instruments Act - requirement of specific averments in complaint to show a person was in charge of and responsible for conduct of company's business - power of High Court under Section 482 CrPC to quash criminal complaint - Whether the criminal complaint under Section 138 read with Section 141 of the Negotiable Instruments Act disclosed sufficient averments against the petitioner to sustain issuance of process and thus whether the complaint should be quashed under Section 482 CrPC. - HELD THAT: - The Court applied the settled legal principle that Section 141 creates a constructive/vicarious criminal liability which must be strictly construed and that the complainant bears the primary responsibility to make specific averments showing that the person sought to be prosecuted was, at the time of the offence, in charge of and responsible for the conduct of the company's business. The Court found that the complaint alleged the accused company and that the accused nos. 2, 3, 4 (the petitioner) and 5 were Directors/Additional Directors and made averments that the goods were supplied to the accused and that cheques issued in payment were dishonoured after presentation and notice. Those averments, the Court held, amounted to sufficient allegations that the petitioner was involved in the day to day affairs of the company for the limited purpose of invoking process; legal authorities require specific factual averments but do not preclude issuance of process where the complaint on its face makes such basic allegations. The petitioner's contention that he was only an employee promoted later as an Additional Director and that he did not sign the cheques could not, on the material before the High Court, be accepted to the extent of dismantling the complaint; such factual contentions and any proof that the petitioner was not responsible for the company's affairs are matters to be examined at trial. The Court therefore exercised its jurisdiction under Section 482 CrPC sparingly and declined to quash the complaint insofar as the petitioner was concerned. [Paras 8, 9, 10]

The petition to quash the complaint is dismissed and the complaint shall proceed against the petitioner; factual disputes as to the petitioner's role are left for trial.

Final Conclusion: The High Court dismissed the Section 482 CrPC petition and declined to quash the complaint under Section 138 read with Section 141 of the Negotiable Instruments Act against the petitioner, holding that the complaint contains sufficient averments to proceed and that factual contentions about the petitioner's non involvement are matters for trial.

Presumption under Section 139 of the Negotiable Instruments Act - Reverse onus - Rebuttal by preponderance of probabilities - Dishonour of cheque due to insufficient funds - Service of statutory demand notice - Appeal against acquittal - interference where trial court's view is not a possible one / perverse - Ingredients of offence under Section 138 of the Negotiable Instruments Act

Presumption under Section 139 of the Negotiable Instruments Act - Reverse onus - Rebuttal by preponderance of probabilities - Whether, on the accused's admission of signing the cheque, the statutory presumption under Section 139 operated and whether the accused rebutted that presumption - HELD THAT: - The Court found that the accused admitted issuance/signature of the cheque in his Section 313 statement and did not lead defence evidence to discharge the statutory presumption. Reliance was placed on the settled principle that once signature/issuance is admitted the presumption that the cheque was issued for discharge of debt/liability arises and the evidential burden shifts to the accused to rebut by preponderance of probabilities. Mere denial in Section 313 was held insufficient and the prosecution was not required to prove the debt as in a civil suit. The discrepancies in amounts relied upon by the Trial Court were held not to be material to rebut the presumption on the facts of this case. [Paras 22, 23, 24, 38, 46]

Presumption under Section 139 was attracted and the accused failed to rebut it; therefore the presumption stands in favour of the complainant.

Dishonour of cheque due to insufficient funds - Service of statutory demand notice - Ingredients of offence under Section 138 of the Negotiable Instruments Act - Whether the cheque was dishonoured and a valid demand notice was served, and whether the ingredients of Section 138 were thereby established - HELD THAT: - The Court accepted unchallenged testimony and bank memo proving that the cheque was presented and returned with endorsement 'Insufficient Funds'. The complainant's evidence regarding service of the legal notice was corroborated by postal receipts and acknowledgement. Given the proved issuance, dishonour and service of notice, and the accused's failure to make payment within the statutory period, the Court held that all ingredients of Section 138 were established. [Paras 41, 42, 43, 45, 46]

Dishonour for insufficient funds and valid service of demand notice were proved; ingredients of Section 138 were satisfied.

Appeal against acquittal - interference where trial court's view is not a possible one / perverse - Whether the High Court could interfere with the Trial Court's acquittal and whether the Trial Court's conclusion was a possible view or perverse - HELD THAT: - Applying Supreme Court precedents on appeals against acquittal, the Court observed that appellate interference is permissible where the trial court's conclusion is perverse or not a possible view. The Trial Court had ignored the statutory presumption under Section 139 and placed the burden of proving the debt on the complainant; it also overlooked incriminating suggestions and admissions in cross-examination. The High Court found the Trial Court's approach to be a view that could not reasonably be taken and therefore justifiably interfered with the acquittal. [Paras 12, 13, 47, 48]

Trial Court's acquittal was interfered with as its reasoning ignored the presumption under Section 139 and amounted to a view that could not reasonably be taken.

Quantum of sentence - remand for hearing - Whether sentence should be imposed at this stage or remitted for separate hearing on quantum - HELD THAT: - Having convicted the accused for the offence under Section 138, the Court did not pronounce sentence immediately but ordered production of the accused on the specified date for hearing on quantum of sentence. The determination of quantum was therefore left open for a subsequent hearing. [Paras 49]

Determination of quantum of sentence remitted for hearing on the specified date.

Final Conclusion: Appeal allowed; the judgment of acquittal dated 31.03.2011 is set aside, the accused is convicted for offence under Section 138 of the Negotiable Instruments Act, 1881; hearing on quantum of sentence is directed to be held on the date fixed.

