TaxTMI Updates e-Newsletter
Dec 25,2020

Detention of goods and vehicle for absence of a valid e-way bill - valid e-way bill requirement for carriage of goods - release of detained goods and vehicle on furnishing a bank guarantee - adjudication under Section 129(3) of the GST Act

Detention of goods and vehicle for absence of a valid e-way bill - valid e-way bill requirement for carriage of goods - Detention of the goods and the vehicle for transportation without a valid e-way bill was justified. - HELD THAT: - The Court examined the detention notice (Ext.P3) which records that the goods and the vehicle were detained because the transportation was not accompanied by a valid e-way bill. Having regard to that recorded reason, the Court found no basis to treat the detention as unjustified and upheld the lawfulness of detention in the circumstances stated in the notice.

Detention sustained as justified on the ground that transportation was not accompanied by a valid e-way bill.

Release of detained goods and vehicle on furnishing a bank guarantee - adjudication under Section 129(3) of the GST Act - Permission to release the goods and vehicle on furnishing a bank guarantee and direction to adjudicate the matter thereafter under Section 129(3) of the GST Act. - HELD THAT: - Although the detention was held to be justified, the Court permitted provisional relief to the petitioner by authorising release of the goods and vehicle upon the petitioner furnishing a bank guarantee for the amount demanded in Ext.P3. The Court directed that following such release, the respondent shall proceed to adjudicate the matter after hearing the petitioner in accordance with the procedure under Section 129(3) of the GST Act. The learned Government Pleader was directed to communicate this order to the respondent and the petitioner was to produce copies of the writ petition and this judgment for expeditious action.

Goods and vehicle to be released on furnishing a bank guarantee; respondent to adjudicate the claim thereafter under Section 129(3) of the GST Act.

Final Conclusion: Detention for transportation without a valid e-way bill upheld; petitioner allowed provisional release of goods and vehicle on furnishing a bank guarantee, with the respondent directed to adjudicate the demand thereafter under Section 129(3) of the GST Act.

Bid non-responsiveness - absorption of tax in bid price - mandatory disclosure of tax components in tender - discount versus absorption of tax - judicial review of tender awards - fairness and non-arbitrariness in public procurement

Bid non-responsiveness - mandatory disclosure of tax components in tender - absorption of tax in bid price - Whether the commercial bid of respondent No.4 was non-responsive for indicating zero in the column 'total amount of GST/IGST' and therefore liable to be rejected. - HELD THAT: - The tender conditions required bidders to indicate applicable tax rates and to show tax amounts in the bid. The commercial bid of respondent No.4, however, recorded '000' in the GST amount column for specified items, which the authority interpreted as the bidder electing not to pass the tax component to Prasar Bharti and instead absorbing it in the quoted price. The Court held that the tender did not make it mandatory for a bidder to pass on tax to the purchaser; a bidder is entitled to absorb the tax within its price. Accordingly, the insertion of '000' for GST in the commercial bid did not constitute non-compliance with the essential conditions such as to render the bid non-responsive. [Paras 13, 14, 16, 19]

Respondent No.4's bid was not non-responsive merely because it showed zero GST; the bid was valid and could be considered.

Judicial review of tender awards - fairness and non-arbitrariness in public procurement - Whether the Court should interfere with the tendering authority's decision declaring respondent No.4 as L-1 under Article 226. - HELD THAT: - Applying settled principles on interference in tender matters, the Court examined whether the authority's decision was arbitrary, mala fide, or such that no reasonable authority could have reached it. The authority accepted respondent No.4's commercial adjustment (absorption of tax) and declared it L-1; there was no material to show mala fides or irrationality in the process. On these findings, and in the absence of any demonstrated public interest being adversely affected, the Court declined to interfere with the award. [Paras 15, 16, 20]

No interference with the tender award; the decision of the authority declaring respondent No.4 as L-1 is sustained.

Discount versus absorption of tax - mandatory disclosure of tax components in tender - Whether respondent No.4's decision to absorb the tax component amounted to a prohibited 'discount' and was therefore excludable from evaluation under the tender instructions. - HELD THAT: - Instruction 7 prohibited bidders from indicating separate discounts and required any discount to be merged in the quoted rate. The Court distinguished a discount (a reduction in cost price) from a decision to absorb statutory tax within the bid price. Since respondent No.4 did not lower its cost price but chose not to pass on tax to the purchaser, it did not amount to a discount within the meaning of the instruction and therefore was not excluded from evaluation on that ground. [Paras 12, 18]

Absorption of the tax element by respondent No.4 is not a prohibited discount and is admissible for evaluation.

Bid amendment after opening - judicial review of tender awards - Whether the petitioner could be permitted at this stage to amend its bid by waiving the tax component so as to alter the comparative position and claim L-1 status. - HELD THAT: - The Court held that permitting a post-opening alteration of the bidder's price structure would amount to re-writing the bid, which is impermissible. Bidders must determine at the appropriate stage whether to absorb tax elements; a belated offer to waive the tax component after commercial bids have been opened cannot be entertained. [Paras 17, 20]

The petitioner cannot amend its bid after opening to absorb the tax component; such belated amendment is impermissible.

Final Conclusion: The writ petition is dismissed. The decision of the tendering authority declaring respondent No.4 as L-1 is upheld: showing zero GST in the commercial bid amounted to absorption of tax and did not render the bid non-responsive or constitute a prohibited discount, and the petitioner cannot amend its bid after opening; no interference under Article 226 is warranted.

Writ petition at show cause notice stage - Maintainability of writ against pending adjudication - Withdrawal of petition leaving grounds open - Right to raise legal contentions before adjudicating authority - Adjudicating authority not to be influenced by interim judicial proceedings

Writ petition at show cause notice stage - Maintainability of writ against pending adjudication - Whether the writ petition seeking to challenge a show cause notice at the stage of pre-adjudication is entertainable - HELD THAT: - The Court declined to entertain the writ application at the stage when only a show cause notice under Section 130 of the CGST Act, 2017 had been issued and the matter remained pending for adjudication. The bench emphasised that where proceedings are at the show cause stage, interference by writ jurisdiction is not appropriate and therefore the Court is not inclined to intervene at that preliminary stage. The Court recorded that its refusal to entertain the writ is confined to the procedural posture of the matter and does not preclude the petitioner from raising legal contentions before the adjudicating authority.

Writ application not entertained at the show cause notice stage; petition disposed of accordingly.

Withdrawal of petition leaving grounds open - Right to raise legal contentions before adjudicating authority - Adjudicating authority not to be influenced by interim judicial proceedings - Whether the petitioner may withdraw the writ while preserving the right to press legal contentions before the respondent and the manner in which the respondent should proceed - HELD THAT: - On the petitioner's request, the Court permitted withdrawal of the writ application while expressly leaving open the petitioner's right to raise all legal contentions, including jurisdictional objections, before the respondent who issued the show cause notice. The Court directed that the respondent shall adjudicate the show cause notice on its merits and shall do so without being influenced by the fact that the writ was declined; the Court clarified that its non-entertainment was solely because the matter remained at the show cause stage.

Withdrawal permitted with liberty to the petitioner to raise all legal contentions before the adjudicating authority; respondent directed to adjudicate uninfluenced by the Court's order.

Final Conclusion: The writ petition challenging the show cause notice was not entertained because the matter was at the pre-adjudication stage; the petition was permitted to be withdrawn while preserving the petitioner's right to raise all legal contentions before the adjudicating authority, which must adjudicate the show cause notice on merits without being influenced by this order.

Revocation of cancellation of registration under Section 30 of the CGST Act - opportunity of hearing - electronic credit ledger reversal and entitlement to input tax credit

Revocation of cancellation of registration under Section 30 of the CGST Act - opportunity of hearing - The authority must consider and decide the writ applicant's applications for revocation of cancellation of registration filed under Section 30 of the CGST Act after giving an opportunity of hearing. - HELD THAT: - The writ court found that the applicant's consultant had inadvertently applied for cancellation and that two applications for revocation under Section 30 were on file with no decision having been taken. The Court directed the Commercial Tax Officer, GST, Ghatak-58, Surat, to examine those applications, grant the writ applicant an opportunity of hearing and pass an appropriate order in accordance with law. The Court fixed a short statutory timeline for disposal and did not adjudicate the merits of revocation itself, leaving factual and legal determination to the authority. [Paras 6, 7]

Respondent authority to hear the applicant and decide the Section 30 revocation applications within eight days of receipt of the order.

Electronic credit ledger reversal and entitlement to input tax credit - consequential effect of revocation on input tax credit - The court refused to adjudicate the substantive entitlement to the reversed electronic credit but indicated the consequence if revocation is allowed. - HELD THAT: - The Court noted that on issuance of the cancellation order the balance in the electronic credit ledger had been reversed and the applicant is presently unable to avail the credit. The Court did not decide the legal entitlement to the reversed credit; instead it observed that if the cancellation of registration is revoked by the authority, the writ applicant may thereafter take appropriate steps to avail the credit in accordance with law. No direction was given to restore credit independent of the revocation determination. [Paras 3, 5, 7]

No adjudication on entitlement to the reversed electronic credit; availability of credit left contingent on successful revocation and compliance with law.

Final Conclusion: Writ petition disposed by directing the respondent authority to hear the applicant and decide the Section 30 revocation applications within eight days; the question of the reversed electronic credit is not decided and remains contingent on any revocation of registration.

Appeal to appellate authority under GST - alternative remedy - bank guarantee - stay on invocation of security pending appeal

Appeal to appellate authority under GST - alternative remedy - Writ petition disposed by relegating the petitioner to the statutory appellate remedy before the GST appellate authority. - HELD THAT: - The Court noted that the petitioner has preferred an appeal against the impugned order (Ext.P10) before the designated appellate authority under the GST law and has remitted the requisite appeal fee. In view of the availability of this statutory remedy, the writ petition is disposed of by directing the petitioner to pursue the appeal before the appellate authority. The disposal is by relegation to the alternate remedy rather than by deciding the merits of the underlying challenge to Ext.P10.

Petitioner relegated to prosecute the appeal before the GST appellate authority; writ petition disposed accordingly.

Bank guarantee - stay on invocation of security pending appeal - Interim protection in respect of the Bank Guarantee furnished for release of detained goods and vehicle. - HELD THAT: - The Court conditioned its disposal on the petitioner keeping alive the Bank Guarantee (Ext.P12) furnished at the time of release. On that condition, the respondent is directed to refrain from invoking the Bank Guarantee for a limited period of two months from the date of the order. This constitutes a limited interim protection preserving the security during the initial pendency of the appellate proceedings.

Petitioner to keep the Bank Guarantee alive; respondent restrained from invoking it for two months.

Final Conclusion: The writ petition is disposed of by directing the petitioner to pursue the appeal before the GST appellate authority; meanwhile, subject to the petitioner keeping the Bank Guarantee alive, the respondent shall not invoke the Bank Guarantee for a period of two months from the date of the order.

Interim bail - Arrest memo specifying offence - Prosecution for tax evasion without assessment or show cause notice - Cooperation with investigation as bail condition - Restriction on travel and passport surrender as bail condition

Interim bail - Cooperation with investigation as bail condition - Restriction on travel and passport surrender as bail condition - Applicant granted interim bail on specified conditions - HELD THAT: - The Court, after noting the arrest and the materials on record, directed release of the applicant on interim bail on furnishing a personal bond with two sureties. The bail was made subject to conditions that the applicant join and cooperate with the investigation, appear as and when required, not leave the National Capital Territory of Delhi except for travel to Lucknow with prior permission of the investigating officer, and surrender his passport to the trial court/duty magistrate. These conditions were imposed as interim measures while the broader legal issues remain pending consideration. [Paras 11]

Interim bail granted subject to the stated personal bond and the enumerated conditions.

Arrest memo specifying offence - Prosecution for tax evasion without assessment or show cause notice - Legality of arrest and of initiating prosecution without show cause notice or assessment proceedings left for detailed consideration - HELD THAT: - The Court observed that the Arrest Memo does not specifically identify the precise offence under the GST Act and that no show cause notice or assessment proceedings have been initiated against the applicant, even though prosecution is proposed. The respondents contend that determination of tax dues is unnecessary prior to launching prosecution. The Court recorded that these issues require examination, permitted filing of a status report and supplementary status report, and granted time to the parties to examine the material and file written submissions. The matter was listed for further hearing for adjudication of these legal questions. [Paras 6, 7, 8, 9, 10]

Questions concerning the sufficiency of the Arrest Memo and the propriety of prosecuting without issuing a show cause notice or initiating assessment proceedings are not decided and are reserved for further hearing after consideration of the status reports and written submissions.

Final Conclusion: Interim bail directed on specified conditions; substantive legal questions about the arrest memo and the initiation of prosecution without prior show cause notice or assessment are reserved for further consideration and listed for hearing.

Refund of balance in the Electronic Cash Ledger under the proviso to Section 54 - treatment of tax deducted at source under Section 51(8) vis-a -vis refund claims - operation of Electronic Cash Ledger and refund in light of Section 49(6)

Refund of balance in the Electronic Cash Ledger under the proviso to Section 54 - operation of Electronic Cash Ledger and refund in light of Section 49(6) - treatment of tax deducted at source under Section 51(8) vis-a -vis refund claims - Whether the petitioner is entitled to refund of the excess balance in its Electronic Cash Ledger notwithstanding tax deducted at source by third parties, and whether the assessing authority erred in treating the claim as one under Section 51(8) instead of the proviso to Section 54 read with Section 49(6). - HELD THAT: - The court found that the petitioner sought refund of the unutilised balance standing in its Electronic Cash Ledger and did not allege any excess or erroneous deduction by the deductors under Section 51. Section 49(6) permits refund of the balance in the Electronic Cash Ledger after payment of known liabilities, and the first proviso to Section 54(1) contemplates such refund claims. The 2nd respondent misconstrued and treated the petitioner's claim as falling under Section 51(8), which applies to refunds arising from excess or erroneous deduction; since no such contention was made by the petitioner, the 2nd respondent's approach was legally incorrect. The correct exercise was to ascertain whether, after providing for any known and determined liabilities for tax, interest, penalty or other amounts under the Act, a balance remained in the Electronic Cash Ledger, and if so, to refund that excess to the petitioner. [Paras 5]

Ext.P4 is quashed; the 2nd respondent is directed to ascertain the excess amount in the petitioner's Electronic Cash Ledger after provision for known liabilities and refund the same within three weeks from receipt of the judgment.

