TaxTMI Updates e-Newsletter
Dec 30,2020

Blocking of Input Tax Credit under Rule 86A - Reason to believe - Requirement of credible material for formation of subjective belief - Distinction between availment and utilization of Input Tax Credit; vested right in utilization - Procedure and communication for provisional measures (need for guidelines) - Provisional attachment under Section 83 and prescribed procedure under Rule 159 - Exercise of writ jurisdiction in revenue matters pending investigation

Blocking of Input Tax Credit under Rule 86A - Reason to believe - Requirement of credible material for formation of subjective belief - Procedure and communication for provisional measures (need for guidelines) - Scope and correct interpretation of Rule 86A - whether authorities may block/debar debit of ITC in electronic credit ledger pending inquiry and whether Rule 86A mandates a specific order and communication of reasons to the affected person. - HELD THAT: - The Court held that Rule 86A confers a drastic power to not allow debit of electronic credit ledger where the Commissioner or an authorised officer has "reason to believe" that ITC has been fraudulently availed or is ineligible. "Reason to believe" is subjective but must have a rational nexus to some credible material; the opinion cannot be formed on imaginary grounds. Rule 86A does not itself prescribe a specific mode of passing a separate communicative order assigning reasons, and the Rule is silent as to mandatory communication; nevertheless, the formation of belief must rest on material which the authority should disclose if the formation of belief is challenged. The Court observed that procedural safeguards are desirable and the Government should issue guidelines for invocation of Rule 86A to prevent misuse and undue hardship. Applying these principles to the facts, the Court found prima facie material on record to justify provisional blocking in the present investigations and that the exercise was not shown to be mala fide. [Paras 44, 54, 62, 63, 65]

Rule 86A may be validly invoked to block ITC where the authority, supported by credible material, has reason to believe fraud or ineligibility; such power must be used sparingly, based on material and guided by procedure; absence of a specific communicated order under Rule 86A does not per se vitiate the exercise, but the Government should prescribe guidelines and the authority must be able to disclose the material forming the belief when challenged.

Distinction between availment and utilization of Input Tax Credit; vested right in utilization - Blocking of Input Tax Credit under Rule 86A - Whether the writ applicants possess an indefeasible/vested right to the ITC so as to preclude blocking under Rule 86A. - HELD THAT: - The Court examined precedents on vested rights in input-credit schemes and held that while utilization of credit (once validly taken) is a vested right, no vested right accrues before the taking of credit. Subordinate legislation can impose procedural restrictions on availment/utilization. In the facts of this case the applicants had not established an indefeasible right that would preclude interim measures under Rule 86A; therefore the plea based on indefeasibility failed. [Paras 34, 35, 36, 40, 41]

The submission of an indefeasible right to ITC vis-a -vis Rule 86A is rejected; utilization and availment are distinct stages and Rule 86A's temporary restriction does not ipso facto extinguish any vested right where no such right has yet accrued or been conclusively determined.

Exercise of writ jurisdiction in revenue matters - Provisional attachment under Section 83 and prescribed procedure under Rule 159 - Whether the Court should exercise writ jurisdiction to direct refund/unblocking of ITC or quash debit entries pending completion of investigation and adjudication. - HELD THAT: - The Court reiterated that interference with statutory revenue proceedings by writ is exceptional and justified only in limited circumstances (e.g., violation of natural justice, lack of jurisdiction, or constitutional challenge). Given the ongoing investigation and the prima facie material disclosed in the respondents' affidavits, the Court declined to direct restoration of credit or repayment at this stage. Recognising that investigations must not be unduly protracted, the Court required the authorities to conclude the investigation and decide on issuance of show-cause notice within a specified timeframe. [Paras 63, 64, 72, 73, 74]

Writ interference is not warranted at this interim stage; the petitions are rejected, subject to the direction that the respondents complete the investigation and take an appropriate decision on initiation of adjudicatory proceedings within six weeks from receipt of the order.

Voluntary payments and retention by revenue pending adjudication - Exercise of writ jurisdiction in revenue matters - Whether amounts deposited (allegedly voluntarily or under pressure) can be retained by Revenue in absence of adjudication/demand. - HELD THAT: - The Court noted competing factual assertions (departmental averment of voluntary deposit and petitioners' claim of coercion) and observed that there are disputed questions of fact. Citing precedents, the Court recognised the principle that retention of amounts without determination is problematic, but in the present facts it declined interim relief because investigation is ongoing and a prima facie case exists. Given the factual disputes, the Court directed expeditious completion of investigation rather than immediate refund. [Paras 69, 70, 71, 72]

No direction for immediate refund or reversal of debit entries; matter remitted to respondents to complete investigation and decide whether to issue show-cause notice, within six weeks.

Final Conclusion: Both writ petitions are dismissed. The Court held that Rule 86A may be invoked to block ITC if the authority, supported by credible material, has reason to believe fraudulent or ineligible availment; such power must be exercised sparingly and with procedural safeguards, and the Government should issue guidelines. The Court declined interim restoration of credits or refund, directed the respondents to complete the investigation and take appropriate action on issuance of show-cause notice within six weeks, and left open any independent challenge to the constitutional validity of Rule 86A.

Bail under Section 439 of the Cr.P.C. - Non-bailable offences under the GST penal regime - Offence of wrongful availment and passing of Input Tax Credit - Documentary evidence-based prosecution - Delay in trial and custody as a factor in granting bail - Conditions of bail including cooperation and surrender of passport

Bail under Section 439 of the Cr.P.C. - Non-bailable offences under the GST penal regime - Documentary evidence-based prosecution - Delay in trial and custody as a factor in granting bail - Grant of bail to the petitioner accused of offences under the OGST Act, 2017 - HELD THAT: - The Court examined the nature and gravity of the allegations of fabricated invoices and bogus input tax credit causing substantial loss to the State, and noted that the prosecution case is primarily documentary. The Court applied established principles governing bail in serious economic offences, recognising there is no inflexible rule denying bail in such cases and that each application depends on its facts and circumstances. The Court observed that custodial detention may not further the ends of justice where the trial may be protracted, particularly after investigation and filing of charge-sheet, and that pre-judging ultimate punishment at the bail stage is inappropriate. Having weighed the prosecution case, the documentary character of evidence, and precedents emphasising factors to be considered (including likelihood of tampering, cooperation in investigation, and the public interest), the Court found bail appropriate subject to stringent conditions to safeguard the investigatory and trial processes. [Paras 10, 11, 12, 13, 14]

Petitioner released on bail on furnishing a bond of Rs. 5,00,000 with one surety of like amount, subject to specified conditions.

Conditions of bail including cooperation and surrender of passport - Allurement or tampering with witnesses as ground for cancellation of bail - Continuation of statutory assessment and recovery proceedings - Terms and conditions attaching to the bail order and consequences of breach - HELD THAT: - The Court imposed conditions to balance the liberty of the accused and protection of the public interest: mandatory cooperation with trial and investigation, prohibition on inducing or intimidating witnesses, the proviso that involvement in similar GST offences or other criminal activities would invite cancellation of bail, and surrender of any passports with prohibition on leaving the country without prior permission. The Court also clarified that assessment and recovery proceedings under the statute shall proceed independently and expeditiously, uninfluenced by observations made in the bail order. [Paras 14]

Bail granted subject to cooperation, no tampering/inducement of witnesses, cancellation on involvement in similar offences or breach of conditions, surrender of passport and prohibition on leaving India without court permission; assessment proceedings to continue unaffected.

Final Conclusion: Bail application allowed: petitioner enlarged on bail on furnishing a bond of Rs. 5,00,000 with one surety of like amount, subject to conditions of cooperation, non-tampering of witnesses, surrender of passport and restraints on departure from India; statutory assessment and recovery proceedings to continue unimpaired.

Summary order. Notice issued returnable on 11th January 2021; respondents Nos.2 and 6 restrained from taking any coercive action against the writ applicant till the next date of hearing; respondents to be served by email; matter listed for final hearing on a pure question of law on 11th January 2021.

Refund of IGST - utilisation of input tax credit - conversion of IGST credit into CGST and SGST - retrospective effect of statutory amendment on administrative functioning - application of earlier judicial precedent

Application of earlier judicial precedent - quashing of Trade Notice - refund of IGST - Whether the petition is covered by the antecedent judgment and entitlement to refund of IGST follows accordingly. - HELD THAT: - The learned counsel for the parties conceded that the present challenge is squarely covered by this Court's earlier decision in M/s. Prince Spintex Pvt. Ltd., which held that the amendment to Notification No.16/2015Cus. applies to imports made during 1.7.2017 to 13.10.2017 and quashed Trade Notice 11/2018 insofar as it required importers under Chapter 5 to pay IGST, thereby entitling the petitioner to refund of IGST paid. On that basis the petition succeeds to the extent indicated in the precedent and the Court proceeded to grant relief consistent with that decision. [Paras 2]

Precedent applied; petitioner entitled to relief in conformity with the earlier decision.

Utilisation of input tax credit - conversion of IGST credit into CGST and SGST - retrospective effect of statutory amendment on administrative functioning - Effect of subsequent amendment to Section 49 and insertion of Sections 49A/49B and Rule 88A on the practical availability of IGST credit and the appropriate remedial direction for refund. - HELD THAT: - The Court noted that after amendment w.e.f.01/02/2019 (and administrative implementation w.e.f.01/06/2019) the GST portal began auto-utilising accumulated IGST credit for payment of tax, resulting in conversion of residual IGST balance into corresponding CGST and SGST credits and leaving nil IGST balance. This administrative effect did not extinguish the petitioner's entitlement under the antecedent ruling. The Court directed that the respondents must reverse the entries reflecting utilisation of the subject IGST credit and debit the corresponding amounts from the presently available credit ledger entries, so that the refund of the IGST originally paid can be sanctioned. The exercise is to be completed within a limited timeframe to give effect to the substantive entitlement despite subsequent automatic utilisation arising from statutory amendment and portal implementation. [Paras 3, 4, 5]

Respondents directed to reverse utilisation entries and sanction refund of the IGST after adjusting the credit ledger as directed within four weeks.

Final Conclusion: The petition is allowed in conformity with the Court's earlier decision; respondents are directed to reverse the utilisation of the subject IGST credit, adjust the credit ledger accordingly, and sanction and pay the refund due to the petitioner within four weeks.

Zero-rated supplies - IGST refund - Rule 96 CGST Rules deeming shipping bill as refund application - Withholding refund - limited grounds under Rule 96(4) - Higher versus lower duty drawback and its effect on IGST refund - Circular No.37/2018 cannot override statutory rules - Interest on delayed refund

Zero-rated supplies - IGST refund - Rule 96 CGST Rules deeming shipping bill as refund application - Entitlement to refund of IGST paid on exported goods despite initial omission in shipping bill where the omission was rectified in GST returns and concordance table was filed. - HELD THAT: - The Court held that Rule 96 of the CGST Rules creates a deeming fiction that the shipping bill filed by an exporter is an application for refund of integrated tax paid on exported goods, and that the claim can be withheld only on the contingencies specified in Rule 96(4). The petitioner's inadvertent failure to disclose IGST details in the shipping bill, subsequently rectified in the GSTR-1/GSTR-3B and by filing the concordance table under CBIC guidance, did not disentitle the exporter to the IGST refund. The Court relied on the decision in Amit Cotton Industries which interprets Section 16 of the IGST Act read with Section 54 of the CGST Act and Rule 96 to the effect that procedural mismatches or circulars cannot be used to deny a refund where the statutory conditions for withholding are not attracted. [Paras 4, 5, 6, 26, 30]

Petitioner entitled to IGST refund as claim was not barred by Rule 96 and procedural omission was rectified; refund must be sanctioned.

