TaxTMI Updates e-Newsletter
Dec 31,2021

Admissibility under Section 97 of the CGST Act - jurisdiction of Authority for Advance Ruling - advance ruling - carry forward or transfer of input tax credit between registrations arising from migration

Admissibility under Section 97 of the CGST Act - jurisdiction of Authority for Advance Ruling - carry forward or transfer of input tax credit between registrations arising from migration - Application for advance ruling was not admitted as the questions raised did not fall within the scope of Section 97 of the GST Act. - HELD THAT: - The applicant sought clarification on reconciliation and utilisation of input tax credit across two GST registrations that arose during migration to the GST regime, and on the manner of filing GSTR-9/9C for FY 2017-18. The Authority observed that, although the facts concerning dual registrations and unutilised credits were set out, the legal questions posed fall outside the matters amenable to determination under Section 97 (advance ruling) of the GST Act. Having considered the application and the submissions at the personal hearing, the Authority concluded that the subject-matter does not fall within the scope of its jurisdiction to decide by way of advance ruling and therefore the application could not be admitted for adjudication on merits. [Paras 6]

Application not admitted; Authority for Advance Ruling has no jurisdiction to decide the questions raised.

Final Conclusion: The application filed by M/s. Amis Engineers for an advance ruling was not admitted because the questions raised regarding reconciliation of turnover and utilisation/transfer of input tax credit between two GST registrations (arising from migration) do not fall within the scope of Section 97; the Authority therefore declined jurisdiction and did not decide the substantive issues.

Entry 8 of Schedule III - supply of warehoused goods before clearance for home consumption - High Sea Sale / supply from FTWZ not leviable to IGST - place of supply is the location of goods when movement terminates - inter-state supply - no reversal of ITC for transactions covered by Schedule III (except Entry 5) under explanation to section 17(3) - no requirement of registration in other State for effecting inter-state supplies

Entry 8 of Schedule III - High Sea Sale / supply from FTWZ not leviable to IGST - Supply of imported goods on High Sea Sale basis or supply of goods from FTWZ facilities to Indian customers liability to IGST - HELD THAT: - The Authority held that the proposed transactions fall within Entry 8 of Schedule III as inserted w.e.f. 1-2-2019, which covers supply of goods by endorsement of document of title after dispatch from port of origin but before clearance for home consumption, and supply of warehoused goods before clearance for home consumption. Transactions covered by Entry 8 of Schedule III do not attract tax under CGST, SGST or IGST. Applying the place of supply rule under Section 10(1)(a) of the IGST Act, when the supplier directs delivery and movement of goods terminates in another State, the location of goods at that time is the place of supply; however, because the transactions are covered by Entry 8 of Schedule III they are not leviable to IGST. [Paras 7, 8]

No, such supplies are not subject to IGST.

No reversal of ITC for transactions covered by Schedule III (except Entry 5) under explanation to section 17(3) - value of exempted supply - Whether input tax credit already taken must be reversed in respect of the aforesaid supplies if they are not leviable to IGST - HELD THAT: - The Authority relied on the explanation to section 17(3) (inserted w.e.f. 1-2-2019) which provides that transactions falling under Schedule III (other than Entry 5) are not to be treated as exempt supplies for the purposes of reversal of common input tax credit. Since the transactions in question fall under Schedule III Entry 8, their value will not be included in the value of exempt supplies and therefore ITC taken need not be reversed on account of these transactions. [Paras 7, 8]

No, reversal of input tax credit is not required.

Place of supply is the location of goods when movement terminates - inter-state supply - no requirement of registration in other State for effecting inter-state supplies - issue of invoice and discharge of obligation under section 31 - Whether issuing invoices from the applicant's Hyderabad office for sale of goods from FTWZ facilities in other States satisfies discharge of obligations under section 31 and whether registration in the States where FTWZs are located is required - HELD THAT: - The Authority observed that where the applicant (supplier) is situated in Telangana but the goods are delivered in other States the place of supply is the location where movement of goods terminates, making the transaction an inter-state supply. Given that characterization, the applicant need not obtain registration in the other States merely to effect such inter-state transactions. The application of section 10(1)(a) determines place of supply; the invoice may be issued from the Hyderabad office consistent with that characterisation and the supplier is not required to register in the States where the FTWZ warehouse of the third-party logistics provider is located for the purpose of these transactions. [Paras 7, 8]

Issuing invoices from Hyderabad is consistent with the place of supply rule and the applicant need not obtain registration in the States where the FTWZ facilities are located for these inter-state supplies.

Final Conclusion: The Authority ruled that the proposed High Sea Sale and FTWZ-origin supplies fall under Entry 8 of Schedule III and are not subject to IGST; ITC already taken need not be reversed in respect of such transactions; the place of supply is the location where movement of goods terminates making the transactions inter-state, and the applicant need not obtain registration in the States where the FTWZ facilities are located to effect these supplies.

Prima facie case - nature and gravity of the offence - possibility of absconding, destruction of evidence and influencing witnesses - economic offences requiring a stringent approach in grant of bail - reasons to believe under Section 69 of the CGST Act - authorization of an officer by the commissioner to effect arrest - bail is the rule and jail is the exception

Prima facie case - nature and gravity of the offence - economic offences requiring a stringent approach in grant of bail - possibility of absconding, destruction of evidence and influencing witnesses - Whether the applicant should be released on regular bail - HELD THAT: - The court applied settled principles that bail is ordinarily the rule but must be considered against factors including existence of a prima facie case, nature and gravity of the offence, risk of absconding, and risk of destruction of evidence or influencing witnesses. On the material before it the enquiry prima facie discloses that the applicant availed and passed on ineligible input tax credit without movement of goods to the tune alleged, constituting serious economic offences. Investigation was ongoing and there was a real apprehension that if released the applicant might destroy evidence or influence witnesses. In view of the scale of the alleged fraud, the gravity of the offence and the risks to the investigation, it was not appropriate at the present stage to grant bail. [Paras 11, 20, 22]

Bail application rejected on merits as the balance of factors (prima facie case, gravity of offence and risks to investigation) disfavoured release.

Credibility of electronic communications - evidentiary support for delivery of goods - Whether the whatsapp chat and the applicant's explanations established genuineness of transactions and delivery of goods - HELD THAT: - The applicant relied on whatsapp communications alleged to show that a third party sent GST registration and tax invoices. However, statements of the third party and his father directly contradicted the applicant's account. When confronted, the applicant admitted he had no proof to rebut those statements. Given the direct, adverse witness statements and the applicant's failure to produce contemporaneous supporting evidence, the whatsapp material could not be relied upon at this stage and the applicant's explanation was held not to be genuine. There was thus no material to establish movement or delivery of goods in support of the claimed transactions. [Paras 19, 20]

Whatsapp chat and the applicant's contentions were found unreliable; there was no satisfactory material establishing delivery of goods.

Reasons to believe under Section 69 of the CGST Act - authorization of an officer by the commissioner to effect arrest - Whether the arrest was valid where the arrest memorandum recorded reasons by the Inspector rather than expressly by the commissioner - HELD THAT: - The court considered the contention that Section 69 requires reasons to believe to be recorded by the commissioner. It observed that prior to arrest documents had been verified and statements recorded, so material existed from which the commissioner could have formed reasons to believe. Although the arrest memorandum mentioned that the Inspector had reasons to believe, it also recorded that the Inspector was duly authorised. Section 69 permits the commissioner, upon having reasons to believe, to authorise an officer to arrest. The court inferred that the commissioner had reasons to believe and had authorised the Inspector to act; accordingly the arrest was not vitiated for want of commissioner's reasons being recorded in the arrest memorandum itself. [Paras 21]

Arrest held valid as the Inspector acted under authorization after reasons to believe were formed by the competent authority.

Final Conclusion: The bail application was rejected: the court found prima facie involvement of the applicant in serious economic offences, the applicant's explanations and electronic material were not presently reliable, the arrest and authorization were lawful under Section 69, and the risks to the ongoing investigation warranted continued detention.

Anticipatory bail - prima facie case - economic offences and bail discretion - ineligible input tax credit (ITC) / GST fraud - use of non existent / fake entities for fraudulent ITC - reason to believe / reasons to believe for arrest - possibility of destruction of evidence - investigation at initial stage

Anticipatory bail - prima facie case - ineligible input tax credit (ITC) / GST fraud - use of non existent / fake entities for fraudulent ITC - possibility of destruction of evidence - investigation at initial stage - Anticipatory bail application by the proprietor of Swara Jewels in respect of alleged offences under the GST law was to be allowed or rejected. - HELD THAT: - The applicant, proprietor of Swara Jewels, had been subjected to search and summoned under the CGST Act; he attended, his statement was recorded and documents were furnished. The respondent authority alleges that the applicant availed input tax credit from and dealt with non existent firms (including Arihant Traders, Sandeep Trading, Gajmukhi Bullion, Mumbadevi Bullion) created by a purported mastermind, and that the total availment of ineligible ITC attributable to the applicant exceeds Rs. 6 Crores. The recorded material, including admissions in the statement of the alleged mastermind and the applicant's own recorded statement showing dealings with those entities, suffices at this stage to constitute a prima facie case against the applicant. Given the infancy of the investigation and the apparent involvement of paper transactions with non existent entities, there is a real risk that if anticipatory bail were granted the applicant might destroy or tamper with evidence. Balancing settled principles governing anticipatory bail-nature and gravity of accusation, prima facie material, stage of investigation and risk to evidence-the court found exercise of discretion against grant of anticipatory bail in the circumstances of this case.

Anticipatory bail application rejected.

Final Conclusion: On the material on record and the stage of investigation indicating prima facie involvement in availment of ineligible ITC from alleged fake entities and a real risk of evidence destruction, the court refused to grant anticipatory bail and dismissed the application.

Stay of demand - power to grant stay of recovery under Section 220(6) of the Income Tax Act - pre-deposit of 20% of disputed demand - adjustment of refunds - pre-decisional hearing under Section 245 of the Income Tax Act - office memorandum dated 29th February, 2016 read with office memorandum dated 25th August, 2017

Pre-deposit of 20% of disputed demand - stay of demand - office memorandum dated 29th February, 2016 read with office memorandum dated 25th August, 2017 - adjustment of refunds - Entitlement to refund of amounts adjusted in excess of 20% of the disputed tax demand for Assessment Year 2016-17. - HELD THAT: - The Court applied the settled administrative norm in the office memorandums that ordinarily an Assessing Officer shall grant stay of recovery until disposal of the first appeal on payment of 20% of the disputed demand, and that any requirement of a higher pre-deposit must be supported by reasons showing applicability of the exceptional category. The Court noted that respondents adjusted refunds in excess of 20% of the disputed demand for Assessment Year 2016-17 without deciding the petitioner's stay application and without articulating special reasons under the memoranda. In similar precedents cited by the Court, recovery in excess of the standard 20% in absence of recorded reasons was held impermissible. The Court further observed that adjustment of refunds took place without affording pre-decisional notice or opportunity as contemplated under the statutory scheme governing adjustments, thereby reinforcing the entitlement to restitution of the excess amount recovered. [Paras 7, 8, 9]

Petitioner is entitled to refund of amounts adjusted in excess of 20% of the disputed tax demand for Assessment Year 2016-17.

