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2026 (5) TMI 1712 - ITAT DELHI Income Tax

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Issues: (i) Whether reopening under section 147 of the Income-tax Act, 1961 was valid in the absence of new tangible material and on the basis of the same material already examined in the original assessment; (ii) Whether the disallowance of Rs. 22,12,031 towards depreciation included in research and development expenses was sustainable on merits.

Issue (i): Whether reopening under section 147 of the Income-tax Act, 1961 was valid in the absence of new tangible material and on the basis of the same material already examined in the original assessment.

Analysis: The original assessment had been completed under section 143(3) after examination of the claim for weighted deduction under section 35(2AB). The reassessment was initiated on the same set of records and submissions already available during the original proceedings. No fresh information or tangible material was shown to have come into possession of the Assessing Officer. The reasons for reopening proceeded on an incorrect factual premise that the assessee had not separated the R&D account, whereas the separate R&D details and supporting documents had already been furnished and verified earlier.

Conclusion: The reopening was held to be bad in law and a clear case of change of opinion; the assumption of jurisdiction under section 147 failed.

Issue (ii): Whether the disallowance of Rs. 22,12,031 towards depreciation included in research and development expenses was sustainable on merits.

Analysis: The assessee had already added back the depreciation component in the computation of income, and the reassessment did not justify a separate disallowance of the same amount. The reassessment order did not disturb the weighted deduction under section 35(2AB), and there was no material to show any multiple deduction for the same expenditure. On the facts, the revenue's objection to the depreciation component was not made out.

Conclusion: The disallowance was deleted and the assessee succeeded on merits as well.

Final Conclusion: The reassessment was invalid and the addition made in reassessment could not survive; the appeal was allowed in full in favour of the assessee.

Ratio Decidendi: Reassessment cannot be sustained where it is founded on the same material already examined in the original assessment and no fresh tangible material exists, especially when the foundational facts for reopening are themselves incorrect.

Change of opinion bars reassessment when no fresh tangible material exists and the original record was already examined.
Reassessment under section 147 was held invalid because it was initiated on the same material already examined in the original section 143(3) assessment, without any fresh tangible material, and on an incorrect factual assumption that the R&D account had not been separately furnished. The reopening was therefore treated as a change of opinion and the assumption of jurisdiction failed. On merits, the disallowance of depreciation included in research and development expenses was deleted because the amount had already been added back in computation and there was no basis for a separate disallowance or multiple deduction concern.

Reassessment after scrutiny - Change of opinion - Weighted deduction for in-house research and development - Multiple deduction under research and development expenditure Reassessment after scrutiny - Change of opinion - Incorrect factual assumption in reasons recorded - Validity of reopening of assessment on the basis of the assessee's claim of weighted deduction for research and development expenditure - HELD THAT: - The Tribunal held that the reopening was founded entirely on material already available in the original scrutiny assessment and no new information or tangible material had come into the Assessing Officer's possession thereafter. It found that the claim under section 35(2AB) had been examined in the original assessment on the basis of the forms, approvals and details furnished by the assessee, and the deduction had then been allowed after verification. The recorded reasons further proceeded on a factually incorrect premise that separate research and development accounts had not been maintained, whereas the record showed that such accounts had been maintained and audited. Reopening after expiry of four years, on the same material and on an incorrect factual basis, was therefore only a case of change of opinion and the assumption of jurisdiction under section 147 was bad in law. [Paras 5, 6] The reassessment notice and assumption of jurisdiction were held invalid, and the challenge to reopening was allowed. Weighted deduction for in-house research and development - Multiple deduction under research and development expenditure - Depreciation included in research and development expenditure - HELD THAT: - On merits also, the Tribunal found no basis for the disallowance. It recorded that the revenue expenditure on research and development included the depreciation figure in dispute, and that this depreciation already formed part of the total book depreciation which had been added back by the assessee in the computation of income. Consequently, there was no separate or multiple claim requiring a further disallowance. The Tribunal also noted that the Assessing Officer had only added back the depreciation amount in reassessment and had not disallowed the weighted deduction itself, while the appellate authority had travelled beyond the reassessment order in upholding denial of weighted deduction without any enhancement notice. [Paras 5, 6] The disallowance on merits was deleted and the assessee's grounds against the addition were allowed. Final Conclusion: The Tribunal allowed the assessee's appeal, holding that the reassessment was invalid as it was based on the same material examined in the original scrutiny and amounted to a change of opinion on an incorrect factual premise. It further held that, even on merits, no multiple deduction had been claimed and the impugned disallowance could not survive.

2026 (5) TMI 1711 - ITAT DELHI Income Tax

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Valuation of preference shares under recognised method upheld; tax addition for share premium could not rest on later projection differences.
Valuation of unquoted preference shares under section 56(2)(viib) was accepted where the assessee used a recognised discounted cash flow method under Rule 11UA and supported it with contemporaneous valuation material. The Assessing Officer could not insist on the net asset value method merely because later actual results differed from projections. Since the preference shares were issued and transferred at the same price and the valuation report was backed by project feasibility details, the share premium was held not to justify an addition under section 56(2)(viib). The deletion of the addition was upheld in favour of the assessee.

Taxability of share premium on preference shares - addition made u/s 56(2)(viib) - share premium received on issuance of compulsorily convertible preference shares and redeemable preference shares - Assessee's option to adopt DCF method - DCF versus NAV method - HELD THAT: - The Tribunal held that no equity shares had been issued by the assessee. In the case of the compulsorily convertible preference shares, each share was convertible into equity shares only after the stipulated period, and on the terms of issue no premium was in fact charged for their issuance; consequently, the provision invoked for taxing excess premium could not, by itself, be applied to those shares. As regards the redeemable preference shares, their valuation was required to be determined under the rule governing unquoted shares other than equity shares, namely, the price they would fetch if sold in the open market, supported by a valuation report from a merchant banker or chartered accountant. The assessee had obtained such valuation using the DCF method, and the Assessing Officer could not compel adoption of the NAV method in its place. The Tribunal further held that mere variance between projected figures and actual results could not invalidate the valuation, particularly when the valuation report, feasibility report and project details had been furnished. Since the redeemable preference shares issued at Rs. 1000 each were subsequently transferred at the same price, that price itself supported the open market value adopted by the assessee. [Paras 6, 7, 8] The relief granted by the Commissioner (Appeals) was upheld and the addition made in respect of the share premium was rightly deleted. Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the deletion of the addition made on share premium. It held that the case concerned preference shares, not equity shares, and that the assessee's valuation in accordance with the rules applicable to unquoted non-equity shares could not be rejected by forcing adoption of another method.