Final Conclusion: The writ petition succeeds; the impugned order rejecting the refund is quashed and the revenue is directed to determine any excess balance in the Electronic Cash Ledger after meeting known liabilities and refund it to the petitioner within three weeks.

Anticipatory bail - appearance on summons - cooperation in investigation - surety and bail bond conditions - vacation of order for non-compliance - verification of court orders by authorities - inquiry into alleged GST evasion

Anticipatory bail - surety and bail bond conditions - Application under Section 438 Cr.P.C. disposed by granting protective bail subject to specified conditions. - HELD THAT: - The Court, having considered the submissions and the documents on record and noting the applicant's assurance of cooperation, directed that the applicant shall furnish a bail bond of Rs. 50,000 with two sureties each in the like amount and an undertaking to appear and cooperate in the assessment proceedings as and when required, to the satisfaction of the officer concerned. One of the sureties was directed to be a family member. These conditions form the basis on which the Court allowed the application under Section 438 Cr.P.C.

Anticipatory bail allowed with requirement to furnish bond and two sureties and to give an undertaking to cooperate in the pending assessment proceedings.

Appearance on summons - cooperation in investigation - vacation of order for non-compliance - Obligation to appear before the competent authority when summoned and consequence of failure to respond. - HELD THAT: - The Court directed the applicant to appear before the competent authority whenever called in the inquiry relating to alleged GST evasion. The order explicitly provides that if the applicant does not respond to any summons or notice issued by the competent officer, the protective order granting bail shall stand vacated. This conditions the continuance of the relief on the applicant's compliance with summons and cooperation in the assessment proceedings.

Applicant must appear and cooperate when summoned; failure to respond will result in vacatur of the bail order.

Verification of court orders by authorities - inquiry into alleged GST evasion - Ancillary procedural directions regarding production and verification of the court order and identity proof. - HELD THAT: - The Court directed the applicant to produce a copy of the order before the S.S.P./S.P. within ten days for ensuring compliance. The applicant was directed to file a computer-generated copy of the order downloaded from the High Court website, self-attested, along with self-attested identity proof (preferably Aadhar) mentioning the linked mobile number. The concerned Court/Authority/Official is required to verify the authenticity of the computerized copy from the High Court website and make a written declaration of such verification. These directions are procedural safeguards to be followed while implementing the bail order.

Applicant to produce and file authenticated computer-generated copy of the order with identity proof; authorities to verify authenticity and record such verification in writing.

Final Conclusion: The application under Section 438 Cr.P.C. is allowed on conditions: the applicant to furnish the prescribed bail bond and sureties, appear and cooperate in the GST assessment proceedings when summoned, comply with the direction to produce and file authenticated copy of this order with identity proof, and the protective order will be vacated if the applicant fails to respond to any summons or notice.

Anticipatory bail - custodial interrogation - influence over witnesses and tampering with evidence - GST chain liability and impact of ingenuine supplies on input tax credit - seriousness of allegations of corrupt nexus between transporters and tax officials - protection of the public exchequer vis-a -vis personal liberty

Anticipatory bail - custodial interrogation - GST chain liability and impact of ingenuine supplies on input tax credit - seriousness of allegations of corrupt nexus between transporters and tax officials - protection of the public exchequer vis-a -vis personal liberty - Anticipatory bail application of the petitioner was rejected and custodial interrogation was held to be necessary for fair and full investigation. - HELD THAT: - The Court found the allegations to be grave and multi-dimensional, involving an alleged long running racket between the petitioner (a transporter), "passers" and Excise and Taxation officials to facilitate evasion of GST. Given the inter connected nature of the GST chain, a single ingenuine or doctored link can affect input tax credit across the chain and have wide fiscal ramifications. The investigation disclosed seized registers, computers and call detail inputs but the Court held that those materials may represent only part of the transactions and that custodial interrogation of the petitioner is necessary to elicit the full picture. The petitioner was assessed to be in possession of material evidence (including GRs and documents) and in a position to influence or assist the named officials; liberty considerations were weighed against the sovereign interest in protecting the public exchequer, with the latter prevailing in the facts of this case. In view of the complexity, potential tax impact and ongoing nature of the probe, pre arrest bail was refused.

Petition for anticipatory bail dismissed; custodial interrogation of the petitioner held to be imperative for fair and full investigation.

Influence over witnesses and tampering with evidence - anticipatory bail - Possession by the Vigilance Bureau of seized registers and computers does not obviate the need for custodial interrogation of the petitioner or rule out risk of tampering or influencing witnesses. - HELD THAT: - The Court rejected the submission that pre existing seizure of documents and electronic devices made custody unnecessary. It observed that the seized material might provide only a window into suspected transactions and that the petitioner, being a principal actor and having access to additional documents such as GRs, could still suppress evidence or assist others to tamper with the investigation. Accordingly, custody was considered necessary notwithstanding existing recoveries.

Rejection of the contention that seizures negate custodial necessity; custodial interrogation permitted for fuller investigation.

Final Conclusion: The High Court dismissed the petition for anticipatory bail, holding that custodial interrogation of the petitioner is necessary given the seriousness of the alleged corrupt nexus, the multi dimensional impact on the GST chain and the risk of interference with evidence; the Court clarified that its observations are confined to the bail application and not to the merits of the case.

Benefit of input tax credit and obligation to pass it on under Section 171 of the CGST Act, 2017 - computation of profiteering by comparing pre GST and post GST input tax credit ratios - commensurate reduction in prices as the sole statutory mode of passing benefit under Section 171 - no retrospective imposition of penalty where penal provision was inserted after the period of contravention - suo moto cognizance and remand for investigation of related project

Benefit of input tax credit and obligation to pass it on under Section 171 of the CGST Act, 2017 - computation of profiteering by comparing pre GST and post GST input tax credit ratios - commensurate reduction in prices as the sole statutory mode of passing benefit under Section 171 - Additional input tax credit became available to the respondent post GST and was not passed on to recipients; profiteering quantified for the period 01.07.2017 to 30.06.2019. - HELD THAT: - The Authority accepted the DGAP's quantification that the ratio of input tax credit to turnover rose from 2.66% (pre GST) to 8.57% (post GST), resulting in an additional ITC benefit of 5.91% of turnover. Applying that percentage to the amounts collected during the period under investigation and recalibrating base prices, the Authority found that the respondent failed to give a commensurate reduction in prices as mandated by Section 171(1) of the CGST Act, 2017. The respondent's contentions - that incremental tax on services (rate rise from 15% to 18%) or only ITC on goods should be excluded, or that increased marketing/commission costs should be offset - were rejected: the Authority held the correct comparator is the total ITC available pre and post GST and that Section 171 prescribes reduction in prices as the mode of passing on benefit, not other adjustments. Consequently, the DGAP's computation of profiteering was upheld. [Paras 15, 16, 31, 33, 34]

Profiteering established; total profiteered amount determined as Rs. 2,44,80,835 (inclusive of GST) for the period 01.07.2017 to 30.06.2019, and the respondent directed to pass on the amount to identified buyers with interest and to reduce future prices commensurately.

No retrospective imposition of penalty where penal provision was inserted after the period of contravention - Whether penalty under Section 171(3A) could be imposed for profiteering committed during 01.07.2017 to 30.06.2019. - HELD THAT: - Although the respondent's conduct amounted to profiteering under Section 171, the penalty provision under Section 171(3A) was inserted into the CGST Act with effect from 01.01.2020 and was not in force during the period when the contravention occurred. The Authority therefore held that penalty under that provision could not be imposed retrospectively for the period covered by the investigation. [Paras 35]

No notice for imposition of penalty to be issued in respect of the period 01.07.2017 to 30.06.2019.

Suo moto cognizance and remand for investigation of related project - Whether the DGAP should investigate the respondent's other project ('Epic') for possible non passing of ITC benefit. - HELD THAT: - The respondent admitted that turnover figures for the subject project included amounts from another project ('Epic'). In view of these admissions and discrepancies, the Authority concluded there were sufficient reasons to investigate whether the respondent had failed to pass on additional ITC in respect of the 'Epic' project. The Authority accordingly directed the DGAP to investigate that project and submit a report under the relevant rule. [Paras 36]

DGAP directed to investigate the 'Epic' project and report whether benefit of ITC has been passed on to eligible buyers.

Final Conclusion: The Authority upheld the DGAP's finding of profiteering for the period 01.07.2017 to 30.06.2019, quantified the profiteered amount at Rs. 2,44,80,835 (inclusive of GST) and directed the respondent to pass this amount to identified buyers with interest and to reduce future prices; penalty under the subsequently inserted provision was not imposed; DGAP directed to investigate the respondent's other project ('Epic').

Writ jurisdiction under Article 226 - pendency of statutory appeal before Commissioner (Appeals) - section 132B application for release of seized property - determination of ownership and genuineness of transaction - expeditious disposal of pending appeal

Writ jurisdiction under Article 226 - pendency of statutory appeal before Commissioner (Appeals) - maintainability of writ where alternate remedy exists - High Court's exercise of writ jurisdiction in presence of a pending appeal before the CIT(A). - HELD THAT: - The Court found a live dispute on factual aspects - ownership of the seized gold, inconsistent versions regarding vouchers and delivery, and the genuineness of the transaction - and noted that Respondent No.5 has filed an appeal before the CIT(A) which is competent to adjudicate those factual issues. Given the pendency of that statutory appeal and the availability of the alternate remedy, the Court declined to exercise its writ jurisdiction under Article 226 to decide the merits of the claim for release of the seized gold at this stage. The Court therefore refused to entertain the petition insofar as it sought substantive relief on the ownership and release of the bullion. [Paras 18, 19]

Writ petition not entertained on merits; Court declined to interfere in view of the pending appeal before the CIT(A).

Section 132B application for release of seized property - determination of ownership and genuineness of transaction - expeditious disposal of pending appeal - Whether the matter should be remitted to the CIT(A) for expeditious adjudication and consequential determination of the Section 132B release application. - HELD THAT: - Although the Court did not decide the merits of the Section 132B application, it recognised the prolonged custody of the seized gold since 28.11.2016 and the existence of an unresolved statutory appeal by Respondent No.5 before the CIT(A). In the interest of justice, the Court directed the CIT(A), which is the competent forum to examine the factual disputes and legal consequences, to decide the appeal expeditiously. The direction mandates disposal of the appeal within three months from receipt of a copy of the order, thereby enabling the appropriate forum to address ownership, genuineness of the transaction and any consequences for the Section 132B application. [Paras 19, 20]

Matter left to the CIT(A) for adjudication; CIT(A) directed to decide the appeal within three months and thereby enable determination of the Section 132B release claim.

Final Conclusion: The High Court declined to adjudicate the merits of the petition in view of the pending appeal before the Commissioner of Income Tax (Appeals) and directed the CIT(A) to decide that appeal expeditiously, within three months from receipt of a copy of this order; the writ petition is disposed of accordingly.

Certificate for deduction at source under Section 197 - mandatory application of Rule 28AA for determining existing and estimated tax liability - judicial review limited to the decision making process (non application of mind / patent illegality) - revisional remedy under Section 264 and the 'Caesar to Caesar' principle where approval is by the Commissioner - approval by the Commissioner on the TRACES portal precludes revision by the same authority

Revisional remedy under Section 264 and the 'Caesar to Caesar' principle where approval is by the Commissioner - approval by the Commissioner on the TRACES portal precludes revision by the same authority - Whether the writ petition was maintainable despite the availability of revision under Section 264. - HELD THAT: - The Court held that the writ petition was maintainable because the impugned order under Section 197 had been passed after approval from the Commissioner (as recorded in the impugned reasons and effected via the TRACES portal). Where the Commissioner himself has given prior approval, the revisional remedy under Section 264 would amount to review by the same authority that has already applied its mind, i.e., an appeal from 'Caesar to Caesar', and hence is not an efficacious alternate remedy. The Court relied on the statutory scheme and authorities holding that previous approval by a higher authority indicates application of mind and removes the availability of revision by that same authority. [Paras 18, 19, 20, 21, 22]

Writ petition is maintainable because the impugned Section 197 order was passed after Commissioner's approval and revision under Section 264 would be an ineffective remedy.

Mandatory application of Rule 28AA for determining existing and estimated tax liability - certificate for deduction at source under Section 197 - judicial review limited to the decision making process (non application of mind / patent illegality) - Whether the assessing officer followed the mandated procedure under Rule 28AA in fixing lower TDS rates and whether the decision making process was vitiated. - HELD THAT: - The Court analysed Rule 28AA which prescribes mandatory parameters (tax on estimated income, tax on assessed/returned/estimated income of last four years, existing liabilities, advance tax/TDS/TCS) to be considered when determining existing and estimated liability. The Court found no reference in the impugned reasons to any computation under Rule 28AA and noted that despite an opportunity to file such computation the Department did not produce it. Since the assessing officer did not carry out or demonstrate the mandatory computations under Rule 28AA, there was non application of mind in the decision making process. The Court emphasised that administrative authorities are bound to follow the rules and standards they themselves have prescribed, and failure to do so renders the decision vulnerable to quashing on grounds of illegality in process. [Paras 25, 26, 27, 28, 29]

Impugned order and reasons quashed for failure to apply Rule 28AA and non application of mind; decision making process held contrary to law.

Certificate for deduction at source under Section 197 - judicial review limited to the decision making process (non application of mind / patent illegality) - Relief to be granted pending fresh decision and scope of further proceedings. - HELD THAT: - The Court remanded the matter to the assessing officer for fresh determination in accordance with law and directed that the fresh determination be completed expeditiously, preferably within two weeks. As an interim measure, the Court directed that the petitioner be given the benefit of the revised TDS rates prescribed for FY 2019 20 (as revised by the Commissioner on 7th November, 2019) read with the 25% rebate announced by the Ministry of Finance on account of the COVID 19 crisis (Press Release dated 13th May, 2020). The Court declined to direct the petitioner to file a fresh application because the petitioner had not contested the nature of services and the respondent had already recorded that the services fall within fees for technical services. [Paras 23, 30, 31, 32, 33]

Matter remanded for fresh determination in accordance with Rule 28AA; interim direction to apply FY 2019 20 revised rates with statutory 25% COVID 19 rebate to the petitioner.

Final Conclusion: The writ petition was allowed: the Section 197 order (FY 2020-21) was quashed for failure to comply with Rule 28AA and non application of mind; the matter is remanded for fresh decision in accordance with law within a short timeframe; meanwhile the petitioner is entitled to the benefit of the revised FY 2019 20 TDS rates adjusted by the 25% COVID 19 rebate.

