TaxTMI Updates e-Newsletter
Dec 25,2021

Right to carry forward transitional CENVAT credit - distinct purposes of FORM GST TRAN-1 and FORM GST TRAN-2 - revise TRAN-1 declaration under Rule 120A within overall period of 180 days - procedural technicalities should not extinguish substantive rights - judicial direction to decide pending representations for rectification

Distinct purposes of FORM GST TRAN-1 and FORM GST TRAN-2 - revise TRAN-1 declaration under Rule 120A within overall period of 180 days - Whether filing of FORM GST TRAN-2 was intended as a mechanism to rectify or substitute omitted credits in FORM GST TRAN-1 and whether the revision facility under Rule 120A effectively extended the period for revising TRAN-1 to match the extended due date for TRAN-1. - HELD THAT: - The Court analysed Rule 117(1) and Rule 117(4) and held that TRAN-1 and TRAN-2 serve distinct objectives: TRAN-1 is the electronic declaration by a registered person entitled to take transitional input tax credit under Section 140, whereas TRAN-2 enables a person registered under GST but not under the existing law to claim credit for goods held in stock without documentary evidence. The insertion of Rule 120A permitted revision of TRAN-1 but only within the overall 180-day period (i.e., up to 27.12.2017). Although the due date for filing TRAN-1 was subsequently extended to 31.03.2020, the time for filing a revised TRAN-1 under Rule 120A was not extended. Therefore TRAN-2 cannot be treated as a surrogate mechanism for rectifying mistakes made in TRAN-1, and the legislature's separate treatment of revision under Rule 120A indicates the intended temporal limit for revising TRAN-1. [Paras 12, 15, 16, 20]

TRAN-1 and TRAN-2 are distinct; TRAN-2 is not a mechanism for rectifying TRAN-1 omissions, and the revision facility under Rule 120A was confined to the overall 180-day period for TRAN-1 revisions.

Right to carry forward transitional CENVAT credit - procedural technicalities should not extinguish substantive rights - judicial direction to decide pending representations for rectification - Whether the petitioners' representations dated 04.03.2020 seeking permission to rectify inadvertent omissions in their TRAN-1 forms should be considered and decided by the respondents despite the limitation/technicality relied upon by the Revenue. - HELD THAT: - The Court recognised that the petitioners had paid CENVAT and, under law, were entitled to carry forward such credit; this entitlement is a substantive right. Citing authorities and principles that procedural or technical requirements should not defeat substantive rights, the Court held that the petitioners' representations, filed within the extended period for filing TRAN-1, merit consideration on their own merits. The Court directed respondent No.1 to consider and decide the representations either by reopening the online portal or by manual means, thereby requiring fresh administrative action rather than an outright dismissal on the technical ground of time-limit for revision. The order reflects a balancing of statutory scheme and the protection of substantive credit rights against purely procedural bars. [Paras 21, 22, 24, 25, 26]

Respondent No.1 is directed to consider and decide the petitioners' representations dated 04.03.2020 on merits (by reopening the portal or manually) within four weeks; the writ petitions are allowed to that extent.

Final Conclusion: The Court held that TRAN-1 and TRAN-2 serve distinct statutory purposes and that TRAN-2 cannot be used to rectify omissions in TRAN-1; nonetheless, because the right to carry forward transitional CENVAT credit is substantive, the petitioners' representations for correction of inadvertent errors in TRAN-1 must be considered afresh by respondent No.1 and a decision taken within four weeks.

Opportunity of being heard - audi alteram partem - natural justice - Rule 92(3) of the CGST Rules - refund under Section 54 - rejection of refund without hearing renders order non est

Rule 92(3) of the CGST Rules - opportunity of being heard - refund under Section 54 - audi alteram partem - natural justice - Validity of rejection of the petitioner's refund claims without granting an opportunity of being heard as mandated by Rule 92(3) read with Section 54. - HELD THAT: - The Court held that sub rule (3) of Rule 92 requires that when the proper officer is satisfied that a refund claim or part thereof is not admissible, he must issue notice in Form GST RFD 08 calling for a reply in Form GST RFD 09 and, after considering that reply, pass an order sanctioning or rejecting the refund; the proviso expressly disallows rejection without giving the applicant an opportunity of being heard. The expression 'opportunity of being heard' is an application of the audi alteram partem principle and is not a mere formality. The Court found that telephonic conversations or email exchanges cannot substitute for the statutory requirement of hearing, particularly because no parallel time limit for rejection is prescribed. Reliance on the Division Bench decision in BA CONTINUUM INDIA (P) LIMITED supported that rejection without hearing violates Rule 92(3) and natural justice, rendering such orders non est in law and amenable to writ jurisdiction despite alternate appellate remedies. In the facts of these petitions the impugned communications rejecting the refund claims were passed without affording the statutorily mandated opportunity to be heard; therefore those orders must be set aside and the respondent directed to afford fresh hearing. [Paras 10, 11, 12, 13, 14]

Impugned rejection orders set aside; respondent directed to hear the petitioner afresh on the refund applications within two months after receipt of copy of the order, all contentions kept open.

Final Conclusion: Writ petitions allowed to the extent that the rejection of the refund claims is quashed and the respondent is directed to afford the petitioner an opportunity of being heard and to decide the refund applications afresh within two months; other contentions reserved and no costs.

Service by registered post with acknowledgement and statutory deeming fiction - order under Section 129(3) of the Central Goods and Services Tax Act - right to pursue statutory remedies and entitlement to certified copy - invocation of bank guarantee and interim abeyance

Service by registered post with acknowledgement and statutory deeming fiction - order under Section 129(3) of the Central Goods and Services Tax Act - The question whether the order dated 25.01.2020 under Section 129(3) of the Act was served on the petitioner. - HELD THAT: - The Court applied Section 169, which prescribes modes of service including registered post with acknowledgement and creates a statutory deeming fiction as to receipt. On the materials (dispatch register showing dispatch on 28.01.2020 and the acknowledgement card), the Court held that the order sent by registered post must be deemed to have been received on 03.02.2020. The statutory fiction of deemed service under Section 169(2)-(3) leaves no room to assume non-receipt where service by registered post with acknowledgement is established by records produced by the respondent. [Paras 8]

Order dated 25.01.2020 was deemed served on the petitioner on 03.02.2020.

Right to pursue statutory remedies and entitlement to certified copy - Whether the petitioner is entitled to be supplied a certified copy of the adjudication order to enable pursuit of statutory remedies. - HELD THAT: - Although the Court found deemed service, it recognised that the petitioner contended non-receipt or loss of the order and relied on extension/condonation principles to protect limitation. The Court held that, irrespective of the deeming fiction, where the petitioner seeks a certified copy to enable exercise of statutory remedies, it is incumbent on the authority to furnish the certified copy. Exercising its discretion, the Court directed the respondent to issue the certified copy forthwith so that the petitioner may pursue available remedies in accordance with law. [Paras 9]

The respondent is directed to issue a certified copy of Order No. IX/CR-69/19/6207/19 dated 25.01.2020 to the petitioner forthwith.

Invocation of bank guarantee and interim abeyance - Whether the bank guarantee invoked by the respondent should be allowed to be enforced immediately or kept in abeyance to enable the petitioner to pursue remedies. - HELD THAT: - Recognising the petitioner's entitlement to a certified copy and the need to enable pursuit of statutory remedies, the Court exercised its equitable discretion to restrain enforcement of the bank guarantee. The Court ordered that invocation of the bank guarantee (by the letter of invocation relied upon by the petitioner) be kept in abeyance and that the bank guarantee be kept alive for a limited period to enable the petitioner to act on receipt of the certified copy. This interlocutory relief was granted to preserve the petitioner's ability to seek remedies without prejudice to the rights of the respondent thereafter. [Paras 9]

Invocation of the bank guarantee is kept in abeyance and the bank guarantee shall be kept alive for a period of 60 days from the date of the order to enable the petitioner to pursue statutory remedies.

Final Conclusion: Deeming of service under Section 169 established deemed receipt of the Section 129(3) order on 03.02.2020; nevertheless the Court directed issuance of a certified copy of the adjudication order and kept invocation of the bank guarantee in abeyance for 60 days to enable the petitioner to pursue statutory remedies.

Confiscation under section 130 of the Central Goods and Services Tax Act, 2017 - intention to evade tax - absence of mandatory documents/delivery challan prescribed under section 31 read with rule 55 of the CGST Rules, 2017 - judicial review under Article 226 of the Constitution - limits on interference with findings of fact - availability of statutory appellate remedy under section 107 of the CGST Act

Confiscation under section 130 of the Central Goods and Services Tax Act, 2017 - intention to evade tax - absence of mandatory documents/delivery challan prescribed under section 31 read with rule 55 of the CGST Rules, 2017 - Validity of the order of confiscation based on the Proper Officer's satisfaction that absence of mandatory documents and attendant circumstances demonstrated an intention to evade tax. - HELD THAT: - The Court recorded that the Proper Officer found the petitioner transporting a large quantity of gold ornaments without the mandatory delivery challan or other documents required under section 31 read with rule 55. After notice and hearing, the officer concluded that the omission and surrounding circumstances clearly evidenced an intention to evade tax. The Court treated that conclusion as a finding of fact and held that such a factual satisfaction by the Proper Officer cannot be set aside under Article 226 unless it is perverse or unsupported by material. The petitioner's contention that omission to carry the delivery challan may at best attract penalty and not confiscation was rejected on the ground that the officer's satisfaction about intent was a factual conclusion supported by circumstances. [Paras 9, 10]

The confiscation order was upheld as the Proper Officer's finding of intention to evade tax, based on absence of mandatory documents and attendant circumstances, was a factual conclusion not to be interfered with under Article 226.

Judicial review under Article 226 of the Constitution - limits on interference with findings of fact - availability of statutory appellate remedy under section 107 of the CGST Act - Whether the High Court should interfere with the confiscation order in exercise of writ jurisdiction under Article 226 given existence of disputed factual questions and statutory appellate remedy. - HELD THAT: - The Court held that the petition raised disputed questions of fact regarding the Proper Officer's satisfaction about evasion of tax. Article 226 is not an appropriate forum to reappraise such factual conclusions unless they are perverse or devoid of evidence. The existence of an efficacious statutory remedy of appeal under section 107 of the Act further militated against interference; the petitioner had an alternative remedy which he had not availed. Accordingly, the Court declined to entertain merits afresh and refused to set aside the order in writ jurisdiction. [Paras 9, 10]

Writ jurisdiction under Article 226 was not exercised to revisit the Proper Officer's factual satisfaction; the petitioner was directed to pursue the statutory appellate remedy.

Final Conclusion: Writ petition dismissed. The High Court upheld the confiscation order, holding that the Proper Officer's factual satisfaction of intention to evade tax, based on absence of mandatory documents and surrounding circumstances, did not warrant interference under Article 226 and the petitioner ought to seek remedy by statutory appeal.

Definition of agricultural produce - exemption under Notification No. 11/2017 C.T. (Rate) and 12/2017 C.T. (Rate) - classification under HSN 0910 - support services to agriculture - taxability of commission agent services - registration under the CGST Act

Definition of agricultural produce - classification under HSN 0910 - Dried and polished turmeric in the facts of this case does not qualify as 'agricultural produce' and is taxable. - HELD THAT: - The Authority examined the post harvest processes said to have been carried out (drying and polishing) and found that such processing makes the turmeric marketable and adds to its value; the applicant did not sufficiently prove that such processes were merely the minimal operations ordinarily done by a cultivator on the farm. Chapter headings and tariff entries show turmeric is covered under Chapter 0910 as a spice; Fresh/non processed turmeric may attract nil rate but dried and polished turmeric falls under HSN 0910 30 20 and is chargeable to GST at 5%. The Authority relied on the tariff classification and explanatory circular to conclude that the subject turmeric is not within the notification definition of agricultural produce and is therefore not exempted from GST. [Paras 5]

Dried and polished turmeric is not an 'agricultural produce'; HSN 0910 30 20; GST rate 5%.

Support services to agriculture - exemption under Notification No. 11/2017 C.T. (Rate) and 12/2017 C.T. (Rate) - taxability of commission agent services - Services rendered by the applicant as a commission agent in relation to the sale of the subject turmeric are not exempt as 'support services to agriculture' and are taxable. - HELD THAT: - Because the product supplied (dried and polished turmeric) does not fall within the notification definition of 'agricultural produce', clause (g) of Sr. No. 54 (Heading 9986) of Notification No.12/2017 CT(R) and Sr. No.24 of Notification No.11/2017 CT(R) cannot be invoked to exempt the commission agent's services. The Authority noted relevant precedents and circulars but applied the tariff classification and statutory definition to hold that the impugned services are outside the notified exemption and thus taxable. [Paras 5]

The applicant's commission agent services in respect of the subject turmeric are taxable and not exempt under the cited notifications.

Registration under the CGST Act - taxability of commission agent services - The applicant is required to obtain registration under the CGST Act for the impugned activities. - HELD THAT: - As the Authority held the services to be taxable (not exempt), the corollary is that the applicant is required to register under the relevant provisions of the CGST Act. The Authority therefore declined the submissions that a commission agent supplying on behalf of an agriculturist (where supplies are not taxable) would be outside compulsory registration, because in the present case the supplies are taxable. [Paras 5]

The applicant must register under the relevant provisions of the CGST Act for the impugned activities.

Final Conclusion: The Advance Ruling holds that dried and polished turmeric in the facts before the Authority is not an 'agricultural produce' (HSN 0910 30 20) and is taxable at 5%; the applicant's commission agent services in relation to that turmeric are not exempt under the cited notifications and are taxable; accordingly the applicant is required to obtain registration under the CGST Act for the impugned activities.

Renting of motor vehicle - transfer of right to use / effective possession and control - taxable supply under GST - Tariff Heading 9966 - cost of fuel included in the consideration - input tax credit eligibility linked to rate choice

Taxable supply under GST - renting of motor vehicle - transfer of right to use / effective possession and control - Services supplied by the applicant to NMMT by supplying, operating and maintaining air conditioned electrically operated buses are taxable under GST. - HELD THAT: - The Authority examined the Operator Agreement and found that the applicant retained ownership of buses but transferred effective possession and control to NMMT: buses were to be plied on routes identified by NMMT, consideration was payable by NMMT on per kilometre basis, and the applicant could not use the buses otherwise. The recipient of the service is NMMT and not the passenger. On these facts, the activity falls within the concept of 'renting of motor vehicle' and therefore constitutes a taxable supply under the GST law. The Authority relied on its prior decision in M/s M P Enterprises & Associates Limited where materially identical contractual terms (save that fuel there was diesel) led to the same conclusion, and found no reason to depart from that reasoning where fuel is electricity charged by the applicant. [Paras 5]

Answered in the affirmative: the services are taxable as renting of motor vehicle.