2026 (5) TMI 1710 - ITAT MUMBAI Income Tax

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Issues: (i) Whether the 6-day delay in filing the assessee's appeal deserved condonation. (ii) Whether the additions made under section 68 of the Income-tax Act, 1961, in respect of the loan advance of Rs. 3 crores and the share-sale receipt of Rs. 40 lakhs were sustainable.

Issue (i): Whether the 6-day delay in filing the assessee's appeal deserved condonation.

Analysis: The delay was supported by an affidavit explaining the cause. The principle that substantial justice should prevail over technical objections in cases of short, non-deliberate delay was applied, and the explanation was treated as sufficient.

Conclusion: The delay was condoned and the appeal was admitted.

Issue (ii): Whether the additions made under section 68 of the Income-tax Act, 1961, in respect of the loan advance of Rs. 3 crores and the share-sale receipt of Rs. 40 lakhs were sustainable.

Analysis: For the loan advance, the assessee furnished confirmations, bank statements, financial statements, and evidence of repayment and interest; the amount was shown as an advance and not a credit in the assessee's books, and the Revenue relied only on uncorroborated investigation material and a retracted third-party statement. For the share-sale receipt, the assessee produced share-sale documents and banking evidence of receipt, while the addition rested on a third-party statement without cross-examination or independent corroboration. In both matters, the assessee's documentary evidence was not rebutted and the additions were founded on suspicion rather than proof.

Conclusion: Both additions were held unsustainable and were deleted.

Final Conclusion: The Revenue's appeal was dismissed and the assessee's appeal was allowed, resulting in deletion of the impugned addition and relief to the assessee on the merits.

Ratio Decidendi: Once the assessee substantiates a transaction with primary documentary evidence, the burden shifts to the Revenue to rebut it with cogent material; an addition under section 68 cannot rest on suspicion or an untested third-party statement, especially where cross-examination is denied.

Section 68 additions fail where primary documents are produced and third-party statements remain untested
A short, non-deliberate delay supported by affidavit was condoned on the basis that substantial justice should prevail over technical objections. Additions under section 68 were deleted because the assessee produced confirmations, bank statements, financial records, repayment and interest evidence for the loan advance, and share-sale documents with banking proof for the receipt; the Revenue relied on uncorroborated investigation material and a retracted third-party statement without cross-examination. Once primary documentary evidence was furnished, the burden shifted to the Revenue to rebut it with cogent material, and suspicion alone could not sustain the additions.

Unexplained cash credit - Applicability of section 68 to loan advances - Third-party statement and cross-examination - Principles of natural justice - effect of Retracted statement HELD THAT: - The Tribunal held that section 68 can be invoked only where a sum is found credited in the books of the assessee, whereas the amount in question represented a loan advanced by the assessee and was therefore a debit in its books. It further found that the assessee had produced confirmation, bank statements, financial statements of the borrower, evidence of repayment through banking channels, and proof that interest received on the loan had been offered to tax. Since the AO neither rebutted this material nor conducted any independent inquiry, and had relied only on investigation-wing information and a retracted third-party statement not furnished for rebuttal or cross-examination, the addition was held to be unsustainable. [Paras 11, 12, 13, 14, 15] The deletion of the addition by the Commissioner (Appeals) was upheld and the Revenue's challenge failed. Third-party statement and cross-examination - Off-market share sale - Addition based on suspicion - Addition under section 68 in respect of consideration received on sale of shares - HELD THAT: - The Tribunal found that the assessee had produced documentary evidence showing that the purchaser was a registered corporate entity, that payment was received through banking channels, and that delivery of shares was effected through transferred physical share certificates. The addition had been made solely on the basis of the statement of a third party, but that statement was not supplied to the assessee and no opportunity of cross-examination was granted. The Tribunal held that such reliance offended natural justice, and further noted that no material had been brought on record to show receipt of cash by the assessee or any flow-back of funds. Since the transaction was already disclosed in the books and return, the addition resting merely on suspicion could not stand. [Paras 22, 23, 24, 25, 26] The addition was directed to be deleted and the assessee's appeal on this issue was allowed. Final Conclusion: The Tribunal upheld the deletion of the addition relating to the loan advanced by the assessee, holding that section 68 was inapplicable to an amount debited as an advance and that the Revenue had failed to rebut the assessee's evidence. It also deleted the addition relating to the share-sale transaction, holding that a third-party statement could not be relied upon without furnishing it and granting cross-examination; accordingly, the Revenue's appeal was dismissed and the assessee's appeal was allowed.

2026 (5) TMI 1709 - ITAT PUNE Income Tax

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Issues: (i) Whether interest income earned by a credit co-operative society from fixed deposits placed with a co-operative bank is eligible for deduction under section 80P(2)(d) of the Income-tax Act, 1961. (ii) Whether the Revenue could succeed in challenging the relief granted in rectification proceedings and the allowance of deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Issue (i): Whether interest income earned by a credit co-operative society from fixed deposits placed with a co-operative bank is eligible for deduction under section 80P(2)(d) of the Income-tax Act, 1961.

Analysis: The interest income in question arose from deposits made with a co-operative bank, which was treated as a co-operative society for the purpose of section 80P(2)(d). The Tribunal followed its coordinate bench view that such interest income qualifies for deduction when earned by a co-operative society from investments with a co-operative bank or co-operative society. The earlier partial disallowance was therefore not sustainable on this issue.

Conclusion: The issue was decided in favour of the assessee, and the deduction under section 80P(2)(d) was held allowable.

Issue (ii): Whether the Revenue could succeed in challenging the relief granted in rectification proceedings and the allowance of deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Analysis: The Tribunal held that the assessee, being a primary credit co-operative society, was entitled to deduction under section 80P(2)(a)(i) on the business income allowed by the appellate authority. It also accepted that the return had in substance claimed deduction under section 80P, and therefore the Revenue's objection to the rectification-related relief did not survive. The Revenue's grounds were rejected in view of the settled coordinate bench position relied upon by the Tribunal.

Conclusion: The issue was decided against the Revenue, and the relief granted by the appellate authority was sustained.

