TaxTMI Updates e-Newsletter
Dec 28,2024

Seizure and detention of goods and conveyance - show cause notice and summary disposal timeline under Section 129 of the Goods and Services Tax Act, 2017 - jurisdictional facts for exercise of power of seizure - prima facie circular trading and evasion of tax

Show cause notice and summary disposal timeline under Section 129 of the Goods and Services Tax Act, 2017 - seizure and detention of goods and conveyance - jurisdictional facts for exercise of power of seizure - Proceedings under Section 129 of the Goods and Services Tax Act, 2017 were directed to be completed expeditiously and the writ petition was disposed without adjudication on the merits of seizure. - HELD THAT: - The Court recorded competing factual contentions: the petitioner contended no notices under Section 129 were issued and that the goods were accompanied by a valid E-way bill and corresponded with the consignment particulars; the respondent asserted detention and show cause notice were served and relied on materials suggesting implausible movements of the goods and a prima facie case of circular trading. The Court held that these disputes of fact could not be resolved in writ proceedings. Observing the statutory timelines under Section 129, the Court directed the 1st respondent to complete the enquiry and decide the proceedings expeditiously and preferably within two weeks. The petitioner or an authorised representative was directed to appear on the specified date and place and to present all written objections and oral submissions, which the authority must consider before passing a decision within the directed timeframe. [Paras 11, 12, 13]

Writ petition disposed with a direction to the 1st respondent to complete proceedings under Section 129 expeditiously (preferably within two weeks), the petitioner to appear and present his case on the specified date, and no adjudication on the merits of seizure; no order as to costs.

Final Conclusion: The Court did not adjudicate the legality of the seizure on merits; instead the matter was remitted to the 1st respondent for expeditious completion of proceedings under Section 129 of the GST Act with directions for the petitioner to appear and place objections, and the writ petition was disposed with no order as to costs.

Limitation for filing appeals - electronic/online filing treated as date of filing - procedural requirement of furnishing certified/self certified copy - condonation of delay - clarificatory/retrospective effect of amendment to Rule 108 of the CGST Rules, 2017 - appeal under Section 107 of the CGST Act, 2017 - final acknowledgment as date of filing

Limitation for filing appeals - electronic/online filing treated as date of filing - final acknowledgment as date of filing - Effect of online filing within the prescribed period where physical submission of certified/self certified copy was made after the statutory period - HELD THAT: - The Court examined Section 107(1) read with Section 107(4) of the CGST Act and Rule 108 of the CGST Rules (pre and post amendment) to determine whether an appeal electronically filed within the 3 months plus 1 month period could be treated as timely notwithstanding later physical submission of the certified/self certified copy. The Court observed that both pre amendment and post amendment Rule 108 permitted electronic filing and provided that, subject to filing the certified/self certified copy within the stipulated period, the date of provisional acknowledgment (or issue of final acknowledgment where applicable) is to be treated as the date of filing. The Court held that where the online filing (including electronic copy of the order) was completed within the limitation period and there was no dispute as to the genuineness of the copy, the delayed physical filing of the certified/self certified copy does not disentitle the appellant to have the appeal heard on merits. The Court considered the technological shift towards electronic filing and treated the requirement of physically filing a certified copy as a procedural requirement which ought not to defeat substantive adjudication where online filing was otherwise complete and within time. [Paras 11, 19, 20]

Appeals in OIA No. 105 to 115 and OIA No. 131 filed online within the prescribed period are to be treated as timely and are remitted to the Appellate Authority for decision on merits.

Clarificatory/retrospective effect of amendment to Rule 108 of the CGST Rules, 2017 - procedural requirement of furnishing certified/self certified copy - Whether the amendment to Rule 108 effected by notification dated 26th December, 2022 is clarificatory and thus applicable to appeals filed before the amendment where online filing was within time - HELD THAT: - The Court considered decisions of several High Courts referenced by the parties and the legislative intent reflected in minutes of the GST Council and the Rule amendment. Observing that the amendment clarified the position regarding submission of the certified/self certified copy and the consequence of uploading the order on the common portal, the Court accepted that the amendment is clarificatory in nature. Consequently, the clarified rule concerning treatment of the date of provisional/final acknowledgment applies to cases where the online filing was completed within the statutory period, and the requirement of physical submission is procedural and not a ground to non suit an appellant who complied electronically within time. [Paras 16, 17, 19]

The amendment to Rule 108 is clarificatory and supports treating timely electronic filing as sufficient where the order's electronic copy was uploaded or furnished; the procedural requirement of physical submission does not automatically deny hearing on merits.

Limitation for filing appeals - condonation of delay - Treatment of appeal where online filing itself was beyond the prescribed limitation period - HELD THAT: - The Court distinguished cases where electronic filing was within time from the present instance in OIA No. 132, where the online filing was also beyond the statutory period. Since the initial electronic filing did not occur within the prescribed period, there was no basis to treat the appeal as timely or to condone the delay merely because of later physical filings. The Court thus applied the limitation tests strictly where online filing was not within time. [Paras 11, 23]

Writ petition is rejected insofar as OIA No. 132; the appeal where online filing itself was beyond limitation is not entitled to condonation on the facts.

Final Conclusion: Writ petition partly allowed: appeals in OIA No. 105 115 and OIA No. 131, where online filing (including electronic copy of the order) was within the prescribed limitation, are remitted to the Appellate Authority for fresh consideration on merits; OIA No. 132, where online filing was beyond limitation, is dismissed. Costs awarded to be deposited by the petitioner as ordered.

Mandatory nature of opportunity of hearing under Section 75(4) of the GST Act - limitation for issuance of show-cause notice under Section 73(10) of the GST Act - quashing of orders for denial of hearing and remand for fresh adjudication

Mandatory nature of opportunity of hearing under Section 75(4) of the GST Act - quashing of orders for denial of hearing and remand for fresh adjudication - Order dated 09.12.2023 was quashed for failure to grant the mandatory opportunity of hearing under Section 75(4) of the GST Act. - HELD THAT: - The Court accepted the petitioner's contention that no opportunity of hearing was granted before passing the order dated 09.12.2023. The Division Bench decision in M/S Atlas Cycles Haryana Limited Versus State of U.P. and another (Writ Tax No. 144 of 2024, decided 12.02.2024) was relied upon to state that the provisions of Section 75(4) are mandatory. In view of the mandatory requirement, the impugned order was quashed and the matter remitted to the respondent for fresh decision after affording the petitioner hearing in accordance with law. [Paras 4, 5]

Order dated 09.12.2023 quashed; respondent directed to pass fresh order after giving opportunity of hearing.

Limitation for issuance of show-cause notice under Section 73(10) of the GST Act - remand for fresh consideration - Order dated 22.10.2024 dismissing the appeal as time-barred was quashed and the question of limitation was left open for fresh consideration by the Assessing Authority. - HELD THAT: - The Court did not decide the limitation point on merits but quashed the appellate order dated 22.10.2024 as consequential to quashing of the adjudicatory order. The petitioner was permitted liberty to raise the question of limitation before the Assessing Authority, thereby remanding the issue of limitation for fresh adjudication in accordance with law. [Paras 2, 5]

Order dated 22.10.2024 quashed; petitioner liberty to raise limitation before the Assessing Authority and issue remanded for fresh consideration.

Final Conclusion: The petition is allowed: both impugned orders dated 09.12.2023 and 22.10.2024 are quashed; the adjudicating authority shall pass a fresh order after affording statutory hearing, and the petitioner may raise the limitation defence before that authority.

Retrospective abolition of Income-tax Settlement Commission - protection of accrued or vested rights against retrospective statute - limits of administrative circular issued under section 119 - reading down retrospective operation to preserve rights up to 31.03.2021 - restoration of settlement application and referral to Interim Board for adjudication on merits

Retrospective abolition of Income-tax Settlement Commission - protection of accrued or vested rights against retrospective statute - limits of administrative circular issued under section 119 - reading down retrospective operation to preserve rights up to 31.03.2021 - Validity of the Finance Act, 2021 (which made the Settlement Commission inoperative retrospectively) and of paragraph 4(i) of the CBDT circular dated 28.09.2021 insofar as they affected eligibility to file settlement applications - HELD THAT: - The Court applied and followed the reasoning in the decision of the Division Bench of the Madras High Court in Jain Metal, as affirmed by dismissal of the SLP, and other High Court decisions. It held that retrospective operation cannot be used to deprive a person of an accrued/vested right to file a settlement application where that application was made before the Finance Act 2021 came into effect for purposes of presidential assent; an administrative circular under section 119 cannot lawfully impose additional burdens beyond the statute and may be read down to protect vested rights. Applying those principles, the Court concluded that applicants who had a right to prefer applications which were effectively rendered inoperative by retrospective abolition must be treated as having their rights preserved, and that the retrospective provision should be construed so as not to defeat applications filed within the preserved period (as guided by the Madras decision read down to preserve rights up to 31.03.2021). The Court therefore found the reasoning of the Single Judge unsustainable to the extent it dismissed challenges to the retrospective effect and the circular's operation against vested rights. [Paras 15, 16]

The retrospective effect of the Finance Act, 2021 and the operation of paragraph 4(i) of the circular, insofar as they would defeat vested rights to file settlement applications, cannot be sustained and must be read/construed to preserve such rights up to the date indicated by authoritative precedent.

Restoration of settlement application and referral to Interim Board for adjudication on merits - Whether the appellants' settlement application filed on 17.03.2021 should be restored and considered by the Interim Board - HELD THAT: - The Court held that the appellants filed their settlement application prior to receipt of the President's assent to the Finance Act, 2021, and therefore had a vested right to prefer the application. In accordance with the principles applied from Jain Metal and other High Court decisions, the orders rejecting the application as invalid were set aside. The application filed on 17.03.2021 was restored to the file of the Settlement Commission and the Interim Board was directed to consider it on merits in accordance with the scheme that may be framed by the Central Government and as applicable to cases arising prior to 31.01.2021. [Paras 16]

The application dated 17.03.2021 is restored; the Interim Board is directed to consider and decide the application on merits in accordance with law and the scheme to be framed by the Central Government.

Final Conclusion: The appeals are allowed; the Single Judge's order and the Settlement Commission's order are quashed, the appellants' settlement application filed on 17.03.2021 is restored, and the Interim Board is directed to consider it on merits in accordance with the applicable scheme; no order as to costs.

Delay in deposit of TDS/TCS - Reasonable cause for delay - COVID-19 pandemic - Compounding of offences under Sections 276B/276BB of the Incometax Act - Sanction under Section 279(1) of the Incometax Act - Inherent jurisdiction under Section 482 Cr.P.C.

Delay in deposit of TDS/TCS - Reasonable cause for delay - COVID-19 pandemic - Sanction under Section 279(1) of the Incometax Act - Whether the proceedings initiated by taking cognizance for alleged delay in deposit of collected TDS/TCS for financial year 2021-2022 should be quashed on the ground that the delay is sufficiently explained by COVID-19 related causes - HELD THAT: - The Court held that the petitioners' explanation for belated deposit of TDS/TCS, ranging from one to eighty-four days for the financial year 2021-2022, was covered by the reasoning in earlier decisions of this Court which recognized the COVID-19 pandemic and its economic fallout as a plausible "reasonable cause" for delay in remittance. The court noted that the competent authority had granted sanction under Section 279(1) but that the sanction and subsequent complaint could be examined in the light of settled precedents. Although offences under Sections 276B/276BB are compoundable and the statutory compounding route ordinarily lies open, the High Court exercised its inherent jurisdiction under Section 482 Cr.P.C. in exceptional circumstances. Applying the determinative reasoning of the cited precedents, the Court concluded that in the facts of the present case, where delay was attributable primarily to COVID-related disruptions and the amounts had been deposited (with interest) before initiation of consequential prosecution, the continuation of criminal proceedings was not warranted and ought to be quashed. [Paras 8, 10]

Impugned order dated 11.08.2023 taking cognizance and issuing summons in 2(C) C.C. Case No.47 of 2023 is quashed and consequential proceedings are quashed.

Final Conclusion: On the facts and in view of this Court's precedents recognising COVID-19 related disruption as a sufficient explanation for delayed deposit of TDS/TCS, the High Court exercised its inherent jurisdiction under Section 482 Cr.P.C. and quashed the cognizance and consequential criminal proceedings initiated for the financial year 2021-2022; parties remain free to pursue statutory compounding avenues where appropriate.

Section 56(2)(vii)(b)(ii) - proviso to sub-clause (vii)(c) to subsection 2 to Section 56 - Section 50C(2) - reference to Valuation Officer - revisional jurisdiction under Section 264

Section 56(2)(vii)(b)(ii) - stamp duty value - income from other sources - Applicability of Section 56(2)(vii)(b)(ii) to the transaction and consequence of variance between sale deed consideration and stamp valuation - HELD THAT: - The court held that where the stamp duty value adopted by the Stamp Valuation Authority exceeds the consideration stated in the sale deed by more than the statutory threshold, subclause (vii)(b)(ii) to subsection (2) of Section 56 applies and the differential stamp duty value is chargeable to tax under the head "Income from other sources". In the present case the guideline value exceeded the sale consideration by an amount above the threshold; hence the SRO value is to be adopted for computation of income unless the valuation is validly disputed under the statutory mechanism provided. [Paras 36, 40, 41]

Section 56(2)(vii)(b)(ii) covers the transaction and the stamp duty value adopted by the SRO has to be adopted for computation of the petitioners' income unless successfully disputed under the statutory referral mechanism.

Proviso to sub-clause (vii)(c) to subsection 2 to Section 56 - Section 50C(2) - reference to Valuation Officer - Whether the assessee may dispute the stamp duty value and the Assessing Officer's duty to refer valuation to a Valuation Officer - HELD THAT: - The court analysed the interplay between Section 56(2)(vii)(c) and Section 50C(2) and concluded that the first proviso to subclause (vii)(c) entitles a recipient of immovable property to dispute the stamp duty value on the grounds available under Section 50C(2). Upon such dispute, the Assessing Officer is obliged to refer the valuation to a Valuation Officer and apply the provisions (including the procedures) identified in Section 50C and related provisions. The fact that the Authorized Representative did not object during assessment does not ipso facto bar invocation of the referral mechanism before the revisional authority or appellate forum, since those proceedings are continuations of the assessment process. [Paras 46, 47, 48, 49, 50]

Where the stamp duty value is disputed on grounds in Section 50C(2), the Assessing Officer must refer valuation to a Valuation Officer under the proviso to subclause (vii)(c) read with Section 50C(2); failure to do so renders the revisional orders unsustainable.

Revisional jurisdiction under Section 264 - remand for fresh consideration - Whether the revisional orders rejecting revision petitions under Section 264 were sustainable - HELD THAT: - Having found that the statutory referral to a Valuation Officer was available and not barred by the AR's earlier acceptance, the court held that the revisional authority's rejection of the revision petitions without directing the requisite valuation reference was unsustainable. The court set aside the impugned orders passed under Section 264 and remitted the matters to the Assessing Officer to redo the exercise under the proviso to subclause (vii)(c) to subsection 2 to Section 56 read with Section 50C(2). The Assessing Officer was directed to pass a final order on merits expeditiously, preferably within six months. [Paras 48, 51, 52]

Impugned orders under Section 264 are quashed and the matters are remitted to the Assessing Officer to refer the valuation to a Valuation Officer and decide afresh in accordance with the statute.

Final Conclusion: Writ petitions allowed to the extent that the revisional orders dated 15.02.2020 are quashed; the matters are remitted to the Assessing Officer to refer the valuation of the property to a Valuation Officer under the proviso to subclause (vii)(c) to subsection 2 of Section 56 read with Section 50C(2) and to pass final orders on merits preferably within six months. No costs.

Faceless assessment - jurisdiction for issuance of notice under Section 148 - Automated Allocation System - risk management strategy - concurrent jurisdiction of Jurisdictional Assessing Officer and Faceless Assessing Officer for assessment under Section 147 - NaFAC jurisdiction commencing from notices under Section 142(1)/143(2) - Board's power to specify cases under Section 144B(2) - curability of procedural irregularity in e-notices

Jurisdiction for issuance of notice under Section 148 - Automated Allocation System - risk management strategy - Jurisdiction to issue notice under Section 148 vests exclusively with the Jurisdictional Assessing Officer where the notice is issued through automated allocation and faceless means as per the Scheme - HELD THAT: - The court held that the e-Assessment Scheme (29.03.2022) requires notices under Section 148 to be issued through automated allocation in accordance with the Board's risk management strategy and in a faceless manner. The Directorate of Income Tax (Systems) selects and allocates cases by the Automated Allocation System (randomised algorithm) based on PAN jurisdiction; once allocated, the Jurisdictional Assessing Officer (JAO) issues the Section 148/148A notice digitally via the ITBA portal. The Scheme and the procedure under Section 144B do not divest the JAO of the power to issue Section 148 notices where the three mandatory ingredients (automated allocation, risk-management-based selection, faceless e-issuance) are complied with. Hence, where those conditions are satisfied, issuance by the JAO is lawful and exclusive for that stage of proceedings. [Paras 37, 41, 42, 44, 58]

Only the Jurisdictional Assessing Officer shall issue notice under Section 148 when the notice is allocated through the Automated Allocation System in accordance with the risk management strategy and sent facelessly via ITBA.

NaFAC jurisdiction commencing from notices under Section 142(1)/143(2) - faceless assessment - National Faceless Assessment Centre (NaFAC) assumes jurisdiction in income-escaping assessment cases only from the stage of issuing notices under Section 142(1) or Section 143(2) - HELD THAT: - Interpreting Section 144B(1) and the Scheme, the court found that NaFAC's role and faceless-assessment procedure commence at the stage where notices under Section 142(1) or 143(2) are to be served and responses forwarded to assessment units. Section 144B expressly contemplates NaFAC assigning cases to assessment units, serving notices under Section 142(1)/143(2), forwarding responses, and thereafter supervising faceless assessment steps. For income-escaping assessment, issuance of Section 148 notice is a precursor; NaFAC's procedural jurisdiction begins only after the Section 148 process has generated either a response or lack thereof and the matter is forwarded by the Directorate of Income Tax (Systems). [Paras 12, 16, 33, 34]

NaFAC's jurisdiction in Section 147 proceedings starts only after receipt of information and at the stage of issuing notices under Section 142(1) or Section 143(2).

Concurrent jurisdiction of Jurisdictional Assessing Officer and Faceless Assessing Officer for assessment under Section 147 - Board's power to specify cases under Section 144B(2) - For making assessment, reassessment or re-computation under Section 147, both the Faceless Assessing Officer (FAO) and the Jurisdictional Assessing Officer (JAO) have concurrent jurisdiction subject to categories or exclusions specified by the Board under Section 144B(2) - HELD THAT: - The court observed that Section 144B(2) empowers the Board to specify territorial areas, persons or classes of cases for faceless assessment; where the Board does not so specify or where exclusions apply (e.g., international taxation, central charges, certain search/seizure cases), the JAO retains jurisdiction. The Scheme and Section 144B when read together show that faceless assessment covers specified classes (not all cases), and that transfer of cases between NaFAC and AO is contemplated. Accordingly, for the categories within the Scheme's scope (automated allocation/risk-managed selections) faceless assessment proceeds, but overall assessment functions can be concurrent between FAO and JAO depending on Board specification and applicable exceptions. [Paras 11, 21, 57, 58]

Assessment, reassessment or re-computation under Section 147 may be carried out by both FAO and JAO concurrently, subject to the Board's specification under Section 144B(2) and statutory exceptions.