IT enabled services - deduction under section 10A - perverse finding

IT enabled services - deduction under section 10A - perverse finding - The Tribunal's conclusion that the assessee's human resources services constitute IT enabled services and that the assessee is entitled to deduction under section 10A for Assessment Year 2007-08 was upheld. - HELD THAT: - The Court noted that the substantial questions of law raised by the revenue were answered against the revenue by an earlier judgment of this Court dated 12.11.2020 in ITA No. 544/2013. The revenue did not dispute that precedent. Relying on the reasoning recorded in that earlier judgment, the Court held that the Tribunal's characterization of the assessee's activity as IT enabled services and the consequent entitlement to deduction under section 10A was correct and not perverse. No separate re-examination of the facts was undertaken because the admitted legal position in the earlier decision disposed of the substantial questions framed in the present appeal.

Appeal dismissed; substantial questions of law answered against the revenue and in favour of the assessee.

Final Conclusion: The revenue's appeal under Section 260-A in respect of Assessment Year 2007-08 is dismissed; the Tribunal's finding that the assessee's human resources activity amounts to IT enabled services and that the assessee is entitled to deduction under section 10A is affirmed in accordance with the earlier decision of this Court.

Change of method of accounting - percentage completion method - project completion method - bona fide change in accounting method - consistency in accounting policy - deduction under section 80IB(10)

Change of method of accounting - percentage completion method - project completion method - bona fide change in accounting method - consistency in accounting policy - Whether the Assessing Officer was justified in rejecting the assessee's switch from the Percentage completion method to the Project completion method, and making an addition by reverting to the earlier method. - HELD THAT: - The Tribunal held that both the Percentage completion method and the Project completion method are recognised accounting methods for determining income from construction projects, the difference being one of timing of profit recognition. The assessee had initially followed the Percentage completion method but, owing to unforeseen circumstances affecting project progress, filed a revised return adopting the Project completion method and thereafter continued to follow that method in subsequent years. The Revenue did not challenge the validity of the revised return nor show that the assessee failed to apply the changed method consistently in later years. In these circumstances the change was held to be bona fide and permissible; the shifting of profit between years inherent in the two methods does not alter the aggregate income but only its timing. Accordingly, the Commissioner (Appeals) was correct in deleting the addition made by the Assessing Officer who had unilaterally reverted to the Percentage completion method. [Paras 4, 5, 6]

Addition deleted; appellate order upholding the assessee's change of accounting method affirmed and Revenue's appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the Commissioner (Appeals)'s deletion of the addition and accepting the assessee's bona fide change from the Percentage completion method to the Project completion method for AY 2006-07.

Re-opening of assessment under Section 147/notice under Section 148 - reason to believe - jurisdiction of assessing officer and estoppel by filing return - provisional assessment subject to District Valuation Officer (DVO) report - valuation for capital gains under Section 50C and reliance on DVO report - receipt of consideration pursuant to prior agreement to sell - principle of natural justice - opportunity to be heard

Jurisdiction of assessing officer and estoppel by filing return - re-opening of assessment under Section 147/notice under Section 148 - Validity of notice issued under Section 148 by ITO Ward 2(3) and assumption of jurisdiction for reassessment. - HELD THAT: - The Tribunal accepted the finding that the assessee had himself filed the original return under ITO Ward 2(3), Jaipur and thereby submitted to the jurisdiction of that officer; the case was subsequently transferred to Ward 2(2) and the assessee participated in proceedings without raising objection. On the statutory bar in Section 124(3) and on relevant precedent, the assessee was estopped from challenging jurisdiction after service of notice/ completion of assessment. The Tribunal therefore concurred with and declined to disturb the CIT(A)'s conclusion on territorial jurisdiction. [Paras 8, 9, 10]

Grounds challenging territorial jurisdiction of notice under Section 148 are dismissed; the assumption of jurisdiction by ITO Ward 2(3) is held valid.

Reason to believe - re-opening of assessment under Section 147/notice under Section 148 - Validity of the reasons recorded for initiating reassessment under Section 147. - HELD THAT: - Although the Tribunal upheld territorial jurisdiction, it found the reasons recorded by ITO Ward 2(3) to be based on incorrect and non existing facts - specifically, the recording that capital gains were not declared when the return in fact disclosed capital gains - demonstrating non application of mind. The Tribunal held that a valid 'reason to believe' must rest on a rational nexus to tangible material and cannot be founded on erroneous facts or mere suspicion; on that basis the assumption of jurisdiction under Section 147 was quashed and proceedings under Section 147 set aside. [Paras 13, 14, 15]

Proceedings initiated under Section 147 are quashed for lack of valid reasons to believe.

Provisional assessment subject to District Valuation Officer (DVO) report - valuation for capital gains under Section 50C and reliance on DVO report - receipt of consideration pursuant to prior agreement to sell - principle of natural justice - opportunity to be heard - Validity of assessment insofar as it was made provisionally subject to DVO report and the correctness of addition made under Section 50C relying on the DVO report. - HELD THAT: - The Tribunal held that the Income tax Act does not permit a provisional assessment conditioned on receipt of a DVO report and relied on the Gujarat High Court authority to that effect; an assessment cannot be left incomplete and later modified by the DVO reference to extend limitation indirectly. The DVO report received post assessment merely adopted stamp duty values without determining fair value, did not address the assessee's objections (including existence of prior agreements and disputed title), relied mechanically on stamp registration values and did not apply valuation methodology or confront documentary objections. The Tribunal also found evidence on record of prior agreements and part consideration received in FY 2004 05/2005 06, and held that mere receipt of part consideration in cash (prior to the proviso to Section 50C) and doubts about the agreement could not sustain an addition. Accordingly, the Tribunal set aside the CIT(A)'s reliance on the DVO report and directed the AO to compute capital gains adopting the stamp values prevailing in FY 2004 05. [Paras 18, 19, 21, 22, 23]

Assessment provisionally made subject to DVO report is set aside; DVO report held inadequate to sustain addition under Section 50C. AO directed to compute capital gains adopting stamp valuation of FY 2004 05.

Principle of natural justice - opportunity to be heard - Claim for relief against interest under Sections 234A, 234B and 234C. - HELD THAT: - The Tribunal recorded that the challenge to interest is consequential upon the decision on assessment and additions and does not require separate adjudication at this stage. [Paras 24]

Ground challenging interest is consequential; no separate adjudication is undertaken.

Final Conclusion: The appeal is allowed in part. Challenges to territorial jurisdiction of the notice are dismissed, but reassessment proceedings under Section 147 are quashed because the reasons recorded were founded on incorrect/non existing facts. The assessment process premised on a provisional DVO reference is set aside; the DVO report was held inadequate to justify addition under Section 50C, and the AO is directed to compute capital gains adopting the stamp values of FY 2004 05. The claim on interest is left consequential.

Mandatory nature of notice under section 143(2) - Reassessment proceedings initiated under section 147/148 - Non-issuance of notice under section 143(2) vitiates reassessment - Return filed in response to notice under section 148 deemed final if no notice under section 143(2) - Assessment void ab initio - Reliance on CBDT Circular No.549

Mandatory nature of notice under section 143(2) - Reassessment proceedings initiated under section 147/148 - Non-issuance of notice under section 143(2) vitiates reassessment - Return filed in response to notice under section 148 deemed final if no notice under section 143(2) - Assessment void ab initio - Reliance on CBDT Circular No.549 - Validity of reassessment completed under sections 147/148 where the assessee filed a return in response to notice under section 148 but no notice under section 143(2) was issued before completion of reassessment. - HELD THAT: - The Tribunal found on perusal of the record that no notice under section 143(2) was issued or shown to have been served upon the assessee after the return was filed in response to the section 148 notice. Reliance was placed on CBDT Circular No.549 and judicial authorities including the decisions in ACIT v. Hotel Blue Moon and subsequent High Court and Tribunal decisions which hold that issuance of notice under section 143(2) is mandatory where the assessing officer takes cognizance of a return and proposes to proceed to scrutiny; omission to issue such notice is not a curable procedural irregularity. The Tribunal also noted precedent of coordinate Benches applying the same principle to reassessment proceedings under section 147/148 and observed that where no notice under section 143(2) is issued within the stipulated period the return may be treated as final and scrutiny proceedings stand terminated. Having found absence of any record of issuance of a section 143(2) notice and no entry in the assessment order or order-sheet to that effect, the Tribunal concluded that the reassessment proceedings were vitiated and could not be sustained. [Paras 8, 9, 10, 11, 14]

Reassessment proceedings under sections 147/148 were quashed as void ab initio for failure to issue the mandatory notice under section 143(2) after the return was filed.

Final Conclusion: The reassessment completed for AY 2010-11 under sections 147/148 was quashed as void ab initio because the assessing officer did not issue the mandatory notice under section 143(2) after the assessee filed a return in response to the section 148 notice; appeal allowed and other grounds left undecided.

Disallowance of expenses attributable to exempt dividend income under section 14A - computation mechanism under Rule 8D(2)(iii) - proportionate disallowance having regard to period of holding - disallowance for computation of book profit under Clause 'f' of Explanation to section 115JB(2) - cost of acquisition for depreciation where assets transferred by holding company and subsequent withdrawal of exemption under section 47A with consequence under section 49(3)

Disallowance of expenses attributable to exempt dividend income under section 14A - computation mechanism under Rule 8D(2)(iii) - proportionate disallowance having regard to period of holding - Appropriate quantum of disallowance under section 14A in the assessment completed under normal provisions - HELD THAT: - The assessee earned dividend income which was claimed exempt and had filed a working during assessment attributing part of salary and administrative costs to the investment activity, arriving at a disallowance of Rs. 99,600. The AO, invoking Rule 8D(2)(iii), computed a larger disallowance. The Tribunal noted that the relevant investment which yielded the dividend was held for only nine days and that applying the computation mechanism of Rule 8D(2)(iii) for the whole year would lead to an absurd result in the peculiar facts of the case. Reliance placed by the assessee on the jurisdictional High Court decision in Pr. Commissioner of Income Tax v. Lee & Muirhead Pvt. Ltd. (as relied upon before the Tribunal) supports that Rule 8D should not be applied blindly where expenses attributable to exempt income are negligible and investments were temporary parking of funds. Balancing these considerations, the Tribunal directed that the AO adopt the assessee's working of Rs. 99,600 as the disallowance under section 14A, treating that amount as representing expenses attributable to the investment activity (and effectively attributable to the nine day holding), thereby meeting the ends of justice in the facts of the case. [Paras 3]

Disallowance under section 14A directed at Rs. 99,600 to be adopted by the AO (treatable as expenses attributable to the nine day holding).

Disallowance for computation of book profit under Clause 'f' of Explanation to section 115JB(2) - inapplicability of mechanical application of Rule 8D(2) for book profit computation - Whether the disallowance computed under section 14A/Rule 8D as adopted by the AO should be applied for computing book profit under Clause 'f' of Explanation to section 115JB(2) - HELD THAT: - For computation of book profits under section 115JB, the Special Bench of the Tribunal in Vireet Investments has held that the mechanical computation under Rule 8D(2) is not to be applied for Clause 'f' of the Explanation, although some disallowance is required. Having regard to that precedent and the Tribunal's conclusion on the normal provisions that an appropriate disallowance is Rs. 99,600, the Tribunal held that the same disallowance should be applied under Clause 'f' of the Explanation to section 115JB(2) for the purpose of computing book profits and directed the AO accordingly. [Paras 4]

Disallowance of Rs. 99,600 to be made under Clause 'f' of Explanation to section 115JB(2) for computation of book profit.

Cost of acquisition for depreciation where assets transferred by holding company and subsequent withdrawal of exemption under section 47A with consequence under section 49(3) - Whether depreciation on second hand plant and machinery acquired from the holding company should be computed on the transferred WDV or on actual cost in the hands of the assessee where the subsidiary status ceased within the relevant period - HELD THAT: - The Tribunal examined the earlier adjudication in the assessee's own case for A.Y.2007 08 and relevant precedents including the Essar Oil line of decisions, and the consequence of section 47A and section 49(3). Where exemption under section 47 invoked at the time of transfer is withdrawn because the transferee ceased to be a 100% subsidiary within the statutory period, section 49(3) mandates that the cost of acquisition in the hands of the transferee shall be the price actually paid. The Tribunal noted that the issue had been decided in the assessee's favour earlier and that the jurisdictional High Court had affirmed the same in a related appeal; on that basis, and following those precedents, the Tribunal found no infirmity in the CIT(A)'s direction to allow depreciation on the revised actual cost and dismissed the revenue's ground. [Paras 5]

Revenue's ground dismissed; depreciation to be allowed on actual cost as determined by application of section 47A and section 49(3) consistent with earlier decisions.

Final Conclusion: Both appeals are partly allowed. For A.Y.2014 15 the disallowance under section 14A is directed at Rs. 99,600 (to be treated as attributable to the short holding period) and the same amount is to be disallowed under Clause 'f' of the Explanation to section 115JB(2) for book profit computation; the revenue's challenge to the allowance of depreciation on the revised cost of assets transferred from the holding company is dismissed, the CIT(A)'s order in that regard being upheld.

Transfer pricing comparables selection - functional comparability - exclusion of comparables due to demerger/extra ordinary event - comparability filters (R&D, export turnover, employee cost) - remand for fresh determination of Arms Length Price - disallowance under section 40(a)(ia) - classification of leased line/data link charges as royalty/fees for technical or professional services - retrospective amendment/Explanation 6 to section 9(1)(vi) and its non application at the relevant time - lex non cogit ad impossibilia (impossibility of compliance with retrospective law)

Transfer pricing comparables selection - functional comparability - comparability filters (R&D, export turnover, employee cost) - exclusion of comparables due to demerger/extra ordinary event - remand for fresh determination of Arms Length Price - Certain companies included in the TPO/AO's final set of comparables are not functionally comparable and must be excluded; matter remitted to AO/TPO to re determine ALP after exclusion. - HELD THAT: - The Tribunal examined the assessee's documentary material (annual reports, notes to accounts and auditors' statements) and accepted the assessee's contentions that: (i) VAMA Industries Ltd.'s software segment mainly comprises engineering/product design services and fails the TPO's own R&D and export filters, rendering it functionally and quantitatively non comparable to the assessee (para 6); (ii) Cybermate Infotek Ltd. is prima facie a software product company (evidenced by product listings, work in progress and high capitalised intangible assets) and not a manpower driven software development services provider, hence not functionally comparable (para 9); (iii) Infobeans Systems India Pvt. Ltd. had undergone a demerger/demerger related restatement of accounts with retrospective effect, an extraordinary corporate event affecting comparability, and therefore should be excluded (paras 11-13); and (iv) Cybercom Datamatics Information Solutions Ltd.'s principal objects and disclosures demonstrate it to be a consulting/technical services provider, not comparable to the assessee's software development services (para 16). Having directed exclusion of these companies, the Tribunal remitted the matter to the AO/TPO to exclude them and freshly determine the assessee's ALP (para 17). The Tribunal treated these grounds as allowed for statistical purposes and ordered fresh computation rather than deciding all competing comparability filters or alternative comparables on the merits. [Paras 6, 9, 13, 16, 17]

VAMA Industries Ltd., Cybermate Infotek Ltd., Infobeans Systems India Pvt. Ltd. and Cybercom Datamatics Information Solutions Ltd. are to be excluded from the final comparable set; matter remitted to AO/TPO to re compute ALP after exclusion.

