TaxTMI Updates e-Newsletter
Dec 28,2020

Admissibility of appeal under Section 100 - advance ruling procedure under Section 98 - first proviso to Section 98(2) - question pending or decided in any proceedings - investigation under Section 67 treated as a proceeding - scope of 'any proceedings' to include DGSTI investigations and summons

Admissibility of appeal under Section 100 - advance ruling procedure under Section 98 - Whether an order rejecting an application for advance ruling under Section 98(2) is appealable to the Appellate Authority under Section 100. - HELD THAT: - An appeal to the Appellate Authority lies only against an advance ruling pronounced under Section 98(4). The order in the present matter rejected the application as inadmissible under Section 98(2) and did not pronounce an advance ruling on merits under subsection (4). Consequently such an order rejecting admission of an application does not qualify as an appealable order under Section 100. The Appellate Authority therefore lacks jurisdiction to entertain an appeal against non-admittance of an application for advance ruling; issues of condonation of delay are rendered academic when the appeal itself is not maintainable. [Paras 12, 14]

The appeal against the order rejecting admission under Section 98(2) is not maintainable before the Appellate Authority under Section 100.

First proviso to Section 98(2) - question pending or decided in any proceedings - investigation under Section 67 treated as a proceeding - scope of 'any proceedings' to include DGSTI investigations and summons - Whether the Authority for Advance Ruling was correct in holding the application inadmissible under the first proviso to Section 98(2) because the question was the subject of an investigation by DGSTI. - HELD THAT: - The first proviso to Section 98(2) renders an application ineligible if the question raised is already pending or decided in any proceedings under the Act. Commencement of an investigation under Section 67 constitutes the start of proceedings to safeguard revenue. Such proceedings may be initiated either by the jurisdictional/concerned officer or by authorised investigative agencies empowered under the Act to issue summons and investigate. The phrase "any proceedings" therefore encompasses investigations by agencies like the DGSTI. The record showed that statements recorded by DGSTI pursuant to summons dealt with classification and rate of tax of the product in question. On that basis the Authority's rejection of the application as inadmissible under the first proviso to Section 98(2) was correct. [Paras 13]

The Authority correctly held the application inadmissible under the first proviso to Section 98(2) because the question was already the subject of DGSTI proceedings.

Final Conclusion: The appeal is dismissed as not maintainable because the impugned order rejected admission of an application under Section 98(2) (and did not pronounce an advance ruling under Section 98(4)); the AAR's finding that the question was the subject of ongoing DGSTI investigation under the scope of "any proceedings" was upheld.

Alternative remedy by statutory appeal - maintainability of writ challenging a penalty order - jurisdictional error - violation of rules of natural justice - interim suspension of recovery to enable statutory remedy

Alternative remedy by statutory appeal - maintainability of writ challenging a penalty order - Challenge to Ext.P8 penalty order by way of writ petition is not maintainable because an effective alternative remedy by appeal under the GST Act exists. - HELD THAT: - The Court found that the petitioner has an effective alternative statutory remedy by way of appeal before the appellate authority under the GST Act against Ext.P8 penalty order. The impugned order was examined and there was no finding that it was tainted by any jurisdictional error or any breach of the rules of natural justice that would justify invocation of extraordinary writ jurisdiction. In these circumstances the availability of the alternative remedy rendered the writ petition untenable and warranted dismissal of the challenge to Ext.P8, without prejudice to the petitioner's right to pursue the appellate remedy.

Writ petition challenging Ext.P8 penalty order dismissed as alternative statutory remedy by appeal is available and the order is not shown to be vitiated by jurisdictional error or breach of natural justice.

Interim suspension of recovery to enable statutory remedy - Short period of interim suspension of recovery was directed to enable the petitioner to approach the appellate authority. - HELD THAT: - Although the writ petition was dismissed, the Court observed that the petitioner sought time to prefer an appeal. Exercising discretion ancillary to the dismissal, the Court directed that steps for recovery under Ext.P8 shall be kept in abeyance for three weeks to enable the petitioner to move the appellate authority. This relief was granted as a limited, time-bound measure to permit invocation of the statutory remedy.

Recovery under Ext.P8 stayed for three weeks to enable the petitioner to prefer the statutory appeal.

Final Conclusion: The writ petition against Ext.P8 penalty order is dismissed as an alternative statutory appeal remedy exists and the order is not shown to be vitiated by jurisdictional error or breach of natural justice; a limited interim stay of recovery for three weeks is granted to enable the petitioner to approach the appellate authority.

Provisional attachment to protect revenue - Power under Section 83 of the CGST Act - Power of inspection, search and seizure and "reasons to believe" under Section 67 of the CGST Act - Discretionary exercise of statutory powers and requirement of fair and judicious exercise - Misclassification of goods and evasion of tax

Power under Section 83 of the CGST Act - Provisional attachment to protect revenue - Discretionary exercise of statutory powers and requirement of fair and judicious exercise - Validity of the provisional attachment of the petitioner's bank accounts under Section 83 of the CGST Act. - HELD THAT: - Section 83 authorises provisional attachment of property, including bank accounts, where proceedings under specified sections (including section 67) are pending and the Commissioner forms an opinion that attachment is necessary to protect revenue; the power is discretionary ('may') and therefore must be exercised justly and judiciously. Mere pendency of proceedings under section 67 does not automatically warrant invocation of the drastic power under section 83, particularly where the taxable person has cooperated with the investigation and there is no record showing why bank accounts, rather than other property, were chosen for attachment. The Commissioner's affidavit did not address why attachment of bank accounts was necessary or whether other property had been considered; given the serious consequences of such an order for property rights and Article 21 interests, the exercise of the power must be reasonable and supported by material. In the present prima facie view, immediate provisional attachment of bank accounts was harsh, excessive and arbitrary. [Paras 17, 18, 25, 26, 28]

Impugned provisional attachment of the petitioner's bank accounts set aside; order dated 18th/19th November, 2020 stayed and withdrawal of the provisional attachment directed forthwith subject to an undertaking.

Power of inspection, search and seizure and "reasons to believe" under Section 67 of the CGST Act - Misclassification of goods and evasion of tax - Whether the facts established suppression of taxable transactions or contravention to evade tax such as to justify attachment under section 83. - HELD THAT: - Section 67 requires that the proper officer have 'reasons to believe' suppression or evasion before authorising inspection; a conjoint reading of sections 67 and 83 shows that attachment under section 83 presupposes such reasons. On the materials before the Court, the petitioner had declared its classification, filed returns and cooperated with investigation; the department's case was that there was misclassification leading to short payment. The order of the Commissioner of Customs (Appeals), Kolkata relied upon by the petitioner was treated by the department as under appeal, but the Commissioner's bald assertion that the appellate order lost relevancy was insufficient. Prima facie the record did not demonstrate suppression of transactions or deliberate contravention to evade tax; therefore, the factual threshold for invoking section 83 was not satisfied on the present material. [Paras 20, 21, 22, 23, 24]

On the prima facie material, it could not be said that the petitioner had suppressed taxable transactions or committed contraventions to evade tax; attachment was therefore not justified on that ground at this stage.

Provisional attachment to protect revenue - Discretionary exercise of statutory powers and requirement of fair and judicious exercise - Whether alternative security offered by the petitioner rendered the bank account attachment unnecessary. - HELD THAT: - Petitioner offered land, building and plant and machinery as security for the revenue. Where a taxable person offers identifiable assets to secure revenue interest and has cooperated with investigation, immediate resort to provisional attachment of bank accounts appears disproportionate. The Court treated such offer, in conjunction with other circumstances, as a factor militating against the exercise of the extreme power under section 83. [Paras 27, 28]

Because petitioner offered substantial assets by way of security and had cooperated with the investigation, ordering withdrawal of the bank account attachment subject to an undertaking not to alienate the offered assets during pendency of proceedings.

Final Conclusion: Writ petition allowed insofar as the provisional attachment of the petitioner's bank accounts is concerned; the impugned order dated 18th/19th November, 2020 is stayed and the provisional attachment directed to be withdrawn forthwith, subject to the petitioner filing an affidavit undertaking not to alienate the specified land, building, plant and machinery pending final hearing.

Summary order. Petition disposed of with direction to the petitioner to file a representation before the Central Goods & Services Tax Authority within 15 days; on receipt the Authority shall consider the representation objectively and decide expeditiously, but not later than 45 days from receipt. No opinion expressed on merits.

Consignment value - e-way bill generation - aggregation of multiple invoices for a single consignment - transporter's obligation to generate Part A of FORM GST EWB-01 - Rule 138 of the Central Goods and Services Tax Rules, 2017

Consignment value - aggregation of multiple invoices for a single consignment - e-way bill generation - Rule 138 of the Central Goods and Services Tax Rules, 2017 - Whether goods transported in a single vehicle under multiple invoices must be treated as a single consignment for the purpose of determining the threshold for e-way bill generation under Rule 138. - HELD THAT: - Explanation 2 to Rule 138 defines "consignment value" as the value declared in an invoice, bill of supply or delivery challan, including GST and any cess. Sub rule (1) requires furnishing of consignment information (Part A) before commencement of movement; sub rule (2) requires supplier or recipient to furnish information (Part B); and sub rule (3) permits the transporter to generate Part A where Part B is not generated. Reading sub rule (1) with Explanation 2, the consignment value is to be determined from the invoice. Where goods of the same consignor, covered by multiple invoices, are transported together in one vehicle, treating each invoice in isolation would defeat the statutory purpose and allow circumvention of the e way bill threshold by splitting value across invoices. Consequently, the aggregate value of the invoices covering goods consigned together in one vehicle constitutes the consignment value for the threshold test under Rule 138, and an e way bill is required if that aggregated value exceeds Rs. 50,000. Applying this principle to the facts, the detention of the goods was not without jurisdiction. [Paras 4, 5, 6]

The aggregated invoice value of goods transported together in one vehicle constitutes the consignment value for Rule 138; detention was within jurisdiction and the orders are not interfered with.

Final Conclusion: Both writ appeals are dismissed; the detention orders were intra vires, and no ground is made out to interfere with the Single Judge's judgment.

Record of personal hearing - personal hearing by video conferencing - procedure for maintenance and supply of hearing record - compliance with principles of natural justice - quashing of orders and remand for fresh hearing

Record of personal hearing - personal hearing by video conferencing - compliance with principles of natural justice - Whether omission to maintain and supply the record of personal hearing conducted by video conferencing during the Covid-19 period vitiated the appellate orders and required quashing and fresh disposal. - HELD THAT: - The Court found that the procedure for maintaining a record of personal hearing conducted by video conferencing was a formal requirement designed to secure compliance with the rules of natural justice during the pandemic. The respondents admitted that the petitioners were represented and that argument notes were on file, but also admitted that the record of personal hearing was inadvertently not sent to the petitioners. The High Court held that because the mandated procedure was not strictly followed, the omission amounted to a breach of the procedural safeguard intended to ensure an effective opportunity of personal hearing and transparency. Consequently, the impugned appellate orders could not stand and required quashing so that the Appellate Authority could re-hear the matters after complying with the prescribed procedure and providing the petitioners an opportunity consistent with natural justice. [Paras 2, 3]

Impugned orders quashed; matters remitted to the Appellate Authority to pass fresh orders after complying with the prescribed procedure for personal hearings by video conferencing and after hearing the petitioners.

Final Conclusion: The High Court quashed the impugned appellate orders for failure to comply with the formal procedure of maintaining and supplying records of personal hearings conducted by video conferencing and directed the Appellate Authority to re-hear and pass fresh orders after compliance within two months.

Summary order. Petition disposed of as withdrawn with liberty to file a fresh petition on the same or subsequent cause of action and liberty to mention for early listing.

Retrospective applicability of statutory notification - Prospective application of notification - Rule 96(10) of the CGST Rules - Notification No. 54/2018 - Stay of proceedings pursuant to statutory notice - Judicial review under Article 226

Stay of proceedings pursuant to statutory notice - Judicial review under Article 226 - Interim suspension of action under the notice dated 24.11.2020 - HELD THAT: - The Court, after hearing the petitioner and noting the challenge to the retrospective operation of Notification No.54/2018, directed that proceedings pursuant to the notice dated 24.11.2020 shall remain stayed until the next date of hearing. The order was made to preserve the parties' positions pending issuance of notice to respondents and further consideration of the challenge under Article 226. The interim relief is limited in time and conditional on the returnable date fixed by the Court. [Paras 7]

Proceedings pursuant to the notice dated 24.11.2020 are stayed until the next date of hearing (24.02.2020).

Retrospective applicability of statutory notification - Prospective application of notification - Rule 96(10) of the CGST Rules - Notification No. 54/2018 - Challenge to the retrospective operation of Notification No.54/2018 directed to be examined by respondents after issuing notice - HELD THAT: - The Court recorded that a Coordinate Bench had held Notification No.54/2018 to be effective with effect from 23.10.2017 but not from the inception of Rule 96(10). The petitioner contends that the Notification itself specifies commencement from the date of publication in the Official Gazette and therefore retrospective application back to the inception of the Rule is impermissible. The Court did not decide the substantive question on merits; instead it issued notice to the respondents to explain the position and to re-examine the correctness of applying the Notification from 23.10.2017 as observed by the Coordinate Bench. The matter is thus reserved for substantive consideration after respondents' response. [Paras 3, 4, 5, 6, 7]

Notice issued to respondents for explanation; substantive question of retrospective applicability of Notification No.54/2018 to be considered on further hearing.

Final Conclusion: The Court granted an interim stay of action under the notice dated 24.11.2020 until the next hearing (24.02.2020), issued notice to respondents to address the challenge to the retrospective application of Notification No.54/2018 vis-a -vis Rule 96(10) of the CGST Rules, and directed that the substantive question be considered thereafter.

Bail is the rule and jail is the exception - unreasonable or onerous bail conditions - payment of outstanding tax liability as condition for grant of bail - personal liberty under Article 21

Payment of outstanding tax liability as condition for grant of bail - unreasonable or onerous bail conditions - personal liberty under Article 21 - The condition imposed by the Trial Court requiring the petitioner to pay the entire outstanding GST liability along with interest as a condition for grant of regular bail. - HELD THAT: - The High Court held that imposing payment of the entire outstanding GST liability as a condition for bail was impermissible and suffered from the vice of unreasonableness. The Court relied on earlier decision in Ranjit Singh (CRM-M-14856-2020) and observed that where investigation/enquiry is complete and chargesheet filed, depriving liberty by imposing recovery of alleged tax liability as a bail condition offends the settled principle that bail is the rule and jail is the exception and engages personal liberty under Article 21. The State did not dispute applicability of the earlier ratio, and no challenge to that decision before the Supreme Court was shown. In consequence, the condition requiring payment of Rs. 2,24,46,239/- along with interest was set aside.

