Issues: (i) Whether penalty for improper importation was sustainable on admitted undervaluation of imported goods; (ii) Whether penalty for use of false or incorrect material applied to import transactions and, if so, its appropriate quantum.

Issue (i): Whether penalty for improper importation was sustainable on admitted undervaluation of imported goods.

Analysis: Section 112(a) of the Customs Act, 1962 applies where an act or omission renders goods liable to confiscation under Section 111 of the Customs Act, 1962. The declared values were substantially lower than the values redetermined on the basis of investigation documents, and the redetermined values and differential duty were admitted.

Conclusion: Penalty under Section 112(a) of the Customs Act, 1962 was validly imposed and is sustained, against the assessee.

Issue (ii): Whether penalty for use of false or incorrect material applied to import transactions and, if so, its appropriate quantum.

Analysis: Section 114AA of the Customs Act, 1962 covers a knowingly or intentionally false or incorrect declaration, statement, or document in a transaction of business for the purposes of the Act; it is not confined to export transactions. Filing Bills of Entry supported by undervalued invoices justified invocation of that provision. In fixing the amount, the existing penalty under Section 112(a) and the circumstances relating to the additional Bill of Entry warranted mitigation.

Conclusion: Penalty under Section 114AA of the Customs Act, 1962 applies to the import undervaluation and is sustainable, but is reduced to Rs.50,000, in favour of the assessee to that extent.

Final Conclusion: The statutory penalties for admitted import undervaluation remain enforceable, with mitigated monetary liability under Section 114AA.

Ratio Decidendi: Section 114AA of the Customs Act, 1962 extends to materially false import declarations, and may operate alongside penalty for improper importation under Section 112(a), subject to appropriate calibration of penalty quantum.

Issues: (i) Whether the CPC was justified in processing the return by treating the assessee as a firm on the basis of its PAN status; (ii) Whether the assessee's status as a Delaware limited partnership and its entitlement to carry forward short-term capital loss require determination under the India-USA DTAA; (iii) Whether the assessee's objection to communication at an incorrect email address requires verification.

Issue (i): Whether the CPC was justified in processing the return by treating the assessee as a firm on the basis of its PAN status.

Analysis: The PAN application was made by selecting the status of partnership firm, the PAN was allotted with firm status, and the returns had been filed as a firm. Section 143(1)(a) permits only limited, system-driven prima facie adjustments. Determination of whether the PAN status was substantively correct fell outside the CPC's scope while processing the return.

Conclusion: The CPC was justified in treating the assessee as a firm on the declared PAN status while processing the return under section 143(1).

Issue (ii): Whether the assessee's status as a Delaware limited partnership and its entitlement to carry forward short-term capital loss require determination under the India-USA DTAA.

Analysis: Section 2(23)(i) does not by itself establish the tax status of an overseas limited partnership. Under Articles 3 and 4 of the India-USA DTAA, the entity's characterization depends on whether it is a body corporate or an entity treated as such for tax purposes and whether its income is taxable in its own hands or in the hands of its partners. The necessary facts concerning formation and fiscal transparency under United States law required further examination. The loss carry-forward claim depends upon the resulting status and applicable return-filing due date.

Conclusion: The Assessing Officer must determine the assessee's status and consequential entitlement to carry forward short-term capital loss in accordance with law after considering the relevant evidence and the India-USA DTAA.

Issue (iii): Whether the assessee's objection to communication at an incorrect email address requires verification.

Analysis: The alleged service of the CPC communication on an email address not furnished by the assessee requires verification from the departmental records.

Conclusion: The email-communication objection shall be examined by the Assessing Officer after verification of the records.

Final Conclusion: The assessee's corporate-status, loss carry-forward and service-contention claims remain open for fresh factual determination, while the CPC's automated processing based on the PAN status is sustained.

Issues: (i) Whether refund of accumulated CENVAT credit claimed for export of output services can be denied for want of nexus between input services and exported output services when the credit itself was not recovered; (ii) Whether compliance with the formula and conditions under Rule 5 of the CENVAT Credit Rules, 2004 was established; (iii) Whether the claimed refund could be rejected on grounds relating to FIRCs and calculation without considering the documents produced.

Issue (i): Whether refund of accumulated CENVAT credit claimed for export of output services can be denied for want of nexus between input services and exported output services when the credit itself was not recovered.

Analysis: The eligibility of availed credit had not been challenged through recovery proceedings under Rule 14 of the CENVAT Credit Rules, 2004 read with Section 73 of the Finance Act, 1994. For a refund claim under Rule 5, the relevant enquiry is compliance with the prescribed refund formula in respect of exported output services. Circular No. 120/01/2010-ST dated 19.01.2010 also treats the nexus enquiry as outside the scope of processing such refund claims.

Conclusion: Denial of refund for non-establishment of nexus is unsustainable, in favour of the assessee.