Board's power to specify cases under Section 144B(2) - faceless assessment - Guidelines issued by the Board (24.05.2023) for processing Section 148 cases and forwarding to NaFAC fall within the Board's power under Section 144B(2) and do not amount to impermissible modifications under Section 151A(2)'s proviso - HELD THAT: - The court distinguished the Central Government's scheme-making power under Section 151A and the Board's power under Section 144B(2). It held that the Board may specify territorial areas or classes of cases to be faceless and issue guidelines to operationalise faceless assessment for cases covered by Section 144B(2). The 24.05.2023 guidelines, which prescribes uploading of documents by JAO and forwarding Section 148 cases to NaFAC for further action, were held to be within the Board's statutory authority and not in conflict with the proviso to Section 151A(2) (which restricts central-government directions after 31.03.2022). [Paras 11, 19, 29, 58]

The Board's guidelines of 24.05.2023 are intra vires Section 144B(2) and valid; they do not amount to prohibited directions under Section 151A(2)'s proviso.

Curability of procedural irregularity in e-notices - faceless assessment - Mentioning the name of an officer on a digitally signed faceless e-notice is a procedural lapse that does not vitiate the initiation of proceedings - HELD THAT: - Although the court noted that in true faceless procedure the officer's name should not be displayed, it treated the inclusion of the officer's name on the ITBA-generated e-notice as a procedural error only. Having concluded that the substantive requisites of automated allocation, risk-based selection and faceless e-issuance were satisfied, the court held that the procedural lapse was curable and would not invalidate the notice or the initiation of proceedings, while advising the department to avoid such practice in future. [Paras 43, 44, 58]

The procedural error of naming the officer on a digitally issued faceless notice is curable and does not vitiate the notice.

Final Conclusion: Writ petitions dismissed. The court held that (i) issuance of notice under Section 148 must be by the JAO where the Scheme's mandatory conditions (automated allocation, Board risk-management selection, faceless e-issuance) are met; (ii) NaFAC's role begins at the stage of notices under Section 142(1)/143(2) and thereafter faceless assessment proceeds; (iii) assessment under Section 147 may be conducted concurrently by FAO and JAO subject to Board specifications under Section 144B(2); (iv) the Board's 24.05.2023 guidelines are intra vires Section 144B(2); and (v) minor procedural lapses in e-notices do not vitiate proceedings, with liberty granted to file replies as directed.

Search and seizure powers under Section 132 - Proviso to Section 132(1)(iii) - stock-in-trade not to be seized - Summons and production powers under Section 131 - Requirement of 'reason to believe' in search and seizure - Retention of seized goods pending completion of assessment - Onus on person in possession to explain discrepancies in stock register

Proviso to Section 132(1)(iii) - stock-in-trade not to be seized - Search and seizure powers under Section 132 - Seizure of gold jewellery/stock-in-trade was not illegal under the proviso to Section 132(1)(iii). - HELD THAT: - The Court found that although the proviso to Section 132(1)(iii) provides that bullion or jewellery being stock-in-trade should not be seized, the respondents had material showing mismatch between the jewellery items carried and the firm's stock register, and the petitioner failed to produce an itemized stock register matching the seized items. The factual dispute as to quantity and valuation, together with mismatching bills and unexplained differences, justified the making of inventory and custody of the goods under the search and seizure provisions. In these circumstances non-release at the investigatory stage was held to be justified until assessment proceedings clarify tax liability. [Paras 7, 8, 10, 12, 13]

Seizure and retention of the jewellery/stock-in-trade cannot be set aside at this stage.

Requirement of 'reason to believe' in search and seizure - Summons and production powers under Section 131 - Proceedings under Sections 131/132 were not quashed on the ground that 'reasons to believe' should have terminated the action. - HELD THAT: - The Court noted the petitioner had been given opportunity under Section 131 to explain the source and particulars of the seized goods. The first summons afforded the petitioner a sufficient chance to account for the jewellery, and his inability to satisfy the authorities prompted further action under Section 132A after requisite approvals. The statutory provision that recorded reasons to believe need not be disclosed was noted, and the mere assertion that 'reasons to believe' existed did not warrant quashing of seizure when factual discrepancies remained. [Paras 6, 11]

Quashing of the proceedings under Sections 131/132 is not warranted.

Retention of seized goods pending completion of assessment - Onus on person in possession to explain discrepancies in stock register - Non-release of the seized goods pending completion of assessment for the year 2024-25 is justified and not amenable to interference in the writ petition. - HELD THAT: - The Court observed that assessment proceedings for 2024-25 are ongoing and the tax liability is yet to be ascertained. Given the factual dispute over itemized stock and valuation, the assessing authority is entitled to consider all relevant documents during assessment. The petitioner will have remedies during and after assessment, including appellate remedies if an adverse order is passed, but at the present investigatory stage custodial retention of the assets was warranted. [Paras 9, 10, 13]

Non-release of the jewellery until completion of assessment is justified; no interference warranted.

Final Conclusion: Writ petition dismissed; orders declining release of the seized jewellery (including order dated 19.06.2024) upheld, with the petitioner left to pursue remedies during assessment proceedings and in appeal if required.

Deduction under Section 80HHC - Explanation (baa) of Section 80HHC - burden of proof on the assessee - treatment of receipts as business income vs miscellaneous receipts - factual findings and perversity

Deduction under Section 80HHC - Explanation (baa) of Section 80HHC - burden of proof on the assessee - treatment of receipts as business income vs miscellaneous receipts - Whether the sum of Rs. 5,52,60,467/- could be treated as income from export business for the purpose of claiming deduction under Section 80HHC or was rightly treated as miscellaneous receipts and excluded under Explanation (baa). - HELD THAT: - The Court observed that the assessee, having claimed deduction under Section 80HHC, bore the burden of proving that the receipts in question were eligible export business profits. The record showed receipt of Rs. 5,52,60,467/-, but the assessee did not lead evidence to establish that these amounts arose from export business. In absence of such proof, the authorities correctly classified the amount as miscellaneous receipts and applied Explanation (baa) of Section 80HHC to exclude 90% while computing profits eligible for deduction. The Court found no infirmity or perversity in the concurrent findings of fact recorded by the assessing officer, CIT(A) and the Tribunal and declined to interfere. [Paras 10, 11]

The Tribunal's and lower authorities' treatment of the receipts as miscellaneous income and exclusion under Explanation (baa) of Section 80HHC is upheld; the assessee's claim for deduction is rejected.

Final Conclusion: The substantial question of law is answered against the assessee; the appeal is dismissed and the Tribunal's order affirmed.

Condonation of delay under section 260 A(2) - Admission of appeal on substantial question of law - Addition as unexplained money under Section 69 A - Deposits during demonetisation and characterization as unexplained investment

Condonation of delay under section 260 A(2) - Application for condonation of delay in filing the appeal - HELD THAT: - The Court accepted the explanation for the delay and exercised its power under sub section (2) of section 260 A to condone the reported delay of 373 days. The period between 16th August, 2023 and 26th July, 2024 was excluded on account of the assessee's application for rectification of the impugned order. The application for condonation was accordingly allowed and disposed of. [Paras 3]

Delay condoned and the application disposed of.

Addition as unexplained money under Section 69 A - Deposits during demonetisation and characterization as unexplained investment - Admission of appeal on substantial question of law - Whether the appeal raises substantial questions of law touching the correctness of addition of a bank deposit as unexplained money/investment and whether the Tribunal's reference to the deposit as 'unexplained investment' warrants admission of the appeal - HELD THAT: - The Tribunal's reference to the deposit as 'unexplained investment' notwithstanding, the Assessing Officer made the addition under the law relating to unexplained money after recording that the assessee's cash book showed a balance of only Rs. 252.40 on 8th November, 2016 while a deposit of old currency was made on 12th November, 2016. The assessee's explanation - that denominations were not maintained and that deposits arose from cash sales and realizations from debtors in the ordinary course of business - was held to be no explanation at all. The AO's finding, affirmed by the First Appellate Authority and the Tribunal, was that the nature and source of the money remained unexplained and therefore the addition was justified. The Court found no substantial question of law arising from the impugned Tribunal order that would warrant admission of the appeal. [Paras 9, 10]

No substantial question of law arises; the appeal is not admitted and is dismissed.

Final Conclusion: The delay in filing the appeal is condoned; however, on merits no substantial question of law is found regarding the addition of the deposit as unexplained money arising from demonetisation period deposits, and the appeal is dismissed.

Taxability of profits from sale of jaggery as non-agricultural income - distinction between jaggery and gur as separate commodities for tax purposes - finality of assessment findings on nature of commodity sold (sugarcane versus jaggery) - precedential weight of earlier High Court decisions on commodity characterization

Taxability of profits from sale of jaggery as non-agricultural income - Profits from the sale of jaggery are not agricultural income and are taxable. - HELD THAT: - The Tribunal held that the activity of selling jaggery has no nexus with agricultural operations and accordingly attracted tax. This Court affirmed that conclusion, noting that the matter had been considered at earlier stages and that the Tribunal's view-followed in other similar orders-correctly treated profits from sale of jaggery as beyond the scope of agricultural income. The Court relied on prior authorities and its own earlier consideration of the issue to sustain the taxability finding. [Paras 3, 9, 10]

Appeal dismissed insofar as the contention that profits from sale of jaggery are agricultural income.

Distinction between jaggery and gur as separate commodities for tax purposes - precedential weight of earlier High Court decisions on commodity characterization - Jaggery and gur are different and distinct commodities; the processed product (jaggery) is not the same as sugarcane in its original form. - HELD THAT: - The Court, after referring to earlier decisions including the judgment in CIT v H.G.Date and other authorities, concluded that the essential characteristic of sugarcane in its original form is altered by processing into jaggery, thereby creating a distinct commodity. On that basis the Court rejected the appellant's argument seeking to treat jaggery (or gur) as equivalent to raw agricultural produce for tax-exempt purposes. [Paras 9]

The distinction between jaggery and gur is affirmed and the processed product is treated as a distinct taxable commodity.

Finality of assessment findings on nature of commodity sold (sugarcane versus jaggery) - The appellant's contention, raised late before this Court, that the sales were of sugarcane (an agricultural commodity) and not jaggery, is rejected as not open for consideration. - HELD THAT: - The assessment order expressly found that the assessee possessed machinery to convert sugarcane into jaggery and that the assessee failed to corroborate its later contention that sales to third parties were of sugarcane. The Court observed that this plea was not taken before the lower appellate authorities and that the question had reached finality at the assessment stage; accordingly the belated argument was not entertained. [Paras 4, 5, 6, 7]

Late plea that commodity sold was sugarcane and not jaggery is rejected as barred by finality of earlier findings.

Final Conclusion: The substantial questions of law are answered against the assessee: profits from sale of jaggery are taxable, jaggery and gur are distinct commodities, and the late contention that sales were of sugarcane is untenable; the appeal is dismissed.

Deduction for broken period interest on purchase of hold to maturity securities - jurisdiction of the Jurisdictional Assessing Officer to initiate reopening under Section 148/148A - binding nature of decisions of the Jurisdictional High Court and judicial discipline - faceless assessment mechanism

Deduction for broken period interest on purchase of hold to maturity securities - Entitlement of the assessee to a deduction for broken period interest (BPI) paid on purchase of HTM securities for the assessment year in question. - HELD THAT: - The Court held that the question whether broken period interest paid on purchase of securities held as stock in trade is allowable as a deduction is no longer res integra and must be decided in favour of the assessee. The Court applied and followed the line of authorities discussed in the judgment (including decisions of this Court and the Supreme Court referred to therein) which accept the assessee's accounting treatment and conclude that allowing deduction for BPI does not result in loss of revenue and that the jurisprudence in Vijaya Bank Ltd. does not apply to the facts of such cases. Having regard to those precedents and the Division Bench decision in HDFC Bank Ltd. (referred to by the Court), the Court concluded that the Assessing Officer had no sustainable basis in law to contend that the BPI was not deductible and therefore the reopening predicated on disallowance of BPI could not be maintained. [Paras 20, 21, 28, 29]

The assessee is entitled to the deduction for broken period interest; the reopening based on disallowance of BPI is without basis and the petition succeeds on this ground.

Jurisdiction of the Jurisdictional Assessing Officer to initiate reopening under Section 148/148A - binding nature of decisions of the Jurisdictional High Court and judicial discipline - faceless assessment mechanism - Validity of the proceedings initiated by the Jurisdictional Assessing Officer in face of the Division Bench decision in Hexaware Technologies Ltd. and the obligation of revenue officers to follow binding High Court decisions. - HELD THAT: - The Court found that the Assessing Officer proceeded contrary to the binding decision of the Division Bench in Hexaware Technologies Ltd., which had interpreted the provisions governing reopening and held that jurisdictional Assessing Officers could not initiate such proceedings where the faceless mechanism applied. The Court emphasized the principles of judicial discipline: subordinate revenue officers are bound to follow the decisions of the Constitutional Court of the State unless and until stayed or set aside by a competent court. The practice of treating an adverse High Court decision as merely "not acceptable" and continuing to issue notices was deprecated; absent a stay, such defiance renders the proceedings illegal. The Court therefore held that there was no basis in law for respondent no.1 to initiate the impugned proceedings and directed that the observations be circulated to Jurisdictional Assessing Officers and the CBDT. [Paras 23, 24, 26, 27, 28]

The impugned proceedings initiated by the Jurisdictional Assessing Officer were contrary to binding High Court authority and unsustainable; revenue officers must comply with the Division Bench decision and the court's observations are to be circulated to the concerned authorities.

Final Conclusion: The writ petition is allowed: the reopening and notices issued in respect of the broken period interest for assessment year 2018-19 were unsustainable in law (the BPI is deductible) and the Assessing Officer wrongly acted contrary to binding decisions of the Jurisdictional High Court; the Court directed circulation of its observations to Jurisdictional Assessing Officers and to the CBDT. Rule made absolute; no costs.

Disallowance of purchase expenses of raw material - burden of proof - rejection of books of accounts as precondition for estimating income - estimation of income by making additions where purchases are unproven - application of precedents on unproven business expenses to raw material purchases - disallowance under Section 37(1) for unproven business expenses

Disallowance of purchase expenses of raw material - rejection of books of accounts as precondition for estimating income - burden of proof - Whether the Appellate Tribunal was justified in confirming the disallowance of the assessee's claimed purchase expenses for paddy and restoring the assessing authority's order without verification of the assessee's books and records. - HELD THAT: - The Court examined the Tribunal's reliance on authorities concerning unproven business expenses and held those decisions inapplicable to the facts where the disputed expenditure related to purchase of a raw material. The Court emphasised that, when the expense claimed concerns raw-material purchases, the assessing authority must first verify and, if necessary, reject the books of accounts (including stock records and purchase registers) before estimating income by disallowing such purchases. In the present case the assessing authority did not carry out such verification of the audited books, Stock Register, Cash Purchase Register and other account records; accordingly there was no justification for treating the purchases as nonexistent and making additions on that basis. The First Appellate Authority's finding - that the trade results as per the books were not rejected and that only a limited disallowance (based on a minor price discrepancy) was warranted - was correctly founded on the record and legal principle. The Tribunal's conclusion that the assessee had failed to discharge the burden of proof and thereby affirming the assessing order was therefore legally unsustainable. [Paras 7]

Impugned order of the Appellate Tribunal set aside; order of the First Appellate Authority restored and the disallowance confined to the limited amount determined by that authority.

Final Conclusion: Appeal allowed: the Appellate Tribunal's order restoring the assessing authority's disallowance is set aside and the First Appellate Authority's order limiting the disallowance is restored, the Court answering the substantial questions of law in favour of the assessee to the extent indicated.

Reassessment based on information from GST investigation - principles of natural justice and right to cross-examination - powers of Commissioner (Appeals) to remit for further enquiry and to reassess - remand for de novo adjudication by Assessing Officer

Reassessment based on information from GST investigation - principles of natural justice and right to cross-examination - powers of Commissioner (Appeals) to remit for further enquiry and to reassess - remand for de novo adjudication by Assessing Officer - Validity of deletion by CIT(A) of addition disallowing expenditure on account of alleged bogus purchases from M/s One Point One Solutions Pvt. Ltd., and appropriate course of action where AO relied on GST investigation without further verification. - HELD THAT: - The AO made an addition treating purchases from OPOS as non-genuine chiefly on the basis of information from a CGST investigation showing OPOS's involvement in fraudulent input tax credit schemes, but the AO did not undertake further enquiries (such as verification of payments from assessee's bank or cross-examination of the supplier) nor did he verify the nexus between the GST findings and the assessee's transactions. The CIT(A) deleted the addition, observing lack of further investigation and denial of opportunity for cross-examination, but did not itself exercise the statutory revisional powers to conduct or direct further enquiry despite acknowledging that further investigation was warranted. The Tribunal noted that the Commissioner (Appeals) possesses plenary powers co-terminus with the Assessing Officer to make or direct further enquiries and to reassess, and that an appellate authority can and should pursue further investigation when material shortcomings in the AO's inquiry are apparent. In view of this, rather than endorsing the deletion or simply remanding without direction, the Tribunal set aside the matter to the AO for fresh assessment after making such further enquiries and investigations as deemed fit and directed that the assessee be given proper and adequate opportunity of being heard in accordance with principles of natural justice for de novo adjudication. [Paras 8, 9]

Appeal allowed for statistical purposes; matter set aside to the AO for fresh assessment with directions to make further enquiries/investigations as deemed fit and to afford the assessee adequate opportunity of hearing for de novo adjudication.

Final Conclusion: The Tribunal allowed the Revenue's appeal for statistical purposes and remanded the assessment to the Assessing Officer for fresh enquiries and de novo adjudication, directing compliance with principles of natural justice and adequate opportunity to the assessee.

Arms' length price of overdue receivables - Separate international transaction of outstanding receivables - Working capital adjustment - Netting of receivables and payables - Computation limited to financial year - Recharacterisation and commercial expediency - Procedural sufficiency of show cause notice - Computation of book profit under section 115JB - Grant of tax credits (advance tax, TDS/TCS, FTC)

Arms' length price of overdue receivables - Separate international transaction of outstanding receivables - Outstanding receivables beyond agreed credit period are a separate international transaction and require separate benchmarking. - HELD THAT: - Form 3CEB recorded receivables from associated enterprises and the assessee in its TP study treated receivables as closely linked to sales/services but did not place factual material demonstrating such close interlinking. The TPO and DRP applied the law that when the credit period ends the sale/service transaction ends and further credit constitutes finance unless material shows otherwise. In absence of evidence from the assessee showing that the receivables were integrally linked to the underlying transactions, the lower authorities correctly treated overdue receivables as a separate international transaction and benchmarked them independently. [Paras 15]

Finding of the TPO/DRP that overdue receivables are a separate international transaction is upheld.