The condition mandating payment of the alleged outstanding GST liability along with interest as a pre-condition to bail was set aside.

Unreasonable or onerous bail conditions - bail is the rule and jail is the exception - The adequacy and quantum of bail security required from the petitioner and modification of the Trial Court's order fixing bail bonds at Rs. 50 lakhs with one surety in like amount. - HELD THAT: - Applying the reasoning in Ranjit Singh, the High Court found the bail bond requirement of Rs. 50 lakhs with one surety to be onerous and reduced the security to a more reasonable quantum. The Court substituted the existing bond condition and directed that bail bonds be reduced to Rs. 25 lakhs, which may be furnished by way of immovable property to the satisfaction of the Ilaqa/Duty Magistrate, Panipat. Other conditions of the Trial Court's bail order were left undisturbed.

Bail bonds fixed at Rs. 50 lakhs with one surety were reduced to Rs. 25 lakhs, to be in the form of immovable property to the satisfaction of the Ilaqa/Duty Magistrate; remaining conditions to continue.

Final Conclusion: The petition was allowed to the extent of setting aside the condition requiring payment of the outstanding GST liability with interest and modifying the bail bonds from Rs. 50 lakhs with one surety to Rs. 25 lakhs (immovable property), while all other conditions of the Trial Court's bail order remain intact.

Anti-profiteering - Passing on benefit of Input Tax Credit - Section 171 of the CGST Act, 2017 - Investigation under Rule 129(6) of the CGST Rules, 2017 - Commencement Certificate and RERA registration as indicators of project launch in post-GST regime - Requirement of pre-GST price history for comparison to establish profiteering

Passing on benefit of Input Tax Credit - Commencement Certificate and RERA registration as indicators of project launch in post-GST regime - Requirement of pre-GST price history for comparison to establish profiteering - Whether the respondent contravened the obligation under Section 171 of the CGST Act, 2017 by not passing on the benefit of Input Tax Credit to recipients in respect of the projects investigated. - HELD THAT: - The DGAP's investigation covered the period 01.07.2017 to 31.12.2019 and found that the subject projects were launched after the introduction of GST. Commencement Certificates for the projects were dated 07.09.2018 and 11.05.2018; RERA registration for the Phase II project was obtained on 11.10.2018 with first booking on 02.11.2018, and no EWS unit was sold as of 31.12.2019. Because the projects were launched and booked in the post GST regime, there was no pre GST price history or pre GST ITC/tax rate applicable to those units against which any post GST benefit could be compared. The DGAP thus concluded that the respondent neither obtained an additional ITC benefit in respect of these projects nor enjoyed a post GST rate reduction that could give rise to an obligation under Section 171(1). The Authority examined the report and material, found no error in the DGAP's reasoning, and accepted that anti profiteering provisions do not apply where projects were launched and transacted only in the post GST period and no comparative pre GST benchmark exists.

No contravention of Section 171 of the CGST Act, 2017 was made out in respect of the projects investigated; the DGAP's finding is upheld.

Final Conclusion: The Authority agreed with the DGAP's report and held that the anti profiteering provisions under Section 171 do not apply to the subject projects launched and transacted in the post GST period; the proceedings initiated by Order No. 78/2019 dated 24.12.2019 are dropped.

Natural justice - Opportunity of being heard - Refund under Section 54 of the CGST Act, 2017 - Reverse charge mechanism (RCM) - Section 17(4) - option for banking companies - Proviso to Rule 92(3) of the CGST Rules, 2017 - refund not to be rejected without hearing - Remand for fresh consideration

Natural justice - Opportunity of being heard - Proviso to Rule 92(3) of the CGST Rules, 2017 - refund not to be rejected without hearing - Whether the Orders-in-Original rejecting the appellant's refund claims were vitiated for denial of opportunity of hearing and breach of principles of natural justice. - HELD THAT: - The adjudicating authority issued FORM GST RFD-08 and proceeded to reject the refund claims without adequately considering the appellant's written request for time to file a reply and without giving a sufficient opportunity for personal hearing. The proviso to rule 92(3) requires that no refund application be rejected without giving the applicant an opportunity of being heard. The Commissioner (Appeals) finds that the adjudicating authority neither considered the appellant's request of 22.10.2019 for 15 days' time nor passed a speaking order detailing reasons after affording a proper hearing. Non-passing of a speaking order and failure to grant reasonable opportunity amounted to denial of natural justice. Consequently, the impugned Orders-in-Original are unsustainable on this ground and are set aside. [Paras 8]

Impugned Orders-in-Original rejecting the refund claims are set aside for denial of opportunity of hearing and breach of natural justice; file remitted for fresh consideration.

Refund under Section 54 of the CGST Act, 2017 - Reverse charge mechanism (RCM) - Section 17(4) - option for banking companies - Remand for fresh consideration - Whether the refund claims for ITC (50% of IGST paid under RCM) are admissible and how they should be processed in view of Section 17(4) and the absence of a specific provision for refund of tax paid under RCM. - HELD THAT: - While the adjudicating authority rejected the claims on the basis that the appellant had exercised the option under Section 17(4) (availing 50% ITC and letting the rest lapse) and that refunds of tax paid under RCM are not covered under the claimed category in Section 54, the Commissioner (Appeals) did not finally adjudicate the merits due to the procedural infirmity. The appellate authority directs that the appellant shall submit all relevant documents to the adjudicating authority and that the claims be processed afresh in accordance with the provisions and procedures of the CGST Act, 2017 and CGST Rules, taking into account the contentions on applicability of Section 17(4), the nature of services from foreign banks under RCM, and applicable notifications. The matter is therefore remanded for adjudication on merits after affording full opportunity and passing a speaking order. [Paras 5, 6, 7, 8]

Refund claims remitted to the adjudicating authority for fresh consideration and adjudication on merits in accordance with law after affording the appellant opportunity to produce documents and be heard.

Final Conclusion: The Orders-in-Original dated 07.11.2019 rejecting the appellant's refund claims for October 2017, August 2017 and December 2017 are set aside for denial of opportunity of hearing; the matters are remitted to the adjudicating authority to process and decide the refund claims afresh in accordance with the CGST Act and Rules after the appellant files relevant documents and is afforded a proper hearing, and a speaking order is to be passed.

Right to legal assistance during interrogation - Presence of advocate at visible but not audible distance during recording of statement - Protection against coercive or extortionate interrogation - Duty to cooperate with statutory investigation subject to safeguards

Presence of advocate at visible but not audible distance during recording of statement - Right to legal assistance during interrogation - Advocate authorised to be present at a visible but not audible distance during interrogation and recording of petitioners' statements - HELD THAT: - The Court, having regard to the petitioners' apprehension of possible coercive methods and relying on the consistent practice and orders of higher courts in similar circumstances, directed that the petitioners' advocate be permitted to be present during interrogation and recording of statements. The presence is limited to a position beyond hearing range but within visible distance and the advocate must be prepared to attend whenever the petitioners are called for interrogation. The order recognises the petitioners' duty to cooperate with the statutory investigation while providing a procedural safeguard against potential coercion, following precedents where similar safeguards were held appropriate. The Court did not accede to any broader or different procedural constraints beyond this limited mode of legal assistance during interrogation.

Writ petition partly allowed by directing that the petitioners' advocate may be present at a visible but not audible distance during interrogation and recording of statements; advocate to sit beyond hearing range but within visible distance and be available when petitioners are called for interrogation.

Final Conclusion: The petition is partly allowed: the petitioners' advocate is permitted to be present during interrogation and recording of statements at a visible but not audible distance, subject to the directions given; other reliefs sought were not granted.

Locus standi - standing doctrine - public interest litigation - challenge to deduction of tax on interest awarded by Motor Accident Claim Tribunal - administrative decision of the CBDT on taxability of MACT award interest

Locus standi - standing doctrine - challenge to deduction of tax on interest awarded by Motor Accident Claim Tribunal - Whether the petitioner has locus standi to maintain a writ petition challenging the requirement to deduct tax on interest awarded by MACT and the CBDT's decision upholding taxability. - HELD THAT: - The Court applied the settled principle that a petitioner must be an aggrieved person injured by the impugned action to have locus standi. Reliance was placed on the principle in Ghulam Qadir that a person may have standing if the impugned action is likely to adversely affect a right having statutory source, but the Court found the petitioner to be a stranger with no right or fundamental right in respect of awards or compensation granted by the MACT. The Court noted that Indian courts have relaxed traditional standing rules in appropriate cases by entertaining public interest litigation where the directly aggrieved person is unable to approach the Court, but held that the present petition was not brought as a PIL in the required format. Consequently, the petition seeking to quash the contested deduction provision and to set aside the CBDT order was not maintainable for want of locus standi.

Petition dismissed for want of locus standi; petitioner may instead file a properly constituted PIL with necessary disclosures, affidavits and undertakings, and the rights and contentions of all parties in any such PIL are left open.

Final Conclusion: Writ petition challenging tax deduction on interest awarded by MACT and the CBDT's decision dismissed for lack of locus standi; court permits filing of a properly constituted PIL and leaves the substantive rights and contentions open for determination in appropriate proceedings.

Rectification of mistake apparent from record - exercise of power under Section 254(2) - pre-amendment limitation period for rectification applications - remand for re-adjudication by lower authority - distinction between rectification and review - absence of apparent mistake

Pre-amendment limitation period for rectification applications - rectification of mistake apparent from record - Maintainability of the Miscellaneous Application under Section 254(2) filed on 24.04.2019 challenging ITAT order dated 10.09.2015. - HELD THAT: - The Tribunal held that the application was filed within the four-year period available under the pre-amendment sub section (2) of Section 254 of the Income tax Act for orders passed prior to 01.06.2016. The amendment reducing the limitation was prospective and therefore could not curtail the applicant's existing four year right; consequently there was no delay in filing the present application and it was maintainable for adjudication on merits. The Tribunal relied on precedent holding that retrospective shortening of limitation cannot be applied to extinguish an existing right to file rectification. [Paras 4]

The Miscellaneous Application was held maintainable as filed within the four year period applicable to orders passed before 01.06.2016.

Absence of apparent mistake - remand for re-adjudication by lower authority - distinction between rectification and review - exercise of power under Section 254(2) - Whether the Tribunal's order dated 10.09.2015 contained a mistake apparent from the record warranting rectification and modification so as to recall the remand of grounds relating to AY 2010-11. - HELD THAT: - On the merits the Tribunal examined the record and the submissions. It noted that the authorised representative had admitted that the appeal for AY 2009 10 was pending before the CIT(A) and that fresh evidence arising from a survey had been produced and was relevant; having considered rival contentions, the Tribunal restored grounds 6 to 16 (relating to the claim and computation of deduction under Section 10B) to the file of the CIT(A) for re adjudication after affording opportunity. The Tribunal found no demonstrable or manifest error in that reasoning; the application sought effectively a review of the Tribunal's order rather than correction of a mistake apparent on the face of the record. Decisions cited by the applicant were distinguishable. Accordingly the Tribunal concluded there was no apparent mistake requiring rectification and dismissed the Miscellaneous Application on merits. [Paras 5, 6]

No apparent mistake was found in the ITAT order of 10.09.2015; the request to recall or modify the remand was rejected and the Miscellaneous Application dismissed on merits.

Final Conclusion: The Miscellaneous Application under Section 254(2) was held maintainable (filed within the pre amendment four year period) but dismissed on merits: the Tribunal found no mistake apparent from the record in its order dated 10.09.2015 and refused to rectify or review the remand of grounds relating to the claim and computation of deduction under Section 10B.

Verification of unverified fixed assets and admissibility of depreciation - remand for verification to the Assessing Officer - disallowance of operating expenses on an ad-hoc basis - requirement of bills, invoices and vouchers for verification of claims - ten percent ad-hoc disallowance of operating expenses

Verification of unverified fixed assets and admissibility of depreciation - remand for verification to the Assessing Officer - requirement of bills, invoices and vouchers for verification of claims - Whether the addition on account of unverified fixed assets and the depreciation claimed thereon could be adjudicated on the record before the Tribunal or required remand to the Assessing Officer for verification. - HELD THAT: - The Tribunal examined the direction of the Hon'ble High Court and the material on record and found that neither books of accounts nor complete bills and vouchers for the fixed assets were produced before the Assessing Officer, the CIT(A) or the Tribunal. The assessee had only filed a Tax Auditor's Form 3CD with a list of assets and a few sample invoices; complete supporting invoices, delivery/installation documents and vouchers for each entry were not available for verification. The Assessing Officer's subsequent order of 17/06/2019 did not address the fixed assets issue conclusively but adjudicated matters confirmed by the High Court. Given the absence of documentary evidence necessary for verification of each fixed-asset entry, the Tribunal concluded that it was not in a position to verify purchases and depreciation on the material before it and that the matter should be restored to the file of the Assessing Officer for detailed examination and verification in accordance with law. [Paras 4, 9, 10]

Issue remanded to the Assessing Officer for examination and verification of the claimed fixed-asset additions and the depreciation thereon; appeal allowed for statistical purposes.

Disallowance of operating expenses on an ad-hoc basis - ten percent ad-hoc disallowance of operating expenses - requirement of bills, invoices and vouchers for verification of claims - Whether the Assessing Officer's 10% ad hoc disallowance of operating expenses for AY 2011 12 was sustainable where books of account and vouchers in respect of operating expenses had been produced and examined. - HELD THAT: - The Tribunal found that for AY 2011-12 the Assessing Officer had obtained and examined the books of account and the vouchers for operating expenses. No specific defects, discrepancies or deficiencies in the bills or vouchers were pointed out by the Assessing Officer. The AO's ad-hoc disallowance was made by reference to earlier years and prior findings rather than by identifying particular infirmities in the current year's records; the CIT(A) upheld the disallowance by relying on those earlier years without noting the changed facts. In these circumstances, the Tribunal held that an ad-hoc 10% disallowance cannot be sustained absent any pointed-out defect in the documentary evidence, and therefore the disallowance could not be upheld. [Paras 12, 15, 16]

Ad-hoc 10% disallowance of operating expenses deleted; assessee's appeal allowed.

Final Conclusion: The appeal in respect of AY 2007-08 is allowed for statistical purposes by remanding the question of unverified fixed-asset additions and related depreciation to the Assessing Officer for verification; the assessee's appeal in respect of AY 2011-12 is allowed by deleting the ad-hoc 10% disallowance of operating expenses as unsustainable on the facts.