Issue (ii): Whether compliance with the formula and conditions under Rule 5 of the CENVAT Credit Rules, 2004 was established.

Analysis: No specific failure to comply with any requirement of Rule 5(1) was identified in the impugned order. A proper factual determination is required, including consideration of the earlier decision concerning identical facts.

Conclusion: Compliance with Rule 5 requires fresh factual determination; no final entitlement was decided on this issue.

Issue (iii): Whether the claimed refund could be rejected on grounds relating to FIRCs and calculation without considering the documents produced.

Analysis: The relevant invoices and FIRCs were stated to have been produced but were not considered. The pending aspects concerning documentation and calculation require proper appreciation on the record.

Conclusion: The FIRC and refund-calculation issues require fresh consideration; no final entitlement was decided on this issue.

Final Conclusion: The refund claim cannot be defeated by reopening the nexus or eligibility of credit without initiating the prescribed recovery process, while the remaining factual requirements for refund must be determined on their merits.

Ratio Decidendi: In a refund claim under Rule 5 of the CENVAT Credit Rules, 2004, the nexus between input services and exported output services cannot be questioned where the availed credit has not been disputed through statutory recovery proceedings; the refund enquiry is confined to the prescribed conditions and formula.

Issues: (i) Applicability of the Multilateral Instrument to the India-Ireland DTAA; (ii) Application of the Principal Purpose Test under Articles 6 and 7 of the Multilateral Instrument; (iii) Characterisation of the aircraft lease as an operating lease or a finance lease; (iv) Existence of a fixed place permanent establishment in India; (v) Applicability of Article 8(1) of the India-Ireland DTAA to aircraft lease rentals.

Issue (i): Applicability of the Multilateral Instrument to the India-Ireland DTAA.

Analysis: The adopted coordinate-bench rulings establish that provisions of the Multilateral Instrument cannot be incorporated into the India-Ireland DTAA in the absence of a specific notification under Section 90(1) of the Income-tax Act, 1961. No factual or legal distinction from those rulings was established.

Conclusion: The Multilateral Instrument could not be invoked to deny treaty benefits under the India-Ireland DTAA. This issue is decided in favour of the assessee.

Issue (ii): Application of the Principal Purpose Test under Articles 6 and 7 of the Multilateral Instrument.

Analysis: The adopted rulings recognise that bona fide aircraft operating-lease arrangements supported by commercial rationale do not fail the Principal Purpose Test, and treaty relief expressly available for such leasing income is not treaty abuse.

Conclusion: The Principal Purpose Test did not justify denial of treaty benefits. This issue is decided in favour of the assessee.

Issue (iii): Characterisation of the aircraft lease as an operating lease or a finance lease.

Analysis: The lease arrangements were materially similar to those previously found to be operating leases. Redelivery of the aircraft to the lessor at the end of the lease supported the conclusion that ownership risks and residual-value exposure remained with the lessor.

Conclusion: The leases are operating leases and not finance leases. This issue is decided in favour of the assessee.

Issue (iv): Existence of a fixed place permanent establishment in India.

Analysis: A leased aircraft operated for the lessee's business is not at the disposal of the foreign lessor. In the absence of the lessor's personnel, infrastructure, or control over the aircraft's operations in India, the disposal test for a fixed place permanent establishment is not met.

Conclusion: The leased aircraft did not constitute a fixed place permanent establishment of the assessee in India. This issue is decided in favour of the assessee.

Issue (v): Applicability of Article 8(1) of the India-Ireland DTAA to aircraft lease rentals.

Analysis: Article 8(1) covers profits from the rental of aircraft in international traffic. The treaty definition does not require examination of each individual voyage; an aircraft operated by an Indian lessee and not operated solely between places in Ireland satisfies the international-traffic requirement. Article 8(1) prevails over domestic taxation provisions.

Conclusion: The aircraft lease rentals fall within Article 8(1) of the India-Ireland DTAA and are taxable only in Ireland, not in India. This issue is decided in favour of the assessee.

Final Conclusion: The substantive additions arising from the aircraft leasing receipts cannot be sustained under the India-Ireland DTAA and are required to be deleted.

Ratio Decidendi: Aircraft-rental income covered by Article 8(1) of the India-Ireland DTAA is taxable only in the lessor's residence State where the aircraft is operated in international traffic and no fixed place permanent establishment of the lessor exists in India.

Issues: (i) Whether an underutilisation-of-capacity adjustment was allowable in benchmarking the assessee's first-year operations under TNMM; (ii) Whether abnormal packing-material cost was excludible from operating cost; (iii) Whether pre-commencement expenditure was excludible from operating cost; (iv) Whether Naman Plastic Processor Ltd. was includible as a comparable; (v) Whether working-capital adjustment was allowable on the assessee's workings; (vi) Whether the statutory tolerance band under Section 92C(2) applied; (vii) Whether Arcee Industries Ltd. and Synthetic Moulders Ltd. could be excluded by applying the persistent-loss filter; (viii) Whether UPS qualified for depreciation at the rate applicable to computers.