Computation limited to financial year - Interest adjustment on overdue receivables must be restricted to the period within the financial year; a computational error extending calculation beyond the year was identified. - HELD THAT: - The Tribunal examined the TPO's computation and paragraph 5.23 of the TP order and found that only interest for the financial year should be taxable in that year. The computation included entries covering days beyond the financial year, producing an excess adjustment. The Tribunal identified this as a computational error and directed that any adjustment be restricted to the period within the financial year. [Paras 16, 22]

TPO's computation is to be corrected so that interest is restricted to the relevant financial year.

Working capital adjustment - Issue of whether a working capital adjustment subsumes the notional interest is remitted to the TPO/AO for fresh consideration. - HELD THAT: - Although the assessee's TP study reserved the right to claim a working capital adjustment, this contention was not advanced before the TPO/DRP. The Tribunal restored the matter to the file of the learned TPO/AO and directed the assessee to demonstrate that, if a proper working capital adjustment is made in accordance with law, the notional interest adjustment would become unnecessary. The TPO/AO is to examine the contention afresh after granting opportunity of hearing and, if an interest adjustment still stands, restrict it to the financial year. [Paras 22]

Remitted to TPO/AO to decide afresh on working capital adjustment and its effect on the interest adjustment.

Netting of receivables and payables - Netting of receivables against payables is to be considered by the TPO if the assessee furnishes facts showing the two relate to the same AE and there are no contrary agreements. - HELD THAT: - Tribunal agreed that where sums are both receivable from and payable to the same associated enterprise, netting is appropriate provided no contrary facts or agreements exist. The assessee must place material to show that outstanding receivables were not beyond the credit period because of corresponding payables. The TPO is directed to examine such facts if produced. [Paras 20]

Directed remand to TPO to verify and decide netting/net-off claim on production of facts.

Recharacterisation and commercial expediency - The TPO has not recharacterised the underlying sale/service transactions; no evidence of commercial expediency for delayed receipts was shown, and the claim of recharacterisation/commercial expediency is rejected. - HELD THAT: - The Tribunal found the TPO applied the law to benchmark the separate transaction of overdue receivables and did not recharacterise the primary transactions. The assessee produced no facts before the authorities to demonstrate commercial expediency for keeping receivables beyond due dates; numerous delayed entries were noted without justification. Reliance on non-transfer-pricing jurisprudence was held inapposite. [Paras 18, 19]

Recharacterisation and commercial expediency objections are rejected; TPO's approach sustained.

Procedural sufficiency of show cause notice - The assessee was given adequate opportunity and the show cause notice and proceedings were procedurally sufficient to raise the overdue-receivable issue. - HELD THAT: - The Tribunal noted the TPO and AO provided opportunities and considered the assessee's replies; the purpose of the show cause notice is to make the assessee aware of the likely action. The contention that the issue was not proposed in the show cause notice was rejected. [Paras 21]

Procedural challenge to the addition on grounds of absence of prior notice is dismissed.

Reserve Bank circular and extended realisation period - RBI press release dated 1 April 2020 extending realisation period does not apply to the financial year under consideration and does not alter the TP determination for the year. - HELD THAT: - The RBI press release extended realisation periods for exports made up to or on 31.7.2020, with the relaxation operative from 1.4.2020. The financial year under appeal is 1-4-2019 to 31-3-2020; therefore the RBI relaxation is inapplicable. Even if applicable, the circular under exchange control may not affect arm's length price determination without specific material. [Paras 17]

Reliance on RBI circular rejected as inapplicable to the relevant financial year.

Computation of book profit under section 115JB - The assessing officer's computation of book profit under section 115JB contains an apparent error and is to be corrected. - HELD THAT: - The assessee returned book profit and tax under section 115JB at figures lower than those taken by the AO in the tax computation sheet. There was no reference or adjustment shown in the assessment order to justify the higher book profit figure used by the AO. The Tribunal found this to be an apparent error and directed the AO to compute correct book profit under section 115JB and the consequent tax. [Paras 24]

AO directed to recompute book profit under section 115JB and consequential tax correctly.

Grant of tax credits (advance tax, TDS/TCS, FTC) - The AO is directed to grant advance tax, TDS/TCS and foreign tax credit after proper verification where claim is supported. - HELD THAT: - The assessee claimed credits including merger-related credits which the AO reduced or denied. The Tribunal directed that, if the credits are supportable on verification (and as reflected in Form 26AS), the AO should grant them. The matter is remitted to the AO for verification and grant of credits where appropriate. [Paras 25]

Ground relating to non-grant of tax credits is allowed and remitted to AO for verification and crediting as appropriate.

Consequential grounds (penalty, interest, late payment interest) - Grounds pertaining to initiation of penalty proceedings and related interest claims are consequential/premature and are dismissed at this stage. - HELD THAT: - The Tribunal treated grounds on initiation of penalty under section 270A, claim for interest under section 244A, and levy under section 234C as consequential upon assessment outcomes. In absence of finalised adjustments required to determine these consequential matters, the Tribunal dismissed these grounds as premature. [Paras 26]

Consequential grounds 9-11 dismissed as premature.

Final Conclusion: Appeal partly allowed: the Tribunal upheld the treatment of overdue receivables as a separate international transaction but found a computational error in interest beyond the financial year and remitted issues of working capital adjustment, netting with payables and verification of tax credits to the TPO/AO for fresh consideration; the AO was directed to correct book profit under section 115JB. Other procedural and consequential grounds were dismissed.

Levy of penalty under Section 271(1)(c) for concealment of income - Explanation 1 to Section 271(1)(c) - presumption of concealment and burden on assessee to explain - Explanation 1(B) - voluntary payment prior to detection as excluding penalty - Requirement of addition/disallowance for invoking Explanation 1 and computing penalty under Explanation 4

Levy of penalty under Section 271(1)(c) for concealment of income - Explanation 1(B) - voluntary payment prior to detection as excluding penalty - Sustainability of penalty where assessee had voluntarily paid tax (with interest) on the disputed capital gain prior to issuance of notice under section 148. - HELD THAT: - The Tribunal found on the record that the assessee had deposited the tax with interest corresponding to the capital gain on 14/15.02.2019, i.e. three years prior to issuance of notice under section 148. On these facts the Tribunal held that the assessee's conduct amounted to a voluntary payment made prior to detection by the revenue and thus fell within the concession contained in Explanation1(B) to section 271(1)(c). Applying that proviso and the authorities relied upon by the assessee, the Tribunal concluded that the voluntary payment established the assessee's bonafides and negated the inference of concealment required to sustain penalty under section 271(1)(c). The Tribunal therefore reversed the lower authorities' conclusion that the payment was made only after detection and rejected the view that such payment could be equated with surrender made consequent to detection. [Paras 11]

Penalty vacated on the ground that voluntary payment prior to detection brings the case within Explanation1(B) and negates liability to penalty.

Levy of penalty under Section 271(1)(c) for concealment of income - Requirement of addition/disallowance for invoking Explanation 1 and computing penalty under Explanation 4 - Alternate ground that penalty could not be sustained because the assessment accepted the income offered in response to notice under section 148 and there was no addition/disallowance. - HELD THAT: - The Tribunal proceeded alternatively to consider that the assessee had included the disputed income in the return filed in response to the section 148 notice and the assessing officer assessed the same amount without making any addition or disallowance. The Tribunal observed that Explanation1 presupposes that an amount has been added or disallowed in computing total income; similarly, Explanation4, which provides machinery for computing penalty, is unworkable in absence of any addition/disallowance. Relying on precedent of the Tribunal in a like factual matrix, the Tribunal held that where the income offered in response to notice is accepted by the AO and no adverse addition is made, penalty under section 271(1)(c) cannot be imposed. [Paras 12]

Penalty vacated alternatively because the returned income in response to notice was accepted and there was no addition/disallowance required by Explanation1/Explanation4 to sustain the penalty.

Final Conclusion: The appeal is allowed; the penalty of Rs. 10,90,397 imposed under section 271(1)(c) for AY 201617 is set aside - on the primary ground that the assessee voluntarily paid tax (with interest) prior to detection (Explanation1(B)), and alternatively because the AO accepted the income offered in response to the section 148 notice with no addition/disallowance, rendering imposition of penalty unsustainable.

Revenue expenditure versus capital expenditure - prior period expenses and computation of book profit under section 115JB - treatment of government capital grants in accounts under Accounting Standard-12 - additional depreciation under Section 32(1)(iia) for power generation - classification of receipts as business income or income from other sources - remand to Assessing Officer for verification and de novo adjudication

Revenue expenditure versus capital expenditure - remand to Assessing Officer for verification - Deletion of addition in respect of guarantee fees paid to Government of Gujarat; direction to AO to verify documents submitted during appellate proceedings - HELD THAT: - The Tribunal followed coordinate-bench authorities holding that guarantee commission paid for obtaining loan does not result in creation of an enduring asset and, being an annual charge, qualifies as revenue expenditure. The CIT(A) deletion was sustained. However, because the CIT(A) had directed verification of the certificate regarding use of loans for construction of plant, that verification direction was retained and the AO was directed to reassess that factual aspect after verifying the certificate and related documents produced during appellate proceedings. [Paras 3]

Addition deleted as revenue expenditure; AO directed to verify the supporting certificate and loan utilisation as directed by CIT(A).

Treatment of government capital grants in accounts under Accounting Standard-12 - remand to Assessing Officer for verification - Addition of 15% of year end balance of capital grants remitted to AO for fresh adjudication - HELD THAT: - Following coordinate bench precedent, the Tribunal held that the question of treating capital grants required verification of the proportionate amount of grant attributable to different assets and application of the actual rates of depreciation relevant to those assets. The matter was therefore set aside to the AO for re-adjudication with directions to verify proportionate allocation, apply appropriate depreciation rates and afford the assessee a hearing. [Paras 4]

Issue remitted to the Assessing Officer for verification of proportionate grant allocation and fresh decision; ground allowed for statistical purposes.

Prior period expenses and computation of book profit under section 115JB - remand to Assessing Officer for de novo adjudication - Disallowance of prior period expenses set aside to AO for fresh consideration - HELD THAT: - Relying on coordinate bench directions and relevant High Court guidance, the Tribunal observed that prior period expenses require examination of whether such expenses crystallised in the year under consideration and whether the accounting treatment complies with applicable standards. Given the assessee's status and the nature of the claims, the Tribunal found it appropriate to remit the matter to the AO for de novo adjudication in accordance with the applicable ratio and after affording opportunity to the assessee to produce evidence. [Paras 5]

Issue set aside to the Assessing Officer for de novo adjudication; ground allowed for statistical purposes.

Additional depreciation under Section 32(1)(iia) for power generation - Assessee entitled to additional depreciation under Section 32(1)(iia) for plant and machinery used in power generation - HELD THAT: - The Tribunal followed the jurisdictional High Court which accepted the view that generation of electricity falls within the concept of production of an "article or thing" (as electricity has been held to be 'goods' by the Supreme Court) and that prior coordinate decisions granting additional depreciation to power generators are in conformity with law. The subsequent legislative amendment expressly including power generation did not negate the pre existing legal position. On that basis the AO was directed to allow the additional depreciation claimed. [Paras 6]

Additional depreciation allowed; AO directed to grant the claim.

Classification of receipts as business income or income from other sources - remand to Assessing Officer for verification - Head under which interest and miscellaneous receipts are taxable remitted to AO for fresh consideration - HELD THAT: - Drawing upon coordinate bench treatment and the Orissa High Court's reasoning that receipts such as interest on advances to employees and other miscellaneous receipts may have direct nexus with the undertaking's essential business activities, the Tribunal directed the AO to re examine the classification of the interest income and miscellaneous receipts in light of relevant evidence and judicial observations and to pass fresh orders after affording opportunity to the assessee. [Paras 7]

Matter remitted to the Assessing Officer to decide afresh the head of income after verification; assessee's ground allowed for statistical purposes and Revenue's contrary ground dismissed.

Prior period expenses and computation of book profit under section 115JB - Addition of prior period expenses to book profit under section 115JB deleted - HELD THAT: - On the question of whether prior period expenses must be added back while computing book profits, the Tribunal followed coordinate bench precedents holding that where prior period expenses have been properly charged to the profit & loss account in compliance with accounting standards, no adjustment for such prior period expenses is required for computing book profit under section 115JB. The AO's addition was therefore rejected. [Paras 8]

Addition deleted; Revenue's ground dismissed.

Treatment of government capital grants in accounts under Accounting Standard-12 - Addition relating to capital grant in computation of book profit under section 115JB deleted - HELD THAT: - The Tribunal accepted that the grant was accounted for in terms of Accounting Standard 12 and that the accounting treatment (transfer to reserve & surplus or as promoters' contribution) justified not reducing asset cost or treating the grant as revenue in the manner contended by the AO. In view of the accounting standard and factual matrix, the AO's addition was held to be unsustainable. [Paras 8]

Addition deleted; Revenue's ground dismissed.

Excess depreciation and rates of depreciation for book profit computation - Addition for excess depreciation in computation of book profit under section 115JB rejected - HELD THAT: - Relying on settled precedents, the Tribunal held that where depreciation charged in the profit & loss account conforms with accounting practice and has been consistently adopted and disclosed, the AO has no jurisdiction under section 115JB to redraw profit by substituting different rates of depreciation. The AO's attempt to disallow depreciation charged in the books was therefore held to be impermissible. [Paras 8]

Addition for excess depreciation rejected; Revenue's ground dismissed.

Final Conclusion: The assessee's appeal is partly allowed and the Revenue's appeal is dismissed. Specific additions (guarantee fee and additional depreciation) are deleted or allowed as indicated; several issues (treatment of capital grants, prior period expenses, and classification of certain receipts) are remitted to the Assessing Officer for verification and fresh adjudication in accordance with the directions given by the Tribunal.

Admission of additional legal grounds - Validity of reassessment proceedings initiated under section 147/148 - Reopening of assessment without application of mind - Mechanical approval under section 151 - Failure to supply reasons for reopening - Curability of clerical error in reasons/approval

Admission of additional legal grounds - Additional grounds 1 to 3 filed before the Tribunal were admitted. - HELD THAT: - The Tribunal found that the additional grounds raised by the assessee (grounds 1 to 3) were purely legal in character and did not require fresh investigation into facts. Applying the settled principle that legal grounds may be admitted even if raised for the first time where failure to do so was not willful or negligent, the Tribunal admitted the additional grounds for adjudication, following the precedent cited by the parties. [Paras 7]

Additional grounds 1 to 3 are admitted.

Validity of reassessment proceedings initiated under section 147/148 - Reopening of assessment without application of mind - Mechanical approval under section 151 - Failure to supply reasons for reopening - Curability of clerical error in reasons/approval - Reassessment proceedings and the reassessment order were quashed as invalid for non-application of mind, mechanical sanction and failure to supply reasons. - HELD THAT: - On a consideration of the proforma for recording reasons and the approval for reopening, the Tribunal found that the Assessing Officer had recorded a non-existent provision (noting section 147(b)) in the column identifying the provisions invoked, which demonstrated non-application of mind. The sanction under the statutory approval process (section 151) was recorded mechanically (the approving authority simply marked approval without evidence of application of mind). The Tribunal also noted that the reasons for reopening were not supplied to the assessee during the proceedings despite requests, and that the reassessment was completed without providing those reasons. Reliance was placed on coordinate-bench decisions addressing identical facts where mechanical approval and similar clerical errors were held fatal to reassessment; the Tribunal respectfully followed those decisions. The Revenue's contention that the error was curable was rejected in view of the cited precedents and the factual finding of ritualistic approval and non-supply of reasons. [Paras 8, 9, 10]

The reassessment proceedings and the reassessment order for AY 2012-13 are quashed.

Final Conclusion: The appeal is partly allowed: additional legal grounds are admitted; the reassessment proceedings and order for AY 2012-13 are quashed on grounds of non-application of mind, mechanical approval and non-supply of reasons, and other merit-based grounds are left undecided as academic.

Bail cancellation - grant of bail under Section 135(1)(a)(b) of the Customs Act - exceptional arrest in smuggling cases - outright smuggling of high value goods - Circular No.13/2022 (clause 2.3(b)/(c)) - statements recorded under Section 108 of the Customs Act - no interference with bail in absence of breach of conditions or compelling prejudice

Bail cancellation - grant of bail under Section 135(1)(a)(b) of the Customs Act - Circular No.13/2022 (clause 2.3(b)/(c)) - statements recorded under Section 108 of the Customs Act - no interference with bail in absence of breach of conditions or compelling prejudice - Maintainability of the bail cancellation application and whether bail granted to the respondents ought to be cancelled - HELD THAT: - The petition under Section 439(2) Cr.P.C. seeking cancellation of bail granted under Section 135(1)(a)(b) of the Customs Act was considered in the light of contentions that the lower court misconstrued Circular No.13/2022 (clause 2.3) and that unretracted statements under Section 108 and other incriminating material established complicity in outright smuggling. The Court noted that no complaint has been filed against the respondents under Section 135(2)(a),(b) of the Customs Act and that the respondents have complied with the conditions of their bail. The Court declined to express any opinion on the merits of the contentions concerning application of the circular, the characterization of the seizure as outright smuggling, or the evidentiary value of statements under Section 108, observing that there was no breach of bail conditions and that the maximum sentence under the Act is seven years. In these circumstances the Court was not inclined to interfere with the bail already granted and refused to entertain the cancellation application. [Paras 11, 12]

Bail cancellation applications dismissed; respondents' bail not cancelled

Final Conclusion: Petition for cancellation of bail dismissed; Court declined to adjudicate the merits of the smuggling allegations or the correctness of the lower court's application of Circular No.13/2022, noting absence of complaint and no breach of bail conditions.

Authority of the Authorized Officer/FSSAI to ensure safety of imported foodstuffs even where no specific domestic standard is prescribed - relevance of Bureau of Indian Standards (BIS) analysis and post-import testing for conformity to IS 8865:2003 - reliance on foreign supplier's test reports versus domestic testing by EIA/BIS - confiscation under the Customs law for goods failing food-safety requirements and attendant remedy of re-export on payment of redemption fine - penalty liability consequent upon goods being made liable to confiscation - effect of delay in post-import testing and natural deterioration on probative value of test reports

Relevance of Bureau of Indian Standards (BIS) analysis and post-import testing for conformity to IS 8865:2003 - authority of the Authorized Officer/FSSAI to ensure safety of imported foodstuffs even where no specific domestic standard is prescribed - confiscation under the Customs law for goods failing food-safety requirements and attendant remedy of re-export on payment of redemption fine - Validity of recall, finding of non-conformity by domestic authorities and consequent re-export with redemption fine. - HELD THAT: - The Tribunal accepted that samples of the imported cocoa beans were tested by FSSAI and thereafter by BIS as directed by the High Court, and that the BIS analysis opined that the samples "do not conform" to the requirements of IS 8865:2003 for the listed parameters. The Adjudicating Authority's action of recalling the goods and permitting re-export on payment of redemption fine followed from those findings of non-conformity and the exercise of the Authorized Officer's power to ensure the goods were not unsafe for human consumption. The Tribunal observed that the initial FSSAI examination (even though conducted against a broader "Fruits and Nuts" standard) had relevance because there are common parameters for agricultural produce and food items, and that the BIS report corroborated non-conformity. On these facts the Tribunal did not disturb the adjudicatory finding that the goods could be treated as not meeting the prescribed requirements and re-exported subject to redemption fine. [Paras 14, 15]

Recall, finding of non-conformity by domestic testing and re-export on payment of redemption fine upheld in principle.