Telescoping of income against book profits - assessment under section 153C consequent to search - bogus accommodation entries / sham transactions - internal related party movements not attracting commission - remand for de novo computation of increase in investments

Telescoping of income against book profits - bogus accommodation entries / sham transactions - Whether the assessee is entitled to set off or 'telescope' the commission income assessed by the AO against the income declared in the books of account for the specified assessment years. - HELD THAT: - A search was conducted and consequential proceedings were initiated under section 153C; the AO assessed commission income treating the transactions as accommodation entries. The CIT(A) rejected the assessee's claim for telescoping on the ground that the books were sham and the assessee had not established that book income was exclusively from commission. This Tribunal noted that the identical question was earlier decided in favour of the assessee for A.Y.2011-12 by this Tribunal, where telescoping was allowed: the income declared in the books comprised gross profit on sales and interest on loans/advances which the AO assessed as accommodation entries, and the Tribunal permitted set off of assessed commission against such book income. Applying that precedent and the reasoning that the income assessed as commission corresponds to amounts reflected in the books (gross profit/other income), the Tribunal directed the AO to allow telescoping of commission income against the income declared in books for all the assessment years under appeal. The Revenue did not dispute applicability of the earlier decision before the Tribunal. [Paras 4]

Allowed - telescoping of the commission income against the income declared in the books ordered to be given for the assessment years in dispute.

Remand for de novo computation of increase in investments - computation of commission based on increase in investments - Whether the AO's computation of 'increase in investments' (and resultant commission) for A.Y.2013-14 and A.Y.2014-15 is correct, and if not, the appropriate course of action. - HELD THAT: - The AO computed commission by applying the rate on amounts he treated as increase in investments for A.Y.2013-14 and A.Y.2014-15. The assessee submitted detailed schedules before the CIT(A) and the Tribunal showing that overall investments had decreased (when current and non current investments are considered together) and contended there was no increase. The Tribunal found that the assessee's chart required re-examination and, in the interest of justice and fair play, remanded the matter to the AO for fresh adjudication and recomputation of the increase in investments and consequent commission in accordance with law. [Paras 5]

Partly allowed for statistical purposes - issue remanded to the AO for de novo adjudication of the computation of increase in investments for A.Y.2013-14 and A.Y.2014-15.

Final Conclusion: The Tribunal allowed the assessee's claim for telescoping commission income against book income for the assessment years in dispute, directing the AO to give effect to the set off; however, the computation of increase in investments for A.Y.2013-14 and A.Y.2014-15 (and the commission based thereon) is remitted to the AO for fresh consideration in accordance with law.

Definition of "charitable purpose" and meaning of "education" under section 2(15) - business activity versus charitable purpose in the context of publishing and sale of text books - entitlement to exemption under section 11 - rule of consistency in taxation - ploughing back of surplus to further charitable objects

Definition of "charitable purpose" and meaning of "education" under section 2(15) - business activity versus charitable purpose in the context of publishing and sale of text books - ploughing back of surplus to further charitable objects - Activities of the assessee relating to developing, printing, publishing and sale of text books fall within the expression of "education" in the definition of "charitable purpose" in section 2(15). - HELD THAT: - The Tribunal, following the coordinate ITAT decision and the judgment of the Hon'ble Delhi High Court, held that generation of profit from publishing and sale of school text books does not, by itself, convert the activity into a commercial business outside "education" under section 2(15). The court considered the setting up, control and management of the assessee, sources of income, pattern of expenditure and the fact that surplus is ploughed back into the educational activity. Applying the principle that the decisive question is whether the activity contributes to the training and development of students, and having regard to consistent treatment of the assessee's activity over many years, the Tribunal concluded that the publication and sale activity is incidental to and in furtherance of the educational object and therefore falls within "education" as a charitable purpose. [Paras 16, 17, 18]

Held that the assessee's publication and sale of text books constitute "education" within section 2(15) and are not rendered non-charitable merely because they produced a surplus.

Entitlement to exemption under section 11 - rule of consistency in taxation - Assessee is entitled to exemption under section 11 for the assessment years in question. - HELD THAT: - Relying on the prior decisions of the Hon'ble Delhi High Court and the coordinate Bench of the Tribunal in the assessee's own cases for earlier assessment years, and applying the rule of consistency where no change of circumstances is shown, the Tribunal held that the assessee qualifies for exemption under section 11. The Tribunal respectfully followed the High Court's finding that the denial of exemption by treating the activity as falling outside the second limb of section 2(15) was contrary to settled law and that the Revenue had no justification to take a different stance given the longstanding position and absence of changed circumstances. Consequently, the Assessing Officer was directed to allow exemption under section 11 with consequential benefits. [Paras 19]

Allowed exemption under section 11 for the relevant assessment years and directed the Assessing Officer to grant consequential relief.

Final Conclusion: Revenue appeals dismissed; following the High Court and coordinate ITAT precedents the Tribunal held that the assessee's publication and sale of school text books fall within "education" under section 2(15) and directed grant of exemption under section 11 for the specified assessment years with consequential benefits.

Reopening of assessment - reason to believe - tangible material - quashing of reassessment proceedings - addition under section 68 - infructuous appeal

Reopening of assessment - reason to believe - tangible material - quashing of reassessment proceedings - Validity of reopening assessment for A.Y. 2010-11 by issuing notice under sections 147/148. - HELD THAT: - The Assessing Officer recorded reasons noting large share premium shown in the balance sheet and concluded that the shares "do not qualify to fetch a premium" and therefore there was reason to believe income had escaped assessment. The Tribunal examined those reasons and held that mere recitals of receipt of share premium, without any tangible material quantifying overvaluation or indicating by what amount income had escaped assessment, do not constitute the requisite material to form a reason to believe under sections 147/148. The Tribunal followed earlier decisions (including the ITAT decision in Balbir Ispat Pvt. Ltd. and the Bombay High Court in Khubchandani Healthparks) which require that the AO have tangible material on which a reasonable person can form the requisite belief; mere assertion of premium without basis is insufficient. Applying that principle to the facts, the Tribunal found no tangible material on record to justify reopening and consequently quashed the reassessment proceedings. [Paras 6, 7]

Reopening under sections 147/148 quashed; assessee's appeal allowed on jurisdictional ground.

Addition under section 68 - infructuous appeal - Effect of quashing reassessment on the addition made under section 68 concerning share application money. - HELD THAT: - The CIT(A) had deleted a large part of the additions and confirmed an addition in respect of share application money. However, because the Tribunal quashed the reassessment proceedings for lack of jurisdictional foundation, the challenge by the Revenue to the deletion on merits became moot. The Tribunal treated the revenue's appeal on merits as infructuous and dismissed it without adjudicating the substantive correctness of the addition under section 68. [Paras 8]

Revenue's appeal on the merits (including the section 68 addition) dismissed as infructuous; no substantive adjudication on the addition.

Final Conclusion: The reassessment proceedings initiated by notices under sections 147/148 for A.Y. 2010-11 were quashed for lack of tangible material to form a reason to believe; accordingly the assessee's appeal is allowed and the revenue's appeal on merits is dismissed as infructuous.

Arm's Length Price - Transfer Pricing Officer's power to determine ALP - Comparability analysis and most appropriate method - Evidence test - Rendition test - Benefit test under section 92(2) - Aggregation versus separate benchmarking of intra-group services - Disallowance under section 40(a)(i) for non-deduction of tax at source

Arm's Length Price - Transfer Pricing Officer's power to determine ALP - Aggregation versus separate benchmarking of intra-group services - Comparability analysis and most appropriate method - Evidence test - Rendition test - Benefit test under section 92(2) - Validity of the Transfer Pricing Officer's determination of ALP of intra group management/management charges at nil and the appropriate approach for determining ALP of such services - HELD THAT: - Tribunal held that the TPO's conclusion that the arm's length price of intra group management services was 'nil' without conducting an appropriate functional/comparability analysis and without applying a most appropriate transfer pricing method is not acceptable. Once an international transaction is identified, its value must be determined having regard to the arm's length price; the TPO cannot set ALP at nil merely because of a view that the assessee did not obtain financial benefit or that services were not required. The assessee must satisfy the evidence test or rendition test and the benefit test under section 92(2), and the TPO/AO is directed to judge requirement of services from the business viewpoint of the assessee. The matter is remitted to the TPO for de novo determination of ALP after examining documents filed by the assessee, selecting the most appropriate method and carrying out comparability analysis. [Paras 17, 20, 23]

TPO's ALP determination at nil set aside; remitted to TPO to determine ALP afresh by applying the most appropriate method and comparability analysis, having regard to evidence and tests under section 92(2).

Disallowance under section 40(a)(i) for non-deduction of tax at source - Arm's Length Price - Validity and maintainability of the addition under section 40(a)(i) for non-deduction of TDS on the impugned management payments - HELD THAT: - The Tribunal observed that the TPO's transfer pricing adjustment on the management charges has been remitted for fresh consideration; accordingly, the consequential corporate tax issue of disallowance under section 40(a)(i) (for amounts on which TDS was not deducted) becomes academic at this stage. The AO/TPO are directed to reconsider the transfer pricing adjustment first; the question of disallowance and related tax consequences should be examined thereafter in light of the re adjudicated TP outcome and the evidence on the nature of payments. [Paras 24, 25]

Addition under section 40(a)(i) set aside for fresh consideration in consequence of remand of the transfer pricing issue; AO/TPO to re adjudicate thereafter.

Final Conclusion: The Tribunal set aside the TPO's finding that ALP of intra group management services was nil and remitted the matter to the TPO for de novo determination of ALP by applying the most appropriate method and comparability analysis after considering the assessee's evidence; consequential corporate tax disallowance under section 40(a)(i) was treated as academic and also remitted for fresh consideration. Appeal allowed for statistical purposes.

Re-opening of assessment - jurisdiction to reopen under Section 147/148 - reason to believe that income has escaped assessment - failure to disclose fully and truly all material facts - change of opinion

Re-opening of assessment - failure to disclose fully and truly all material facts - change of opinion - jurisdiction to reopen under Section 147/148 - Validity of reassessment proceedings initiated by issuance of notice under section 148 for Assessment Year 2006-07 - HELD THAT: - The Tribunal held that reassessment after the four-year period could be valid only if the AO had reason to believe that income had escaped assessment by reason of the assessee's failure to fully and truly disclose all material facts. On the record the assessee had disclosed and furnished particulars concerning the prior period claim of Rs. 19,22,905/- during the original assessment proceedings; the AO had examined those details and allowed the claim. The reasons recorded for reopening do not allege any nondisclosure of material facts but indicate merely a different view on the allowability of the expense. Reopening an assessment on that basis amounts to a change of opinion, which does not satisfy the condition in the proviso to Section 147. Consequently the AO lacked the requisite satisfaction and jurisdiction to issue the notice under section 148. Because jurisdiction to reopen was absent, the reassessment was quashed and the merits were rendered academic. [Paras 10, 11, 12]

Impugned notice under section 148 and the reassessment framed u/s 143(3) read with section 147 for A.Y. 2006-07 quashed for lack of jurisdiction; reassessment held to be based on change of opinion and not on failure to disclose material facts.

Final Conclusion: The appeal is allowed; the reassessment proceedings for Assessment Year 2006-07 are quashed as the reopening did not satisfy the proviso to Section 147 and the AO therefore lacked jurisdiction.

Assessment void ab initio - notice in name of non-existent entity invalid - amalgamation resulting in cessation of amalgamating company - person for the purpose of the Income-tax Act - admission of additional ground by Tribunal

Assessment void ab initio - notice in name of non-existent entity invalid - amalgamation resulting in cessation of amalgamating company - person for the purpose of the Income-tax Act - Sustainability of an assessment order passed in the name of a company that had ceased to exist by virtue of a court-approved scheme of amalgamation. - HELD THAT: - The Tribunal found that pursuant to a scheme of amalgamation approved by the High Court the amalgamating company had ceased to exist prior to the date on which the assessing officer passed the assessment order. Reliance was placed on the Supreme Court decision in Maruti Suzuki India Ltd., which held that once a scheme of amalgamation is approved and the amalgamating company stands dissolved without winding up, it ceases to be a "person" for the purposes of the Act and assessment proceedings or notices in its name are invalid. Applying that principle, the Tribunal held that issuance of notice and framing of assessment in the name of an entity which had already ceased to exist rendered the initiation of proceedings and the assessment order null and void. The Tribunal rejected the contention that such defect was a mere procedural irregularity curable under general provisions, concluding instead that the absence of a living legal entity against whom the assessment was framed was fatal to jurisdiction and validity of the order. As a consequence, the assessment order was annulled. [Paras 11, 13, 14]

Assessment order dated 29.12.2006 passed in the name of the dissolved amalgamating company is void ab initio and is annulled.

Final Conclusion: The appeal is allowed; the assessment for AY 2004-05 dated 29.12.2006, being framed in the name of a company that had ceased to exist as a result of a court-approved amalgamation, is void ab initio and is annulled; other grounds were not adjudicated.

Crystallization of expenditure - advance payment for license fee - claim of expenditure in the year to which it pertains - cash system of accounting versus mercantile system - disallowance of expenditure

Crystallization of expenditure - advance payment for license fee - claim of expenditure in the year to which it pertains - cash system of accounting versus mercantile system - Whether the advance licence fee paid in Financial Year 2005-06 and shown as an advance in the balance sheet could be claimed as revenue expenditure in Financial Year 2006-07 (Assessment Year 2007-08) when the licence was granted and the expenditure crystallized. - HELD THAT: - The assessee paid licence fee in advance (during Financial Year 2005-06) as required by government regulations and reflected that amount in the audited financial statements as an advance (asset). The licence for Financial Year 2006-07 was subsequently granted, at which point the advance converted into an incumbent obligation and the expenditure crystallized in Financial Year 2006-07 (relevant to Assessment Year 2007-08). The Tribunal found that crystallization in the year to which the licence pertained entitled the assessee to claim the amount as an expenditure in that year. The choice between cash and mercantile accounting did not affect the conclusion because the payment in 2005-06 remained an advance until crystallization in 2006-07; therefore the disallowance by the AO, and its confirmation by the CIT(A), was not justified.

The disallowance of the licence fee was set aside and the claim of the assessee for the licence fee as expenditure in Assessment Year 2007-08 was allowed.

Final Conclusion: Appeal allowed: the advance licence fee shown as an asset in Financial Year 2005-06 was held to have crystallized in Financial Year 2006-07 and was rightly claimable as expenditure in Assessment Year 2007-08; the addition disallowing the licence fee is deleted.