Tariff Heading 9966 - cost of fuel included in the consideration - Appropriate classification and applicable GST rate for the services. - HELD THAT: - The Authority held that the services are classifiable under Tariff Heading 9966 as 'renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient.' The contract price is inclusive of all charges including the cost of charging batteries (electricity), and therefore satisfies the condition that cost of fuel is included in the consideration. Consequentially, the applicant may opt for the concessional scheme applicable to that entry: either pay tax at the lower rate without availing input tax credit or pay the higher rate with entitlement to input tax credit. [Paras 5]

Classified under Tariff Heading 9966; taxable at 12% with availment of input tax credit or 5% without availment of input tax credit.

Input tax credit eligibility linked to rate choice - Whether the applicant is eligible to avail input tax credit on inputs used in supplying services to NMMT. - HELD THAT: - The Authority held that entitlement to input tax credit depends on the rate option exercised by the applicant under the relevant rate notification. If the applicant pays tax at the rate which permits credit (i.e. the standard rate under the entry), it may claim input tax credit on procurement of inputs used for supplying the service. If the applicant elects the lower rate that disallows input tax credit, such credit cannot be availed. The Authority applied the same reasoning adopted in prior similar rulings and the specific conditions of the Rate Notification. [Paras 5]

Applicant may avail input tax credit only if it pays tax at the rate that permits such credit (i.e. the higher rate); if it opts for the lower rate, input tax credit is not available.

Final Conclusion: The Authority ruled that the applicant's supply of electric AC buses to NMMT is a taxable activity falling under 'renting of motor vehicle' and is classifiable under Tariff Heading 9966; GST is payable at 12% with the availment of input tax credit or at 5% without such availment, and input tax credit is available only if the applicant pays tax at the rate that permits credit.

Employees' contribution to Provident Fund and ESI - deduction under section 43B and section 36(1)(va) (PF/ESI employee contribution) - retrospective operation of Finance Act, 2021 amendment - entitlement to deduction where payment made before due date of filing return under section 139(1)

Employees' contribution to Provident Fund and ESI - entitlement to deduction where payment made before due date of filing return under section 139(1) - deduction under section 43B and section 36(1)(va) (PF/ESI employee contribution) - Employees' contribution to PF and ESI paid before the due date of filing the return is deductible for the relevant assessment year. - HELD THAT: - Relying on the binding decision of the jurisdictional High Court in Essae Teraoka Pvt. Ltd v. DCIT and the Tribunal's precedent in M/s. Shakuntala Agarbathi Company v. DCIT, the Tribunal held that where the assessee has remitted employees' contribution to PF/ESI prior to the due date for filing the return under section 139(1), such payments qualify for deduction. The Tribunal followed the High Court's construction that the word 'contribution' in the relevant provision encompasses both employer and employee contributions and that timely payment prior to the return-filing due date entitles the employer to deduction. Applying those authorities to the facts, the assessee's payment before the due date warranted deletion of the disallowance made by the Assessing Officer. [Paras 7]

Disallowance in respect of employees' contribution to PF/ESI deleted and deduction granted.

Retrospective operation of Finance Act, 2021 amendment - deduction under section 43B and section 36(1)(va) (PF/ESI employee contribution) - The amendment made by Finance Act, 2021 to section 36(1)(va) and section 43B is not declaratory or retrospective so as to apply to the assessment year under consideration. - HELD THAT: - The Tribunal considered whether the Finance Act, 2021 amendment to section 36(1)(va) and section 43B could be treated as clarificatory and retrospective. Citing the Supreme Court's guidance that a provision stated to 'remove doubts' cannot be presumed retrospective if it alters previously settled law, and noting the jurisdictional High Court's earlier decision favourable to the assessee, the Tribunal concluded that the amendment changes the legal position adversely to the assessee and therefore cannot be given retrospective effect. The amendment is effective from 01.04.2021 and applies from AY 2021-2022 onwards; consequently it does not govern the relevant assessment year. [Paras 7]

Amendment by Finance Act, 2021 held not applicable to the assessment year in issue.

Final Conclusion: Appeal allowed; disallowance of employees' contribution to PF/ESI deleted and deduction granted for AY 2018-2019; Finance Act, 2021 amendment to sections 36(1)(va) and 43B held not to apply to the assessment year under consideration.

Deductibility of employees' contribution to provident fund and ESI - application of Section 43B to employee contribution - due date of filing return under Section 139(1) - prospective operation of Finance Act, 2021 amendment - legislative intent and Notes on Clauses for determining retrospectivity

Deductibility of employees' contribution to provident fund and ESI - due date of filing return under Section 139(1) - Whether employees' contribution to PF/ESI remitted after the due date prescribed by the PF/ESI statutes but before the due date of filing return under Section 139(1) is allowable as a deduction under the Income-tax Act for the assessment year under consideration. - HELD THAT: - The Tribunal followed its earlier decision in Lumino Industries Limited, holding that where the assessee has remitted employees' contributions to funds set up for employee welfare before the due date for filing the return under Section 139(1), such payments are allowable as deduction for the assessment year in question. The Tribunal noted binding decisions of the jurisdictional High Court that accepted the claim where payments were made before filing of the return and emphasised that, prior to the Finance Act, 2021 amendment, Section 43B was not treated as applying to employee contributions for determining the 'due date' under Section 36(1)(va). Applying that precedent to the facts of the present case, the disallowance by the Assessing Officer and confirmation by the CIT(A) were set aside and the deduction allowed. [Paras 3]

Disallowance of employees' contribution to PF/ESI (paid after statutory due date but before filing of return) deleted and deduction allowed for AY 2017-18.

Prospective operation of Finance Act, 2021 amendment - application of Section 43B to employee contribution - legislative intent and Notes on Clauses for determining retrospectivity - Whether the amendment introduced by Finance Act, 2021 (clarifying that Section 43B does not apply to employee contributions for determining the 'due date' under Section 36(1)(va)) operates retrospectively or prospectively. - HELD THAT: - The Tribunal applied the test of legislative intent as explained by the Supreme Court (Vatika Township and Snowtex) and examined the Notes on Clauses of the Finance Bill, 2021. The Notes expressly stated that the amendments take effect from 1 April 2021 and apply to AY 2021-22 and subsequent years. On this basis the Tribunal concluded that the amendment is prospective in operation and does not affect earlier assessment years. Consequently, the post-amendment interpretation favouring denial of deduction on the ground that Section 43B applies was held inapplicable to the assessment year before the Tribunal. [Paras 17, 18]

Finance Act, 2021 amendment is prospective (effective 1 April 2021) and therefore does not apply to AY 2017-18.

Final Conclusion: The Tribunal allowed the appeal: the disallowance of employees' contributions to PF and ESI (paid after statutory due dates but before filing of return) for AY 2017-18 was deleted and the deduction allowed; the Finance Act, 2021 amendment was held to be prospective (effective 1 April 2021) and therefore not applicable to the assessment year in issue.

Penalty under section 271(1)(c) for furnishing inaccurate particulars of income - Bona fide belief - Classification of rental income as business income versus income from house property - Levy of penalty where income is offered but assessed under a different head

Penalty under section 271(1)(c) for furnishing inaccurate particulars of income - Bona fide belief - Classification of rental income as business income versus income from house property - Whether penalty under section 271(1)(c) is leviable where the assessee offered rental receipts as business income bona fide, there was no concealment and the assessing officer/authorities assessed the same under the head 'income from house property'. - HELD THAT: - The Tribunal held that the assessee had disclosed the rental receipts and offered them to tax as business income based on the partnership firm's object of providing "space solutions" and on the footing that furnished space with fixtures and services was being provided to clients. The assessing officer and subsequent appellate authorities preferred a different head of income, treating the receipts as income from house property. The Tribunal recorded that there was no concealment and that the assessee acted under a bona fide belief; the same treatment had been accepted by the AO in the immediately preceding assessment year. In these circumstances the Tribunal concluded that mere disagreement by the tax authorities about the appropriate head of assessment does not convert the disclosure into furnishing inaccurate particulars attracting penalty under section 271(1)(c). Consequently, levy of penalty was not justified and was to be deleted. [Paras 8, 9]

Penalty under section 271(1)(c) deleted and the appeal allowed.

Final Conclusion: The Tribunal allowed the appeal for AY 2013-14, deleting the penalty under section 271(1)(c) because the rental income was disclosed and offered to tax under a bona fide belief as business income, and mere reassessment under a different head by the authorities did not justify penalty.

Deductibility of employee contributions to PF and ESI deposited after statutory due date but before filing return - application of section 43B to employee's share of statutory contributions - prospective operation of clarificatory amendments made by Finance Act, 2021 to sections 36(1)(va) and 43B - consequential deletion of interest under sections 234A, 234B and 234C

Deductibility of employee contributions to PF and ESI deposited after statutory due date but before filing return - application of section 43B to employee's share of statutory contributions - Whether disallowance of employees' contributions towards PF and ESI, deposited after the statutory due date but before filing return under section 139(1), was sustainable - HELD THAT: - The Tribunal followed a coordinate-bench decision which held that employees' share of PF and ESI deposited after the prescribed time under the respective enactments but before filing the return under section 139(1) is allowable and the disallowance made by the AO (and confirmed by the CIT(A)) was not sustainable. The coordinate bench relied on authoritative High Court decisions in the jurisdiction that treated employee's and employer's shares alike for the purpose of section 43B, and applied the principle that where two reasonable constructions are possible, the one favourable to the assessee is to be adopted. Applying that reasoning to the facts of these appeals, the Tribunal deleted the additions made on account of delayed deposit of employees' contributions for both assessment years.

Disallowances on account of delayed deposit of employees' contributions to PF and ESI for AYs 2018-2019 and 2019-2020 deleted.

Prospective operation of clarificatory amendments made by Finance Act, 2021 to sections 36(1)(va) and 43B - Whether the Explanations inserted by the Finance Act, 2021 to sections 36(1)(va) and 43B operate retrospectively for the assessment years under consideration - HELD THAT: - The Tribunal noted earlier decisions of various benches, the CBDT's memorandum and the coordinate-bench reasoning that the amendments effected by the Finance Act, 2021 (inserting Explanations) operate from 1 April 2021 (assessment year 2021-22 onwards) and are not retrospective. Consequently, those amendments could not be applied to disallow the deductions for the assessment years 2018-19 and 2019-20. The Tribunal therefore held that the CIT(A)'s view that the amendments have retrospective effect was unsustainable.

Clarificatory amendments by Finance Act, 2021 held prospective and not applicable to the assessment years 2018-2019 and 2019-2020.

Consequential deletion of interest under sections 234A, 234B and 234C - Whether interest charged under sections 234A, 234B and 234C survives after deletion of the substantive additions - HELD THAT: - As the substantive additions arising from alleged non-deduction of employees' contributions were deleted, the Tribunal held that the interest components charged by the AO and confirmed by the CIT(A) under sections 234A, 234B and 234C could not survive. Accordingly, the interest levied for both assessment years was deleted as consequential relief.

Interest charged under sections 234A, 234B and 234C for AYs 2018-2019 and 2019-2020 deleted consequentially.

Final Conclusion: Both appeals are allowed: disallowances of employees' contributions to PF and ESI for AYs 2018-2019 and 2019-2020 are deleted, the Finance Act, 2021 amendments are not applicable retrospectively to these years, and the interest charged under sections 234A/234B/234C is deleted consequentially.

Assessment of income on ad hoc basis - Rejection of books of account and estimation of income - Comparative gross profit rate in assessment - Allowance of interest and depreciation after appellate scrutiny - Appreciation of facts and evidence by appellate tribunal - Interference by High Court under Section 260-A

Rejection of books of account and estimation of income - Comparative gross profit rate in assessment - Allowance of interest and depreciation after appellate scrutiny - Appreciation of facts and evidence by appellate tribunal - Assessment of income on ad hoc basis - Validity of the ITAT's assessment of the assessee's income at Rs. 50 lakh in place of returned loss, notwithstanding the Assessing Officer's rejection of books and estimation of profit, and whether the High Court should interfere under Section 260-A. - HELD THAT: - The ITAT examined the record and noted admitted technical defects in the assessee's books but placed weight on the gross profit rate shown for the year under consideration (29.29%) vis-a -vis the immediately preceding year (27.87%). On that factual comparison and after scrutiny of the profit and loss accounts, the ITAT held that the gross profit rate was reasonable, allowed claim for interest and depreciation (except on assets added during the year as directed earlier), and fixed the assessee's income at Rs. 50 lakh. The High Court held that the ITAT's conclusion was an appreciation of evidence and findings of fact based on material on record, not perverse, and therefore not susceptible to interference under Section 260-A. The Court observed that the Revenue failed to demonstrate any perversity or legal error in the Tribunal's factual conclusions, which rested on comparative gross profit analysis and allowance of expenditures after verification.

The ITAT's assessment and factual findings are sustained; no substantial question of law arises for adjudication and the Revenue appeals are dismissed.

Final Conclusion: The High Court dismissed the appeals under Section 260-A, holding that the ITAT's conclusion-based on comparison of gross profit rates, verification of accounts, and allowance of certain expenditures-was an appreciation of evidence and not amenable to interference; no substantial question of law was made out.

Rectification under Section 154 - e-Assessment Scheme / faceless assessment - vitiation for non-consideration of pending application - remand for fresh assessment - consideration of response to show cause notice

Rectification under Section 154 - vitiation for non-consideration of pending application - consideration of response to show cause notice - remand for fresh assessment - Impugned assessment order vitiated for failure to consider pending rectification application and petitioner's response to the show cause notice; matter remanded for fresh assessment. - HELD THAT: - The petitioner filed a rectification petition under Section 154 on 17.01.2020 to correct the inadvertent business code entry and to secure consequential reliefs including depreciation. While the return was selected for complete scrutiny under the National e-Assessment Centre, the faceless assessment authority passed the final assessment order without taking the pending rectification application into account and without considering the petitioner's response dated 17.03.2021 to the draft assessment and show cause notice. The Court held that where a return is taken up for complete scrutiny and a rectification petition is pending before completion of assessment proceedings, the assessing authority ought to have considered that rectification application. The omission to do so vitiated the impugned order. In addition, the response filed by the petitioner in reply to the draft assessment and show cause notice must also be considered in the fresh proceedings. For these reasons the assessment order was set aside and the matter remanded to the National e-Assessment Centre, Delhi for passing a fresh assessment after giving effect to the rectification petition and taking into consideration the petitioner's response. [Paras 9, 10]

Assessment order dated 17.03.2021 set aside; matter remanded to respondent No.1 to pass a fresh assessment order after giving effect to the rectification petition dated 17.01.2020 and considering the petitioner's response dated 17.03.2021.