Issue (i): Whether an underutilisation-of-capacity adjustment was allowable in benchmarking the assessee's first-year operations under TNMM.

Analysis: The assessee operated for only seven months in its first year and achieved materially lower capacity utilisation than established comparable companies. Under TNMM, economic adjustments are required to eliminate material differences affecting margins. Non-availability of capacity data for every comparable could not justify denial where data for some final comparables was available and could indicate the industry trend.

Conclusion: Underutilisation-of-capacity adjustment is allowable in favour of the assessee, to be computed from the average available capacity data of the final comparables.

Issue (ii): Whether abnormal packing-material cost was excludible from operating cost.

Analysis: The asserted inability to recycle packing material in the first year did not by itself establish that the additional cost was abnormal or unrecoverable from the customer. No material established that the cost could not have been passed on through product pricing.

Conclusion: Packing-material cost is not excludible from operating cost; this issue is against the assessee.

Issue (iii): Whether pre-commencement expenditure was excludible from operating cost.

Analysis: The expenditure was incurred before commercial production by an entity in its first year of operations, whereas the comparables were established entities. Such expenditure was not comparable with the costs of mature entities and did not relate to the international transactions being benchmarked.

Conclusion: Pre-commencement expenditure must be excluded from operating cost in favour of the assessee.

Issue (iv): Whether Naman Plastic Processor Ltd. was includible as a comparable.

Analysis: The financial disclosures showed that the comparable ceased operations only in the succeeding assessment year. Its exclusion for the relevant year rested on an unsupported assumption that manufacturing activity had already stopped.

Conclusion: Naman Plastic Processor Ltd. must be included as a comparable in favour of the assessee.

Issue (v): Whether working-capital adjustment was allowable on the assessee's workings.

Analysis: The workings were prepared in accordance with applicable professional guidelines using publicly available opening and closing balances. Requiring intra-year movements and trade/non-trade break-ups, which are not publicly available and are not mandated for the computation, would make the adjustment impossible to obtain.

Conclusion: Working-capital adjustment is allowable in favour of the assessee on the final set of comparables.

Issue (vi): Whether the statutory tolerance band under Section 92C(2) applied.

Analysis: For the relevant assessment year, the applicable proviso provided a five per cent tolerance band between the arm's-length price and the actual transaction price. Its applicability must be assessed after giving effect to the revised benchmarking directions.

Conclusion: The five per cent tolerance band must be applied in favour of the assessee; any transfer-pricing adjustment within that band must be deleted.

Issue (vii): Whether Arcee Industries Ltd. and Synthetic Moulders Ltd. could be excluded by applying the persistent-loss filter.

Analysis: A company is persistently loss-making only where it has incurred losses in all three relevant years. Each company earned profit in one of the three years and therefore did not fail the persistent-loss filter merely because it incurred losses in the other two years.

Conclusion: Arcee Industries Ltd. and Synthetic Moulders Ltd. cannot be excluded under the persistent-loss filter; this issue is in favour of the assessee.

Issue (viii): Whether UPS qualified for depreciation at the rate applicable to computers.

Analysis: UPS performs an integral supporting function for computer systems and is functionally part of such systems for depreciation purposes.

Conclusion: UPS qualifies for depreciation at 60 per cent in favour of the assessee.

Final Conclusion: The transfer-pricing computation requires revision by allowing the directed economic adjustments, excluding pre-commencement cost, revising the comparable set, and applying the applicable tolerance band; the depreciation claim on UPS is sustained.

Ratio Decidendi: Under TNMM, material economic differences between a first-year tested party and mature comparables must be neutralised through reasonably quantifiable adjustments, and lack of non-public granular comparable data cannot defeat an otherwise supportable adjustment.

Issues: (i) Whether transfer-pricing adjustments relating to AMP expenditure, royalty, headquarters expenses and service-warranty charges must be recomputed in accordance with the APA; (ii) Whether expatriate salary was deductible as business expenditure; (iii) Whether royalty paid to parent entities was capital expenditure; (iv) Whether provision for service warranty, made on a scientific and rational basis, was deductible; (v) Whether DDT was to be computed under section 115-O notwithstanding the Indo-Korea DTAA claim.

Issue (i): Whether transfer-pricing adjustments relating to AMP expenditure, royalty, headquarters expenses and service-warranty charges must be recomputed in accordance with the APA.

Analysis: The APA entered under section 92CC of the Income-tax Act, 1961 covered the relevant rollback and APA years as well as the impugned international transactions, including AMP expenditure, royalty, service-warranty charges and management-related expenses. It prescribed the Other Method under rule 10AB of the Income-tax Rules, 1962 and a specified mechanism for determining the arm's length price.