Pre-decisional hearing under Section 245 of the Income Tax Act - adjustment of refunds - verification of facts - Procedure to be followed by respondents for effecting refund of the excess adjustment. - HELD THAT: - The Court directed the respondents to verify the facts pleaded in the writ petition and, if those facts are found true, to refund the amount adjusted in excess of 20% within a specified timeframe. This direction follows from the Court's finding that the excess adjustments occurred without following the prescribed procedure (including pre-decisional opportunity) and without deciding the stay application. The order requires the revenue to undertake fact-verification before making the refund, thereby remitting a limited matter of factual confirmation and implementation to the respondents rather than deciding quantumary or collateral disputes on merits. [Paras 9, 10]

Respondents to verify the petitioner's factual claims and, if found true, refund the excess adjustment over 20% within six weeks.

Final Conclusion: Writ petition disposed of with direction that respondents shall verify the facts stated by the petitioner and, if found correct, refund within six weeks the amount adjusted in excess of 20% of the disputed demand for Assessment Year 2016-17; the order recognises that recovery beyond the standard 20% without recorded reasons or requisite pre-decisional procedure is impermissible.

Violation of principles of natural justice - Service of notice by email/electronic service - Ex parte assessment - Notices under Section 142(1) of the Income tax Act - Assessment under Section 153C of the Income tax Act - Fresh assessment after giving opportunity of hearing

Violation of principles of natural justice - Service of notice by email/electronic service - Ex parte assessment - Notices under Section 142(1) of the Income tax Act - Petitioner was not heard before passing the assessment order as notices were sent to an earlier/defunct e-mail address and thus principles of natural justice were violated. - HELD THAT: - The Court examined the assessment order and the averments on record and found that though notices under Section 142(1) were issued, there is no evidence of effective service on the petitioner. The respondents stated notices were sent to the e mail address available on the ITBA portal, which was the petitioner's earlier and now defunct e mail; the petitioner had informed the department of a new e mail address on 15.08.2019. Reading the assessment order and the counter affidavit together shows that the assessee did not receive the statutory notices and was not afforded an opportunity to respond before completion of assessment. In those circumstances the impugned order was rendered ex parte and amounted to a breach of natural justice. [Paras 6, 10, 11, 12]

The assessment order dated 28.09.2021 is set aside on the ground of violation of the principles of natural justice.

Quashing of assessment order - Fresh assessment after giving opportunity of hearing - Assessment under Section 153C of the Income tax Act - Appropriate remedy is to quash the impugned assessment and direct fresh assessment in accordance with law after giving the petitioner adequate opportunity of hearing. - HELD THAT: - Having concluded that the petitioner was not heard and the assessment was completed on the basis of seized material without service of requisite notices, the Court exercised its corrective jurisdiction under Article 226. Rather than relegating the petitioner to the appellate forum, the Court quashed the impugned order and directed the Assessing Officer to pass a fresh assessment for the relevant assessment year in accordance with law, ensuring that the petitioner is given a proper and adequate opportunity of hearing before any fresh assessment is finalised. [Paras 13, 15]

Impugned assessment order is quashed and respondent is directed to pass fresh assessment for AY 2019 20 after giving adequate opportunity of hearing to the petitioner.

Final Conclusion: Writ petition allowed to the extent that the assessment order dated 28.09.2021 (AY 2019 20) is quashed for breach of natural justice; respondent directed to make fresh assessment in accordance with law after affording the petitioner an opportunity of hearing.

Carry forward and set-off of losses - due date for filing return under section 139(1) and Explanation 2(aa) - transfer pricing provisions and Form 3CEB - international transactions - benefit of extended due date by filing Form 3CEB

Due date for filing return under section 139(1) and Explanation 2(aa) - transfer pricing provisions and Form 3CEB - carry forward and set-off of losses - benefit of extended due date by filing Form 3CEB - Return filed on 22.11.2013 cannot be treated as filed within the extended time for the purpose of claiming carry forward of losses for A.Y. 2013-14. - HELD THAT: - The Tribunal examined whether the return filed on 22.11.2013 could be treated as timely under Explanation 2(aa) to Section 139 by reason of applicability of transfer pricing provisions. It found as facts that the statutory due date was 30.09.2013, that Form 3CEB was filed and certified only on 30.11.2013 (i.e. after the return was filed), and that the Form 3CEB itself reported international transactions as Nil and did not disclose the alleged capital contribution or any reason for non-reporting. On that factual matrix the Tribunal agreed with the CIT(A) that the assessee could not avail the extended filing date based on Form 3CEB: where Form 3CEB does not establish contemporaneous international transactions (and was obtained after the return), the prerequisite for claiming the extended due date under Explanation 2(aa) was not satisfied. The Tribunal rejected the assessee's contention that bona fide belief in applicability of transfer pricing provisions entitled it to the extended date when the documentary record did not support reporting of international transactions or contemporaneous filing of the transfer pricing certificate. Applying these findings, the Tribunal held that the assessee was not eligible to carry forward the losses for A.Y. 2013-14. [Paras 9, 10]

Assessee's return filed on 22.11.2013 is not a return filed in time for claiming carry forward of losses; CIT(A)'s order is upheld and the appeal is dismissed.

Final Conclusion: Appeal dismissed. The Tribunal upheld the CIT(A)'s finding that the return filed on 22.11.2013 was not within the extended due date under Explanation 2(aa) to Section 139 and therefore the assessee was not entitled to carry forward the losses for A.Y. 2013-14.

Exemption under section 80P(2)(a)(i) - attribution of investment income to business activities - income from other sources versus business income - enhanced business income and applicability of exemption - construction of "members" in light of State Cooperative Societies Act

Exemption under section 80P(2)(a)(i) - income from other sources versus business income - attribution of investment income to business activities - Interest earned on fixed deposits with Bank of Baroda is eligible for exemption under section 80P(2)(a)(i) as business income of the cooperative society. - HELD THAT: - The Tribunal accepted that the interest on fixed deposits arose from deployment of surplus funds of the cooperative society and is attributable to the society's business of lending to members. Noting conflicting High Court authorities, the Bench followed the Coordinate Bench of the ITAT Pune and the view that interest on surplus invested with banks is attributable to the activities of the society and therefore qualifies as business income eligible for exemption under section 80P(2)(a)(i). Consequently, the earlier treatment of such interest as "income from other sources" did not preclude granting the exemption once it is held to be business income. [Paras 9]

Grounds of appeal No.1 & 2 allowed; interest on fixed deposits to be exempted under section 80P(2)(a)(i).

Exemption under section 80P(2)(a)(i) - attribution of investment income to business activities - Interest earned on securities held with the RBI is eligible for exemption under section 80P(2)(a)(i). - HELD THAT: - The Tribunal applied the same reasoning as for interest on bank deposits: interest arising from investment of surplus funds is attributable to the cooperative society's business and hence falls within the exemption conferred by section 80P(2)(a)(i). The decision therefore directs the Assessing Officer to exempt such interest on securities held with RBI. [Paras 10]

Grounds of appeal No.3 & 4 allowed; interest on RBI securities to be exempted under section 80P(2)(a)(i).

Enhanced business income and applicability of exemption - exemption under section 80P(2)(a)(i) - Business income enhanced by disallowances made by the Assessing Officer shall qualify for exemption under section 80P(2)(a)(i). - HELD THAT: - The Tribunal held that any disallowances that increase the business profits of the cooperative society will result in enhanced business income which, being business income, is equally eligible for exemption under section 80P(2)(a)(i). The Tribunal therefore allowed the grounds challenging other disallowances on the limited basis that the increased profits arising therefrom would be covered by the statutory exemption. [Paras 11]

Grounds of appeal No.5 to 10 allowed to the extent that enhanced business income from disallowances shall qualify for exemption under section 80P(2)(a)(i).

Construction of "members" in light of State Cooperative Societies Act - exemption under section 80P(2)(a)(i) - Nominal and extraordinary members, as defined under the Maharashtra Cooperative Societies Act, 1960, are to be treated as "members" for the purposes of section 80P(2)(a)(i). - HELD THAT: - Relying on the principle that the term "members" in section 80P(2)(a)(i) must be construed in the context of the State law under which the cooperative is formed, and on the definition of "members" in the Maharashtra Cooperative Societies Act, 1960, the Tribunal held that loans to nominal and extraordinary members fall within the scope of lending to "members". Consequently, denial of exemption on the ground that funds were lent to such categories was not justified. [Paras 12]

Ground of appeal No.11 allowed; nominal and extraordinary members qualify as "members" for section 80P(2)(a)(i) purposes.

Final Conclusion: The appeal is allowed. The interest on bank deposits and securities held with RBI, and business income enhanced by disallowances, qualify for exemption under section 80P(2)(a)(i); nominal and extraordinary members are to be treated as "members" under the Maharashtra Cooperative Societies Act, 1960. The Assessing Officer is directed to give effect to these conclusions.

Validity of reassessment notice under section 148 - rectification proceedings under section 154 and bar to reassessment pending completion - reason to believe that income has escaped assessment - change of opinion - borrowed satisfaction - quashing of reassessment notice and consequential assessment

Rectification proceedings under section 154 and bar to reassessment pending completion - validity of reassessment notice under section 148 - Whether initiation of reassessment proceedings by issuing notice under section 148 was valid where rectification proceedings under section 154 on identical grounds had been initiated but not concluded. - HELD THAT: - The Tribunal found that before issuing the section 148 notice the Assessing Officer had initiated proceedings under section 154 in respect of the same alleged mistakes (addition of provision for bad and doubtful debts and disallowance under section 14A). The assessee had filed detailed replies to the proposed rectification. No rectification order under section 154 was, however, on record and the Revenue did not show that those proceedings had culminated in an order. The Tribunal held that where rectification proceedings on identical grounds are pending and not concluded by an order, reassessment proceedings for the same reasons cannot be validly initiated; the assessment process cannot be treated as finally complete while the section 154 proceedings remain undecided. Relying on the coordinate bench precedents and on the totality of facts, the Tribunal concluded that the notice under section 148 was bad in law and therefore liable to be quashed. Because the reassessment was quashed on this ground, the Tribunal did not adjudicate the merits of the additions made in the reassessment. [Paras 12, 13, 14]

Notice issued under section 148 and the consequential reassessment order quashed; reassessment set aside.