Final Conclusion: Writ petition allowed in part: impugned assessment order dated 17.03.2021 is set aside and the matter remanded to the National e-Assessment Centre, Delhi for fresh assessment after giving effect to the rectification petition and considering the response to the draft assessment; writ disposed of and no costs.

Full and true disclosure - manner in which undisclosed income was derived - satisfaction to entertain a declaration at the admission stage - scope of the Settlement Commission at the first/entertainment stage - presumption arising under Section 132(4A), Section 56(2)(vii) and Section 292C - non-application of mind - remand for fresh consideration by the Settlement Commission

Full and true disclosure - satisfaction to entertain a declaration at the admission stage - scope of the Settlement Commission at the first/entertainment stage - Whether the Income Tax Settlement Commission was justified in summarily rejecting the petitioner's settlement application at the admission stage on the ground that the manner of earning the undisclosed income was not satisfactorily explained. - HELD THAT: - The Court applied the principle in Ajmera Housing Corporation to hold that an application under the settlement provisions requires the declarant to make a "full and true" disclosure of undisclosed income, the manner of its derivation and computation of additional tax; at the admission stage the Settlement Commission's role is to record a tentative satisfaction on these aspects and not to conduct an adjudication on merits. The burden of the declarant is to disclose; proving the disclosure in full detail and resolving competing inferences is for later stages after the revenue is heard. The Settlement Commission rejected the petition at the threshold without recording a clear satisfaction and without considering material produced by the petitioner (returns, bank statements, will deed, invoices, the Memorandum of Agreement and other documents). That approach amounted to non-application of mind because the Commission failed to examine the documentary material on record before forming its tentative opinion; rejection at the admission stage is permissible only if the application is wholly bogus or unfounded on its face, which the Commission did not demonstrate here. Consequently the summary rejection on the stated ground was unsustainable.

The summary rejection of the petition at the admission stage for failure to explain the manner of earning the undisclosed income was set aside.

Presumption arising under Section 132(4A), Section 56(2)(vii) and Section 292C - manner in which undisclosed income was derived - remand for fresh consideration by the Settlement Commission - Whether the Settlement Commission properly considered (or ought to have considered) the Memorandum of Agreement, documentary evidence and the legal presumptions applicable to cash seized from the petitioner before rejecting the application, and what relief should follow. - HELD THAT: - The Court found that the Settlement Commission did not consider the effect of the Memorandum of Agreement and the documentary material placed before it, nor did it address the legal presumption that may arise under the cited statutory provisions when cash is seized and third parties disown the amount. The Commission's treatment of alternative hypothetical possibilities without forming a definite (even tentative) opinion on the material before it demonstrated an approach based on doubts and probabilities rather than on considered satisfaction. Given these defects, the Court held that the matter could not be finally decided on the present record and that the proper course was to set aside the impugned order and remit the matter for reconsideration so that the Settlement Commission (now the Interim Board) may examine the documentary material, apply the relevant legal presumptions and record the requisite satisfaction (or otherwise) in accordance with law.

Order set aside and the matter remitted to the Settlement Commission (interim Board) for fresh consideration in accordance with law.

Final Conclusion: The order of the Income Tax Settlement Commission dated 27.09.2018 is set aside as procedurally and legally unsustainable; the petition is allowed and the matter is remitted to the Settlement Commission (now the Interim Board) to pass a fresh order after considering the material on record and applying the legal principles summarized above, expeditiously.

Revisionary jurisdiction under section 263 - erroneous and prejudicial to the interest of revenue - speculative transaction versus business income - rule of consistency / change of opinion - audit objection as basis for reopening under section 263

Revisionary jurisdiction under section 263 - erroneous and prejudicial to the interest of revenue - speculative transaction versus business income - Whether the Pr. CIT was justified in setting aside the assessments under section 263 on the ground that the loss from day trading was speculative and the AO's order was erroneous and prejudicial to the interest of revenue. - HELD THAT: - The Tribunal held that both limbs of section 263 must be satisfied - the assessment must be erroneous and prejudicial to the revenue. The assessee demonstrated, by alternative and original computations and carry forward positions, that treating the questioned amount as speculative loss would not alter the declared loss or taxable income for AYs 2015-16 and 2016-17 because of substantial brought forward losses which would absorb any recharacterisation. The Pr. CIT did not dispute these computations. In these circumstances there is no revenue loss in the relevant year or subsequent years; therefore the assessment could not be regarded as prejudicial to the interest of revenue and could not be reopened under section 263 on that ground. [Paras 15]

Pr. CIT was not justified in setting aside the assessments under section 263 on the ground of speculative character of the loss because there was no prejudice to the interest of revenue.

Rule of consistency / change of opinion - speculative transaction versus business income - Whether the impugned order under section 263 was sustainable where earlier years with similar transactions had been accepted as business income/loss. - HELD THAT: - The Tribunal found that the assessee had consistently treated day trading and F&O transactions as business income/loss in earlier assessment years, and those assessments had been accepted under section 143(3). Where the AO has adopted one view from among permissible views and applied his mind, merely changing the head of income thereafter amounts to a change of opinion. The Pr. CIT's action, being based on an audit objection and amounting to a retrospective change of head without showing prejudice to revenue, constituted a change of opinion not warranting exercise of revisionary power under section 263. [Paras 16]

The exercise of power under section 263 amounted to impermissible change of opinion and was unsustainable where assessments in earlier years on similar facts were accepted as business income/loss.

Audit objection as basis for reopening under section 263 - revisionary jurisdiction under section 263 - Whether initiation of revisionary proceedings solely on the basis of an audit objection, without establishing prejudice to revenue or lack of inquiry by the AO, justified setting aside the assessments. - HELD THAT: - The Tribunal noted that the Pr. CIT's action was taken on the basis of audit observations which had already been examined during the assessment proceedings. The AO had issued specific queries, received replies, and completed assessment under section 143(3). In the absence of a demonstrable failure of inquiry causing prejudice to revenue (which was not shown because taxable income remained unaffected), initiation based merely on audit objection and the desire for a different mode of enquiry did not satisfy the dual requirement of section 263. [Paras 11, 16]

Revisionary proceedings initiated solely on the basis of audit objection without demonstrable prejudice to revenue or a failure of inquiry by the AO were not sustainable; the section 263 orders were set aside.

Final Conclusion: The Tribunal allowed the appeals, set aside the orders passed by the Pr. CIT under section 263 and restored the assessments framed under section 143(3) for AYs 2015-16 and 2016-17, holding that there was no prejudice to revenue, the action represented a change of opinion and had proceeded from audit objections already examined by the AO.

Deductibility of employees' contribution to provident fund and ESI under Section 36(1)(va) - non-applicability of Section 43B to employees' contribution - prospective versus retrospective operation of tax amendments - legislative intent ascertained from Notes on Clauses to the Finance Bill - binding effect of jurisdictional High Court decisions - followership of Tribunal precedents on identical issues

Deductibility of employees' contribution to provident fund and ESI under Section 36(1)(va) - non-applicability of Section 43B to employees' contribution - prospective versus retrospective operation of tax amendments - legislative intent ascertained from Notes on Clauses to the Finance Bill - followership of Tribunal precedents on identical issues - binding effect of jurisdictional High Court decisions - Deletion of disallowance of employees' contribution to PF/ESI paid after statutory due date but before filing date, for the assessment year under consideration. - HELD THAT: - The Tribunal examined whether belated remittance of employees' contributions to PF/ESI, made after the due date under the respective labour statutes but before the due date for filing the return under section 139(1), is allowable as a deduction under Section 36(1)(va). Relying on the Tribunal's earlier well considered decision in Lumino Industries Limited (common order dated 17 November 2021) dealing with identical facts and law, the Tribunal followed that precedent. The Tribunal further addressed the contention that the Finance Act, 2021 amendment (which clarifies that Section 43B does not apply to employees' contributions) is retrospective. Applying the test of legislative intent as explained by the Supreme Court (including reliance on Notes on Clauses), the Tribunal found the Finance Act, 2021 amendment expressly takes effect from 1 April 2021 (applying to AY 2021-22 and subsequent years) and is thus prospective. Consequently, for assessment years prior to AY 2021-22 the pre amendment position applies; the binding decisions of the jurisdictional Calcutta High Court and favorable Tribunal precedents govern, and payments made before filing of the return under section 139(1) are allowable. On that basis the disallowance confirmed by the lower authorities was set aside and the deduction directed to be allowed. [Paras 2, 3]

Disallowance deleted and claim of deduction for employees' contributions remitted before the return filing date under section 139(1) allowed for the assessment year before AY 2021-22.

Final Conclusion: The Tribunal, following its preceding decision in Lumino Industries Limited and applying the legislative intent test (Notes on Clauses), held the Finance Act, 2021 amendment to be prospective and allowed the assessee's claim: the disallowance of employees' PF/ESI contribution (paid after statutory due date but before filing date) is deleted for AY 2017-18.

Allowability of employees' contribution to provident fund and ESI as deduction under Section 36(1)(va) when remitted after statutory due date but before filing return - applicability of Section 43B to employees' contribution and distinction between employer's and employee's contribution - retrospective versus prospective operation of Finance Act, 2021 amendment/Explanation 2 and the role of Notes on Clauses in ascertaining legislative intent - binding effect of jurisdictional High Court decisions on Tribunal in absence of retrospective amendment

Allowability of employees' contribution to provident fund and ESI as deduction under Section 36(1)(va) when remitted after statutory due date but before filing return - distinction between employer's contribution and employee's contribution for deduction purposes - Employees' contribution to PF and ESI remitted after the due date prescribed under the respective statutes but before the due date of filing return under section 139(1) is allowable as a deduction for the assessment years in question. - HELD THAT: - The Tribunal, following its earlier well reasoned decision in Lumino Industries Limited, held that where the assessee remitted employees' share of PF/ESI to the relevant funds before filing the return under section 139(1), such payments are allowable as deduction under Section 36(1)(va) for the assessment years before the Finance Act, 2021 amendment took effect. The Tribunal noted the distinction between employer's and employee's contributions, observed that liability for interest or penalty under PF/ESI enactments does not ipso facto negate the deduction where actual payment was made before filing the return, and relied on binding decisions of the jurisdictional High Court applicable until the amendment takes effect. For these appeals, factually identical to Lumino, the disallowances made by the AO and confirmed by the CIT(A) were deleted and the assessee's claim allowed. [Paras 3, 4]

Disallowances in respect of employees' contribution to PF and ESI for the stated assessment years deleted and the claims allowed.

Retrospective versus prospective operation of Finance Act, 2021 amendment/Explanation 2 and the role of Notes on Clauses in ascertaining legislative intent - applicability of Explanation 2 that clarifies that Section 43B shall not apply to employee contributions - The Finance Act, 2021 amendment (Explanation 2) is prospective, with effect from 1 April 2021 (i.e., AY 2021-22 onwards), and therefore does not apply to the assessment years under adjudication. - HELD THAT: - Applying the test of legislative intent endorsed by the Supreme Court, the Tribunal examined the Notes on Clauses to the Finance Bill, 2021 which expressly state that the amendments will take effect from 1st April, 2021. On that basis the Tribunal concluded the amendment is prospective and not clarificatory/retrospective for prior years. Consequently, the pre amendment position - namely the jurisdictional High Court decisions permitting deduction where employees' contribution was remitted before filing the return - remained binding for the assessment years before AY 2021-22, and the CIT(A)'s view treating the amendment as retrospective was set aside. [Paras 13, 17, 18]

Amendment by Finance Act, 2021 held to be prospective (effective 1 April 2021) and therefore inapplicable to the assessment years under appeal; CIT(A)'s finding of retrospectivity set aside.

Final Conclusion: The Tribunal allowed the appeals: deletions of disallowances relating to delayed remittance of employees' PF/ESI contributions for A.Y. 2017-18, 2018-19 and 2019-20 were directed, the Finance Act, 2021 amendment was held prospective (effective AY 2021-22) and therefore did not affect the assessee's entitlement to deduction for the years before AY 2021-22.

Liability under section 201(1) for failure to deduct tax at source - interest under section 201(1A) for delayed/non-deduction of tax - Form 15G/15H declarations as discharge against TDS deduction - obligation of the payer to obtain prescribed declarations in proper form - effect of defective or incompletely filled declarations on TDS liability - relevance of system and bona fides of collection for compliance with TDS regime

Liability under section 201(1) for failure to deduct tax at source - interest under section 201(1A) for delayed/non-deduction of tax - Form 15G/15H declarations as discharge against TDS deduction - effect of defective or incompletely filled declarations on TDS liability - Whether the bank can be treated as an assessee in default and fastened with demand under section 201(1) read with section 201(1A) for not deducting tax where it had obtained Form 15G/15H which were alleged to be incompletely filled or not filed with the Commissioner. - HELD THAT: - The Tribunal examined the survey findings that several Forms 15G/15H maintained by the bank lacked mandatory particulars. The AO treated the bank as an assessee in default and raised demand under sections 201(1) and 201(1A). The CIT(A) had confirmed the AO's view that declarations without mandatory fields are equivalent to non-filing. The Tribunal, however, relied on the coordinate bench's earlier decision in the assessee's own case and on principles that where the payer has obtained declarations and has a regular system for collection and verification (here a software-enabled system and evidence that over 75% of interest payments were supported by forms), the payer is not automatically an assessee in default for purposes of TDS liability. The Tribunal noted the bank's nature as a regional rural bank dealing largely with small farmers (many of whom fall below basic exemption), the practical difficulties in collecting voluminous forms from rural branches after time lapse, and the confirmed submission of a substantial proportion of forms on remand. It observed that failure to furnish particulars to the income-tax authority within prescribed time may attract other statutory consequences but does not by itself convert the payer into an assessee in default under section 201(1) where declarations have been obtained and their genuineness is not doubted. Applying these considerations, and following the earlier Tribunal view and the cited judicial dicta that obtaining bona fide declarations discharges the payer's obligation to deduct tax, the Tribunal held that the demands under sections 201(1) and 201(1A) were not sustainable and allowed the appeals. [Paras 10, 11, 12]

Demand raised under section 201(1) and interest under section 201(1A) deleted; appeals allowed for AY 2011-12 to AY 2014-15.