Enhancement of assessment by appellate authority - notice and opportunity of hearing / principle of natural justice - remand for fresh consideration - treatment of appeal as allowed for statistical purposes

Enhancement of assessment by appellate authority - notice and opportunity of hearing / principle of natural justice - remand for fresh consideration - Whether the Commissioner of Income Tax (Appeals) enhanced the assessment without issuing a written notice and without giving the assessee an opportunity to file objections, and the consequent relief. - HELD THAT: - The Tribunal examined the CIT(A)'s order and noted that at paragraph 6.29 of the CIT(A)'s order the factual position which led to proposed enhancement was recorded but no written notice of enhancement had been issued to the assessee. The departmental representative also confirmed absence of any written notice. In view of the absence of a formal notice and in order to secure the assessee's right to be heard, the matter was remitted to the CIT(A) for fresh consideration in accordance with law. The CIT(A) is directed that, if he proposes to enhance the assessment, he shall issue a notice to the assessee, consider any written objections filed, and afford a fair opportunity of hearing before adjudicating the appeal. [Paras 5, 7, 8]

Remitted to the CIT(A) for reconsideration with directions to issue notice and afford a fair hearing before any enhancement is made.

Final Conclusion: The appeal is disposed of by remitting the matter to the CIT(A) for reconsideration in accordance with law; the Tribunal treated the appeal as allowed for statistical purposes.

Registration under section 12A/12AA - Religious institution eligibility for registration - Charitable versus religious activities under section 2(15) - Public charitable character and beneficiary/investment/irrevocability clauses

Registration under section 12A/12AA - Religious institution eligibility for registration - Charitable versus religious activities under section 2(15) - Public charitable character and beneficiary/investment/irrevocability clauses - Whether the appellant-trust is entitled to registration under section 12A/12AA as a charitable or religious institution. - HELD THAT: - The Tribunal found that the trust is a registered trust whose deed and bye-laws expressly provide for worship of Shri Goverdhannath Ji and a range of activities that include religious functions as well as stated charitable objects such as running a gaushala, Sanskrit school, dispensaries, imparting education without discrimination, scholarships, medical camps, blood donation drives and providing free food (bhandara). The Commissioner (Exemptions) refused registration on the ground that the trust's activities were predominantly religious and that expenditures were largely on worship and temple maintenance, and also relied on absence of beneficiary, investment and irrevocability clauses. The Tribunal held that there is no bar to granting registration to a religious institution under the scheme of sections 11 read with 12A/12AA, and that the trust's objects and activities include charitable elements. The Tribunal also observed that the Commissioner himself recorded charitable-cum-religious activity (bhandara). On that basis the Tribunal concluded that the denial of registration was unjustified and directed the Commissioner to grant registration under section 12A/12AA.

The appeal is allowed and the Commissioner (Exemptions) is directed to register the appellant-trust under section 12A/12AA.

Final Conclusion: The Tribunal allowed the appeal, holding that a trust engaged in religious activities may also be registered under section 12A/12AA where its objects and activities include charitable purposes; the CIT(E)'s refusal to register the trust was set aside and registration was directed.

Reopening of assessment under section 147 - requirement of reasonable belief and independent application of mind - Information from Investigation Wing - necessity of verification and correlation with assessee's records - Reason to believe - Escaped assessment - Quashing of reassessment for want of bona fide satisfaction

Reopening of assessment under section 147 - requirement of reasonable belief and independent application of mind - Information from Investigation Wing - necessity of verification and correlation with assessee's records - Reason to believe - Escaped assessment - Validity of reopening of assessment and consequent reassessment framed u/s. 147 in view of the Assessing Officer having formed belief solely on information from the Investigation Wing without independent verification - HELD THAT: - The Assessing Officer reopened assessment after receiving information from the Investigation Wing that the assessee had received an amount said to be accommodation entry routed through one Shri Vipin Garg. The reasons recorded show that the Assessing Officer relied on that information and stated that the assessee had not filed a return, whereas the assessee had in fact filed its return declaring the relevant amount. The Tribunal held that the information received from the Investigation Wing, though relevant, required examination and verification against the assessee's accounts and the filed return before forming a belief that income had escaped assessment. The incorrect recital that no return was filed demonstrates that the Assessing Officer did not consult relevant records or apply independent mind; his belief was based on suspicion rather than a bona fide satisfactio n supported by verification. Consequently, the reopening and reassessment were held to be invalid and liable to be quashed. [Paras 7]

Reopening and reassessment under section 147 quashed as the Assessing Officer failed to form a reasonable belief after independent verification; appeal allowed.

Final Conclusion: The reassessment initiated by issuance of notice under section 148 read with section 147 was quashed because the Assessing Officer formed belief solely on information from the Investigation Wing without correlating or verifying the assessee's filed return and accounts; appeal allowed.

Liability under section 201(1)/201(1A) for failure to deduct tax at source - first proviso to section 201(1) - certificate from payee/chartered accountant and tax having been paid by payee - presumptive assessment in absence of production of records - pronouncement of orders within 90 days under Rule 34(5) of the Income tax Appellate Tribunal Rules - exclusion of lockdown period as extraordinary circumstance

Liability under section 201(1)/201(1A) for failure to deduct tax at source - first proviso to section 201(1) - certificate from payee/chartered accountant and tax having been paid by payee - presumptive assessment in absence of production of records - Whether the assessee is in default under sections 201(1)/201(1A) for failing to deduct TDS on dhami/commission and whether the claim under the first proviso to section 201(1) absolves the assessee of that liability. - HELD THAT: - The Tribunal found that the assessing officer treated the assessee as in default for A.Y. 2014-15 on the basis of survey recorded admissions and, for A.Ys. 2013-14 and 2015-16, adopted a presumptive approach by applying the same dhami/commission amount as for 2014-15 in the absence of production of purchase bills. The Tribunal expressed inability to sustain the presumption adopted for the two years where records were not produced. However, the assessee asserted that the recipients had included the disputed amounts in their returns and paid tax thereon and that it had obtained certificates in the prescribed form (Form No. 26A) as contemplated by the first proviso to section 201(1). The Tribunal held that these factual claims require verification and directed that the matter be restored to the file of the ITO(TDS) for examination of the maintainability of the assessee's reliance on the first proviso and for verification of the veracity of the certificates and tax compliance by the payees. The Tribunal also directed the assessee to furnish requisite details called for by the ITO(TDS) in the set aside proceedings. [Paras 6]

Matter remanded to the ITO(TDS) for verification of the assessee's claim under the first proviso to section 201(1) and for fresh consideration of the default demand for A.Ys. 2013-14, 2014-15 and 2015-16.

Pronouncement of orders within 90 days under Rule 34(5) of the Income tax Appellate Tribunal Rules - exclusion of lockdown period as extraordinary circumstance - Whether the Tribunal's order, pronounced after more than 90 days from conclusion of hearing, was barred by Rule 34(5) or justified by extraordinary circumstances arising from the COVID 19 lockdown. - HELD THAT: - The Tribunal considered Rule 34(5) and authorities addressing the time for pronouncement, and examined the impact of the COVID 19 lockdown and related judicial and governmental directions treating the period as exceptional. Relying on reasoning in a coordinate bench decision, the Tribunal held that the lockdown period constitutes extraordinary circumstances and that the period during which the lockdown was in force should be excluded when computing the 90 day period for pronouncement. Applying this pragmatic interpretation, the Tribunal concluded that the delay in pronouncement in the present case was justified and did not render the order invalid. [Paras 7, 8, 10]

Delay in pronouncement is excused by the extraordinary circumstances of the lockdown; the order is valid and the lockdown period is to be excluded for computation of the 90 day limit under Rule 34(5).

Final Conclusion: The Tribunal set aside the orders of the lower authorities for verification: the question of liability under sections 201(1)/201(1A) was remanded to the ITO(TDS) for verification of the assessee's compliance with the first proviso to section 201(1) and for fresh adjudication; the Tribunal also held that the delay in pronouncement beyond 90 days was justified by the COVID 19 lockdown and excluded that period for computing the time limit, and allowed the appeals for statistical purposes accordingly.

Revisionary power under Section 263 - assessment erroneous and prejudicial to the interest of revenue - duty of the Assessing Officer to make adequate enquiry before completing assessment - factual correctness of office note appended to assessment - quashing of assessment and remand for fresh assessment - pronouncement of orders within 90 days under Rule 34(5) - exclusion of lockdown period for computation of time limits

Revisionary power under Section 263 - assessment erroneous and prejudicial to the interest of revenue - duty of the Assessing Officer to make adequate enquiry before completing assessment - factual correctness of office note appended to assessment - quashing of assessment and remand for fresh assessment - Validity of the Pr. CIT's exercise of powers under Section 263 in quashing the assessment framed under Section 143(3) and directing fresh assessment. - HELD THAT: - The Tribunal upheld the Pr. CIT's exercise of revisionary jurisdiction under Section 263, observing that the Assessing Officer had not carried out adequate enquiry into material transactions and that the office note recorded by the then ITO Ward-5(3) was factually incorrect. The Pr. CIT recorded that a sum stated to belong to the HUF was deposited into an individual's account and that this issue had not been examined by the AO; the assessee's representative could not demonstrate that the AO had made any conclusive findings on the point. Given that the AO functions both as investigating and adjudicating officer, failure to make adequate enquiries rendered the assessment erroneous and prejudicial to the revenue. For these reasons the assessment was quashed and the AO was directed to frame assessment afresh. The Tribunal found no illegality in the Pr. CIT seeking and considering the AO's report and confronting it to the assessee before invoking Section 263, and dismissed the grounds alleging lack of independent application of mind by the Pr. CIT. [Paras 4, 8, 9]

Order under Section 263 quashing the assessment and directing fresh assessment was valid and is upheld; the assessee's appeal on this issue is dismissed.

Pronouncement of orders within 90 days under Rule 34(5) - exclusion of lockdown period for computation of time limits - Whether the Tribunal's delay in pronouncing the order beyond 90 days from conclusion of hearing was permissible. - HELD THAT: - The Tribunal noted Rule 34(5)'s use of the term 'ordinarily' and examined the exceptional disruption caused by the COVID-19 lockdown. Relying on contemporary judicial treatment of lockdown-related extensions, the Tribunal accepted that the period during which the lockdown was in force should be excluded for computing the 90-day limit for pronouncement under Rule 34(5). Applying that approach to the present case, the delay in pronouncement beyond 90 days was justified by the extraordinary circumstances and therefore did not invalidate the order. [Paras 10, 11, 12]

Delay in pronouncement beyond 90 days is excused by the exclusion of the lockdown period; the order is validly pronounced.

Final Conclusion: The Tribunal dismissed the assessee's appeal, upholding the Pr. CIT's order under Section 263 to quash the assessment and direct a fresh assessment, and held that the Tribunal's delayed pronouncement of its order was justified by excluding the COVID-19 lockdown period for the purpose of Rule 34(5) time computation.

Restoration of company name under Section 252 of the Companies Act, 2013 - exercise of discretionary power to restore struck off companies - compliance with Companies Fresh Start Scheme, 2020 (CFSS-2020) - restoration subject to filing of overdue statutory records and payment of costs - Registrar empowered to satisfy itself about realization of dues before striking off

Restoration of company name under Section 252 of the Companies Act, 2013 - exercise of discretionary power to restore struck off companies - restoration subject to filing of overdue statutory records and payment of costs - Tribunal directed restoration of the Company's name struck off by the Registrar of Companies, subject to specified conditions. - HELD THAT: - The Tribunal accepted the petitioner's case that non-filing of annual returns and financial statements was inadvertent and not the subject of any investigation or complaint; the Registrar of Companies did not oppose restoration but sought compliance with statutory requirements and recovery of costs. While the impugned striking off was legally in order, the Tribunal exercised the discretionary power under Section 252 to restore the company in the interest of justice and ease of doing business, having regard to the bona fide contentions, the absence of adverse findings against the company, and the Company's intention to avail CFSS-2020 to regularize defaults. Restoration was ordered on condition that the company files all overdue statutory documents with prescribed fees/additional fee/fine within 30 days of restoration, that the petitioner ensure personal compliance, that the company pay the specified cost to the Central Government within three weeks (failing which the order will lapse), and that the Registrar publish the order in the Official Gazette and restore consequential actions including DINs of directors. The Tribunal clarified that the order is confined to violations leading to the striking off and does not preclude the Registrar from taking lawful action for any other violations or offences. [Paras 6, 7, 8]

The Company's name is restored in the Register on conditions: filing all statutory documents with prescribed fees/additional fee/fine within 30 days; personal compliance by the petitioner's representative; payment of the cost to the Central Government within three weeks; delivery of certified copy to ROC and publication in the Official Gazette; restoration of consequential actions including DINs; and the order is without prejudice to action for other violations.

Final Conclusion: The Tribunal allowed the petition and directed restoration of the Company's name struck off by the ROC, subject to compliance with filing, payment of costs and other conditions specified in the order; the restoration does not preclude the Registrar from taking appropriate action in respect of any other violations.

Deemed decree under Arbitration and Conciliation Act, 1996 - satisfaction of decree by deposit in court - decretal debt paid into court - execution under Order XXI of the Code of Civil Procedure, 1908 - claims in corporate insolvency resolution process - effect of approved resolution plan under the Insolvency and Bankruptcy Code, 2016 - overriding effect of the Insolvency and Bankruptcy Code - application of Essar Steel principle in resolution proceedings

Deemed decree under Arbitration and Conciliation Act, 1996 - satisfaction of decree by deposit in court - decretal debt paid into court - execution under Order XXI of the Code of Civil Procedure, 1908 - Right of award-holder to realise proceeds deposited by award-debtor in executing court prior to commencement of insolvency resolution process - HELD THAT: - The court held that when the award-debtor deposited the crystallised arbitral award amount in the executing court in terms of Order XXI Rule 1(1)(a) CPC, the decretal debt was effectively paid into court and the executing court held the funds as trustee for the benefit of the decree-holder. Upon such deposit the right in respect of the awarded sum passed to the beneficiary; the deposit operated to discharge the obligation of the award-debtor prior to the enactment and application of the IBC. The executing court's role thereafter in releasing the invested proceeds to the award-holders is ministerial. Consequently the sum deposited in 2007 cannot be treated as an asset of the corporate debtor subject to the subsequent insolvency resolution process, and the award-holders were entitled to the proceeds notwithstanding later approval of a resolution plan. [Paras 23, 24, 26, 30, 33]

The respondents are entitled to realise and receive the proceeds deposited in the executing court in 2007; those proceeds are not subject to the subsequent insolvency resolution process.

Claims in corporate insolvency resolution process - effect of approved resolution plan under the Insolvency and Bankruptcy Code, 2016 - overriding effect of the Insolvency and Bankruptcy Code - application of Essar Steel principle in resolution proceedings - Whether respondents lost right to enforce the award by not lodging a claim in the insolvency process and whether Essar Steel ratio applies - HELD THAT: - The court rejected the appellants' contention that the respondents were obliged to lodge their claim in the insolvency proceedings and therefore could not claim the deposited sum after approval of the resolution plan. The court distinguished the Essar Steel principle on the factual basis that in Essar the claims were not discharged before the resolution plan; here the award-debtor had satisfied its obligation by depositing the awarded amount in court in 2007, long before the IBC or any resolution process intervened. Because the claim had been discharged by deposit, there was no asset of the corporate debtor for the resolution process to adjudicate, and the respondents' omission to file a claim in the insolvency process did not affect their right to the deposited proceeds. [Paras 13, 15, 18, 31]

Failure to lodge a claim in the resolution process did not defeat the respondents' right to the sum already deposited in court; the Essar Steel ratio is inapplicable on these facts.