Reliance on foreign supplier's test reports versus domestic testing by EIA/BIS - effect of delay in post-import testing and natural deterioration on probative value of test reports - Whether the foreign supplier's pre-import test reports could displace the later domestic EIA/BIS findings and whether delay in domestic testing rendered those findings unreliable. - HELD THAT: - The Tribunal considered the appellant's submission that foreign supplier reports showed conformity at import and that subsequent domestic tests (in some instances conducted months later) would reflect deterioration and thus be unreliable. The Tribunal found that the claim of an 11month delay did not uniformly apply to all consignments and that two consignments were imported in September 2014, undermining the contention that all testing was belated. Further, the Tribunal held that the initial FSSAI tests on import had relevance and that BIS testing pursuant to the High Court's directions produced a report of non-conformity. On these findings the Tribunal declined to accept that foreign supplier reports should displace domestic analysis in the present case. [Paras 15]

Foreign supplier's reports rejected as sufficient to overturn domestic EIA/BIS findings; delay/deterioration argument not accepted on the facts.

Penalty liability consequent upon goods being made liable to confiscation - confiscation under the Customs law for goods failing food-safety requirements and attendant remedy of re-export on payment of redemption fine - Appropriateness and quantum of redemption fine and penalty imposed in consequence of the adjudication. - HELD THAT: - While the Tribunal did not overturn the Adjudicating Authority's determination that the goods were liable to action under the Customs law, it exercised its appellate power to moderate the financial consequences. Having regard to the facts and circumstances, including the tests and remedial steps taken, the Tribunal considered the redemption fine and penalty susceptible to reduction. The Tribunal therefore reduced the redemption fine and penalty imposed by the Adjudicating Authority to more moderate sums. [Paras 17, 18]

Redemption fine and penalty reduced by the Tribunal; appeal partially allowed.

Final Conclusion: The Tribunal upheld the domestic testing conclusions that the imported cocoa beans did not conform to IS 8865:2003 and affirmed the course of recall and re-export subject to payment of redemption fine, rejected the contention that foreign supplier's preimport reports or alleged testing delay entitled the appellant to set aside domestic findings, but exercised discretion to reduce the redemption fine and penalty, allowing the appeal in part.

Redemption fine and penalty in re-export cases - discretion to waive or impose penalty for bona fide mistake - confiscation and re-export of imported goods found unfit after quarantine testing - veterinary health certificate and postarrival testing by Animal Quarantine Authority

Redemption fine and penalty in re-export cases - discretion to waive or impose penalty for bona fide mistake - veterinary health certificate and postarrival testing by Animal Quarantine Authority - Whether redemption fine and penalty should be imposed when goods are permitted to be reexported in the facts of this case. - HELD THAT: - The Tribunal examined the factual matrix that the imported goods were perishable, imported on the basis of a Veterinary Health Certificate declaring them free from relevant OIE pathogens, but were subsequently found positive on testing by the Animal Quarantine Authority and therefore not fit for release for home consumption. The Tribunal observed that the Board's circular expressly leaves imposition of redemption fine or penalty to the Commissioner's discretion in cases of bona fide mistakes and permits allowing reexport without insisting on rigid penal consequences. Applying that principle and having regard to the appellant's status as a regular importer who had taken prescribed precautions and certifications at the load port, the Tribunal found that the facts did not justify the confiscationcumredemption fine and penalty imposed by the original authority and upheld by the Commissioner (Appeals). The Tribunal relied on its earlier decision in a similar factsituation involving identical goods and concluded that where reexport is allowed and the importer had acted bona fide and complied with required specifications, the imposition of redemption fine and penalty was not warranted. [Paras 7, 8]

The imposition of redemption fine and penalty is not sustainable on the facts; the impugned order is set aside and the appeal is allowed.

Final Conclusion: On the facts-perishable goods imported on a Veterinary Health Certificate but found unfit on postarrival testing, and in view of the Board guidance permitting discretion in bona fide cases-the Tribunal set aside the confiscationcumredemption fine and the penalty and allowed the appeal.

Refund of Special Additional Duty under Notification No.102/2007-Cus. - requirement of endorsement on commercial invoices for claiming SAD refund - entitlement to SAD refund where appropriate VAT/sales tax is exempt or NIL - relevance of departmental circular clarifying refund entitlement irrespective of VAT rate

Requirement of endorsement on commercial invoices for claiming SAD refund - refund of Special Additional Duty under Notification No.102/2007-Cus. - Claim for SAD refund cannot be denied solely on the ground that commercial invoices did not bear endorsements or stamps indicating CENVAT credit was not availed. - HELD THAT: - The Tribunal applied the Larger Bench decision in Chowgule & Company Pvt. Ltd. which held that an importer/trader who paid SAD and discharged VAT/ST liability on subsequent sale is entitled to the benefit of the refund under Notification No.102/2007 notwithstanding that commercial invoices did not carry an endorsement that duty credit is not admissible, subject to satisfaction of other conditions of the notification. Relying on that precedent, the impugned rejection based solely on absence of invoice endorsements was held unsustainable. [Paras 4, 6]

Rejection of refund claim solely for non-endorsement on invoices is not justified; appellant entitled to refund subject to other conditions of the notification.

Entitlement to SAD refund where appropriate VAT/sales tax is exempt or NIL - relevance of departmental circular clarifying refund entitlement irrespective of VAT rate - Refund of SAD under Notification No.102/2007 is admissible even where the goods were exempt from VAT or where the appropriate VAT/sales tax rate was NIL. - HELD THAT: - The Tribunal followed its Chennai Bench rulings and the reasoning in Gazal Overseas and Kubota, drawing on Circular No.6/2008 which clarifies that the notification requires payment of appropriate sales tax/VAT but does not condition the refund on the VAT rate being equal to or higher than the SAD rate. Therefore, so long as the statutory requirement of paying appropriate VAT/sales tax is satisfied (including instances where the appropriate rate is NIL), the refund of the full 4% SAD is allowable. Applying this principle to the present facts, the rejection on the ground of VAT exemption/NIL was unsustainable. [Paras 5, 6]

Refund claim cannot be denied on account of VAT/Sales Tax being exempt or NIL; appellant entitled to refund in accordance with the notification and circular.

Final Conclusion: Appeal allowed; impugned order set aside and refund of SAD granted to the appellant with consequential relief in accordance with the cited precedents and departmental clarification.

Exemption for goods re-imported for repair or reconditioning under Notification No. 52/2003-Cus - interpretation of 'repair or reconditioning' to include reprocessing - eligibility of 100% EOU for duty-free re-import - requirement of re-export within one year of re-import - permissible administrative relaxation and effect of prior permission/endorsement

Exemption for goods re-imported for repair or reconditioning under Notification No. 52/2003-Cus - interpretation of 'repair or reconditioning' to include reprocessing - Applicability of S.No.14 of Notification No.52/2003-Cus dated 31.03.2003 to goods (food products) re-imported for reprocessing and whether 'repair or reconditioning' embraces reprocessing. - HELD THAT: - On a plain reading of S.No.14(i) of Notification No.52/2003-Cus the term 'repair or reconditioning' is wide and inclusive. The Tribunal held that the expression encompasses reprocessing, re-making, restoring and similar processes and is not confined to machinery, equipment, spare parts or accessories. Consequently, goods not specified in AnnexureVII which are reimported within three years from date of export for the purpose of repair/reconditioning (including reprocessing) fall within the exemption. The Adjudicating Authority's narrower construction limiting the exemption to machinery and allied items was held to be untenable. [Paras 17]

S.No.14(i) applies to the appellant's reimported food products subjected to reprocessing; the exemption under Notification No.52/2003Cus is available.

Eligibility of 100% EOU for duty-free re-import - requirement of re-export within one year of re-import - permissible administrative relaxation and effect of prior permission/endorsement - Whether, on the factual matrix (100% EOU status, prior permission/endorsement at time of reimport, execution of bond with undertaking to reexport, and subsequent reexport after reprocessing), duty could be demanded despite alleged noncompliance with the oneyear reexport condition for some items. - HELD THAT: - The Tribunal noted the appellant was a 100% EOU and had obtained permission/endorsement at the time of reimport, having executed the requisite bond and disclosed export particulars. Most goods were reexported within one year; the limited delay in respect of three items was attributed to pandemicrelated vessel unavailability. Given the nature of the permission/endorsement by the proper officer, the furnishing of details at reimport and eventual reexport after reprocessing, there was no justification for imposing duty. The Tribunal relied on the principle that administrative permissions and the surrounding facts showing bona fide reimport and reexport militate against treating the delay as a ground for denial of the exemption in the circumstances of this case. [Paras 17]

No differential duty can be demanded; the appellant is entitled to the exemption in view of its EOU status, prior permission/endorsement, bond undertaking and ultimate reexport after reprocessing.

Final Conclusion: The appeal is allowed: the Tribunal held that S.No.14 of Notification No.52/2003Cus covers reprocessing of reimported goods (including food products), and on the facts - 100% EOU status, prior permission/endorsement and reexport after reprocessing - the demand of duty was unsustainable; consequential relief, if any, to follow as per law.

Limitation barred by extended period absent suppression, fraud or collusion - invocation of extended period of limitation - suppression of facts - classification of imported goods - claim under exemption notification

Limitation barred by extended period absent suppression, fraud or collusion - invocation of extended period of limitation - suppression of facts - Demand for differential duty raised by Show Cause Notice is time-barred - HELD THAT: - The Tribunal found that there was no allegation or material establishing suppression of facts, fraud, collusion or willful misstatement by the appellant at the time of import. The appellant had produced invoice and product catalogue and the goods were assessed and cleared by the proper officer on the basis of those particulars. In the absence of a positive act of suppression or dishonest conduct, the extended period of limitation could not be invoked to sustain a demand issued after three years and nine months. Consequently, the demand founded on the belated Show Cause Notice is unsustainable. [Paras 7]

Appeal allowed on limitation grounds; demand is barred by limitation.

Classification of imported goods - claim under exemption notification - Classification of the imported spectrometers was not adjudicated - HELD THAT: - The Tribunal explicitly declined to decide the classification issue after determining that the impugned orders were unsustainable on limitation grounds. Because the decision on limitation was dispositive, the question whether the goods fall under the heading claimed by the appellant or the heading adopted by the Department was not considered on merits in this appeal and remains open for determination in accordance with law. [Paras 7]

Classification not decided and left to be considered afresh in accordance with law.

Final Conclusion: The appeals are allowed: the demand raised by the belated Show Cause Notice is barred by limitation and the impugned orders set aside on that ground; the issue of classification of the imported spectrometers was not decided and remains open for fresh consideration.

Revocation of Customs Broker licence - Forfeiture of security deposit - Penalty under Regulation 18 of CBLR, 2018 - Due diligence in KYC verification under Regulation 10(e) of CBLR, 2018 - Verification of authorisation of representative under Regulation 10(n) of CBLR, 2018 - Distinction between active facilitation/mens rea and negligence of a Customs Broker - Proportionality of disciplinary sanction against Customs Broker - Role of Customs Broker confined to verification of genuineness of exporter/importer and not to verification of goods

Due diligence in KYC verification under Regulation 10(e) of CBLR, 2018 - Role of Customs Broker confined to verification of genuineness of exporter/importer and not to verification of goods - Alleged violation of Regulation 10(e) of CBLR, 2018 by the appellant - HELD THAT: - The Tribunal found as an admitted fact that the exporter produced KYC documents which the appellant verified online and on that basis filed the shipping bills in good faith. The Adjudication Authority's allegation under Regulation 10(e) was held unsustainable because the Customs Broker's obligation is to verify the genuineness of the exporter/importer (KYC) and not to physically verify the goods or address; physical verification is not a legal requirement and, in the circumstances (including constraints during the Covid-19 period), the appellant's online verification discharged the duty under Regulation 10(e). [Paras 5]

No violation of Regulation 10(e) of CBLR, 2018; allegation unsustainable.

Verification of authorisation of representative under Regulation 10(n) of CBLR, 2018 - Distinction between active facilitation/mens rea and negligence of a Customs Broker - Alleged violation of Regulation 10(n) of CBLR, 2018 for accepting documents from exporter's representative without proper authorisation - HELD THAT: - The Tribunal held that the appellant was negligent in accepting documents through a representative without ensuring that the representative was duly authorised, thereby breaching Regulation 10(n). However, because the appellant had verified the KYC documents online and filed the shipping bill in good faith, this negligence did not amount to active involvement or conscious facilitation (mens rea) in the illegal export. Thus liability was confined to negligence for failure to verify authorisation rather than complicity in the substantive offence. [Paras 5, 7, 8]

Negligence under Regulation 10(n) established; however, no active facilitation or mens rea found.

Revocation of Customs Broker licence - Forfeiture of security deposit - Proportionality of disciplinary sanction against Customs Broker - Validity of revocation of licence and forfeiture of security deposit imposed on the appellant - HELD THAT: - Applying the Tribunal's earlier reasoning in the co-noticee's matter and on the facts that the appellant verified KYC online and filed the shipping bill in good faith, the Tribunal found no justification for revoking the Customs Broker licence or forfeiting the security deposit. The act of negligence in not verifying authorisation did not warrant the extreme sanctions of licence revocation and forfeiture; proportionality required setting aside those orders while addressing culpability by other means. [Paras 6, 7, 8]

Revocation of licence and forfeiture of security deposit set aside.

Penalty under Regulation 18 of CBLR, 2018 - Proportionality of disciplinary sanction against Customs Broker - Sustainability of the penalty of Rs.50,000/- imposed under Regulation 18 of CBLR, 2018 - HELD THAT: - Having found negligence under Regulation 10(n) but no mens rea or active facilitation, the Tribunal exercised proportionality to tailor the disciplinary response: revocation and forfeiture were set aside, but a monetary penalty as a measure commensurate with the negligence was held to be reasonable and tenable. Accordingly, the penalty imposed under Regulation 18 was upheld. [Paras 7, 8]

Penalty of Rs.50,000/- under Regulation 18 of CBLR, 2018 upheld.

Final Conclusion: The appeal is partly allowed: the revocation of the Customs Broker licence and forfeiture of the security deposit are set aside, but the penalty imposed under Regulation 18 of CBLR, 2018 is upheld as proportionate to the negligence found under Regulation 10(n), while no breach of Regulation 10(e) was made out.

Jurisdiction of Civil Court to decide disputed questions of title and partition - exclusive jurisdiction of the National Company Law Tribunal under Sections 241, 242 and bar under Section 430 of the Companies Act, 2013 - Order VII Rule 11 (rejection of plaint) and Order VII Rule 10 (return of plaint) - res judicata operates at different stages of the same suit - concept of quasi-partnership and lifting the corporate veil in family companies - applicability and exceptions under the Prohibition of Benami Property Transactions Act, 1988 (as amended)

Res judicata operates at different stages of the same suit - Whether the defendant's subsequent application under Order VII Rule 11 was barred by res judicata in view of an earlier identical application rejected by the Trial Court - HELD THAT: - The Bench noted that an earlier application under Order VII Rule 11 filed by another defendant raising identical grounds was considered and rejected by the Trial Court by order dated July 15, 2017, and that order has attained finality. Since both applications were under Order VII Rule 11 and raised substantially the same contention that the suit was barred by the Companies Act, 2013, the subsequent application filed by respondent no. 25 is barred by the principle of res judicata which operates at different stages of the same suit. [Paras 36, 37]

The application of respondent no. 25 was barred by res judicata and could not be entertained.

Order VII Rule 11 (rejection of plaint) and Order VII Rule 10 (return of plaint) - jurisdiction of Civil Court to decide disputed questions of title and partition - Whether the Trial Judge was correct in treating the application under Order VII Rule 11 as one under Order VII Rule 10 and returning the plaint to be presented before the NCLT - HELD THAT: - The court analysed the plaint and found the primary reliefs to be declaratory relief and partition based on alleged joint family funds and title tracing to the family patriarch. Disputed questions of title and partition, including claims to immovable properties not belonging to the companies, fall within the jurisdiction of Civil Courts and are not within the exclusive domain of the NCLT. Consequential reliefs concerning company management do not determine jurisdiction at the threshold. The Bench relied on precedent holding that pure questions of title are for Civil Courts and that partial rejection/return of plaint is impermissible; if some consequential reliefs ultimately fall within NCLT jurisdiction, the Civil Court may at trial relegate those specific reliefs while adjudicating primary reliefs. [Paras 38, 39, 40, 41, 42]

The Trial Judge erred in returning the plaint; the primary reliefs are within the Civil Court's jurisdiction and the plaint should not have been returned in toto.

Exclusive jurisdiction of the National Company Law Tribunal under Sections 241, 242 and bar under Section 430 of the Companies Act, 2013 - Whether the NCLT has jurisdiction to adjudicate the primary reliefs claimed in the plaint (title to shares and company assets) and whether Section 430 ousts the Civil Court's jurisdiction in the present suit - HELD THAT: - The court held that Sections 241 and 242 (and the bar in Section 430) apply only to matters that fall squarely within the exclusive jurisdiction of the NCLT. The plaintiffs do not seek relief merely as shareholders but claim title and inheritance in respect of shares, company assets and certain immovable properties on the footing that these emanate from the joint family nucleus. Such claims to title and partition are beyond the jurisdiction of the NCLT under Sections 241/242 and hence Section 430's bar is not attracted to these primary reliefs. [Paras 43, 44, 45]

The NCLT does not have jurisdiction to decide the primary declaratory and partition reliefs; Section 430 does not oust the Civil Court's jurisdiction over those claims.

Concept of quasi-partnership and lifting the corporate veil in family companies - Whether the concept of quasi-partnership is applicable on the plaint averments and whether the Civil Court can apply equitable doctrines to family companies on those averments - HELD THAT: - On the averments in the plaint-cross-shareholdings, pervasive family control of directorships, and formation of companies from joint family funds-the court found that the companies prima facie constitute joint family or quasi-partnership entities. Given those plaint averments, the doctrine of quasi-partnership and, if necessary, lifting the corporate veil can be invoked. The court emphasised that the applicability of these doctrines is to be assessed on the plaint for the limited purpose of Rule 11/Rule 10 scrutiny and that such averments bring the primary reliefs within the jurisdiction of the Civil Court. [Paras 46, 47, 48]

The concept of quasi-partnership is applicable on the pleadings and supports maintainability of the civil suit for declaration and partition.