Final Conclusion: The Tribunal allowed the appeals for AY 2011-12 to AY 2014-15, holding that where the bank had obtained Form 15G/15H and demonstrated a bona fide system and substantial compliance, it could not be treated as an assessee in default and the demands under sections 201(1) and 201(1A) were set aside.

Deduction of employees' contribution to PF and ESI under Section 36(1)(va) - disallowance under Section 43B read with Section 36(1)(va) - prospective operation of Finance Act, 2021 Explanation 5 (w.e.f. 01/04/2021) - binding effect of jurisdictional High Court decisions (Rajasthan High Court) - payment of statutory contributions after statutory due date but before filing return under Section 139(1)

Deduction of employees' contribution to PF and ESI under Section 36(1)(va) - disallowance under Section 43B read with Section 36(1)(va) - payment of statutory contributions after statutory due date but before filing return under Section 139(1) - prospective operation of Finance Act, 2021 Explanation 5 (w.e.f. 01/04/2021) - binding effect of jurisdictional High Court decisions (Rajasthan High Court) - Whether the additions/disallowances made for delayed deposit of employees' contribution to EPF and ESI (paid after statutory due date but before filing return under Section 139(1)) are sustainable prior to the prospective amendment by Finance Act, 2021. - HELD THAT: - The Tribunal held that where the employees' contributions to EPF and ESI were deposited after the statutory due date but before filing the return of income under Section 139(1), such amounts cannot be disallowed under Section 43B read with Section 36(1)(va) for assessment years prior to the effective date of Explanation 5 introduced by Finance Act, 2021 (w.e.f. 01/04/2021). The Bench observed that identical facts were decided by the Tribunal earlier and that the jurisdictional decisions of the Hon'ble Rajasthan High Court, which are binding on authorities within its territory, support the assessee's claim. Since Explanation 5 declaring the changed position was prospective with effect from 01/04/2021, it did not apply to the assessment years before that date; consequently the disallowances sustained by the CIT(A) were deleted following the binding precedents and earlier Tribunal orders. [Paras 9, 11]

Additions/disallowances relating to delayed deposit of employees' contribution to EPF and ESI (paid before filing return under Section 139(1)) are deleted for the assessment years before Explanation 5 w.e.f. 01/04/2021; appeals allowed.

Final Conclusion: The Tribunal allowed the appeals and deleted the additions made for delayed deposit of employees' PF and ESI contributions deposited before filing the return under Section 139(1), holding that the prospective Explanation 5 of Finance Act, 2021 (w.e.f. 01/04/2021) did not apply and that the jurisdictional Rajasthan High Court's consistent decisions entitled the assessee to the deduction.

Addition under section 68 - unsecured loan - creditworthiness of creditors - genuineness of transactions - ex parte appellate order - remand for fresh consideration - direction to grant final opportunity

Addition under section 68 - creditworthiness of creditors - genuineness of transactions - ex parte appellate order - direction to grant final opportunity - remand for fresh consideration - Restoration of the matter to the file of the learned CIT(A) with direction to grant a final opportunity to the assessee to substantiate creditworthiness of the directors and genuineness of the unsecured loans, and to decide the issue on facts and law. - HELD THAT: - The Assessing Officer made an addition under section 68 in respect of unsecured loans from three directors on the ground that creditworthiness and genuineness were not substantiated to his satisfaction. The learned CIT(A) sustained the addition by an ex parte order as the assessee did not appear before her. The assessee contended that adequate opportunity was not granted and that, if heard, it could substantiate the transactions. Having considered the facts and the parties' submissions, the Tribunal found it appropriate in the interest of justice to remit the matter to the learned CIT(A) for fresh adjudication. The CIT(A) is directed to grant one final opportunity to the assessee to produce evidence and to decide the question of identity, creditworthiness and genuineness in accordance with fact and law; the assessee must appear without seeking adjournment, failing which the CIT(A) may pass an appropriate order. [Paras 6, 7]

Issue remanded to the learned CIT(A) with direction to grant one final opportunity to the assessee and decide the addition under section 68 on merits; failure to appear will permit the CIT(A) to pass an appropriate order.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes and remitted the disputed addition under section 68 (relating to unsecured loans from directors) to the learned CIT(A) for fresh consideration after granting one final opportunity to the assessee to substantiate creditworthiness and genuineness; non appearance will empower the CIT(A) to pass an appropriate order.

Grant of bail under Section 37 NDPS Act - Commercial quantity - Reasonable grounds for believing accused not guilty - Supreme Court Legal Aid Committee directions on undertrials - Right to personal liberty and speedy trial under Article 21

Grant of bail under Section 37 NDPS Act - Commercial quantity - Reasonable grounds for believing accused not guilty - Supreme Court Legal Aid Committee directions on undertrials - Right to personal liberty and speedy trial under Article 21 - Whether the petitioner, accused in an offence involving commercial quantity of contraband under the NDPS Act and in custody for over nine years, is entitled to regular bail - HELD THAT: - Section 37 of the NDPS Act imposes a non obstante limitation: bail in cases involving commercial quantity can be granted only after opportunity to the Public Prosecutor and where the court is satisfied on reasonable grounds that the accused is not guilty and is not likely to commit an offence while on bail. The Court recognised the societal harm from commercial drug trafficking but also emphasised the constitutional protection under Article 21 against prolonged pre-trial detention. Applying the Supreme Court Legal Aid Committee directions, particularly the provision that an undertrial charged with offences carrying minimum imprisonment of ten years is entitled to release if in custody for not less than five years, the petitioner-detained since July 2012-falls within that mandate. Balancing the statutory restrictions of Section 37 with the Supreme Court directions and the right to speedy trial, the Court concluded that the statutory bar did not preclude bail in the present facts because the criteria under the Legal Aid Committee directions were satisfied; the grant of bail was therefore appropriate subject to specified conditions. The Court clarified that its observations relate only to the grant of bail and not to the merits of the prosecution. [Paras 12, 13, 14, 15, 16]

Bail granted to the petitioner despite the commercial quantity of contraband, on application of the Supreme Court Legal Aid Committee directions and subject to conditions set by the Court.

Final Conclusion: The petition for regular bail is allowed: the petitioner, detained since 20.07.2012 in a case involving commercial quantity of ketamine, is released on bail subject to furnishing bonds, surrendering passport, residence reporting, periodic police attendance, and other conditions; observations are confined to bail and not to the merits of the case.

Disposal of seized goods - Customs Act as a self-contained/complete code - Inapplicability of Section 451 Cr.P.C. to goods seized/confiscated under the Customs Act - Disposal Manual 2019 - procedure for perishable (Category I) goods - Jurisdiction of criminal court during investigation

Inapplicability of Section 451 Cr.P.C. to goods seized/confiscated under the Customs Act - Customs Act as a self-contained/complete code - Whether a criminal court could direct disposal of imported goods seized/confiscated under the Customs Act by invoking Section 451 Cr.P.C. - HELD THAT: - The Court held that the Customs Act constitutes a complete code governing search, seizure, adjudication, confiscation and release of goods and contains its own procedures and remedies, including adjudication, imposition of fines in lieu of confiscation, vesting of confiscated goods in the Central Government and appellate mechanisms. In view of the statutory scheme and the self-contained nature of the Customs Act, the provisions of Section 451 Cr.P.C. do not operate to confer on a criminal court power to order disposal of goods seized/confiscated under the Customs Act during the investigation phase. The Court relied upon and followed the reasoning in the decision considered in Directorate of Revenue Intelligence v. M/s PRK Diamonds Pvt. Ltd., and related authorities applying the principle that a special statute with comprehensive procedural machinery excludes invocation of general Cr.P.C. provisions for disposal of goods seized under that special statute. [Paras 14, 15, 16, 49, 54]

Criminal court lacked jurisdiction to order disposal of goods seized/confiscated under the Customs Act by invoking Section 451 Cr.P.C.; such disposal must follow the statutory scheme under the Customs Act.

Disposal Manual 2019 - procedure for perishable (Category I) goods - Disposal of seized goods - Whether the procedure adopted by the Customs authority under the Disposal Manual 2019 for disposal of perishable seized goods was correct and whether invocation of Section 451 Cr.P.C. was warranted in the circumstances. - HELD THAT: - The Court examined the Disposal Manual 2019 which prescribes procedures for disposal of goods seized or confiscated under the Customs Act and classifies perishable goods (Category I) to be disposed of immediately after seizure subject to prescribed formalities and notice to owners/claimants. While the Manual contemplates prompt disposal of perishable items and lists dry dates within the category of goods that may be treated as perishable, the Court found that the Manual does not authorise invocation of Section 451 Cr.P.C. by a criminal court to effect disposal of goods seized/confiscated under the Customs Act. The Court therefore upheld the authority of the Customs department to follow the Disposal Manual's procedures for perishable goods, but held that disposal could not be directed by a criminal court under Section 451 Cr.P.C. [Paras 20, 21, 22]

Disposal under the Disposal Manual 2019 for perishable goods is a procedure available to Customs authorities; however, a criminal court cannot invoke Section 451 Cr.P.C. to order disposal of goods seized/confiscated under the Customs Act.

Final Conclusion: Writ petition allowed; the order of the Chief Metropolitan Magistrate dated 16.02.2020 directing disposal of the seized imported dry dates under Section 451 Cr.P.C. is quashed and set aside. Disposal of goods seized or confiscated under the Customs Act must proceed in accordance with the statutory scheme and applicable departmental procedure (Disposal Manual 2019), and not by invoking Section 451 Cr.P.C. by a criminal court.

Limitation for issuance of show cause notice under Section 124 - violation of principles of natural justice by inadequate notice - burden of proof under Section 123 and evidentiary onus shifting to Revenue - confiscation under Section 110 and requirement of reasonable belief

Limitation for issuance of show cause notice under Section 124 - Validity of the show cause notice issued after the statutory six months period from seizure. - HELD THAT: - The show cause notice proposing confiscation was issued on 05/11/2015 though the relevant seizure occurred on 27/11/2014. The Tribunal holds that a show cause notice under Section 124, insofar as it relates to goods seized under Section 110, was required to be issued within six months of the seizure and, having been issued beyond that period, is barred by limitation and void ab initio. The Tribunal relies on authority holding that delayed issuance beyond the statutory period vitiates the proceeding and substantively prevents confirmation of confiscation where the statutory time-limit is not complied with. [Paras 7, 9]

Show cause notice held to be time-barred and void ab initio; proceedings based on it cannot sustain confiscation.

Violation of principles of natural justice by inadequate notice - Whether appellants were denied reasonable opportunity of hearing by service of summons/notices with unrealistically short time. - HELD THAT: - The Tribunal finds from the time-and-date chart and record that summons/notices were served allowing only five to seven days, with several of the appellants receiving notices after the hearing date had expired. On this basis the Tribunal concludes that absence of reasonable time to appear amounted to denial of a reasonable opportunity and thereby violated the principles of natural justice. The adjudicating authority's finding that the appellants wilfully failed to cooperate is held to be incorrect where the short service period prevented effective participation. [Paras 5, 8, 9]

Findings against appellants set aside for violation of principles of natural justice for inadequate notice and opportunity.

Burden of proof under Section 123 and evidentiary onus shifting to Revenue - confiscation under Section 110 and requirement of reasonable belief - Whether appellants discharged their statutory burden under Section 123 and whether Revenue established a reasonable belief that the seized foreign-marked gold was smuggled. - HELD THAT: - Appellants produced tax/VAT invoices, work orders, delivery challans and correspondence explaining acquisition and movement of the impugned gold through the trade practice of 'Angariya' and job work. The Tribunal holds these documents sufficient to discharge the initial onus under Section 123 of the Customs Act of showing licit possession, thereby shifting the burden to the Revenue to demonstrate that the goods were smuggled. The Tribunal finds no evidence that duties were unpaid or any objective material to support a reasonable belief of smuggling; mere foreign markings on gold are insufficient to establish smuggling, particularly in the absence of investigation showing unpaid duty. Consequent confiscatory findings are held to be presumptive and unsupported by requisite objective material. [Paras 5, 6, 9]

Appellants discharged burden under Section 123; Revenue failed to establish reasonable belief of smuggling and confiscation is unjustified.

Final Conclusion: The Tribunal set aside the impugned Order-in-Appeal: the show cause notice was time-barred; appellants were denied a reasonable opportunity of hearing; and the appellants discharged the statutory burden under Section 123 while the Revenue failed to prove smuggling. Accordingly the appeals are allowed and the confiscation order is quashed.

EPCG authorization - export obligation - proof of service of show cause notice / order-in-original and reckoning date of communication - computation of limitation under section 128 of the Customs Act - condonation of delay by Commissioner (Appeals) limited to 90 days as per Singh Enterprises - remand for de novo adjudication

Proof of service of show cause notice / order-in-original and reckoning date of communication - onus of proof of service - Whether the date from which the period of limitation for filing appeal under section 128 of the Customs Act must be reckoned and whether the Department proved service of the Order in Original upon the appellant. - HELD THAT: - The Tribunal found that there was no cogent evidence on record establishing proof of service of the Order in Original on the appellant and that the Department bore the onus of proving service. The appellant produced correspondence acknowledging receipt of the Show Cause Notice and thereafter correspondence showing receipt of recovery proceedings and ultimately receipt of the O I O on 6.01.2017. The Commissioner (Appeals) had treated 14.12.2015 as the date of communication without recording cogent reasons for rejecting 6.01.2017 as the date of receipt. In view of the absence of satisfactory proof of service and the Commissioner (Appeals)'s failure to consider the appellant's pleaded date of receipt, the Tribunal remanded the matter to the Commissioner (Appeals) to determine, with reference to evidence, the true date of communication and to proceed accordingly. [Paras 6, 7]

Matter remanded to the Commissioner (Appeals) to examine and determine, on the record, the date of communication/proof of service of the O I O and to proceed thereafter.