Final Conclusion: The assessee's appeal is allowed; the notice under section 148 and the resultant reassessment for A.Y. 2014-15 are quashed and the assessment is set aside. The Tribunal did not decide the substantive merits of the additions.

Tax audit under section 44AB - Penalty under section 271B - Reasonable cause under section 273B - Project completion method - Work-in-progress treatment - Bona fide belief defence to penalty

Tax audit under section 44AB - Penalty under section 271B - Reasonable cause under section 273B - Project completion method - Work-in-progress treatment - Bona fide belief defence to penalty - Whether penalty under section 271B can be sustained where the assessee, following the project completion method, did not obtain a tax audit on the bona fide belief that there were no gross receipts or turnover in the year and expenses were shown as work-in-progress. - HELD THAT: - The Tribunal recorded that the assessee maintained accounts on the project completion method, showed no sales or gross receipts in the profit & loss account for the year, treated project costs as work-in-progress and disclosed advances as advances. On these facts the assessee acted under a bona fide belief that the threshold for tax audit under section 44AB was not reached and accordingly did not procure an audit report. The Tribunal observed that section 273B relieves an assessee from penalty where a reasonable cause for non-compliance is proved; the Revenue did not establish that the assessee's belief was mala fide. The Tribunal further noted that the assessing officer retains the ability to examine the composition and allowability of expenses included in work-in-progress when income is assessed on project completion; that possibility does not render the assessee's belief unreasonable. In light of these conclusions the failure to obtain a tax audit was held to constitute a reasonable cause for the purposes of section 273B, and therefore penalty under section 271B could not be levied. [Paras 9, 10]

Penalty under section 271B deleted and the appeal allowed.

Final Conclusion: The appeal is allowed: penalty imposed under section 271B for AY 2012-13 is set aside because the assessee's bona fide belief, arising from following the project completion method and showing costs as work-in-progress with no gross receipts, amounted to a reasonable cause under section 273B.

Revisional jurisdiction under section 263 of the Income-tax Act - limitation under section 263(2) - scope of reassessment and 'escaped assessment' under section 147 - doctrine of merger in reassessment proceedings

Revisional jurisdiction under section 263 of the Income-tax Act - limitation under section 263(2) - scope of reassessment and 'escaped assessment' under section 147 - doctrine of merger in reassessment proceedings - Whether the Commissioner's revision under section 263 in respect of the reassessment for A.Y.2008-09 was barred by limitation and hence void. - HELD THAT: - The Tribunal found that the consultancy receipts in question were disclosed in the assessee's original return and accompanying income and expenditure account filed on 25/03/2009 and therefore were matters on the record at the time of the original scrutiny assessment completed on 13/12/2010. The Assessing Officer, when framing reassessment under section 147, had a second occasion to examine matters and, in the re-assessment order dated 22/02/2016, had dealt with the issues raised in the reasons for reopening; no error in the reassessment order attributable to the AO was found. Applying the principle that reassessment proceedings are confined to income that escaped assessment and do not permit the revisional authority to go beyond the subject-matter of reassessment, the Tribunal held that the Commissioner's exercise of revisional jurisdiction under section 263 was required to be initiated within the period prescribed by section 263(2) calculated from the date of the assessment which was sought to be revised. Relying on the Supreme Court authority reproduced in the order, the Tribunal concluded that where the subject-matter of revision relates to an original assessment matter distinct from the reassessed item, the period of limitation for invoking section 263 runs from the date of the order of assessment and not from the date of reassessment. Since the Commissioner issued the revision order beyond that period, the revisional action was time-barred and without jurisdiction. Because the revision was quashed on limitation grounds, the Tribunal did not adjudicate the merits of the substantive contentions raised by the Commissioner. [Paras 3]

Revision order passed by the Commissioner under section 263 is quashed as barred by limitation; grounds No.1 and 2 of the assessee are allowed and other grounds are declared infructuous.

Final Conclusion: The appeal is allowed: the revisional order dated 21/03/2018 under section 263 is quashed as time barred in relation to A.Y.2008-09 and the related grounds of the assessee are allowed.

Apportionment of expenses between group entities in a profit sharing arrangement - treatment of bad debt deduction where fee income was not shared with the holding company - deductibility of bonus/remuneration as business expenditure under section 37 of the Act - application of section 40A(2)(b) to payments to persons designated as directors for internal purposes

Apportionment of expenses between group entities in a profit sharing arrangement - Deletion of disallowance made for non apportionment of expenses between the assessee and its holding company - HELD THAT: - The Tribunal found on the facts that the assessee and its holding company operated under an MOU amounting to a profit sharing/collaboration arrangement whereby the assessee shared net success fees and that expenses of the collaboration project were borne and accounted for in the assessee's books. The AO had misconceived that only gross revenue was shared while the assessee claimed full expenses; this was factually incorrect. Because the assessee had in substance shared only net profit with the holding company, the ad hoc disallowance of 50% of the collaboration expenses was unwarranted. The CIT(A)'s deletion of the disallowance was therefore upheld. [Paras 3]

Disallowance of Rs.3,44,24,282 (50% of collaboration expenses) deleted; ground dismissed.

Treatment of bad debt deduction where fee income was not shared with the holding company - Deletion of disallowance of 50% of bad debt written off on the ground that bad debt should have been shared with the holding company - HELD THAT: - The Tribunal accepted the assessee's factual case that the Sterlite Technologies Ltd. project had not involved services of the holding company and that the assessee had not shared the fee with the holding company. Ledger entries and fee sharing details for the relevant years supported the CIT(A)'s factual finding, which Revenue did not controvert. Once the fee income had been offered by the assessee and the balance became irrecoverable and written off in the year under consideration, the bad debt was allowable. The AO's presumption of sharing of bad debt with the holding company was therefore rejected and the deletion by the CIT(A) sustained. [Paras 4]

Disallowance of Rs.89,83,454 (50% of bad debt) deleted; ground dismissed.

Deductibility of bonus/remuneration as business expenditure under section 37 of the Act - application of section 40A(2)(b) to payments to persons designated as directors for internal purposes - Deletion of ad hoc disallowance of 25% of bonus payments to employees including key management personnel - HELD THAT: - The Tribunal noted that the assessee produced its bonus policy, individual payment details, TDS compliance and explanations that payments were performance linked, market oriented and made for retention of talent. The AO's disallowance was ad hoc, unsupported by rejection of books or specific defects, and rested on a misunderstanding that certain designated employees were company directors attracting section 40A(2)(b). The CIT(A) correctly found only one person to be a related party in the audit report and observed no tax arbitrage. On these facts the bonus payments were held to be incurred in the ordinary course and allowable under section 37; the adhoc disallowance could not be sustained. [Paras 5]

Ad hoc 25% disallowance of bonus payments deleted; ground dismissed.

Final Conclusion: All substantive grounds raised by Revenue were dismissed and the appeal is decided in favour of the assessee; Revenue's appeal is dismissed.

Disallowance under section 14A read with rule 8D(2) - recording of satisfaction before applying rule 8D - apportionment of expenditure to exempt income - consideration limited to investments yielding exempt income

Disallowance under section 14A read with rule 8D(2) - recording of satisfaction before applying rule 8D - consideration limited to investments yielding exempt income - Validity of the disallowance made under section 14A read with rule 8D(2) in assessment where the assessing officer did not record satisfaction and included all expenses in computation. - HELD THAT: - The Tribunal found that the assessing officer did not record the requisite satisfaction on the file that the assessee's claim of not incurring expenditure in relation to exempt income was incorrect, nor did he refer to the assessee's accounts as required by section 14A(2). The assessing officer quantified the disallowance by applying rule 8D(2) without first establishing such satisfaction and, in doing so, included all expenses debited to profit and loss account (including depreciation and windmill repairs) instead of limiting the apportionment to those expenses relatable to the exempt income. The Tribunal noted that only expenses relatable to investments from which exempt income was actually earned ought to have been considered for apportionment under rule 8D(2). In the absence of the mandatory satisfaction and proper reference to accounts, the disallowance could not be sustained and was therefore liable to be deleted. [Paras 9]

Disallowance of Rs. 2,97,99,176/- under section 14A read with rule 8D(2) deleted; appeal allowed.

Final Conclusion: The orders of the lower authorities confirming the disallowance under section 14A read with rule 8D(2) are reversed for lack of recorded satisfaction and improper apportionment; the appeal is allowed.

Determination of annual value under section 23(1)(a) - municipal rateable value as recognised yardstick for annual lettable value - treatment of part-occupation for business/profession under section 22 - assessing officer's power to estimate fair market rent based on market evidence - inadmissibility of substituting municipal valuation without relevant material

Treatment of part-occupation for business/profession under section 22 - determination of annual value under section 23(1)(a) - Whether the basement used by the assessee for business/profession is to be excluded from income from house property and the declaration of municipal rateable value for the remaining floors should be accepted. - HELD THAT: - The Tribunal examined the material placed on record including prior year income-tax returns and municipal records relied upon by the assessee showing commercial use of the basement and noted that municipal lettable value is an accepted basis for determining annual lettable value. The Tribunal found that lower authorities had not adequately controverted the assessee's evidence of business/professional use and that municipal valuation was relied upon by the assessee for the other floors. Applying the principle that municipal rateable value may be a rational yardstick for annual value unless shown to be not representative of fair market rent, the Tribunal observed that the Assessing Officer failed to justify substitution of municipal values by an estimated market rent in the facts of this case. Following co-ordinate bench precedents, the Tribunal concluded that the basement, being used for business/profession and supported by municipal records and earlier returns, should not have been assessed as deemed rent under section 22 and that the municipal rateable value declaration for the other floors could not be disregarded without sufficient material. [Paras 11, 12]

Assessee's contention that the basement was used for business/profession is accepted and municipal rateable value declaration for the other floors is to be recognised; the addition is not sustainable.

Municipal rateable value as recognised yardstick for annual lettable value - assessing officer's power to estimate fair market rent based on market evidence - inadmissibility of substituting municipal valuation without relevant material - Whether the Assessing Officer was justified in ignoring municipal annual letting value and estimating the property's annual value at a higher figure on the basis of an inspector's local enquiry. - HELD THAT: - The Tribunal considered the Assessing Officer's reliance on an inspector's three-hour local enquiry and contemporaneous market estimates to substitute the municipal annual letting value. It applied legal authority that municipal valuation can be a reasonable yardstick but is not binding on the Assessing Officer if there is material to show it does not represent fair market rent. On the facts, however, the Tribunal found that the AO did not produce sufficient material to displace the municipal valuation and that the inspector's unauthenticated local enquiries were an inadequate basis to determine a markedly higher notional rent. The Tribunal further relied on co-ordinate bench decisions holding that municipal rateable value is a recognised basis for ALV and that substitution by expected rent requires cogent evidence. In consequence, the Tribunal held the AO's estimate unsustainable. [Paras 11, 12]

Assessing Officer's substitution of municipal values by the inspector's market estimate is not justified; the addition based on that estimate is to be deleted.