Conclusion: The transfer-pricing adjustments are to be recomputed in accordance with the APA, in favour of the assessee.

Issue (ii): Whether expatriate salary was deductible as business expenditure.

Analysis: The expatriates were recruited through the assessee's process, worked under its direct control and supervision, rendered services exclusively for its business, and received remuneration directly from the assessee with applicable tax deduction. The earlier determination on materially identical facts was applied consistently.

Conclusion: Expatriate salary is allowable as business expenditure under section 37(1) of the Income-tax Act, 1961, in favour of the assessee.

Issue (iii): Whether royalty paid to parent entities was capital expenditure.

Analysis: Consistent earlier decisions for preceding assessment years had accepted the assessee's treatment of the royalty payment, and the royalty transaction was also covered by the APA.

Conclusion: The royalty payment is not disallowable as capital expenditure, in favour of the assessee.

Issue (iv): Whether provision for service warranty, made on a scientific and rational basis, was deductible.

Analysis: Earlier decisions covering comparable years had rejected the Revenue's disallowance of service-warranty provision, and no distinguishing material was shown.

Conclusion: The scientifically and rationally determined provision for service warranty is deductible, in favour of the assessee.

Issue (v): Whether DDT was to be computed under section 115-O notwithstanding the Indo-Korea DTAA claim.

Analysis: The treaty-based claim concerning DDT was subject to pending consideration by the Supreme Court, which had identified the nature of DDT and its treaty treatment as questions requiring final adjudication and indicated that similar proceedings may be stayed.

Conclusion: No final merits determination was made on the DDT claim; the issue was remitted for action after the final Supreme Court adjudication.

Final Conclusion: The APA governs the computation of the covered transfer-pricing transactions, while the disputed expatriate salary, royalty and service-warranty deductions stand accepted; resolution of the DDT treaty claim remains dependent on the pending authoritative determination.

Issues: (i) Whether duty demands for alleged clandestine manufacture and clearance and undervaluation, founded on mismatches in ER-1, ER-4, ER-6 returns and Trial Balance figures, were sustainable without corroborative evidence; (ii) Whether the extended period could be invoked for the financial year 2013-14 on the same disclosed facts that had formed the basis of earlier proceedings for financial year 2012-13.

Issue (i): Whether duty demands for alleged clandestine manufacture and clearance and undervaluation, founded on mismatches in ER-1, ER-4, ER-6 returns and Trial Balance figures, were sustainable without corroborative evidence.

Analysis: The alleged clandestine production was derived by applying input-output ratios to discrepancies in statutory returns and Trial Balance figures. Such estimation lacked a scientific basis and was not supported by evidence of excess procurement or consumption of raw materials, electricity consumption, additional labour, transport of the alleged goods, buyers, sale proceeds, or private records of cash transactions. The reconciliations and Chartered Accountant's certificate explained the discrepancies. ER-4 figures were auto-generated from inventory and production values and could not, without further evidence, establish actual sale value or undervaluation. No evidence established receipt of any alleged differential consideration from buyers.

Conclusion: The demands for clandestine manufacture and clearance and for undervaluation were unsustainable for want of cogent and corroborative evidence, in favour of the assessee.

Issue (ii): Whether the extended period could be invoked for the financial year 2013-14 on the same disclosed facts that had formed the basis of earlier proceedings for financial year 2012-13.

Analysis: The relevant ER-1, ER-4 and ER-6 returns and Trial Balance had been furnished by the assessee. Earlier proceedings concerning the same issue and the preceding financial year had already been initiated, placing the material facts within the Revenue's knowledge. The same or similar disclosed facts could not subsequently constitute suppression.

Conclusion: Invocation of the extended period was invalid because no suppression of facts was established, in favour of the assessee.

Final Conclusion: The impugned duty demands founded on alleged clandestine removal, undervaluation and extended limitation could not be sustained.

Ratio Decidendi: A charge of clandestine manufacture, removal or undervaluation cannot rest solely on return or accounting mismatches and estimated input-output ratios; it requires cogent corroborative evidence, and disclosed facts previously known to the Revenue cannot support a subsequent allegation of suppression for extended limitation.

Issues: (i) Whether duty could be demanded for alleged clandestine manufacture and clearance solely from mismatches among ER-1, ER-4, ER-6 and trial-balance figures and estimated input-output ratios; (ii) Whether undervaluation could be established solely from differences between ER-4 sale figures and ER-1 clearance values without evidence of additional consideration.

Issue (i): Whether duty could be demanded for alleged clandestine manufacture and clearance solely from mismatches among ER-1, ER-4, ER-6 and trial-balance figures and estimated input-output ratios.