Higher versus lower duty drawback and its effect on IGST refund - Circular No.37/2018 cannot override statutory rules - Denial of IGST refund on the ground that exporter had claimed higher duty drawback was not sustainable where the drawback claimed represented only the customs component and did not amount to availing higher drawback that precludes IGST refund. - HELD THAT: - The Court examined Notification 131/2016-Cus.(N.T.) and its amendment and observed that the rationale for denying IGST refund where higher drawback was availed is to prevent double benefit when higher drawback includes Central Excise and Service Tax components. However, where the rates in the higher and lower drawback columns are the same, the drawback represents only the Customs component and does not subsume GST. In the petitioner's case the relevant HSN attracted the same rate under both columns (higher and lower) (2%), indicating only the Customs element was claimed. Consequently the petitioner could not be presumed to have availed a double benefit and Circular No.37/2018-being explanatory and post-dating the export-could not be used to deny the refund or override Rule 96 and the statutory scheme. [Paras 6, 8, 9, 10]

Refund cannot be denied on the basis that higher drawback was claimed where the claimed drawback only represented the Customs component; Circular No.37/2018 does not justify denial.

Withholding refund - limited grounds under Rule 96(4) - Circular No.37/2018 cannot override statutory rules - Validity of reliance on Circular No.37/2018 to withhold IGST refund contrary to Rule 96. - HELD THAT: - The Court held that the circular in question is in the nature of departmental instruction and cannot contravene the statutory regime embodied in Rule 96 which prescribes only two contingencies for withholding refund. The circular, being dated after the export and intended as guidance on drawback, cannot be allowed to displace the statutory scheme governing IGST refunds. Therefore reliance on the circular to deny refund was unsustainable. [Paras 6, 28, 29, 34]

Circular No.37/2018 cannot be invoked to withhold refund where the statutory conditions for withholding under Rule 96(4) are not met.

Interest on delayed refund - Entitlement to interest on delayed payment of sanctioned IGST refund. - HELD THAT: - The Court directed immediate sanction of the IGST refund and provided that if the principal refund amount is not sanctioned and paid within six weeks from receipt of the order, interest shall accrue at the rate of 9% from the date of the shipping bill until actual payment. The Court therefore afforded a limited timeline and fixed rate for accrual of interest in the event of non-payment within the prescribed period. [Paras 11]

If refund is not paid within six weeks of receipt of the order, interest at 9% shall accrue from the date of the shipping bill until payment.

Final Conclusion: Writ petition allowed: respondents directed to sanction the IGST refund claimed on the exports (shipping bill dated July 2017); denial based on claimed higher drawback or Circular No.37/2018 held unsustainable where statutory conditions for withholding under Rule 96 are not attracted; if refund is not paid within six weeks, interest at 9% shall accrue from the date of the shipping bill.

Validity of notice under Section 148 issued to a deceased assessee - Reopening of assessment and requirement of notice to the correct person as condition precedent to jurisdiction - Inapplicability of section 292B/292BB to notices issued to a deceased person or to legal representatives who have not participated - No statutory obligation on legal heirs to intimate death of the assessee to the Income-tax Department

Validity of notice under Section 148 issued to a deceased assessee - Reopening of assessment and requirement of notice to the correct person as condition precedent to jurisdiction - Notices under Section 148 and consequent assessment orders issued in the name and PAN of a deceased assessee are invalid and vitiate the reassessment proceedings. - HELD THAT: - The Tribunal held that issuance of a notice under Section 148 is the foundation for reopening and is a condition precedent to jurisdiction; such notice must be addressed to the correct person and cannot be validly issued to a deceased person. Relying on the decision of the Hon'ble Delhi High Court in Savita Kapila (426 ITR 502) and consistent High Court precedents, the Tribunal concluded that notices and consequential assessment orders issued in the name and PAN of the deceased did not fulfil the jurisdictional requirement and are therefore null and void. Applying that principle to the facts before it - where notices and assessment orders for the three assessment years were issued in the name and PAN of the deceased - the Tribunal quashed those assessment orders. [Paras 8, 11]

Assessment orders and notices issued in the name and PAN of the deceased for AYs 2008-09, 2009-10 and 2010-11 quashed; Grounds No.1 and 2 allowed.

Inapplicability of section 292B/292BB to notices issued to a deceased person or to legal representatives who have not participated - No statutory obligation on legal heirs to intimate death of the assessee to the Income-tax Department - Section 292B/292BB cannot validate or be invoked where proceedings were initiated against a deceased person and legal representatives did not submit to jurisdiction or participate; legal heirs have no statutory duty to inform the Department of the death. - HELD THAT: - The Tribunal, following the reasoning in Savita Kapila and other High Court authorities, accepted that section 292B/292BB is directed to cure certain defects only where the assessee (or a person who has participated) is the noticee; it cannot be invoked to validate initiation of proceedings against a dead person. Likewise, there is no statutory obligation on legal heirs to intimate the death or to cancel PAN registration, and mere non-updation of PAN or failure of the Department to have record of death does not validate a notice issued to a deceased. Because the legal heirs had not stepped into the shoes of the deceased for these proceedings, the statutory curative provisions were not applicable and could not cure the jurisdictional defect. [Paras 8]

Contentions invoking section 292B/292BB and any alleged duty of legal heirs to intimate death rejected; such provisions do not validate the impugned proceedings.

Final Conclusion: Following the jurisdictional principle that a reopening notice under Section 148 must be issued to the correct person, and applying binding High Court authority, the Tribunal quashed the reassessment notices and assessment orders issued in the name and PAN of the deceased for AYs 2008-09, 2009-10 and 2010-11 and allowed the appeals.

Entitlement to deduction for foreign exchange loss - allowance of a belated claim not made in the original return - distinction between powers of the assessing officer and the appellate authorities to entertain new claims - application of accounting standards (AS-11 / ICDS VI) in determining tax-year relevance of exchange differences - finality of assessment and limitation on reopening assessments by belated claims

Allowance of a belated claim not made in the original return - distinction between powers of the assessing officer and the appellate authorities to entertain new claims - finality of assessment and limitation on reopening assessments by belated claims - Whether a claim for deduction, not made in the original return but submitted during assessment proceedings by letter, can be entertained and allowed by the assessing officer or by the appellate authorities. - HELD THAT: - The Tribunal noted established law that the assessing officer cannot ordinarily entertain a new deduction not claimed in the return except by way of a revised return; however the appellate authorities are not so constrained and may consider such claims in appeal. The judgment referred to the duty of the department not to take advantage of an assessee's omission and to draw attention to refunds or reliefs clearly due, but recognised the legal distinction between summary processing under section 143(1) and scrutiny assessments under section 143(3). In consequence, the AO's outright rejection of the lettered claim without discussion was not decisive of the assessee's entitlement at the appellate stage; the CIT(A) could have considered the claim, and the Tribunal applied those principles to permit appellate consideration of the belated claim insofar as it related to the year under consideration. [Paras 8]

The appellate authority (and the Tribunal) may consider a deduction claimed belatedly by letter though the assessing officer cannot normally allow it in absence of a revised return; the Tribunal entertained the claim at the appellate stage.

Entitlement to deduction for foreign exchange loss - application of accounting standards (AS-11 / ICDS VI) in determining tax-year relevance of exchange differences - finality of assessment and limitation on reopening assessments by belated claims - Whether the forex loss claimed by the assessee is allowable for A.Y. 2014-15 and, if so, the quantum attributable to that assessment year. - HELD THAT: - The Tribunal examined the computation submitted by the assessee and the accounting policy disclosures showing that the aggregate restated loss up to 31.3.2014 was larger than the portion attributable to the year ending 31.3.2014 alone. Applying AS-11 and the transitional guidance relied upon, the Tribunal held that only the portion of the restated exchange loss that actually relates to the previous year relevant to A.Y. 2014-15 is allowable in that year. The Tribunal rejected the claim for the entire restated cumulative loss, finding that part of the amount comprised exchange differences attributable to earlier years and therefore not deductible in A.Y. 2014-15. On the basis of the assessee's computation, the Tribunal directed allowance of the portion quantified as relating to A.Y. 2014-15. [Paras 9]

Deduction towards forex loss allowed partially: only the portion quantified as relating to A.Y. 2014-15 (Rs. 41,96,702/-) to be granted; the remainder disallowed.

Final Conclusion: The appeal is partly allowed: the Tribunal held that the appellate authority could consider the belatedly claimed deduction and directed the assessing officer to grant deduction for the portion of the foreign exchange loss attributable to A.Y. 2014-15 (Rs. 41,96,702/-), disallowing the balance as relating to earlier years.

Bogus purchases - accommodation entries - genuineness of purchases - profit element approach - addition on estimate basis - precedential value of High Court decision

Bogus purchases - genuineness of purchases - addition on estimate basis - profit element approach - Validity of restricting the addition to 12.5% of alleged bogus purchases instead of 25% made by the Assessing Officer. - HELD THAT: - The Tribunal upheld the CIT(A)'s restriction of the addition to 12.5% of the purchases of Rs. 14,99,063 by applying the profit-element approach. The AO had not doubted the assessee's sales but found that the parties from whom purchases were shown were accommodation-entry providers and the assessee failed to prove the genuineness of purchases or produce the suppliers. Given the surrounding circumstances and the likelihood that purchases reflected grey-market acquisitions shown as purchases from the impugned parties to suppress profits, an estimate addition was warranted. Following the ratio in CIT v. Simit P. Sheth, the Tribunal accepted that only the profit margin embedded in such purchases should be added and that 12.5% is a reasonable estimate of that profit element. Having found the facts to fit that approach, the Tribunal found no reason to interfere with the CIT(A)'s order. [Paras 6, 7]

Addition restricted to 12.5% of the alleged bogus purchases; order of CIT(A) upheld.

Precedential value of High Court decision - genuineness of purchases - Reliance on the Supreme Court decision in N.K. Proteins Ltd. to justify 100% addition. - HELD THAT: - The Tribunal rejected the revenue's contention that the CIT(A)'s order was contrary to the ratio in N.K. Proteins Ltd., observing that the facts of that decision are different from the present case. The Tribunal emphasised that where sales are not doubted and the circumstances point to purchases made in the grey market with only the profit element suppressed, the profit-element approach of the Gujarat High Court (Simit P. Sheth) is applicable. Therefore the Supreme Court decision relied upon by the revenue did not mandate setting aside the CIT(A)'s order in the facts of this case. [Paras 4, 7]

N.K. Proteins Ltd. not held to be applicable on the facts; contention to substitute 100% addition dismissed.

Final Conclusion: The Tribunal dismissed the revenue's appeal for assessment year 2011-12, upholding the CIT(A)'s restriction of the addition to 12.5% of the alleged bogus purchases as a reasonable estimate of the profit element, and rejected the revenue's reliance on the Supreme Court decision as distinguishable on facts.

Disallowance under Section 14A read with Rule 8D - Onus of proof for nexus of expenditure with exempt income - Exclusion of investments advised through Portfolio Management Services to avoid double disallowance - Consideration of diminution in value of investments while computing disallowance - Application of Section 94(7) - disregard of loss on specified buy sell around record date

Disallowance under Section 14A read with Rule 8D - Onus of proof for nexus of expenditure with exempt income - Validity of invoking Section 14A r.w. Rule 8D where assessee made an ad hoc disallowance and whether AO was required to record dissatisfaction before applying Rule 8D - HELD THAT: - Tribunal held that the primary onus lies on the assessee to justify the basis adopted for disallowance; absence of any rational material or documentary evidence for the assessee's estimation (0.5% of exempt income) warranted rejection of that basis. Once the assessee accepted that some expenditure related to exempt income, and failed to maintain separate books or produce evidence, the AO was justified in recording dissatisfaction with the assessee's working and applying Rule 8D to compute disallowance. The Tribunal relied on its own earlier order in the assessee's case holding the assessee's estimation method as faulty and accepted the AO's satisfaction recorded in the assessment order as sufficient to invoke Rule 8D. [Paras 17, 18, 19]

Assessee's estimation method rejected; disallowance under Section 14A r.w. Rule 8D upheld in part and to be computed as per Rule 8D.