Applicability and exceptions under the Prohibition of Benami Property Transactions Act, 1988 (as amended) - Whether the Benami Act (with 2016 amendments) barred the suit and whether the benami defence could be raised at the stage of an application under Order VII Rule 11 or Rule 10 - HELD THAT: - The court held that the benami plea, being founded on the averments in the plaint, could be raised for the first time in the application under Rule 11/Rule 10 and in appeal. The relevant point for applicability of the 2016 amendments is the date when decree is passed; nevertheless, on the pleadings the exceptions in Section 2(9A)(b) sub-clauses (i) and (iv) of the Benami Act (pertaining to properties held by a Karta/HUF or joint ownership by lineal ascendants/descendants where consideration is from known sources) are at least arguable. These exceptions could not be resolved at the threshold without evidence, and therefore the benami bar is not a ground for rejection/return at the preliminary stage. [Paras 50, 51, 52, 53, 54]

Benami defence is arguable on the pleadings and cannot justify returning or rejecting the plaint at the inception; it requires trial and evidence.

Order VII Rule 11 (rejection of plaint) and Order VII Rule 10 (return of plaint) - Whether the Trial Judge committed error in exercising jurisdiction to return the plaint and in the mould of relief granted - HELD THAT: - The court concluded that the Trial Judge wrongly entertained the application of respondent no. 25 and, by treating an Order VII Rule 11 application as one under Rule 10, directed return of the plaint to be presented before the NCLT. Given the findings that (i) res judicata barred the subsequent application, (ii) primary reliefs lie within Civil Court jurisdiction, (iii) quasi-partnership averments and benami issues are triable on evidence, the Trial Judge's action was a patent error of law and fact. [Paras 55, 56, 57]

The impugned order returning the plaint was set aside and the appeal allowed.

Final Conclusion: The Division Bench allowed the appeal, set aside the Trial Court's order of December 22, 2021 returning the plaint to be presented before the appropriate forum, held that the primary reliefs of declaration and partition fall within the jurisdiction of the Civil Court (not the NCLT), found the respondent's Rule 11 application barred by res judicata, ruled that quasi-partnership and benami issues are arguable on the pleadings and require trial, and disposed of connected applications with no order as to costs.

Challenge Process - Negotiation Process - Regulation 39(1A) of the CIRP Regulations - Eligibility criteria under Section 25(2)(h) - Definition of "group" and scope of the word "entity" in Invitation for Expression of Interest - Commercial wisdom of the Committee of Creditors - Material irregularity under Section 61(3)(ii) of the IBC - Approval of Resolution Plan under Section 30/31 of the IBC

Challenge Process - Increment condition in Process Note - Regulation 39(1A) of the CIRP Regulations - Validity of the Challenge Process conducted on 27.10.2023 - HELD THAT: - The Tribunal examined the Challenge Process rules in the Process Note (Clause 7 and related clauses) and the emails exchanged during bidding. Clause 7 required (i) matching or exceeding the threshold bid to continue and (ii) improving bids in each round in multiples of INR 10 crores. The Consortium's second-round bid of INR 242 crores failed the multiples-of-10-crores requirement and therefore attract the Exit/Elimination provision; the RP rightly deemed the Consortium exited. The SRA's subsequent bids complied with the increment rule and the challenge was properly closed. The Tribunal also held that Regulation 39(1A) permits use of a challenge mechanism and did not find any conflict with the manner in which the challenge was conducted. [Paras 23, 24, 25]

The Challenge Process dated 27.10.2023 was conducted in accordance with the CIRP Regulations and the Process Note; no violation of Regulation 39(1A) was found.

Negotiation Process - RFRP Clause 2.3.11 - Commercial wisdom of the Committee of Creditors - Validity of the post-challenge Negotiation Process conducted by the CoC/RP - HELD THAT: - The RFRP (Clause 2.3.11) expressly empowered the CoC to conduct further rounds of negotiations for value maximisation. The Tribunal noted that revised financial proposals were solicited and opened in the presence of Resolution Applicants, and the Consortium expressly recorded satisfaction with the negotiation process in the CoC minutes. Reliance on precedent confirmed that a CoC may negotiate after a challenge mechanism. On these bases the Tribunal found the negotiation process permissible and properly conducted. [Paras 26, 28, 29]

The CoC was competent to conduct the Negotiation Process after the Challenge Process, and the negotiations were carried out in accordance with the RFRP and Process Note.

Eligibility criteria under Section 25(2)(h) - Definition of "group" and "entity" in Invitation for Expression of Interest - Approval of Resolution Plan under Section 30/31 - Whether the Successful Resolution Applicant (SRA) was ineligible because the promoter's net worth/turnover could not be treated as part of the 'group' (i.e., whether 'entity' excludes individuals) - HELD THAT: - Clause 3 of the IEOI required eligibility at a group level. The IEOI defined 'group' by reference to an 'entity' holding or controlled by specified thresholds; the Tribunal interpreted 'entity' expansively and concluded it may include individuals. The RP had recorded that the SRA was corporatized from a proprietorship and had considered the promoter's net worth in assessing group eligibility; statutory and policy materials (including MIB guidance) were read as supporting an expansive meaning of 'entity'. The CoC/RP's verification and contemporaneous treatment of promoter net worth and turnover satisfied the eligibility tests in Clause 3, and the Tribunal declined to substitute its view for the CoC's commercial determination except where non-compliance with statutory parameters exists. [Paras 34, 36, 38, 43, 51]

The SRA was eligible to submit a Resolution Plan; the net worth and turnover of the promoter could be included for the purposes of group eligibility under Clause 3 of the IEOI.

Material irregularity under Section 61(3)(ii) of the IBC - Commercial wisdom of the Committee of Creditors - Approval of Resolution Plan under Section 30/31 of the IBC - Whether material irregularities by the RP existed so as to warrant interference with the AA's approval of the Resolution Plan - HELD THAT: - The Tribunal reviewed the allegations of procedural irregularity, nondisclosure of certain VDR letters, the timing and content of CA certificates and additional documents sought to be adduced, and the challenge/negotiation steps. It found the challenge and negotiation processes compliant with governing rules, the RP's eligibility determination supported by the record, and the additional tax/GST returns not required by the IEOI and barred from production by statutory bars invoked; the alleged irregularities did not meet the threshold of material irregularity under Section 61(3)(ii). The Tribunal reiterated the limited scope for judicial interference with the CoC's commercial wisdom under Sections 30 and 31. [Paras 42, 45, 49, 52, 53]

No material irregularity within the meaning of Section 61(3)(ii) was established; there is no ground to interfere with the Adjudicating Authority's approval of the Resolution Plan.

Final Conclusion: All appeals are dismissed; the CoC's approval of the Sapphire Media Ltd. Resolution Plan and the Adjudicating Authority's order dated 06.05.2024 approving the plan stand affirmed.

Maintainability of a Section 7 application filed by financial creditors in a class - threshold requirement for class financial creditors under Section 7 - effect of criminal proceedings/FIR or its status report on Section 7 adjudication - force majeure defence to defeat admission under Section 7 - joint admission against multiple corporate debtors in a real estate project - debt and default as determinative for admission under Section 7 - settlement offer and its relevance to admission under Section 7

Threshold requirement for class financial creditors under Section 7 - maintainability of a Section 7 application filed by financial creditors in a class - Whether the Section 7 application filed by 115 allottees in a class satisfied the threshold and was maintainable - HELD THAT: - The Tribunal upheld the Adjudicating Authority's earlier findings that the Section 7 application met the threshold and was maintainable. The argument that twenty affidavits were forged and therefore the threshold of 100 allottees was not met was considered and rejected. The maintainability challenge had been earlier examined by the Adjudicating Authority (order dated 21.10.2022) and by this Tribunal (judgment dated 17.11.2023), and the Supreme Court held that maintainability stood concluded between NCLT and NCLAT. The Court emphasised that objections regarding forged affidavits had been raised and decided by the Adjudicating Authority and the order rejecting those contentions cannot be bypassed by reliance on interim developments in a criminal probe. Consequently, the submission that the threshold was not fulfilled was held to be without merit. [Paras 11, 12, 17, 18]

Threshold and maintainability objections were rejected and the Section 7 application was held to be maintainable.

Effect of criminal proceedings/FIR or its status report on Section 7 adjudication - Whether the Status Report of the police in FIR No.102/2024 could be relied upon to displace the Adjudicating Authority's prior findings in the Section 7 proceedings - HELD THAT: - The Tribunal held that a Status Report in criminal proceedings initiated by the corporate debtor cannot be used to circumvent or overturn the Adjudicating Authority's considered rejection of the corporate debtor's application to initiate criminal proceedings and related objections in the Section 7 matter. The Adjudicating Authority had earlier rejected the plea to initiate criminal proceedings and found the IA to be an attempt to delay and forum-shop; that decision cannot be bypassed by the corporate debtor filing an FIR and relying on the Status Report in those criminal proceedings. Therefore the Status Report was not treated as admissible evidence to negate the threshold or to defeat admission. [Paras 17, 18]

The Status Report in the FIR has no bearing on the Section 7 adjudication and cannot be relied upon to defeat admission.

Joint admission against multiple corporate debtors in a real estate project - privity and financial creditor status in a project with interconnected entities - Whether a joint Section 7 petition against the land owning company and associated developers was maintainable and whether the land owning company could be said not to owe financial debt to the allottees - HELD THAT: - The Tribunal agreed with the Adjudicating Authority that all three corporate debtors were intrinsically interwoven in the single real estate project and had joined hands in its development; consequently a joint insolvency application against them was maintainable. The land owning company could not absolve itself of liability by asserting lack of privity because the collaboration agreements, shareholding pattern and conduct showed close connection and responsibility towards the project and the allottees. Prior authorities relied on by the appellants (in different factual contexts where direct financial transaction was absent) were distinguished. [Paras 25, 26]

The joint Section 7 petition against the three corporate debtors was maintainable and the land owning company could not be held free of financial liability in the project.

Debt and default as determinative for admission under Section 7 - Whether there was debt and default such as to require admission of the Section 7 application - HELD THAT: - Relying on the Adjudicating Authority's findings and the Supreme Court's pronouncement in M. Suresh Kumar Reddy v. Canara Bank regarding the limited discretion of NCLT once default is established, the Tribunal found that debt and default in delivery of units within the contractual timeline (36 months plus grace) were established. Repeated attempts by the corporate debtors to delay or settle on terms unacceptable to the allottees were noted, and the Adjudicating Authority's reliance on evidentiary materials and rejection of settlement offers as inadequate was affirmed. Thus the statutory test for admission under Section 7 was met. [Paras 19, 21, 23]

Debt and default were established and the Section 7 application warranted admission.

Force majeure defence to defeat admission under Section 7 - Whether the plea of force majeure (defective land title and RERA cancellation) absolved the corporate debtors from liability and justified rejection of the Section 7 application - HELD THAT: - The Tribunal endorsed the Adjudicating Authority's reasoning that the force majeure plea was an afterthought and unsustainable. The RERA cancellation was due to the corporate debtors' own mismanagement, failure to comply with directions and inadequate progress, and was not a 'bolt from the blue'. The court noted inconsistencies in the corporate debtors' conduct (including representations to allottees and a petition under Section 230 seeking to continue the project), and held that pending land title litigation did not absolve them of contractual obligations to complete the project. Hence the force majeure defence failed to defeat admission. [Paras 30, 31, 32, 33, 34]

Force majeure defence was rejected and held not to be a valid ground to refuse admission under Section 7.

Settlement offer and its relevance to admission under Section 7 - Whether the settlement offers/proposals by the corporate debtors required the Adjudicating Authority to refuse admission or stay proceedings - HELD THAT: - The Adjudicating Authority considered the corporate debtors' settlement proposals and afforded opportunity for negotiations; those offers were rejected by the financial creditors in a class as inadequate (refund of principal with minimal interest). The Tribunal observed that the Adjudicating Authority cannot compel a settlement acceptable to creditors and that when creditors in class decline the offer, the offer does not preclude admission. The court also noted the appellant subsequently deposited an amount in the appellate proceedings but the class creditors did not accept the offered sum. [Paras 19, 20, 21]

Rejection of the settlement offers by the financial creditors did not prevent admission; the Adjudicating Authority rightly refused to accept the proposals as defeating the Section 7 petition.

Final Conclusion: The impugned order admitting the Section 7 petition was affirmed. The Tribunal found no merit in the appellants' contentions regarding threshold non compliance, reliance on the FIR/Status Report, force majeure, lack of privity, or settlement proposals; the appeal is dismissed, the interim deposit refunded and pending applications disposed of.

Continuing guarantee - on demand guarantee and date of default for guarantor - limitation period for initiation of insolvency process against personal guarantor - acknowledgement of liability and revival of limitation - Rule 7(1) Demand Notice under the Personal Guarantors Rules - Section 95 initiation of insolvency resolution process for personal guarantors - signing authority and Gazette notification conferring signing power on bank officers - Form C compliance regarding authorised signatory

Continuing guarantee - on demand guarantee and date of default for guarantor - limitation period for initiation of insolvency process against personal guarantor - Rule 7(1) Demand Notice under the Personal Guarantors Rules - Whether the Section 95 application filed on 18.06.2022 was time barred. - HELD THAT: - The Court examined the Deed of Guarantee which expressly provided for a continuing/on demand guarantee and stipulated that the amount guaranteed would be payable on the Bank serving a notice requiring payment. The Bank issued a Section 13(2) demand notice dated 04.06.2021 to the guarantors (with payment sought within 60 days), and subsequently a Rule 7(1) Demand Notice which recorded the debt as due on 04.06.2021 and the default as occurring on 04.08.2021. Under the terms of the guarantee the guarantor's liability and the commencement of limitation arise on invocation of the guarantee by demand upon the guarantor. Therefore the limitation period for the personal guarantor commenced from the demand made by the Bank and not from the earlier date of default of the corporate debtor. Applying these principles, the petition filed on 18.06.2022 was within the limitation period calculated from the demand dated 04.06.2021 and was not time barred. [Paras 22]

Section 95 application filed on 18.06.2022 was within limitation and not time barred.

Form C compliance regarding authorised signatory - signing authority and Gazette notification conferring signing power on bank officers - Whether the Section 95 application was validly filed by an authorised officer of the Bank. - HELD THAT: - The admitted Authority Letter showed that the Assistant General Manager (SMGS V) signed the Section 95 application. The Bank relied on a Gazette of India notification dated 02.05.1987, issued under Regulations framed under the State Bank of India Act, which authorises officers of grade SMGS IV and above to exercise signing power in respect of documents connected with the Bank's business. That Gazette notification is subsisting and in the public domain. On this basis the Tribunal found that the AGM had statutory signing power to file the petition and that the challenge based on lack of authorisation under Form C was not tenable. [Paras 23]

The Section 95 application was validly filed by a duly authorised officer and the plea of defective authorisation is rejected.

Final Conclusion: Both impugned orders admitting the Section 95 applications are upheld: the petitions were not barred by limitation and were filed by authorised signatories; the appeals are dismissed.

Preferential and undervalued transaction - avoidance under Sections 43 and 49 of the Insolvency and Bankruptcy Code - wrongful trading under Section 66(2) of the Insolvency and Bankruptcy Code - mandatory registration of conveyance deed under Section 17 of the Registration Act - effect of contractual termination clause upon commencement of insolvency proceedings

Preferential and undervalued transaction - avoidance under Sections 43 and 49 of the Insolvency and Bankruptcy Code - wrongful trading under Section 66(2) of the Insolvency and Bankruptcy Code - effect of contractual termination clause upon commencement of insolvency proceedings - Validity of the Slump Sale Agreement dated 05.05.2018 and the entitlement of the purchaser to retain assets acquired thereunder - HELD THAT: - The Appellate Tribunal upheld the view that the Slump Sale Agreement was a preferential and undervalued transaction and vulnerable to avoidance under the Code. The Tribunal found that the purchaser's case rested on an alleged unsecured advance to the corporate debtor, but documentary evidence establishing the advance was not placed on record; the absence of such evidence rendered the transaction prima facie dubious and susceptible to the inference of defeating creditors. The Tribunal also relied on the timing and circumstances - including that the property had been hurriedly sold while a petition under Section 9 was pending - and observed overtones of wrongful trading under Section 66(2). Independently, the Slump Sale Agreement contained a clause providing for automatic termination if a liquidator (or insolvency proceedings) intervened before the closing date; since the admission order was passed before the closing date, the agreement was technically terminated and could not confer benefit on the purchaser. Having regard to these factors, the Tribunal concluded there was no error in setting aside the agreement and directing restoration of assets to the corporate debtor. [Paras 25, 26]

The Slump Sale Agreement dated 05.05.2018 is set aside as a preferential and undervalued transaction and the assets are to be returned to the corporate debtor; the appeal is dismissed.

Mandatory registration of conveyance deed under Section 17 of the Registration Act - Consequence of non-execution/registration of registered conveyance deed for transfer of immovable property pursuant to the Slump Sale Agreement - HELD THAT: - The Tribunal noted that no registered sale/conveyance deed had been executed as contemplated by Clause 7 of the Slump Sale Agreement. Relying on the principle that transfer of immovable property cannot be completed by agreement alone and requires a registered conveyance deed, the absence of registration was treated as a further infirmity undermining the purchaser's claim to title. The lack of a registered conveyance deed, coupled with the other infirmities identified, supported the conclusion that the purchaser could not claim the benefit of the purported transfer.

Non-execution/registration of the conveyance deed is fatal to the purchaser's claim and reinforces the setting aside of the transaction.

Final Conclusion: The Tribunal's order setting aside the Slump Sale Agreement and directing return of the assets to the corporate debtor is affirmed; the appeal is dismissed without costs.

Contravention of Section 8(1) of the Foreign Exchange Regulations Act, 1973 - contravention of Section 68 of the Foreign Exchange Regulations Act, 1973 - burden of proof and shifting of onus - adverse inference for failure to produce evidence in response to summons - powers of adjudicating officer and Appellate Board to summon witnesses and require production of documents (powers of a Civil Court) - validity of penalty imposed under FERA

Contravention of Section 8(1) of the Foreign Exchange Regulations Act, 1973 - validity of penalty imposed under FERA - Whether the penalty imposed on the appellants for alleged routing of foreign exchange through an overseas company and consequent investment back into group companies was sustainable - HELD THAT: - The Tribunal found that investments totalling approximately Rs. 208 Crores by the offshore company M/s Twinstar into various Sterlite group companies between 1993 and 1999 were not in dispute. The critical question was the source of funds of M/s Twinstar given its minimal paid-up capital. The Adjudicating Authority concluded, on the material collected, that the appellants had routed funds offshore and reintroduced them as investments without requisite permission under the Act of 1973. The Tribunal recorded that the appellants failed to produce documents or evidence to explain the source of the funds despite summons and opportunity, and that the investigation had assembled circumstantial material showing the improbability of the offshore entity having the means to make such investments. Applying these findings, the Tribunal held there was no reason to interfere with the adjudicating authority's conclusion and the penalty imposed was held to be sustainable. [Paras 12, 13, 14, 15, 19]

Penalty imposed by the Adjudicating Authority for contravention of the Act of 1973 is upheld and the appeals on this ground are dismissed.