Final Conclusion: The Tribunal allowed the appeal for Assessment Year 2015-16, set aside the orders of the lower authorities, and directed the Assessing Officer to delete the addition arising from the estimate of annual lettable value; the assessee's declaration of municipal rateable value and use of the basement for business/profession were accepted for the year under consideration.

Claim of carry forward and set off of loss - return filed beyond due date under section 139(1) - time limit for filing return to avail carry forward of loss - remedy for delayed filing lies outside appellate forum

Claim of carry forward and set off of loss - return filed beyond due date under section 139(1) - time limit for filing return to avail carry forward of loss - Whether the assessee is entitled to carry forward and set off the loss of AY 2017-18 in AY 2018-19 when the return for AY 2017-18 was filed after the due date specified under section 139(1). - HELD THAT: - The Tribunal recorded that it was an admitted fact that the return for AY 2017-18 was filed on 22nd January, 2018 whereas the due date under section 139(1) was 5th August, 2017. The statute requires that the return for the year in which the loss was incurred must be filed within the time specified under section 139(1) to claim carry forward and set off of such loss. The assessee's explanation that a court restraint order prevented access to business documents and caused the delay was considered but held not to enable a benefit which the statute conditions upon timely filing. The Tribunal observed that any remedy for prevention from filing within time lies outside the scope of the Tribunal's grant of carry forward; consequently, failure to comply with the statutory time limit disentitles the assessee from carrying forward the loss to AY 2018-19. The CIT(A)'s conclusion upholding the disallowance in the intimation under section 143(1) was affirmed.

Assessee not entitled to carry forward and set off the loss of AY 2017-18 in AY 2018-19 as the return for AY 2017-18 was filed beyond the due date specified under section 139(1); appeal dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s order and dismissed the appeal, holding that late filing of the return for AY 2017-18 disentitled the assessee from carrying forward and setting off the loss in AY 2018-19.

Deduction under section 36(1)(va) read with section 43B - delayed payment of employees' contribution to Provident Fund and Employees State Insurance - due date for claiming deduction - payment made before due date of return under section 139(1) - prospective operation of Finance Act 2021 amendment - retrospective/clarificatory operation of statutory amendment

Deduction under section 36(1)(va) read with section 43B - delayed payment of employees' contribution to Provident Fund and Employees State Insurance - due date for claiming deduction - payment made before due date of return under section 139(1) - prospective operation of Finance Act 2021 amendment - Whether delayed payment of employees' contribution to PF and ESI is disallowable by applying the Finance Act 2021 amendments retrospectively where the contributions were paid before the due date for furnishing the return of income under section 139(1). - HELD THAT: - The Tribunal applied the settled principle that belated payment of employees' contribution to PF and ESI is allowable as a deduction under the relevant provisions if such payment is made before the due date for filing the return of income under section 139(1). The Commissioner (Appeals) had upheld the disallowance by treating the Finance Act, 2021 amendments as clarificatory and retrospective. The Tribunal, however, followed the Coordinate Bench decision which held that the Finance Act 2021 amendments take effect from 1.4.2021 and therefore operate prospectively from assessment year 2021-22; they do not apply to earlier assessment years. Applying that precedent, and noting no contrary binding decision was brought to its attention, the Tribunal found that the amended provisions could not be applied to the assessment year under dispute and that, on the facts, the employees' contributions were paid before the due date for filing the return. Consequently the disallowance made by applying the 2021 amendments was not sustainable. [Paras 6, 7]

Assessee's claim of deduction for the employees' contribution to PF and ESI is allowable; the disallowance is deleted.

Final Conclusion: Appeal allowed; disallowance of deduction for employee contributions to PF and ESI set aside and deduction admitted because payments were made before the due date for filing return and the Finance Act 2021 amendments apply prospectively.

Arm's Length Price - Comparable Uncontrolled Price method - Transactional Net Margin Method - business support services - onus of proof - remand for de novo adjudication

Arm's Length Price - Comparable Uncontrolled Price method - Acceptance of benchmarking of programme production services by the assessee under the Comparable Uncontrolled Price (CUP) method and reversal of the TPO's adjustment. - HELD THAT: - The TPO rejected the assessee's CUP benchmarking on the ground that the comparable involved TV programme production which was not sufficiently similar to the assessee's radio-based programme services and therefore adopted TNMM and made an adjustment. The Commissioner (Appeals) concluded that the third party margin for the allegedly more complex TV services was lower than the margin earned by the assessee for its simpler radio services and hence the assessee's pricing was at arm's length; the Commissioner (Appeals) accepted the CUP benchmarking and reversed the TPO's adjustment. The Tribunal, after considering the materials and parties' submissions, proceeded on the basis that the Commissioner (Appeals) rightly accepted the CUP benchmarking for programme production and did not sustain the TPO's adjustment in respect of those services. [Paras 4, 11]

The CUP benchmarking for programme production services is accepted and the adjustment made by the TPO on that footing is not sustained.

Business support services - Arm's Length Price - onus of proof - remand for de novo adjudication - Whether the amounts invoiced to the associated enterprise included a mark-up on business support costs and whether an adjustment should be made to add a mark-up in respect of business support services. - HELD THAT: - The agreement's Schedule distinguishes between direct (programme production) costs and a separate category labelled business support cost, with different mark ups specified in different periods. The assessee raised a single invoice for programme production which did not show bifurcation of direct cost, business support cost or mark up, and did not place on record workings or supporting evidence demonstrating that the invoice included a 12% mark up on business support cost. On the available record the Tribunal could not conclusively find that business support costs were remunerated with mark up and therefore could not either accept the assessee's claim or uphold the first appellate authority's addition without further enquiry. The Tribunal held that if the assessee establishes by proper workings and evidence that all costs (direct and business support) were remunerated with the agreed mark up, no adjustment would be warranted; the burden to prove this rests on the assessee. Consequently the Tribunal has restored the matter to the Commissioner (Appeals) for fresh adjudication after affording the assessee an opportunity to produce supporting evidence. [Paras 6, 8, 9, 10, 11]

Issue restored to the file of the Commissioner (Appeals) for de novo consideration; assessee to establish by proper working and evidence whether invoice includes agreed mark up on business support costs.

Final Conclusion: The Tribunal upheld the acceptance of CUP benchmarking for programme production services (thereby negating the TPO's adjustment on that head) but remanded the question of mark up on business support costs to the Commissioner (Appeals) for fresh adjudication, placing the onus on the assessee to prove that the single invoice included the agreed mark up on such costs.

Allowability of business expenditure during temporary lull - maintenance of corporate status as indicium of intention to resume business - allowability of depreciation where assets exist despite non-operation - consistency with earlier tribunal findings on similar facts

Allowability of business expenditure during temporary lull - maintenance of corporate status as indicium of intention to resume business - consistency with earlier tribunal findings on similar facts - Addition on account of disallowance of administrative and other business expenses was not sustainable and such expenses were allowable. - HELD THAT: - Tribunal applied the principle previously adopted in earlier years that where a company maintains its establishment and corporate set-up with an intention to resume business (in that case supported by pending litigation over fixed assets and an expected compensation), expenditure incurred to maintain the company and to meet legal and incidental obligations cannot be treated as expenditure incurred after permanent cessation of business. The assessee had no permanent closure, was maintaining staff and incurring statutory, legal, professional and audit expenses; these were held to be genuine business expenditure in the circumstances and therefore allowable. The Tribunal followed its earlier reasoning and directed the AO to allow the expenditure claimed in the profit & loss account. [Paras 7, 8]

Addition disallowing administrative and related business expenses set aside and expenditure allowed.

Allowability of depreciation where assets exist despite non-operation - consistency with earlier tribunal findings on similar facts - Disallowance of depreciation on the ground of non-operation was not sustainable and depreciation was allowable. - HELD THAT: - On the same facts and having regard to earlier years where depreciation on the assets was allowed, the Tribunal held there was no basis to deny depreciation merely because business operations were not carried out in the relevant year. The assets continued to exist and had been treated similarly in prior years; accordingly the claim for depreciation was allowed. [Paras 9]

Addition disallowing depreciation set aside and depreciation allowed.

Final Conclusion: Appeal allowed; the disallowances of business expenditure and depreciation made by the AO and confirmed by the CIT(A) are set aside and the claimed expenses and depreciation are to be allowed, following the Tribunal's prior reasoning on similar facts.

Disallowance of interest under Section 36(1)(iii) of the Act on account of borrowed funds invested in non business assets - nexus between expenditure and the purpose of business - deduction of interest on loans advanced to subsidiary/related concerns - corporate guarantee as an international transaction for transfer pricing - retrospective inclusion of guarantee within the definition of international transaction

Disallowance of interest under Section 36(1)(iii) of the Act on account of borrowed funds invested in non business assets - nexus between expenditure and the purpose of business - deduction of interest on loans advanced to subsidiary/related concerns - Validity of addition disallowing interest expenses where borrowed funds were advanced/invested in group, subsidiary and joint venture concerns - HELD THAT: - The Tribunal affirmed the Commissioner's deletion of the notional interest addition. The Court applied the principle that, once a nexus between the expenditure and the purpose of the business is established, tax authorities must not substitute their commercial judgment for that of the taxpayer and try to determine what would be a 'reasonable' business decision. The Tribunal relied on the reasoning in S.A. Builders Ltd. that a holding company ordinarily may claim interest deduction where borrowed funds are advanced to a subsidiary in which it has a commercial interest, and on High Court precedents allowing interest deduction where borrowings were used for investment in subsidiaries. In the facts of the case the assessee had demonstrated that the investments in joint venture, group and subsidiary companies were strategic and connected with business objectives; consequently the Commissioner was justified in deleting the disallowance and the Revenue's appeal was dismissed. [Paras 6]

The disallowance of interest was deleted; Revenue's appeal dismissed.

Corporate guarantee as an international transaction for transfer pricing - retrospective inclusion of guarantee within the definition of international transaction - Whether providing corporate guarantees to overseas associated enterprises constitutes an international transaction subject to transfer pricing adjustment - HELD THAT: - The Tribunal upheld the Commissioner's conclusion that corporate guarantees fall within the ambit of 'international transaction' for transfer pricing purposes. The assessee accepted the relevance of the Madras High Court decision in Pr. CIT v. Redington (India) Ltd., which construed the Explanation to the statutory definition as including 'guarantee' and as having retrospective effect; the Commissioner had followed analogous High Court authority and reduced the adjustment to a lower rate. Given the binding judicial treatment and the assessee's acceptance of the legal position, the Commissioner's partial addition qua corporate guarantees was sustained. [Paras 7, 8]

Transfer pricing adjustment in respect of corporate guarantees upheld in part; assessee's appeal dismissed.