Exclusion of investments advised through Portfolio Management Services to avoid double disallowance - Consideration of diminution in value of investments while computing disallowance - Whether investments made through PMS should be excluded from the average value of investments for computing disallowance under Rule 8D, and whether diminution in value of investments should be considered - HELD THAT: - Tribunal accepted the assessee's submission that investments managed through Portfolio Management Services (PMS) were made on PMS advice and the PMS fees had already been disallowed; therefore such investments should be excluded from the Rule 8D computation to avoid double disallowance. The Tribunal also directed that diminution in the value of investments be taken into account while computing the disallowance under Rule 8D, noting prior acceptance of that principle by the Revenue in an earlier assessment year and invoking consistency of approach. [Paras 21, 22]

Authorities directed to exclude PMS managed investments from Rule 8D computation and to allow benefit of diminution in value of investments when computing disallowance.

Application of Section 94(7) - disregard of loss on specified buy sell around record date - Validity of disallowing short term capital loss claimed by the assessee under Section 94(7) - HELD THAT: - Facts showed purchases within three months prior to the record date and sales within nine months after the record date in respect of units whose dividend income was exempt. Section 94(7) unambiguously requires that such loss, to the extent not exceeding the dividend income, be ignored for computing taxable income. The assessee did not dispute these factual strings and conceded no legal misapplication; therefore the Tribunal found no infirmity in the AO's and CIT(A)'s application of Section 94(7) and sustained the addition. [Paras 26, 27, 31]

Addition under Section 94(7) upheld; the short term losses in question are to be ignored to the extent provided by the provision and not set off against short term capital gains.

Final Conclusion: Appeals partly allowed: disallowance under Section 14A r.w. Rule 8D sustained but directed adjustments - exclude PMS managed investments and factor diminution in investment value; addition under Section 94(7) sustained. Same conclusions applied mutatis mutandis to A.Ys. 2010 11 to 2013 14.

Arm's length price of advertisement, marketing and sales promotion expenses - treatment of AMP expenses as an international transaction - resale price method as an appropriate transfer pricing method for distributors - exclusion of selling and distribution expenses from AMP for benchmarking - application of comparable analysis and functional similarity in AMP benchmarking

Treatment of AMP expenses as an international transaction - application of OECD guidance on marketing intangibles - Whether the AMP expenditures incurred by the assessee can be treated as an international transaction and how the legal tests in the cited High Court authority apply. - HELD THAT: - The Tribunal accepted the legal position already articulated by the Hon'ble Delhi High Court that AMP expenditures can be treated as part of the international transaction where appropriate, but that this requires factual examination of the parties' rights and conduct and application of OECD guidance on marketing intangibles. The Tribunal held that the question is fact-sensitive and must be examined by comparing functions, rights and whether the distributor has any economic ownership or entitlement to benefits from marketing intangibles. The Tribunal noted the High Court's guidance that external comparables performing similar AMP functions and not being legal owners of the brand are preferable and that a finding requires verification of whether gross/net margins duly account for AMP expenses. [Paras 8]

AMP expenditures may constitute an international transaction subject to factual verification and application of the legal standards set out by the High Court and OECD guidance; the Tribunal applied those standards in the present factual matrix.

Resale price method as an appropriate transfer pricing method for distributors - comparable analysis and functional similarity in AMP benchmarking - Whether the Resale Price Method (RPM) is an appropriate method to benchmark the AMP-related international transaction in the assessee's case and whether the TPO's selection of comparables was permissible. - HELD THAT: - Relying on the High Court's observation, the Tribunal found that RPM may be appropriate where comparables perform similar AMP and distribution functions and are not legal owners of the brand. The Tribunal observed that the Revenue had not demonstrated why RPM would be inapplicable in this case. The TPO's selection of Vivek Ltd. as an external comparable (a trader/reseller not owning a brand) was noted, and the Tribunal proceeded to test whether gross/net margins after adjustments would account for AMP expenses, as directed by the High Court. [Paras 8]

Resale Price Method is not rejected as a matter of law in this case; comparable analysis must be applied and, on the present facts and computations, RPM-based comparison was applied by the Tribunal.

Exclusion of selling and distribution expenses from AMP for benchmarking - quantification of arm's length adjustment on AMP - Whether selling and distribution expenses should be excluded from AMP for purposes of ALP determination and whether the adjustment made by the TPO/DRP merits reduction. - HELD THAT: - Applying the High Court's direction to exclude selling and distribution expenses for the purpose of determining AMP, the Tribunal examined the assessee's break-up of AMP and selling/distribution costs. On the undisputed computations (and recognising that the TPO had considered an appropriate comparable), the Tribunal accepted that after excluding selling and distribution expenses and accounting for grant receipts from the AE the correct adjustment quantification is substantially lower than that originally made by the TPO/DRP. The Tribunal noted that the Revenue did not dispute the computation presented during hearing. [Paras 8]

The TPO/DRP's adjustment is to be restricted by excluding selling and distribution expenses; on the facts the adjustment is limited to the amount computed by the Tribunal.

Quantification of arm's length price adjustment - Whether the addition of Rs. 13,50,86,400 made by the TPO/DRP is sustainable or requires reduction. - HELD THAT: - Having applied the RPM-oriented comparable analysis and excluded selling and distribution expenses as per the High Court's guidance, and after taking into account the grant received from the AE, the Tribunal computed the arm's length margin and arm's length price. The Tribunal found the Revenue did not dispute the computation produced by the assessee and concluded that the original adjustment by TPO/DRP was excessive. [Paras 8, 9]

The adjustment made by the TPO/DRP of Rs. 13,50,86,400 is reduced; the Tribunal directs that the adjustment be restricted to Rs. 2,85,10,127 and allows the appeal in part.

Final Conclusion: Applying the legal principles and factual tests laid down by the Hon'ble Delhi High Court and OECD guidance, the Tribunal held that AMP expenditures may be treated as an international transaction subject to factual comparison; it found RPM may be applied where comparables perform similar AMP functions, excluded selling and distribution expenses from AMP for benchmarking, and, on undisputed computations, reduced the TPO/DRP adjustment - directing that the adjustment be restricted to Rs. 2,85,10,127 and partly allowing the appeal.

Comparability - transfer pricing - arm's length price - functional analysis (functions, assets and risks) - comparability judged by functions, assets and risks under Rule 10B(2) - use of comparable companies and exclusion on functional dissimilarity

Comparability - functional analysis (functions, assets and risks) - use of comparable companies and exclusion on functional dissimilarity - transfer pricing - Exclusion of specified comparable companies from the final list for determination of arm's length price - HELD THAT: - The Tribunal examined the assessee's functional profile (captive software development service provider with minimal assets and limited risks) and applied a comparability assessment guided by functions, assets and risks. Following precedents of the Coordinate Bench, the Tribunal held that certain large/product/risk-taking companies and those with differing business lines or significant intangibles are functionally dissimilar and therefore not suitable comparables. Infosys Ltd., Larsen & Toubro Infotech Ltd. and Persistent Systems Ltd. were excluded as they are large, risk-taking/product companies without segmental information showing software development services and possess significant intangibles or product orientation. Genesys International Corporation Ltd. was excluded because its business is predominantly GIS/geospatial services (not principally software development services) and it possesses intangibles inconsistent with the assessee's functional profile. ICRA Techno Analytics Ltd. was excluded on functional non comparability and because its related party transactions exceeded the threshold relied upon for exclusion. The Tribunal found the DRP's endorsement of the TPO's comparables insufficient to override these comparability defects and therefore directed exclusion of the five identified comparables, which brought the assessee's margin within the acceptable range. [Paras 20]

The five comparables (Genesys International Corporation Ltd., ICRA Techno Analytics Ltd., Infosys Ltd., Larsen & Toubro Infotech Ltd., Persistent Systems Ltd.) are excluded from the final list of comparable companies; appeal partly allowed.

Final Conclusion: Following functional analysis and binding Tribunal precedent, five specified comparables were excluded from the comparable set; consequently the appeal is partly allowed and the transfer pricing adjustment is reduced accordingly.

Appealability of interlocutory order under section 142(2A) - special audit: requirement of complexity of accounts - extension of limitation under section 153 linked to special audit - disallowance under section 40(a)(ia) for non-deduction of TDS - scope and applicability of section 194C

Appealability of interlocutory order under section 142(2A) - extension of limitation under section 153 linked to special audit - Whether the Tribunal can adjudicate the challenge to the order making reference under section 142(2A) when the assessment is challenged as barred by limitation. - HELD THAT: - The Tribunal held that when the validity of an assessment order is challenged on the ground that it was passed beyond the period of limitation arising from an order under section 142(2A), all aspects integral to the assessment process, including the legality of the reference to special audit, are amenable to challenge before the Tribunal. Special audit is integral to assessment and can affect the period of limitation under section 153; therefore the Tribunal has jurisdiction to examine whether the reference under section 142(2A) complied with law for purposes of deciding limitation. The Tribunal rejected the Revenue's reliance on Sahara India (Firm) as not laying down a blanket bar and noted supportive judicial authority permitting such examination when limitation is in issue. [Paras 4]

Objection of the Revenue dismissed; grounds challenging the reference under section 142(2A) admitted and held to be appealable before the Tribunal for the purpose of deciding limitation.

Special audit: requirement of complexity of accounts - Whether the reference to special audit under section 142(2A) was valid on the ground that the accounts were not complex. - HELD THAT: - The Assessing Officer recorded multiple, uncontroverted factual findings showing numerous transactions (599 trucks), discrepant particulars across GRs, vouchers and Form 15-I (unsigned forms, signatures in father's name, differing names, payments in parts to different persons and lack of records identifying recipients). Those factual findings were upheld by the Commissioner (Appeals). Given the volume of transactions and the inability to reconcile particulars, the Tribunal found that the AO was justified in being satisfied that the accounts required deeper verification and constituted complexity under section 142(2A). Whether accounts are complex is a question of fact and the appellate authority's conclusion was not shown to be erroneous on the record. [Paras 6, 11, 12, 13]

Reference to special audit under section 142(2A) was valid and additional grounds attacking the reference (and consequent limitation extension) were dismissed.

Disallowance under section 40(a)(ia) for non-deduction of TDS - scope and applicability of section 194C - Whether the disallowance of freight expenses under section 40(a)(ia) for failure to deduct tax at source was justified, having regard to the applicability of section 194C and the factual matrix of separate GRs. - HELD THAT: - The AO disallowed freight expenses after the special auditor found discrepancies and concluded the assessee had not discharged TDS obligations. The assessee's principal contention - that there were no continuing contracts with transporters and each GR constituted a separate contract so that individual payments did not attract TDS under section 194C - was examined in light of the record. The Tribunal noted that the Revenue did not dispute the factum of freight expenditure and there was no finding of any written or oral long-term contract with the subcontractors; in many instances separate GRs existed for each trip and payments to each transporter did not exceed the threshold for TDS in individual transactions. Relying on the reasoning of the jurisdictional High Court decisions cited by the assessee, the Tribunal held that the discrepancies relied upon to reject the assessee's proviso-based claim did not establish existence of contracts attracting section 194C(1). The discrepancies related to identity and verification of recipients but did not, on the record, establish that the freight payments were pursuant to contracts of a nature attracting TDS under section 194C. [Paras 14, 16, 18, 19]

Disallowance under section 40(a)(ia) for non-deduction of TDS in respect of the freight payments deleted; grounds 1 to 3 of the appeal allowed.