Burden of proof and shifting of onus - adverse inference for failure to produce evidence in response to summons - powers of adjudicating officer and Appellate Board to summon witnesses and require production of documents (powers of a Civil Court) - Whether the burden of proof lay on the respondents to prove initial transfer by the appellants or whether an adverse inference could be drawn against the appellants for failing to produce documents and not complying with summons - HELD THAT: - The Tribunal reviewed authorities on burden of proof and adverse inference, noting that where the revenue adduces sufficient direct or circumstantial evidence, the onus may shift to the party in exclusive control of relevant documents to rebut that evidence. The Act confers powers on enforcement officers, the adjudicating officer and the Appellate Board to summon witnesses and require production of documents, and the Tribunal found that summons were issued to D.P. Agarwal (a director of M/s Twinstar and the appellant company) who did not comply. In view of the non-production and the circumstantial material demonstrating the offshore entity's lack of means, the Tribunal held that an adverse inference was permissible and that the appellants failed to discharge the shifted onus. [Paras 16, 17, 18, 19]

Adverse inference for non-appearance/non-production of documents is justified; burden shifted and appellants failed to discharge it, which supports upholding the impugned order.

Final Conclusion: The Appellate Tribunal dismissed the appeals, upheld the adjudicating authority's finding of contravention and the penalties imposed, and held that adverse inferences and shifting of the burden of proof were justified in view of the circumstantial evidence and the appellants' failure to produce documents in response to summons.

Contravention of Section 10(6) of the Act of 1999 - Penalty under Section 42(1) of the Act of 1999 - High seas sale - Liability of partners for conduct of business - Requirement of material showing role to impose penalty on a director - Reduction of penalty for absence of serious recovery efforts

Contravention of Section 10(6) of the Act of 1999 - High seas sale - Reduction of penalty for absence of serious recovery efforts - Contravention of Section 10(6) established against M/s G. Tex Inc. and appellant Rajesh Jhanwar; penalty reduced. - HELD THAT: - The Tribunal found that M/s G. Tex effected remittance of foreign exchange though the ten import containers when examined by Customs were empty; the transaction involved a prior "high seas sale" and part consideration was received despite non-receipt of goods. The facts show remittance of US$ 6,56,864 without receipt of the copper scrap and without requisite documents with the banker, constituting contravention of Section 10(6). The Tribunal also evaluated the mitigation pleaded by the appellant that attempts were made to recover the amount, but found those efforts not sufficiently serious (no civil claim instituted). In view of the contravention and the peculiarity of the facts, the Tribunal held the original penalty excessive and exercised its power to reduce the penalty on merits to 25% of the original amount, observing that the 25% pre-deposit satisfies the modified order. [Paras 3, 11, 12, 14]

Contravention under Section 10(6) is upheld against M/s G. Tex Inc. and appellant Rajesh Jhanwar; penalty reduced to 25% of the original amount (pre-deposit treated as satisfying the modified order).

Liability of partners for conduct of business - Requirement of material showing role to impose penalty on a director - Penalty imposed on appellant Madhusudan Jhanwar set aside for lack of material showing his responsibility for the transaction. - HELD THAT: - The Tribunal examined the record and concluded that appellant Madhusudan Jhanwar was not in charge of, nor responsible for, the conduct of the business transactions that led to the remittance; the contravention and related acts were at the behest of and conducted by appellant Rajesh Jhanwar. Absent material demonstrating Madhusudan Jhanwar's role in the remittance or import, imposition of equal penalty on him could not be sustained. Reliance was placed on the Tribunal's earlier reasoning and precedent to the same effect. [Paras 5, 12, 13]

Penalty imposed on appellant Madhusudan Jhanwar is set aside for lack of culpable role in the impugned transaction.

Final Conclusion: The Tribunal upholds contravention under Section 10(6) against M/s G. Tex Inc. and appellant Rajesh Jhanwar but reduces the penalty to 25% of the original amount (pre-deposit to satisfy the modified order); the penalty imposed on appellant Madhusudan Jhanwar is set aside. The appeal is otherwise disposed of.

Placing any sum to the credit of any person resident outside India - deeming liability under the deeming provision - abetment versus direct contravention - mitigation of penalty for procedural and factual circumstances - ex parte order and opportunity to be heard

Placing any sum to the credit of any person resident outside India - The appellant bank was held to have contravened the prohibition on placing any sum to the credit of a person resident outside India as envisaged by the provision invoked. - HELD THAT: - The Tribunal examined the scope of the prohibition and observed that the provision is directed at persons who place sums to the credit of persons resident outside India. The material on record, including the bank's own admission to the RBI that no permission for opening the account was available and that prescribed particulars were not maintained, establishes that the account of a non-resident entity was opened and sums were placed to its credit without requisite permission. Prior authority indicates that mens rea is not a necessary ingredient for such contravention under the Act. Accordingly, the factual findings sustain liability under the provision as applied to the bank's conduct. [Paras 16, 21]

The bank was held to have contravened the prohibition on placing sums to the credit of a person resident outside India.

Deeming liability under the deeming provision - abetment versus direct contravention - The bank could not be treated merely as an abettor; by operation of the deeming provision it was to be deemed to have contravened the relevant provision itself. - HELD THAT: - The Tribunal analysed Section 49 which deems the holder of a permission or licence to have contravened the provision where conditions are not complied with. The bank was the holder of permission subject to compliance with foreign exchange law and, therefore, in view of the non-compliance the deeming fiction applies. The consequence is that the allegation of abetment is inapplicable to the bank since abetment under that provision arises only against another person, not the licence-holder who is deemed to have contravened. [Paras 22]

By operation of the deeming provision the appellant bank is to be treated as having contravened the provision and not merely as an abettor.

Ex parte order and opportunity to be heard - mitigation of penalty for procedural and factual circumstances - Although liability was established, the penalty imposed on the bank was reduced in view of mitigating factors including procedural deficiencies in the orders below and the bank's conduct and status. - HELD THAT: - The Tribunal noted mitigating factors: the bank had informed the RBI and ED when the lapse came to light, deliberate mala fides were not alleged, the matter related to the early 1990s when KYC norms and enforcement were less stringent, and there was no proof on record that statutory call notices were duly served rather than resulting in ex parte adverse findings. Balancing the established contravention against these mitigating circumstances and the bank's public-sector status, the Tribunal concluded that a substantially reduced penalty would meet the ends of justice. [Paras 17, 23]

Penalty imposed on the bank was substantially reduced.

Final Conclusion: Appeal allowed in part: liability of the bank for contravention is upheld by application of the deeming provision, but in view of mitigating facts and procedural deficiencies the penalty imposed by the authorities below is substantially reduced and the matter disposed of accordingly.

Confiscation of property - proceeds of crime - attachment and lifting of attachment - fixed deposit in lieu of properties - confiscation under Section 8(5) of the P.M.L.A. Act - application of the Code of Criminal Procedure to Special Court proceedings - appeal under Section 454 Cr.P.C. - third party purchaser rights

Application of the Code of Criminal Procedure to Special Court proceedings - appeal under Section 454 Cr.P.C. - Availability of appeal to the High Court under Section 454 Cr.P.C. against an order of confiscation passed by the Special Court in PMLA proceedings - HELD THAT: - The Court examined the statutory scheme under the P.M.L.A. Act which makes the provisions of the Cr.P.C. applicable to proceedings before the Special Court except as otherwise provided. The High Court observed that an order of confiscation by the Special Court amounts to disposal of property under Section 452 Cr.P.C., and that against such disposal an appeal lies to the High Court under Section 454 Cr.P.C. The P.M.L.A. Act does not provide for a separate appeal remedy against an order of confiscation; accordingly the remedy of appeal under Section 454 Cr.P.C. is available and the present appeal is maintainable. [Paras 10]

An appeal under Section 454 Cr.P.C. lies to this Court against the Special Court's order of confiscation in PMLA proceedings.

Confiscation of property - proceeds of crime - fixed deposit in lieu of properties - confiscation under Section 8(5) of the P.M.L.A. Act - third party purchaser rights - attachment and lifting of attachment - Legality of confiscating properties purchased by a third party after attachment was lifted when the accused had furnished fixed deposit receipts as directed by the Supreme Court - HELD THAT: - The Court considered the factual sequence: (i) the accused was directed by the Supreme Court to furnish fixed deposit receipts of a nationalized bank of the amount equal to the assessed disproportionate assets with a lien in favour of C.B.I. and E.D.; (ii) on furnishing that fixed deposit the E.D. withdrew the provisional attachment and entries of lien were deleted; and (iii) thereafter the accused executed a registered sale deed in favour of the appellant, who acquired title and possession. The High Court construed Sub-section (5) of Section 8 P.M.L.A. to apply to properties "involved in money-laundering or which has been used for commission of offence of money-laundering" and concluded that the fixed deposit furnished pursuant to the Supreme Court order constituted the property involved to the extent of the quantified proceeds of crime. The Court held that the Special Court, instead of confiscating the fixed deposit (the asset substituted and available for confiscation), erred in confiscating the appellant's immovable properties which had been validly sold after the attachment was lifted. The Special Court therefore committed an error in ordering confiscation of the appellant's properties shown at Sl. No.2 of Schedule 'A'. [Paras 16]

The confiscation of the appellant's properties is set aside because the fixed deposit furnished in compliance with the Supreme Court order was the asset available for confiscation to the extent of the proved proceeds of crime.

Final Conclusion: The appeal is allowed; the High Court held that an appeal under Section 454 Cr.P.C. lies against confiscation orders of the Special Court in PMLA proceedings, and on the merits set aside the Special Court's confiscation of the appellant's properties (Sl. No.2 of Schedule 'A'), reasoning that the fixed deposit furnished pursuant to the Supreme Court order was the asset available for confiscation to the extent of the quantified proceeds of crime.

Provisional attachment under PMLA - computation of 180 days and exclusion due to In re: Limitation - dependence of offence of money laundering on scheduled offence - nexus between proceeds of crime and attachment by value thereof - ingredients of offence of money laundering (Section 3) - recording of reasons to believe under Section 5 - adjudicating authority's consideration of merits

Provisional attachment under PMLA - computation of 180 days and exclusion due to In re: Limitation - Whether the provisional attachment lapsed on account of confirmation being beyond 180 days. - HELD THAT: - Tribunal considered the effect of COVID 19 orders of the Supreme Court (In re: Limitation and its 2022 restoration) and subsequent High Court decisions. Having examined authorities and the facts of this case, the Tribunal held that the period from 15.03.2020 to 28.02.2022 is to be excluded in computing the 180 day period under Section 5, and therefore the confirmation did not lapse. The Tribunal relied on the reasoning that the Supreme Court's exclusion applies to statutory periods for termination of proceedings and distinguished authorities treating criminal liberty provisions differently; on that basis the Adjudicating Authority was not functus officio and the attachment did not lapse. [Paras 22, 23]

The attachment did not lapse; the period from 15.03.2020 to 28.02.2022 is excluded in computing the 180 days, and the challenge on this ground is rejected.

Dependence of offence of money laundering on scheduled offence - adjudicating authority's consideration of merits - Whether offence under Section 3 PMLA was made out and whether lack of predicate offence or interim judicial observations entitled the appellants to set aside the attachment. - HELD THAT: - Tribunal recorded that the Uttarakhand High Court had considered the facts and taken cognizance under PMLA, and that the complaint, investigation materials and charge sheets disclosed allegations of manipulation, back dating and layering giving rise to proceeds of crime. The Tribunal observed that observations in interim orders (including bail) do not amount to final adjudication and do not override the High Court's detailed judgment finding a prima facie case. On that basis the Tribunal found no merit in the submission that money laundering could not be made out for want of a scheduled offence or on grounds urged by the appellants. [Paras 26, 29]

The challenge that money laundering was not made out for want of a scheduled offence or because of interim observations is rejected.

Nexus between proceeds of crime and attachment by value thereof - proceeds of crime - value of any such property - Whether the Tribunal erred in attaching properties on the principle of 'value thereof' without direct nexus to proceeds of crime. - HELD THAT: - Tribunal reviewed precedent (including Axis Bank, Vijay Madanlal Choudhary and subsequent High Court decisions) and held that Section 2(1)(u) permits attachment of property equivalent in value where direct tainted property cannot be traced. The Tribunal examined appellants' documentary assertions concerning ancestral gifts, alleged loans and bank transactions, found insufficient disclosure or corroboration of legitimate sources for acquisition in the crucial period, and accepted the Enforcement Directorate's position that equivalent value attachment was permissible when tainted property was not fully traceable. [Paras 30, 37, 42]

No error in attaching properties on the basis of 'value thereof'; the challenge on lack of direct nexus is rejected.

Ingredients of offence of money laundering (Section 3) - Whether the foundational ingredients of money laundering (placement, layering, integration or specified activities) were absent so as to vitiate the attachment. - HELD THAT: - Tribunal noted that the investigation, statements under Section 50 and material including bank records and alleged transfers supported findings of activities connected with proceeds of crime. It relied on the Uttarakhand High Court's detailed treatment of the evidence and concluded that the requirement under Section 3 is satisfied at the prima facie/adjudicatory stage in this matter; the appellants' contention of absence of concealment, possession, acquisition or projection of proceeds was not accepted. [Paras 44, 46]

The contention that basic ingredients of Section 3 are not satisfied is rejected.

Recording of reasons to believe under Section 5 - adjudicating authority's consideration of merits - Whether the provisional attachment was invalid for want of recorded 'reasons to believe' or for failure of the Adjudicating Authority to consider merits and demerits. - HELD THAT: - Tribunal recorded that the statutory procedure was followed: the authorised officer recorded reasons in writing and forwarded the material in sealed cover to the Adjudicating Authority, which issued notices and proceeded under Section 8. The Tribunal reviewed the impugned order and found that the Adjudicating Authority addressed the issues raised; the claim that the order was mechanical or template based did not warrant interference in light of the material and the detailed findings of the High Court and the Tribunal's own review. [Paras 47, 48, 49]

No infirmity in recording of reasons or in the Adjudicating Authority's consideration; these grounds fail.

Final Conclusion: All grounds raised by the appellants were considered and rejected by the Tribunal; the appeals fail and are dismissed.

Maintainability of appeal under Section 26 of the Prevention of Money Laundering Act - Appeal against Provisional Attachment Order - Appellate Tribunal jurisdiction limited to orders of Adjudicating Authority and Director under Section 13(2) - Tribunal bound by statute; earlier contrary orders per incuriam - Remand to Adjudicating Authority for fresh consideration of Provisional Attachment

Maintainability of appeal under Section 26 of the Prevention of Money Laundering Act - Appeal against Provisional Attachment Order - Appellate Tribunal jurisdiction limited to orders of Adjudicating Authority and Director under Section 13(2) - Tribunal bound by statute; earlier contrary orders per incuriam - Appeal against the Provisional Attachment Order is not maintainable under Section 26 of the PMLA. - HELD THAT: - Section 26 permits appeals to the Appellate Tribunal only against orders of the Adjudicating Authority or against an order of the Director made under sub section (2) of section 13. A provisional attachment order does not fall within the class of orders against which an appeal lies under sub sections (1) or (2). Consequently, an appeal filed challenging a provisional attachment is outside the statutory ambit of Section 26 and cannot be entertained. The Tribunal observed that to allow such an appeal-or to follow earlier internal practice permitting appeals against provisional attachment on grounds such as hardship-would amount to rewriting the statute; an earlier contrary order of the Tribunal must be treated as per incuriam and cannot override the clear statutory scheme. On this basis the appeal is liable to be dismissed as not maintainable.

Appeal dismissed as not maintainable; appellant relegated to approach the Adjudicating Authority.

Remand to Adjudicating Authority for fresh consideration of Provisional Attachment - Proceedings before the Adjudicating Authority shall continue and the Adjudicating Authority is to examine the sustainability of the second Provisional Attachment Order. - HELD THAT: - Although the appeal is dismissed for want of maintainability, the Tribunal directed that the matter should proceed before the Adjudicating Authority. The parties were directed to appear before the Adjudicating Authority on the specified date. The Tribunal made clear that its dismissal of the appeal should not influence the Adjudicating Authority, which must independently examine the issues, including whether a second provisional attachment order arising from the same ECIR is sustainable and in light of the Authority's earlier order denying confirmation of an earlier provisional attachment.

Matter remitted to the Adjudicating Authority for independent consideration of the Provisional Attachment Order; parties to appear before the Adjudicating Authority on the specified date.

Final Conclusion: The appeal challenging the Provisional Attachment Order is dismissed as not maintainable under Section 26 PMLA; the appellant is directed to pursue remedy before the Adjudicating Authority, which has been instructed to independently examine the sustainability of the provisional attachment.

Dismissal for delay - gross delay - unsatisfactory explanation for delay - reservation of question of law

Dismissal for delay - gross delay - unsatisfactory explanation for delay - Civil Appeals dismissed on the ground of delay. - HELD THAT: - The Court found a gross delay of 408 days in filing the Civil Appeals by the appellant (Revenue) and held that the delay had not been satisfactorily explained. In consequence, the appeals were dismissed for want of prosecution on the ground of delay. The dismissal is founded solely on the procedural default of unexplained and undue delay in seeking appellate relief. [Paras 1, 2]

Appeals dismissed on account of unexplained gross delay.

Reservation of question of law - question of law not decided by the Court and left open for determination. - HELD THAT: - Although the appeals were dismissed for delay, the Court expressly left the substantive question of law undecided. By reserving the question of law, the Court did not adjudicate the merits or legal issues raised in the appeals and preserved the right of the parties to have that question considered at an appropriate time or forum. [Paras 3]

Question of law kept open.

Final Conclusion: The Civil Appeals are dismissed for want of prosecution due to an unexplained gross delay of 408 days; the substantive question of law is reserved and remains open for future consideration.

Security Agency - Taxable Service - commercial concern - service tax liability - totality of activity test

Security Agency - Taxable Service - Services rendered by the Kerala State Ex-Services League attract service tax as security agency / taxable service. - HELD THAT: - The Court examined the statutory definitions of Security Agency and Taxable Service as they stood for the relevant period and held that the appellant's activity - providing security personnel (who are its members) to establishments - falls squarely within those definitions. The determinative element is that the service consists of providing security personnel or related investigation/detection/verification services; the appellant's function of furnishing personnel for security duties therefore constitutes a taxable service under the Finance Act, 1994 as interpreted by the Tribunal and accepted by this Court. [Paras 8, 9]

The services rendered by the appellant attract service tax as security agency / taxable service.

Commercial concern - totality of activity test - service tax liability - Whether the appellant is a commercial concern engaged in the business of rendering security services, thereby attracting service tax liability. - HELD THAT: - The Court accepted the Tribunal's conclusion that the term commercial concern is to be judged by the nature and objective of the entity's activities. Relying on the proposition that it is the totality of activities and the objective of the institution (the totality of activity test) which determines commercial character, the Court held that when an association embarks on transactions designed to earn income for its members it assumes a commercial character even if in some years it makes no profit. The Court distinguished educational institutions whose principal object is non profit education and concluded that the appellant's conduct of placing and supplying personnel as part of an income generating venture renders it a commercial concern for the purposes of service tax. [Paras 9, 10]

The appellant is a commercial concern for the relevant activities and therefore liable to service tax on the security services it provided.