Final Conclusion: The assessee's appeal succeeded and the Revenue's cross-appeal failed, resulting in full relief to the assessee on the disputed deduction claims.

Ratio Decidendi: Interest earned by a co-operative society from deposits with a co-operative bank qualifies for deduction under section 80P(2)(d), and the assessee's eligibility for deduction under section 80P is not defeated when the claim is otherwise covered by the statutory scheme and supported by settled coordinate bench precedent.

Co-operative society deductions under section 80P upheld for interest from co-operative bank deposits and business income
Interest earned by a credit co-operative society from fixed deposits with a co-operative bank was treated as eligible for deduction under section 80P(2)(d), because the bank was regarded as a co-operative society for that purpose and the Tribunal followed its coordinate bench view. The Tribunal also upheld deduction under section 80P(2)(a)(i) for the assessee's business income, holding that the rectification-related relief remained valid since the return had in substance claimed deduction under section 80P. The Revenue's objections were rejected, and the appellate relief was sustained.

Deduction on interest from investments with co-operative bank - Deduction for credit co-operative society u/s 80P Deduction on interest from investments with co-operative bank - Co-operative bank as species of co-operative society - claim of Interest income earned by the credit co-operative society from fixed deposits placed with Pune District Central Co-op. Bank Ltd. eligible for deduction u/s 80P(2)(d) - HELD THAT: - The Tribunal followed the co-ordinate Bench decision in Shri Bhairavnath Multisate Cooperative Credit Society [2024 (9) TMI 342 - ITAT PUNE] which had held that where a co-operative society earns interest from investments made with a co-operative bank or co-operative society, the co-operative bank is to be treated as a species of co-operative society and the interest so earned qualifies for deduction under section 80P(2)(d). Applying that settled position, the Tribunal held that the disallowance sustained by the appellate authority in respect of interest from deposits with Pune District Central Co-op. Bank Ltd. was not justified. [Paras 7, 8] The disallowance of deduction on the interest income from the co-operative bank was set aside and the Assessing Officer was directed to allow the claim under section 80P(2)(d). Deduction for credit co-operative society under section 80P - Claim of deduction in return of income - The Revenue's challenge to the allowance of deduction under section 80P(2)(a)(i) and to the appellate order passed in proceedings arising from section 154 - HELD THAT: - The Tribunal held that it has consistently been accepted in co-ordinate Bench decisions that a primary credit co-operative society is entitled to deduction under section 80P(2)(a)(i) in respect of income attributable to its business. It further found that the Revenue's premise that the assessee had not claimed deduction under section 80P in the return was factually incorrect, since the assessee had claimed deduction under section 80P(2)(a)(i) on its total income and the appellate authority had merely allowed the business profit component while separately disallowing the interest component. On that basis, both grounds raised by the Revenue were dismissed. [Paras 11, 12] The Revenue's appeal was dismissed and the allowance of deduction under section 80P(2)(a)(i) as granted by the appellate authority was sustained. Final Conclusion: The assessee's appeal was allowed and the Revenue's cross-appeal was dismissed. The Tribunal held that the interest earned from deposits with the co-operative bank was deductible under section 80P(2)(d), while the allowance of deduction under section 80P(2)(a)(i) in respect of the assessee's business income remained undisturbed.

2026 (5) TMI 1708 - ITAT RANCHI Income Tax

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Penalty under section 271AAC(1) falls when the section 69A addition is deleted and deposits are treated as explained receipts.
Penalty under section 271AAC(1) was unsustainable where the underlying quantum addition under section 69A had already been deleted and the cash deposits were treated as explained business receipts. Once the addition itself no longer survived, section 69A ceased to apply to the deposits, and the consequential penalty could not stand independently. The Tribunal therefore deleted the penalty, accepting that the penalty provision could not be invoked without a surviving basis in the quantum assessment.

2026 (5) TMI 1691 - SC Order Customs

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Customs confiscation and retracted statements: High Court restored absolute confiscation after finding no lawful provenance of high-purity gold.
Customs confiscation proceedings may rest on reasonable belief supporting seizure under reverse-burden provisions, and belated retraction does not automatically displace statements recorded under Section 108 in deemed judicial proceedings. The High Court held the Tribunal's contrary view perverse, restored absolute confiscation with consequential penalties, and found that the documentary record did not establish lawful provenance of the high-purity gold. The Special Leave Petition was dismissed, leaving the High Court's order undisturbed.

2026 (5) TMI 1687 - CESTAT NEW DELHI Customs

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Customs broker penalty under export overvaluation allegations fails where knowledge, participation, and confiscation-linked conduct are unproved.
Penalty under section 114(iii) of the Customs Act requires proof that the person did, or omitted to do, an act rendering the goods liable to confiscation under section 113. No material showed that the Customs Broker participated in overvaluation, knew the export goods were overvalued, or withheld any such knowledge from the department. The valuation of export goods is not the Customs Broker's function, and mere non-cooperation during investigation does not by itself satisfy the ingredients for penalty. The penalty was therefore not sustainable and was set aside.

2026 (5) TMI 1674 - SC Order Money Laundering

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PMLA arrest challenge: Supreme Court dismisses SLP and permits regular bail on its own merits.
Arrest under Section 19(1) of the Prevention of Money Laundering Act, 2002 was challenged as illegal. The High Court found no manifest arbitrariness or gross non-compliance with PMLA safeguards in the arrest and remand proceedings, and declined to quash the remand orders, leaving parties' rights open in trial and bail proceedings. The Supreme Court dismissed the Special Leave Petition and granted liberty to seek regular bail, directing that any such application be considered on its own merits without being influenced by the observations in the impugned order.

2026 (5) TMI 1673 - KERALA HIGH COURT Money Laundering

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Issues: (i) Whether a writ petition is maintainable against a summons issued under Section 50 of the Prevention of Money Laundering Act, 2002; (ii) whether proceedings under the Prevention of Money Laundering Act, 2002 can commence in the absence of an FIR in respect of a scheduled offence; (iii) whether immunity granted under the Income-tax Act, 1961 extends to proceedings under the Prevention of Money Laundering Act, 2002; and (iv) whether the respondent's powers under the Prevention of Money Laundering Act, 2002 are dependent on the final report of the SFIO under Section 212 of the Companies Act, 2013, including whether subsequent filing of a complaint by the SFIO can be considered.

Issue (i): Whether a writ petition is maintainable against a summons issued under Section 50 of the Prevention of Money Laundering Act, 2002.