Computation of limitation under section 128 of the Customs Act - condonation of delay by Commissioner (Appeals) limited to 90 days as per Singh Enterprises - remand for de novo adjudication - Whether the Commissioner (Appeals) has power to condone delay beyond 90 days and the consequent remedy when the effective date of communication is 6.01.2017 and the appeal before Commissioner (Appeals) was filed within 90 days from that date. - HELD THAT: - The Tribunal applied the settled law of the Apex Court in Singh Enterprises that the Commissioner (Appeals) cannot condone delay beyond 90 days from the date of communication of the order under section 128. Accepting the appellant's uncontested receipt of the O I O on 6.01.2017, the Tribunal observed that the appeal to the Commissioner (Appeals) was filed within 90 days from that date and that only a short delay of 28 days needed condonation. In exercise of its supervisory jurisdiction and in view of the settled principle limiting condonation, the Tribunal directed the Commissioner (Appeals) to condone the delay of 28 days and to rehear and adjudicate the appeal afresh on merits. [Paras 8]

Directed Commissioner (Appeals) to condone the delay of 28 days (being within the 90 day limitation rule) and to rehear and decide the appeal de novo on merits.

Final Conclusion: The Order in Original is set aside and the appeal is allowed to the extent that the matter is remitted to the Commissioner (Appeals) for determination of the date of communication/proof of service and, treating 6.01.2017 as the date of communication, the Commissioner (Appeals) is directed to condone the delay of 28 days and to rehear and decide the appeal afresh on merits.

Quorum for meetings - adjourned meeting quorum rule under Section 103(3) - majority representing three-fourths in value for compromise or arrangement under Section 230(6) - dispensing with meetings under Section 230-232 - virtual meetings and e voting as means of securing shareholder/creditor consent

Quorum for meetings - adjourned meeting quorum rule under Section 103(3) - Validity of NCLT directing fixed numeric quorums of 440 shareholders and 50 unsecured creditors for adjourned meetings in the scheme proceedings. - HELD THAT: - The Tribunal found that Paragraph 15 of the impugned order does not identify any statutory provision or rule empowering the NCLT to prescribe 10% (440) of shareholders or a minimum of 50 unsecured creditors as the revised quorum. Section 103(3) provides that if an adjourned meeting still lacks the prescribed quorum within half-an-hour, the members present shall constitute the quorum; there is no statutory basis in Sections 230-232 or the relevant Rules for mandating a determinate numeric percentage to constitute the adjourned quorum in scheme meetings. Consequently, the direction in the impugned order fixing 440 shareholders and 50 unsecured creditors as the quorum was without authority and liable to be set aside. [Paras 7, 8]

The direction fixing a quorum of 440 shareholders and 50 unsecured creditors is set aside.

Majority representing three-fourths in value for compromise or arrangement under Section 230(6) - virtual meetings and e voting as means of securing shareholder/creditor consent - dispensing with meetings under Section 230-232 - Whether participation numbers at a virtual meeting are determinative of assent to a scheme, and whether e voting/other modes of voting satisfy requirements of Section 230(6). - HELD THAT: - The Tribunal accepted the appellants' submission that voting on a scheme under Sections 230-232 can occur through virtual meetings, postal ballot or e voting, and that physical attendance at a virtual meeting is not determinative of consent. What matters for approval is compliance with the statutory voting threshold-a majority in number representing three-fourths in value as required by Section 230(6). In the present case, given that requisite stakeholders had already expressed assent (including by affidavit) and that the transferee is a listed company obliged to provide remote e voting in terms of applicable listing regulations, fixing a higher or specific numeric presence at the virtual meeting cannot be equated with the absence or presence of consent under Section 230(6). [Paras 6, 7, 8]

Presence of a prescribed number at the virtual meeting is not a prerequisite for establishing assent; compliance with Section 230(6) by lawful modes of voting (including e voting) suffices.

Dispensing with meetings under Section 230-232 - Disposition of the two appeals including consequential directions on meetings and the status of the separate appeal seeking modification. - HELD THAT: - Having set aside the NCLT's numeric quorum directions and noting that major stakeholders had recorded assent, the Tribunal directed that the meetings may be conducted within eight weeks from the date of the order. Company Appeal (AT) No. 135 (challenging the impugned order) was allowed with directions as above. Company Appeal (AT) No. 134, which sought rectification/modification of the NCLT order, was dismissed as infructuous for the reasons recorded in the allowed appeal. [Paras 8, 9, 11]

Appeal allowed; meetings to be held within eight weeks; the related appeal for modification dismissed as infructuous.

Final Conclusion: The Tribunal allowed the appeal against the NCLT order insofar as it fixed specific numeric quorums for adjourned meetings, holding there was no statutory basis for such a mandate; it affirmed that statutory voting thresholds under Section 230(6) can be met by lawful modes including e voting and directed that the requisite meetings be conducted within eight weeks, while a separate appeal for rectification was dismissed as infructuous.

Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013 - dispensing with meetings of shareholders and creditors where members/creditors give no objection affidavits - convening meeting of unsecured creditors by Video Conferencing with statutory notices and publication - service of notices to regulatory and revenue authorities and 30 day representation period - filing of Chairman's Report after the creditors' meeting - no meeting required where there are no secured creditors - jurisdiction of the Tribunal to adjudicate scheme petitions where registered offices are within its territorial Bench

Dispensing with meetings of shareholders and creditors where members/creditors give no objection affidavits - Requirement to convene meetings of shareholders of the Applicant Companies dispensed with on account of unanimous/no objection affidavits. - HELD THAT: - The Tribunal recorded that all shareholders of the Applicant Companies have given 'no objection' affidavits to the proposed Scheme of Amalgamation. On that basis, and having examined the affidavits on record, the Tribunal dispensed with the requirement to convene meetings of shareholders of the Applicant Companies for approval of the Scheme. [Paras 13]

Meetings of shareholders of the Applicant Companies are dispensed with.

Convening meeting of unsecured creditors by Video Conferencing with statutory notices and publication - Meeting of unsecured creditors of the Transferee Company directed to be convened with specified procedural steps. - HELD THAT: - The Tribunal found that consent of unsecured creditors of the Transferee Company had not been obtained. It therefore directed that a meeting of the unsecured creditors of the Transferee Company be convened through Video Conferencing, specifying quorum/adjournment rules, appointment of Chairman and scrutinizer, notice period of 30 days by registered post/courier/email, requirement to publish advertisement in specified newspapers, and mode of voting and reporting of results by the Chairman within seven days of the meeting. [Paras 14]

A meeting of unsecured creditors of the Transferee Company shall be convened in the manner and on the terms directed.

Dispensing with meetings of shareholders and creditors where members/creditors give no objection affidavits - Requirement to convene meetings of unsecured creditors of the Transferor Companies dispensed with where more than 90% in value have given no objection affidavits. - HELD THAT: - The Tribunal noted that more than 90% in value of the unsecured creditors of all Transferor Companies have given 'no objection' affidavits to the Scheme. Having regard to those affidavits, the Tribunal dispensed with the requirement of convening meetings of the unsecured creditors of the Transferor Companies. [Paras 19]

Meetings of unsecured creditors of the Transferor Companies are dispensed with.

No meeting required where there are no secured creditors - No meetings of secured creditors required as there are no secured creditors of any Applicant Company. - HELD THAT: - The Tribunal recorded that there are no secured creditors in any of the Applicant Companies; consequently, the statutory requirement to convene meetings of secured creditors does not arise. [Paras 18]

No meetings of secured creditors are required.

Service of notices to regulatory and revenue authorities and 30 day representation period - Directives on service of notices to specified authorities and the period for raising objections/representations. - HELD THAT: - The Tribunal directed that, in accordance with the statutory scheme, notices of the meetings shall be served at least 30 days in advance on the Central Government (Regional Director), Registrar of Companies, Official Liquidator attached to the Delhi High Court, jurisdictional Income tax authorities and any sectoral regulatory authorities. Those authorities are to raise objections or representations, if any, within 30 days of receipt of the notice; absence of objection within the period will be treated as no objection. [Paras 15, 16]

Notices to statutory authorities to be served and objections to be made within 30 days, failing which no objection shall be presumed.

Filing of Chairman's Report after the creditors' meeting - Requirement to file the Chairman's Report before the Tribunal within seven days of the meeting. - HELD THAT: - The Tribunal directed that the Chairman's Report on the meeting shall be filed before the Tribunal within seven days from the conclusion of the meeting, in accordance with the procedural requirements for schemes under the Act. [Paras 17]

Chairman's Report to be filed within seven days of the meeting.

Jurisdiction of the Tribunal to adjudicate scheme petitions - Tribunal's territorial jurisdiction over the petition affirmed. - HELD THAT: - The Tribunal noted that the registered offices of all Applicant Companies are situated in Delhi and accordingly held that jurisdiction to entertain the scheme petition lies with this Bench. [Paras 6]

This Bench has jurisdiction to hear and decide the application.

Final Conclusion: The Company Application under Sections 230-232 seeking directions for dispensing with certain meetings and convening others in relation to the proposed Scheme of Amalgamation is allowed in the terms recorded: shareholders' meetings and certain unsecured creditors' meetings are dispensed with where affidavits indicate no objection; a meeting of unsecured creditors of the Transferee Company shall be convened as directed; notices to statutory authorities, publication, appointment of Chairman and scrutinizer, and filing of the Chairman's Report are ordered; no meetings of secured creditors are required; and the Tribunal's jurisdiction is affirmed.

Scheme of Amalgamation - dispensation from convening creditors' and members' meetings - notice and convening requirements for unsecured creditors - appointment of chairperson and scrutinizer for creditors' meetings - quorum for creditors' meetings - e-voting and virtual meeting compliance with MCA circulars - service of notices and publication requirements - compliance with Companies Act, 2013 and Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - furnishing of scheme on requisition and filing of meeting report

Dispensation from convening creditors' and members' meetings - Dispensation from convening and holding meetings of equity shareholders and secured creditors of the Transferor and Transferee Companies. - HELD THAT: - The Tribunal recorded that affidavits of consent from all equity shareholders of each company and from the sole debenture trustee/secured creditor (as applicable) were placed on record. In view of those unqualified consents, the Tribunal dispensed with convening and holding the meetings of the equity shareholders and of the secured debenture holders/secured creditor for the respective companies. The dispensing exercise rests on the representation and documentary proof of unanimous consent filed with the application and is reflected in the directions issued by the Tribunal. [Paras 14]

Dispensation granted for convening meetings of equity shareholders and of secured creditors of the Transferor and Transferee Companies, as recorded in the order.

Notice and convening requirements for unsecured creditors - quorum for creditors' meetings - appointment of chairperson and scrutinizer for creditors' meetings - e-voting and virtual meeting compliance with MCA circulars - service of notices and publication requirements - furnishing of scheme on requisition and filing of meeting report - compliance with Companies Act, 2013 and Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Directions for convening meetings of unsecured creditors of the Transferor and Transferee Companies and associated procedural compliances. - HELD THAT: - The Tribunal directed that meetings of the unsecured creditors of the Transferor and Transferee Companies be convened (both fixed for 27.01.2022 at specified times, with location and option for video-conferencing) and specified the quorum for each meeting. The Tribunal declined the applicants' counsel's request to limit notices by monetary threshold and held that individual notices must be issued to all unsecured creditors, thereby requiring full individual service. The order prescribes: appointment of chairperson and alternate chairperson, appointment of a scrutinizer, adjournment and proxy rules for quorum computation, compliance with MCA circulars permitting virtual meetings and e-voting, publication in specified newspapers, sending notices to designated regulators and authorities, furnishing copies of the Scheme on requisition, filing of meeting reports and the affidavit of service prior to meetings, and strict compliance with the relevant provisions and forms under the Companies Act, 2013 and the Rules. These directions are mandatory steps to be followed before the meetings and for subsequent reporting. [Paras 11, 13, 14, 15]

Meetings of unsecured creditors ordered to be convened with detailed procedural directions (notice, publication, quorum, chairperson/scrutinizer appointment, e-voting/virtual compliance, regulator service, furnishing of scheme on request, filing of reports and affidavit of service) and refusal to limit notices by monetary threshold.

Final Conclusion: The Company Applications under sections 230-232 were allowed subject to the Tribunal's directions: meetings of equity shareholders and secured creditors are dispensed with on account of recorded unanimous consents; meetings of unsecured creditors are to be convened on the specified terms and with the procedural compliances mandated by the Tribunal including notices, publication, quorum, appointments, virtual/e voting compliance, service to regulators, furnishing of the Scheme on requisition and filing of statutory reports.

Reduction of share capital - Protection of creditors and stakeholders - Sanction of National Company Law Tribunal under section 66 - Selective reduction as minority exit mechanism - Buy-back distinct from reduction of capital - Valuation by registered valuer and payment of fair value - Compliance with statutory procedure and auditor's certificate

Reduction of share capital - Sanction of National Company Law Tribunal under section 66 - Confirmation of the petition for reduction of the company's issued, subscribed and fully paid-up equity share capital by cancelling and extinguishing specified equity shares and fixing the altered capital. - HELD THAT: - The Tribunal found that the statutory procedure required for reduction had been followed: the board had proposed the reduction, the shareholders passed the special resolution approving the reduction at the general meeting held on June 10, 2020, and no objector appeared to oppose the petition. Having considered the petition, the Tribunal was satisfied to confirm the reduction and to record the altered capital and the form of minutes as part of the order. The petition was accordingly made absolute and the capital reduced as per the schedule. [Paras 5, 6, 7, 12, 14]

The Tribunal confirmed and sanctioned the reduction of share capital and directed registration of the order and minutes, recording the revised capital.

Protection of creditors and stakeholders - Compliance with statutory procedure and auditor's certificate - Satisfaction that creditors' interests and other stakeholders are protected and that requisite certifications and statutory compliances have been furnished. - HELD THAT: - The Tribunal recorded that no objector challenged the petition and was satisfied that each creditor either consented to the reduction, had his debt discharged, or had his claim determined or secured. The petitioner furnished a certificate from the statutory auditor regarding the proposed accounting treatment in conformity with generally accepted accounting principles, and undertook to comply with any further statutory requirements. The Regional Director's request for an affidavit concerning protection of creditors and statutory dues was noted in the report and addressed by the petitioner. [Paras 2, 8, 10, 11]

The Tribunal was satisfied that creditors' and stakeholders' interests were protected and that statutory certification and compliance had been met.