Disallowance under section 40(a)(ia) - classification of leased line/data link charges as royalty/fees for technical or professional services - retrospective amendment/Explanation 6 to section 9(1)(vi) and its non application at the relevant time - lex non cogit ad impossibilia (impossibility of compliance with retrospective law) - Disallowance under section 40(a)(ia) for failure to deduct TDS on leased line/data link charges deleted; assessee not liable to deduct TDS under section 194J on the facts of the year under consideration. - HELD THAT: - The Tribunal reviewed precedent relied on by the assessee and noted that at the relevant time the legal position did not impose an obligation on the assessee to treat leased line/data link charges as 'royalty' or fees under section 194J. The Tribunal found force in earlier decisions holding that retrospective amendments (including the Explanation deeming certain transmissions to be 'process') cannot be invoked to fasten liability to deduct TDS for an earlier year and applied the maxim lex non cogit ad impossibilia. In consequence, the assessee could not be held to be in default for non deduction of TDS on leased line charges and the disallowance under section 40(a)(ia) was deleted (paras 21-24). [Paras 18, 21, 24, 25]

Disallowance under section 40(a)(ia) for non deduction of TDS on leased line/data link charges is deleted and the assessee's ground on this point is allowed.

Final Conclusion: The appeal is partly allowed: the Tribunal has directed exclusion of specified companies from the comparable set (VAMA Industries Ltd., Cybermate Infotek Ltd., Infobeans Systems India Pvt. Ltd. and Cybercom Datamatics Information Solutions Ltd.) and remitted the transfer pricing matter to the AO/TPO for fresh determination of ALP; independently, the disallowance under section 40(a)(ia) for non deduction of TDS on leased line/data link charges is deleted.

Validity of notice under section 148 where approval by Additional Commissioner qualifies as Joint Commissioner under the definition clause - Scope of sanction for issue of notice under section 151(2) insofar as approval must be given by the competent authority - Burden on assessee to explain source of investments and unexplained investment additions under section 69 - Remand for limited verification of factual claim regarding investment in Indira Vikas Patra - Acceptance of source shown by assessee and deletion of addition where source is satisfactorily established

Validity of notice under section 148 where approval by Additional Commissioner qualifies as Joint Commissioner under the definition clause - Scope of sanction for issue of notice under section 151(2) insofar as approval must be given by the competent authority - Whether notice issued under section 148 is invalid because approval was given by Additional Commissioner instead of Joint Commissioner. - HELD THAT: - The Tribunal examined the definition in clause 28(C) of section 2 which treats a person appointed as an Additional Commissioner of Income-tax as a Joint Commissioner for the purposes of the Act. The statutory scheme in section 151(2) requires satisfaction of the (Joint) Commissioner on recorded reasons before a notice under section 148 is issued after the four year period. Given the definition, approval obtained from the Additional Commissioner falls within the meaning of 'Joint Commissioner' for the purpose of sanctioning the notice. The assessee's objection that only a Joint Commissioner (and not an Additional Commissioner) could grant approval is therefore unsustainable. [Paras 7]

Assessee's contention rejected; notice under section 148 held valid as approval by Additional Commissioner is within the definition of Joint Commissioner.

Remand for limited verification of factual claim regarding investment in Indira Vikas Patra - Burden on assessee to explain source of investments and unexplained investment additions under section 69 - Whether the addition of Rs. 1,98,847 as unexplained opening capital should stand in view of the assessee's claim of prior investment in Indira Vikas Patra (IVP) of Rs. 1,60,000. - HELD THAT: - The assessee produced documents asserting investment of Rs. 1,60,000 in Indira Vikas Patra in 1995 and maturity proceeds received in 2001, and the AR pointed to taxation of the interest component in assessment year 2002 03. The Tribunal found that this contention raised a factual issue requiring verification by the Assessing Officer. Accordingly the matter was set aside to enable the AO to verify whether the IVP investment of Rs. 1,60,000 was indeed made in 1995 and whether its interest/maturity proceeds were brought to tax in AY 2002 03; if proved, that portion of the opening capital should be accepted and not added back under section 69. [Paras 12]

Issue remanded to the Assessing Officer for limited purpose of verification of the IVP investment of Rs. 1,60,000; remaining small balance confirmed.

Acceptance of source shown by assessee and deletion of addition where source is satisfactorily established - Burden on assessee to explain source of investments and unexplained investment additions under section 69 - Whether the addition of Rs. 1,50,000 as unexplained investment in a flat, allegedly paid by the assessee's mother, was sustainable. - HELD THAT: - The Assessing Officer recorded that Rs. 1,50,000 was paid by draft by the mother to the builder and the assessee consistently maintained that the amount was given by her mother. The Tribunal held that once the assessee showed the source (payment by the mother to the builder), she discharged her burden. Any further doubt about the mother's source or creditworthiness could have been pursued by the AO against the mother, which was not done. On this basis the addition could not be sustained. [Paras 18]

Addition of Rs. 1,50,000 deleted; ground allowed.

Burden on assessee to explain source of investments and unexplained investment additions under section 69 - Whether additions of small amounts (Rs. 11,656 out of Rs. 1,25,000 and Rs. 35,000) should be pressed by the assessee. - HELD THAT: - The assessee did not press these grounds on account of the smallness of the amounts. The Tribunal noted the non-pressing of these grounds and accordingly did not entertain them on merits. [Paras 13, 14]

Grounds dismissed as not pressed by the assessee.

Final Conclusion: The appeal is partly allowed: the challenge to the reopening notice is dismissed; the addition of Rs. 1,50,000 is deleted; the addition relating to alleged IVP investment of Rs. 1,60,000 is remitted to the Assessing Officer for limited verification; other small amount grounds are dismissed/not pressed. The result is partly in favour of the assessee for statistical purposes.

Deduction under section 80P(2)(d) of the Income-tax Act - Characterisation of a co-operative bank as a "co-operative society" for s.80P(2)(d) - Effect of insertion of sub-section (4) to section 80P on investments with co-operative banks - Precedent rule preferring a view favourable to the assessee where non jurisdictional High Court decisions conflict

Deduction under section 80P(2)(d) of the Income-tax Act - Characterisation of a co-operative bank as a "co-operative society" for s.80P(2)(d) - Effect of insertion of sub-section (4) to section 80P on investments with co-operative banks - Precedent rule preferring a view favourable to the assessee where non jurisdictional High Court decisions conflict - Interest income earned by a co-operative society from deposits with a co-operative bank is eligible for deduction under section 80P(2)(d) of the Act. - HELD THAT: - The Tribunal examined the statutory language of section 80P(2)(d) and judicial authorities. It accepted the reasoning in the Tribunal's earlier decision in Kaliandas Udyog Bhavan Premises Co-op Society Ltd. that s.80P(2)(d) entitles deduction for interest or dividends derived by a co-operative society from investments with any other co-operative society. While recognising that sub section (4) to s.80P (inserted w.e.f. 01.04.2007) excludes certain co operative banks from claiming s.80P benefits for themselves, the Tribunal held that this exclusion does not prevent a co operative society from claiming deduction under s.80P(2)(d) in respect of interest earned on investments made with a co operative bank, because a co operative bank continues to fall within the statutory definition of "co-operative society". The Tribunal noted conflicting High Court decisions on the point, and applying the rule in K. Subramanian v. Siemens India Ltd., resolved the conflict in favour of the assessee by following the decisions favourable to the assessee (including the Karnataka and Gujarat High Courts and relevant Tribunal precedents) and distinguishing authorities relied on by the Revenue as not being on point or being factually distinguishable. On that basis the Tribunal allowed the claim of deduction. [Paras 4, 7]

Deduction under section 80P(2)(d) is allowable in respect of interest income earned by the co operative society from deposits with co operative banks; the assessee's appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal for assessment year 2015-16, holding that interest income earned by the co operative society from deposits with co operative banks qualifies for deduction under section 80P(2)(d), and resolved conflicting authorities in favour of the assessee.

Unexplained cash credit under section 68 - admission of additional evidence in appellate proceedings - remand to Assessing Officer for de novo adjudication - disallowance of interest consequential to addition - treatment of interest from partners as business income versus income from other sources - principle of consistency in assessment treatment

Unexplained cash credit under section 68 - admission of additional evidence in appellate proceedings - remand to Assessing Officer for de novo adjudication - disallowance of interest consequential to addition - Addition of unsecured loans as unexplained cash credits and consequential disallowance of interest restored to Assessing Officer for fresh adjudication after admission of additional evidence. - HELD THAT: - The Tribunal examined additional documents filed by the assessee in respect of 16 creditors (PANs, addresses, bank statements showing cheque receipts, confirmations, ITRs, Form 15G, loan repayment details and assessee's bank entries) which were not produced before the Assessing Officer. Finding that these documents go to the root of the controversy and could not be obtained earlier, the Tribunal in the interest of justice admitted the additional evidence. As the evidence was not before the Assessing Officer, the Tribunal held that the matter cannot be finally decided at the appellate stage and directed de novo adjudication by the Assessing Officer, with an opportunity to the assessee to file the admitted documents before him. The restoration covers both the addition made under the unexplained cash credit head and the consequential disallowance of interest, leaving the Assessing Officer to determine identity, genuineness and creditworthiness afresh in accordance with law. [Paras 8]

Admitted additional evidence and restored the issue of addition under section 68 and consequential disallowance of interest to the Assessing Officer for fresh adjudication after granting opportunity to the assessee.

Treatment of interest from partners as business income versus income from other sources - principle of consistency in assessment treatment - Whether interest received from partners is taxable as income from other sources or to be adjusted against work in progress as business income; Tribunal directed deletion of the addition treating it as income from other sources. - HELD THAT: - The Tribunal examined the factual and accounting treatment across adjacent assessment years and the acceptance by revenue of the assessee's treatment in A.Y. 2009-10 (assessment completed under section 143(3)) and by the CIT(A) for A.Y. 2011-12, where interest from partners was treated as reducing closing work in progress. Observing that the assessee consistently reduced interest credited by partners from work in progress and that such treatment was accepted by the revenue in the immediately preceding and succeeding years, the Tribunal applied the principle of consistency. In view of these accepted treatments and the reasoning recorded by the CIT(A) in the related year that the projects were separate and interest should be adjusted against the relevant project's WIP, the Tribunal found no reason to treat the interest as an independent source taxable under income from other sources for A.Y. 2010-11. [Paras 13, 14]

Directed the Assessing Officer to delete the addition treating interest from partners as income from other sources and allow the interest to be adjusted against closing work in progress in accordance with the principle of consistency.

Final Conclusion: The appeal is partly allowed: (i) additions made under section 68 in respect of 16 creditors and the consequential disallowance of interest are remanded to the Assessing Officer for fresh adjudication after allowing the assessee to produce the admitted additional evidence; and (ii) the addition treating interest from partners as income from other sources for A.Y: 2010-11 is deleted and the interest is to be adjusted against work in progress as held by the Tribunal.

Deduction under section 10A - Voluntary Transfer Pricing Adjustment - Prior period income-expenses matching - Remand for factual verification - Consequential adjustment in subsequent assessment year

Deduction under section 10A - Voluntary Transfer Pricing Adjustment - Deduction under section 10A in respect of a voluntary transfer pricing adjustment offered by the assessee. - HELD THAT: - The Tribunal held in principle that deduction under section 10A is allowable where the assessee itself has offered the amount as a voluntary transfer pricing adjustment in the revised return. The Tribunal noted that the TPO had accepted that the assessee made a voluntary TP adjustment and that prior tribunal authority in the assessee's own case supported eligibility for deduction of a voluntary TP adjustment. Accordingly, the legal stance adopted is that a voluntary TP adjustment offered by the assessee can form the basis for claiming deduction under section 10A, subject to factual verification on related prior period expenses. [Paras 4]

In principle, the voluntary TP adjustment offered by the assessee is eligible for deduction under section 10A.

Prior period income-expenses matching - Remand for factual verification - Consequential adjustment in subsequent assessment year - Whether the prior period expenses reported in the audited accounts are related to the prior period income claimed and the consequential treatment if they are related. - HELD THAT: - The Tribunal found that it was not clear on the record whether prior period expenses shown in Schedule 8 of the audited accounts for the relevant year are related to the prior period income which has been offered as a voluntary TP adjustment. The Tribunal recorded absence of any finding by the AO or the CIT(A) on this factual linkage and the unavailability of details before the Bench. For this reason, the Tribunal remanded the matter to the assessing officer to examine whether any or all of the reported prior period expenses relate to the prior period income offered in the present year. If any part or the whole of such expenses are found to be related, only the net amount remaining after deducting the related expenses shall be considered eligible for deduction under section 10A, and the related expenses should be disallowed in the subsequent assessment year to avoid double allowance. If no part of the expenses is found to be related, the entire prior period income offered shall be allowed for deduction under section 10A and no consequential adjustment for the subsequent assessment year will arise. The AO is directed to afford the assessee adequate opportunity to produce material on this factual aspect. [Paras 4]

Matter remanded to the AO for factual verification of linkage between the reported prior period expenses and the prior period income; eligibility for section 10A deduction to be determined accordingly, with consequential directions for the subsequent assessment year if necessary.

Final Conclusion: The appeal is allowed for statistical purposes: the Tribunal accepts in principle that the voluntary transfer pricing adjustment is eligible for deduction under section 10A but remands the matter to the AO to verify whether reported prior period expenses relate to that income; eligibility and any consequential adjustment in the subsequent assessment year are to be determined after such verification.