Final Conclusion: The appeal is dismissed. The executing court and Registrar, Original Side are directed to effect the release of the deposited proceeds to the respondents upon written communication of withdrawal of the pending special leave petition; until such withdrawal is communicated, the release orders will not operate.

Classification as wilful defaulter - natural justice - supply of material and opportunity to represent - show-cause notice under Clause 3(b) of the RBI Master Circular, 2015 - Identification Committee and Review Committee procedure - prejudice test for procedural non-compliance - requirement of independent and reasoned order by Review Committee - strict construction of penal Master Circular

Strict construction of penal Master Circular - classification as wilful defaulter - Whether Clause 3 of the RBI Master Circular, 2015 governing identification of wilful defaulters applies to persons other than the concerned borrower and the promoters/whole-time director named therein. - HELD THAT: - The Master Circular operates in a restricted and specific domain and prescribes that a show-cause notice is to be issued to the concerned borrower and the promoters/whole-time director. Since the Circular is penal in nature it must be strictly construed. Accordingly, the identification mechanism under Clause 3 cannot be applied to persons who are not promoters or whole-time directors (in this case petitioners 3 to 12), although the reasoning does not affect petitioner nos. 1 and 2 who were promoters/directors and guarantors. [Paras 37]

Clause 3 of the Master Circular does not extend to persons other than the borrower and the promoters/whole-time director; the procedure was not maintainable as to petitioners 3-12, while petitioners 1 and 2 fall within the Circular.

Natural justice - supply of material and opportunity to represent - prejudice test for procedural non-compliance - show-cause notice under Clause 3(b) of the RBI Master Circular, 2015 - Whether non-supply of the forensic report and non-service of the Identification Committee order violated principles of natural justice and caused prejudice so as to vitiate the show-cause notice and subsequent committee orders. - HELD THAT: - The committees relied centrally on a forensic report which was not supplied to the petitioners at the relevant stages. The Identification Committee's order was not served on the petitioners and the show-cause notice and orders contained conclusive findings suggestive of a pre-determined view. In these circumstances the non-supply of the forensic report and non-service of the Identification Committee order deprived the petitioners of a meaningful opportunity to rebut material on which adverse conclusions were based. The court applied the prejudice test: where omission to supply an enquiry report would make a difference, non-service is fatal. The non-supply here was held to have caused substantial prejudice because the petitioners demonstrated parts of the report that could have been relied upon in their defence and the report itself was of limited and tentative purport. [Paras 39, 40, 48, 50, 52]

Non-supply of the forensic report and non-service of the Identification Committee order violated natural justice and caused prejudice, thereby vitiating the show-cause notice and the committee orders.

Identification Committee and Review Committee procedure - requirement of independent and reasoned order by Review Committee - Whether the Review Committee applied independent mind and rendered a reasoned order or whether its order was merely a reiteration of the Identification Committee's findings and therefore vitiated. - HELD THAT: - The Review Committee's order reproduced the findings of the Identification Committee and the forensic report without demonstrating any independent application of mind. The Review Committee also proceeded without the petitioners having had an opportunity to make representations to the Identification Committee because the Identification Committee's order and the forensic report had not been furnished. Given that the Review Committee's function is appellate and must consider representations and the materials afresh, mere reiteration without independent reasoning was held to be insufficient. [Paras 41, 45, 46]

The Review Committee failed to apply independent mind; its order was non-speaking in substance and contributed to vitiation of the identification process.

Final Conclusion: The writ petition is allowed. The show-cause notice dated November 5, 2019 and the orders of the Identification Committee and the Review Committee (dated October 22, 2019 and March 31, 2020 respectively) are set aside. The respondents are permitted to initiate fresh proceedings in accordance with Clause 3 of the RBI Master Circular, 2015, provided a proper show-cause notice and all relevant documents on which the Identification Committee intends to rely are served on the persons concerned so as to enable meaningful representations before the Identification Committee and, if required, before the Review Committee.

Attachment of property under PMLA - Person interested - Right to enjoyment of attached property - Opportunity of hearing under Section 8 PMLA - Principle of natural justice - Made-over/cultivation agreements versus ownership - Remand for fresh adjudication

Attachment of property under PMLA - Person interested - Opportunity of hearing under Section 8 PMLA - Principle of natural justice - Whether confirmation of the Provisional Attachment Order in respect of the appellants' properties without notice to or examination of the appellants violated the provisions of PMLA and principles of natural justice - HELD THAT: - The Tribunal found that the appellants, on the material before it, prima facie hold ownership and an interest in the attached immovable properties and had only executed made-over/cultivation agreements in favour of third parties. Section 5(4) (definition of "person interested") and Section 8 require that persons claiming interest be given an opportunity to indicate sources of income and be heard before adjudication. Despite documentary material on record indicating the appellants' interest, they were neither noticed nor examined by the Enforcement Directorate or the Adjudicating Authority. A decision premised on assumptions that long possession for cultivation amounts to transfer of ownership cannot substitute for adjudication by a competent civil forum and does not relieve the Adjudicating Authority of its duty to afford hearing under Section 8. The failure to give the appellants notice and opportunity amounted to a clear breach of natural justice and of the statutory scheme governing attachment and adjudication under the PMLA.

Findings of confirmation of attachment insofar as they relate to the appellants were set aside for breach of natural justice and statutory procedure; the matter was remitted for fresh adjudication after giving the appellants due opportunity.

Made-over/cultivation agreements versus ownership - Remand for fresh adjudication - Whether the question of ownership arising from made-over/cultivation agreements could be finally determined by the Tribunal or should be examined afresh by the Adjudicating Authority - HELD THAT: - The Tribunal recorded that issues as to whether long cultivation or made-over tenancy arrangements amount to transfer of ownership cannot be resolved on assumption and require proper adjudication. The Tribunal expressly declined to express any opinion on the merits of the source of income or ownership and directed that the Adjudicating Authority, after affording notice and hearing to the appellants and after considering all relevant materials and replies, must record a finding whether the attached properties are involved in money-laundering. Consequently, the Tribunal remanded the matter for read-judication limited to these aspects, directing the appellants to file applications raising all legal and factual contentions within the prescribed period.

Matter remitted to the Adjudicating Authority for fresh adjudication on merits and record of findings regarding involvement of the properties in money-laundering, after giving the appellants opportunity to be heard; attachments to remain in effect and parties to maintain status quo pending adjudication.

Final Conclusion: The appeal is allowed in part: the impugned confirmation order is set aside insofar as it concerns the appellants for failure to afford statutory notice and hearing; the matter is remanded to the Adjudicating Authority for read-judication within the specified period after giving the appellants due opportunity to file pleadings and be heard; attachments to continue and status quo to be maintained pending that adjudication.

Manpower recruitment or supply agency service - provision of service by an employee to the employer - employer-employee relationship - method of disbursement of salary - consideration for provision of service

Manpower recruitment or supply agency service - employer-employee relationship - provision of service by an employee to the employer - method of disbursement of salary - consideration for provision of service - Whether amounts paid in respect of employees seconded by foreign group companies to the appellant constitute taxable manpower recruitment or supply agency service. - HELD THAT: - The Tribunal held that the arrangements evidenced by the secondment agreements establish an employer-employee relationship between the appellant and the secondees during the period of secondment. The legal tests for classification under the manpower recruitment or supply agency service were applied and it was found that there was no service-provider/service-recipient relationship as required by the definition of manpower recruitment or supply agency; the payments made by the foreign group companies were reimbursements for salary disbursement and not a consideration for supply of manpower. Post negative list law (definition of "service" excluding provision of service by an employee to the employer) reinforces the position that services rendered by secondees in the course of employment are excluded from service tax. The Tribunal relied on earlier decisions (including Volkswagen and other tribunal/high court authorities) and held that the method of salary disbursement does not alter the nature of the transaction. Applying these principles, the Tribunal allowed the assessee's appeals and dismissed the Department's appeal on this question. [Paras 12, 13]

Demands confirmed by the Commissioner under the head "manpower recruitment or supply agency service" set aside; appeals of the assessee allowed and Department's appeal dismissed on this issue.

Consideration for provision of service - method of disbursement of salary - Whether amounts shown as paid through GAR 7 challans and credits (differential tax, interest and credit notes) were appropriated and properly adjusted against the demand. - HELD THAT: - The Tribunal noted a discrepancy between amounts paid by the appellant (service tax and interest via GAR 7 challans, and credit notes impacting taxable value) and the figures accepted in the impugned order. The Tribunal observed that the learned Commissioner did not examine/appropriate the payments and credits produced by the appellant. As this was a factual/quantificatory matter dependent on examination of payment records and appropriation, the Tribunal remanded the matter to the Commissioner for limited purpose of verifying the challans, appropriations and computing any balance demand of service tax and interest, if payable. [Paras 12, 13]

Matter remanded to the Commissioner for verification of payments/appropriation and determination of any residual service tax and interest liability.

Final Conclusion: The Tribunal held that secondment of foreign group employees to the appellant did not attract service tax as manpower recruitment or supply agency service because an employer-employee relationship existed and the payments were reimbursements, not consideration for supply of manpower; the appellant's appeals are allowed and the Department's appeal dismissed. The record of payments (GAR 7 challans, credits) was remanded to the Commissioner for verification and determination of any remaining tax/interest payable.

Condonation of delay - CENVAT credit reversal and subsequent communications - Bona fide belief negating necessity to prosecute appeal - Estoppel by conduct in recovery proceedings - Penalty under CENVAT Credit Rules - Recovery under proviso to section 73(1) of the Finance Act, 1994

Condonation of delay - CENVAT credit reversal and subsequent communications - Bona fide belief negating necessity to prosecute appeal - Application for condoning delay in filing the appeal against the Commissioner's order was allowed subject to costs. - HELD THAT: - The Tribunal examined the appellant's explanation for the delay of about 2,102 days in filing the appeal and accepted that the appellant had reversed the CENVAT credit after the impugned order and had informed the Department in writing. The records showed that the Department had also communicated with the asset reconstruction company and the auction purchaser about compliance with the Commissioner's order. The Tribunal found that these events could reasonably have induced a bona fide belief in the appellant that filing an appeal before the Tribunal was unnecessary. The Tribunal considered but distinguished authorities relied upon by the Department on their peculiar facts and concluded that those precedents did not apply. On the accepted explanation and surrounding conduct, the Tribunal held that the delay was satisfactorily explained and condoned the delay, while imposing a cost to be deposited in the Prime Minister's CARES Fund.

Delay in filing the appeal condoned; appeal admitted subject to deposit of costs of Rs. 25,000 within one month and listing for compliance report.

Final Conclusion: The condonation application is allowed and the appeal admitted subject to payment of costs; the matter is listed for a compliance report on the payment.

Set aside of service tax demand - exemption under Notification No. 9/2003-ST and Notification No. 24/2004-ST - reimbursable expenses as taxable service - limitation - demand barred by normal period of limitation - retrospective amendment and absence of validation clause

Set aside of service tax demand - reimbursable expenses as taxable service - Service tax demand on reimbursable expenses for October, 2001 to March, 2006 set aside - HELD THAT: - The Tribunal held that the service tax demand of Rs. 19,02,103/- on reimbursable expenses for the period October, 2001 to March, 2006 has been set aside. The final order (paras 8 and 9 of the earlier order, as read in this disposal) concluded that such demand was unsustainable in light of the authorities relied upon and has therefore been quashed for the stated period. [Paras 5]

Demand on reimbursable expenses for October, 2001 to March, 2006 is set aside.

Exemption under Notification No. 9/2003-ST and Notification No. 24/2004-ST - Commercial Coaching or Training service - Benefit of exemption under Notification No. 9/2003-ST and Notification No. 24/2004-ST extended for period 01.07.2003 to 31.03.2008 - HELD THAT: - The Tribunal applied and extended the exemption contained in the cited notifications to the appellant in respect of the service tax demand classified under Commercial Coaching or Training service. The earlier final order granted relief for amounts falling in the periods 01.07.2003 to 31.03.2006 and 01.04.2006 to 31.03.2008, and for all practical purposes treated the entire span 01.07.2003 to 31.03.2008 as covered by the notifications, resulting in the setting aside of the demand for that period on merits. [Paras 5]

Exemption under Notification No. 9/2003-ST and Notification No. 24/2004-ST extended to the appellant for 01.07.2003 to 31.03.2008; corresponding demand set aside.

Limitation - demand barred by normal period of limitation - Demand up to March, 2006 barred by normal period of limitation - HELD THAT: - The Tribunal held, while addressing limitation contentions, that the demand up to March, 2006 is barred by the normal period of limitation. This finding was recorded in the course of disposing the miscellaneous applications and was identified as an additional basis for extinguishing demands upto that date, alongside the merits-based relief already granted for the disputed periods. [Paras 5]

Demand up to March, 2006 is time barred under the normal period of limitation.

Retrospective amendment and absence of validation clause - Appellant's contention that retrospective amendment to definition would not affect pending proceedings without a validation clause rejected - HELD THAT: - The Tribunal noted and rejected the appellant's contention that the retrospective amendment to the definition in Section 65(105)(zzc) would not apply in the absence of a validation clause. The earlier final order (para 11 referenced) expressly disallowed that submission and treated the amendment as operative for the purposes of the case, thereby rejecting the appellant's merit-based plea on that ground. [Paras 3]

Contention that retrospective amendment without validation clause would not affect the case is rejected.

Final Conclusion: The miscellaneous applications for clarification are dismissed as unnecessary: the Tribunal's final order already set aside the service tax demands for the periods in dispute-reimbursable expenses October 2001-March 2006 quashed; exemption under Notification No. 9/2003 ST and Notification No. 24/2004 ST extended for 01.07.2003-31.03.2008; and demands up to March 2006 held time barred; the appellant's plea regarding retrospective amendment without a validation clause was rejected.