Selective reduction as minority exit mechanism - Valuation by registered valuer and payment of fair value - Permissibility and fairness of effecting a selective reduction extinguishing shares held by pre-identified minority shareholders and providing payment determined by a registered valuer. - HELD THAT: - The Tribunal accepted the petitioner-company's explanation that the reduction targeted pre-identified minority shareholders holding less than a specified number of shares in order to provide an exit in the context of an illiquid private company. The company relied on a registered valuer's report to fix the consideration payable per share and pointed to unanimous shareholder approval of the reduction and absence of objections following statutory notice. The Tribunal considered precedent and submissions that where fair value is paid and the procedure is observed, selective reduction to facilitate minority exit is permissible and not inherently unfair. [Paras 5, 6, 9]

The Tribunal accepted that the selective reduction was not unfair or unjust, having regard to valuation, shareholder approval and absence of objections.

Buy-back distinct from reduction of capital - Whether the proposed transaction is to be treated as a buy-back requiring proceedings under the buy-back provisions or as a reduction of capital requiring Tribunal sanction. - HELD THAT: - The petitioner contended, and the Tribunal proceeded on the basis, that reduction of capital under the Companies Act is a distinct remedy from statutory buy-back provisions and that resort to reduction under section 66 is permissible even if the economic effect resembles a purchase of minority shares. The Tribunal accepted the submission and authorities cited to the effect that buy-back provisions do not supplant the court's jurisdiction to sanction schemes of reduction, and that invoking reduction does not convert the proceeding into a buy-back under the buy-back provisions. [Paras 9]

The Tribunal treated the proposal as a reduction of capital and not as a buy-back, and found the objection on that ground to be without merit.

Compliance with statutory procedure and auditor's certificate - Directions regarding registration, filing and publication consequent to confirmation of the reduction. - HELD THAT: - On confirming the reduction, the Tribunal directed that the petitioner act on procedural formalities: file the certified order and minutes with the Registrar within the stipulated period and publish notices about registration and the minutes in the specified newspapers. The Tribunal also specified that regulatory authorities may act on the certified copy of the order and minutes. [Paras 12, 13, 14]

The petitioner was directed to file and publish the certified order and minutes and to comply with related procedural formalities.

Final Conclusion: The Tribunal sanctioned and confirmed the petitioner's reduction of share capital under the Companies Act, having satisfied itself as to protection of creditors and stakeholders, the fairness of the selective minority exit based on registered valuation and shareholder approval, and compliance with statutory certifications; consequential directions for filing, registration and publication were given.

Acknowledgement under Section 18 of the Limitation Act, 1963 - balance sheet entries as acknowledgment of debt - applicability of Section 18 to proceedings under the I&B Code - definition of 'financial debt' under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - remand for fresh consideration to the Adjudicating Authority

Acknowledgement under Section 18 of the Limitation Act, 1963 - balance sheet entries as acknowledgment of debt - applicability of Section 18 to proceedings under the I&B Code - Whether the balance sheet for FY 2016-17 signed on 01.09.2017 could constitute an acknowledgment under Section 18 of the Limitation Act, thereby restarting limitation for the Section 7 application. - HELD THAT: - The Adjudicating Authority noted the last payment in March 2016 and rejected the Section 7 application as time-barred without examining whether the Corporate Debtor's balance sheet for FY 2016-17 contained an acknowledgment within the meaning of Section 18. This Court observed that entries in books of account or balance sheets can amount to an acknowledgment under Section 18 and that the question is fact-sensitive: an entry must be examined to determine whether it is unequivocal or qualified by caveats. Relying on the Supreme Court authorities cited in the judgment, the Court held that the AA erred in not considering the balance sheet to determine whether it operated to restart limitation; accordingly the matter must be examined afresh by the AA in the light of Section 18 and the cited precedents. [Paras 4, 5, 7, 8]

The AA's failure to examine the balance sheet for an acknowledgement under Section 18 was an error; the issue must be reconsidered by the AA.

Definition of 'financial debt' under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - Whether the Appellant falls within the definition of 'financial creditor' despite absence of proof of payment of interest. - HELD THAT: - The AA held the Appellant was not a Financial Creditor because there was no document showing payment of interest. This Court examined the definition in Section 5(8) which describes 'financial debt' as a debt 'alongwith interest, if any', and concluded that interest is not a mandatory element in every transaction. The expression 'if any' indicates that a debt may qualify as a financial debt even if no interest has been paid in the past. The Court further observed that consideration of the balance sheet on remand may bear upon the question of whether the debt is a financial debt, and therefore the AA should re-examine the claim of the Appellant to be a Financial Creditor after taking the balance sheet into account. [Paras 9, 10]

The AA's conclusion that absence of proof of interest payment excludes the Appellant from being a Financial Creditor was incorrect; the AA must re-consider the financial creditor question (including the balance sheet) on fresh notice.

Final Conclusion: The appeal is allowed. The order of the Adjudicating Authority rejecting the Section 7 application is set aside and the matter is remitted to the Adjudicating Authority for fresh consideration after issuing fresh notice to the Corporate Debtor and affording it an opportunity to be heard.

Initiation of Corporate Insolvency Resolution Process - Admission of Section 7 application - Existence of default - Appointment of Interim Resolution Professional - Moratorium under section 14 of the IBC - Supply of essential goods during moratorium - Duties of Interim Resolution Professional and cooperation by management

Admission of Section 7 application - Existence of default - The Section 7 petition filed by the financial creditor for initiation of CIRP is admitted on the ground of established financial debt and default. - HELD THAT: - The Tribunal examined the loan confirmation agreement, ledger entries and dishonoured cheques and found that the corporate debtor had admitted liability by issuing cheques which were subsequently returned with the memo 'Funds Insufficient'. Applying the settled principle that once existence of a financial debt and default is established and the application is otherwise complete with no disciplinary bar against the proposed resolution professional, the adjudicating authority is obliged to admit the petition, the Tribunal concluded that the financial creditor had satisfied the statutory requirements and admitted the petition to initiate CIRP. [Paras 5]

The application under Section 7 of the IBC is admitted and CIRP of the corporate debtor is initiated.

Appointment of Interim Resolution Professional - The proposed professional is appointed as Interim Resolution Professional (IRP). - HELD THAT: - The financial creditor proposed Mr. Pawan Kumar Goyal as IRP and filed the requisite Form-2 showing no disciplinary proceedings. Having regard to the proposal and the absence of any disqualification or pending disciplinary proceedings against him, the Tribunal appointed the proposed person as IRP and directed him to take charge of the corporate debtor's management immediately and perform the statutory functions. [Paras 6]

Mr. Pawan Kumar Goyal is appointed as the Interim Resolution Professional and directed to assume charge and perform the IRP's statutory duties.

Moratorium under section 14 of the IBC - A moratorium under section 14 is declared with the statutory prohibitions specified. - HELD THAT: - The Tribunal declared the moratorium operative from the date of the order until completion of CIRP and enjoined the statutory prohibitions including institution or continuation of suits or proceedings, transfer or disposal of assets, enforcement of security interests and recovery of property in possession of the corporate debtor. These directions mirror the statutory scope of moratorium to protect the corporate debtor's assets during CIRP. [Paras 7]

Moratorium is declared and the actions prohibited by section 14 are stayed for the duration of the CIRP.

Supply of essential goods during moratorium - Supply of essential goods or services to the corporate debtor shall not be terminated, suspended or interrupted during the moratorium period as provided. - HELD THAT: - The Tribunal clarified that termination, suspension or interruption of supply of essential goods or services to the corporate debtor is not permitted during the moratorium and that the provision of section 14(1) shall not apply to such transactions as notified by the Central Government, thereby protecting the continuity of essential supplies during CIRP. [Paras 8]

Essential supplies to the corporate debtor shall continue and shall not be interrupted during the moratorium.

Duties of Interim Resolution Professional and cooperation by management - The IRP is directed to comply with statutory obligations and the corporate debtor's directors, promoters and management must cooperate with the IRP. - HELD THAT: - The Tribunal directed the IRP to comply with the provisions of the Code relating to custody and management and called for cooperation from the directors, promoters and persons associated with the management of the corporate debtor as required by section 19 to enable the IRP to discharge functions under the Code. This order enforces statutory duties and cooperation essential for effective conduct of CIRP. [Paras 9]

IRP shall perform duties under the Code and the corporate debtor's management must extend all assistance and cooperation.

Administrative directions arising from admission - Ancillary administrative directions are issued for implementation of the order and updating statutory records. - HELD THAT: - The Tribunal directed the financial creditor to communicate the order to the IRP and corporate debtor and to send a copy of the order to the Registrar of Companies for updating the corporate debtor's status on MCA-21. The Tribunal also directed the IRP to make the public announcement and call for claims as prescribed, thereby completing the administrative steps consequent to admission of the petition. [Paras 6, 10, 11, 12]

The financial creditor and registry are directed to communicate and notify the order; the IRP shall make the public announcement and call for submission of claims.

Final Conclusion: The Section 7 petition was admitted on proof of debt and default; the proposed IRP was appointed and directed to assume charge and make the statutory public announcement; moratorium under section 14 was declared with protection for continuation of essential supplies; the corporate debtor's management was ordered to cooperate and administrative steps for communication and updating records were directed.

Dissolution of corporate debtor - Early dissolution where realizable properties insufficient to cover liquidation cost - Application by liquidator for dissolution under Section 54 of the Insolvency and Bankruptcy Code, 2016 - Affairs do not require any further investigation

Dissolution of corporate debtor - Application by liquidator for dissolution under Section 54 of the Insolvency and Bankruptcy Code, 2016 - Early dissolution where realizable properties insufficient to cover liquidation cost - Affairs do not require any further investigation - Application for dissolution of the Corporate Debtor was allowed and the Corporate Debtor was ordered to be dissolved with immediate effect. - HELD THAT: - The Tribunal found that the liquidation process had been completed and no realizable assets remained with the Corporate Debtor, which was a non operating unit. The liquidator had complied with the Liquidation Regulations by issuing public notice (Form B), submitting the preliminary report and asset memorandum, forming the stakeholder consultation committee, and filing the final report with the compliance certificate. Given that the realizable properties were insufficient to cover the cost of liquidation and that the affairs of the Corporate Debtor did not require further investigation, the Tribunal held that dissolution was appropriate under the statutory framework governing dissolution and early dissolution. Consequential directions were issued: the Corporate Debtor was dissolved immediately, the liquidator was discharged from the date of the order, and the liquidator was directed to forward copies of the order to the relevant statutory authorities including the Registrar of Companies for updating records. [Paras 9, 10, 12, 13, 14]

Application allowed; Bansal Shipping Pvt. Ltd. dissolved with immediate effect, liquidator discharged and directed to forward the order to statutory authorities including the RoC.

Final Conclusion: The Tribunal allowed the liquidator's application for dissolution, concluding that liquidation was complete, no realizable assets remained and no further investigation was necessary; the Corporate Debtor is dissolved forthwith, the liquidator is discharged and directed to forward the order to the appropriate authorities for updating records.

Refund under rule 5 of the CENVAT Credit Rules, 2004 - eligibility for CENVAT credit on input services - recovery of ineligible CENVAT credit under rule 14 of the CENVAT Credit Rules, 2004 - effect of denial of refund on CENVAT credit balance - registration address and entitlement to refund

Refund under rule 5 of the CENVAT Credit Rules, 2004 - eligibility for CENVAT credit on input services - registration address and entitlement to refund - recovery of ineligible CENVAT credit under rule 14 of the CENVAT Credit Rules, 2004 - effect of denial of refund on CENVAT credit balance - Legality of denial of refund of CENVAT credit attributable to rent paid for premises not entered in the registration certificate when refund was claimed. - HELD THAT: - The Tribunal examined the scheme of the CENVAT Credit Rules, 2004 and held that entitlement to refund under rule 5 is governed by eligibility rules (rule 3) and by the continued operation of rule 6; any credit found ineligible must be recovered only through proceedings under rule 14 after issuing notice. Denial of refund per se does not extinguish credited CENVAT balance but restores the amount to the assessee's credit for adjustment against future liability. In the present case the impugned order refused part of the refund on the ground that the renting-of-immovable-property service related to an address not reflected in registration, but there is no record of proceedings under rule 14 or of any notice and recovery having been initiated. Consequently the refusal to grant refund without following the prescribed recovery procedure under rule 14 was incorrect in law. The Tribunal set aside the impugned order and allowed the appeals on this basis. [Paras 5, 7, 8]

Denial of the refund was incorrect in law because ineligible credit was not recovered through proceedings under rule 14 after notice; the impugned order is set aside and the appeals are allowed.

Final Conclusion: The Tribunal allowed the appeals, holding that refusal of part of the refund was legally untenable in the absence of rule 14 proceedings for recovery of ineligible credit; the impugned order is set aside.

Reversal of Cenvat credit under Rule 6 of the Cenvat Credit Rules, 2004 for restaurant services - CBIC Circular No.213/3/2019 - clarification that reversal under Rule 6 is not required for restaurant services - bar on issuance of show cause notice under Section 73(3) of the Finance Act, 1994 where tax (with interest) is paid before issuance of SCN - imposition of penalty under Section 78 of the Finance Act, 1994 where tax has been paid prior to SCN (other than suppression or willful mis-statement)

Reversal of Cenvat credit under Rule 6 of the Cenvat Credit Rules, 2004 for restaurant services - CBIC Circular No.213/3/2019 - clarification that reversal under Rule 6 is not required for restaurant services - Whether reversal under Rule 6 of CCR, 2004 was required in respect of restaurant services and whether the departmental demand based on such reversal was sustainable. - HELD THAT: - The Tribunal found the question no longer res-integra in view of CBIC Circular No.213/3/2019 (dated July 05, 2019), which clarified that reversal under Rule 6(3) of the Cenvat Credit Rules, 2004 is not required for provision of restaurant services. Applying that clarification, the Tribunal held that the Revenue's appeal against the first appellate authority's dropping of the demand raised on the basis of Rule 6 must fail. Consequently the demand confirmed by the lower authority to the extent attributable to reversal under Rule 6 was ordered to be dismissed. [Paras 6]

Revenue's appeal insofar as it sought recovery by applying Rule 6 on restaurant services is dismissed; the demand insofar as based on such reversal is dropped.