Final Conclusion: Both cross appeals are dismissed: the Revenue's disallowance of interest was correctly deleted on the facts and law; the assessee's challenge to the transfer pricing adjustment for corporate guarantees failed and the partial addition was sustained.

Liability of any person for contravention under Sections 114 and 117 of the Customs Act - responsibilities and due diligence obligations of a Customs House Agent and its employees under the Customs House Agents Licensing Regulations, 2004 - use and misuse of a Customs House Agent licence and liability for lending or permitting third party use - mens rea and culpability in cases of mis declaration and stealthy export - power of appellate Tribunal to enhance penalty where original penalty is inadequately low

Liability of any person for contravention under Sections 114 and 117 of the Customs Act - mens rea and culpability in cases of mis declaration and stealthy export - Whether the appellant, an employee of a Customs House Agent, is liable to penalty under Section 114 (and residually Section 117) of the Customs Act for involvement in mis declaration and attempted export of prohibited goods. - HELD THAT: - The Court held that the penal provisions refer to 'any person', thereby attracting liability of persons who are party to mis declaration or who abet contraventions. The appellant's employer admitted that a blank Annexure A bearing the employer's signature was handed over to the appellant. That admission, viewed with the facts of stealthy export and the role played in preparing the Annexure A, establishes negligence and recklessness in permitting misuse of the CHA licence. The Regulations and the Act contemplate action against violators who facilitate mis declaration; ignorance of the transaction does not absolve a person who has not discharged the due diligence obligations imposed by the Regulations. Accordingly, the Court rejected the contention that being an employee insulated the appellant from penal liability where he failed to perform statutory and regulatory obligations and where his acts formed part of the scheme by which prohibited goods were exported. [Paras 12, 14, 17]

The appellant is liable to penalty under Section 114 (and, residually, Section 117) of the Customs Act for being party to the mis declaration and reckless lending/misuse of the CHA licence.

Responsibilities and due diligence obligations of a Customs House Agent and its employees under the Customs House Agents Licensing Regulations, 2004 - use and misuse of a Customs House Agent licence and liability for lending or permitting third party use - Whether the appellant's liability must be pursued only under the CHALR 2004 or could also be proceeded under the penal provisions of the Customs Act. - HELD THAT: - The Court observed that CHALR 2004 is supporting legislation and imposes non transferability and due diligence obligations (Regulations 12 and 13). Those regulatory obligations do not exclude penal action under the parent Act; rather, contravention of the Regulations can give rise to action under the Customs Act as well. The Court rejected the submission that only the Regulations apply, holding that proceedings under the Act and under the Regulations are complementary and that grave offences cannot be immunised from penal action under the Act simply because Regulations also provide remedies. [Paras 12, 16, 17]

Liability under CHALR 2004 does not preclude prosecuting or imposing penalty under the Customs Act; action under both regimes is permissible where warranted.

Power of appellate Tribunal to enhance penalty where original penalty is inadequately low - Whether the CESTAT was justified in enhancing the penalty imposed on the appellant from the reduced amount to the enhanced amount. - HELD THAT: - The Court noted that the Tribunal is empowered to enhance penalty if the earlier penalty is inadequate. Section 117 is a residuary provision with a lower cap and does not restrict imposition of higher penalties where specific provisions prescribe higher maxima. Given the factual finding of mis declaration, admission regarding the Annexure A and failure to discharge regulatory obligations, the Tribunal's view that the earlier reduced penalty was low was sustainable. The Court found no infirmity or mala fide in enhancing the penalty. [Paras 6, 17, 18]

The CESTAT was justified in enhancing the penalty; the enhancement is valid and the enhanced penalty stands.

Final Conclusion: The appeals are dismissed. The High Court upheld the CESTAT's enhancement of penalty, holding that the appellant, an employee of a Customs House Agent who had admitted handing over a signed blank Annexure A and who failed to discharge due diligence obligations under the Regulations, was liable under the Customs Act and that enhancement of the penalty by the Tribunal was justified.

Classification by dominant use - special purpose/off-road tyres - original equipment fitment versus replacement tyres - reliability of third party/manufacturer subsidiary email as evidence - applicability of import restriction based on tariff classification

Classification by dominant use - special purpose/off-road tyres - original equipment fitment versus replacement tyres - reliability of third party/manufacturer subsidiary email as evidence - applicability of import restriction based on tariff classification - Whether the imported tyres are classifiable as special purpose off road/mining tyres (CTH 40118000/40119000) or as pneumatic tyres of a kind used on motor cars (CTH 40111010), and whether the departmental reliance on competitor/manufacturer subsidiary email and OE fitment establishes classification attracting import restriction. - HELD THAT: - The Tribunal examined technical literature, purchasers' certificates, product descriptions and a clarification placed by the appellants' technical service team showing the tyres to be MUD terrain/off road tyres not designed for normal highway use. The Department's case rested on an e mail from a manufacturer's Indian subsidiary and on web descriptions suggesting use on SUVs such as Thar/Gurkha, and on the absence of OE fitment for mining vehicles. The Tribunal applied the principle of classification by dominant use, noting that tyres predominantly designed and used for difficult terrain, rocky/muddy areas and off road activities are not "normal" on road motor car tyres merely because they can be fitted to certain vehicles. The Tribunal rejected reliance on an unverified e mail from a competitor/related commercial party as conclusive evidence, observed that the Department did not demonstrate OE supply of the impugned tyres for normal on road use, and accepted that replacement fitment for temporary off road use supports classification as special purpose/off road tyres. Having found the impugned tyres to be essentially suitable for off road use and not principally designed for normal on road motor car use, the Tribunal held that the lower authorities' classification under CTH 40111010 was not justified and that the appellants' classification was sustainable. Consequently, any import restriction predicated on the departmental classification could not be sustained on the record before the authorities. [Paras 15, 16]

Impugned order set aside; appeal allowed and tyres to be treated as special purpose/off road tyres for classification and consequential relief granted.

Final Conclusion: The Tribunal allowed the appeal, holding that the imported MUD terrain/off road tyres are essentially special purpose tyres suitable for off road use and are not to be classified as pneumatic tyres of a kind used on motor cars; the impugned orders based on the contrary classification and resultant import restriction were set aside with consequential relief as per law.

Power to dispense with meetings under schemes of arrangement - judicial discretion in convening or dispensing with shareholder and creditor meetings - pari materia of Section 230 of the Companies Act, 2013 and Section 391 of the Companies Act, 1956 - first motion directions for calling meetings in schemes of arrangement - compliance with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016

Power to dispense with meetings under schemes of arrangement - pari materia of Section 230 of the Companies Act, 2013 and Section 391 of the Companies Act, 1956 - judicial discretion in convening or dispensing with shareholder and creditor meetings - Whether the Tribunal has the power to dispense with calling meetings of shareholders and creditors in a scheme of arrangement. - HELD THAT: - After surveying decisions under both the old and new Companies Acts and coordinate Benches/authorities, the Tribunal concluded that it possesses the power to dispense with meetings of shareholders and other classes of persons in relation to a scheme of arrangement. That power is to be exercised by applying judicial discretion depending on the facts and circumstances of each case. The Tribunal noted conflicting views in coordinate Benches but emphasised judicial discipline and the need to follow precedents unless referred to a larger Bench; ultimately it held that dispensing with meetings is permissible in appropriate cases and must be fact-sensitive. [Paras 30]

The Tribunal holds that, depending on the facts and circumstances of each case, it has the power to dispense with meetings of shareholders and others by exercising judicial discretion.

First motion directions for calling meetings in schemes of arrangement - compliance with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - judicial discretion in convening or dispensing with shareholder and creditor meetings - Exercise of the Tribunal's discretion in the present petition - dispensing with shareholders' meetings and directing convening of specified creditors' meetings with conditions. - HELD THAT: - Applying its concluded discretion to the facts of the joint application by the three applicant companies, the Tribunal dispensed with the meetings of equity shareholders of all three applicants where affidavits of consent were on record and the ownership/shareholding patterns justified dispensation. The Tribunal also dispensed with the meeting of unsecured creditors of the Transferor Company as 100% in value had consented. However, it directed convening of meetings of secured creditors of the Transferor and Transferee Companies and of the unsecured creditors of the Transferee Company by video conferencing with remote e-voting, prescribing quorum rules, timelines for notice and publication, circulation of explanatory statements, provisional accounting statements, filing of affidavits of service, and other compliances under the Act and the Rules. The Tribunal appointed the Chairperson, Alternate Chairperson and Scrutinizer for the meetings and directed the applicants to bear their fees and to comply strictly with statutory forms and procedural requirements. [Paras 31, 32]

In the present case the Tribunal dispensed with the equity shareholders' meetings of all three applicant companies and the unsecured creditors' meeting of the Transferor Company, and directed convening of the specified secured and unsecured creditors' meetings for the Transferee and Transferor Companies with detailed procedural directions and statutory compliances.

Final Conclusion: The Tribunal recognised and exercised its discretion to dispense with shareholders' meetings and certain creditors' meetings where consents and facts warranted, and ordered convening of specified creditors' meetings in the present matter with directions for statutory notices, circulation of documents, quorum, voting arrangements and procedural compliance under the Companies Act, 2013 and the Rules.

Scheme of Amalgamation - Dispensing with meetings of shareholders and creditors - Notice to sectoral regulators and authorities under Section 230(5) - Transfer and vesting of assets and liabilities on amalgamation - Continuation of pending proceedings by transferee company - Auditor's certificate and valuation report as compliance evidence

Dispensing with meetings of shareholders and creditors - Meetings of the equity shareholders and creditors of both applicant companies were dispensed with. - HELD THAT: - The Tribunal considered the affidavits of consent filed by all shareholders of the Transferor and Transferee companies and the affidavits of creditors showing requisite consent in compliance with Section 230(9). Having examined those consent affidavits, the Tribunal exercised its power to dispense with holding of the meetings of members and creditors of both companies and recorded that such meetings are dispensed with as prayed for. [Paras 15]

Meetings of the members/equity shareholders and of the creditors of both applicant companies are dispensed with.

Scheme of Amalgamation - Auditor's certificate and valuation report as compliance evidence - The Company Application for sanction of the Scheme of Amalgamation is allowed and the Scheme is sanctioned subject to directions. - HELD THAT: - On consideration of the Scheme annexed to the petition, the board resolutions approving the Scheme, the auditor's certificates and the valuation report supporting the exchange ratio, and the representations that the amalgamation would enable more efficient utilization of resources and would not adversely affect creditors, the Tribunal found the Company Application deserving of allowance. The Tribunal therefore allowed the first motion petition and sanctioned the Scheme in terms of the prayers subject to specified compliances. [Paras 6, 9, 10, 16, 17]

The Company Application is allowed and the Scheme of Amalgamation is sanctioned, subject to the directions given by the Tribunal.