Admissibility of abatement under Notification No. 01/2006 ST - restriction on availment and utilisation of CENVAT credit for abated services - distinction between input service and output service in composite contracts - classification of composite contract as "works contract" for service tax purposes - temporal operation of exemption/abatement notifications and retrospective use of credits availed for pre notification period

Admissibility of abatement under Notification No. 01/2006 ST - restriction on availment and utilisation of CENVAT credit for abated services - temporal operation of exemption/abatement notifications and retrospective use of credits availed for pre notification period - Whether abatement under Notification No. 01/2006 ST could be denied on the ground that CENVAT credit (availed in respect of input services received prior to 01.03.2006) was reflected in the ST 3 return and utilised in March 2006. - HELD THAT: - The Tribunal found that the CENVAT credit entry for March 2006 related to input services received prior to 01.03.2006 and that such credit had been legitimately availed when there was no restriction under the earlier notifications. The court relied on precedents holding that where credit pertains to services received and used prior to the effective date of the restrictive notification, the benefit of the abatement cannot be denied merely because the accounting/availment occurred on or after 01.03.2006. The adjudicating authority's conclusion that the condition in Notification No.1/2006 ST was infringed because payment through CENVAT credit appeared in the March 2006 return was rejected on the ground that the underlying input services were rendered prior to 01.03.2006 and therefore outside the prohibition in the superseding notification.

The denial of abatement for March 2006 on the ground of utilisation of CENVAT credit was not sustained; abatement could not be refused where the credit related to input services used before 01.03.2006.

Distinction between input service and output service in composite contracts - Whether the design and consulting engineering services furnished by the appellant were merely incidental to CIC/ECI and therefore would disqualify the appellant from claiming abatement under Notification No. 01/2006 ST. - HELD THAT: - The adjudicating authority had treated consulting engineering service as part of a composite contract and an input for CIC/ECI; the Tribunal disagreed. The court accepted the appellant's contention, supported by reasoning and cited decisions, that design and engineering are discrete services and not necessarily incidental to the construction/erection services so as to nullify the abatement entitlement. Consequently, consulting engineering services could not be automatically treated as disqualifying input services for the purpose of Notification No. 01/2006 ST.

Consulting/design engineering services were not to be treated as merely incidental input services that would deprive the appellant of the benefit of the notification; the impugned denial on this ground was set aside.

Classification of composite contract as "works contract" for service tax purposes - temporal operation of exemption/abatement notifications and retrospective use of credits availed for pre notification period - Whether the contracts executed by the appellant were properly characterised as "works contract" services (taxable only w.e.f. 01.06.2007) and consequently whether demands raised under CIC/ECI for periods prior to 01.06.2007 and thereafter were sustainable. - HELD THAT: - The Tribunal accepted the appellant's additional ground (permitted to be added) and followed authoritative decisions holding that where the essential character of the contract is an indivisible works contract, service tax on such works contract was not leviable prior to 01.06.2007. The court relied on the principle that voluntary registration under a particular service heading does not preclude a party from asserting the correct legal classification of the service rendered. Applying the established law, demands framed under CIC/ECI for periods before 01.06.2007 (and demands post 01.06.2007 framed under CIC/ECI instead of under the statutory "works contract" charge where applicable) could not be sustained.

The demand under CIC/ECI for the period prior to 01.06.2007 (and demands post 01.06.2007 to the extent misclassified) was held unsustainable; the impugned order was set aside on this ground.

Final Conclusion: The impugned adjudication confirming service tax, interest and penalties was set aside insofar as it denied abatement under Notification No.1/2006 ST and insofar as it sought recovery for periods when the contracts were correctly characterisable as works contracts; the appeal is allowed.

Levy of service tax on dealer incentives - business auxiliary service - principal-to-principal dealer relationship - penal charges not being consideration for service - classification under goods transport agency service - binding effect of tribunal precedents on adjudicating authorities

Levy of service tax on dealer incentives - business auxiliary service - principal-to-principal dealer relationship - Service tax is not leviable on incentives/discounts received by the dealer from the manufacturer for the period covered by the show cause notice. - HELD THAT: - The Tribunal found and this Appellate Tribunal accepts that the appellant purchased vehicles from the manufacturer on a principal-to-principal basis and resold them; the incentives received under the declared schemes and circulars flow from that commercial relationship and not as consideration for any service provided to the manufacturer. The Commissioner could not decline to follow the Tribunal's consistent view that such receipts are not taxable under Business Auxiliary Service. Reliance on earlier Tribunal decisions and the Joint Commissioner's order for subsequent periods supports that the incentives are not consideration for BAS and hence not liable to service tax. [Paras 11, 12, 14, 15, 16]

Demand of service tax on incentives/discounts under BAS is set aside.

Penal charges not being consideration for service - Amounts collected as cheque-bouncing charges and cancellation penalties are not consideration for a service and hence not leviable to service tax. - HELD THAT: - The Tribunal's reasoning and subsequent authorities indicate that such receipts are penal in nature and do not constitute consideration for supply of service. The Department's reliance on an advance ruling was distinguished, and a later rectification in that advance ruling recognizing exemption for analogous penal/interest amounts was noted. Accordingly, the impugned demand on penal receipts cannot be sustained. [Paras 19, 21]

Demand of service tax on cheque-bouncing charges and cancellation penalties is set aside.

Classification under goods transport agency service - Service tax demand under GTA in respect of freight/transportation charges paid by the dealer is not sustainable in the absence of consignment notes or identification as a goods transport agency. - HELD THAT: - The Tribunal in earlier decisions and the present record show that freight expenses paid by the appellant were taxed as GTA only when the requisite indicia (such as consignment notes) existed. In the absence of such documentation or the appellant operating as a GTA, the activity cannot be classified as GTA service, and the demand is unsustainable. [Paras 11, 12, 20]

Demand of service tax under GTA on transportation/freight charges is set aside.

Registration and number plate charges - business auxiliary service - Amounts collected for vehicle registration and number plate facilitation are not exigible to service tax under BAS. - HELD THAT: - Following the Tribunal's earlier decision in the appellant's own matter and similar precedents, such receipts were not found to be consideration for a service provided to the manufacturer or others but incidental to the sale transaction. Consequently, taxation under BAS is not warranted. [Paras 11, 20]

Demand of service tax on registration and number plate charges is set aside.

Binding effect of tribunal precedents on adjudicating authorities - Adjudicating authorities are bound to follow Tribunal decisions and cannot decline to apply them merely because the department disagrees or has preferred further appeal. - HELD THAT: - The Tribunal reminded the adjudicating authority of the principle, as stated by the Supreme Court, that orders of higher appellate authorities must be followed by subordinate revenue officers; the Commissioner erred in differing from the Tribunal's findings without any stay or competent order suspending the Tribunal's decision. Such departure cannot be sustained. [Paras 16, 18]

Commissioner's contrary approach is unsustainable; Tribunal precedent must be followed.

Final Conclusion: The impugned order confirming service tax, interest and penalty is set aside; the appeal is allowed and demands in respect of incentives, registration/number plate charges, miscellaneous/penal receipts and freight under GTA are not sustainable.

Levy of service tax under reverse charge on banking and other financial services - Taxability of regulatory consultancy services as Scientific or Technical Consultancy Services - Limitation and applicability of extended period where facts were disclosed during audit - Classification of services provided for overseas regulatory marketing approvals

Levy of service tax under reverse charge on banking and other financial services - Levy of service tax on charges deducted by foreign banks while delivering inward remittances to the appellant's Indian bankers - HELD THAT: - The Tribunal accepted the appellants' contention that the charges deducted by foreign correspondent banks in the process of transferring export sale proceeds to the appellant's Indian banker do not establish a service provider-service recipient relationship between the foreign banks and the appellant. The Tribunal followed precedent in Green Ply Industries Ltd. and Raj Petro, holding that where the Indian bank (not the beneficiary appellant) is the recipient of the foreign bank's services, the appellant cannot be made liable under reverse charge as recipient of banking and financial services. The Commissioner's reliance on the stay-order reasoning in Green Ply was rejected because the Tribunal had reiterated the same principle in the final disposal. Consequently the demand under the category of "Banking and other Financial Services" was set aside. [Paras 11, 12]

Demand for service tax on charges deducted by foreign banks under the head 'Banking and other Financial Services' is set aside.

Taxability of regulatory consultancy services as Scientific or Technical Consultancy Services - Classification of services provided for overseas regulatory marketing approvals - Whether services received from overseas consultants for compilation of clinical and non-clinical overviews are taxable as Scientific or Technical Consultancy Services - HELD THAT: - The Tribunal accepted the appellants' submission and relied on Tribunal precedent in IPCA Laboratories that services procured for obtaining marketing/registration approvals abroad (regulatory services) are not in the nature of "Scientific or Technical Consultancy Services." The Tribunal noted the statutory requirement that such consultancy must be rendered by a scientist, technocrat or a science/technology institution and must relate to disciplines of science or technology. Services that consist of compiling literature-based overviews to meet regulatory filing requirements were held to be regulatory/marketing-related and not scientific/technical consultancy; hence the department's classification was unsustainable. [Paras 13, 14]

Demand of service tax on consultancy charges classified as 'Scientific or Technical Consultancy Services' is set aside.

Limitation and applicability of extended period where facts were disclosed during audit - Whether the demand (in particular for period 2006-07) is barred by limitation - HELD THAT: - The Tribunal found that the Department had examined the relevant payments during audit and the appellants had furnished replies, ST-3 returns, ledger extracts and expert opinion; further, the appellants commenced discharging service tax under reverse charge from 01.06.2007 and the department had accepted returns for later periods. In view of disclosure during audit, absence of suppression or mala fide intent, and availability of CENVAT credit for any tax that might have been payable, the extended period could not be invoked for 2006-07. Consequently the demand for 2006-07 was held to be time-barred. [Paras 15]

Demand for the period 2006-07 is barred by limitation and is unsustainable.

Final Conclusion: The impugned order is set aside: the service-tax demand on charges deducted by foreign banks (banking and financial services) is quashed; consultancy charges for regulatory overviews are not taxable as scientific or technical consultancy and the demand for 2006-07 is time-barred. The appeal is allowed with consequential relief as per law.

Renting of immovable property service - flow of consideration - declared services and negative list - threshold exemption under Notification No.8/2008 and subsequent exemption

Renting of immovable property service - flow of consideration - Whether the appellant rendered 'renting of immovable property' service to film distributors and was therefore liable to service tax on box-office share received. - HELD THAT: - The agreements between the appellant (exhibitor) and film distributors transferred theatrical exhibition rights to the appellant, who in turn paid the distributors a share of Net Box Office Collection. The Tribunal noted that for a transaction to be classifiable as 'renting of immovable property' the immovable property must be given for use or occupation by the service recipient in return for consideration. Here the theatre was used and occupied by the appellant in its own right and the distributors did not pay the appellant any consideration; rather the flow of payment was from the appellant to the distributors for exhibition rights. The Tribunal placed reliance on the reasoning in Moti Talkies where identical agreements were held not to constitute a service by the exhibitor to the distributor because no consideration passed from distributor to exhibitor. Applying that principle, the Principal Commissioner's finding that the appellant rendered 'renting of immovable property' service was unsustainable. [Paras 10, 11, 12, 13]

Finding that the appellant rendered 'renting of immovable property' service to distributors set aside; no service tax leviable on box-office share on that basis.

Threshold exemption under Notification No.8/2008 and subsequent exemption - declared services and negative list - Whether the amounts shown as miscellaneous receipts, license fee from snack bar, shots and slides hire, and interest income were liable to service tax under 'renting of immovable property' or otherwise. - HELD THAT: - The Tribunal examined each category of receipt. The license fee received from the snack bar operator was a genuine license receipt; the confirmed demand for that license fee was below the monetary threshold exemption and therefore not taxable. Income from 'shots and slides hire' (advertisement slots) falls within the negative list from 1 July 2012 as 'selling of space or time slots for advertisement' and therefore is not taxable w.e.f. that date; even prior to that date such income was for exhibiting advertisement material and did not amount to 'renting of immovable property'. Interest income was from bank deposits and did not arise from provision of renting services. On these bases the Tribunal held that demands confirmed by the Principal Commissioner in respect of these receipts could not be sustained. [Paras 14, 15, 16, 17]

Demands in respect of miscellaneous receipts, snack-bar license fee (being below threshold), shots and slides hire (covered by negative list w.e.f. 01.07.2012), and interest income were set aside.

Final Conclusion: The impugned order confirming service tax demands (for October 2008 to March 2014) under 'renting of immovable property' and related demands was set aside; the appeal is allowed and the confirmed demands are not sustainable for the reasons stated.

Provisional attachment under Section 45 of the Gujarat Value Added Tax Act, 2003 - One-year limitation on provisional attachment - Expiry of provisional attachment in absence of fresh order - Right of bank account holder to operate account where provisional attachment has lapsed

Provisional attachment under Section 45 of the Gujarat Value Added Tax Act, 2003 - One-year limitation on provisional attachment - Expiry of provisional attachment in absence of fresh order - Right of bank account holder to operate account where provisional attachment has lapsed - Whether the provisional attachment order dated 15.06.2016 continued to operate beyond one year and, if not, whether the bank must permit the account-holder to operate the account. - HELD THAT: - The Court noted that Section 45(1) authorises provisional attachment and that sub section (2) expressly provides that such provisional attachment shall cease to have effect after the expiry of one year from the date of the order. The provisional attachment dated 15.06.2016 was not followed by any fresh order extending or reviving the attachment. Consequently, the provisional attachment had lapsed by efflux of time and could not be treated as subsisting when this petition was heard. The Court observed that the writ applicant should not have been restrained from operating her bank account once the provisional attachment had ceased to exist, and also noted the bank's failure to permit operation of the account despite the lapse of the provisional attachment. Applying the statutory one year limitation and its plain effect, the Court concluded that the continuing freeze was unwarranted and required quashing so that the account-holder's rights could be restored. [Paras 5, 6, 7]

Writ allowed; the provisional attachment dated 15.06.2016 is treated as having ceased by efflux of time in absence of any fresh order, and HDFC Bank, Ahmedabad, is directed to permit the writ applicant to operate her current bank account.

Final Conclusion: The writ petition is allowed; the provisional attachment order of 15.06.2016 has lapsed after one year in absence of any fresh order and the bank is directed to permit the petitioner to operate her account.

Refund of tax - interest on delayed refund - expeditious decision in accordance with law - Delhi Value Added Tax Act, 2004 - Mafatlal principle

Refund of tax - interest on delayed refund - Mafatlal principle - Claim for refund of DVAT for the 4th quarter of assessment year 2013 (01.01.2014 to 31.03.2014) remanded to the respondent authorities for decision. - HELD THAT: - The Court did not adjudicate the substantive merits of the refund claim or entitlement to interest or exemplary damages. Applying the principle in Mafatlal Industries Ltd. v. Union of India, the Court directed the respondent authorities to decide the petitioner's refund claim in accordance with the law, rules and regulations, and the provisions of the Delhi Value Added Tax Act, 2004. The respondents are to consider and dispose of the claim expeditiously and as practicable, giving effect to statutory provisions governing refunds and any entitlement to interest arising from delayed payment. No determination was made on the quantum, admissibility, or rate of interest; those matters remain for the authority to decide on merits in accordance with law. [Paras 3]

The petition is disposed by directing the respondents to decide the refund claim for 01.01.2014 to 31.03.2014 expeditiously and in accordance with law, including applicable precedent.