Bar on issuance of show cause notice under Section 73(3) of the Finance Act, 1994 where tax (with interest) is paid before issuance of SCN - imposition of penalty under Section 78 of the Finance Act, 1994 where tax has been paid prior to SCN (other than suppression or willful mis-statement) - Whether penalty under Section 78 could be sustained where service tax and interest were paid by the respondent before issuance of the show cause notice and there was no material to establish suppression or willful mis-statement. - HELD THAT: - The Tribunal applied the statutory provision contained in Section 73(3) of the Finance Act, 1994, which prevents issuance of a notice under subsection (1) in respect of tax that has been paid (by the assessee on his own ascertainment or on officer's ascertainment) and communicated to the officer before service of the notice. Relying on precedent of the Tribunal and High Courts, the Bench held that where tax and interest were paid prior to issuance of the SCN and the Department did not place material demonstrating suppression or willful mis-statement, imposition of penalty under Section 78 was not justified. The lower authorities' confirmation of penalty was thus found to be in error and was set aside. [Paras 7, 8]

Penalty imposed under Section 78 is deleted; Revenue's appeal against confirmation of penalty is dismissed.

Final Conclusion: The Departmental appeal is dismissed in entirety: the demand based on reversal under Rule 6 of the CCR, 2004 (in respect of restaurant services) is dropped in view of CBIC Circular No.213/3/2019, and the imposition of penalty under Section 78 is deleted because tax and interest were paid prior to issuance of the SCN without material of suppression; the first appellate order is modified accordingly and the cross-objection is disposed of in the same terms.

Maintainability of appeal under Section 35G - extended period of limitation for recovery of excise duty - relation to the rate of duty and value of goods for purposes of assessment - appeal to the Supreme Court under Section 35L - mixed question of fact and law

Maintainability of appeal under Section 35G - relation to the rate of duty and value of goods for purposes of assessment - Whether an appeal under Section 35G is barred where the impugned demand arises from valuation or rate questions and the revenue challenges only limitation - HELD THAT: - The Full Bench held that the exclusion in the bracket to Section 35G (orders relating, among other things, to determination of questions having a relation to the rate of duty or to the value of goods for purposes of assessment) must be read to require a direct and proximate relationship to rate or value before an order falls within Section 35L. Applying the principles in Navin Chemicals and subsequent Supreme Court decisions, only questions that directly and proximately determine rate or value (including taxability/excisability) are routed to the Supreme Court. The Tribunal had confirmed the Commissioner's findings on duty, interest and penalty and only set aside the demand on limitation. A decision on limitation, being essentially factual or at most a mixed question of fact and law, does not have the requisite direct and proximate nexus with rate or value for purposes of assessment and therefore does not attract the Section 35L exclusion. Consequently such an appeal is maintainable in the High Court under Section 35G. [Paras 32, 38, 39]

An appeal under Section 35G is maintainable in the High Court where the only issue impugned before the Court is limitation and that issue has no direct and proximate relation to rate of duty or value for assessment.

Extended period of limitation for recovery of excise duty - mixed question of fact and law - appeal to the Supreme Court under Section 35L - Whether the Tribunal's decision setting aside demand as time-barred (invocation of extended limitation) is a matter fitting the special categories that must be appealed to the Supreme Court under Section 35L - HELD THAT: - The Court analysed the scope of Sections 35G and 35L (and their pari materia Customs Act counterparts) and the categories identified by the Supreme Court which warrant direct appeal to the Supreme Court (rate of duty, valuation for assessment, classification/exemption, enhancement/reduction of value). The question of invoking the extended period of limitation, as decided by the Tribunal on facts and evidence, lacks the direct and proximate nexus with rate or value necessary to fall within those categories. The issue of limitation is factually driven or a mixed question of fact and law and therefore is not a decision in rem affecting rate or value that requires exclusive appellate jurisdiction in the Supreme Court under Section 35L. [Paras 30, 31, 32, 36, 38]

The Tribunal's setting aside of the demand on limitation does not fall within the special categories for appeal to the Supreme Court under Section 35L; it is amenable to challenge before the High Court under Section 35G.

Final Conclusion: The Full Bench answered the referred questions by holding that an appeal under Section 35G is maintainable in the High Court where the sole challenge is to the Tribunal's finding that a demand is time-barred, since such a limitation determination does not have the direct and proximate relation to rate of duty or value of goods that would require appeal to the Supreme Court under Section 35L; the appeal papers are to be placed before the Division Bench for further consideration.

Entitlement to Cenvat Credit based on supplier invoices - reliability of confessional or investigative statements and effect of retraction on evidentiary value - proof required for clandestine removals / sham supplies - burden of proof on the Revenue to establish modus operandi and flowback of funds - imposition of penalty predicated on uncorroborated statements

Reliability of confessional or investigative statements and effect of retraction on evidentiary value - imposition of penalty predicated on uncorroborated statements - Whether the adjudication and penalties can be sustained when the departmental case rests primarily on statements of key witnesses which were subsequently retracted on cross-examination. - HELD THAT: - The Tribunal found that the Department's case relied predominantly on the statements of Shri Amit Gupta and the transporter Shri Sanjeev Maggu. Both witnesses, when cross-examined on 10.04.2018, retracted their earlier examination-in-chief and stated that their prior statements were recorded under pressure or were typed/dictated by investigating officers. The adjudicating authority and Commissioner (Appeals) failed to give due weight to these retractions and proceeded on presumptions drawn from the earlier statements. In the absence of any corroborative material or independent evidence supporting those initial statements, the Tribunal held that the evidentiary value of the retracted statements was vitiated and therefore insufficient to sustain the findings and penalties imposed on the appellants. [Paras 9, 10, 11, 15, 17]

Findings and penalties grounded principally on the retracted statements are unsafe and were set aside.

Entitlement to Cenvat Credit based on supplier invoices - proof required for clandestine removals / sham supplies - burden of proof on the Revenue to establish modus operandi and flowback of funds - Whether the Revenue proved that the appellants did not receive goods corresponding to the invoices and thereby were not entitled to claim Cenvat Credit. - HELD THAT: - The Tribunal observed that except for the investigative statements (now retracted) there was no independent or corroborative evidence to demonstrate non-delivery of goods or clandestine removal. Records of transport, factory receipt, weighment, statutory records of receipt of inputs, and bank payments by cheque/RTGS were on record and were not effectively controverted by reliable evidence. The Tribunal relied on earlier orders dealing with the same investigation and on the settled principle that clandestine removal is a serious charge which the Revenue must prove by tangible evidence (listing investigative aspects that should have been examined). Given the absence of clinching evidence linking seized cash or recovered documents to the impugned invoices, the Tribunal concluded the Revenue failed to discharge its burden to show that supplies were sham and that Cenvat Credit was wrongly availed. [Paras 12, 13, 15, 16, 17]

The claim of denial of Cenvat Credit for the impugned invoices is unsupported by evidence and was quashed; demands confirmed on that basis set aside.

Burden of proof on the Revenue to establish modus operandi and flowback of funds - entitlement to Cenvat Credit based on supplier invoices - Whether payments made by cheque/RTGS established that payments were part of a sham scheme and whether the Revenue proved cash-back or flowback of sale proceeds. - HELD THAT: - The Tribunal noted that payments by cheque/RTGS were on record and that the Revenue alleged but did not prove any return of those payments in cash. While some cash was seized from the premises of Amit Gupta, no documentary nexus was produced to connect that cash to the specific invoices in issue. Prior orders in related matters of the same investigation were cited where identical allegations of flowback were held unproven for want of connecting evidence. On the facts, the allegation of payments being returned in cash remained a presumption without evidentiary foundation. [Paras 13, 15]

Allegations of cash-back/flowback in respect of the impugned payments were unproven and could not sustain the demand or penalties.

Final Conclusion: The Tribunal held that the Revenue's case rested on presumptions and uncorroborated investigative statements which were retracted on cross-examination and that no other sufficient evidence linked the appellants to sham supplies or clandestine removals. The orders confirming demands and imposing penalties in respect of the impugned invoices were set aside and all appeals were allowed.

Compliance with Rule 6(3) of the Cenvat Credit Rules, 2004 - Proportionate reversal of common credit in respect of exempted services and trading of goods - Extended period of limitation and invocation of extended period - Adjudicatory duty to consider pre-SCN submissions and departmental inspection/report - Consequences of setting aside demand - interest and penalty

Compliance with Rule 6(3) of the Cenvat Credit Rules, 2004 - Proportionate reversal of common credit - Whether the appellant complied with the procedure of Rule 6(3) of the CCR, 2004 for the period 2012-13 to 2016-17 and whether any further reversal of Cenvat credit was required. - HELD THAT: - The Tribunal found on the material on record, including the Range Superintendent's report dated 23/07/2019, that the appellant had complied with the procedures laid down under Rule 6 of the CCR, 2004. The report held that the appellant had effected reversals and, for the years 2014-15 to 2016-17, had in fact made excess reversal. The Tribunal also recorded that for 2012-13 and 2013-14 the entire Cenvat credit stood reversed and adjudicated by an earlier OIO dated 21/06/2016 which had attained finality. On these findings the Tribunal held there was no further reversal due from the appellant for the period under dispute. [Paras 6, 7]

The appellant complied with Rule 6(3) CCR, 2004 and no additional reversal of Cenvat credit was required for 2012-13 to 2016-17.

Extended period of limitation and invocation of extended period - Knowledge of documents by department and limitation bar - Whether the demand raised by the SCN dated 04/09/2018 could be sustained by invoking the extended period of limitation. - HELD THAT: - The Tribunal noted that the department had the relevant documents and had issued a spot memo in respect of 2014-15 as early as 29/09/2015. Given that the material was in the possession of the department since 2015, there was no justification for invoking the extended period of limitation for issuing the SCN on 04/09/2018. Accordingly, the Tribunal concluded that the demand was barred by limitation and could not be sustained on that ground. [Paras 7]

The demand in the SCN dated 04/09/2018 is time-barred and unsustainable by invocation of the extended period of limitation.

Adjudicatory duty to consider pre-SCN submissions and departmental inspection/report - Failure to discuss material submissions in adjudication - Whether the adjudicating authority properly considered the appellant's pre SCN submissions and the Range Superintendent's report before confirming the demand. - HELD THAT: - The Tribunal observed that the Range Superintendent's detailed report dated 23/07/2019, which concluded compliance and excess reversal by the appellant, was on record and that the adjudicating authority did not discuss the appellant's submissions or that report in the OIO. The Tribunal held that the adjudicator ought to have taken those submissions and the report into account before confirming the demand. This omission was noted in reaching the conclusion that the demand could not be sustained. [Paras 6]

The adjudicating authority failed to consider material pre SCN submissions and the Range Superintendent's report before confirming the demand; such omission vitiates the OIO.

Final Conclusion: The appeal is allowed: the demand of Cenvat credit for 2012-13 to 2016-17 is set aside both on merits and on limitation; consequential interest and penalty are also not sustainable. Appeal allowed with consequential relief as per law.

Clandestine removal - burden of proof on Revenue - corroborative evidences - reliance on private seized documents - statements recorded during search - investigative corroboration by inquiry of named persons and transporters - links between seized documents and factory activities - extended period of limitation - penalty for wilful suppression and misstatement - appropriation of deposit against demand

Clandestine removal - reliance on private seized documents - statements recorded during search - burden of proof on Revenue - corroborative evidences - investigative corroboration by inquiry of named persons and transporters - links between seized documents and factory activities - Validity of confirmed duty demand for alleged clandestine removal of finished excisable goods for the periods specified. - HELD THAT: - The Tribunal found that the department's case rested exclusively on unsigned loose private documents seized during search and on statements recorded at the time of search. The seized papers bore no indication that they belonged to the appellant company and did not contain specific descriptions of the finished excisable goods sufficient to quantify clandestine removals. Despite verifiable clues on the documents (names, vehicle numbers), the Revenue did not undertake basic inquiries - such as recording statements of the person whose premises yielded the documents, questioning the persons named, or verifying vehicle movements with transporters - nor did it produce independent tangible evidence (for example, evidence of excess raw material purchases/consumption, undisputed discoveries of finished goods outside the factory, buyers' confirmations, or proof of transportation) that would connect the seized material to factory operations. The Tribunal contrasted this with authorities where investigation extended beyond seizures and statements and produced corroboration. On the composite appraisal of evidence and relevant precedents, the Tribunal held that the Revenue failed to discharge the burden of proving clandestine removals by independent corroborative tangible evidence, and that statements and loose papers standing alone could not sustain the confirmed demand.

Demand for duty confirmed on account of alleged clandestine removals set aside.

Penalty for wilful suppression and misstatement - appropriation of deposit - extended period of limitation - burden of proof on Revenue - Validity of penalties imposed on the appellants and appropriation of deposit/ invocation of extended limitation in light of the primary demand being unsupported. - HELD THAT: - The Tribunal applied the same determinative reasoning that defeated the demand: because the demand for duty was not established by independent corroborative evidence, consequential measures premised on that demand could not be upheld. The adjudicating authority's confirmation of the demand under the extended limitation and the imposition of penalties under the statutory/regulatory provisions were founded on the same infirm evidential base (unsigned private papers and statements). Given the absence of requisite corroboration and failure of the Revenue to conduct necessary investigative steps, the Tribunal held that the penalties and appropriation could not stand.

Penalties and appropriation of deposit confirmed by the adjudicating authority set aside.

Final Conclusion: On evaluation of the material on record and relevant precedents, the Tribunal allowed the appeals, set aside the adjudicating authority's order confirming the demand of duty for alleged clandestine removals and the consequential penalties and appropriation, and granted consequential relief to the appellants.

Eligibility for Rule 6(6)(v) of the Cenvat Credit Rules, 2004 for exported trading goods - requirement of execution of export bond for non-dutiable exported goods - application of Rule 6(3) of the Cenvat Credit Rules, 2004 to trading goods - reversal of proportionate credit for common input services when trading activity is exempted

Eligibility for Rule 6(6)(v) of the Cenvat Credit Rules, 2004 for exported trading goods - requirement of execution of export bond for non-dutiable exported goods - application of Rule 6(3) of the Cenvat Credit Rules, 2004 to trading goods - Benefit of Rule 6(6)(v) is available to an exporter in respect of trading goods exported without execution of an export bond where the goods were procured duty paid and no Cenvat credit was availed. - HELD THAT: - The Tribunal found that the appellant procured caps and brushes as duty paid trading goods and exported them without availing Cenvat credit; consequently no excise duty was payable and no export bond was executed. Relying on the decision of the Hon'ble Bombay High Court in Repro (India) Ltd. and consistent Tribunal precedents, the Court held that execution of an export bond is not a prerequisite to claim the benefit of Rule 6(6)(v) where the exported goods are non dutiable/exempt and no credit has been taken. In that factual and legal matrix Rule 6(3)(b) does not apply and the department cannot deny the exemption under Rule 6(6)(v) merely because the trading goods were not exported under bond. The consequence is that the provisions of Rule 6(1), (2), (3) and (4) are not attracted in such cases.