Analysis: A summons under Section 50 merely requires attendance, statement, and production of records in aid of investigation. It does not by itself create an adverse civil consequence or a completed cause of action. The challenge was directed at the investigation stage, and the summons did not justify judicial interference at that stage.

Conclusion: The writ petition was premature and not maintainable against the summons.

Issue (ii): Whether proceedings under the Prevention of Money Laundering Act, 2002 can commence in the absence of an FIR in respect of a scheduled offence.

Analysis: The statutory scheme of the Prevention of Money Laundering Act, 2002 permits inquiry and investigation on the basis of material relating to proceeds of crime, and the Supreme Court has held that absence of an FIR does not bar commencement of inquiry or investigation. The summons in the present case was issued only for investigation, and the Court followed the settled position that registration of an FIR is not a precondition.

Conclusion: Proceedings under the Prevention of Money Laundering Act, 2002 can commence without an FIR in respect of the scheduled offence.

Issue (iii): Whether immunity granted under the Income-tax Act, 1961 extends to proceedings under the Prevention of Money Laundering Act, 2002.

Analysis: The immunity under Section 245H of the Income-tax Act, 1961 is confined to prosecution under that Act and, in the present statutory setting, does not extend to prosecution or proceedings under other Central enactments for applications made after 01.06.2007. The settlement machinery under the Income-tax Act does not deal with money-laundering proceedings.

Conclusion: The immunity granted under the Income-tax Act, 1961 does not protect the petitioners from proceedings under the Prevention of Money Laundering Act, 2002.

Issue (iv): Whether the respondent's powers under the Prevention of Money Laundering Act, 2002 are dependent on the final report of the SFIO under Section 212 of the Companies Act, 2013, including whether subsequent filing of a complaint by the SFIO can be considered.

Analysis: The authority under the Prevention of Money Laundering Act, 2002 is not conditioned on the completion of SFIO proceedings or on a final report under the Companies Act, 2013. The Court also held that subsequent events existing before judgment can be taken into account, and the later filing of the SFIO complaint removed the factual foundation of the petitioners' objection that there was no scheduled offence.

Conclusion: The respondent's powers are not dependent on the SFIO final report, and the subsequent SFIO complaint could be considered.

Final Conclusion: The challenge to the summons and the investigation failed on all material grounds, and no interference was warranted in the exercise of writ jurisdiction.

Ratio Decidendi: A summons issued under Section 50 of the Prevention of Money Laundering Act, 2002 at the investigation stage is not ordinarily amenable to writ interference, and initiation of inquiry under the Act does not require a prior FIR where the statutory material indicates a possible scheduled offence and proceeds of crime.

PMLA investigation can proceed without an FIR, and Section 50 summons is not usually open to writ challenge.
A Section 50 PMLA summons is an investigatory step requiring attendance, statement, and production of records, so writ interference is generally not warranted at that stage. Proceedings under the PMLA may commence without a prior FIR for the scheduled offence where material indicates proceeds of crime. Immunity under Section 245H of the Income-tax Act is confined to that statute and does not extend to PMLA proceedings. The PMLA authority is also not dependent on an SFIO final report under the Companies Act, and a later SFIO complaint filed before judgment may be taken into account to remove the objection that no scheduled offence existed.

Maintainability of challenge to summons - Settlement immunity under Income-tax law - PMLA inquiry without FIR - Consideration of subsequent events in writ proceedings Summons under Section 50 PMLA - Prematurity of writ petition - writ petition challenging summons issued for appearance, statement and production of documents under the PMLA - HELD THAT: - The Court held that a summons issued under Section 50 merely requires the person concerned to attend, state the truth and produce records, and by itself does not give rise to a cause of action. Since no adverse order affecting rights had been passed at that stage, interference in writ jurisdiction was found unwarranted. The Court therefore accepted the preliminary objection that the challenge to the summons was premature, though it proceeded to examine the other contentions as well. [Paras 12] The challenge to the summons was rejected as premature. Immunity from prosecution - Settlement under Income-tax Act - PMLA proceedings - Immunity claimed on the basis of an order of settlement under the Income-tax Act extendable to proceedings under the PMLA or not? - HELD THAT: - The Court held that, by reason of the second proviso to Section 245H(1), where an application for settlement is made after 01.06.2007, immunity cannot be granted from prosecution under any Central Act other than the Income-tax Act and the Wealth-tax Act. As the settlement application was made in 2020, any immunity available to the petitioner could only relate to prosecution under the Income-tax Act. The Settlement Commission or Interim Board was also held to have no authority to deal with money-laundering complaints, and the conclusiveness of the settlement order was confined to matters within that statutory scheme. [Paras 13] The plea that settlement under the Income-tax Act barred proceedings under the PMLA was rejected. Inquiry under PMLA - Absence of FIR - ECIR as internal document - Issuance of summons and commencement of inquiry under the PMLA invalidated merely because no FIR had been registered in respect of the scheduled offence - HELD THAT: - Relying on the law declared by the Supreme Court [2022 (7) TMI 1316 - SUPREME COURT (LB)], the Court held that non-recording of an FIR in respect of a scheduled offence does not prevent the authorities under the PMLA from commencing inquiry or investigation for collection of evidence and for initiating civil action in relation to proceeds of crime. The summons in question showed that the matter was only at the stage of investigation, and at that stage the statute did not require registration of an FIR as a condition precedent for issuing summons under Section 50. [Paras 17] The contention that absence of an FIR deprived the respondent of jurisdiction to issue summons was rejected. Subsequent events in writ jurisdiction - Scheduled offence under Companies Act - Independence of PMLA power - whether Court could take note of the subsequent filing of a complaint by the SFIO, and the respondent's power under the PMLA dependent upon submission of a final report by the SFIO - HELD THAT: - The Court held that, in proceedings under Article 226, facts that come into existence before pronouncement of judgment and bear directly on the controversy must be considered, and ignoring them would render the adjudication academic. Since it was brought on record that the SFIO had filed a complaint alleging offences including one constituting a scheduled offence, the foundational argument that the summons had been issued without any scheduled offence no longer survived. The Court further held that, in any event, the respondent's power to issue summons for investigation under the PMLA was not contingent on the SFIO first submitting its final report. [Paras 20] The Court considered the subsequent SFIO complaint and rejected the contention that action under the PMLA depended on the SFIO's final report. Final Conclusion: The writ petition was dismissed. The Court held that the challenge to summons under the PMLA was premature, that income-tax settlement immunity did not extend to money-laundering proceedings, that an FIR was not a condition precedent for inquiry under the PMLA, and that the subsequent SFIO complaint could be taken into account while deciding the writ petition.