Final Conclusion: The Tribunal held that it has jurisdiction to examine the legality of a reference under section 142(2A) when limitation is in issue, upheld the AO's reference to special audit on facts found (complexity of accounts), dismissed the assessee's additional grounds attacking the reference and consequent limitation challenge, and directed deletion of the additions disallowing freight expenses under section 40(a)(ia) because the Revenue failed to establish applicability of section 194C given the factual finding that payments were pursuant to separate GRs; appeal partly allowed.

Treatment of unexplained cash credits under section 68 - burden of proof as to identity, genuineness and creditworthiness of creditor - evidentiary value of mediator/intermediary's confirmation and ledger/balance sheet entries - deletion of addition where transaction is proved genuine

Treatment of unexplained cash credits under section 68 - burden of proof as to identity, genuineness and creditworthiness of creditor - evidentiary value of mediator/intermediary's confirmation and ledger/balance sheet entries - deletion of addition where transaction is proved genuine - Whether the addition of Rs. 20,00,000 made as unexplained cash credit could be sustained where the assessee produced ledger and balance sheet entries and a confirmation from the advocate mediator that the advance was returned. - HELD THAT: - The Tribunal examined the material on record, including the assessee's books showing a 'land advance' of Rs. 20 lakhs and the confirmation furnished by the advocate who acted as intermediary. The advocate's confirmation and the entries in the balance sheet for the relevant year established that the assessee had advanced the amount through the mediator and that the amount was subsequently refunded when the proposed purchase could not be completed because the land titles were not regularisable (lands originally belonging to SC/ST). The Tribunal held that, although the names of the individual land owners were not specifically furnished, the mediator had arranged and effected the refund and this, together with the ledger/balance sheet entries, was sufficient to discharge the assessee's burden to prove identity and genuineness of the transaction. On these findings the Tribunal concluded that the addition made by the Assessing Officer and confirmed by the CIT(A) was not sustainable and warranted deletion. [Paras 10]

Addition of Rs. 20,00,000 treated as unexplained cash credit deleted and the appeal allowed.

Final Conclusion: On the material before it - mediator's confirmation and the assessee's accounting entries showing the advance and its refund - the Tribunal found the transaction genuine, set aside the addition made under section 68 and allowed the appeal for Assessment Year 2009-10.

Depreciation on goodwill/customer list as an intangible asset - business or commercial rights within the Explanation to Section 32 - non-compete clause as ancillary to transferred commercial rights in a composite Business Transfer Agreement - classification of customer list as intangible property for depreciation purposes

Depreciation on goodwill/customer list as an intangible asset - business or commercial rights within the Explanation to Section 32 - non-compete clause as ancillary to transferred commercial rights in a composite Business Transfer Agreement - Depreciation claimed on capitalised customer list/goodwill arising from acquisition under a Business Transfer Agreement is allowable. - HELD THAT: - The Tribunal followed co-ordinate-bench decisions which held that where a business is acquired under a composite Business Transfer Agreement and consideration is allocated to customer list/goodwill, those items fall within the expression "business or commercial rights of similar nature" in the Explanation to Section 32(1) and are intangible assets eligible for depreciation. The non-compete clause in such a composite agreement was treated as supporting or strengthening the transferred commercial rights rather than representing a separate non-depreciable payment; further legislative recognition of customer-related intangibles in the context of transfer pricing rules (Sec.92B Explanation) reinforces that customer list is an intangible property. On these conclusions, the earlier Tribunal orders allowing depreciation on goodwill/customer list were applied to the assessment year under appeal and the claim allowed. [Paras 5, 6, 7]

Assessee entitled to depreciation on the intangible asset described as customer list/goodwill; appeal allowed on this ground.

Final Conclusion: The Tribunal allowed the appeal and sustained the claim of depreciation on capitalised customer list/goodwill for AY 2013-14, following co-ordinate-bench precedents and treating the amounts as intangible business/commercial rights eligible for depreciation.

Conversion of limited scrutiny to complete scrutiny and its effect on scope of assessment - Binding effect of CBDT instructions on scope of CASS selection and requirement to intimate taxpayer - Requirement of prior written approval before expanding limited scrutiny and necessity of show cause notice for additions - Principle of natural justice where expansion of scope affects taxpayer's opportunity to be heard - Cash credits under section 68 - onus on assessee to prove identity, creditworthiness and genuineness - Valuation of unquoted shares for premium - applicability of discounted cash flow method - Rule 11UA - permissible methods for determining fair market value of unquoted equity shares - Rejection of valuation evidence requires identification of deficiencies; threshold rejection not permissible

Conversion of limited scrutiny to complete scrutiny and its effect on scope of assessment - Binding effect of CBDT instructions on scope of CASS selection and requirement to intimate taxpayer - Requirement of prior written approval before expanding limited scrutiny and necessity of show cause notice for additions - Principle of natural justice where expansion of scope affects taxpayer's opportunity to be heard - Cash credits under section 68 - onus on assessee to prove identity, creditworthiness and genuineness - Whether additions made by AO in a case originally selected for limited scrutiny, but converted (with approval) to complete scrutiny and the assessment passed the next day, were valid and whether additions under section 68 are sustainable. - HELD THAT: - The Tribunal found that the assessee's return was selected under CASS for limited scrutiny confined to verification of large share premium. The AO obtained approval for conversion to complete scrutiny on 21.12.2016 and passed the assessment order on 22.12.2016 making additions that were not part of the limited scrutiny reasons. CBDT instructions require that where a limited scrutiny is converted to complete scrutiny prior written approval must be obtained and the taxpayer intimated; further, where AO proposes additions he must issue an appropriate show cause notice stating reasons. The record showed drafting of a proposed assessment and seeking approval in advance and that the AO had made roving enquiries beyond limited scrutiny before formal conversion. The Tribunal held that non adherence to the CBDT instructions and expansion of scope without affording appropriate opportunity and notice rendered the AO's exercise unlawful. On merits, for the loans treated as cash credits under section 68, the assessee had produced confirmations, income tax returns, bank statements and source of fund evidence for each lender; the AO made no further inquiry and rejected the evidence without probing. The Tribunal held that the assessee had discharged the primary onus and that the AO should have carried out enquiries to rebut genuineness; in absence of such enquiries the additions were unsustainable. [Paras 5, 6, 7]

Additions treating unsecured loans as income under section 68 quashed because they were beyond the limited scrutiny scope as selected under CASS, the CBDT instructions were not followed and, additionally, the assessee had discharged the basic onus of proving identity, creditworthiness and genuineness.

Valuation of unquoted shares for premium - applicability of discounted cash flow method - Rule 11UA - permissible methods for determining fair market value of unquoted equity shares - Rejection of valuation evidence requires identification of deficiencies; threshold rejection not permissible - Principle of natural justice where evidence admitted at appellate stage must be considered if compliant with rules - Whether share premium received on fresh issue of unquoted shares was taxable under section 56(2)(viib) when the assessee furnished a valuation under discounted cash flow method certified under Rule 11UA. - HELD THAT: - The assessee issued partly paid equity shares at a premium and furnished a valuation by a Chartered Accountant applying the discounted cash flow (DCF) method under Rule 11UA to determine fair market value. Rule 11UA permits valuation either by the prescribed net asset/book value formula or by the discounted free cash flow method. The Tribunal noted that the AO and the CIT(A) did not point out any specific deficiency in the DCF valuation; merely rejecting the valuation at threshold was impermissible. Absent demonstrable infirmities in the valuation methodology or its application, the DCF valuation under Rule 11UA had to be accepted and the addition under section 56(2)(viib) therefore lacked merit. [Paras 8, 9]

Addition made under section 56(2)(viib) for excess share premium deleted because the assessee's DCF valuation under Rule 11UA was an acceptable method and was not shown to be deficient.

Final Conclusion: The Tribunal partly allowed the appeal for AY 2014 15: additions made by the AO treating unsecured loans as income under section 68 were deleted for being beyond the scope of limited scrutiny and for want of adequate enquiry despite the assessee having produced supporting evidence; the addition under section 56(2)(viib) on account of share premium was deleted as the assessee's DCF valuation under Rule 11UA was an acceptable method not shown to be deficient. Remaining grounds became academic in view of these deletions.

Time bound disposal of statutory appeals - consideration of application for re export of confiscated goods pending appeal - redemption fine under Section 125 of the Customs Act, 1962 - confiscation under Section 111(d) of the Customs Act, 1962 - penalty under Section 112(a)(i) of the Customs Act, 1962

Time bound disposal of statutory appeals - consideration of application for re export of confiscated goods pending appeal - Appellate authority directed to take up and decide the statutory appeal and any application for re export in a time bound manner. - HELD THAT: - The writ court noted that a statutory appeal against the adjudicating authority's confiscation order had been filed and, without deciding merits, directed respondent No.5 (Commissioner of Customs (Appeals), Kandla) to take up the appeal at the earliest and decide it in accordance with law. The court permitted the counsel for the writ applicant to prefer an appropriate application before the appellate authority seeking permission to re export the goods. The appellate authority was required, if unable to take up the main appeal for hearing, to at least hear the application for re export within eight days of its filing, and to take an appropriate decision within fifteen days from the date of receipt of this writ order. The court invited attention to the circular dated 16th September 2014 (Annexure H), particularly clause 4, while clarifying that it had not gone into the merits of the confiscation order. [Paras 3, 4]

Directed respondent No.5 to take up and decide the appeal in accordance with law; permitted filing of an application for re export before the appellate authority and directed that the re export application be heard within eight days if the main appeal cannot be taken up, and that an appropriate decision be taken within fifteen days of receipt of this order.

Consideration of application for re export of confiscated goods pending appeal - redemption fine under Section 125 of the Customs Act, 1962 - Request for re export of goods remitted to the appellate authority for fresh consideration; court did not adjudicate on the merits of requiring payment of redemption fine. - HELD THAT: - The court refrained from adjudicating the merits of the confiscation order or the requirement to pay the redemption fine under Section 125 for re export. Instead, it directed that the applicant may press an application for re export before the appellate forum where the statutory appeal is pending. The appellate authority is to consider that application afresh and take an appropriate decision within the time frame directed by the court. The writ court explicitly limited its order to procedural directions and did not rule on substantive entitlement or the correct application of Section 125. [Paras 4]

Remitted the re export request to the appellate authority for fresh consideration and directed time bound disposal of the same; declined to go into merits.

Final Conclusion: Writ petition disposed by directing the Commissioner of Customs (Appeals), Kandla, to take up and decide the statutory appeal in accordance with law; petitioner permitted to file an application for re export before the appellate authority, which must be heard within eight days if the main appeal cannot be heard, and a decision taken within fifteen days of receipt of this order; merits left open.

Transaction value - rejection of declared value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - consent to enhancement of assessable value - waiver of speaking order under section 17(5) of the Customs Act, 1962 - waiver of show-cause notice and personal hearing under section 124 of the Customs Act, 1962 - contemporaneous import data / NIDB data as basis for enhancement - burden on Revenue to prove that declared invoice does not reflect transaction value

Consent to enhancement of assessable value - transaction value - Whether the Commissioner (Appeals) was justified in setting aside the assessing officer's re-assessment where the importers had in writing agreed to enhancement of the declared value and paid duty accordingly. - HELD THAT: - The Tribunal found that both importers had, by written letters, expressly agreed to enhance the declared value to the levels proposed by the assessing officer and expressly waived their right to a show-cause notice, personal hearing and a speaking order. Once an importer consents to the enhanced value and pays duty, that consented value effectively becomes the declared transaction value requiring no further investigation or justification; revenue is not obliged to establish valuation afresh. The Commissioner (Appeals) failed to advert to these crucial facts and proceeded as if the enhancement was done without the importers' written acceptance. On merits, therefore, the Commissioner (Appeals) erred in setting aside the assessing officer's orders. [Paras 21, 30, 31, 47, 48]

The Commissioner (Appeals) erred; the assessing officer's re-assessments based on the importers' written acceptance are upheld.