Bailee's particular lien - right of retention and appropriation of payments - characterisation of payment/attendant circumstances indicating appropriation - general lien under Section 171 of the Indian Contract Act, 1872 - prima facie case, balance of convenience and irreparable injury for grant of mandatory injunction

Characterisation of payment/attendant circumstances indicating appropriation - right of retention and appropriation of payments - Whether the payment of Rs. 4,35,000/- on 30th May, 2020 was made towards sea freight for the second consignment and whether defendants were justified in appropriating that payment against past dues. - HELD THAT: - The court examined the long-standing on-account practice between the parties and contemporaneous WhatsApp communications which showed an assurance by the defendants that receipt of Rs. 4,35,000/- would lead to release of the three bills of lading. The invoices for the second consignment were raised unusually late (on 17th June, 2020), which lent weight to the plaintiffs' case that the payment was intended for and accepted as freight for the second consignment. There is no evidence that the defendants gave prior notice of appropriation of the payment towards other outstanding dues. In those circumstances the payment must be treated as having been made towards the freight of the second consignment and the defendants were not justified in appropriating it against other dues. [Paras 20, 21, 22, 25]

Rs. 4,35,000/- paid on 30th May, 2020 were towards sea freight for the second consignment and defendants were not justified in adjusting it against past dues.

Bailee's particular lien - Whether the defendants, as freight forwarding agents/bailees, had a right to retain the shipment under the bailee's particular lien. - HELD THAT: - Section 170 of the Indian Contract Act confers a particular lien on a bailee who has rendered labour or skill in respect of the goods, permitting retention until due remuneration is received. Applying the facts, the court found that the defendants' conduct and the communications indicated the payment was towards freight for the second consignment and that the defendants' subsequent refusal to release the bills was not a lawful exercise of a particular lien in respect of that consignment. The court therefore rejected the defendants' plea that they validly exercised a bailee's particular lien to withhold the bills. [Paras 13, 21, 22, 25]

Defendants were not entitled to retain the goods of the second consignment by way of a bailee's particular lien in respect of the sea freight that had been paid.

General lien under Section 171 of the Indian Contract Act, 1872 - Whether the defendants were entitled to exercise a general lien under Section 171 of the Indian Contract Act, 1872 to retain the goods as security for a general balance of account. - HELD THAT: - Section 171 grants a statutory general lien only to specified categories (bankers, factors, wharf-ingers, attorneys of a High Court and policy-brokers) unless there is an express contract to the contrary. The court observed that the defendants do not fall within the statutory categories and the pleadings do not disclose any express contractual right enabling a general lien. Reliance was placed on authoritative exposition of Section 171 to hold that absent an express contract conferring such a right, the defendants could not claim a general lien. [Paras 23, 24, 25]

Defendants were not entitled to exercise a general lien under Section 171 and had no contractual right on record to retain the goods as security for a general balance.

Prima facie case, balance of convenience and irreparable injury for grant of mandatory injunction - Whether plaintiffs established a prima facie case and whether the balance of convenience and risk of irreparable loss favoured grant of the mandatory relief to release the bills of lading. - HELD THAT: - The court considered the perishable nature of the cargo (paper with limited life), the fact that sea freight for the second consignment had been paid, and the evidence that buyers had cancelled orders due to detention of cargo. Given the findings that the payment was for freight and that the defendants could not lawfully retain the goods, the court concluded that plaintiffs had established a prima facie case and that the balance of convenience tilted in their favour. The potential loss to plaintiffs from non-release of the cargo and the purpose of the suit would be frustrated if the injunction were refused, satisfying the requirement for grant of mandatory relief. [Paras 22, 25, 26]

Plaintiffs made out a prima facie case, balance of convenience favoured them and they would suffer irreparable loss if injunction were refused; mandatory relief to release the bills of lading was warranted.

Final Conclusion: Appeal allowed; impugned order dated 10th August, 2020 quashed and set aside; plaintiffs' prayer for mandatory relief granted and defendants directed to release the bills of lading immediately; as appeal disposed, connected civil application stands disposed.

Provisional release of seized goods - bank guarantee as condition for release - bond for full value of seized goods - compliance with appellate and Supreme Court directions - contempt for non-compliance of judicial order

Compliance with appellate and Supreme Court directions - bank guarantee as condition for release - Petitioner to furnish a Bank Guarantee of Rs. 15 Crores as directed by the Supreme Court for provisional release of seized goods and respondents to release the goods on satisfaction of that condition and the stipulation of a bond. - HELD THAT: - The Supreme Court modified the High Court's order by enhancing the quantum of the bank guarantee to Rs. 15 Crores; consequently, the petitioner is required to furnish a bank guarantee in that sum to the satisfaction of the competent authority. Upon furnishing the bank guarantee and the requisite bond as directed by CESTAT, the competent authority is directed to forthwith release the seized goods provisionally in terms of the CESTAT order as modified. The High Court recorded that the original bank guarantees earlier furnished are available in the respondent's office and can be collected by the petitioner, and it left it open for the petitioner to furnish the enhanced bank guarantee at the office of the competent authority identified for this purpose. [Paras 5, 6, 8, 9, 10]

Contempt petition disposed of by directing compliance with the Supreme Court order: petitioner to furnish BG of Rs. 15 Crores and requisite bond, and on satisfaction the competent authority shall forthwith release the seized goods provisionally.

Provisional release of seized goods - bond for full value of seized goods - Release of seized goods is conditional on furnishing a bond for the full value of the goods in addition to the enhanced bank guarantee. - HELD THAT: - The CESTAT had allowed provisional release subject to conditions including a bond for full value of the seized goods and a bank guarantee with an autorenewal clause. The higher courts upheld the requirement of a bond and specified the quantum of the bank guarantee (enhanced by the Supreme Court). The High Court directed that upon fulfilment of these stipulated conditions by the petitioner, the revenue authority shall release the detained/seized goods forthwith or within four working days of compliance. [Paras 1, 2, 8, 9]

Release shall be carried out upon petitioner furnishing the bond covering the full value and the bank guarantee as directed; respondents to release the goods forthwith thereafter.

Final Conclusion: The contempt petition was disposed of by directing the petitioner to comply with the Supreme Court's modification by furnishing a bank guarantee of Rs. 15 Crores and the requisite bond; upon such compliance the competent authority shall forthwith release the seized goods provisionally.

Condonation of delay - Interpretation of "sufficient cause" - Right to adjudication on merits - Pre-deposit requirement and financial difficulty

Condonation of delay - Interpretation of "sufficient cause" - Pre-deposit requirement and financial difficulty - The Tribunal erred in rejecting the application for condonation of delay and refusing to admit the appeal without considering the merits. - HELD THAT: - The Court applied the settled principle that the expression "sufficient cause" is to be construed liberally to advance substantive justice and not as a penal provision. The appellant explained that financial difficulty prevented timely arrangement of the prescribed pre-deposit, causing a delay of 455 days. Having regard to the established jurisprudence favouring liberal consideration of sufficient cause and the explanation offered by the appellant, the Tribunal's rejection on limitation grounds without considering the merits was held to be unsustainable. The substantial question framed on admission was answered in favour of the appellant and against the revenue. [Paras 6]

Answered in favour of the assessee; the Tribunal's refusal to condone delay was set aside.

Right to adjudication on merits - Condonation of delay - Whether the matter should be remitted for decision on merits after quashing the Tribunal's order. - HELD THAT: - The Court quashed the Tribunal's order which dismissed the appeal as time-barred and remitted the matter to the Tribunal for fresh consideration on merits. The remand requires the Tribunal to afford the parties an opportunity and to decide the appeal on its substantive merits, taking into account the Court's finding on the sufficiency of the cause for delay. [Paras 7]

Order dated 06.12.2017 quashed and matter remitted to the Tribunal for decision on merits after affording opportunity to the parties.

Final Conclusion: The Tribunal's order rejecting the application for condonation of delay is quashed; the appeal is remitted to the Tribunal for fresh adjudication on merits after affording the parties an opportunity.

Import of used electronic equipment - functionality requirement for import - re-export and illegal traffic under the H&OW Rules - Extended Producer Responsibility - Forms 6 and 7 under Schedule VII of the H&OW Rules - Technical Review Committee recommendations non statutory - BIS compulsory registration and specified standards

Import of used electronic equipment - functionality requirement for import - Forms 6 and 7 under Schedule VII of the H&OW Rules - Whether the imported Multi Function Devices (MFDs) could be cleared despite absence of DGFT import licence and without Forms 6/7 where MFDs are not indigenously manufactured and have certified residual functionality of five years. - HELD THAT: - The Court applied the reasoning of the earlier Division Bench (Annexure-3) as affirmed by the Supreme Court (Annexure-4) and held that where MFDs are not manufactured in India and an Inspection Agency approved by DGFT has certified residual functionality of at least five years, the absence of an import licence and the non production of Forms 6 and 7 do not invalidate clearance. Schedule VII lists MFDs (item 4(j)/now 4(k)), and the Rules, as amended, permit import by actual users or traders subject to the documents specified; Form 6 was held not mandatory in that context and Form 7 is not required for MFDs when the amended H&OW Rules permit import in accordance with Schedule VII. The ambiguity in the country of origin certificate was construed in favour of the importers where functionality was certified. The Court rejected contentions founded on contraventions of the Foreign Trade (Development & Regulation) Act in this factual matrix, observing that confiscation/ redemption under Section 11 operates on different principles and that the prior conclusions in Annexures 3/4 govern identical facts. [Paras 2, 3, 4, 10]

Imported MFDs certified to have minimum five years functionality and not manufactured in India could be cleared notwithstanding absence of DGFT licence and omission of Forms 6/7; earlier conclusions in Annexures 3 and 4 apply and the appeals are without merit.

Extended Producer Responsibility - Whether Extended Producer Responsibility (EPR) authorisation and filing of annual return must precede import or may be obtained after importation of MFDs. - HELD THAT: - The Court observed that EPR obligations and the related requirement to file annual returns arise upon the MFDs losing functionality (i.e., becoming e waste), which is after the minimum functional period of five years certified at import. Thus obtaining EPR authorisation subsequent to import was permissible because the duty to manage e waste crystallises only when the equipment becomes non functional, and the annual return to the State Pollution Control Board is likewise a post functional obligation. [Paras 3]

EPR authorisation and the annual return need not precede import; they arise after the MFDs become non functional and may validly be obtained after import.

Technical Review Committee recommendations non statutory - Whether recommendations of the Technical Review Committee (TRC) adding manufacture date limits (e.g., manufacture within seven or five years) are enforceable in the absence of incorporation into the Rules. - HELD THAT: - The Court analysed the statutory role of the TRC as reflected in Schedule I and Schedule II of the H&OW Rules and concluded that the TRC's statutory duty is to resolve disputes as to hazardousness where applicable. Recommendations of the TRC that amount to additional conditions (such as date of manufacture restrictions) are not statutory and cannot be imposed unless incorporated into the Rules. The Rules prescribe minimum functionality (five years) from date of import and do not refer to manufacture date limits for importation. [Paras 5, 6]

TRC recommendations imposing manufacture date conditions are not enforceable unless enacted into the Rules; the statutory minimum functionality of five years governs.

BIS compulsory registration and specified standards - prohibition of goods not conforming to specified standards - Whether BIS compulsory registration and the requirement of conformity to specified standards precluded import of MFDs in the facts of these cases. - HELD THAT: - The Court examined the Electronics and Information Technology Goods (Requirements of Compulsory Registration) Order, 2012 and Annexures from BIS. It noted that clause wise prohibitions exist for goods not conforming to specified standards and requiring a Standard Mark and URN where a standard is prescribed. However, the Court found that no specific BIS standard for MFDs had been prescribed in the Order; although Annexure 23 described generic categories including printers and related equipment, MFDs as combined equipment were not the subject of a prescribed standard at the relevant time. The later notification of 01.04.2020 by MeitY classifying MFDs under printers/plotters was observed to affect import only prospectively from its date. Consequently, the earlier absence of a prescribed BIS standard for MFDs meant mandatory BIS registration could not be insisted upon for the imports under challenge. [Paras 7, 8, 9]

In the absence of a prescribed BIS standard for MFDs at the relevant time, compulsory BIS registration could not be enforced against these imports; the 01.04.2020 notification affects import restrictions only from its date.

Re-export and illegal traffic under the H&OW Rules - Whether the Customs direction for re export/confiscation could stand where the Court found no violation of the H&OW Rules and the imported goods fell within 'other waste'. - HELD THAT: - Relying on the earlier decision in Annexure 3 and its affirmation by the Supreme Court (Annexure 4), the Court noted that Rule 15 deals with illegal traffic and re export but that no contravention of the H&OW Rules or categorisation as a restricted item was established in these facts. Consequently, the Court interfered with the Customs direction for re export. The Court also recorded that goods had been released on the basis of Annexure 3, and reiterated the prior direction to inform DGFT and to have surety bonds executed in the manner directed in Annexure 3, permitting Customs to initiate return proceedings if bonds were not furnished. [Paras 4, 11]

Re export/confiscation directions were set aside in these facts; goods released under Annexure 3 remain released subject to executing the surety bond as directed, failing which Customs may proceed for return.

Final Conclusion: Appeals by the Revenue are dismissed; the Court upholds the prior conclusions in Annexures 3 and 4 that MFD imports certified to have five years' residual functionality and not manufactured in India could be released notwithstanding absence of DGFT licence or pre import EPR/BIS formalities where no prescribed BIS standard existed, TRC recommendations not incorporated in the Rules are not enforceable, and respondents who cleared goods under interim orders must execute the surety bonds directed in Annexure 3 within two months or face return proceedings.

Principles of natural justice - non-supply of relied upon documents with the Show Cause Notice - remand for de novo adjudication after furnishing relied upon documents and opportunity of hearing - imposition of penalty under Section 112 of the Customs Act, 1962 - burden of proof under Section 123 of the Customs Act, 1962

Non-supply of relied upon documents with the Show Cause Notice - principles of natural justice - remand for de novo adjudication after furnishing relied upon documents and opportunity of hearing - Adjudication vitiated for non-supply of relied upon documents with the Show Cause Notice and matter remanded for fresh adjudication after supplying documents and granting opportunity to the noticee. - HELD THAT: - The Tribunal found that the Show Cause Notice dated 14.08.2018 was issued without appending or supplying copies of documents on which the adjudicating authority relied (BSF seizure records, Customs inventory, statements, assay report etc.), and that the imposition of penalty by the Adjudicating Authority proceeded on the basis of those documents. It is a settled legal position that when an authority intends to rely upon documents, copies must be furnished to the noticee with the show cause notice or provided before final adjudication; failure to do so vitiates the adjudication for breach of principles of natural justice (see reasoning at paragraph 6). Applying the principle that a delinquent should not be allowed to go scot free solely because of departmental negligence, the Tribunal followed the approach of remanding the matter for fresh adjudication after providing authenticated copies of all relied upon documents and granting a reasonable opportunity to file reply and for personal hearing (paragraphs 8 and 10). The remand is confined to the present noticee and requires the Assistant Commissioner of Customs, Maldah to decide the matter de novo expeditiously. [Paras 6, 10]

Impugned Order-in-Appeal and the Order-in-Original insofar as they relate to the present appellant are set aside and the matter is remanded to the original Adjudicating Authority for de novo adjudication after supplying relied upon documents and granting opportunity of defence and personal hearing.