2026 (5) TMI 1668 - CESTAT BANGALORE Service Tax

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Issues: (i) Whether the extended period of limitation could be invoked for the second show cause notice when the Revenue was already aware of the same alleged irregular availment of credit from the earlier notice; (ii) Whether cenvat credit attributable to trading activity was inadmissible and required proportionate reversal for the normal period, with penalties liable to be set aside.

Issue (i): Whether the extended period of limitation could be invoked for the second show cause notice when the Revenue was already aware of the same alleged irregular availment of credit from the earlier notice.

Analysis: The Revenue had already issued an earlier show cause notice on the same broad allegation of wrong availment of credit in relation to trading activity. On that footing, the subsequent notice for the later period could not be sustained under the extended limitation period, as the necessary element of suppression for invoking the extended period was not established.

Conclusion: The extended period of limitation was not available to the Revenue.

Issue (ii): Whether cenvat credit attributable to trading activity was inadmissible and required proportionate reversal for the normal period, with penalties liable to be set aside.

Analysis: Trading activity was treated as a non-taxable activity, and credit was held inadmissible to the extent attributable to such activity. The Tribunal applied the principle of proportionate reversal for the admissible normal period and accepted that the matter required quantification on that basis. It further held that the penalties could not survive in the manner imposed once the demand was confined to the normal period and worked out afresh.

Conclusion: Proportionate credit attributable to trading activity was held reversible for the normal period, the penalties were set aside, and the matter was remanded for quantification.

Final Conclusion: The dispute was resolved by denying extended limitation, limiting the demand to the normal period, vacating the penalties, and sending the matter back only for computation of the reversible credit.

Ratio Decidendi: Credit attributable to activity outside the tax net is not admissible, but the extended period cannot be invoked absent suppression where the Department was already aware of the same issue, and the reversible credit may be worked out on a proportionate basis for the normal period.

Extended limitation fails where the Department already knew the credit issue; trading-linked Cenvat credit needs proportionate reversal.
Extended limitation could not be invoked for a second show cause notice where the Department was already aware of the same alleged wrong credit availment and no suppression was established. Credit attributable to trading activity, treated as a non-taxable activity, was held inadmissible to that extent and required proportionate reversal for the normal period. Penalties could not survive in the form imposed once the demand was confined to the normal period and recalculated on that basis. The matter was therefore remanded only for quantification of the reversible credit.

Invocation of the extended period for the second show-cause notice - irregular availment of Cenvat credit in relation to trading activity from the earlier notice -Suppression of facts - Proportionate reversal of credit - Cenvat credit on input services attributable to trading activity - Proportionate reversal of credit for non-taxable activity. Extended period of limitation - Prior show-cause notice on identical facts - HELD THAT: - The Tribunal held that once an earlier show-cause notice had already been issued on the same allegation of irregular availment of Cenvat credit in relation to trading activity, the Department could not invoke suppression again for the subsequent period. Revenue awareness arising from the first notice defeated the basis for resort to the extended period in the second notice. [Paras 5] The demand could survive only for the normal period, and the extended period was held inapplicable. Cenvat credit on trading activity - Non-taxable activity - Proportionate reversal of credit - HELD THAT: - The Tribunal held that credit is permissible only in relation to taxable services, and trading activity is not a taxable service. For that reason, credit attributable to the trading segment could not be retained. Relying on Lally Automobiles Pvt. Ltd. [2018 (7) TMI 1679 - DELHI HIGH COURT], as affirmed in Lally Automobiles Private Limited v. Commissioner [2019 (6) TMI 414 - SC ORDER], the Tribunal accepted that, even if the rules did not provide a specific advance segregation mechanism for such mixed activity, the correct course was proportionate attribution and reversal of credit relatable to trading activity. Since the extended period was held unavailable, quantification had to be confined to the normal period. [Paras 5] The appellant was held liable to reverse proportionate credit attributable to trading activity, limited to the normal period, and the matter was remanded only for quantification. Penalty for wrongful availment of Cenvat credit - HELD THAT: - After restricting the demand to the normal period and remanding the matter only for quantification of the admissible reversal, the Tribunal set aside all penalties imposed under the impugned order. [Paras 5] All penalties were set aside. Final Conclusion: The Tribunal held that credit attributable to trading activity was not admissible and had to be reversed proportionately, but only for the normal period because the extended period was not invocable after the earlier notice on the same issue. The matter was remanded solely for quantification of such credit for the normal period, and all penalties were set aside.

2026 (5) TMI 1662 - SC Order Central Excise

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Textile cess liability requires an independent definition of manufacture, while time-barred demands against processing units remain unsustainable.
Textile cess demands against independent units dyeing or processing grey cloth were set aside because the Central Excise definition of manufacture could not be imported into the Textile Committee Act. The demands were also time-barred under Rule 10 of the Textile Committee (Cess) Rules, 1975, as the notices were issued after the prescribed limitation period. The Tribunal's non-speaking order was set aside. The Supreme Court dismissed the special leave petitions, finding no ground to interfere with the High Court judgment.

2026 (5) TMI 1661 - SC Order Central Excise

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Rule 8(3A) validity remains open after departmental appeal disposal under the low tax effect litigation policy.
Rule 8(3A) of the Central Excise Rules, 2002 was not substantively examined because the departmental appeal was disposed of under the low tax effect and departmental litigation policy. The question concerning the rule's validity remains open for determination in appropriate proceedings. The Special Leave Petition was dismissed after condonation of delay, with no ground found to interfere with the impugned order.

2026 (5) TMI 1653 - SC Order GST

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Deposited Amount Transfer and Release Directed After Verification Following Dismissal of Special Leave Petitions
The SC dealt with disposal of amounts deposited under an earlier order and lying with the Registry after dismissal of the special leave petitions. It directed transfer of the aggregate deposited amount, with accrued interest, to the office of the CGST and Central Excise Commissionerate. After due verification and identification, the amount was to be disbursed to the petitioners within one week of transfer.