Waiver of speaking order under section 17(5) of the Customs Act, 1962 - waiver of show-cause notice and personal hearing under section 124 of the Customs Act, 1962 - Whether a speaking order under section 17(5) and the procedure under section 124 must be complied with where the importer has in writing confirmed acceptance of the re-assessment and waived those rights. - HELD THAT: - Section 17(5) requires a speaking order where reassessment is contrary to self-assessment, but expressly excepts cases where the importer confirms acceptance of the re-assessment in writing. Rule 12(2) requires the proper officer to intimate grounds and provide hearing only at the request of the importer. Here, the importers voluntarily relinquished their rights under section 124 and section 17(5) in writing; consequently, the assessing officer was not obliged to pass a speaking order or issue a show-cause notice before effecting assessment at the accepted enhanced values. [Paras 16, 17, 18, 22, 23]

The statutory requirement to pass a speaking order and to issue a show-cause notice/personal hearing does not apply where the importer has validly and in writing waived those rights.

Rejection of declared value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - proceeding sequentially through Rules 4 to 9 - Whether the assessing officer was required to first record rejection of the transaction value under Rule 12 and thereafter determine value under Rules 4-9 despite the importer's written acceptance of the enhanced value. - HELD THAT: - Rule 12 provides a mechanism for rejection of declared value and mandates further procedure only where the proper officer has reason to doubt and the doubt persists. However, where the importer has accepted the enhanced value in writing, the declared value effectively stands rejected by the importer and the consented value becomes the transaction value; therefore there is no need for the assessing officer to undertake the sequential exercise under Rules 4-9 to determine value. The Tribunal relied on precedent where consent to enhancement obviated further inquiry and precluded subsequent successful challenge to the consented value. [Paras 25, 29, 30, 31]

Where the importer accepts the enhanced value in writing, the assessing officer need not proceed to reject the declared value under Rule 12 and determine value under Rules 4-9.

Contemporaneous import data / NIDB data as basis for enhancement - burden on Revenue to prove that declared invoice does not reflect transaction value - Whether contemporaneous import data (NIDB data) alone can be the basis for rejecting the declared transaction value. - HELD THAT: - The Tribunal noted settled law that NIDB/contemporaneous data cannot be the sole basis for rejecting transaction value absent cogent reasons and evidence showing that the invoice does not reflect the true transaction value. While rule 12(1) permits raising doubt where comparable imports show significantly higher values, the revenue must discharge the burden of proving that the invoice value is not representative. In the present case the court observed that the Department's reliance on contemporaneous data was not determinative because the importers themselves accepted the higher values in writing; accordingly the Commissioner (Appeals)'s reliance on absence of reasons in the AO's record overlooked the importers' consent. [Paras 14, 20, 26, 46]

NIDB/contemporaneous data alone cannot be the sole basis to reject the declared transaction value; the Revenue must discharge the burden of proving the declared invoice does not reflect transaction value.

Final Conclusion: The appeals filed by the Commissioner of Customs succeed. The Tribunal set aside the 36 orders of the Commissioner (Appeals) and restored the assessments made by the assessing officer at the enhanced values accepted in writing by the importers; the Commissioner (Appeals)'s orders allowing the importers' appeals are therefore set aside.

Scheme of Arrangement - Demerger - Appointed Date - Vesting of assets and liabilities - Transfer of employees as going concern - Compliance with sections 230 to 232 of the Companies Act, 2013 - Liability for non-compliance with section 135 (CSR) - Related party transactions compliance under section 188 - Competition Commission of India notice and threshold exemption - CIN rectification and Registrar of Companies' records - Tax implications subject to decision of tax authorities

Scheme of Arrangement - Compliance with sections 230 to 232 of the Companies Act, 2013 - Appointed Date - Sanction of the Scheme of Arrangement and fixation of Appointed Date. - HELD THAT: - The Tribunal considered the petition, the reports of the Regional Director and Registrar of Companies, statutory compliance steps taken (meetings, notices, publications) and the material placed on record. The Regional Director concluded that the Scheme is fair, reasonable and not contrary to public policy. The Tribunal was satisfied that the procedure required under sub-sections (1) and (2) of section 232 has been complied with and that the Scheme, as approved by the Boards of the Transferor and Resulting Companies, can be sanctioned. The Tribunal fixed the Appointed Date as 1st April, 2019 and sanctioned the Scheme subject to specified directions and conditions recorded in the order.

The Scheme of Arrangement is sanctioned and the Appointed Date is 01st April, 2019.

Vesting of assets and liabilities - Demerger - Effect of the demerger on assets, liabilities and pending proceedings of the Apparel Division. - HELD THAT: - The Tribunal ordered that, with effect from the Appointed Date, all assets relating to the Apparel Division of the Transferor Company shall, without further act or deed, stand transferred to and vest in the Resulting Company as a going concern. All debts, secured and unsecured liabilities, obligations, taxes and duties relating to the Apparel Division are likewise transferred and shall become the liabilities and duties of the Resulting Company. The Tribunal further directed that any legal proceedings by or against the Transferor Company relating to the Apparel Division shall be continued by or against the Resulting Company.

Assets, liabilities and pending proceedings relating to the Apparel Division are transferred to and shall vest in the Resulting Company.

Transfer of employees as going concern - Status of employees of the Apparel Division following the demerger. - HELD THAT: - The Scheme provides and the Tribunal sanctioned that all employees working for the Apparel Division of the Transferor Company shall become employees of the Resulting Company without any break or interruption in service and on terms of service not less favourable than those enjoyed by them. The Tribunal endorsed this transfer of employment pursuant to the Scheme.

Employees of the Apparel Division shall become employees of the Resulting Company on continuation of service on not less favourable terms.

Liability for non-compliance with section 135 (CSR) - Related party transactions compliance under section 188 - Treatment of CSR and related party compliance and transfer of liabilities arising from non-compliance. - HELD THAT: - The Registrar of Companies and the Regional Director raised queries regarding CSR shortfall and compliance with section 188 for related party transactions. The Petitioners filed affidavits undertaking that requisite disclosures and approvals have been placed on record and that CSR obligations have been met. The Tribunal directed that any liability arising from non-compliance with section 135 shall stand transferred to and become the liability of the Resulting Company. Further, the Petitioner Companies were directed to ensure compliance with applicable provisions of the Companies Act and to file statutory returns and periodic affidavits certifying such compliance.

Liabilities arising from non-compliance with CSR (section 135) are transferred to the Resulting Company; Petitioners must ensure and certify compliance with section 188 and other applicable provisions.

Competition Commission of India notice and threshold exemption - Requirement of filing a notice with the Competition Commission of India (CCI) for the proposed combination. - HELD THAT: - The CCI informed that a notice is mandatorily required where thresholds are met, but exemptions exist. The Petitioners served notice on CCI and certified that, on their assessment, the value and turnover of the demerged undertaking fall below the thresholds requiring mandatory CCI approval under the cited notification. No objection was received from CCI in the proceedings before the Tribunal. On the material before it, the Tribunal accepted the Petitioners' submission regarding threshold exemption and proceeded to sanction the Scheme subject to the usual reservation that statutory permissions and compliances remain the responsibility of the Companies and relevant authorities.

No prior CCI approval was treated as required on the material presented; the Scheme is sanctioned subject to any obligations under competition law as may be applicable.

CIN rectification and Registrar of Companies' records - Registrar of Companies' records - Correction of mismatch in Company Identification Number (CIN) in Registrar records. - HELD THAT: - A discrepancy in the CIN of the Resulting Company in Registrar records was noted and satisfactorily explained as arising from historical office shifts and recording of the year. The Tribunal recorded that the matter has been rectified in MCA records and directed the Registrar of Companies, Karnataka, to rectify the CIN if not already done and, if required, to issue a fresh Certificate of Incorporation so that the correct CIN is reflected in all records.

Registrar of Companies, Karnataka, to ensure rectification of CIN and, if necessary, issue a fresh Certificate of Incorporation.

Tax implications subject to decision of tax authorities - Adjudication of tax consequences arising from the Scheme. - HELD THAT: - The Tribunal expressly recorded that tax implications arising out of the Scheme, in particular issues concerning the Income Tax Authorities, remain subject to final decision by the concerned tax authorities. The Tribunal did not adjudicate the tax consequences on merits but made it clear that any determination by the tax authorities shall be binding on the Resulting Company.

Tax implications are not finally adjudicated by the Tribunal and are left to the concerned Income Tax Authorities for final decision.

Final Conclusion: The Tribunal sanctioned the Scheme of Arrangement for demerger of the Apparel Division from the Transferor to the Resulting Company with Appointed Date of 01.04.2019, directing vesting of assets and liabilities, transfer of employees, compliance with CSR and related-party requirements, rectification of CIN by the ROC, and leaving tax consequences to the final decision of the tax authorities; Petitioners were directed to complete statutory filings and certify compliance.

Restoration of name in the Register of Companies - struck off under Section 248 - filing of annual returns and financial statements - payment of prescribed fees/additional fee and cost for revival - publication in the Official Gazette - continuing regulatory power of the Registrar of Companies

Restoration of name in the Register of Companies - filing of annual returns and financial statements - payment of prescribed fees/additional fee and cost for revival - continuing regulatory power of the Registrar of Companies - Name of the company struck off by the Registrar is to be restored in the Register of Companies subject to specified conditions. - HELD THAT: - The company was struck off after non-filing of Annual Returns and Financial Statements for the financial years 2016-17 and 2017-18, prompting ROC to conclude it was not in operation. The NCLT found on the material placed before it (including Financial Statements for year ended 31.03.2020 and bank transactions) that the company had trading operations, assets and liabilities and ongoing transactions, and that ROC's report permitted restoration on merits subject to compliance. Balancing the default in statutory filings against the established continuation of business, the Tribunal exercised its power under Section 252(3) to direct restoration of the company's name from the date of striking off, while prescribing consequential conditions: filing of all pending statutory documents including the Annual Accounts and Annual Returns for the defaulting years with prescribed fees/additional fee/fine within 45 days of restoration; personal assurance of compliance by the company's representative; payment of a specified cost for each year of default by online payment within 30 days; delivery of a certified copy of the order to ROC and publication by ROC in the Official Gazette after compliance. The order is confined to violations that led to the striking off and does not preclude ROC from taking other lawful actions for any other violations or offences committed prior to or during striking off. [Paras 5, 6]

The company's name is restored in the Register of Companies since the date of its striking off, subject to filing of pending statutory documents with prescribed fees/additional fee/fine, payment of costs and the other conditions specified by the Tribunal.

Final Conclusion: The Company Appeal is allowed; the Tribunal directs restoration of the company's name in the Register of Companies subject to compliance with the conditions ordered (filing of pending returns/accounts with prescribed fees/additional fee/fine, payment of costs, delivery of certified copy and Gazette publication) while leaving open ROC's power to take any other lawful action for unrelated violations.