Notice to sectoral regulators and authorities under Section 230(5) - The Applicant Companies were directed to serve notices in Form CAA.3 with disclosures to specified authorities and allow 30 days for representations. - HELD THAT: - The Tribunal directed the petitioners to issue notices in Form No. CAA.3 along with the disclosures required under Rule 6, as provided by Section 230(5) read with Rule 8, to the Regional Director (NER), the Registrar of Companies (NER), the Official Liquidator (NER) and the Income Tax authorities having jurisdiction. The notices are to inform the authorities that representations, if any, are to be filed within 30 days, and service shall be by speed post or by hand delivery; an affidavit of service by speed post is to be filed within two weeks. [Paras 16]

Notices in Form CAA.3 with required disclosures to the specified authorities are to be issued forthwith and compliance in 30 days and filing of affidavit of service within two weeks are directed.

Transfer and vesting of assets and liabilities on amalgamation - Continuation of pending proceedings by transferee company - All properties, assets, rights and liabilities of the Transferor Company shall be transferred to and vest in the Transferee Company and pending proceedings shall continue by or against the Transferee Company as provided in the Scheme. - HELD THAT: - The Scheme provides for transfer and vesting of all estates, interests, rights and obligations of the Transferor Company to the Transferee Company without further act or deed, subject to existing charges, and for continuation of suits, appeals and proceedings by or against the Transferor Company in the name of the Transferee Company. The Tribunal, in sanctioning the Scheme, accepted these provisions as part of the amalgamation to take effect pursuant to the Scheme. [Paras 4]

Assets, rights and liabilities of the Transferor Company shall stand transferred and vested in the Transferee Company and pending proceedings shall continue in the Transferee Company in accordance with the Scheme.

Final Conclusion: The Tribunal allowed the first-motion Company Application and sanctioned the proposed Scheme of Amalgamation between Cachar Ispat Private Limited and Ladi Steel Industries Private Limited, dispensed with meetings of members and creditors on the basis of filed consents, directed service of statutory notices to specified authorities under Section 230(5) with a 30-day opportunity for representations, and ordered the usual compliances including filing of affidavit of service.

Creation of corpus by Committee of Creditors - duty to maintain corporate debtor as going concern - direction to CoC members to provide interim finance / corpus contributions - exercise of powers under Section 60(5) of the Insolvency and Bankruptcy Code, 2016

Creation of corpus by Committee of Creditors - direction to CoC members to provide interim finance / corpus contributions - duty to maintain corporate debtor as going concern - Respondents to be directed to pay pending contributions to the corpus as approved by the Committee of Creditors to enable continuation of the CIRP and preservation of the Corporate Debtor as a going concern. - HELD THAT: - The Tribunal recorded that the corpus was created and approved by requisite majorities of the CoC in meetings dated 14.12.2018, 16.12.2019 and 07.09.2020 for the purposes of keeping the Corporate Debtor as a going concern and meeting CIRP expenses. The record showed instalments and cash calls were made but contributions from certain CoC members remained unpaid and were specifically tabulated in the order. In the absence of an alternate source of funds and given the urgent need to preserve assets and meet operational and insolvency-related costs, the Tribunal exercised its jurisdiction under Section 60(5) of the Code and directed the named respondents to make their pending contributions towards the approved corpus. The payment was ordered to be made within 15 days of receipt of the certified copy of the order to enable the Applicant to operate the business of the Corporate Debtor as a going concern and preserve assets during the CIRP. [Paras 18, 19, 20]

IA 1651 of 2020 in CP 1765 of 2018 is allowed and disposed of; respondents listed in paragraph 17 directed to pay their pending corpus contributions within 15 days from receiving the certified copy of the order.

Final Conclusion: The application under Section 60(5) IBC is allowed: the Tribunal directed the respondents shown in paragraph 17 to pay outstanding contributions to the CoC approved corpus within 15 days of receipt of the certified copy so as to enable continuation of the CIRP and preservation of the Corporate Debtor as a going concern.

Operational debt - service of demand notice under Section 8 - default in payment - admission under Section 9(5) of IBC, 2016 - jurisdiction of the Adjudicating Authority - limitation period - appointment of Interim Resolution Professional - moratorium under Section 14 - constitution of Committee of Creditors - deposit for IRP expenses

Operational debt - service of demand notice under Section 8 - default in payment - The claim for operational debt, its service by demand notice and the existence of default remained uncontroverted. - HELD THAT: - The petitioner produced invoices for supplies (including the invoice dated 24.08.2017) and a demand notice dated 02.05.2019 sent by speed post and email to the registered address of the corporate debtor. The petitioner filed an affidavit of service and bank statements showing non-receipt of payment. The corporate debtor did not file any reply or raise a dispute to the demand notice and forfeited its right to file a reply, leading the Tribunal to treat the claim as uncontroverted and the default as established. [Paras 5, 6, 9, 12, 16]

The operational debt and default were held proved and uncontroverted by the corporate debtor.

Jurisdiction of the Adjudicating Authority - limitation period - The Tribunal had jurisdiction to entertain the petition and the petition was not barred by limitation. - HELD THAT: - The registered office of the corporate debtor is situated in Bathinda, Punjab, which places the matter within the jurisdiction of this Tribunal. The default was stated to have occurred on 24.08.2017 and the petition was filed on 06.06.2019; on this basis the Tribunal found that the petition was filed within the period of limitation and therefore not time-barred. [Paras 10, 11]

Jurisdiction of the Tribunal was affirmed and the petition held timely.

Admission under Section 9(5) of IBC, 2016 - moratorium under Section 14 - The petition was admitted under Section 9(5) and the moratorium under Section 14 was declared consequent to admission. - HELD THAT: - Applying the test articulated in Mobilox Innovations (as cited), the Tribunal found that (i) there was an operational debt above threshold, (ii) documentary evidence showed the debt was due and unpaid, and (iii) no pre-existing dispute or proceedings were on record. On that basis the petition met the statutory requirements and was admitted in terms of Section 9(5). Consequent upon admission, the moratorium specified in Section 14(1) was declared to operate from the insolvency commencement date, subject to the exceptions and further provisions of Sections 14(2)-(4). [Paras 12, 15, 16, 17]

Section 9 petition admitted and moratorium under Section 14 declared in relation to the corporate debtor.

Appointment of Interim Resolution Professional - constitution of Committee of Creditors - An Interim Resolution Professional was appointed and directed to perform duties including public announcement, compilation of claims and constitution of the Committee of Creditors. - HELD THAT: - As the petitioner had not nominated an insolvency professional, the Tribunal, relying on the IBBI list, appointed Mr. Subhash Saini as Interim Resolution Professional subject to his consent and disclosures. The IRP was directed to act in accordance with the Code, prepare inventory of assets, cause public announcement under the Regulations, collate claims, constitute the Committee of Creditors and file a report certifying its constitution within thirty days, and convene the first meeting within seven days thereafter. The powers of the board of directors were ordered suspended and management vested in the IRP pursuant to Section 17. [Paras 13]

Mr. Subhash Saini appointed as Interim Resolution Professional with directions to perform statutory functions and constitute the Committee of Creditors.

Deposit for IRP expenses - The operational creditor was directed to deposit an amount to meet initial IRP expenses. - HELD THAT: - The Tribunal directed the operational creditor to deposit a specified sum with the Interim Resolution Professional within three days of receipt of the order to meet expenses in accordance with the Regulations; the amount was ordered to be subject to adjustment by the Committee of Creditors and refundable as accounted for by the IRP. [Paras 14]

Operational creditor directed to deposit funds for IRP expenses, subject to adjustment by the Committee of Creditors.

Communication of order - The order and its particulars were to be communicated to the petitioner, corporate debtor, IRP, IBBI and RoC with a compliance report to the Tribunal. - HELD THAT: - The Tribunal directed registry to send a copy of the order to the petitioner, the corporate debtor and the appointed IRP, and also to forward a copy to the IBBI for records. A copy was to be sent to the Registrar of Companies for updating master data and the RoC was directed to send a compliance report to the Registrar, NCLT. [Paras 18]

Registry directed to communicate the order to concerned parties and authorities and obtain compliance report from RoC.

Final Conclusion: The Section 9 petition was admitted on proof of an uncontroverted operational debt and default, the Tribunal declared the moratorium, appointed an Interim Resolution Professional with directions to take statutory steps including public announcement and constitution of the Committee of Creditors, directed the operational creditor to deposit funds for initial IRP expenses, and ordered communication of the order to the parties, IBBI and RoC.

Financial debt - Financial contract - Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Proof of debt and default - Rule 4 of the IBBI (Application to Adjudicating Authority) Rules, 2016 - Regulation 8 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016

Financial debt - Financial contract - Proof of debt and default - Whether the Financial Creditor established a financial debt and default sufficient to admit an application under Section 7 of the IBC, 2016. - HELD THAT: - The Tribunal held that admission under Section 7 requires satisfaction of statutory pre-conditions: existence of a debt, that the debt is due and payable, that the debt partakes the character of a financial debt, and that there is a default. Rules and regulations require production of the financial contract or other relevant documents to demonstrate the debt, its tenure, interest and repayment terms. The Applicant failed to produce any document evidencing the claimed debt amount or a financial contract despite being queried at final hearing. Reliance was placed on the statutory scheme and the cited appellate authority emphasising that in absence of a defined financial contract the transaction cannot be treated as a financial debt. On these grounds the Tribunal found that the Applicant did not prove that a debt had become due and payable and that there was default. [Paras 8, 9, 15]

Application under Section 7 dismissed for failure to establish a financial contract, the existence of a financial debt and default; CP/IB/69/2021 dismissed.

Final Conclusion: The petition under Section 7 of the IBC, 2016 was dismissed because the Financial Creditor failed to produce a financial contract or other required evidence to prove the existence of a financial debt and default; consequently the Corporate Insolvency Resolution Process was not initiated and CP/IB/69/2021 stands dismissed.

Corporate Insolvency Resolution Process - default in payment of financial debt - admission under Section 7 of IBC, 2016 - appointment of Interim Resolution Professional - moratorium under Section 14 - prohibition on enforcement including SARFAESI proceedings - duties and obligations of the Interim Resolution Professional

Default in payment of financial debt - admission under Section 7 of IBC, 2016 - Financial Creditor established existence of financial debt and default and the application under Section 7 is maintainable. - HELD THAT: - The Tribunal recorded that the Financial Creditor, an NBFC, granted a term loan to the Corporate Debtor and produced the certificate of default issued by NeSL. The Corporate Debtor did not dispute that a debt exceeding Rs. 1 crore was due and that it had committed default. Those facts were treated as the only relevant facts required for the inquiry under Section 7. The Tribunal therefore found that the Financial Creditor had established both the existence of the financial debt and the default, rendering the Section 7 application defect-free and capable of admission. [Paras 7]

Section 7 application admitted as Financial Creditor established debt and default.