2026 (5) TMI 1643 - SC Order Income Tax

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Reassessment on a mere change of opinion cannot proceed where reopening is based on alleged colourable transactions.
Reopening of assessment under section 147 was discussed in the context of alleged ingenuine purchases routed through a colourable device. The Supreme Court declined to interfere with the High Court's view that the reassessment was based on a mere change of opinion by the Assessing Officer, so the taxpayer could not be subjected to further scrutiny on that basis. The special leave petition was dismissed.

2026 (5) TMI 1642 - SC Order Income Tax

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Tax treatment of logistic services as fees for technical services was left undisturbed, and the SLP was dismissed.
Income arising from the sale of logistic services was treated as fees for technical services under the Act and the India-USA DTAA, and the Supreme Court declined to interfere with that view under Article 136. The Special Leave Petition was dismissed, and the connected interlocutory application(s) were disposed of.

2026 (5) TMI 1611 - CESTAT CHENNAI Customs

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Issues: (i) Whether Bluetooth wireless headsets, earphones, earbuds and neckbands were classifiable under CTH 85176290 as apparatus for transmission or reception of voice, image or other data, or under CTH 85183000 as headphones and earphones. (ii) Whether the essential character and principal function of the imported goods, together with Circular No. 36/2013-Cus. dated 05.09.2013, required classification under CTH 85176290.

Issue (i): Whether Bluetooth wireless headsets, earphones, earbuds and neckbands were classifiable under CTH 85176290 as apparatus for transmission or reception of voice, image or other data, or under CTH 85183000 as headphones and earphones.

Analysis: The imported goods were found to be Bluetooth devices capable of receiving and transmitting voice and data through wireless connectivity, functioning as transceivers in a network environment. The description of heading 8517 covered apparatus for transmission or reception of voice, image or other data, while heading 8518 covered headphones and earphones. On the technical features placed on record, the goods were not mere earphones or headphones but devices with communication capability falling within the broader networking apparatus of heading 8517.

Conclusion: The goods were held classifiable under CTH 85176290 and not under CTH 85183000.

Issue (ii): Whether the essential character and principal function of the imported goods, together with Circular No. 36/2013-Cus. dated 05.09.2013, required classification under CTH 85176290.

Analysis: Classification was held to depend on the essential character and principal function of the goods under the General Rules for Interpretation and Note 3 to Section XVI. The circular specifically clarified that Bluetooth wireless headsets for mobile phones are active parts of a wireless network and simultaneously receive and transmit voice and data, whereas headphones combined with a microphone under heading 8518 carry only audio signals and are not an active part of a network. The circular was treated as binding on the field formations and consistent with the product literature and technical catalogues.

Conclusion: The essential character and principal function, read with the circular, supported classification under CTH 85176290.

Final Conclusion: The classification adopted in the impugned order was set aside, the duty demand and connected consequences did not survive, and the appeal succeeded on merits with consequential relief.

Ratio Decidendi: Where Bluetooth headsets or similar devices function as wireless transceivers capable of receiving and transmitting voice and data in a network, their essential character and principal function place them under heading 8517 rather than heading 8518.

Bluetooth wireless headsets classified as network transceivers, not mere headphones, under the essential character test.
Bluetooth wireless headsets, earphones, earbuds and neckbands were treated as wireless transceivers capable of receiving and transmitting voice and data, so they fell under CTH 85176290 rather than CTH 85183000. The classification turned on the goods' essential character and principal function under the General Rules for Interpretation and Note 3 to Section XVI, with Circular No. 36/2013-Cus. confirming that Bluetooth headsets for mobile phones are active parts of a wireless network. Headphones and earphones under heading 8518 were distinguished as devices carrying only audio signals. The impugned classification was set aside and the demand and connected consequences did not survive.

Classification of Bluetooth wireless headsets - Essential character and principal function - Binding nature of Board circulars - Transmission or reception apparatus in wireless networks - Imported JABRA brand Bluetooth wireless headphones, earphones, earbuds and neckbands were classifiable under CTH 85176290 OR under CTH 85183000 HELD THAT: - The Tribunal held that the imported devices, on the basis of their technical features and catalogues, were Bluetooth-enabled apparatus capable of receiving, converting and transmitting voice and data in a wireless network, and were therefore not mere headphones or earphones carrying only audio signals. Applying the principle that classification of composite goods must be determined by their essential character and principal function, the Tribunal found that Bluetooth technology and network communication functionality were the distinguishing features of the goods. Reliance was placed on the Board Circular No. 36/2013-Cus., which clarifies that Bluetooth wireless headsets for mobile phones, being active parts of a wireless network and simultaneously transmitting and receiving voice and data, fall under sub-heading 8517.62, whereas headphones combined with a microphone under heading 8518 carry only audio signals and are not active parts of a network. The Tribunal also followed the reasoning in M/s. Minda D-Ten Pvt. Ltd. v. Commissioner of Cus. (Import), New Delhi [2021 (8) TMI 120 - CESTAT NEW DELHI] holding that Bluetooth-enabled devices functioning as transceivers fall under CTH 85176290. It therefore found that the original authority had overlooked both the technical material and the binding clarification issued by the Board. [Paras 20, 21, 22, 24, 25] The reclassification under CTH 85183000 was set aside, and the goods were held classifiable under CTH 85176290; consequently, the duty demand founded on the contrary classification could not survive. Final Conclusion: The Tribunal allowed the appeal and held that the imported Bluetooth wireless headsets, earphones, earbuds and neckbands were classifiable under CTH 85176290. The impugned order confirming reclassification and consequential duty demand was set aside with consequential relief.

2026 (5) TMI 1610 - CESTAT KOLKATA Customs

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Issues: (i) whether franchise fee paid for licensing rights in relation to TH and FC brands was includible in the value of imported goods under Rule 10(1)(c) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007; (ii) whether advertisement and promotional expenses and corporate marketing fee were includible in the assessable value under Rule 10(1)(e) of those Rules; and (iii) whether the extended period of limitation was invokable.

Issue (i): whether franchise fee paid for licensing rights in relation to TH and FC brands was includible in the value of imported goods under Rule 10(1)(c) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.

Analysis: Rule 10(1)(c) permits inclusion only of royalties and licence fees related to imported goods that the buyer is required to pay, directly or indirectly, as a condition of sale. The franchise fee in question was paid for domestic sell, distribute and promote rights, not as consideration for procurement of the goods from the overseas suppliers. The imports were on principal-to-principal basis from independent foreign suppliers, and the payment did not constitute a condition of sale of the imported goods.