Restoration of name of company struck off - power of Registrar to strike off for non filing and non operation - exercise of Tribunal's discretion under Section 252(3) - requirement to file pending statutory returns and payment of fees - restoration subject to conditions and costs - principle of ease of doing business and interest of justice

Restoration of name of company struck off - exercise of Tribunal's discretion under Section 252(3) - power of Registrar to strike off for non filing and non operation - requirement to file pending statutory returns and payment of fees - restoration subject to conditions and costs - principle of ease of doing business and interest of justice - Whether the Tribunal should restore the Company's name struck off by the Registrar and on what terms - HELD THAT: - The Tribunal accepted that the Registrar had power under Section 248 to strike the Company for non filing and non operation and that the Registrar had complied with the prescribed procedure. However, having regard to the bona fide contentions of the petitioner, absence of any pending investigation or complaint, and the principle of ease of doing business together with the prevailing economic difficulties, the Tribunal exercised its discretionary jurisdiction under Section 252(3) to restore the Company's name. The restoration was granted on terms necessary to protect creditors and statutory compliance: the Company must file all pending statutory documents and pay prescribed fees/additional fees/fines within 30 days of restoration; the petitioner must ensure personal compliance; a specified cost must be paid to the Central Government within three weeks failing which the order lapses; the Registrar is to restore consequential records including DINs and publish the order in the Official Gazette after receipt of a certified copy; and the order is confined to the violations that led to the striking off and does not preclude the Registrar from taking action for any other violations committed prior to or during the striking off. The Tribunal therefore balanced the Registrar's statutory powers with remedial relief conditioned to secure compliance and protect third party interests. [Paras 6, 7, 8]

The Company's name is restored in the Register as if it had not been struck off, subject to filing of pending returns and payment of prescribed fees/fines, payment of the stated cost to the Central Government, delivery of a certified copy of the order to the Registrar, publication by the Registrar, and the reservation of the Registrar's power to take action for other violations.

Final Conclusion: C.P.No.89/BB/2020 disposed of by restoring the name of Pure Entertainment Private Limited on the Register of Companies subject to conditions: filing of pending documents with fees/fines, payment of costs to the Central Government, compliance steps by the petitioner's representative, restoration of consequential records by the Registrar and publication in the Official Gazette; the order is confined to the defaults leading to striking off and does not preclude action for other violations.

Restoration of company name - Strike off for non filing and non carrying on business under Section 248 framework - Exercise of power under Section 252(3) by Tribunal - Conditions for restoration including statutory filings and costs - Registrar's pre striking duty to ensure realization of dues - Principle of ease of doing business and remedial leniency - Restoration not precluding subsequent action for other violations

Restoration of company name - Exercise of power under Section 252(3) by Tribunal - Principle of ease of doing business and remedial leniency - The Tribunal granted restoration of the Company's name struck off by the Registrar of Companies. - HELD THAT: - The Tribunal, applying its power under the statutory provision for restoration, accepted the petitioner's contention that the non filing of annual returns/financial statements was not intentional or deliberate, noted that there were no investigations or complaints pending against the Company, and recorded that the ROC did not oppose restoration subject to terms. Considering the Company's continued operations, the adverse impact of strike off on creditors, employees and business, and the undertaking to file outstanding returns, the Tribunal took a lenient view in the interest of justice and ease of doing business and directed restoration of the name.

The name of the Company is restored by ordering the ROC to restore the Company on the Register and to give consequential effect including restoration of Directors' DINs.

Conditions for restoration including statutory filings and costs - Registrar's duty to satisfy realization of dues - Restoration was subject to specified conditions: filing of statutory documents, payment of prescribed fees/penalty, payment of costs, delivery of certified copy, publication by ROC, and compliance supervision by the petitioner's representative. - HELD THAT: - The Tribunal imposed terms to safeguard statutory compliance and stakeholders' interests. The Company must file all pending statutory documents with prescribed fees/additional fee/fine as determined by the ROC within 30 days of restoration; the petitioner's representative must personally ensure compliance; the petitioner must pay the directed cost to the Central Government within the stipulated time or the order will lapse; the petitioners may deliver a certified copy of the order to the ROC; and upon compliance the ROC is directed to publish the order in the official Gazette. These conditions balance remedial relief with procedural safeguards and ROC's statutory responsibilities.

Restoration granted subject to the filing of outstanding returns/documents with fees/fines within 30 days, payment of directed costs within the stipulated time, delivery of a certified copy, and subsequent publication by the ROC.

Restoration not precluding subsequent action for other violations - Registrar's pre striking duty to ensure realization of dues - The order to restore the Company's name does not prevent the Registrar of Companies from taking appropriate action under law for any other violations or offences committed prior to or during striking off. - HELD THAT: - While reinstating the Company as if its name had not been struck off, the Tribunal expressly confined the relief to the violations that led to the strike off and clarified that ROC remains free to initiate or continue actions for any other contraventions. This preserves the ROC's statutory enforcement powers despite the remedial restoration ordered.

Restoration is confined to the grounds that led to strike off and does not bar the ROC from taking lawful action for other violations.

Final Conclusion: The Tribunal allowed the company petition and directed restoration of the Company's name on the ROC register, subject to conditions including filing outstanding statutory documents with prescribed fees/fines, payment of costs, delivery of a certified copy and publication by the ROC; the restoration does not preclude the ROC from taking further action for other violations.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - treatment of employee claims (pension, gratuity, provident fund) during corporate insolvency resolution process - admission of claims as on the insolvency commencement date - inclusion of admitted claims in the Information Memorandum - EPF authorities' claim vis-a -vis individual provident fund claims - interest on gratuity for culpable delay - distribution of assets pursuant to an approved resolution plan or under liquidation

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - treatment of employee claims (pension, gratuity, provident fund) during corporate insolvency resolution process - distribution of assets pursuant to an approved resolution plan or under liquidation - Whether the applicants were entitled to a direction for disbursement of pension, gratuity and provident fund during the corporate insolvency resolution process. - HELD THAT: - The Tribunal observed that a moratorium under Section 14 of the I&B Code had been declared on 28.11.2019, which prohibits institution or continuation of proceedings and bars distributions outside the CIRP framework. The Resolution Professional submitted that distributions to creditors during CIRP cannot be directed by the Tribunal and that any payment or distribution must follow an approved resolution plan under Section 31 or, in the event of liquidation, under Section 53. Having considered the materials and the fact that admitted claims were included in the Information Memorandum, the Tribunal found that no relief directing interim disbursement to the applicants during CIRP survived for consideration. [Paras 5, 9, 13, 17, 18]

Relief seeking direction to disburse pension, gratuity and provident fund during CIRP is not maintainable and nothing survives for further consideration.

Admission of claims as on the insolvency commencement date - inclusion of admitted claims in the Information Memorandum - interest on gratuity for culpable delay - Whether the Resolution Professional had admitted the applicants' gratuity claims and interest thereon up to the insolvency commencement date and included the same in the Information Memorandum. - HELD THAT: - The Resolution Professional stated that, in accordance with Regulation 13 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, claims were to be verified and admitted as on the insolvency commencement date. The RP admitted gratuity and interest (to the insolvency commencement date of 28.11.2019) for eligible claimants, as reflected in the admitted-claims table, and confirmed that these admitted claims were included in the Information Memorandum circulated to resolution applicants. The Tribunal referred to the Regional Labour Commissioner's determination on culpable delay and interest, but noted that the RP had already admitted interest till the insolvency commencement date and had acted in accordance with the Regulations. [Paras 11, 12, 13, 17]

The Resolution Professional had admitted gratuity and interest up to the insolvency commencement date and included the admitted claims in the Information Memorandum.

EPF authorities' claim vis-a -vis individual provident fund claims - admission of claims as on the insolvency commencement date - Whether the applicants' individual provident fund claims could be admitted where the EPF authorities had filed and had their claims admitted by the Resolution Professional. - HELD THAT: - The record shows that the EPF authorities filed claims for the employees' PF dues and that those claims were admitted by the Resolution Professional. Consequently, the RP did not admit the individual applicants' separate claims in respect of provident fund dues. The Tribunal noted this factual position and the RP's adherence to admitting the EPF authority's claim, leaving no additional PF claim by the applicants to be admitted or disbursed separately. [Paras 14, 15, 17]

Because the EPF authorities' claims in respect of provident fund dues were filed and admitted by the Resolution Professional, the applicants' individual PF claims were not admitted.

Final Conclusion: The application is disposed of: the Tribunal recorded that gratuity and interest had been admitted by the Resolution Professional up to the insolvency commencement date and included in the Information Memorandum, EPF claims in respect of PF dues were admitted (precluding separate admission of individual PF claims), and no entitlement existed to direct disbursement of pension, gratuity or PF during CIRP; accordingly nothing further survives for consideration.

Anticipatory bail - possession and acquisition of assets from proceeds of crime - onus to explain when proceeds of crime are found in possession - filing of income tax returns to legalize tainted proceeds - statement under section 50 of the Prevention of Money Laundering Act - offence under the Prevention of Money Laundering Act

Anticipatory bail - possession and acquisition of assets from proceeds of crime - filing of income tax returns to legalize tainted proceeds - onus to explain when proceeds of crime are found in possession - statement under section 50 of the Prevention of Money Laundering Act - Application for anticipatory bail by the petitioner was rejected. - HELD THAT: - The Court found specific allegations by the Enforcement Directorate that after the petitioner's marriage in June 2014 his family acquired multiple movable and immovable assets allegedly from the proceeds of crime of his father in law. The petitioner and his father had not produced documentary evidence, aside from ancestral land, to show prior lawful acquisition of the impugned assets. The record showed substantial cash deposits and transfers from the petitioner's mother in law, admissions and statements recorded under section 50 of the PMLA indicating receipt of funds and lack of independent source of income, and the petitioner's filing of income tax returns for later years which the prosecution contended were intended to legalize tainted receipts. In these circumstances the Court applied the settled principle that where proceeds of crime are found in a person's possession, the onus to satisfactorily explain the source lies on that person; the petitioner's explanations and documents were held insufficient. On the basis of these incriminating material and the absence of satisfactory explanation, the Court concluded that the petitioner was not entitled to anticipatory bail.

Petition for anticipatory bail rejected.

Final Conclusion: The High Court refused anticipatory bail, holding that the prosecution material, including statements under the PMLA and financial transactions suggesting acquisition of assets from alleged proceeds of crime and the attempt to legalize those receipts through income tax filings, did not permit grant of anticipatory relief to the petitioner.

Bail under the Prevention of Money Laundering Act, 2002 - proviso to Section 45(1) of the PMLA (bail threshold) - cooperation in investigation - non-arrest during investigation under Section 19 PMLA - prior bail in the scheduled offences - long investigation and delay as a ground for bail

Bail under the Prevention of Money Laundering Act, 2002 - cooperation in investigation - non-arrest during investigation under Section 19 PMLA - prior bail in the scheduled offences - long investigation and delay as a ground for bail - Applicant entitled to be released on bail in Case Crime No. 15 of 2019 under PMLA on the conditions imposed by the High Court. - HELD THAT: - The Court found that the applicant cooperated with the Directorate of Enforcement throughout the investigation initiated by registration of ECIR in 2010 until filing of the complaint in 2018 and was not arrested during the CBI investigation which culminated in charge sheeting and grant of bail in the scheduled offences. The Directorate did not arrest the applicant under Section 19 of the PMLA during the prolonged investigation, and the applicant did not misuse interim liberty previously granted. The Court observed that the investigation had been conducted over an extended period and that the investigating agency had an obligation to discover evidence during that time. On these facts - continued cooperation, absence of misuse of liberty, earlier grant of bail in related cases, non-arrest during long investigation - the Court held it was a fit case for bail and directed release on furnishing specified bonds and complying with conditions aimed at preventing tampering with evidence and ensuring attendance at key trial events.

Applicant released on bail subject to furnishing personal bond and sureties and compliance with enumerated conditions.

Proviso to Section 45(1) of the PMLA (bail threshold) - bail under the Prevention of Money Laundering Act, 2002 - Court considered but did not bar bail despite prosecution's contention on the amount of 'proceeds of crime' exceeding the proviso threshold. - HELD THAT: - The applicant's counsel relied on the proviso to Section 45(1) of the PMLA which contemplates bail where the proceeds involved are less than the specified monetary threshold. The prosecution asserted that the total proceeds of crime exceeded that threshold. The Court noted the prosecution's contention regarding the amount but, taking the overall factual matrix - including the applicant's cooperation, non-arrest during long investigation, earlier bail in related cases, and absence of misuse of liberty - exercised its discretion to grant bail notwithstanding the prosecution's averment on the quantum. Thus, while the proviso and quantum were considered, the Court's decision turned on the totality of circumstances rather than an absolute application of the monetary threshold urged by the respondent.