Final Conclusion: The Appellate Tribunal's order upholding service tax and penalty was maintained. The appeals are dismissed.

Taxability of tour operator services for Haj and Umrah - Negative list regime - Place of provision of services - Mega Exemption Notification - clause 5 and 5A - Small scale exemption (basic exemption) for taxable services - Reverse charge on legal/consultancy services - Interest and penalty for suppression and extended period recovery

Taxability of tour operator services for Haj and Umrah - Negative list regime - Place of provision of services - Whether tour operator services provided by private tour operators for Haj and Umrah are liable to service tax (post-introduction of the negative list regime). - HELD THAT: - The Tribunal applied the Supreme Court's analysis in All India Haj Umrah Tour Organizer Association Mumbai holding that under the negative list regime (with Rules determining place of provision) the place of provision of services rendered by private Haj group operators to Indian pilgrims is within the taxable territory. The Supreme Court reasoning-summarised by the Tribunal-explains that the location of the recipient for unregistered individual pilgrims is their usual place of residence in India and Rule 3 (place of provision generally) therefore renders such services taxable. The Tribunal observed that the issue is no longer res integra and followed the Supreme Court holding that private tour operators' Haj/Umrah packages are not covered by the Mega Exemption and are taxable post 01.07.2012. Having applied this binding precedent, the Tribunal found the Commissioner (Appeals) conclusion (allowing exemption) unsustainable and restored the Original Authority's confirmation of demand in respect of tour operator services. [Paras 4, 5]

Tour operator services provided by private tour operators for Haj and Umrah are taxable under the post-negative list service tax regime; the Commissioner (Appeals) order granting relief on this point is set aside and the Original Authority's demand is restored.

Mega Exemption Notification - clause 5 and 5A - Whether the Mega Exemption Notification (clauses 5 and 5A) exempts services rendered by private tour operators in relation to Haj/Umrah. - HELD THAT: - The Tribunal relied on the Supreme Court's exposition that clause 5A of the Mega Exemption Notification is confined to services by specified organisations (Haj Committee of India or State Haj Committees and the limited other entity specified) in relation to pilgrimages facilitated by the Ministry of External Affairs under bilateral arrangements; private HGOs are not 'specified organisations' and clause 5A therefore does not extend exemption to them. The Tribunal further noted the Supreme Court's clarification that clause 5(b) (conduct of any religious ceremony) applies to a service provider who conducts a religious ceremony, which is not the nature of services rendered by private HGOs. The Tribunal held that the Commissioner (Appeals) had erred in relying on precedents in the pre-negative list era and that the Mega Exemption does not shelter private tour operators. [Paras 4]

Mega Exemption Notification clauses relied upon do not exempt private tour operators' Haj/Umrah services; exemption is limited to specified organisations and is not available to the respondent.

Small scale exemption (basic exemption) for taxable services - Notification No.33/2012 - aggregate turnover threshold - Whether the respondent was eligible for the small scale/basic exemption (aggregate value not exceeding Rs.10 lakh) for Travel Agent service and Business Auxiliary Service during the relevant years. - HELD THAT: - The Original Authority examined the ST-3 returns and the break-up of taxable services reported in the show cause notice and concluded that the aggregate taxable value exceeded the exemption threshold under the Notification. The Commissioner (Appeals) had allowed the appellant on this ground, but the Tribunal, having restored the Original Authority's order, accepted the original finding that the exemption was not available because the aggregate taxable services exceeded the limit. The Tribunal found no merit in the impugned Commissioner (Appeals) conclusion permitting the basic exemption. [Paras 4, 5, 59, 60]

Basic/small scale exemption was not available to the respondent for the relevant period as the aggregate taxable value exceeded the threshold; the Original Authority's rejection of the exemption is restored.

Reverse charge on legal/consultancy services - Whether the amount characterised as legal consultancy was liable to service tax under reverse charge. - HELD THAT: - The Original Authority recorded that payments described as 'Legal Expenses' were not supported by evidence showing payment to advocates and therefore concluded reverse charge liability could be sustained. The Commissioner (Appeals) had found no taxability on the ground that payments were made to a Chartered Accountant and not to advocates. The Tribunal, after considering the record (including the Original Authority's finding at para 45 that no payment evidence to a chartered accountant was produced before the authority), restored the Original Authority's order. The Tribunal thereby rejected the Commissioner (Appeals) conclusion that the reverse charge was not attracted in the absence of evidence that payments were to advocates. [Paras 4, 5, 45, 47, 48]

Reverse charge liability in respect of the contested legal/consultancy payments stands as held by the Original Authority; the Commissioner (Appeals) relief on this point is set aside.

Interest and penalty for suppression and extended period recovery - Whether interest and penalties (including penalty under Section 78 and penalties under Section 77/Section 75 interest) were lawfully leviable for suppression/deliberate evasion and extended period of recovery. - HELD THAT: - The Original Authority found deliberate suppression and invocation of proviso to Section 73(1) for extended period recovery, imposed interest under Section 75 and penalties under Section 77 and Section 78. The Commissioner (Appeals) had set aside demands, but the Tribunal relied on the Original Authority's detailed findings (paras 61-66) where suppression, extended period invocation and mandatory nature of penalty/interest were explained, and concluded that imposition of interest and penalties was justified. The Tribunal restored the penalties and interest as confirmed in the Original Authority's order. [Paras 62, 63, 64, 65, 66]

Interest and penalties for suppression, extended period recovery and other defaults were lawfully imposed and are restored; the Commissioner (Appeals) order setting them aside is overturned.

Final Conclusion: The revenue appeal is allowed; the Commissioner (Appeals) order granting relief to the respondent is set aside and the Original Authority's Order-in-Original confirming service tax demand, interest and penalties (including matters relating to tour-operator taxability for Haj/Umrah, inapplicability of the Mega Exemption to private HGOs, denial of basic exemption, reverse charge issues and penalties) is restored.

Abatement of appeal on liquidation - continuance under Rule 22 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 - appeal dismissed as infructuous - effect of approved resolution plan and extinguishment of claims (Ghanshyam Mishra principle)

Abatement of appeal on liquidation - continuance under Rule 22 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 - appeal dismissed as infructuous - Whether the departmental appeal survives after the corporate respondent has been ordered into liquidation where no application for continuance under Rule 22 was filed by the liquidator. - HELD THAT: - The Tribunal recorded that the respondent company has been placed under liquidation by the NCLT and that no application for continuance of the appeal by the Official Liquidator or other successor-in-interest was filed under Rule 22 within the prescribed period. Rule 22 provides that where a company is being wound up the appeal shall abate unless such an application is made (subject to the Tribunal's discretion to allow delay for sufficient cause). Having found no continuance application, the Tribunal held that the proceedings in the appeal became infructuous. The Tribunal also noted the principle in Ghanshyam Mishra that claims not part of an approved resolution plan stand extinguished and creditors cannot continue proceedings in respect of such claims, a consideration reinforcing the conclusion that the departmental proceedings cannot be continued against a company in liquidation in the absence of proper continuance steps. [Paras 4, 5, 8, 9]

The appeal abates and is dismissed as infructuous for want of continuance application by the liquidator under Rule 22.

Final Conclusion: The departmental appeal is abated and dismissed as infructuous because the respondent company is under liquidation and no application for continuance under Rule 22 of the CESTAT (Procedure) Rules, 1982 was filed by the Official Liquidator or successor-in-interest.

Cash refund of accumulated CENVAT credit - refund under Rule 5 of Cenvat Credit Rules, 2004 - export of services - exempted / non-taxable services and entitlement to refund - precedent of mPortal India Wireless Solutions (Karnataka High Court)

Cash refund of accumulated CENVAT credit - refund under Rule 5 of Cenvat Credit Rules, 2004 - export of services - exempted / non-taxable services and entitlement to refund - precedent of mPortal India Wireless Solutions (Karnataka High Court) - Entitlement to cash refund of accumulated cenvat credit for services exported during November 2007 to April 2008 even if those services were nontaxable or classified as exempted. - HELD THAT: - The Tribunal found as an undisputed fact that the appellant exported services during the relevant quarter resulting in accumulation of cenvat credit and had claimed refund under Rule 5 of CCR, 2004. Relying on the Karnataka High Court's decision in mPortal India Wireless Solutions and subsequent High Court and Tribunal authorities applying the same principle, the Tribunal held that refund under Notification No.5/2006-CE(NT) read with Rule 5 is not made contingent on the exported service being taxable. Even if the services were classified as exempted or non-taxable at the relevant time, the appellant could not be denied the refund of accumulated cenvat credit. Applying this settled ratio, the Tribunal concluded that the rejection of the refund claim was unsustainable and set aside the impugned order, granting consequential relief as per law. [Paras 5, 8]

Impugned order set aside and appeal allowed; appellant entitled to refund of accumulated cenvat credit with consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeal, holding that the appellant is entitled to cash refund of accumulated CENVAT credit under Rule 5 of CCR, 2004 for exports effected in November 2007 to April 2008 notwithstanding that the exported services were nontaxable or classified as exempt, following the Karnataka High Court's decision in mPortal and related precedents; the impugned order rejecting the refund is set aside with consequential relief.

Goods transport agency service - reverse charge mechanism - exemption under Notification No. 08/2005-S.T. (production of goods on behalf of the client) - job work performed at principal's premises - extended period of limitation by reason of suppression - penalty under Section 78 of the Finance Act, 1994 - penalty under Section 77 of the Finance Act, 1994

Goods transport agency service - reverse charge mechanism - Liability for service tax on transportation charges received by the appellant as consignment agent classified as GTA service. - HELD THAT: - The Tribunal found that the appellant's activity was correctly classifiable as goods transport agency service and that the recipient (M/s. Tata Steels Ltd.) had accepted and discharged the service tax liability under the reverse charge mechanism by an express letter. On that basis the confirmed demand against the appellant under clearing and forwarding agency service insofar as it related to transportation/GTA charges could not be sustained and was set aside. [Paras 6]

Demand of Rs.44,83,913/- (transportation/GTA charges) set aside as tax was discharged by the recipient under reverse charge.

Exemption under Notification No. 08/2005-S.T. (production of goods on behalf of the client) - job work performed at principal's premises - Whether appellant is entitled to exemption under Notification No. 08/2005-S.T. for job-work services performed at the principal's premises. - HELD THAT: - The Tribunal examined the terms of Notification No. 08/2005-S.T. and observed that the notification exempts production of goods on behalf of a client (processing of raw or semi-finished goods supplied by the client) without any condition that the work must be done at the job-worker's own premises. The appellant rendered job work at the principal's site and the final products were cleared by the principal on payment of duty. Since the statutory exemption does not require the job work to be done at the appellant's premises, the demand confirmed under business auxiliary service for job-work charges was unsustainable and was set aside. [Paras 6]

Demand of Rs.1,07,40,970/- under business auxiliary service set aside; exemption under Notification No. 08/2005-S.T. held applicable.

Extended period of limitation by reason of suppression - renting of immovable property service - Sustainability of invoking extended period of limitation for service tax on renting of immovable property and liability for the normal period. - HELD THAT: - The Tribunal noted that there was confusion prevailing during the relevant period regarding liability under renting of immovable property service. In view of that prevailing doubt, invocation of the extended period of limitation on the ground of suppression was set aside. The appellant remains liable for service tax for the normal period of limitation along with interest. The Tribunal also recorded that the appellant had already paid the quantified service tax for the normal period (amounts for 2010-11 and 2011-12) and appropriated those challans against the demand, while interest for delayed payment remains payable by the appellant. [Paras 6]

Extended-period demand set aside; appellant liable to pay tax for the normal period with interest; amounts already paid for normal period appropriated.

Penalty under Section 78 of the Finance Act, 1994 - penalty under Section 77 of the Finance Act, 1994 - Imposability of penalties under Sections 78 and 77 of the Finance Act, 1994. - HELD THAT: - The Tribunal found no establishment of suppression of facts with intent to evade tax and further found the allegation that incorrect service values were shown in ST-3 returns to be unsubstantiated. On those findings, the legal precondition for imposing the penalty under Section 78 was absent and the basis for the penalty under Section 77 was not made out. Accordingly both penalties were set aside. [Paras 7, 8]

Penalties imposed under Sections 78 and 77 set aside.

Final Conclusion: The appeal succeeds in part: demands confirmed under clearing and forwarding (GTA) service and business auxiliary service are set aside; invocation of extended limitation for renting of immovable property service is set aside and liability is limited to the normal period (amounts already paid appropriated; interest payable); penalties under Sections 78 and 77 are set aside. The appeal is disposed of accordingly.

Erection, Commissioning or Installation service - Works Contract service - vivisection of composite service contract - composition scheme for payment of service tax - extended period of limitation

Erection, Commissioning or Installation service - Works Contract service - M/s Larsen & Toubro Ltd. - Classification of the appellant's activities for the period 10.09.2004 to 31.01.2009 as either 'Erection, Commissioning or Installation' service or as 'Works Contract' service. - HELD THAT: - The Tribunal applied the ratio of the Hon'ble Supreme Court in M/s Larsen & Toubro Ltd. and found that where activities include supply of goods and materials and the contract is in substance a works contract, such activities cannot be sustainedly classified as 'Erection, Commissioning or Installation' service. For the period prior to 01.06.2007 the Supreme Court's ruling precludes liability to service tax under the impugned head. For the period from 01.06.2007 the activities are classifiable as 'Works Contract' service. The Tribunal rejected the Adjudicating Authority's approach of treating the gross contract amount (including value of goods) as taxable under 'Erection, Commissioning or Installation' in view of the settled law that works contracts were not chargeable under that head before legislative change and that the correct classification for the subsequent period is 'Works Contract'. [Paras 13, 14]

Activities for 10.09.2004 to 01.06.2007 are not taxable as 'Erection, Commissioning or Installation' services; activities for 01.06.2007 to 31.01.2009 are classifiable as 'Works Contract' service.

Composition scheme for payment of service tax - Works Contract service - Entitlement of the appellant to benefit under the Works Contract composition scheme for the period from 01.06.2007 to 31.01.2009. - HELD THAT: - Relying on the Tribunal's earlier decision in M/s Mfar Construction Pvt. Ltd. and the applicable rules, the Tribunal held that the appellant's works-contract activities for the period 01.06.2007 to 31.01.2009 are eligible for composition under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. The Tribunal noted that non-intimation of availment of the composition scheme is a condonable lapse and, following precedent, granted benefit of the composition scheme subject to law. [Paras 6, 14, 15]

Appellant is eligible for the composition scheme for Works Contract service for the period 01.06.2007 to 31.01.2009.

Extended period of limitation - Whether the extended period of limitation for issuance of the show-cause notice could be invoked against the appellant. - HELD THAT: - The appellant asserted that the demand was time-barred because the investigation commenced earlier and communications were exchanged with the Department, including a reply dated 29.11.2006; the show-cause notice was issued on 17.08.2009. The Tribunal's dispositive reasoning on classification rendered the contention on extended limitation immaterial for the period 10.09.2004 to 01.06.2007 because those activities were held not taxable under the impugned head. The Tribunal observed the appellants' bona fide belief and the contemporaneous confusion on classification but disposed the appeal on classification and composition grounds rather than separately remanding or upholding invocation of extended limitation. [Paras 8, 9, 13, 14]

Extended period contention need not sustain the demand since the activities prior to 01.06.2007 were held not taxable; no separate adverse finding sustaining invocation of the extended period was recorded.

Final Conclusion: Following the Supreme Court in M/s Larsen & Toubro Ltd. and relevant Tribunal authority, the appeal is allowed: activities from 10.09.2004 to 01.06.2007 are not taxable as 'Erection, Commissioning or Installation' services; activities from 01.06.2007 to 31.01.2009 are classifiable as 'Works Contract' service and eligible for the composition scheme; consequential relief to the appellant granted as per law.

Eligibility of CENVAT credit on goods imported under Project Imports - definition of input service and nexus with output service - capital goods classification for special purpose vehicles - CENVAT credit for services incurred for business promotion and stakeholder engagement - CENVAT credit for repairs and maintenance versus original construction

Eligibility of CENVAT credit on goods imported under Project Imports - CENVAT credit on Passenger Boarding Bridge, Bridge Mount Converter and lighting equipment imported under 'Project Imports'. - HELD THAT: - The Tribunal found it was an admitted fact that the goods were imported as part of 'Project Import' under the relevant Customs chapter heading. In the absence of any limiting condition in the CENVAT Credit Rules for such project-imported goods, and following authorities recognizing that project imports are eligible for credit irrespective of their subsequent classification under Central Excise Tariff headings, these goods qualify for CENVAT credit even if they may be classifiable differently for CETH purposes. [Paras 19]

Credit allowed for the goods imported under Project Imports.

Definition of input service and nexus with output service - CENVAT credit on professional and consultancy services related to the Hotel project (feasibility, arbitration), chartered flights for senior management, Pinnacle Award ceremony, sponsorship and event management services, photography services, sponsorships and business events, immigration/relocation services, guest house maintenance and related expenses, flower decoration, hotel accommodation and membership fees. - HELD THAT: - The Tribunal examined whether these services, though not directly related to the core output service, were required for provision of the appellant's output service given the appellant's business activity (operation of a greenfield airport under concession). Relying on precedents and the factual matrix that such services relate to business promotion, stakeholder engagement, operational requirements, relocation of personnel on business assignment and essential activities to meet contractual/operational standards, the Tribunal held that these services fall within the inclusive ambit of input service and are eligible for CENVAT credit. The Tribunal also recorded that certain items already reversed by the appellant may be adjusted accordingly. [Paras 20, 22]

Credit allowed for the listed professional, travel, event, sponsorship, photography, immigration, guest house and related service expenditures.

CENVAT credit for repairs and maintenance versus original construction - CENVAT credit on construction-related services where the authority had found lack of documentary evidence whether services were repair/modification or original construction. - HELD THAT: - The Tribunal noted that services used for repairs or modification of premises of the provider of output service are specifically included within the inclusion portion of the definition of input service. On the material before it, the Tribunal accepted the appellant's contention that the expenditures related to repair and modification work rather than original construction, and therefore are eligible for CENVAT credit. [Paras 21]

Credit allowed for construction/repair/modification services to the extent they relate to repair/modification (not original construction).

Capital goods classification for special purpose vehicles - CENVAT credit on Mobile Command Post Vehicles, projection screens and advertising structures. - HELD THAT: - The Tribunal accepted that the Mobile Command Post Vehicle is a special purpose customized motor vehicle not designed to carry passengers or goods but equipped for disaster response and communications, falling within the ambit of capital goods as contemplated in the CENVAT Credit Rules. On that basis, and having regard to the nature and use of the projection screens and advertising structures for effective operations, the Tribunal held these items are eligible as capital goods/input for the purpose of CENVAT credit. [Paras 21]

Credit allowed for the special purpose vehicle and related operational structures as capital goods/input.