Appointment of Interim Resolution Professional - duties and obligations of the Interim Resolution Professional - Interim Resolution Professional appointed as proposed by the Financial Creditor and directed to perform CIRP functions. - HELD THAT: - Having admitted the Corporate Debtor into CIRP, the Tribunal appointed the Insolvency Professional nominated by the Financial Creditor as the IRP, noting no pending disciplinary proceedings against her. The IRP was directed to make the public announcement, call for claims, and perform the functions conferred by the Code, including protection and preservation of the Corporate Debtor's property and management of operations as a going concern, and to receive cooperation from the Corporate Debtor's personnel as required by the insolvency code.

IRP appointed and directed to perform statutory duties of CIRP.

Moratorium under Section 14 - prohibition on enforcement including SARFAESI proceedings - Moratorium declared with prohibition on institution or continuation of suits and on enforcement actions, including proceedings under the SARFAESI Act, during the CIRP. - HELD THAT: - The Tribunal declared the moratorium to operate from the date of the order until completion of CIRP or until approval of a resolution plan or liquidation. The order expressly prohibited institution or continuation of suits or proceedings against the Corporate Debtor, execution of any judgment or decree, and any action to recover or enforce security interests, including under the SARFAESI Act, as well as transfer, encumbrance, alienation or disposal of the Corporate Debtor's assets during the moratorium period. Pending proceedings under SARFAESI or similar Acts were to be dealt with in accordance with Sections 14 and 238 of the Code.

Moratorium imposed; enforcement actions including SARFAESI proceedings prohibited during CIRP.

Prohibition on enforcement including SARFAESI proceedings - interlocutory applications - Interlocutory applications filed by the Corporate Debtor seeking restraint on the Financial Creditor's recovery actions were disposed of in view of the moratorium. - HELD THAT: - Two interim applications by the Corporate Debtor seeking restraint on the Financial Creditor's proceedings before executive and SARFAESI fora were considered in the context of the moratorium directions. Given the prohibition on enforcement and continuation of proceedings during CIRP as set out in the order, the Tribunal disposed of the interlocutory applications accordingly. [Paras 8]

IA/44(MP)2021 and IA/106(MP)2021 disposed of in view of the moratorium and admission.

Final Conclusion: The Tribunal admitted the Corporate Debtor into the Corporate Insolvency Resolution Process on the Financial Creditor's Section 7 petition, appointed the nominated Interim Resolution Professional, declared the moratorium (prohibiting enforcement including SARFAESI actions) with CIRP effective from the date of the order, and disposed of the interlocutory applications accordingly.

Limitation and acknowledgement in balance-sheet - pre-existing dispute under section 9 of the IBC - requirement of corporate authorisation for filing insolvency application - application maintainability under section 9 read with Rule 6

Limitation and acknowledgement in balance-sheet - Whether the Section 9 application was barred by limitation - HELD THAT: - The Tribunal applied the principles in Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal regarding when entries in company balance-sheets may amount to an acknowledgement under section 18 of the Limitation Act. The respondent had admitted in writing that the disputed amount appeared in its balance-sheets until it was written off on July 20, 2018. Given that admission, and pursuant to section 58 of the Evidence Act, the Tribunal accepted that the sums shown under "trade payable current" included the debt claimed by the petitioner and concluded that limitation was extended. On that basis the application was held not to be time-barred. [Paras 8]

Application is not barred by limitation.

Pre-existing dispute under section 9 of the IBC - application maintainability under section 9 read with Rule 6 - Whether a genuine pre-existing dispute exists between the parties such as to bar initiation of CIRP - HELD THAT: - Applying the Mobilox standard, the Tribunal examined whether the respondent's contentions amounted to a plausible dispute requiring further investigation rather than a patently feeble or vexatious plea. Material issues identified included substantial variance between purchase order rates and invoice rates (with the respondent alleging overcharging and poor quality), lack of documentary proof of prior payment claims relied upon by the petitioner, absence of agreed interest terms and the sudden claim of interest after a long lull. The Tribunal found these contentions substantial and prima facie credible, thereby constituting a genuine dispute which precludes admission of the section 9 petition. [Paras 9, 10, 11, 12, 13]

There exists a genuine pre-existing dispute; the petition cannot be admitted on merits.

Requirement of corporate authorisation for filing insolvency application - application maintainability under section 9 read with Rule 6 - Whether the petition filed on behalf of the operational creditor was maintainable in absence of corporate authorisation/board resolution - HELD THAT: - The Tribunal noted that the petition did not disclose how the person who filed it was authorised by the corporate operational creditor and that Form 5 requires enclosure of authorisation. The absence of a board resolution or equivalent authorisation was held to be a defect going to the root of maintainability and, therefore, the filing was not properly authorised. However, since the Tribunal had already found a genuine dispute on the merits, it declined to remit the petition for rectification at a late stage as such rectification would be futile in light of that substantive conclusion. [Paras 14, 16, 17, 18]

Filing without corporate authorisation is not maintainable; petition not returned for rectification and dismissed because a genuine dispute exists.

Final Conclusion: The Tribunal held that the Section 9 petition was not time-barred but that a bona fide pre-existing dispute existed as to liability and interest; additionally the petition lacked corporate authorisation. In view of the genuine dispute, the petition was dismissed and not returned for rectification.

Bail under Prevention of Money Laundering Act - exceptionally strong prima-facie case for grant of bail - proceeds of crime - money laundering - generation, placement, layering and integration - statements recorded under Section 50 of the PMLA as admissible evidence - application of Nikesh Tarachand Shah (twin conditions of Section 45)

Bail under Prevention of Money Laundering Act - exceptionally strong prima-facie case for grant of bail - proceeds of crime - money laundering - generation, placement, layering and integration - statements recorded under Section 50 of the PMLA as admissible evidence - Applicant has not made out an exceptionally strong prima-facie case to be released on bail in this money laundering prosecution. - HELD THAT: - The Court examined the ECIR, documentary trail and statements recorded by the ED under Section 50 of the PMLA and found prima-facie material indicating conversion of a charitable trust into a Sec.8 company by forged documents, transfers from trust accounts into the applicant's accounts, contemporaneous withdrawals and credit entries, and transactions arranged through an intermediary to portray tainted funds as untainted. The Chartered Accountant's statements and other documentary evidence were held to prima-facie establish the stages of money laundering - generation, layering, placement and integration - implicating the applicant as an active participant. The Court accepted that the twin conditions in Section 45(1) were rendered ineffective by the ratio in Nikesh Tarachand Shah for bail-purpose consideration, but held that even under Section 439 Cr.P.C. and the remaining part of Section 45 the tripod test and other bail parameters disfavour release: the accused is linked to prima-facie material, witnesses have been threatened/assaulted and co accused remain evasive, raising a real risk of tampering with evidence and frustrating the investigation and trial. On these determinative facts and reasoning the Court refused to undertake a roving inquiry into merits and concluded that bail must be denied. [Paras 3, 32, 34]

Bail application rejected.

Final Conclusion: On the materials and statements before it the Court finds satisfactory prima-facie evidence of money laundering implicating the applicant and, applying the relevant bail principles, declines to grant bail; PMLA Bail Application No.867 of 2021 is rejected.

Extended period of limitation - wilful suppression - burden of proof for invoking extended limitation - disclosure to department - CENVAT credit on input services - reversal of credit on sale of property

Extended period of limitation - wilful suppression - disclosure to department - Extended period of limitation cannot be invoked in absence of fraud or wilful suppression where the assessee had made prior disclosures to the Department. - HELD THAT: - The Tribunal found that the appellant had informed the Department about availment and proposed utilisation of CENVAT credit and the manner of reversal upon sale by letters dated 24.10.2008 and 24.04.2009, as reflected on the appeal record. These disclosures were not disputed by the lower authorities and were not addressed in the adjudication or appeal orders. The Show Cause Notice did not contain positive evidence of any fraudulent conduct or wilful suppression by the appellant. In the absence of such an element, the statutory extended period of limitation relied upon by the Department for demanding tax could not be invoked. Consequently, the demand framed under the extended limitation was unsustainable and was set aside. The Tribunal therefore decided the dispute on limitation alone and refrained from adjudicating the merits. [Paras 4, 5, 6]

Demand confirmed under extended limitation quashed for lack of fraud or wilful suppression; appeal allowed on limitation grounds.

Final Conclusion: The appeal is allowed on the ground that the extended period of limitation could not be invoked in the absence of fraud or wilful suppression; the demand is set aside and consequential relief, if any, shall follow.

Relevant date for refund under Section 11B(5) Explanation (eb) - limitation period for refund claims - refund of service tax on advances - provisionally paid duty and its adjustment - doctrine of unjust enrichment - claim for refund of duty and interest

Relevant date for refund under Section 11B(5) Explanation (eb) - provisionally paid duty and its adjustment - limitation period for refund claims - The relevant date for computing limitation under Section 11B for refund of service tax paid on advances is the date of adjustment/cancellation of the provisional payment (i.e., date of cancellation of the purchase orders). - HELD THAT: - The service tax paid on advances was a provisional payment made under the Point of Taxation Rules, 2011 and required adjustment once it was finally determined that no service would be provided. Explanation (eb) to Section 11B(5) specifies that where duty is paid provisionally under the Act or rules, the relevant date is the date of adjustment of duty after finalisation. Applying that provision, the date on which the purchase orders were cancelled (and the advances refunded or adjusted) is the relevant date from which the one year limitation for filing refund claims runs. Consequently, refund applications must be filed within one year from the date of cancellation/adjustment of the purchase orders to be within the time prescribed by Section 11B. [Paras 21, 22, 23, 25, 26]

The cancellation of the purchase orders is the relevant date for limitation under Section 11B(5) Explanation (eb); refund claims must be filed within one year from that date.

Limitation period for refund claims - claim for refund of duty and interest - Whether the appellant's refund claims were filed within the one year period from the relevant date must be examined by the adjudicating authority. - HELD THAT: - The Tribunal found from the papers that it was not manifest whether the refund claims were filed within one year from the date of cancellation of the purchase orders. Since the relevant date has been held to be the date of cancellation, the question of timeliness cannot be decided on the record before the Tribunal and requires verification by the adjudicating authority against the specific cancellation and filing dates. [Paras 23, 28]

Matter remanded to the adjudicating authority to verify whether each refund claim was filed within one year from the date of cancellation/adjustment of the purchase orders.

Doctrine of unjust enrichment - refund of service tax on advances - Applicability of the bar of unjust enrichment to the refund claims is to be examined afresh by the adjudicating authority on the basis of the documentary evidence. - HELD THAT: - The Tribunal did not decide the question of unjust enrichment on merits. It noted the parties' conflicting contentions on whether the service tax burden was passed on to customers and observed that the adjudicating authority must examine the documents placed by the appellant (including ledger/balance sheet entries and supporting certifications) to determine whether the incidence of tax had been passed on and whether the unjust enrichment bar is attracted. [Paras 27, 28]

Issue of unjust enrichment is remanded to the adjudicating authority for determination based on evidence.