Analysis: The quantified production was derived through an unscientific conversion of alleged raw-material differences by fixed input-output ratios. The documentary reconciliations adequately explained the reported mismatches. The Revenue produced no corroboration of excess procurement of inputs or consumables, excess electricity consumption, additional labour, transport movements, buyers, cash transactions, or unaccounted sale proceeds. Accounting discrepancies and estimated production, without such independent evidence, could not establish clandestine manufacture or clearance.

Conclusion: The allegations of clandestine manufacture and clearance were not proved; the related duty demand is unsustainable in favour of the assessee.

Issue (ii): Whether undervaluation could be established solely from differences between ER-4 sale figures and ER-1 clearance values without evidence of additional consideration.

Analysis: The ER-4 sale value was an auto-generated accounting figure derived from opening inventory, production value and closing inventory, rather than the actual transaction-wise clearance value. The reconciliation and records supported the ER-1 values. No evidence showed receipt of consideration over and above invoice values, and no corroborative statements or material connected the accounting difference with any differential realization.

Conclusion: Undervaluation was not established; the related duty demand is unsustainable in favour of the assessee.

Final Conclusion: The impugned duty demands, together with their consequential liabilities, cannot survive for want of reliable corroborative evidence.

Ratio Decidendi: A central-excise duty demand founded solely on return or accounting variances must be supported by cogent corroborative evidence of unaccounted production or removal, or of additional consideration, as applicable.

Issues: (i) Whether the Bangalore Development Authority could levy scrutiny fee, ground rent and security deposit for sanction of a building plan; (ii) Whether labour welfare cess could be demanded upfront; (iii) Whether CGST and SGST could be collected on sanction of a building plan.

Issue (i): Whether the Bangalore Development Authority could levy scrutiny fee, ground rent and security deposit for sanction of a building plan.

Analysis: Section 29 of the Bangalore Development Authority Act, 1976 permits exercise of municipal commissioner powers only upon a State Government notification. The Act contains no authority to collect the impugned charges. The municipal levies on which the Authority relied had been held unauthorized; a fee further requires statutory authority and a reasonable correlation with services rendered.

Conclusion: The Authority was not entitled to demand scrutiny fee, ground rent or security deposit. The finding is in favour of the assessee.

Issue (ii): Whether labour welfare cess could be demanded upfront.

Analysis: Although labour welfare cess remains payable, Rule 4 of the Building and Other Construction Workers' Welfare Cess Rules, 1998 prescribes its manner and timing of collection. Upfront recovery before construction is inconsistent with that Rule.

Conclusion: Labour welfare cess cannot be collected upfront and must be collected in the manner prescribed by Rule 4. The finding is in favour of the assessee.

Issue (iii): Whether CGST and SGST could be collected on sanction of a building plan.

Analysis: Sanction of a building plan involves no supply of goods or provision of services.

Conclusion: CGST and SGST are not collectible on sanction of the building plan. The finding is in favour of the assessee.

Final Conclusion: The challenged non-cess imposts and tax components lack legal basis, while cess liability survives only in accordance with the prescribed statutory collection mechanism; the determination remains contingent on the pending writ appeal concerning the validity of the relevant levies.

Ratio Decidendi: A development authority cannot levy building-plan charges without statutory authority, and labour welfare cess must be collected only in the manner and at the time prescribed by the governing cess rules.

Issues: Whether separate branches of a bank could be treated as assessees in default for failure to deduct tax at source on leave travel concession reimbursements involving foreign travel, where non-deduction was pursuant to binding interim directions.

Analysis: Although exemption for leave travel concession involving a foreign leg was not available on merits, the branches were bound during the relevant period by interim directions stating that the reimbursement did not constitute income for tax-deduction purposes. The statutory obligation to deduct tax at source could not operate contrary to subsisting judicial directions. Default under the relevant provision arises only where a legally enforceable obligation to deduct tax exists and is not fulfilled; that obligation stood displaced during the currency of the interim directions.

Conclusion: The assessees could not be treated as assessees in default for the impugned period, and no consequential interest was chargeable.

Issues: (i) Whether compostable bags and packing materials made from PLA and PBAT are classifiable under Chapter 39 or Chapter 48, and the appropriate HSN; (ii) Whether such compostable bags and packing materials qualify as bio-degradable bags under Entry 319 of Schedule I to Notification No. 9/2025-Central Tax (Rate) dated 17.09.2025 and attract GST at 5%.

Issue (i): Whether compostable bags and packing materials made from PLA and PBAT are classifiable under Chapter 39 or Chapter 48, and the appropriate HSN.

Analysis: The test report established that the bags are made from a blend of Poly Lactic Acid and Poly Butylene Adipate Terephthalate, which are polymeric plastic materials, and not paper. Goods made of such materials fall under Chapter 39 as plastics and articles thereof.

Conclusion: The goods are classifiable under Chapter 39, specifically heading 3923 2990 as sacks and bags of other plastics. This issue is decided against the assessee.