Proviso to Section 45(1) considered but did not preclude grant of bail on the facts; bail granted.

Final Conclusion: Bail granted to Rajendra Kumar Mishra in Case Crime No. 15 of 2019 under PMLA on furnishing specified bonds and sureties, subject to conditions designed to prevent tampering, ensure cooperation and attendance at critical stages of trial.

Offences under PMLA non-bailable - Section 45 PMLA mandatory conditions for bail - Special statute prevails over general law (Section 5 CrPC) - Economic offences constitute a class apart - Factors to be weighed while considering bail in economic/offence involving public funds

Section 45 PMLA mandatory conditions for bail - Offences under PMLA non-bailable - Special statute prevails over general law (Section 5 CrPC) - Economic offences constitute a class apart - Factors to be weighed while considering bail in economic/offence involving public funds - Application for grant of bail to the accused-applicant under Section 439 Cr.P.C. read with Section 45 of the PMLA. - HELD THAT: - The High Court refused the bail application. The court held that PMLA is a special statute whose provisions override the general provisions of the Cr.P.C., and that Section 45 prescribes mandatory conditions for bail which must be complied with. The court took into account the Supreme Court's detailed findings and directions in Writ Petition (C) No.940 of 2017 which flagged extensive diversion of home buyers' funds, non compliance with Court directions, forensic audit findings indicating siphoning of funds into sham companies, prima facie contraventions including money laundering and possible FEMA violations, and the continuing investigation by Enforcement Directorate to unearth the money trail. Applying established precedents that economic offences involving deep rooted conspiracies and large public money constitute a distinct class warranting stringent scrutiny at bail stage, the court found that having regard to the nature and magnitude of allegations, the accused's role as a managing director and the factual matrix recorded by the Supreme Court and forensic auditors, it was not appropriate to enlarge the accused on bail while investigation and tracing of proceeds continued. The court therefore declined to exercise its discretion in favour of bail. [Paras 24, 25, 26, 27, 28]

Bail refused; bail application rejected.

Final Conclusion: The High Court declined bail to the accused-applicant under Section 439 Cr.P.C. read with Section 45 of the PMLA, applying the mandatory conditions of Section 45, the overriding effect of the PMLA over Cr.P.C., and stringent bail principles applicable to grave economic offences involving diversion of public/home buyers' funds; the bail petition is rejected.

Interim release of attached property - provisional attachment under PMLA - confirmation of attachment by the Adjudicating Authority - possession following confirmation under Section 8(4) of PMLA - de-sealing of attached property under the Prevention of Money-laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013 - right to be heard / opportunity of hearing before passing orders affecting attached property - Appellate Tribunal's power to pass interim orders under Section 26(4) of PMLA

Interim release of attached property - provisional attachment under PMLA - confirmation of attachment by the Adjudicating Authority - possession following confirmation under Section 8(4) of PMLA - de-sealing of attached property under the Rules 2013 - right to be heard - Appellate Tribunal's power under Section 26(4) of PMLA - Whether the Appellate Tribunal could order de-sealing/temporary release of property provisionally attached and confirmed under PMLA during pendency of proceedings. - HELD THAT: - The statutory scheme of PMLA contemplates provisional attachment by the Director (or authorised officer) under Section 5, followed by adjudication and confirmation by the Adjudicating Authority under Section 8, after which possession is to be taken by the Director or authorised officer. There is no provision in PMLA or in the Rules 2013 permitting temporary de-sealing or interim release of property for use by the attached persons while proceedings are pending. The Appellate Tribunal may exercise powers under Section 26(4), but it must give both parties an opportunity of hearing before passing orders that affect the attachment; summary disposal on the day fixed merely for appearance, without perusal of record or hearing, was contrary to that obligation. The impugned order also contained findings inconsistent with the record (notably as to notice and awareness of respondent), and treated interlocutory applications in a manner amounting to determination of merits without proper procedure. Rule 5(5) of the Rules 2013 uses 'may' and does not create a mandatory entitlement to release; its application is to be determined by the Adjudicating Authority. For these reasons the impugned order, being contrary to the statutory scheme, Rules 2013 and passed without affording proper opportunity to the Enforcement Directorate, could not be sustained.

Impugned order directing de-sealing and interim handover of possession is contrary to PMLA and Rules 2013 and was passed without affording required opportunity; the order is set aside.

Final Conclusion: The appeal is allowed; the Appellate Tribunal's interim order of de-sealing and temporary release of the attached property is set aside as contrary to the statutory scheme of PMLA and the Rules 2013 and having been passed without affording the Enforcement Directorate a proper opportunity of hearing.

Power of Appellate Tribunal to grant interim relief under Section 26(4) of the Prevention of Money Laundering Act - inherent powers and principles of natural justice governing Appellate Tribunal procedure - attachment and possession under the Prevention of Money Laundering Act and their provisional nature - requirement of a reasoned speaking order and non-application of mind - remand for fresh decision by the Appellate Tribunal

Power of Appellate Tribunal to grant interim relief under Section 26(4) of the Prevention of Money Laundering Act - inherent powers and principles of natural justice governing Appellate Tribunal procedure - attachment and possession under the Prevention of Money Laundering Act and their provisional nature - Whether the Appellate Tribunal had jurisdiction and power to pass an interim order restoring possession of an attached property for a limited period during the pendency of an appeal. - HELD THAT: - The Court held that Section 26(4) confers on the Appellate Tribunal the power to "pass such orders thereon as it thinks fit" after giving parties an opportunity of being heard, and Section 35 permits the Tribunal to regulate its procedure guided by principles of natural justice. Where the Tribunal is prima facie satisfied that there is an apparent error on the record or non-compliance with statutory procedure in attachment/taking possession, it may, in a deserving case, grant interim relief concerning the subject-matter of the appeal. Such power to pass interim orders is ancillary to the Tribunal's power to pass final orders and is not excluded by the scheme of the Act so long as no specific statutory bar is shown. The Court noted, however, that the bar in Section 8 (vested powers of the Special Court upon commencement of trial) would be attracted only once trial has commenced and charges are framed; that was not the present position. The exercise of this discretionary power must be founded on proper appreciation of statutory provisions and factual compliance or non-compliance therewith. [Paras 8, 9, 10]

Appellate Tribunal has jurisdiction to grant interim restoration of attached property in appropriate cases during the pendency of appeal, subject to compliance with statutory safeguards and exercise of proper discretion.

Requirement of a reasoned speaking order and non-application of mind - remand for fresh decision by the Appellate Tribunal - Whether the impugned interim order of the Appellate Tribunal was sustainable on the facts of this case. - HELD THAT: - On the facts, the Appellate Tribunal's order merely asserted it had inherent powers to restore the property if possession was taken without following due procedure, but it did not identify or apply specific statutory provisions or explain how mandatory procedures were not complied with. The order was thereby cryptic, sketchy and non-speaking, evidencing non-application of mind. For that reason the order could not stand. The Court set aside the impugned order and remanded the matter to the Appellate Tribunal for fresh decision in accordance with law, directing that parties be heard and the Tribunal address statutory compliance and justification when exercising its discretionary power. [Paras 11, 12, 13]

Impugned order set aside and matter remanded to the Appellate Tribunal for a fresh, reasoned decision in accordance with law.

Final Conclusion: The appeal is allowed: while the Appellate Tribunal has jurisdiction to pass interim restoration orders under Section 26(4) in appropriate cases, the impugned order was non-speaking and unsustainable; it is set aside and the matter is remanded to the Appellate Tribunal for fresh decision in accordance with law.

Anticipatory bail under Section 438 Cr.P.C. - scope of relief under the Prevention of Money Laundering Act - economic offences as a distinct class for bail - powers of arrest under the PMLA - pre-arrest bail premature where investigation ongoing

Anticipatory bail under Section 438 Cr.P.C. - scope of relief under the Prevention of Money Laundering Act - pre-arrest bail premature where investigation ongoing - Application for anticipatory bail under the Cr.P.C. in respect of offences investigated under the PMLA is premature and is not to be granted in the facts of this case. - HELD THAT: - The Court examined the statutory scheme of the PMLA and observed that the Act contains no specific provision dealing with grant of anticipatory bail; authorities under the PMLA are vested with comprehensive investigative and arrest powers to be exercised by senior officers, indicating the need for caution before implicating or arresting persons. Precedents treating economic offences as a distinct class for bail were considered, and the Court noted that such offences warrant a stricter approach to anticipatory bail. On the material placed before it, the ED has gathered statements and electronic material that establish sufficient basis for interrogation and indicate possible involvement of the petitioner, although he has not yet been arraigned as an accused. Given that investigation is ongoing, the petitioner has been cooperating and the ED has not yet concluded whether to array him as an accused, the Court held that seeking extraordinary relief of pre-arrest bail at this stage is premature. The Court therefore declined to restrain arrest and dismissed the anticipatory bail plea, leaving the exercise of arrest powers under the PMLA to the competent senior officers in accordance with law. [Paras 9, 10]

Anticipatory bail application dismissed as premature; no restraint on arrest.

Final Conclusion: The petition for anticipatory bail is dismissed as premature; the Court declines to restrain arrest and leaves the ED free to proceed in accordance with the PMLA and applicable precedents.

Suppression of facts - extended period of limitation - self-assessment - deemed registration - irregular CENVAT credit - exemption of advances received prior to 10.09.2004 - burden on revenue to prove willful suppression

Suppression of facts - extended period of limitation - burden on revenue to prove willful suppression - Whether the proviso to section 73(1) permitting invocation of the extended five-year period could be invoked on the facts of the case - HELD THAT: - The Tribunal examined the scope of the proviso to section 73(1) and the settled precedents which require that 'suppression of facts' (as one of the triggers for the extended period) must be deliberate and with an intent to evade tax. Relying on the ratio in Pushpam Pharmaceuticals and subsequent Supreme Court decisions and the Delhi High Court's reasoning, the Tribunal held that mere omission or incorrect statement does not constitute suppression unless wilful with intent to evade. The show cause notice equated self-assessment errors with deliberate suppression; however the Tribunal found the appellant had been regularly filing returns and that the Department also had a duty of return-scrutiny, as reflected in the Board's Circular. Examining the audit objections and the appellant's explanations, the Tribunal concluded there was no evidence of deliberate or wilful suppression to evade service tax and therefore the extended period could not be invoked. [Paras 35, 36, 37, 38, 39]

Extended period under the proviso to section 73(1) could not be invoked as there was no wilful suppression of facts with intent to evade tax.

Exemption of advances received prior to 10.09.2004 - Whether service tax was payable on advances received prior to 10.09.2004 for construction services - HELD THAT: - The Tribunal considered the Notification dated 10.09.2004 which exempts that portion of the value of specified taxable services received prior to 10.09.2004. Applying that Notification to the audit objection, the Tribunal concluded that advances received by the appellant prior to 10.09.2004 were covered by the exemption and therefore not liable to service tax. [Paras 41, 42]

Advances received prior to 10.09.2004 for construction services were exempt and not taxable.

Irregular CENVAT credit - deemed registration - self-assessment - Whether CENVAT credit taken on invoices addressed to premises other than the registered premises was inadmissible for the period 23.02.2006 to 13.02.2007 - HELD THAT: - The Tribunal analysed the Credit Rules and the facts of centralized registration. The appellant applied for centralized registration on 23.02.2006 and was granted centralized registration on 14.02.2007. Under the relevant rule, if a registration certificate is not issued within seven days of application, registration is deemed to have been granted from the date of application. On that basis the Tribunal found no requirement in the Rules that invoices be addressed only to registered premises and held that credit availed for the period 23.02.2006 to 13.02.2007 was proper because registration was deemed from the date of application. [Paras 43, 44]

CENVAT credit taken for the period 23.02.2006 to 13.02.2007 was admissible as centralized registration was deemed from the date of application.