Final Conclusion: Impugned order set aside and the matter remanded to the adjudicating authority to determine (a) whether each refund claim was filed within one year from the date of cancellation/adjustment of the purchase orders (the relevant date under Section 11B(5) Explanation (eb)), and (b) whether the bar of unjust enrichment applies; appeal disposed of by remand.

Denial of right to cross-examination under Section 9D of the Central Excise Act, 1944 - evidentiary value of documents recovered during search - reliance on statements recorded during investigation as admissible evidence - decision on remand and duty to afford opportunity of hearing

Denial of right to cross-examination under Section 9D of the Central Excise Act, 1944 - decision on remand and duty to afford opportunity of hearing - Whether non cross examination of an ex employee (Shri Brajesh Singh) amounted to denial of natural justice under Section 9D and vitiated the adjudication following remand. - HELD THAT: - The Tribunal found that after the matter was remanded the adjudicating authority took steps to afford opportunity for cross examination by issuing notices on three occasions; the notices were returned undelivered and the ex employee was acknowledged by the appellant as untraceable at the personal hearing. The authority and the Commissioner (Appeals) therefore proceeded to decide the matter on merits. In these circumstances the authorities' attempts to secure the witness and the appellant's failure to make the witness available or to produce alternatives made further insistence on cross examination impracticable. The Tribunal held that this conduct amounted to sufficient compliance with the mandate to afford an opportunity of cross examination and that the absence of cross examination in the given facts did not automatically render the proceedings vitiated or deprive the appellant of natural justice. [Paras 7]

Non cross examination of the untraceable ex employee did not vitiate the adjudication; the authorities had complied with remand directions and afforded the requisite opportunity.

Evidentiary value of documents recovered during search - reliance on statements recorded during investigation as admissible evidence - Whether the notebooks recovered during search and the statements recorded could be relied upon to sustain the demand for clandestine removals. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals)'s conclusion that the notebooks were preparatory records relating to the appellant's transactions and their evidentiary value could not be denied merely because the person who prepared them was not cross examined when that person was untraceable. The statements recorded of Shri Abhishek Nandwani and Shri H K Nandwani were found to contain admissions that entries in the seized notebooks related to transactions not regularly entered in books of account and relating largely to cash dealings; there was no retraction of those statements. The appellant's assertion that the notebooks belonged to a competitor was not substantiated by any documentary evidence showing that the entries did not pertain to the appellant's business. In these circumstances the reliance on seized notebooks and recorded statements to confirm clandestine removals was held to be justified. [Paras 7]

The notebooks recovered during search and the recorded statements were rightly admitted weight and sufficed to sustain the demand; the Commissioner (Appeals) rightly relied upon them.

Final Conclusion: The appeal is dismissed; the Commissioner (Appeals)'s order upholding the demand and penalty is affirmed as the authorities complied with remand directions, the failure to cross examine the untraceable witness did not vitiate the proceedings, and the seized notebooks together with recorded statements furnished sufficient evidence of clandestine removals.

Presumption under Section 139 of the Negotiable Instruments Act - existence of a legally enforceable debt or liability upon appropriation of collateral security - liability of drawer where cheque is signed and delivered and onus to rebut the presumption - inchoate/incomplete negotiable instrument and effect of delivery of signed blank cheque - appellate review of an order of acquittal - scope and interference - conviction under Section 138 read with Section 141 of the Negotiable Instruments Act

Presumption under Section 139 of the Negotiable Instruments Act - existence of a legally enforceable debt or liability upon appropriation of collateral security - liability of drawer where cheque is signed and delivered and onus to rebut the presumption - Whether the learned Magistrate erred in acquitting the respondents by holding that the complainant failed to prove that the cheque was issued in discharge of a legally enforceable debt or liability - HELD THAT: - The Court found that the trial Court ignored material evidence that the respondent company had taken a bank loan and that the fixed deposit standing in the name of the complainant was appropriated by the bank to liquidate that loan. Appropriation of the fixed deposit in the name of the complainant gave rise to a legally enforceable debt or liability against the respondent company. The presumption under Section 139 operates in favour of the complainant where a cheque is signed and delivered, and the drawer bears the onus of adducing evidence to rebut that presumption. The learned Magistrate failed to consider the statutory presumption and the bank manager's evidence showing appropriation of the collateral; on proper appreciation of that evidence, the acquittal was unsustainable. The High Court therefore set aside the acquittal and held that the respondents were liable for the offence charged.

Acquittal set aside; respondents convicted for offence under Section 138 read with Section 141 of the Negotiable Instruments Act.

Appellate review of an order of acquittal - scope and interference - Whether the High Court should interfere with the trial Court's order of acquittal in the present case - HELD THAT: - While appellate interference with an acquittal should be cautious and only where the trial Court's view is perverse or based on misappreciation of law or evidence, the High Court, on full review under its powers, may reverse an acquittal if the trial Court failed to appreciate evidence lawfully in its true perspective. Applying that principle, the High Court concluded that the trial Court's evaluation was legally erroneous for disregarding the presumption under Section 139 and the evidence of appropriation; accordingly, interference was justified and the conviction recorded.

High Court interfered with and reversed the acquittal, convicting the respondents.

Sentence to be determined by trial Court after hearing respondents - Disposition of the matter as to sentence - HELD THAT: - The High Court directed that the complaint file be returned to the trial Court and that the trial Court issue notice to the respondents to appear for hearing on the point of sentence. The trial Court was directed to hear the respondents on sentence and pass appropriate sentencing orders for the offence under Section 138 read with Section 141, thus leaving quantum and other sentencing considerations to be determined afresh by the Magistrate.

Matter remitted to the trial Court for hearing and determination on sentence.

Final Conclusion: The appeal was allowed: the trial Court's order of acquittal was set aside and the respondents were convicted for offence under Section 138 read with Section 141 of the Negotiable Instruments Act; the case is remitted to the trial Court for notice to the respondents and hearing on the point of sentence.

Quashing of FIR registered under Section 174-A of the Indian Penal Code - effect of compromise/withdrawal in proceedings under Section 138 of the Negotiable Instruments Act - abuse of the process of law - consequence of being declared a proclaimed person where proceedings in the main complaint are regularised or withdrawn

Quashing of FIR registered under Section 174-A of the Indian Penal Code - effect of compromise/withdrawal in proceedings under Section 138 of the Negotiable Instruments Act - abuse of the process of law - Whether FIR No.28 dated 10.02.2020 registered under Section 174-A IPC and consequential proceedings should be quashed where the complaint under Section 138 NI Act stood withdrawn on compromise with a statement by the complainant that nothing remains due. - HELD THAT: - The Court found on the record that the FIR under Section 174-A IPC was registered because the petitioner had been declared a proclaimed person in the Section 138 NI Act proceedings. The complainant thereafter stated on 16.03.2020 that the entire cheque amount had been received and the complaint was withdrawn and dismissed as withdrawn, and the accused (petitioner) had joined those proceedings and been granted bail. In light of those facts and in view of earlier decisions of this Court in similar circumstances (including decisions in Baldev Chand Bansal and Ashok Madan ), the Court held that continuation of proceedings under Section 174-A IPC, when the main complaint under Section 138 NI Act has been compromised and withdrawn, would amount to an abuse of the process of law. The determinative reasoning is that the FIR was a direct consequence of the proclamation arising from the main complaint, and once that complaint is withdrawn and the alleged default regularised, there remains no justification for continuing the criminal proceedings under Section 174-A which were engendered by the now-terminated main case.

FIR No.28 dated 10.02.2020 registered under Section 174-A IPC at Police Station City Safidon, District Jind, and all subsequent proceedings arising therefrom are quashed.

Final Conclusion: Petition allowed; the FIR under Section 174-A IPC and all consequential proceedings are quashed as continuation would be an abuse of the process of law in view of the compromise and withdrawal of the Section 138 NI Act complaint.

Legally enforceable debt or liability - offence under Section 138 of Negotiable Instruments Act - money-lending business license - dishonour of cheque - 'exceeds arrangement' - acquittal - proof beyond reasonable doubt

Legally enforceable debt or liability - money-lending business license - There was no legally enforceable debt payable to the complainant by the accused. - HELD THAT: - The trial Court found, on the evidence and admissions of P.W.1, that the complainant conducted money lending/chit business without producing any licence. P.W.1 admitted advancing money in the course of chit transactions, that the cheque was handed over as an already drafted instrument and that he had filed multiple suits and cheque cases earlier. Relying on the Explanation to Section 138 N.I. Act and precedent treating absence of a money lending licence as negating an enforceable liability in comparable circumstances, the Court concluded that the complainant could not demonstrate a legally enforceable debt or liability recoverable by him. [Paras 9, 10]

No legally enforceable debt was established; the complainant was not entitled to prosecute under Section 138 of the N.I. Act on that basis.

Dishonour of cheque - 'exceeds arrangement' - offence under Section 138 of Negotiable Instruments Act - The cheque (Ex.P.1) was not held to have been issued by the accused towards discharge of a legally enforceable debt. - HELD THAT: - The trial Court analysed the circumstances of handing over and drafting of Ex.P.1, the discrepancies in the amount relative to the alleged loan plus agreed interest, and the complainant's own admissions that he did not know where or by whom the cheque was drafted. Given these facts and the finding that the complainant lacked licence for money lending, the Court concluded that Ex.P.1 was not shown to have been issued by the accused in discharge of a legally enforceable debt, notwithstanding the bank memos evidencing dishonour on the ground 'exceeds arrangement'. [Paras 8, 9, 10]

Ex.P.1 was not established as a cheque issued for discharge of an enforceable debt; the requisite element for Section 138 was not proved.

Acquittal - proof beyond reasonable doubt - offence under Section 138 of Negotiable Instruments Act - The conviction under Section 138 N.I. Act was not warranted and the accused's acquittal was upheld. - HELD THAT: - Balancing the evidence and the trial Court's findings, the High Court found that the prosecution failed to prove the essential ingredients of Section 138 beyond reasonable doubt - namely, a legally enforceable debt and issuance of the cheque in discharge thereof. The trial Court's reliance on the complainant's admissions and relevant authorities led to a conclusion of acquittal which, on review of the record, required no interference. [Paras 10, 11]

The judgment of acquittal dated 31.12.2007 is confirmed; the criminal appeal is dismissed.

Final Conclusion: The High Court dismissed the Criminal Appeal, affirmed the trial Court's acquittal of the accused under Section 138 of the Negotiable Instruments Act, and found that the complainant failed to establish a legally enforceable debt and that the cheque was given to discharge such a debt.