Conclusion: The franchise fee was not includible in the assessable value and the issue was decided in favour of the assessee.

Issue (ii): whether advertisement and promotional expenses and corporate marketing fee were includible in the assessable value under Rule 10(1)(e) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.

Analysis: Rule 10(1)(e) applies only to payments made as a condition of sale to the seller or to a third party to satisfy an obligation of the seller. The advertisement and promotional expenses were incurred by the importer on its own account for its business in India, and the corporate marketing fee was also not shown to be payable to the overseas suppliers or to any third party at their instance. Such post-import business expenditure, even if it incidentally benefited the foreign brand owner, was not an additional consideration for the imported goods.

Conclusion: The advertisement and promotional expenses and the corporate marketing fee were not includible in the assessable value and the issue was decided in favour of the assessee.

Issue (iii): whether the extended period of limitation was invokable.

Analysis: The imports had already been provisionally assessed and the matter was within the knowledge of the revenue, including through earlier provisional assessments and finalisation proceedings. In these circumstances, suppression was not made out so as to justify invocation of the extended period.

Conclusion: The extended period of limitation was not invokable and the issue was decided in favour of the assessee.

Final Conclusion: The demand, confiscation consequences, redemption fine and penalty could not survive, and the appeal was allowed with consequential relief.

Ratio Decidendi: Royalty, licence fee, advertisement spend or similar business payments are includible in customs value only when they are shown to be a condition of sale of the imported goods and to have a direct legal nexus with the import transaction, not when they are incurred on the importer's own account for post-import commercial activities.

Customs valuation excludes post-import brand and marketing payments unless they are a condition of sale of the imported goods.
Royalty, licence fee and other business payments are includible in customs value only when they are a condition of sale of the imported goods and have a direct nexus with the import transaction. Franchise fee paid for domestic sell, distribute and promote rights was not linked to procurement of goods from overseas suppliers, so it was excluded under Rule 10(1)(c). Advertisement and promotional and corporate marketing fee incurred on the importer's own account for post-import business activity were not additional consideration under Rule 10(1)(e). As the imports were provisionally assessed and within revenue's knowledge, extended limitation was also unavailable, and the demand, confiscation, redemption fine and penalty could not survive.

Condition of sale in customs valuation - Royalty and franchise fee related to imported goods - Advertisement and marketing expenditure on buyer's own account - Extended limitation in customs undervaluation proceedings Franchise fee includibility - Royalty and licence fee as condition of sale - Post-import distribution rights - Franchise fee paid for Tommy Hilfiger and French Connection brand rights was not includible in the assessable value of the goods imported from Hong Kong - HELD THAT:- The Tribunal held that addition under Rule 10(1)(c) is permissible only where the royalty or licence fee is related to the imported goods and its payment is a condition of sale of those goods. On the terms of the arrangements, the appellant imported the goods from overseas suppliers on principal-to-principal basis and paid the franchise fee to the franchisors for the right to sell, distribute and promote the branded goods in India. The fee was thus linked to post-import domestic distribution rights and not to procurement of the imported goods. Non-payment of the fee would affect the right to sell the goods under the brand in India, but not the import transaction itself. As the payment was not a condition of sale of the imported goods, it could not be added to the transaction value. [Paras 8, 9, 12, 13] The demand based on inclusion of franchise fee in the assessable value was unsustainable. Advertisement and promotional expenditure - Corporate marketing fee - Payments on buyer's own account - Advertisement, marketing and promotion expenses and corporate marketing fee inclusion in the assessable value of the imported goods - HELD THAT: - The Tribunal held that Rule 10(1)(e) applies only where payment is made as a condition of sale of the imported goods, either to the seller or to a third party to satisfy an obligation of the seller. The appellant incurred advertisement and promotional expenditure on its own account for promoting its own sales in India, and such expenditure was post-import in character. Those payments were neither made to the overseas suppliers nor to any third party at their direction, and were not shown to discharge any obligation of the sellers. The corporate marketing fee also lacked such nexus, since it was not paid to the suppliers or on their behalf. Tribunal further noted that the earlier SVB view on the appellant's brand-related marketing spend was to the same effect and, in the absence of challenge to that view, the Department could not adopt a contrary position. [Paras 15, 18, 19, 20, 21] AMP expenditure and corporate marketing fee were held not addable to the transaction value. Extended period of limitation - Knowledge of the department - Confiscation and consequential penalty - HELD THAT: - The Tribunal found that the imports and valuation aspects were already within the knowledge of the Revenue, as the goods had earlier been provisionally assessed on execution of bonds and deposit of duty, and those assessments were later finalized by accepting the declared value and refunding the deposit. In those circumstances, suppression could not be alleged and the extended period was not available. Once undervaluation itself failed, the goods were not liable to confiscation; consequently, redemption fine and penalty were also not imposable. [Paras 22, 23, 24] The demand was also barred from invocation of the extended period, and the consequential confiscation, fine and penalty were set aside. Final Conclusion: The Tribunal held that franchise fee, AMP expenditure and corporate marketing fee were not includible in the assessable value of the imported goods, since they were not payments made as a condition of sale of the imports. The extended period was also held inapplicable; accordingly, the impugned order was set aside and the appeal was allowed with consequential relief.

2026 (5) TMI 1609 - CESTAT KOLKATA Customs

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Issues: (i) Whether the imported goods under the live consignments were correctly classifiable under Tariff Item 68149090, and whether the CRCL report conclusively established that they did not fall under Tariff Item 25251090. (ii) Whether the test results of two live consignments could be applied to the past imports, and whether the extended period of limitation, confiscation, redemption fine, and penalties were sustainable.

Issue (i): Whether the imported goods under the live consignments were correctly classifiable under Tariff Item 68149090, and whether the CRCL report conclusively established that they did not fall under Tariff Item 25251090.

Analysis: The classification was determined by the tariff entries and the HSN notes. Heading 2525 covers crude mica and mica rifted into sheets, while Heading 6814 covers worked mica and articles of mica, including mica further worked than merely rifted and trimmed. The laboratory reports described the samples as mica that appeared to be processed, and one sample was mixed with polymer or additives. The physical examination, laboratory reports, and supporting material showed that the live consignments had undergone processing beyond merely rifting and trimming.

Conclusion: The live consignments were correctly classifiable under Tariff Item 68149090, and the differential duty confirmed on those consignments was upheld against the assessee.