Final Conclusion: Writ petition disposed of by remanding the petitioner's DVAT refund claim for the period 01.01.2014 to 31.03.2014 to the respondent authorities for expeditious decision in accordance with the Delhi Value Added Tax Act, 2004 and the Mafatlal principle; no substantive determination made on merits or interest.

Violation of principles of natural justice - change of grounds for revision without disclosure - failure to provide opportunity to produce evidence/right of personal hearing - revision of assessment under section 27(2) of the TNVAT Act - concessional rate of tax for sales to Government Departments - remand for fresh consideration

Violation of principles of natural justice - change of grounds for revision without disclosure - concessional rate of tax for sales to Government Departments - failure to provide opportunity to produce evidence/right of personal hearing - Impugned assessment orders are arbitrary and contrary to principles of natural justice for having altered the ground of revision and not affording sufficient opportunity to produce certificates. - HELD THAT: - The revision notice dated 31.12.2019 proposed revision on the ground that sales were to local bodies and hence not entitled to concession. The final assessment orders dated 28.08.2020, however, revised the assessment on a different ground-non-production of certificates for sales to Government Departments-without disclosing any reason for this change of opinion. The fourth respondent did not give the petitioner sufficient opportunity to produce the required certificates or to be heard despite the petitioner having paid tax on the basis that sales were to Government Departments and undertaking to produce certificates. The Court observed that had the revision notice informed the petitioner of the deficiency, the petitioner could have produced the certificates during assessment proceedings. For these reasons the impugned orders suffer from arbitrariness and breach the audi alteram partem principle. [Paras 8, 9, 10, 11, 13]

Impugned assessment orders dated 28.08.2020 are quashed as arbitrary and violative of the principles of natural justice.

Remand for fresh consideration - failure to provide opportunity to produce evidence/right of personal hearing - revision of assessment under section 27(2) of the TNVAT Act - Matter remanded to the assessing authority for fresh consideration with directions to afford opportunity to produce certificates and to grant personal hearing before passing final orders on merits. - HELD THAT: - In view of the identified procedural infirmity, the Court directed that the matter be returned to the fourth respondent for fresh consideration. The petitioner undertook to produce all required certificates and the Court required the fourth respondent to grant the petitioner the right of personal hearing and sufficient opportunity to produce the certificates relied upon for claiming the concessional rate. The fourth respondent is to pass final orders on merits and in accordance with law after allowing such opportunity. [Paras 12, 14]

Matter remanded to the fourth respondent for fresh consideration; final orders to be passed after providing personal hearing and opportunity to produce certificates within twelve weeks from receipt of this order.

Final Conclusion: The impugned assessment orders dated 28.08.2020 are quashed for arbitrariness and violation of natural justice; the matter is remanded to the fourth respondent to decide afresh on merits after granting the petitioner personal hearing and opportunity to produce the requisite certificates within twelve weeks; no order as to costs.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal of statutory presumption on preponderance of probabilities - dishonour for "funds insufficient" and ingredients of Section 138 of the N.I. Act - probable defence and burden of proof of the drawer - sentence by way of fine and compensation under Section 357 Cr.P.C.

Presumption under Section 139 of the Negotiable Instruments Act - dishonour for "funds insufficient" and ingredients of Section 138 of the N.I. Act - rebuttal of statutory presumption on preponderance of probabilities - Validity of the Trial Court's acquittal in a cheque bounce prosecution and whether the accused rebutted the statutory presumption that the cheque was issued for a legally enforceable debt or liability. - HELD THAT: - The court found issuance of the cheque and the accused's signature to be admitted and the cheque's return endorsed "funds insufficient"; demand notice was proved and a presumption under Section 139 (read with Sections 118 and 114 evidentiary presumptions) arose in favour of the complainant. The trial court's reliance on absence of additional security documents, lack of proof of source of funds and perceived improbability of advancing a large hand loan was held to be legally untenable because those considerations cannot displace the statutory presumption unless the accused adduces cogent evidence to rebut it. The accused's defences - that the cheque was given as security for a chit transaction, that the amount was repaid, and disputes about sale of land - were held to be neither probable nor supported by documents or reliable testimony. Defence witnesses failed to furnish particulars or corroboration and the accused admitted the cheque and signature. In the absence of credible rebuttal on the preponderance of probabilities, the ingredients of Section 138 stood proved and the acquittal was set aside. [Paras 16, 22, 23, 24, 25]

The Trial Court's acquittal was set aside; the accused was convicted for the offence punishable under Section 138 of the Negotiable Instruments Act.

Sentence by way of fine and compensation under Section 357 Cr.P.C. - regulatory character of offences under the Negotiable Instruments Act - Appropriate sentence and disposition of fine and compensation following conviction under Section 138 N.I. Act. - HELD THAT: - Having convicted the accused, the Court proceeded to sentence. Noting the regulatory purpose of the N.I. Act and delay in final disposal of the matter, the court imposed a monetary sentence by way of fine equal to double the cheque amount and provided that payment within a specified period would avoid imprisonment. The order directed payment to the complainant as compensation under Section 357 Cr.P.C., with a small residue to the State account, and stipulated imprisonment in default of payment for a limited period. [Paras 26, 27, 28]

Accused sentenced to pay a fine (double the cheque amount) with direction for payment to the complainant as compensation under Section 357 Cr.P.C.; imprisonment in default as ordered.

Final Conclusion: The High Court set aside the Trial Court's acquittal, convicted the accused under Section 138 of the Negotiable Instruments Act for issuance of a cheque dishonoured for insufficiency of funds, and sentenced him to pay a fine equal to double the cheque amount with directions for payment to the complainant as compensation and imprisonment in default.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal on preponderance of probabilities - dishonour for insufficiency of funds - re-appreciation of evidence on appeal - standard of proof in criminal prosecution versus defence

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal on preponderance of probabilities - dishonour for insufficiency of funds - Whether the Appellate Court erred in acquitting the accused of the offence punishable under Section 138 of the Negotiable Instruments Act and whether the Trial Court's conviction should be restored. - HELD THAT: - The cheque (Ex.P1) was admittedly signed by the accused and was dishonoured on the ground of 'funds insufficient', notice was issued and service is not disputed. Once signature on the cheque is admitted, the statutory presumption under Section 139 of the Negotiable Instruments Act arises and the burden shifts to the accused to rebut it. The accused sought to rebut by asserting a prior loan of a smaller amount from the complainant's brother and produced documents (Exs.D1-D3) and oral witnesses (DWs 1-3). The Court found that Exs.D1 and D3 bore no dates, there was no proof of service of those replies on the complainant, and no corroborative documentary evidence was produced to show repayment or receipt; DW.2's evidence was inconsistent and did not inspire confidence; DW.1 admitted material facts adverse to his defence (including absence of stop payment or police endorsement). Evidence produced before the Appellate Court (DW.3) regarding registration particulars of vehicles did not satisfactorily establish that the complainant lacked funds or that the alleged sale proceeds existed in a manner that would disprove the complainant's account. The Appellate Court's reliance primarily on differences of ink and handwriting and on DW.3's evidence, without addressing the admissions and weaknesses in the accused's defence, was held to be a perverse re-appreciation. Applying the principle that the accused must establish his defence on the preponderance of probabilities, the material produced fell short of rebutting the presumption under Section 139. Accordingly, the Appellate Court's acquittal was set aside and the Trial Court's conviction restored. [Paras 27, 28, 29, 31, 32]

Appellate Court's acquittal set aside; Trial Court's conviction under Section 138 NI Act restored.

Final Conclusion: The appeal is allowed; the impugned judgment of acquittal is set aside and the conviction and sentence recorded by the Trial Court in C.C.No.476/2007 are restored, with records remitted to the Trial Court.

Presumption under Section 118 and Section 139 of the Negotiable Instruments Act - Offence under Section 138 of the Negotiable Instruments Act - Rebuttal of presumption by cogent evidence - Ingredients of prosecution under Section 138 - Compensatory (not punitive) object of Section 138 - Sentence by way of fine in lieu of imprisonment

Presumption under Section 118 and Section 139 of the Negotiable Instruments Act - Rebuttal of presumption by cogent evidence - Ingredients of prosecution under Section 138 - Offence under Section 138 of the Negotiable Instruments Act - Complainant proved the essential ingredients of Section 138 and accused failed to rebut statutory presumption; accused convicted under Section 138 N.I. Act - HELD THAT: - The complainant produced the cheque (Ex.P1), bank endorsement showing dishonour (Ex.P2), statutory notice and postal records (Exs.P3 to P4) and PW1's evidence reiterated the complaint. The accused admitted signature and issuance of the post dated cheque but pleaded it was given only as security. Where signature and issuance are not disputed, the presumption under Section 118 and Section 139 arises in favour of the complainant. The accused must rebut that presumption by cogent evidence; a bare denial is insufficient. The trial court's reliance on the absence of documentary security, doubts about the complainant's financial capacity and expectation that repayment should have been made by D.D. or cheque was held to be perverse and legally untenable because, absent any cogent evidence to displace the statutory presumption, the complainant was not required to prove the entire antecedent civil transaction as in a civil suit. On the proved facts - issuance, presentation, dishonour and service of notice with no payment within the statutory period - the ingredients of Section 138 were established and the accused failed to rebut the presumption, warranting conviction. [Paras 11, 12, 13, 14, 16]

Conviction of accused for offence under Section 138 of the Negotiable Instruments Act.

Compensatory (not punitive) object of Section 138 - Sentence by way of fine in lieu of imprisonment - Appropriate sentence and compensation on conviction - HELD THAT: - Applying the principle that the remedy under Section 138 is compensatory rather than primarily punitive, the court imposed a sentence of fine (twice the amount of the cheque) and in default simple imprisonment for a limited period. Acting under Section 357 Cr.P.C., the court directed payment of a major part of the fine as compensation to the complainant and the remainder towards prosecution expenses. The court considered the parties' submissions regarding accused's financial condition and the delay in realization, and elected to impose fine and compensation rather than immediate imprisonment.

Accused sentenced to pay fine and ordered payment of compensation to complainant; default imprisonment prescribed for non payment.

Final Conclusion: Appeal allowed; impugned acquittal set aside, accused convicted under Section 138 N.I. Act. Accused sentenced to pay a fine (twice the cheque amount) with default simple imprisonment for a specified period; a major portion of the fine directed to be paid to the complainant as compensation and the balance to the State towards prosecution costs.

Maintainability of complaint filed by power-of-attorney holder - presumption under Section 118 and Section 139 of the Negotiable Instruments Act - post-dated cheque given as security - offence under Section 138 of the Negotiable Instruments Act - compensatory nature of Section 138 and sentencing by fine

Maintainability of complaint filed by power-of-attorney holder - A.C. Narayanan principle requiring specific averment of knowledge - Complaint filed by a power-of-attorney holder is maintainable where the holder has requisite knowledge of the transaction and this is established in the evidence. - HELD THAT: - The Court applied the ratio of A.C. Narayanan that a power-of-attorney holder must have knowledge of the transaction and must make specific assertion of such knowledge in the complaint. Although the complaint's averment on knowledge was concise, the deponent (PW1) in examination-in-chief stated he was the Assistant Manager and knew the facts of the case, and no contradiction was elicited in cross-examination. On the evidence adduced, the power-of-attorney holder demonstrated sufficient knowledge to verify the complaint and to be examined as witness. The trial Court's reliance upon a purported defect in the power-of-attorney at the judgment stage was therefore perverse and contrary to the authoritative Supreme Court guidance requiring examination of the deponent's knowledge by evidence rather than technical formalism. [Paras 15, 16, 19]

The complaint filed by the power-of-attorney holder is maintainable on the evidence produced.

Presumption under Section 118 and Section 139 of the Negotiable Instruments Act - post-dated cheque given as security - offence under Section 138 of the Negotiable Instruments Act - The cheque was in discharge of liability and the complainant proved the ingredients of offence under Section 138; the accused failed to rebut statutory presumptions and the trial Court's finding of a security cheque was unsubstantiated. - HELD THAT: - The Court examined the evidentiary material - cheque (Ex.P1), bank endorsement (Ex.P2), statutory notice (Ex.P3), postal receipt and acknowledgment (Exs.P4,P5) and complaint (Ex.P6) - and found they corroborated the complainant's case, establishing presentation, dishonour for insufficiency of funds and service of notice. The accused admitted signature and issuance but pleaded the cheque was a post-dated security; such denial, without cogent evidence, did not rebut the statutory presumptions under Sections 118 and 139 as explained in Kishan Rao and Rangappa. The trial Court's acquittal on the ground that the cheque was given as security and on technicalities regarding the power-of-attorney was held to be perverse given the record. Consequently, the ingredients of Section 138 were held to be satisfied and conviction was called for. [Paras 17, 18, 19]

The accused failed to rebut the statutory presumptions; the offence under Section 138 is established and the trial Court's acquittal is set aside.

Final Conclusion: Appeal allowed. The trial Court's judgment of acquittal is set aside; the accused is convicted for the offence under Section 138 of the Negotiable Instruments Act. Sentence of fine equal to twice the amount of the cheque was imposed, with default simple imprisonment for four months, and the major portion of the fine directed to be paid to the complainant as compensation.

Quashing of criminal proceedings under the inherent powers of the High Court (Section 482 Cr.P.C.) - Sufficiency of material for framing of charges / order for trial - Prima facie evidence - Misuse of cheques and impersonation in negotiable instruments transactions - Offence under Section 138 of the Negotiable Instruments Act and ancillary criminal accusations under the IPC

Quashing of criminal proceedings under the inherent powers of the High Court (Section 482 Cr.P.C.) - Sufficiency of material for framing of charges / order for trial - Prima facie evidence - Whether the charge sheets against the petitioners for offences under various provisions of the IPC ought to be quashed under the Court's inherent powers. - HELD THAT: - The petitioners sought quashing of criminal proceedings on the ground that the allegations, if any, related only to an offence under Section 138 of the Negotiable Instruments Act and that the charge sheets under IPC provisions were without any prima facie material. The High Court examined the charge sheets and the material collected by the Investigating Officer, notably the statement of CW4 who stated that he prepared the promissory notes at the petitioners' request, that the documents were handed over to the complainant as executed by the petitioners, and that impersonation and misuse of family cheques were subsequently revealed. The Court held that CW4's statement could not be discarded at the stage of a Section 482 application and that the Investigating Officer had collected sufficient material to require a full trial to determine the truth of the allegations. On that basis the Court concluded it was not appropriate to interfere by quashing the proceedings.

Petitions for quashing are dismissed; the matters shall proceed to trial.