Final Conclusion: The Tribunal allowed the appeals filed by the assessee, holding that the disputed credits (including project-imported goods, specified services for hotel project, travel, awards/events, sponsorships, photography, landscaping/maintenance, immigration/relocation, guest house and repair/modification services, and identified capital goods) are eligible for CENVAT credit; the departmental appeal against allowance of credit on sponsorship, event management and photography was dismissed.

Recovery of duty under Section 11A - penalty under Section 11AC - penalty under Rule 173Q - interest under Section 11AB - non-application of mind - perversity - evidentiary value of statements recorded during inspection - appellate interference on findings of fact

Recovery of duty under Section 11A - penalty under Section 11AC - penalty under Rule 173Q - interest under Section 11AB - appellate interference on findings of fact - Appellate Tribunal's confirmation of demand of duty, imposition of penalties and interest was not vitiated by non-application of mind or perversity. - HELD THAT: - The High Court examined the record of inspection, the show cause notice, the original order, the CESTAT's remand directions and the subsequent re-determination by the Commissioner. The Court found that the Commissioner, on remand, re-quantified the duty liability after giving abatement for duty paid by the third party and re-assessed the penalty and interest in accordance with the statutory provisions. The authorities did not base their conclusions solely on statements recorded during inspection; the Commissioner considered other material on record and carried out verification before passing the re-determined order. In an appeal under Section 35G, interference with findings of fact is permissible only if the findings are perverse; the Court held that the factual findings and conclusions reached by the authorities cannot, by any stretch, be called perverse. Consequently, the Tribunal's confirmation of the Commissioner's order as to duty, penalty and interest was upheld. [Paras 19, 20, 21]

The Tribunal's finding confirming duty, penalty and interest is upheld and is not vitiated by non-application of mind or perversity.

Evidentiary value of statements recorded during inspection - non-application of mind - The contention that the Commissioner relied solely on inspection statements was rejected. - HELD THAT: - The Court addressed the appellant's submission that the original order was founded only on statements recorded at the time of inspection. Having perused the record, the Court observed that the Commissioner, particularly on remand, examined and verified documentary material and re-determined liability and penalties on the basis of the total material available. Thus, the reliance on inspection statements was not sole or decisive, and the challenge that the order was passed without application of mind was found to be untenable. [Paras 10, 19]

The argument that the order was based solely on inspection statements and hence invalid is rejected.

Final Conclusion: The substantial question of law is answered against the assessee; the appeal is dismissed and the orders of the authorities affirming demand of duty, imposition of penalties and interest are upheld.

Obligation under Rule 6 of the CENVAT Credit Rules, 2004 - separate accounts requirement for inputs and input services - value of trading under Explanation 1(c) to Rule 6(3D) of the CCR, 2004 - payment option of 6% under Rule 6(3) of the CCR, 2004 - extended period of limitation under Section 11A(4) of the Central Excise Act, 1944 - penalty under Rule 15 of the CCR, 2004 read with Section 11AC of the Central Excise Act, 1944 - requirement of concurrent factual finding on usage of common inputs/input services

Obligation under Rule 6 of the CENVAT Credit Rules, 2004 - separate accounts requirement for inputs and input services - requirement of concurrent factual finding on usage of common inputs/input services - payment option of 6% under Rule 6(3) of the CCR, 2004 - value of trading under Explanation 1(c) to Rule 6(3D) of the CCR, 2004 - Whether the demand under Rule 6(3) of the CENVAT Credit Rules, 2004 for payment equal to 6% of the value of exempted services (trading) for the years 2012-13 to 2015-16 is sustainable - HELD THAT: - The Tribunal examined whether the adjudicating authority had recorded any finding that common inputs or input services were used both for the provision of taxable services/manufacture of dutiable goods and for exempted services (trading), a precondition to invoke Rule 6(3). The recorded material before the Tribunal included documents asserting that trading was carried out from a separate premises and ledgers/invoices for trading, and evidence on freight being below the notified exemption threshold. The impugned order, however, merely quoted Rule 6 and computed liability without analysing or recording findings on how the alleged common input services were used for both taxable and exempted activities. Because the basic factual predicate-usage of common inputs/input services for both kinds of activity-was not found by the adjudicating authority, the Tribunal held it could not uphold the demand. The Tribunal refused to remit the matter for fresh adjudication, observing that the show cause notice and adjudication proceeded on audit objections without appreciation of the evidences on record. Consequentially the confirmed demand under Rule 6(3) was set aside. [Paras 4]

Demand under Rule 6(3) for the tax periods 2012-13 to 2015-16 set aside for want of factual findings on use of common inputs/input services

Penalty under Rule 15 of the CCR, 2004 read with Section 11AC of the Central Excise Act, 1944 - Whether penalty imposed under Rule 15 of the CCR, 2004 read with Section 11AC of the Central Excise Act, 1944 is sustainable - HELD THAT: - The penalty was imposed consequentially upon confirmation of the demand. As the Tribunal found no merit in the demand-the foundational factual finding being absent-the Tribunal set aside the penalty as well. The Tribunal accordingly did not record any independent finding on culpability beyond the conclusion that the demand itself could not be sustained on the record before the adjudicating authority. [Paras 4]

Penalty set aside as consequential to setting aside the demand

Final Conclusion: Appeal allowed. The confirmed demand under Rule 6(3) of the CENVAT Credit Rules, 2004 for the years 2012-13 to 2015-16 and the consequential penalty under Rule 15 read with Section 11AC are set aside for want of any recorded finding that common inputs/input services were used for both taxable and exempted activities; no definitive finding was recorded on the issue of limitation.

Marketability - excisability - manufacture - capable of being bought and sold - inputs used in exempted final product - normal period of limitation - extended period of limitation

Marketability - excisability - capable of being bought and sold - Sugar syrup with 78.2% sugar produced during manufacture of biscuits is excisable as a marketable intermediate product. - HELD THAT: - The Tribunal applied the established test that actual sale is not necessary; what matters is the capability of being bought and sold. Chemical analysis showed sugar content of 78.2% by weight and, relying on Board Circular/CRCL guidance that solutions with 65% or more sugar retard microbial growth and have shelf life, the Authority correctly found the syrup to be stable and fit for market. Precedents and Tribunal decisions treating sugar solutions above the prescribed concentration as marketable were followed. On these facts the syrup qualifies as a distinct, marketable product and thus an excisable good even though the final product (biscuits) is exempt. [Paras 11, 12]

Sugar syrup produced during the course of manufacture of exempt biscuits is marketable and liable to duty as excisable goods.

Extended period of limitation - normal period of limitation - Extended period of limitation could not be invoked; demand is restricted to the normal limitation period. - HELD THAT: - Although excisability was established, the Tribunal held that the matter involved interpretation of law and therefore the Revenue was not entitled to invoke the extended period of limitation. The demand was accordingly confined to the normal period of limitation. [Paras 12]

Demand limited to the normal period of limitation; extended period cannot be sustained.

Penalty - No penalty is imposable on the appellant. - HELD THAT: - Having confirmed excisability but restricted the demand to the normal limitation period on grounds of interpretation of law, the Tribunal held that imposition of penalty was not warranted in the circumstances and therefore no penalty should be imposed. [Paras 13]

No penalty is imposable.

Final Conclusion: The appeal is partly allowed: excisability of the sugar syrup (78.2% sugar) is confirmed, the monetary demand is confined to the normal period of limitation and no penalty is imposed.

Penalty under APVAT Act, 2005 - absence of show cause notice - quashing of penalty for failure to provide opportunity to be heard - issuance of fresh show cause notice subject to legal permissibility

Penalty under APVAT Act, 2005 - absence of show cause notice - quashing of penalty for failure to provide opportunity to be heard - Validity of the penalty order enacted without issuing a show cause notice and the consequence thereof. - HELD THAT: - The Court recorded that the order of penalty under the APVAT Act, 2005 was passed without issuance of any show cause notice and that this factual position was conceded by the revenue. The High Court therefore rightly quashed the penalty order for want of the opportunity to be heard. The Supreme Court found no ground to interfere with that conclusion and observed that, instead of accepting the High Court's order and proceeding to issue a fresh show cause notice, the revenue had prolonged litigation for six years. The Court held that the revenue may, if legally permissible, issue a fresh show cause notice to the assessee, but the impugned penalty order could not be sustained in the absence of prior notice and opportunity. [Paras 4, 5, 6, 7]

The appeal is dismissed; the penalty order stands quashed for want of a show cause notice, and the revenue may, if permissible in law, issue a fresh show cause notice.

Final Conclusion: The petition is dismissed; the High Court's quashing of the penalty order passed without a show cause notice is upheld, subject to the revenue's option to issue a fresh show cause notice if legally permissible.

Period of limitation for assessment and reassessment - computation of limitation excluding time of appellate and revisional proceedings - effect of remand or direction for fresh assessment on limitation - jurisdictional bar where reassessment exceeds prescribed limitation despite remand

Period of limitation for assessment and reassessment - computation of limitation excluding time of appellate and revisional proceedings - Computation of the period of limitation for reassessment in respect of tax periods commencing 1 April 2007 where time taken in appeals and revisional proceedings must be excluded. - HELD THAT: - The Court examined the proviso applicable to tax periods commencing 1 April 2007 which fixes a seven year limitation from the end of the prescribed tax period, and the amended provision (with retrospective effect) excluding from computation the period taken for disposal of appeals and revisional proceedings. Applying that law to the facts, the seven year period for May 2007 expired on 31.05.2014, and after excluding the days during which proceedings were pending before the Appellate Authority, the Additional Commissioner and the Commissioner (391 days), the outer limit moved to late June 2015. The Court held that those exclusionary provisions must be applied in computing limitation and that the period taken by appellate and revisional authorities is to be subtracted when calculating the expiry of the limitation for reassessment. [Paras 22, 23, 24]

The limitation for reassessment is to be computed by excluding the durations of appeals and revisional proceedings; on the facts the reassessment could not be validly made after the recalculated expiry in June 2015.

Effect of remand or direction for fresh assessment on limitation - jurisdictional bar where reassessment exceeds prescribed limitation despite remand - Whether the Commissioner's order remitting the matter for fresh assessment operates to revive or extend the period of limitation so as to permit reassessment on 30.05.2018. - HELD THAT: - Relying on the principle in Jaipuria Brothers Ltd. and subsequent High Court authority, the Court held that a direction for fresh assessment by a superior authority does not have the effect of defeating the statutory period of limitation applicable to reassessments. Even where a matter is remanded for a fresh assessment, the Assessing Officer's power to reassess is subject to the same limitation period, computed after excluding time spent in appellate and revisional proceedings. Because the reassessment impugned was completed on 30.05.2018, well after the recalculated limitation cut-off, the reassessment was without jurisdiction. The Single Judge's conclusion that limitation commenced only from the date of the Commissioner's remand order was erroneous for failing to exclude the intervening appellate and revisional periods. [Paras 24, 26, 29]

The remand/direction for fresh assessment did not revive or extend limitation; the reassessment dated 30.05.2018 was therefore beyond jurisdiction and invalid.

Final Conclusion: The writ appeal is allowed: the Single Judge's order is set aside; the reassessment and demand dated 30.05.2018 are quashed as being barred by limitation after excluding the periods of appellate and revisional proceedings; no costs.

Validity of subsequent assessment where original assessment remains unaltered - Finality of assessment order - Non-est in law of later conflicting assessment - Rectification for error apparent on the face of the record - Right to appeal and treatment of timebar for filing appeal - Availability of amnesty scheme relief

Validity of subsequent assessment where original assessment remains unaltered - Non-est in law of later conflicting assessment - Finality of assessment order - Whether the later assessment order (Ext. P3 dated 29.03.2021) for the year 2015-16 can be sustained when an earlier assessment order (Ext. P2 dated 15.12.2018) for the same year remains unmodified and unappealed. - HELD THAT: - The Court found that Ext. P2, issued under Section 25(1) of the KVAT Act on 15.12.2018, was not set aside or modified by any proceeding. The statutory framework does not permit the Assessing Authority to lawfully pass a fresh assessment order for the same assessment year while the original assessment stands unaltered, because that would permit contradictory orders to coexist without the original being set aside or modified by a recognised procedure. In consequence, the second assessment order (Ext. P3) creating a different liability could not be sustained and is non-est in law. The Court therefore did not find it necessary to determine the maintainability of the rectification application under Section 66. [Paras 5]

Ext. P3 dated 29.03.2021 is non-est in law and cannot be sustained; the earlier assessment Ext. P2 dated 15.12.2018 remains operative.

Right to appeal and treatment of timebar for filing appeal - Availability of amnesty scheme relief - Relief by way of extension/treatment of time to enable the petitioner to challenge Ext. P2 and the procedural directions to the Appellate Authority. - HELD THAT: - Although the writ petition is dismissed and Ext. P2 stands, the Court exercised its discretion to permit the petitioner to file an appeal against Ext. P2 within two weeks from receipt of a certified copy of the judgment. The first Appellate Authority under the KVAT Act is directed to treat such an appeal as having been filed in time, afford the petitioner a hearing, and decide the appeal in accordance with law. The Court directed the Appellate Authority to endeavour to dispose of the appeal within three months of its filing. Separately, the Court observed that the petitioner remains free to seek relief under the amnesty scheme then in force. [Paras 8]

Petitioner permitted to file an appeal against Ext. P2 within two weeks of receipt of certified copy; Appellate Authority to treat it as filed in time, grant hearing and endeavour to dispose of the appeal within three months; petitioner may apply for amnesty if so advised.

Final Conclusion: Writ petition dismissed. The second assessment order Ext. P3 (29.03.2021) is held nonest and cannot be sustained; Ext. P2 (15.12.2018) remains operative. Petitioner is permitted to file an appeal against Ext. P2 within two weeks from receipt of certified copy of this judgment, which the Appellate Authority shall treat as timely, hear and endeavour to decide within three months; petitioner remains free to seek relief under the applicable Amnesty Scheme.

Exercise of inherent powers to quash criminal proceedings under Section 482 of the Code of Criminal Procedure - Vicarious criminal liability of persons "in charge of and responsible for conduct of business" under Section 141 of the Negotiable Instruments Act - Essential ingredients of offence under Section 138 of the Negotiable Instruments Act - Necessity of specific averments in complaint to fasten liability under Section 141 - Resignation and absence of control as defence to liability under Section 141 - Principle of sparing and cautious exercise of inherent jurisdiction as laid down in State of Haryana v. Bhajan Lal

Vicarious criminal liability of persons "in charge of and responsible for conduct of business" under Section 141 of the Negotiable Instruments Act - Resignation and absence of control as defence to liability under Section 141 - Necessity of specific averments in complaint to fasten liability under Section 141 - Whether the complaint and consequential proceedings against the petitioner under Section 141 of the Negotiable Instruments Act are maintainable where the petitioner had ceased to be an additional director before issuance of the cheques and there are no averments showing control of or responsibility for conduct of the company's business at the relevant time. - HELD THAT: - The Court applied settled principles that vicarious liability under Section 141 extends to every person who, at the time the offence was committed, was in charge of and responsible for the conduct of the business of the company, and that mere designation as a director is insufficient; the complaint must contain clear averments to bring a person within Section 141. It was found on record that the petitioner had resigned as additional director with effect from 16th July, 2014, whereas the cheques were drawn on 28th and 30th September, 2014 and returned unpaid thereafter; the petitioner was not a signatory of the cheques and his resignation averred that he was excluded from daytoday management. In the absence of any material or averments showing that the petitioner was in charge of or responsible for the conduct of the company's business at the relevant time, no prima facie case under Section 141 stood made out against him. Applying the principle that inherent powers under Section 482 are to be exercised sparingly but may be invoked where allegations, even if taken at face value, do not prima facie constitute an offence, the Court concluded that continuation of proceedings against the petitioner was not justified. [Paras 24, 25, 26]

Complaint and consequential proceedings against the petitioner under Section 141 of the Negotiable Instruments Act quashed as no prima facie case made out against him for being in charge of or responsible for the conduct of the company's business at the relevant time.

Final Conclusion: The petition under Section 482 CrPC is allowed; the Criminal Complaint bearing CC No. 532/1/15 (New No. 44813/2016) and consequential proceedings insofar as they relate to the petitioner are quashed for failure to allege or establish that the petitioner was in charge of and responsible for the conduct of the company's business at the time of the commission of the offence.

Inherent jurisdiction to prevent abuse of process of law and to secure the ends of justice - prima facie offence under Section 138 of the Negotiable Instruments Act - vicarious liability of directors for company offences under Section 141 of the Negotiable Instruments Act - strict construction of penal provisions creating vicarious liability - requirement of specific averments as to a director's role in company affairs

Prima facie offence under Section 138 of the Negotiable Instruments Act - Whether the complaint and summoning order disclose a prima facie case under Section 138 of the Negotiable Instruments Act. - HELD THAT: - The Court examined the statutory ingredients of Section 138 and the factual matrix: the cheque was presented and dishonoured, the payee issued a demand notice within the statutory period, and the drawer failed to make payment within the prescribed time. On the record the cheque was dishonoured on 21st October, 2019, the demand notice was dated 2nd November, 2019 (within 30 days), and no payment followed. Applying settled authorities on the ingredients of Section 138, the Court found that the essential statutory conditions were prima facie satisfied and that the learned Magistrate was justified in issuing summons on that basis. The Court therefore declined to quash the complaint or the summoning order on the ground that Section 138 was not made out. [Paras 23, 36, 37, 38]

A prima facie case under Section 138 is made out and the summoning order is justified; the complaint is not quashed on this ground.

Vicarious liability of directors for company offences under Section 141 of the Negotiable Instruments Act - requirement of specific averments as to a director's role in company affairs - strict construction of penal provisions creating vicarious liability - Whether the petitioner, as a director, is prima facie liable under Section 141 of the Negotiable Instruments Act and whether the complaint contains sufficient averments of her role in the company's affairs. - HELD THAT: - The Court reviewed the law that mere directorship is not sufficient for liability under Section 141; there must be specific averments showing that the person was in charge of and responsible for the conduct of the company's business at the relevant time, or that the offence was with consent or connivance. On perusal of the complaint, the Court noted explicit averments that the petitioner and another director were responsible for day-to-day functions and that they had approached the complainant in relation to the property transaction. Documentary material annexed to the petition (AoA, MoA, Company Master Data) further showed the petitioner as a first director, promoter and subscriber, with a recorded DIN. Although the petitioner contended she was not an authorised signatory, the Court held that non-signatory status does not, by itself, absolve a director if the requisites of Section 141 are prima facie satisfied. Taking these averments and documents together, the Court concluded there was a prima facie case against the petitioner under Section 141 and that the summons were correctly issued. [Paras 30, 31, 32, 34, 35]

Prima facie liability under Section 141 is established by the complaint's averments and annexed company records; the petitioner cannot be discharged at this stage and the complaint is not quashed on this ground.

Final Conclusion: The petition to quash the complaint and the summoning order is dismissed; the learned Magistrate did not commit illegality in issuing summons and the Court declines to exercise its inherent powers to quash the proceedings.