Issue (ii): Whether such compostable bags and packing materials qualify as bio-degradable bags under Entry 319 of Schedule I to Notification No. 9/2025-Central Tax (Rate) dated 17.09.2025 and attract GST at 5%.

Analysis: Entry 319 grants the concessional rate only to bio-degradable bags. Under the Plastic Waste Management Rules, compostable plastics and biodegradable plastics are separately regulated: compostable plastics must conform to IS/ISO 17088, whereas biodegradable plastics must conform to IS 17899 T:2022 and have the requisite CPCB certification. The applicant's documents established certification for compostable carry bags conforming to IS/ISO 17088, but did not establish certification for biodegradable plastics under IS 17899 T:2022. That standard expressly excludes compostable plastics within IS/ISO 17088 from its scope.

Conclusion: The compostable bags and packing materials do not qualify as bio-degradable bags under Entry 319 and are not eligible for GST at 5%. This issue is decided against the assessee.

Final Conclusion: Compostable polymer bags remain classified as plastic packing articles, and certification as compostable plastic does not by itself satisfy the distinct statutory requirements applicable to biodegradable bags for the concessional rate.

Ratio Decidendi: Where a concessional entry is confined to biodegradable bags, goods certified only as compostable plastics cannot qualify unless they meet the separate statutory standard and certification prescribed for biodegradable plastics.

Issues: Whether interest on refund of a pre-deposit made for filing an appeal is payable at 12% per annum rather than 6% per annum.

Analysis: The pre-deposit was made under Section 35F of the Central Excise Act, 1944. Section 35FF, read with Notification No. 24/2014-C.E. (N.T.) dated 12.08.2014, fixes interest on refund of such pre-deposit at 6% per annum from the date of payment until refund. The statutory notification governed the claim and did not permit interest at 12% per annum.

Conclusion: Interest on the refunded pre-deposit is payable only at 6% per annum; the claim for interest at 12% per annum is rejected, against the assessee.

Issues: (i) Whether notional usage charges for premises occupied by the sister concern could be assessed as income from other sources; (ii) Whether disallowance of building-related and common expenses was sustainable after classification of the sister concern's income as income from other sources; (iii) Whether ad hoc disallowance of trade-incentive expenditure as capital expenditure was sustainable; (iv) Whether depreciation on moulds and dies was allowable where the assets were used in manufacture of packaging containers.

Issue (i): Whether notional usage charges for premises occupied by the sister concern could be assessed as income from other sources.

Analysis: The arrangement permitted either usage charges or reimbursement of agreed expenses. The parties implemented reimbursement of common costs and did not implement the stipulated per-square-foot usage charges or related security deposit. In the absence of evidence that usage charges were actually received or had become receivable, a notional amount could not be brought to tax under the head income from other sources.

Conclusion: The notional usage charges of Rs. 475.73 lakhs were not taxable as income from other sources, in favour of the assessee.

Issue (ii): Whether disallowance of building-related and common expenses was sustainable after classification of the sister concern's income as income from other sources.

Analysis: Expenditure incurred wholly and exclusively to earn income from other sources is deductible under Section 57(ii) and Section 57(iii). The disallowance attributable to the sister concern was founded on assessment of notional rental income under house property and could not survive. Actual rent received from the third-party occupant remained assessable under house property; therefore, only depreciation and building-related expenses attributable to the area occupied by that tenant could be disallowed.

Conclusion: Disallowance relatable to the sister concern was deleted; disallowance was restricted to depreciation and building-related expenses attributable to the third-party tenant's occupied area, partly in favour of the assessee.

Issue (iii): Whether ad hoc disallowance of trade-incentive expenditure as capital expenditure was sustainable.

Analysis: Trade incentives and brand-promotion expenditure were incurred as part of the assessee's regular business model for promotion of products. The incidental benefit to the brand did not convert the expenditure into capital expenditure or justify an ad hoc disallowance.

Conclusion: The disallowance of trade-incentive expenditure was deleted, in favour of the assessee.

Issue (iv): Whether depreciation on moulds and dies was allowable where the assets were used in manufacture of packaging containers.

Analysis: The finished products were packed in plastic containers manufactured using the relevant moulds and dies. This established actual use of the assets during the relevant year and satisfied the put-to-use requirement.

Conclusion: Depreciation on moulds and dies was allowable, in favour of the assessee.

Final Conclusion: No notional usage income was chargeable without evidence of receipt or accrual, and the related expense claim was to be recomputed consistently; the trade-incentive and mould-and-die depreciation claims were allowable.

Ratio Decidendi: Income assessable under the head income from other sources cannot include notional usage charges absent evidence of actual receipt or enforceable accrual, and expenditure wholly and exclusively incurred to earn such income is deductible.