Imposition of penalty under Section 112 of the Customs Act, 1962 - burden of proof under Section 123 of the Customs Act, 1962 - Effect of the Appellate Commissioner's failure to address appellant's grounds (including Section 123 contention and denial of opportunity) and limitation of relief vis-a -vis co-noticee whose appeal attained finality. - HELD THAT: - The Tribunal observed that the appellant had specifically raised before the Appellate Commissioner that he had no prior knowledge of the alleged confiscable nature of the goods, that Section 123 was inapplicable, and that documents relied upon had not been supplied; however, those grounds were not considered by the Appellate Commissioner and the impugned order was passed mechanically (paragraph 3). While such omissions support quashing the orders for breach of natural justice, the Tribunal applied the remedial principle that the delinquent should not be allowed to escape adjudication: because the common adjudication order produced two separate Orders-in-Appeal and the Order-in-Appeal in favour of the other noticee has attained finality, the present remand is restricted to the present appellant and does not reopen the concluded decision in respect of the other noticee (paragraph 8). Parties remain free to raise all points afresh before the Adjudicating Authority in accordance with law (paragraph 10). [Paras 3, 8, 10]

The Appellate Commissioner's impugned order is set aside insofar as it relates to the present appellant for failure to consider his grounds; the remand is confined to the present appellant only and does not affect the final order in respect of the other noticee.

Final Conclusion: The appeal is allowed in part: the Orders imposing and confirming penalty against the present appellant are quashed and the matter is remanded to the original Adjudicating Authority for de novo adjudication after furnishing authenticated copies of all relied upon documents and granting a reasonable opportunity to the appellant to file replies and for personal hearing; the remand is restricted to the present appellant and does not disturb the final order in respect of the other noticee.

Summary order. Questions framed on whether the High Court may proceed with a company petition after conversion of a PIL and whether jurisdiction is ousted by Section 434(1)(c) of the Companies Act, 2013 read with Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016; matter adjourned for further hearing and posted to the additional cause list on 07.12.2020 at 3.00 PM.

Scheme of Amalgamation - Dispensation of shareholders' meeting - Convening of creditors' meetings - Meetings by video conferencing and remote e voting - Notice and publication requirements under Companies (Compromises, Arrangements and Amalgamations) Rules - Appointment of Chairman and Scrutiniser for CAA meetings - Quorum and determination of creditor values for meeting purposes - Filing of results in Form CAA 4 and compliance with Rule 12 and Rule 14 - Sending Form CAA 3 to statutory authorities and 30 day representation period

Dispensation of shareholders' meeting - Scheme of Amalgamation - Whether the meetings of Equity and Preference shareholders of the Applicant Transferor Company and the meeting of Equity shareholders of the Applicant Transferee Company should be dispensed with. - HELD THAT: - The Tribunal found that the entire Equity and Preference share capital of the Transferor Company is held by the Transferee Company and that no consideration shares are to be issued such that rights and interests of the Transferee Company's public shareholders remain unaffected. On this basis, and having perused the records and submissions including consent affidavits of the Transferor Company's shareholders, the Tribunal dispensed with the meetings of the Equity and Preference shareholders of the Applicant Transferor Company and held that meeting of the Equity shareholders of the Applicant Transferee Company is not necessary. [Paras 6, 9, 14, 17]

Meetings of Equity and Preference shareholders of the Transferor Company are dispensed with; meeting of Equity shareholders of the Transferee Company is not necessary.

Convening of creditors' meetings - Quorum and determination of creditor values for meeting purposes - Whether and when meetings of the Secured and Unsecured creditors of the Applicant Companies should be convened and the applicable quorum and valuation rules for such meetings. - HELD THAT: - The Tribunal recorded that the Transferor Company has no secured creditors and therefore no meeting of secured creditors is required. It directed that a meeting of unsecured creditors of the Transferor Company be convened on 22nd October 2020. For the Transferee Company, separate meetings of secured creditors and unsecured creditors were directed to be convened on 22nd October 2020 at specified times. The Tribunal specified quorum rules (secured creditors quorum: two; unsecured creditors quorum: fifteen persons present in person or through authorized representative) and held that the number and value of debts shall be according to company books and, where disputed, the Chairman of the meeting shall determine value for meeting purposes. [Paras 15, 16, 18, 27, 28]

No meeting of secured creditors of the Transferor Company; unsecured creditors' meeting of the Transferor Company and separate secured and unsecured creditors' meetings of the Transferee Company to be convened on 22nd October 2020, with prescribed quorum and valuation rules.

Meetings by video conferencing and remote e voting - Notice and publication requirements under Companies (Compromises, Arrangements and Amalgamations) Rules - Modality of conducting the meetings, voting mechanism and requirements for issuing notices and advertisement. - HELD THAT: - Relying on the Ministry of Corporate Affairs circulars, the Tribunal directed that all creditor meetings be convened and conducted through video conferencing or other audio visual means and that voting be carried out through remote e voting at the time of the meetings. The Transferee Company, being listed, must provide facility for remote e voting to public shareholders and report public shareholders' e voting results separately. The Tribunal directed issuance of notices in Form No. CAA 2 at least one month before the meetings (with Scheme, explanatory statement and remote e voting instructions), publication of advertisements in specified newspapers, and prohibition of voting by proxy while permitting authorized representatives. [Paras 19, 20, 21, 22, 23]

All directed meetings to be held via video conferencing with remote e voting; notices in Form CAA 2, prescribed advertisement and voting restrictions to be complied with.

Appointment of Chairman and Scrutiniser for CAA meetings - Filing of results in Form CAA 4 and compliance with Rule 12 and Rule 14 - Appointment of meeting officials and post meeting reporting obligations. - HELD THAT: - The Tribunal appointed an independent Chartered Accountant (with named alternates) as Chairman for all meetings and a practicing Company Secretary as Scrutiniser. It directed the Chairman to issue notices and advertisements, to determine procedural matters at the meetings, to file an affidavit at least seven days before the meetings confirming issuance of notices and advertisements as per Rule 12, and to report the results of the meetings in Form No. CAA 4 verified by affidavit within thirty days of conclusion of the last meeting as required under the Companies (CAA) Rules. [Paras 24, 25, 26, 29, 30]

Chairman and Scrutiniser appointed; Chairman to comply with notice/advertisement duties and file pre meeting affidavit and file Form CAA 4 within thirty days after meetings.

Sending Form CAA 3 to statutory authorities and 30 day representation period - Requirement to notify specified statutory authorities and timeline for representations. - HELD THAT: - The Tribunal directed the Applicant Companies to send notices in Form No. CAA 3 together with the disclosures under Rule 6 to the Regional Director (North Western Region), Registrar of Companies (Gujarat), Income Tax Authorities, Reserve Bank of India, the stock exchanges, SEBI and the Official Liquidator, forthwith by registered post/speed post/courier/hand delivery or e mail as required. It recorded that those authorities may make representations to the Tribunal within thirty days of receipt of such notice, failing which they will be deemed to have no objection. [Paras 31]

Form CAA 3 notices to specified authorities to be sent forthwith; thirty day period for representations prescribed.

Scheme of Amalgamation - Disposal of CA (CAA) No. 55 of 2020. - HELD THAT: - Having given the foregoing directions for convening the requisite meetings, notices, modalities and filings, the Tribunal allowed and disposed of CA (CAA) No. 55 of 2020. [Paras 32]

CA (CAA) No. 55 of 2020 is allowed and disposed of subject to the directions issued.

Final Conclusion: The Tribunal directed dispensation of shareholder meetings where appropriate, ordered convening of specified creditors' meetings on 22nd October 2020 to be held via video conferencing with remote e voting, prescribed notice, publication, quorum, appointment of Chairman and Scrutiniser, pre and post meeting filing obligations and statutory notifications, and allowed CA (CAA) No. 55 of 2020.

Scheme of Amalgamation - Dispensing with convening of meetings under Companies Act procedure - Convening of creditors' meeting and voting procedure - Notice, service and publication requirements for meetings and representations - Appointment and powers of Chairman and Scrutinizer for creditors' meeting - Determination of value of claims for voting - Service of scheme on tax and regulatory authorities and Official Liquidator

Scheme of Amalgamation - Dispensing with convening of meetings under Companies Act procedure - Dispensation of convening and holding of meetings of the equity shareholders of both applicant companies. - HELD THAT: - The Tribunal recorded that all equity shareholders of both Applicant Companies have given consent affidavits in respect of the proposed Scheme of Amalgamation. In view of those unanimous consents, the convening and holding of the meetings of the equity shareholders for considering and approving the Scheme is dispensed with.

Meetings of the equity shareholders of both Applicant Companies are dispensed with.

Dispensing with convening of meetings under Companies Act procedure - No requirement to convene meetings of secured and unsecured creditors of the first applicant/transferor company. - HELD THAT: - The Tribunal recorded that there are no secured or unsecured creditors in the first Applicant/Transferor Company. On that factual finding, the need to convene meetings of secured and unsecured creditors of the first Applicant/Transferor Company for considering the Scheme was held to be obviated.

Meetings of secured and unsecured creditors of the first Applicant/Transferor Company are dispensed with.

Convening of creditors' meeting and voting procedure - Dispensation of meeting of trade/sundry creditors of the first Applicant/Transferor Company. - HELD THAT: - The Tribunal noted that although there existed trade/sundry creditors as on 31.03.2020, the entire amounts were paid off as on the date of the application. Given that position, the convening and holding of the meeting of trade/sundry creditors of the first Applicant/Transferor Company was held unnecessary.

Meeting of trade/sundry creditors of the first Applicant/Transferor Company is dispensed with.

Dispensing with convening of meetings under Companies Act procedure - Dispensation of convening and holding meetings of secured and unsecured creditors of the second Applicant/Transferee Company. - HELD THAT: - The Tribunal recorded that all secured and unsecured creditors of the second Applicant/Transferee Company have furnished consent affidavits in respect of the proposed Scheme. On that basis, the Tribunal dispensed with convening meetings of those classes of creditors.

Meetings of secured and unsecured creditors of the second Applicant/Transferee Company are dispensed with.

Convening of creditors' meeting and voting procedure - Notice, service and publication requirements for meetings and representations - Appointment and powers of Chairman and Scrutinizer for creditors' meeting - Determination of value of claims for voting - Directions for convening the meeting of trade/sundry creditors of the second Applicant/Transferee Company and procedural modalities for that meeting. - HELD THAT: - The Tribunal directed that the meeting of trade/sundry creditors of the Transferee Company be convened at the specified place and time (via video conferencing) and prescribed procedural requirements: service of notice at least one month prior to the meeting together with the statement of material facts, publication in two specified newspapers not less than thirty days prior, provision for proxy and authorized representatives, quorum in accordance with Section 103 of the Companies Act, the Chairman's powers to decide procedural questions and to determine disputed claim values for voting, and reporting of results to the Tribunal within seven days. The Tribunal also fixed the Chairman and Scrutinizer and their professional fees and required filing of affidavit of service seven days before the meeting.

Meeting of trade/sundry creditors of the second Applicant/Transferee Company to be convened with the specified procedural directions, appointments, and reporting obligations.

Service of scheme on tax and regulatory authorities and Official Liquidator - Notice, service and publication requirements for meetings and representations - Directions to serve copies of the Scheme on specified authorities and to allow them thirty days to file representations. - HELD THAT: - The Tribunal directed service of the Scheme and notice upon the Income Tax authority within whose jurisdiction the applicants are assessed, the Central Government through the Regional Director, the Registrar of Companies and other applicable regulatory authorities, and the Official Liquidator. Each such authority and the Official Liquidator were given thirty days from receipt of the notice to submit representations to the Tribunal, with simultaneous service of such representations on the Applicant Companies; failure to do so would result in the presumption of no representations.

Applicants to serve the Scheme on the specified authorities and the Official Liquidator and to permit thirty days for representations; affidavit of service to be filed.

Final Conclusion: The Tribunal permitted dispensation of shareholder meetings for both companies and of certain creditor meetings where consent or full payment existed; directed convening of the meeting of trade/sundry creditors of the Transferee Company with detailed procedural directions (notice, publication, Chairman and Scrutinizer appointment, proxy, claim valuation, quorum and reporting) and ordered service of the Scheme on tax and regulatory authorities and the Official Liquidator with a thirty day window for representations.

Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - existence of operational debt and default - pre-existing dispute doctrine and its applicability - service of demand notice under Section 8 - jurisdiction of the adjudicating authority - limitation period for filing under the Code - appointment of Interim Resolution Professional and statutory duties - security deposit for Interim Resolution Professional's expenses - moratorium under Section 14 of the Code

Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - fulfillment of requirements under Section 9(3) - The application under Section 9 was admitted and the Corporate Insolvency Resolution Process was initiated. - HELD THAT: - The Tribunal found that the application was complete and that the Operational Creditor had complied with the statutory requirements, including filing the affidavit and bank statements in terms of Section 9(3). Having established default on the operational debt and found no sustainable pre-existing dispute obstructing the claim, the Bench held the requirements of Section 9(5) were met and admitted the application to commence CIRP. [Paras 22, 25]

Application under Section 9 admitted and CIRP initiated.

Existence of operational debt and default - evidence of invoices, post-dated cheques and dishonour - The operational debt and default by the Corporate Debtor were established. - HELD THAT: - The Tribunal relied on the invoices supplied between August 2016 and September 2017, the post-dated cheques issued by the Corporate Debtor which were dishonoured for insufficient funds, and ledger/transactional records to conclude that a debt was due and the Corporate Debtor had defaulted. The admitted correspondence from the Corporate Debtor acknowledging payment obligations reinforced the conclusion that default had occurred. [Paras 5, 6, 11, 19, 21]

Operational debt proved and default established.