Short-payment of service tax - self-assessment - Whether the alleged short-payment of service tax for October 2005 to March 2006 and for 2006-07 was established and showed intention to evade tax - HELD THAT: - The Tribunal reviewed the audit computations, the appellant's working papers, TR-6 challans and explanations. It noted that the Adjudicating Authority rejected the appellant's working for lack of documentary support without seeking clarification and that the appellant had produced TR-6 challans for amounts relied upon. The Tribunal found the appellant's explanations plausible, that computations in the show cause notice were not adequately explained, and that there was no evidence of deliberate omission or intent to evade payment in relation to the alleged short-payments. [Paras 48, 49, 50, 51, 52]

Allegations of short-payment for the specified periods were not established as demonstrating wilful intent to evade tax; the appellant's explanations were accepted.

Final Conclusion: The impugned order confirming demands (including invocation of the extended limitation) was set aside. The Tribunal held that the proviso to section 73(1) could not be invoked in the absence of wilful suppression with intent to evade tax, advances prior to 10.09.2004 were exempt, the CENVAT credit for the period following the application for centralized registration was admissible, and the alleged short-payments were not shown to amount to deliberate evasion; consequently the appeal was allowed and the order dated 27.06.2014 was quashed.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - opportunity of hearing under the Scheme - chronological processing of SVLDRS applications - verification of declared tax dues with reference document - administrative discretion in processing SVLDRS declarations

Chronological processing of SVLDRS applications - administrative discretion in processing SVLDRS declarations - Whether the Department was obliged to process SVLDRS applications in chronological order and whether processing a later application earlier amounted to jurisdictional error. - HELD THAT: - The Court held that the statute does not impose a requirement to process SVLDRS applications strictly in the order of filing. The Department lawfully exercised administrative discretion to process the application whose declared tax dues matched the amount quantified in the departmental reference document, thereby enabling earlier finalisation of that declaration. The action of considering and accepting the later-filed application did not amount to illegality or jurisdictional error, and rendering the earlier application redundant was permissible in the circumstances. [Paras 9, 10]

No obligation to process SVLDRS applications in chronological order; acceptance of the later application was not contrary to law and does not warrant interference.

Opportunity of hearing under the Scheme - verification of declared tax dues with reference document - Whether rejection of the earlier application as duplicate without affording an opportunity of hearing under the Scheme was illegal. - HELD THAT: - The Court found no illegality in the course adopted by the authorities. The Scheme requires verification of declarations by reference to documents known to both parties; where the later application correctly matched the departmental quantification, it was processed and accepted. The Department was not shown to have committed a jurisdictional error by not issuing a separate notice on SVLDRS-2 or by treating the earlier application as redundant in light of the accepted declaration. The petitioner's contention that a hearing under the Scheme was mandatory in these facts did not succeed. [Paras 9, 10]

Rejection of the earlier application as rendered redundant by acceptance of the later, correctly matched declaration, and without separate hearing, did not amount to illegality.

Final Conclusion: Writ petition dismissed; the High Court found no illegality in the authority's decision to accept the later SVLDRS declaration which corresponded to the departmental quantification and to treat the earlier application as redundant, and accordingly declined to interfere.

Writ jurisdiction under Article 226 and availability of alternative remedy - Principles of natural justice and service under statutory procedure - Service of orders under Section 37C of the Central Excise Act - Classification of goods - textile/fabric produced by weaving or knitting versus articles of plastic - Discrimination in imposition of central excise and uniformity of levy - Remand for fresh adjudication after quashing of invalid order

Writ jurisdiction under Article 226 and availability of alternative remedy - Maintainability of writ petition despite existence of statutory appeal under Central Excise Act - HELD THAT: - The Court held that availability of an alternative statutory remedy is a discretionary consideration and does not operate as an absolute bar to exercise of writ jurisdiction. In the facts of the case the Court found good grounds to entertain the petition despite the remedy of appeal under Section 35B, having regard to (i) the manner in which the adjudicating order was passed, (ii) prima facie absence of opportunity of hearing, and (iii) a specific contention of discriminatory treatment vis-a -vis similarly situated manufacturers in other States. The Court applied the established exceptions where writ jurisdiction may be exercised notwithstanding an alternative remedy (enforcement of fundamental rights, failure of natural justice, orders wholly without jurisdiction or vires challenged) and followed precedent recognising that central excise must be collected uniformly and discrimination may warrant writ relief.

Writ petition entertained and preliminary objection of alternative remedy rejected.

Service of orders under Section 37C of the Central Excise Act - Principles of natural justice and service under statutory procedure - Validity of service of the Order in Original under Section 37C and consequence for adjudication - HELD THAT: - The Court held that the impugned Order in Original was not validly served in terms of Section 37C since the department did not show compliance with the primary mode of service (tender or registered post with acknowledgement) before resorting to affixation. Relying on the Supreme Court's exposition that statutory procedure for service must be followed ('the thing must be done in that way or not at all'), the Court found service by pasting at factory gate on a person who was not shown to be an authorized agent amounted to a miscarriage of justice. Consequently, defective service vitiated the Order in Original.

Impugned Order in Original quashed on account of invalid service; matter remitted for fresh adjudication after proper service and hearing.

Classification of goods - textile/fabric produced by weaving or knitting versus articles of plastic - Remand for fresh adjudication after quashing of invalid order - Prima facie characterisation of the products as fabrics/textiles and treatment of CBEC Circular/Collectorate Trade Notice - HELD THAT: - On prima facie examination the Court observed that the products (Agro Shade Net and Geo Grid) are produced by knitting/weaving processes (Raschel knitting and weaving) and that the Chemical Examiner described one sample as a knitted fabric. The Court noted the legal proposition in Porritts & Spencer that 'textile' in popular sense means a woven/knitted fabric irrespective of raw material, and observed that the CBEC Circular/Order No.8/92 and the Ahmedabad Trade Notice appear to have emphasised the nature of raw material (HDPE strips) rather than the method of production. The Court declined to decide the ultimate validity of the Circular/Trade Notice but recorded that those instruments prima facie appear contrary to the law laid down by the Apex Court and directed that the Union of India re-examine the Circular/Trade Notice. The Court also recorded the petitioners' specific plea of discrimination (many manufacturers treated the goods as textiles) and directed that this plea be specifically addressed in the fresh adjudication.

Prima facie the goods are fabrics/textiles; the CBEC Circular and Trade Notice to be re-examined by Union of India and the adjudicating authority to decide afresh, dealing specifically with discrimination.

Remand for fresh adjudication after quashing of invalid order - Relief and consequential directions following quashing of the Order in Original - HELD THAT: - The Court quashed and set aside the impugned Order in Original dated 30.6.2020 and remitted the matter to the adjudicating authority for fresh consideration in accordance with law after affording adequate opportunity of hearing to the writ-applicants. The Union of India was directed to first reconsider the CBEC Circular/Order No.8/92 and Ahmedabad Trade Notice No.78/94 in light of the Court's observations so that the adjudicating authority can apply the outcome in the fresh adjudication. The Court also directed termination of any recovery proceedings initiated on the strength of the impugned Order and required the fresh exercise to be completed within six months.

Order in Original quashed and matter remitted for fresh hearing; Union to re-examine Circular/Trade Notice; recovery proceedings terminated; fresh adjudication within six months.

Final Conclusion: The writ petition was partly allowed: the Court entertained the writ despite availability of statutory appeal, quashed the impugned Order in Original dated 30.6.2020 for defective service under Section 37C and other prima facie defects, remitted the matter to the adjudicating authority for fresh consideration after affording hearing, directed the Union to re-examine the CBEC Circular/Order No.8/92 and Ahmedabad Trade Notice No.78/94, and ordered termination of recovery proceedings based on the quashed order with the fresh exercise to be completed within six months.

Regular bail - interim bail - disclosure statement - admissibility of confessional statements - offence of financing illicit traffic - HAWALA transaction - scheduled offence under the Prevention of Money Laundering Act - overriding effect of the PMLA

Regular bail - disclosure statement - admissibility of confessional statements - HAWALA transaction - Petitioner to be released on regular bail in the FIR under the NDPS Act. - HELD THAT: - Petitioner was nominated in the FIR primarily on the basis of the disclosure statement of the main accused. No recovery has been effected from the petitioner and the allegations against him relate to alleged HAWALA transactions and nomination in the disclosure statement. Co-accused with similar allegations, but from whom recovery was effected, had already been granted regular bail by the trial court. The matter is debatable on merits and the petitioner has not misused the interim bail previously granted by this Court. The admissibility and legal effect of the disclosure/confessional statement would be subject to judicial scrutiny at trial; the Court did not express any opinion on the merits of the prosecution case or on the correctness of the allegations. In these circumstances, the interim bail order was made absolute and converted into regular bail, subject to furnishing of fresh heavy bail/surety bonds to the satisfaction of the trial Court or concerned Duty Magistrate.

Interim bail made absolute and petitioner directed to be released on regular bail on furnishing fresh heavy bail/surety bonds to the satisfaction of the trial Court/concerned Duty Magistrate; no opinion expressed on merits.

Final Conclusion: The petition is allowed by converting the interim bail into regular bail and directing release of the petitioner on furnishing fresh heavy bail/surety bonds; the Court refrained from expressing any view on the merits of the case.

Delayed payment of gratuity under the Payment of Gratuity Act, 1972 - entitlement to simple interest for delayed gratuity - rate of interest to compensate for delayed statutory payment - timeliness of pension and other retiral benefits - claim for compensation for harassment and mental agony

Delayed payment of gratuity under the Payment of Gratuity Act, 1972 - entitlement to simple interest for delayed gratuity - Whether the petitioner is entitled to interest on delayed payment of gratuity and the relief to be granted for the period of delay. - HELD THAT: - The court found that the respondents were deficient in making payment of gratuity within the statutory period. The gratuity became payable thirty days from the date of retirement, but payment was in fact made on 18.01.2019 instead of by 02.03.2013. Applying the statutory framework governing payment of gratuity, the court held that the petitioner is entitled to simple interest for the period of delay. Considering the circumstances and the impossibility of attachment of gratuity, the court fixed the rate of interest at 7% per annum for the period from 02.03.2013 to 17.01.2019. The court directed payment of this interest by the respondents within six weeks from the date the petitioner communicates the order to the appointing authority. [Paras 14]

Interest at 7% per annum is awarded on the delayed gratuity for the period 02.03.2013 to 17.01.2019, to be paid within six weeks from communication of this order.

Timeliness of pension and other retiral benefits - claim for compensation for harassment and mental agony - Whether the petitioner is entitled to compensation or other reliefs for alleged harassment caused by delay in departmental proceedings and withholding of retiral benefits. - HELD THAT: - The petitioner sought compensation for harassment, statutory/market/penal interest on various dues, and litigation expenses. The court observed that while departmental proceedings and procedural steps contributed to delay, the respondents explained procedural and jurisdictional impediments (including change of authority and requirement of Form-4 for commutation). The court declined to entertain an award of damages for harassment in the absence of a pleaded and adjudicated public law cause of action specifically seeking such relief in the writ petition. Consequently, the court did not grant compensation or other punitive reliefs and confined relief to statutory interest on gratuity. [Paras 13, 14]

Claim for compensation and other punitive reliefs for harassment is not granted; petition is partly allowed only to the extent of interest on delayed gratuity.

Final Conclusion: Writ petition partly allowed: respondents held deficient in payment of gratuity and directed to pay simple interest at 7% per annum for the specified period within six weeks; no compensation for harassment or other punitive relief granted; no order as to costs.