Writ of Mandamus - Lock and seal and demolition of unauthorised construction - Connected proceedings before the National Company Law Tribunal - Transfer/primacy of proceedings under Section 60(3) of the Insolvency and Bankruptcy Code, 2016 - Appropriate forum / forum of adjudicating authority

Writ of Mandamus - Lock and seal and demolition of unauthorised construction - Whether a writ of mandamus should be issued directing respondents 1 to 3 to act on the lock and seal notice and demolish the unauthorised construction. - HELD THAT: - The Court declined to grant the mandamus sought. It recorded that the building in question is already under lock and seal and observed that the dispute between the parties involves matters which must be pursued before the appropriate forum. Having regard to the factual position and the existence of parallel proceedings, the Court closed the writ petition instead of directing immediate demolition or other executive action.

Writ petition refused insofar as a mandamus for demolition/implementation of the lock and seal notice is sought; petition closed.

Connected proceedings before the National Company Law Tribunal - Transfer/primacy of proceedings under Section 60(3) of the Insolvency and Bankruptcy Code, 2016 - Appropriate forum / forum of adjudicating authority - Whether further action in respect of the disputed construction should be pursued before the NCLT in view of pending insolvency-related proceedings and the operation of Section 60(3) IBC. - HELD THAT: - The Court noted that connected proceedings are pending before the NCLT (I.A. No.72 of 2022 in C.P. No.568/IB/2017) instituted by the Resolution Professional and that the I.A. seeks directions related to completion of construction and compensation to home buyers. The Court relied on the principle in Section 60(3) of the Insolvency and Bankruptcy Code, 2016 that cases relating to the corporate debtor pending in other Courts or Tribunals shall be transferred to, or determined by, the Adjudicating Authority handling the insolvency resolution or liquidation. In view of the pendency before the NCLT and the statutory primacy conferred by Section 60(3), the Court held that any further action ought to be settled before the NCLT rather than by this writ forum.

Further action to be pursued before the NCLT; writ forum declined to proceed in light of Section 60(3) IBC and pending insolvency proceedings.

Final Conclusion: Writ petition closed. The petitioner is granted liberty to pursue remedies before the appropriate forum (including the National Company Law Tribunal in view of pending insolvency proceedings under Section 60(3) IBC). No costs.

Tribunal - Lis - Adjudication - Transfer of judicial power - Article 227 jurisdiction - Article 226 jurisdiction - Board of Discipline - Natural justice

Tribunal - Article 227 jurisdiction - Board of Discipline - The Board of Discipline constituted under the Chartered Accountants Act, 1949 is not a Tribunal within the meaning of Article 227 of the Constitution of India. - HELD THAT: - The Court applied the established test for identifying a 'Tribunal' and found that the Board of Discipline does not satisfy the essential attributes required for a body to be treated as a Tribunal for the purposes of Article 227. The Board does not exercise transferred judicial powers to adjudicate a lis between contesting parties; its function is to examine complaints of professional misconduct to see whether there is reason to believe misconduct has occurred. The mere holding of hearings and application of principles of natural justice does not convert such a body into a Tribunal, because natural justice obligations may arise even where there is no transfer of judicial power by the State. Consequently, the Board of Discipline was held not amenable to revisional jurisdiction under Article 227. [Paras 18, 19, 21, 22, 23]

Board of Discipline is not a Tribunal within Article 227 and therefore not subject to revisional jurisdiction of the High Court under Article 227.

Lis - Adjudication - Transfer of judicial power - A complaint before the Board of Discipline does not constitute a 'lis' and the Board does not adjudicate a lis between contesting parties. - HELD THAT: - Relying on authority concerning disciplinary bodies, the Court observed that proceedings before the Board are investigatory and protective of professional standards rather than adversarial disputes between parties. A complainant before the disciplinary body is not analogous to a plaintiff in a civil suit; the Board's role is to determine whether there is reason to believe misconduct occurred, and it may act suo motu. Because there is no transfer of judicial power to decide a lis and no adjudication of competing legal rights between contesting parties, the proceedings do not amount to a lis for constituting a Tribunal. [Paras 18, 19, 21, 22]

Proceedings before the Board of Discipline are not a lis and do not amount to adjudication of a lis; hence the Board is not a Tribunal.

Article 227 jurisdiction - Article 226 jurisdiction - The Civil Revision Petition under Article 227 is not maintainable in respect of the Board of Discipline; however, relief may be sought by filing a writ petition under Article 226. - HELD THAT: - Since the Board of Discipline is not a Tribunal within Article 227, the Court held that revisional jurisdiction under Article 227 cannot be invoked against its order and accordingly dismissed the Civil Revision Petition as not maintainable. The Court nonetheless recognized the broader scope of Article 226 and granted the petitioner liberty to file a writ petition under Article 226, observing that the period during which the Civil Revision was prosecuted would not be taken against the petitioner for laches if such a writ is filed. [Paras 3, 23, 24]

Civil Revision under Article 227 dismissed as not maintainable; petitioner granted liberty to file a writ under Article 226 without prejudice on laches.

Final Conclusion: The Civil Revision Petition challenging the Board of Discipline's order is dismissed as not maintainable under Article 227 since the Board is not a 'Tribunal' nor does the complaint constitute a 'lis'; liberty granted to the petitioner to file a writ petition under Article 226, with the time spent in prosecuting the revision not to be treated against the petitioner for laches. No costs.