Issues: Whether dismissal of the statutory appeal as time-barred warranted interference where the FORM GST DRC-07 summary was uploaded on the portal within the condonable limitation period but the appellant had not sought condonation of delay.

Analysis: The summary of the original order was uploaded on 22.08.2024 and the appeal was filed on 21.12.2024. This placed the appeal within the further condonable period contemplated under the statutory appellate framework. The failure to file an application seeking condonation could be considered by the appellate authority upon remand.

Conclusion: The time-bar dismissal was set aside in favour of the assessee, and the appellate authority was directed to consider the delay-condonation application in accordance with law and, if satisfied, determine the appeal on merits.

Ratio Decidendi: Where a statutory appeal is filed within the legally condonable period, omission to accompany it with a delay-condonation application may warrant restoration for consideration of the delay and, upon condonation, adjudication on merits.

Issues: Whether an adjustment for excess employee cost attributable to underutilisation of resources in the assessee's first full year of operations should be allowed while determining its arm's length margin under the Transactional Net Margin Method.

Analysis: Under the Transactional Net Margin Method, differences affecting net margins require appropriate comparability adjustment. The assessee was in its first full year of operations and had incurred employee costs for anticipated business that did not materialise, resulting in underutilised manpower. An adjustment for such excess employee cost was warranted. However, the proposed computation, which derived the employee-cost differential by reference to turnover and applied that differential to total revenue, did not correctly quantify the excess cost. The adjustment must instead be determined by comparing the assessee's employee-cost-to-total-cost ratio with the average corresponding ratio of the final comparables, and reducing the resulting excess employee cost from operating cost.

Conclusion: The assessee is entitled to an underutilisation adjustment for excess employee cost, to be recomputed by the transfer-pricing authority using the employee-cost-to-total-cost methodology; the arm's length margin shall be redetermined accordingly.

Ratio Decidendi: Under the Transactional Net Margin Method, disproportionate fixed employee costs incurred during an initial operational ramp-up may warrant a comparability adjustment, but the adjustment must be quantified by reference to the excess cost itself rather than by applying an employee-cost differential to revenue.

Issues: (i) Whether material requisitioned by the first appellate authority under its statutory inquiry power could be treated as additional evidence barred by Rule 46A; (ii) Whether the educational institution qualified for exemption as substantially financed by the Government; (iii) Whether the addition for cash deposits was sustainable without reconciliation of the deposits with the books and supporting records.

Issue (i): Whether material requisitioned by the first appellate authority under its statutory inquiry power could be treated as additional evidence barred by Rule 46A.

Analysis: Section 250(4) independently empowers the appellate authority to make or direct further inquiry for effective disposal of an appeal. Rule 46A regulates evidence voluntarily tendered by an assessee, while Rule 46A(4) preserves the appellate authority's power to call for documents or witnesses. Material specifically called for by the appellate authority cannot therefore be equated with voluntary additional evidence, and no prejudice from the inquiry was established.

Conclusion: The material called for under Section 250(4) was not inadmissible additional evidence under Rule 46A; this issue was decided in favour of the assessee.

Issue (ii): Whether the educational institution qualified for exemption as substantially financed by the Government.

Analysis: Exemption under Section 10(23C)(iiiab) requires that the institution exist solely for educational purposes without a profit motive and be wholly or substantially financed by the Government. Rule 2BBB treats Government grants exceeding fifty per cent of total receipts as substantial financing. The verified records showed Government grants exceeding fifty per cent of total receipts, and there was no dispute that the institution pursued only educational objects without profit motive. Registration under Section 12A or Section 12AB was not a condition for this independent exemption.

Conclusion: The institution satisfied Section 10(23C)(iiiab) and was entitled to exemption; this issue was decided in favour of the assessee.

Issue (iii): Whether the addition for cash deposits was sustainable without reconciliation of the deposits with the books and supporting records.

Analysis: Although the explanation was that the deposits represented fees, arrears, other receipts and re-deposited withdrawals recorded in the books, there was no clear factual finding reconciling the cash deposits with the cash book, bank entries and supporting evidence. The issue required factual verification.

Conclusion: The deletion of the cash-deposit addition was set aside and the issue was restored for fresh examination; this issue was decided in favour of the Revenue.

Final Conclusion: The exemption under Section 10(23C)(iiiab) remains available, while the source and reconciliation of cash deposits require fresh factual determination.

Ratio Decidendi: Evidence called for by the appellate authority under its independent statutory inquiry power is not voluntary additional evidence governed by Rule 46A, and an educational institution is substantially Government-financed where the prescribed grant-to-receipts threshold is met.

Issues: Whether cash payments towards credit-card dues were satisfactorily explained by cash withdrawals from the assessee's bank account and income returned from contract business under presumptive taxation.