Final Conclusion: The High Court dismissed the petitions under its inherent jurisdiction, finding that prima facie material collected during investigation - particularly the statement of the bond writer - amply justified continuing the criminal proceedings and that interference under Section 482 Cr.P.C. was not warranted.

Acquittal set aside and remand for fresh disposal - non-prosecution versus disposal on merits - no cross-examination ('no cross') of witness - recall under Section 311 Cr.P.C. - imposition of costs for negligent prosecution

No cross-examination ('no cross') of witness - recall under Section 311 Cr.P.C. - non-prosecution versus disposal on merits - acquittal set aside and remand for fresh disposal - Whether the Trial Court erred in acquitting the accused when the complainant's witness was not cross-examined and the matter was not decided on merits - HELD THAT: - The Court noted that P.W.1 had been examined but was not subjected to cross-examination and the trial court recorded 'no cross'. An application under Section 311 Cr.P.C. had been allowed and further opportunities were afforded, but P.W.1 remained absent and no request was made to recall earlier orders. The Magistrate thereafter proceeded to pronounce judgment of acquittal without adjudicating the matter on merits. Having regard to the complainant's conduct in failing to pursue the prosecution despite repeated adjournments and the fact that the evidence was not tested by cross-examination, the High Court concluded that the acquittal could not stand and that the matter required fresh consideration on merits. Consequently the impugned judgment of acquittal was set aside and the case remanded to the Trial Court for fresh disposal. [Paras 10, 11, 12, 13, 15]

Impugned judgment of acquittal set aside and the matter remanded to the Trial Court for fresh disposal on merits; parties to appear before the Trial Court on 29.12.2020.

Imposition of costs for negligent prosecution - acquittal set aside and remand for fresh disposal - Whether cost should be imposed for the complainant's conduct in prosecuting the complaint negligently - HELD THAT: - The Court, having taken note of the complainant's prolonged non-appearance and failure to prosecute despite repeated opportunities (including after an order under Section 311 Cr.P.C.), held that imposition of costs was appropriate. The High Court directed the complainant to deposit costs and provided for distribution of the same between the accused and the State; restoration of the trial file was made conditional on deposit of the ordered costs. [Paras 14, 15]

Complainant directed to deposit costs and portion of the cost to be paid to the accused; file to be restored on deposit as directed.

Final Conclusion: Appeal allowed; impugned judgment of acquittal dated 11.11.2010 set aside and the matter remanded to the Trial Court for fresh disposal on merits; parties to appear on 29.12.2020; complainant directed to deposit the prescribed costs and file to be restored on such deposit; trial court records to be transmitted forthwith.

Presumption under Section 139 of the Negotiable Instruments Act, 1881 - rebuttable presumption - probabilising the defence / preponderance of probabilities - onus of proof in cheque bounce prosecutions - appellate interference standard - perversity and where two views are possible - appreciation of oral and documentary evidence

Presumption under Section 139 of the Negotiable Instruments Act, 1881 - rebuttable presumption - probabilising the defence / preponderance of probabilities - appreciation of oral and documentary evidence - Whether the Trial Judge erred in acquitting the accused in the cheque dishonour complaints and whether the appeals require interference. - HELD THAT: - The Court accepted that admission of the cheques gives rise to the statutory presumption under Section 139 of the NI Act but reiterated that such presumption is rebuttable. The decisive question was whether the accused had rebutted that presumption by probabilising a defence. On re appreciation the Court noted material inconsistencies and lacunae in the complainant's case: the complaint and notice were bald as to date and purpose of the alleged loan; PW.1's cross examination contained contradictory statements about when and how the amounts were paid; she admitted the accused had demanded return of the cheques; and she failed to produce bank books, receipts or contemporaneous documentary proof of the cash advances or of her asserted business dealings despite saying such records existed. Those admissions and inconsistencies, together with effective cross examination, rendered the complainant's primary assertion-that she advanced Rs. 2,04,000-to be doubtful. The Court held that an accused can rebut the presumption either by leading evidence or by effective cross examination which creates reasonable doubt; on the facts the accused did the latter and thus probabilised a plausible defence (that only a smaller amount was borrowed and repaid and the cheques were demanded back). Applying the settled appellate standard that an acquittal should not be disturbed unless there is perversity or illegality, and that where two views are possible benefit goes to the accused, the Court found no perversity in the Trial Judge's appreciation and declined to interfere. [Paras 35, 38, 39, 41, 42]

The Trial Court's acquittal is upheld; the accused's defence was probabilised and the presumption under Section 139 was rebutted on the material before the Court.

Final Conclusion: The appeals are dismissed. The High Court found no error or perversity in the Trial Judge's evaluation of evidence: although Section 139 presumption arises on admission of cheques, it was rebutted here by admissions, inconsistencies and effective cross examination, and therefore the acquittal was maintained.

Dismissal for non-prosecution - Section 385 Cr.P.C. - disposal of appeal by notifying date of hearing - securing presence of convicted appellant - remand for fresh consideration - withdrawal of deposited amount subject to furnishing security

Dismissal for non-prosecution - Section 385 Cr.P.C. - disposal of appeal by notifying date of hearing - securing presence of convicted appellant - Impugned order dismissing the appeal for non-prosecution was contrary to law and unsustainable. - HELD THAT: - The First Appellate Court dismissed the appeal because the appellants' counsel did not appear to take steps to issue process. Where the appellant is a convicted accused, Section 385 Cr.P.C. requires that the appeal be disposed of by notifying the date of hearing; if the advocate for the convicted appellant fails to appear the court should have secured the presence of the appellant by following due process. The appellate court's dismissal for non-prosecution without securing the presence of the convicted appellants was therefore improper. Having regard to these legal requirements and the fact that the appeal had been admitted for hearing, the dismissal could not stand. [Paras 14, 16]

Impugned order dated 28.11.2016 dismissing the appeal is set aside.

Remand for fresh consideration - withdrawal of deposited amount subject to furnishing security - Appeal remanded to the First Appellate Court for fresh consideration with directions to proceed and limited interim liberty to the complainant to withdraw deposited funds subject to security. - HELD THAT: - In view of the setting aside of the dismissal, the matter was remitted to the First Appellate Court to hear and decide the appeal afresh. To avoid further delay the parties were directed to appear before the First Appellate Court on the fixed date and the appellate court was directed to hear and dispose of the appeal within three months from appearance. The complainant was permitted to withdraw the amount deposited by the accused, but only upon furnishing appropriate security and surety to the satisfaction of the Trial Court. Records of the Sessions/Appellate and Trial Courts were directed to be returned to the First Appellate Court forthwith. [Paras 16, 17, 18, 19]

Matter remanded to the First Appellate Court for fresh consideration with the stated timetable and conditional permission to withdraw the deposited amount.

Final Conclusion: The High Court set aside the First Appellate Court's dismissal for non-prosecution as contrary to the requirements of Section 385 Cr.P.C., remanded the appeal for fresh consideration with directions for expeditious disposal and permitted conditional withdrawal of deposited funds subject to security.

Prosecution of the drawer of a cheque - liability of proprietor of a sole proprietorship - distinction between a firm and a proprietary concern - application of Section 141 of the Negotiable Instruments Act in the context of proprietary concerns - maintainability of complaint under Section 138 of the Negotiable Instruments Act against a non-signatory

Prosecution of the drawer of a cheque - liability of proprietor of a sole proprietorship - maintainability of complaint under Section 138 of the Negotiable Instruments Act against a non-signatory - application of Section 141 of the Negotiable Instruments Act in the context of proprietary concerns - Whether the complaint under Section 138 of the Negotiable Instruments Act is maintainable against the petitioner (A3), who is the wife of the proprietor (A2) and not the drawer or authorized signatory of the cheques issued by the sole proprietorship (A1). - HELD THAT: - The Court examined the legal distinction between a firm and a proprietary concern and accepted that a proprietary concern is not a separate juridical person distinct from its proprietor. The issuance of cheques by the proprietor in the name of the proprietorship amounts to issuance by the proprietor himself; therefore, liability for dishonour under Section 138 is attributable to the drawer/proprietor. Section 141, which concerns attribution of liability to a firm and its representatives, does not extend to a sole proprietorship treated as not being a firm. The petitioner was not an authorized signatory and no material was shown to establish that she, distinct from the proprietor, drew, signed or authorized the cheques. Relying on the established principle that a non-juridical proprietary concern cannot be prosecuted separately from its proprietor and that only the drawer can be prosecuted for cheque dishonour, the Court found the complaint against the petitioner to be not maintainable. The Court confined its decision to the maintainability of the complaint against A3 and observed that other points raised would be open for adjudication at trial as required. [Paras 15, 16, 18, 19]

Proceedings in the complaint under Section 138 are quashed as against the petitioner (A3); the trial court proceedings shall continue insofar as they relate to other accused.

Final Conclusion: The writ petitions are allowed and the criminal proceedings in C.C.Nos.3439 & 3440 of 2014 are quashed insofar as they relate to the petitioner/A3 alone; connected petitions stand closed.

Vicarious liability of director under Section 141 of the Negotiable Instruments Act - essential averments in complaint for prosecution of company officials - quashing of criminal proceedings under Section 482 Cr.P.C. - cognizance and maintainability of complaint for offence under Section 138 r/w 141, 142 NI Act

Vicarious liability of director under Section 141 of the Negotiable Instruments Act - essential averments in complaint for prosecution of company officials - quashing of criminal proceedings under Section 482 Cr.P.C. - Whether the complaint alleging offence under Sections 138 r/w 141, 142 of the Negotiable Instruments Act is maintainable against the director (petitioner/A3) in the absence of specific averments that she was "in charge of, and responsible for, the conduct of business" of the company at the time of the offence. - HELD THAT: - The Court found that the complaint contains only bald averments that the petitioner was in charge of and responsible to the company at the relevant time, and does not specify what part she played or how she was responsible for issuance of the cheques. Applying the principle in S.M.S. Pharmaceuticals, a complaint seeking to fasten vicarious liability under Section 141 must, read as a whole, contain allegations fulfilling the requirement that the accused was in charge of and responsible for the conduct of the company's business at the time of the offence. While hypertechnicality is to be avoided, the complainant bears the primary obligation to make necessary averments to attract Section 141; absent such factual foundation, the ingredients of the offence are lacking. The petitioner was also not a signatory to the cheques. On this basis the Court concluded that the complaint does not make out a case against the petitioner under Section 141 and therefore cognizance as to her could not properly be sustained. [Paras 16, 17, 18, 19]

Proceedings in C.C.No.254 of 2015 are quashed as against the petitioner/A3 for lack of requisite averments to fasten liability under Section 141 of the Negotiable Instruments Act.

Final Conclusion: The criminal original petition is allowed; proceedings in C.C.No.254 of 2015 are quashed as to the petitioner/A3 alone. The trial in the case against the remaining accused is to be completed by the trial Court within three months from the lifting of lockdown and resumption of normal functioning.

Criminal liability under Section 138 of Negotiable Instruments Act - Bank endorsement "Code-5: Kindly contact Drawer/Drawee Bank" and effect on dishonour - Non-CTS cheques and Reserve Bank of India guidelines - Cheques issued as security and discharge of debt - abuse of process - High Court's inherent power under Section 482 Cr.P.C. to quash proceedings

Bank endorsement "Code-5: Kindly contact Drawer/Drawee Bank" and effect on dishonour - Criminal liability under Section 138 of Negotiable Instruments Act - Whether a complaint under Section 138 NI Act is maintainable when the returning bank's endorsement reads "Code-5: Kindly contact Drawer/Drawee Bank" - HELD THAT: - The Court examined the bank's endorsement on the presented instruments and noted the endorsement directing the complainant to contact the drawer/drawee bank. While prior decisions recognise that a cheque returned for any reason can attract Section 138, the Court applied the reasoning in its earlier order in Sathiyamurthi v. Kesava Narayanan to hold that an endorsement directing the presenter to contact the drawer/drawee bank does not, in the facts of the case, amount to a clear dishonour constituting actionable dishonour under Section 138. The Court therefore concluded that where the bank's return memo does not reflect straightforward dishonour but instead directs further contact/presentation, a complaint premised solely on that endorsement may not sustain criminal proceedings without further compliance or enquiry. [Paras 7, 8]

The endorsement "Code-5: Kindly contact Drawer/Drawee Bank" was not treated as sufficient dishonour to sustain the Section 138 complaint in the circumstances of this case.

Non-CTS cheques and Reserve Bank of India guidelines - Bank endorsement "Code-5: Kindly contact Drawer/Drawee Bank" and effect on dishonour - Whether presentation of long dated, non-CTS cheques issued in 2008 (after RBI ceased clearing non-CTS cheques from 01.01.2019) affects the characterization of bank returns and the liability under Section 138 - HELD THAT: - The Court noted that the cheques were issued in 2008 and were non-CTS cheques which, by RBI guidelines, ceased to be cleared from 01.01.2019. The bank's return endorsement indicating contact with the drawer/drawee bank was understood in the context that the instruments were non-CTS and were presented after a long lapse. The Court accepted that the return for that reason undermines the premise of an unequivocal dishonour by the drawee bank and is a material circumstance relevant to maintainability of a Section 138 complaint. [Paras 7]

The non-CTS character and long lapse in presentation rendered the bank's endorsement and resultant returns materially different from an unequivocal dishonour, weighing against sustaining the Section 138 complaint.

Cheques issued as security and discharge of debt - abuse of process - High Court's inherent power under Section 482 Cr.P.C. to quash proceedings - Whether the complaint should be quashed on the ground that the impugned cheques were issued as security in 2008 and the underlying debt had been discharged in 2009, rendering the criminal proceedings an abuse of process - HELD THAT: - The petitioner produced bank endorsement and a banker s letter showing the cheques were issued in 2008 and the material on record (including the petitioner's reply and the admitted receipt of settlement dated 12.03.2009) established that the alleged indebtedness had been discharged and that the cheques had originally been given as security. The respondent did not file a rejoinder to the petitioner's reply asserting settlement. Having regard to these circumstances and the nature of the bank returns, the Court concluded that the complaint amounted to an abuse of the process of court. Exercising its inherent jurisdiction under Section 482 Cr.P.C., the Court found it appropriate to quash the proceedings rather than remit the matter for trial where the complaint lacked a sustainable factual foundation. [Paras 6, 8, 9]

Proceedings were quashed as the cheques were shown to have been given as security and the debt discharged, and continuation of the complaint would constitute abuse of process; therefore the High Court exercised its inherent power to quash the prosecution.

Final Conclusion: The Criminal Original Petition is allowed; the proceedings in S.T.C.No.1535 of 2019 before the Judicial Magistrate No.II, Puducherry, are quashed as the bank endorsements, the non-CTS character and long lapse in presentation, together with evidence that the cheques were given as security and the debt discharged, render the complaint unsustainable and an abuse of the process of court.