Pre-existing dispute doctrine and its applicability - scope of pre-existing dispute (Innoventive and Mobilox principles) - Alleged pre-existing disputes related to earlier transactions (2013-14) and did not bar the present Section 9 application. - HELD THAT: - Applying the established principle that only pre-existing disputes relevant to the claimed debt can defeat a Section 9 petition, the Tribunal held that the disputes relied upon by the Corporate Debtor pertained to earlier contracts and deliveries from 2013-14, whereas the debt in question arose from invoices dated August 2016 to September 2017. The Tribunal treated subsequent contentions raised in reply to the demand notice as insufficient to constitute a pre-existing dispute for the present transactions, particularly in view of the Corporate Debtor's contemporaneous admissions to payment liability. [Paras 13, 14, 15, 16, 21]

Pre-existing disputes pleaded by the Corporate Debtor do not pertain to the present claim and do not bar admission.

Service of demand notice under Section 8 - mode of communication and compliance with service requirements - Service of the demand notice under Section 8 was effected in compliance with the Code. - HELD THAT: - The Tribunal noted that the demand notice was sent by speed post (with postal receipt and tracking) and, when the notice could not be delivered, by email to the registered email id in MCA records. The Corporate Debtor replied to the demand notice, evidencing receipt, and the Tribunal treated the service as compliant with the statutory requirement. [Paras 8, 9, 12]

Demand notice was validly served under Section 8.

Jurisdiction of the adjudicating authority - registered office as basis for territorial jurisdiction - limitation period for filing under the Code - The Tribunal has jurisdiction and the application was filed within the prescribed limitation period. - HELD THAT: - Relying on the registered office of the Corporate Debtor being in New Delhi, the Tribunal held it had territorial jurisdiction to entertain the Section 9 application. The Bench also recorded that the petition was within the prescribed limitation, thereby removing procedural impediments to admission. [Paras 23, 24]

Tribunal has jurisdiction and the application is within limitation.

Appointment of Interim Resolution Professional and statutory duties - An Interim Resolution Professional was appointed and directed to perform statutory functions. - HELD THAT: - As the Applicant had not proposed an IRP, the Tribunal appointed Mr. Mansij Arya as Interim Resolution Professional and directed him to take steps as required under the Code, including the duties specified in Sections 15, 17, 18, 20 and 21. [Paras 26]

IRP appointed and directed to perform statutory functions.

Security deposit for Interim Resolution Professional's expenses - adjustment by Committee of Creditors - The Operational Creditor was directed to deposit a security amount to meet IRP expenses, subject to adjustment by the Committee of Creditors. - HELD THAT: - The Tribunal directed the Operational Creditor to deposit a specified sum with the IRP within three days to enable the IRP to perform functions under the regulations, and recorded that the amount would be subject to appropriate adjustment by the Committee of Creditors as accounted for by the IRP. [Paras 27]

Operational Creditor to deposit security for IRP's expenses; amount subject to later adjustment.

Moratorium under Section 14 of the Code - On admission, the moratorium under Section 14(1) was ordered to apply to the Corporate Debtor. - HELD THAT: - Consequent to admission of the Section 9 application, the Tribunal directed that the moratorium as envisaged under Section 14(1) shall follow, prohibiting actions specified in the provisos, and that other provisions of Section 14 would operate during the moratorium period. [Paras 28]

Moratorium under Section 14 declared upon admission.

Final Conclusion: The Tribunal admitted the Section 9 petition after finding that the Operational Creditor had established debt and default, that alleged earlier disputes did not relate to the present invoices and hence did not bar admission, and that service and limitation requirements were satisfied; an Interim Resolution Professional was appointed, a deposit for IRP expenses directed, and the moratorium under Section 14 imposed.

Binding nature of sanctioned resolution plan - overriding effect of the Insolvency and Bankruptcy Code - approval of resolution plan under section 31 - interpretation of "adjudicated" in a resolution plan - recovery and appropriation under section 87 of the Finance Act, 1994 - obligation of the State to refund amounts held beyond lawful retention

Binding nature of sanctioned resolution plan - overriding effect of the Insolvency and Bankruptcy Code - approval of resolution plan under section 31 - Resolution plan approved by the committee of creditors and sanctioned by the adjudicating authority is binding on the Central Government and other stakeholders. - HELD THAT: - The Code's scheme gives primacy to commercially negotiated resolution plans approved by the requisite majority of the committee of creditors. Section 31(1) makes an approved resolution plan binding on the corporate debtor and its creditors, including the Central Government, and section 238 gives the Code overriding effect over inconsistent laws. The adjudicating authority's role is limited to satisfying the requirements of section 30(2) and not to reassess the commercial wisdom of the committee of creditors. Once the Tribunal sanctioned the resolution plan, its terms - including the treatment of operational creditors' claims - are binding on the respondent. [Paras 29, 31, 39]

Tribunal-sanctioned resolution plan binds the respondent; the plan's provision to settle operational creditors' dues at 5% of adjudicated principal (with waiver of interest and penalties) must be given effect.

Interpretation of "adjudicated" in a resolution plan - recovery and appropriation under section 87 of the Finance Act, 1994 - obligation of the State to refund amounts held beyond lawful retention - Amount payable under the resolution plan is 5% of the principal dues as 'adjudicated' (i.e., crystallized principal amount), and the respondent cannot appropriate pre-recovered sums beyond that entitlement; excess must be refunded. - HELD THAT: - The resolution plan used the term 'adjudicated' to refer to the principal dues that would crystallize upon completion of adjudication proceedings. The Tribunal's sanction requires the respondent to compute 5% of the adjudicated principal (here Rs. 7,02,20,725.00) as the amount recoverable. Although respondent had invoked section 87(b)(i) to recover sums prior to adjudication, the Tribunal-sanctioned plan governs the quantum recoverable. Where the State holds amounts in excess of what it is lawfully entitled to retain under the sanctioned plan, it has a duty to refund the excess; such retention cannot be sustained merely because the State purportedly recovered the sums earlier. [Paras 38, 39, 41]

Respondent shall retain only 5% of the adjudicated principal dues and refund the balance of the amounts already recovered; the appropriation direction in the impugned order is set aside to that extent.

Final Conclusion: Writ petition allowed: the Tribunal-sanctioned resolution plan is binding on the revenue; petitioner's service-tax principal dues are to be settled at 5% of the adjudicated principal (5% of Rs. 7,02,20,725.00), respondent must retain only that amount from sums already recovered and refund the balance to the petitioner within three months.

Consulting engineer service - reverse charge - termination / cancellation fee not taxable as consideration for service - requirement of actual receipt of advice, consultancy or technical assistance to attract service tax - reliance on contractual termination provisions to determine taxability

Consulting engineer service - reverse charge - termination / cancellation fee not taxable as consideration for service - requirement of actual receipt of advice, consultancy or technical assistance to attract service tax - Whether the amount paid by the assessee to the foreign licensor under the Model Termination Agreement is exigible to service tax as "consulting engineer" service on reverse charge basis. - HELD THAT: - The Tribunal found that the demand rested solely on the Termination Agreement payment of JPY 130,000,000 and that the show cause notice and impugned order failed to identify any specific advice, consultancy or technical assistance actually rendered by Honda Japan to the appellant in the period between the Model Agreement and its termination. The Commissioner (Appeals) relied on clauses of the Technical and Model Agreements to conclude that technical information had been furnished, but the Tribunal held that those overarching contractual provisions could not be used to impute a taxable service in respect of a distinct termination payment without evidence that technical assistance was in fact supplied. The payment under the Termination Agreement was held to be compensation to restitute Honda Japan for costs, expenses and non cancelable commitments incurred in work towards commencement of production and thus constituted a cancellation/compensation payment rather than consideration for an identifiable consulting engineer service. The Tribunal noted that the show cause notice did not specify any particular consulting engineer activity supplied and the Department's assumption that technical information must have been furnished was not supported by factual averments. Reliance on precedents where termination/cancellation amounts were held not taxable reinforced the conclusion that no service tax liability arose on the termination payment. [Paras 27, 28, 31, 34, 37]

The payment under the Termination Agreement is not consideration for a taxable "consulting engineer" service on reverse charge; the demand confirmed by the Commissioner (Appeals) is unsustainable.

Final Conclusion: The order dated January 23, 2015 passed by the Commissioner (Appeals) confirming service tax, penalty and interest on the termination payment is set aside and the appeal is allowed.

Declared service under section 66E(e) of the Finance Act - consideration for a taxable service and nexus with the service (section 67 explanation) - distinction between conditions to a contract and consideration for the contract - recovery of penalty/forfeiture/liquidated damages as compensation versus consideration for tolerating an act - requirement of a flow of consideration from service recipient to service provider

Declared service under section 66E(e) of the Finance Act - consideration for a taxable service and nexus with the service (section 67 explanation) - distinction between conditions to a contract and consideration for the contract - recovery of penalty/forfeiture/liquidated damages as compensation versus consideration for tolerating an act - Whether amounts recovered by the appellant as penalty, earnest money forfeiture and liquidated damages constitute a declared service under section 66E(e) and are taxable for the period July 2012 till March 2016. - HELD THAT: - The Tribunal held that a declared service under section 66E(e) requires an agreement in which one party, for a consideration, agrees to refrain from an act, or to tolerate an act or situation, or to do an act; there must be a flow of consideration from the service recipient to the service provider and a nexus between the amount charged and the service rendered (paras 25-26, 18, 24). Reliance on Bhayana Builders and subsequent Supreme Court pronouncements was applied to emphasize that only amounts which are consideration for the taxable service fall within value for service tax under section 67 (paras 19-21). The Tribunal analyzed the contracts and concluded that the principal intention of the agreements was supply of coal, goods or services and that penal clauses were safeguards for commercial interest, not stipulations creating an obligation by the appellant to tolerate breach in exchange for consideration; the contracts did not specify an obligation on the appellant to refrain from an act or tolerate an act for a defined consideration (paras 27-33). Authorities (including Lemon Tree, K.N. Foods, and the European Court of Justice decision cited) were examined and distinguished on the basis that retention or recovery as compensation on breach does not automatically convert such sums into consideration for a declared service where the agreement lacks an express element of agreeing to tolerate or refrain as the service (paras 33-36, 34). Applying these principles, the Tribunal found it unsustainable to treat the penalty, EMD forfeiture and liquidated damages collected by the appellant as consideration for tolerating an act and therefore not taxable as a declared service under section 66E(e) for the specified period (paras 14, 28, 43). [Paras 30, 32, 33, 43, 44]

Amounts recovered as penalty, earnest money forfeiture and liquidated damages are not consideration for a declared service under section 66E(e) and therefore are not taxable as service for the period July 2012 till March 2016; the impugned order confirming service tax demand is set aside.

Final Conclusion: The appeal is allowed: the demand of service tax, interest and penalty confirmed by the Principal Commissioner on account of penalty, EMD forfeiture and liquidated damages for July 2012 till March 2016 is unsustainable and the impugned order dated December 18, 2018 is set aside.

Cenvat credit distribution - Input Service Distributor - Rule 7 of Cenvat Credit Rules, 2004 - direct nexus between research & development services and manufacture - research and development as integral part of manufacturing process - precedential weight of prior Tribunal bench decision

Cenvat credit distribution - Input Service Distributor - Rule 7 of Cenvat Credit Rules, 2004 - direct nexus between research & development services and manufacture - Entitlement to distribute Cenvat credit including Education Cess and SHE Cess taken on Research & Development services to the appellant's manufacturing units in terms of Rule 7, Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal, by reference to its earlier final order in the assessee's own case, held that research and development activities in the pharmaceutical industry form an essential and integral part of the manufacturing process because certification, quality control and product development are prerequisites for a marketable drug. Services availed in a centralized R&D/Integrated Product Development Organisation (IPDO) therefore have a direct nexus with manufacture in the various production units. Where the assessee is registered as an Input Service Distributor, the Cenvat credit availed on input services used in the R&D unit, including Education Cess and SHE Cess, can be distributed to the manufacturing units under Rule 7. The Tribunal found the view consistent with earlier Tribunal and higher court decisions relied upon, concluded the issue was no longer res integra, and held the impugned demand unsustainable. [Paras 3, 8, 9, 10]

Allowed; impugned order set aside and the appellant entitled to distribute the Cenvat credit on R&D services to its manufacturing units, with consequential benefits as per law.

Final Conclusion: The appeal is allowed; the impugned order is set aside and the appellant is entitled, as an Input Service Distributor, to distribute the Cenvat credit (including applicable cesses) taken on Research & Development services to its manufacturing units in conformity with the Tribunal's earlier findings, with consequential relief as per law.

Interest on delayed refunds - Section 11BB - Deeming fiction in the Explanation to Section 11BB - Commencement of liability for interest from expiry of three months from date of receipt of refund application - Strict construction of fiscal legislation - Mandamus to consider representation for payment of interest

Interest on delayed refunds - Section 11BB - Deeming fiction in the Explanation to Section 11BB - Interest under Section 11BB is payable from the date immediately after the expiry of three months from the date of receipt of the refund application and the Explanation does not postpone that date. - HELD THAT: - The Court applied the ratio of the Supreme Court in Ranbaxy Laboratories Ltd. which holds that Section 11BB operates only after an order for refund under Section 11B is made, and that interest becomes payable where the duty ordered to be refunded is not paid within three months from the date of receipt of the application under Section 11B(1). The Explanation which treats an appellate or court order as an order under Section 11B(2) does not affect the date from which interest becomes payable; it does not postpone the commencement of liability. The Court noted that fiscal provisions must be strictly construed and that circulars emphasising disposal of rebate/refund claims within three months reinforce that interest under Section 11BB is attracted automatically where rebate/refund is sanctioned beyond that period. [Paras 5]

Held that interest under Section 11BB is attracted from the expiry of three months from receipt of the refund application; the Explanation does not delay the commencement of interest.

Mandamus to consider representation for payment of interest - Application of precedent - The Assistant Commissioner is directed to consider the petitioner's representation dated 19.12.2019 (and reminders) for payment of interest on the rebate, in light of Ranbaxy (supra), within eight weeks after hearing the petitioner. - HELD THAT: - The petitioner's representation seeking interest under Section 11BB remained pending. The Court found the ratio of Ranbaxy applicable on the facts and, rather than adjudicating the claim on merits itself, directed the respondent to consider the representation in accordance with the settled law, affording the petitioner an opportunity to be heard either physically or via video conferencing. The directive is time-bound and procedural, leaving substantive adjudication to the Assistant Commissioner in light of the legal principle stated. [Paras 7]

Directed the respondent to consider the representation dated 19.12.2019 within eight weeks in light of the Supreme Court's decision in Ranbaxy and after hearing the petitioner.

Final Conclusion: Writ petition disposed by directing the Assistant Commissioner to consider the pending representation for payment of interest on the rebate in accordance with the Supreme Court's ratio in Ranbaxy Laboratories Ltd., within eight weeks after hearing the petitioner; no costs.