Impugned order set aside; appeal allowed.

Final Conclusion: Where trading goods exported were procured duty paid and no Cenvat credit was availed, execution of an export bond is not mandatory to claim Rule 6(6)(v); the Tribunal set aside the order denying that benefit and allowed the appeal.

Vicarious liability under Section 141 of the Negotiable Instruments Act - criminal liability under Section 138 of the Negotiable Instruments Act - liability of a former director who ceased to be in office prior to commission of the offence - execution of guarantee deed giving rise to civil but not criminal liability - quashing of criminal proceedings under Section 482 Cr.P.C.

Vicarious liability under Section 141 of the Negotiable Instruments Act - liability of a former director who ceased to be in office prior to commission of the offence - execution of guarantee deed giving rise to civil but not criminal liability - quashing of criminal proceedings under Section 482 Cr.P.C. - Whether execution of guarantee deeds by the petitioner, who had resigned as Director prior to issuance of the disputed cheques, attracts criminal liability under Sections 138/141 of the Negotiable Instruments Act and warrants sustaining the summoning orders. - HELD THAT: - The Court applied the settled principle that Section 141 NI Act is a penal deeming provision which must be strictly construed and can fasten vicarious liability only upon persons who were in-charge of and responsible for the conduct of the company's business at the time the offence was committed. Reliance was placed on earlier decisions establishing that mere pleading that a person was a Director is insufficient; specific averments are required as to how the Director was in-charge and responsible. The Court further noted authority holding that a letter/deed of guarantee executed by an erstwhile Director who ceased to hold office prior to issuance of the cheques may give rise to civil liability but does not attract criminal liability under Sections 138/141. On the facts, undisputed records (Form DIR-12 and ROC master data) showed the petitioner ceased to be a Director before the cheques were issued, the cheques were signed by the Managing Director/authorized signatory, and no undertaking to honour the cheques was attributed to the petitioner. Given these circumstances and the absence of material to show the petitioner was in-charge of the company's affairs at the relevant time, continuation of criminal proceedings against him would amount to abuse of process and was not sustainable. The Court therefore concluded that the summoning orders against the petitioner ought to be set aside and that any liability arising from the guarantee deeds is of a civil nature and may be pursued separately. [Paras 16, 17, 18]

Summoning orders against the petitioner under Sections 138/141 NI Act set aside; criminal proceedings quashed insofar as they relate to the petitioner.

Final Conclusion: The petitions under Section 482 Cr.P.C. are allowed; the summoning orders impugned in the complaints under Sections 138/141 NI Act are set aside as the petitioner, having resigned prior to issuance of the cheques, cannot be held vicariously liable criminally though civil remedies on the guarantee remain available.

Compromise in criminal proceedings - Compounding of offence under Section 147 of the Negotiable Instruments Act read with Section 320(6) Cr.P.C. - Revisional jurisdiction to set aside conviction on bona fide compromise - Offence under Section 138 Negotiable Instruments Act as compensatory in nature - Conditional acquittal subject to deposit in terms of Damodar S. Prabhu

Compromise in criminal proceedings - Revisional jurisdiction to set aside conviction on bona fide compromise - Offence under Section 138 Negotiable Instruments Act as compensatory in nature - Validity of the compromise between the parties and whether the High Court could set aside the convictions and sentence on the basis of that compromise. - HELD THAT: - The Court found that a genuine and bona fide compromise had been effected between the parties, evidenced by the complainant's additional affidavit and prior compliance with its terms. The nature of the cheque-dishonour offence under Section 138 is compensatory, and in view of settled precedent including Damodar S. Prabhu, the High Court in exercise of revisional jurisdiction may allow the compromise and set aside conviction and sentence where the compromise is free from coercion and has been complied with. The petitioner had already undergone part of the custodial sentence and the parties jointly represented that the compromise was bona fide and would promote peace between them. Applying these principles, the Court concluded that indulgence in favour of the petitioner was justified and that the convictions and sentence could be quashed subject to stipulated conditions.

The convictions and sentences recorded by the trial and appellate courts were set aside on the basis of the genuine compromise and revisional power of the High Court.

Conditional acquittal subject to deposit in terms of Damodar S. Prabhu - Compounding of offence under Section 147 of the Negotiable Instruments Act read with Section 320(6) Cr.P.C. - The condition to be imposed for allowing the compromise and the consequence of non-compliance. - HELD THAT: - Relying on the authority of Damodar S. Prabhu and the Court's power under Section 147 of the Negotiable Instruments Act read with Section 320(6) Cr.P.C., the Court imposed a condition in the nature of a monetary deposit to the District Legal Services Authority. The petitioner was directed to deposit the specified sum within four weeks of receipt of the certified copy of the judgment; the order expressly provided that failure to make the deposit would render the criminal revision ineffective (deemed dismissed). This condition was imposed as a necessary corollary to granting relief pursuant to the compromise and to ensure implementation of the compensatory object of the offence.

Revision allowed subject to the petitioner depositing the directed amount with the District Legal Services Authority within the stipulated period, failing which the revision would stand dismissed.

Final Conclusion: The criminal revision is allowed on the ground of a genuine, bonafide compromise; the convictions and sentences under Section 138 N.I. Act are set aside and the petitioner is acquitted subject to depositing the specified amount with the District Legal Services Authority within four weeks, failure of which will render the order ineffective.

Transfer of criminal proceedings - Power of High Court under Section 407 CrPC - Territorial jurisdiction - Offence under Section 138 of the Negotiable Instruments Act - Fair and impartial trial - Question of law of unusual difficulty - Convenience of parties and witnesses not a ground for transfer

Transfer of criminal proceedings - Power of High Court under Section 407 CrPC - Convenience of parties and witnesses not a ground for transfer - Territorial jurisdiction - Whether the criminal complaint pending before the Chief Judicial Magistrate, Jorhat should be transferred to the Chief Judicial Magistrate, Dibrugarh on grounds of inconvenience to the accused. - HELD THAT: - The High Court exercised the jurisdiction under Section 407 CrPC and considered the limited grounds for transfer: inability to have a fair and impartial trial, likelihood of a question of law of unusual difficulty, statutory requirement, general convenience of parties or witnesses, or expedience for ends of justice. The petitioner did not raise any apprehension of unfair or partial trial nor any question of law of unusual difficulty. The sole ground urged was inconvenience caused by travel from the petitioner's residence to Jorhat. Reliance was placed on the principle in Rajesh Talwar v. CBI that mere inconvenience of travel cannot override the statutory territorial jurisdiction of the trial court; convenience or inconvenience alone is inconsequential to the mandate of the Code. The Court recorded that the petitioner is an able-bodied agriculturist of 38 years, public transport between Dibrugarh and Jorhat is available and the journey can be completed in a day; no physical disability or exceptional hardship was shown. On this factual and legal basis, the plea for transfer on grounds of inconvenience was rejected and the exercise of power under Section 407 to transfer the case was not warranted. [Paras 7, 8, 9, 10, 11]

Petition for transfer of C.R. [N.I.] Case no. 462/2019 from Jorhat to Dibrugarh is dismissed for lack of merit.

Final Conclusion: The petition under Section 407 CrPC seeking transfer of the criminal complaint under Section 138 of the Negotiable Instruments Act from Jorhat to Dibrugarh is dismissed; no order as to costs.

Offence under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption under Section 118 of the Negotiable Instruments Act - probable defence - preponderance of probabilities - existence of a legally enforceable debt or liability - service of statutory notice and opportunity to make payment

Offence under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption under Section 118 of the Negotiable Instruments Act - probable defence - preponderance of probabilities - existence of a legally enforceable debt or liability - Sustainability of conviction under Section 138 of the Negotiable Instruments Act in view of admitted issuance of cheque, statutory presumptions and the accused's defence - HELD THAT: - The revision court upheld the concurrent findings of the trial court and the Sessions Judge that the accused had issued the cheque and did not successfully rebut the statutory presumption of liability. The accused did not deny his signatures on the cheque and asserted in his statement under Section 313 CrPC that the cheque was given to his son-in-law; no cogent evidence was produced to show that the cheque was issued to a third party or that the complainant was not the holder entitled to enforce it. Once issuance and signature on the cheque were not denied, the presumption under Sections 118 and 139 of the Act operated and the onus shifted to the accused to raise a probable defence on the preponderance of probabilities. The court applied the settled principle that the accused need only discharge this onus on the balance of probabilities and may rely upon materials on record to raise a probable defence. The judgment considered and followed the guidance in Rohitbhai Jivanlal Patel v. State of Gujarat and M/s. Laxmi Dyechem V. State of Gujarat , emphasising that if no probable defence is established to create doubt about the existence of a legally enforceable debt or liability, the statutory presumption prevails. The complainant's evidence established advancement of money, presentation and dishonour of the cheque, receipt of the return memo and service of the legal notice; cross-examination did not elicit material to displace the presumption. The accused's explanation as to how the cheque reached the complainant was neither supported by evidence nor sufficient to tilt probabilities in his favour. On these grounds the courts below were rightly satisfied of guilt under Section 138 and there was no scope for interference. [Paras 9, 11, 12, 16, 17]

Conviction under Section 138 of the Negotiable Instruments Act is affirmed as the accused failed to rebut statutory presumption and no probable defence was established.

Final Conclusion: Revision petition dismissed; judgments of conviction and sentence affirmed. The petitioner is directed to surrender to serve the sentence if not already served; pending applications disposed of and any bail bonds cancelled.

Vicarious liability under Section 141 of the Negotiable Instruments Act - requirement of specific averments to fasten liability on directors - strict construction of penal provision creating vicarious liability - cognizance under Section 138 of the Negotiable Instruments Act - quashing of criminal proceedings under Section 482 Cr.P.C.

Vicarious liability under Section 141 of the Negotiable Instruments Act - requirement of specific averments to fasten liability on directors - strict construction of penal provision creating vicarious liability - cognizance under Section 138 of the Negotiable Instruments Act - Whether the proceedings under Sections 138, 141 and 142 of the Negotiable Instruments Act could be sustained against the petitioner (a director) in absence of specific averments showing he was in charge of and responsible for the conduct of the company's business or that he issued the cheque or induced the transaction. - HELD THAT: - The Court applied the settled principle that Section 141 creates vicarious liability which must be strictly construed and that liability of a director must be specifically pleaded. Merely arraying a director as an accused or stating his designation is inadequate; the complaint must aver how and in what manner the director was in charge of and responsible for the conduct of the business at the relevant time or, for Section 141(2), how he was guilty of consent, connivance or negligence. The material on record showed the cheque was issued by the Managing Director in his capacity and the engagement bond and other documents did not name the petitioner or disclose his role in issuing the cheque or managing the company's affairs. The complaint contained no specific averments that the petitioner was responsible for the company's affairs, issued the cheque, or induced the complainant to part with money with intent to cheat. In those circumstances, reliance on the principles in National Small Industries Corporation Ltd. v. Harmeet Singh Paintal requires that the proceedings against the petitioner be quashed, because vicarious liability cannot be presumed and must be pleaded with particulars sufficient to show the director's responsibility for the conduct of the company's business at the relevant time. [Paras 6, 7, 8]

Proceedings against the petitioner (A3) in C.C. No. 216 of 2012 are quashed for failure of the complaint to aver the petitioner's responsibility or role sufficient to fasten vicarious liability under Section 141 of the NI Act.

Final Conclusion: The criminal petition under Section 482 Cr.P.C. is allowed and the proceedings in C.C. No. 216 of 2012 against the petitioner are quashed for want of specific averments establishing his responsibility for the company's affairs or involvement in the cheque transaction.

Examination under Section 202(2) Cr.P.C. in complaints under Section 138 Negotiable Instruments Act - Admissibility of complainant's affidavit under Section 145 Negotiable Instruments Act - Maintainability of complaint against improperly impleaded accused

Examination under Section 202(2) Cr.P.C. in complaints under Section 138 Negotiable Instruments Act - Admissibility of complainant's affidavit under Section 145 Negotiable Instruments Act - Whether a Magistrate is obliged to hold an inquiry under Section 202(2) Cr.P.C. before issuing summons in a complaint under Section 138 of the Negotiable Instruments Act - HELD THAT: - The Court, relying on the decision in Sunil Todi & Ors. v. State of Gujarat & Anr., notes that Section 145 of the Negotiable Instruments Act permits the complainant to give evidence by affidavit which is to be read in evidence notwithstanding the Cr.P.C., and that this legislative change was intended to expedite trials under Section 138. In that context the Constitutional Bench observed that where complainant's evidence is by affidavit there is no reason to insist upon examination of witnesses on oath, and consequently Section 202(2) Cr.P.C. is inapplicable to such complaints for the purpose of examining witnesses on oath. Applying that principle, the High Court held that it is not mandatory for the Magistrate to hold an inquiry under Section 202(2) Cr.P.C. before issuing summons in a complaint under Section 138 N.I. Act.

It is not mandatory for the Magistrate to conduct an inquiry under Section 202(2) Cr.P.C. prior to issuing summons in complaints under Section 138 of the N.I. Act where Section 145 N.I. Act operates to permit affidavit evidence.

Maintainability of complaint against improperly impleaded accused - Whether petitioners who contend they were wrongly impleaded and are not connected with the proprietorship that issued the cheque have a right to challenge the complaint - HELD THAT: - The Court observed that the petitioners assert that some of the accused were not connected with the proprietorship that issued the cheque and that their impleadment amounts to abuse of process. While the Court did not decide the merit of these contentions on the merits at this stage, it recognised the petitioners' legal right to assail the proceedings initiated by way of a complaint before the Magistrate and treated the revisional petition as fit for admission for adjudication of those contentions.

Petitioners have a legal right to challenge the maintainability of the complaint and the High Court admitted the criminal revision for consideration of those contentions.

Final Conclusion: The criminal revision petition is admitted; relying on the Supreme Court authority the High Court held that a Magistrate is not mandatorily required to hold an inquiry under Section 202(2) Cr.P.C. in complaints under Section 138 N.I. Act where Section 145 permits affidavit evidence, and the petitioners retain the right to assail alleged wrongful impleadment; notice is issued and the matter is listed for further proceedings.