Analysis: The bank statement disclosed frequent cash withdrawals sufficient to cover the credit-card payments, and the Revenue did not identify any specific mismatch or establish that the withdrawn cash had been used elsewhere. A direct date-wise correlation between every withdrawal and payment was unnecessary where availability of cash throughout the year was established. Further, having accepted the income returned from contract business under presumptive taxation, the Revenue could not reject the explanation that bank credits and consequent withdrawals were attributable to that business. Taxing the payments sourced from already taxed business receipts would result in double taxation.

Conclusion: The cash payments of Rs. 10,90,100 towards credit-card dues stood satisfactorily explained; the addition as unexplained money under Section 69A was deleted.

Issues: (i) Whether availment of Cenvat credit in statutory returns violated Condition No. 25 of Notification No. 12/2012-CE; (ii) Whether non-utilisation or subsequent reversal/lapse of credit restored eligibility for concessional duty; (iii) Whether the differential-duty demand, interest and penalty, including invocation of the extended period, were sustainable.

Issue (i): Whether availment of Cenvat credit in statutory returns violated Condition No. 25 of Notification No. 12/2012-CE.

Analysis: Condition No. 25 required that no Cenvat credit of duty on inputs or service tax on input services be taken. The condition concerns the act of taking credit, rather than its utilisation. Credit recorded and availed in ST-3 and ER-1 returns constituted availment under the statutory scheme. As an exemption condition, the requirement was subject to strict construction and the claimant bore the burden of proving compliance.

Conclusion: Availment of Cenvat credit violated Condition No. 25 and disentitled the assessee to the concessional duty rate.

Issue (ii): Whether non-utilisation or subsequent reversal/lapse of credit restored eligibility for concessional duty.

Analysis: Non-utilisation did not negate the completed act of taking credit. Migration of credit during transition to GST, its lapse, or a later reversal could not retrospectively cure the breach that arose when credit was simultaneously availed with the concessional excise-duty benefit. The decisions concerning reversal of credit were inapplicable to the strict eligibility condition governing the exemption.

Conclusion: Non-utilisation, later reversal, or lapse of credit did not restore the assessee's eligibility for concessional duty.

Issue (iii): Whether the differential-duty demand, interest and penalty, including invocation of the extended period, were sustainable.

Analysis: The discrepancy was detected in audit, and filing returns did not excuse wrongful availment of the concession despite prohibited credit availment. The extended period was consequently available. Upon the resulting short payment of duty, interest followed under the statutory provision, and penalty was warranted for availing the concessional rate despite ineligibility.

Conclusion: The differential-duty demand, extended-period invocation, interest and penalty were sustainable against the assessee.

Final Conclusion: The concessional excise-duty exemption was unavailable where Cenvat credit had been taken during the relevant period, and the consequential fiscal liabilities remained enforceable.

Ratio Decidendi: Where an exemption notification requires that no Cenvat credit be taken, recording and availing credit itself breaches the condition; non-utilisation, reversal, lapse, or subsequent GST transition cannot cure that breach retrospectively.

Issues: Challenge to the Orders-in-Original for the financial years 2021-2022 to 2023-2024 and to the impugned order dated 25.06.2026.

Outcome: Notice issued and operation of the challenged orders stayed until the next hearing.

Issues: (i) Whether an excess input tax credit demand could be confirmed on a basis different from that specified in the show cause notice; (ii) Whether payment of tax under the IGST head by mistake attracted Section 77 of the Central Goods and Services Tax Act, 2017.

Issue (i): Whether an excess input tax credit demand could be confirmed on a basis different from that specified in the show cause notice.

Analysis: The notice compared input tax credit availed in GSTR-3B with the annual return in GSTR-9, whereas the impugned order compared auto-populated GSTR-2A with GSTR-3B. The figures adopted in the order also differed from those in the reply. The changed basis was not put to the petitioner for response, requiring fresh consideration consistent with natural justice.

Conclusion: The excess input tax credit issue requires reconsideration and is decided in favour of the assessee.

Issue (ii): Whether payment of tax under the IGST head by mistake attracted Section 77 of the Central Goods and Services Tax Act, 2017.

Analysis: Section 77 applies where IGST is paid under the mistaken belief that a supply is inter-State. The remittance under the IGST head was not made on such a mistaken characterisation of the supply. The amount paid may be considered for appropriation towards CGST and SGST liability, with a refund application if procedurally required.

Conclusion: Section 77 is inapplicable to the mistaken remittance, and the short-payment issue requires reconsideration in favour of the assessee.

Final Conclusion: The determinations on the two contested issues cannot stand and must be freshly decided after affording a reasonable opportunity; the related bank-account attachment stands raised.

Ratio Decidendi: A tax demand cannot be sustained on a factual basis not proposed in the show cause notice, and the statutory mechanism for tax paid under a mistaken inter-State characterisation does not apply to a mere erroneous payment under the IGST head.