Principles of natural justice - Opportunity of hearing before adverse administrative order - Requirement of show cause notice when rejecting a claim - Concurrent operation of benefits under overlapping notifications - Remand for fresh consideration - Availability of alternate statutory remedy where natural justice is violated

Principles of natural justice - Opportunity of hearing before adverse administrative order - Requirement of show cause notice when rejecting a claim - Remand for fresh consideration - Impugned order passed without affording opportunity of hearing to the petitioner and without issuing a show cause notice was violative of principles of natural justice and required setting aside and remand. - HELD THAT: - The Court examined only the limited question of breach of natural justice and noted the admitted fact that no opportunity of hearing was afforded before the respondent rejected the petitioner's claim under notification No. 01/2010 CE. The Court accepted that while a notice may be unnecessary where the authority is satisfied with a claim, if the authority is of the opinion that the claim is not tenable it must issue a notice so that the grounds for rejection can be placed for discussion. The absence of any provision in the statute or notification expressly prohibiting an opportunity of hearing was noted. Reliance was placed on precedent where an order passed without issuing a detailed notice was set aside. Applying these principles, the Court concluded that the impugned order, being adverse and passed without hearing or show cause notice, offended judicially recognised rules of natural justice and could not stand; accordingly the matter was remitted for fresh consideration after affording the petitioner a hearing. [Paras 6, 7, 8]

Impugned order set aside and matter remitted to the competent authority to decide afresh after affording due opportunity of hearing to the petitioner.

Availability of alternate statutory remedy where natural justice is violated - Concurrent operation of benefits under overlapping notifications - Availability of an alternate statutory appeal did not bar invocation of the High Court's extraordinary jurisdiction where there was a violation of principles of natural justice; questions about concurrent operation of overlapping notifications were left for fresh consideration. - HELD THAT: - The Court acknowledged the respondents' submission that the impugned order was appealable and that the scheme envisaged appeal. However, relying on established authority, the Court held that where principles of natural justice are breached the existence of an alternate remedy is not a bar to invoking writ jurisdiction. The Court did not adjudicate the substantive controversy regarding whether benefits under the two notifications could run concurrently or whether investments could be aggregated; those factual and legal questions were left to the competent authority to decide after providing hearing to the petitioner on all contentions. [Paras 3, 4, 6, 8]

Existence of statutory appeal did not preclude exercise of writ jurisdiction for natural justice breach; substantive issues regarding overlapping notifications to be reconsidered by authority after hearing.

Final Conclusion: Writ petition allowed; impugned order dated 29.05.2018 set aside and the matter remitted to the competent authority for fresh decision after affording the petitioner a proper opportunity of hearing; questions on substantive entitlement under the notifications to be decided afresh.

Admissibility of statements recorded under Section 14 without compliance of Section 9D - reliability of electronic VAHAN database and correspondence from vehicle owners as evidence - onus and compliance with Rule 9 of the Cenvat Credit Rules for taking input credit - requirement of confrontation and right to cross-examination before reliance on extraneous statements - penalty liability of director where departmental demand and credit denial are unsustainable

Admissibility of statements recorded under Section 14 without compliance of Section 9D - requirement of confrontation and right to cross-examination before reliance on extraneous statements - Statements recorded during investigation under Section 14 were inadmissible in the adjudication in absence of compliance with Section 9D and examination-in-chief by the adjudicating authority. - HELD THAT: - The Tribunal followed binding High Court authority holding that statements recorded during search/seizure are not relevant or admissible unless the procedural safeguards of Section 9D are complied with. The adjudicating authority was required to conduct examination-in-chief of witnesses whose earlier statements were relied upon and form a conscious opinion on admissibility before permitting cross-examination. In the present case no such examination-in-chief or formation of opinion was conducted; therefore the statements relied upon by the department were eschewed from evidence. [Paras 22]

Statements recorded under Section 14 without compliance with Section 9D and without examination-in-chief are inadmissible and cannot be relied upon.

Reliability of electronic VAHAN database and correspondence from vehicle owners as evidence - requirement to verify VAHAN data through RTO records before denying credit - Investigation based solely on VAHAN website searches and stereotyped letters from vehicle owners was not a reliable basis to disallow Cenvat credit. - HELD THAT: - The Tribunal found the departmental exercise of checking vehicle details on www.vahan.nic.in and relying on similarly worded denial letters to be insufficient. The VAHAN pages themselves disclosed possibilities such as non-digitisation or data-entry errors which required verification from the concerned RTOs. The letters from vehicle owners appeared stereotyped, were not the subject of formal recorded statements or cross-examination, and therefore lacked evidentiary value. Consequently the transporter-end investigation was held to be half-baked and not a dependable foundation for denial of credit. [Paras 23, 29, 30, 31]

VAHAN-based search results and undemonstrated/unstamped letters from vehicle owners, without RTO verification or opportunity for cross-examination, cannot be used to deny Cenvat credit.

Onus and compliance with Rule 9 of the Cenvat Credit Rules for taking input credit - denial of credit where dealer invoices are duty-paid and goods receipt is evidenced - The appellant discharged the onus under Rule 9 CCR and was entitled to the Cenvat credit claimed for the disputed periods. - HELD THAT: - The appellant produced duty-paid invoices, weighment slips, bank payments, entries in RG-23 and evidence of payment of duty on finished goods (including exports). The department produced no evidence of flow-back of money or that goods were not duty paid, nor did it show alternative sources of raw materials sufficient to rebut the appellant's production figures. Given these facts and the absence of reliable contrary evidence from the department, the Tribunal concluded that the appellant had taken all reasonable steps required under Rule 9 and the denial of credit could not be sustained. [Paras 24, 25, 26, 33]

Appellant satisfied the requirements of Rule 9 CCR; the Cenvat credit denial is unjustified and is set aside.

Penalty liability of director where departmental demand and credit denial are unsustainable - Penalty imposed on the director could not be sustained once the departmental demand was set aside on merits. - HELD THAT: - Since the Tribunal allowed the appeal on merits and set aside the demand for wrongfully availed Cenvat credit, the consequential penalty imposed on the director had no sustentative basis. The Tribunal therefore held the penalty on the director cannot survive in view of the appellate decision allowing the appellant relief. [Paras 37, 38]

Penalty on the director is set aside as consequential to allowing the appeal and quashing the demand.

Final Conclusion: On the merits the appeals were allowed: investigative statements recorded under Section 14 were excluded for non-compliance with Section 9D; VAHAN-based searches and unsigned/stereotyped letters were held unreliable without RTO verification or cross-examination; the appellant was found to have complied with Rule 9 CCR and was entitled to the Cenvat credit for F.Y. 2013-14 and F.Y. 2014-15; consequential interest/demand and the penalty on the director were set aside.

Attachment of debts for recovery of tax arrears - effect of a set aside assessment order on consequent recovery proceedings - application of departmental clarification/circular in fresh assessment proceedings

Attachment of debts for recovery of tax arrears - effect of a set aside assessment order on consequent recovery proceedings - clarification of the assessment year in recovery proceedings - Whether the impugned recovery/attachment orders premised on an assessment order that had been set aside could be sustained. - HELD THAT: - The Court examined the impugned recovery orders which attached amounts due to the petitioner for recovery of tax arrears claimed to arise from an assessment. The First Respondent clarified that the demand was for assessment year 2013-2014 and not 2014-2015. The material on record showed that the earlier assessment order for 2013-2014 had been set aside by a Division Bench and the matter remitted for fresh consideration; consequently, the recovery proceedings initiated under the assessment order that was set aside could not be allowed to survive. The Court therefore concluded that the impugned recovery orders based on the set aside assessment were liable to be quashed. The Court, however, expressly left open the right of the revenue to recover any amount found due under the fresh assessment order dated 21.09.2015 by following the legal procedure recognised by law. [Paras 5]

Impugned recovery/attachment orders issued pursuant to the assessment that was set aside are quashed; respondent is not precluded from recovering any amounts due under the fresh assessment order of 21.09.2015 by appropriate legal proceedings.

Final Conclusion: Writ petition allowed; impugned recovery orders set aside for having been issued pursuant to an assessment order already set aside, subject to the respondent's right to pursue recovery under the subsequent fresh assessment by lawful proceedings; connected petitions closed, no costs.

Maintainability of writ petition in presence of alternative statutory remedy - doctrine of exhaustion of statutory remedies - discretion under Article 226 to bypass statutory remedies - availability of statutory appeal with condonation power

Maintainability of writ petition in presence of alternative statutory remedy - doctrine of exhaustion of statutory remedies - availability of statutory appeal with condonation power - Writ petition dismissed for failure to avail the statutory appeal remedy under the TNVAT Act in respect of liability for the year 2014-2015. - HELD THAT: - The petition challenges the assessment order for 2014-2015 but the statute provided an alternative remedy by way of appeal to the Appellate Authority under Section 51 of the TNVAT Act, which also permits the Appellate Authority to condone delay for a further period. The petitioner did not prefer the statutory appeal and offered no acceptable explanation for bypassing the prescribed remedy. Applying the settled principle that Article 226 is not intended to short circuit or circumvent statutory procedures, and relying on the reasoning in Assistant Collector of Central Excise v. Dunlop India Ltd. that discretionary writ jurisdiction should not ordinarily be exercised where adequate statutory remedies exist (particularly in revenue matters), the Court refused to entertain the writ and expressly declined to adjudicate the merits of the departmental order. [Paras 3, 4, 5]

Writ petition dismissed for non interference due to non exhaustion of the statutory appeal remedy; no adjudication on merits.

Final Conclusion: The writ petition challenging the assessment for 2014-2015 is dismissed because the petitioner failed to avail the statutory appeal mechanism under the TNVAT Act and offered no acceptable reason to warrant exercise of discretionary writ jurisdiction; the Court did not decide the merits.

Mechanical adoption of Enforcement Wing report - independent assessment under Section 27(2) of the Tamil Nadu Value Added Tax Act, 2006 - burden of proof under Section 17 of the Tamil Nadu Value Added Tax Act, 2006 - principles of natural justice - furnishing relied documents and personal hearing - remand for fresh consideration

Mechanical adoption of Enforcement Wing report - independent assessment under Section 27(2) of the Tamil Nadu Value Added Tax Act, 2006 - burden of proof under Section 17 of the Tamil Nadu Value Added Tax Act, 2006 - Validity of the assessment orders where the Assessing Officer relied on Enforcement Wing findings without making an independent assessment - HELD THAT: - The Court found that the only document seized (lorry receipt No.A713 dated 01.10.2014) related solely to the assessment year 2014-15 but was reflected across all impugned orders, demonstrating mechanical adoption of the Enforcement Wing's report rather than an independent assessment. The burden under Section 17 lies on the dealer to prove transactions are not liable to tax; however, once the petitioner denied inter-state sales and requested copies of documents relied upon, the Assessing Officer was obliged to examine and furnish the material relied upon and to apply independent mind. The impugned orders show no such evaluative exercise and instead confirm the Enforcement Wing's proposal without proper reasoning or proof that seized material constituted taxable inter-state transactions. Having regard to settled law that an independent assessment must be made under Section 27(2), the Court held the orders to be arbitrary and passed by total non-application of mind. [Paras 18, 20, 23]

Impugned assessment orders quashed to the extent they rest on mechanical acceptance of the Enforcement Wing report and without independent assessment; matter remanded for fresh consideration.

Principles of natural justice - furnishing relied documents and personal hearing - remand for fresh consideration - Whether principles of natural justice were complied with in assessment proceedings, in particular furnishing of documents relied upon and affording opportunity of personal hearing - HELD THAT: - The petitioner expressly requested specific particulars and copies of documents (name of alleged interstate sellers, dates and values of alleged sales, copies of lorry receipts, freight details and purchase invoices). The receipt of those replies is not disputed, yet the Assessing Officer did not furnish the documents relied upon and proceeded to pass the orders. The Court held that failure to supply the material on which revision was proposed and to afford effective opportunity of personal hearing amounted to violation of natural justice. Consequently, the proceedings could not stand and required remand so that the petitioner may be furnished the relied documents, be given opportunity for personal hearing, and the Assessing Officer may pass fresh orders on merits. [Paras 16, 21, 25]

Impugned orders quashed for violation of natural justice; matter remanded to enable furnishing of relied documents, personal hearing and fresh adjudication.

Final Conclusion: The impugned assessment orders for the assessment years 2011-12, 2012-13, 2013-14 and 2014-15 are quashed and the matters remanded to the Assessing Officer for fresh consideration on merits after furnishing to the petitioner all documents relied upon and affording opportunity of personal hearing; final orders to be passed within twelve weeks from receipt of this order.

Violation of principles of natural justice - right to personal hearing - non-consideration of reply to revision of assessment notice - remand for fresh consideration

Violation of principles of natural justice - right to personal hearing - non-consideration of reply to revision of assessment notice - Impugned assessment orders were passed in breach of natural justice by not considering the assessee's replies and by not affording personal hearing. - HELD THAT: - The petitioner produced delivery/acknowledgement evidence showing that replies to the revision of assessment notices were sent and received by the Assistant Commissioner. The respondents did not produce contra-evidence specifically denying receipt and, notwithstanding their affidavit alleging opportunity was given, the assessment orders do not record any personal hearing or consideration of the replies. In these circumstances, and having regard to the settled legal position that personal hearing is mandatory, the Court accepted the petitioner's contention that the replies were not considered and that the assessee was denied the right of personal hearing, constituting a breach of natural justice. [Paras 8, 9, 10]

Findings of breach of natural justice established; impugned assessment orders are vitiated for non-consideration of replies and for denial of personal hearing.

Remand for fresh consideration - Relief to be granted by quashing the impugned orders and remanding the matter for fresh adjudication after affording opportunity and personal hearing. - HELD THAT: - Because the assessment orders were passed without considering the replies and without providing personal hearing, the Court set aside the impugned orders and remanded the matters to the assessing authority for fresh consideration on merits. The authority was directed to afford the petitioner sufficient opportunity to raise all objections and to grant personal hearing, and to pass final orders in accordance with law within twelve weeks from receipt of the copy of this order. [Paras 11]

Impugned orders dated 15.10.2018 quashed; matters remanded for fresh consideration with directions to afford opportunity and personal hearing and to decide within twelve weeks.

Final Conclusion: Writ petitions allowed; assessment orders for 2013-2014 and 2014-2015 quashed and remitted for fresh consideration after affording the assessee the right of personal hearing and opportunity to raise objections; disposal directed within twelve weeks.