Issue (ii): Whether the test results of two live consignments could be applied to the past imports, and whether the extended period of limitation, confiscation, redemption fine, and penalties were sustainable.

Analysis: Each Bill of Entry is a separate assessment, and the Department had not drawn samples from the past consignments. No evidence showed that all past consignments were identical in physical characteristics to the live consignments. The dispute was one of classification, and the record disclosed full particulars in the Bills of Entry without proof of collusion, wilful misstatement, or suppression of facts. Since the foundation for invoking the extended period failed, the confiscation and consequential penalties also could not survive.

Conclusion: The test results of the two live consignments could not be mechanically applied to the past imports, the demand on the past consignments was set aside, the extended period of limitation was held inapplicable, and the confiscation, redemption fine, and penalties were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded only in part: the reclassification and duty demand were sustained for the live consignments, while the demands relating to the past consignments and all consequential confiscatory and penal consequences were set aside.

Ratio Decidendi: Classification must be decided on the terms of the tariff headings and relevant notes, and test results from one consignment cannot be mechanically extrapolated to other consignments without independent evidence; extended limitation requires proof of suppression or wilful misstatement.

Mica classification and limitation turn on tariff notes, independent evidence, and proof of suppression in past imports.
Tariff classification of imported mica depended on the tariff headings, HSN notes, physical examination and laboratory reports. Goods found to be processed beyond mere rifting and trimming, including mica mixed with polymer or additives, were classifiable under Tariff Item 68149090, and differential duty on the live consignments was upheld. Test results from two live consignments could not be mechanically extended to past imports without independent evidence of identical goods. As the Bills of Entry disclosed full particulars and there was no proof of collusion, wilful misstatement or suppression, the extended period of limitation failed, and the associated confiscation, redemption fine and penalties were set aside for the past consignments.

Customs tariff classification - Worked mica - Application of test reports to past consignments - Extended limitation in classification disputes - Confiscation for misdeclaration - Penalty for interpretational dispute Customs tariff classification - Worked mica - CRCL test report - goods covered by the two live consignments classified under tariff item 68149090 OR under tariff item 25251090 - HELD THAT: - The Tribunal held that heading 2525 covers crude mica and mica merely rifted into sheets or splittings, whereas heading 6814 covers natural mica further worked than merely rifted and trimmed. In relation to the two live consignments, the CRCL reports showed the samples to be processed mica, and in one case mixed with polymer/additives. The adjudicating authority had also relied on physical examination and the nature of the goods as regular-shaped sheets with plain edges. On that material, the Tribunal found no infirmity in the conclusion that the goods had moved beyond the stage of crude mica or mere rifting and were classifiable as worked mica under heading 6814. [Paras 8] The reclassification of the goods in the two live consignments under tariff item 68149090 and the differential duty thereon were upheld. Application of test reports to past consignments - Separate assessment of each Bill of Entry - Extrapolation without evidence - HELD THAT: - The Tribunal held that no samples had been drawn from the past consignments and no test reports were available for them. Since classification depends on the physical characteristics of each consignment, test results from one consignment cannot be extrapolated to other consignments already cleared. The contention that the past imports were the same goods from the same supplier was rejected for want of evidence, particularly when even the two test reports relied on by the Department were not identical. The demand for past consignments was therefore found unsustainable as it rested on assumption rather than proof. [Paras 9] The differential duty demand in respect of the past 72 consignments, including the two provisionally assessed consignments, was set aside. Extended limitation in classification disputes - Suppression of facts - Willful misstatement - extended period under Section 28(4) invocable for the past imports - HELD THAT: - The Tribunal found that the dispute was a pure classification dispute. The appellant had declared the goods in the same manner as described in the supplier's documents and had disclosed the relevant particulars in the Bills of Entry, including value, quantity and specifications. A mere difference of opinion on the proper tariff heading could not be treated as misdeclaration. As the Department failed to establish collusion, willful misstatement or suppression of facts with intent to evade duty, the statutory conditions for invoking the extended period were held absent. [Paras 10] The demand raised by invoking the extended period of limitation was held unsustainable and was set aside. Confiscation for misdeclaration - Penalty for interpretational dispute - False documents - Confiscation under Section 111(m), redemption fine, and penalties under Sections 112, 114A and 114AA - HELD THAT: - The Tribunal held that confiscation under Section 111(m) requires material misdeclaration, which was absent because the description in the Bills of Entry matched the supplier's documents and the dispute was only as to classification. For penalty under Section 112, the Tribunal found no conscious or deliberate act rendering the goods liable to confiscation, the matter being one of interpretation of tariff entries. Penalty under Section 114A also failed because the ingredients necessary for invoking the extended period were not established. Penalty under Section 114AA was held inapplicable since the invoices and packing lists were genuine and no false or fabricated document had been used. [Paras 11, 12] The confiscation, redemption fine, and all penalties imposed under Sections 112, 114A and 114AA were set aside. Final Conclusion: The appeal was partly allowed. Classification of the goods in the two live consignments under tariff item 68149090 and the differential duty thereon were upheld, but the demand for past consignments based on those test reports, the invocation of extended limitation, the confiscation, redemption fine and all penalties were set aside.

2026 (5) TMI 1608 - CESTAT CHENNAI Customs

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Issues: (i) Whether LCD panels imported for use in automotive instrument clusters were classifiable under Heading 9013 or under Headings 8708/8714 as parts of motor vehicles; (ii) Whether the description declared in the Bills of Entry amounted to misdeclaration or suppression so as to justify invocation of the extended period of limitation under Section 28(4) of the Customs Act, 1962.

Issue (i): Whether LCD panels imported for use in automotive instrument clusters were classifiable under Heading 9013 or under Headings 8708/8714 as parts of motor vehicles.

Analysis: Classification has to be made on the basis of the goods as imported, not on the basis of the finished product in which they are later used. Heading 9013 specifically covers liquid crystal devices unless they are more specifically covered elsewhere by nomenclature. Note 2(g) to Section XVII excludes articles of Chapter 90 from the scope of parts and accessories, and Note 3 cannot be used to override that exclusion merely because the goods are suitable for sole or principal use with motor vehicles. The more specific description of LCD panels under Heading 9013 prevails over the generic description of parts under Headings 8708 and 8714.

Conclusion: The imported LCD panels were correctly classifiable under Heading 9013 and not under Headings 8708/8714.

Issue (ii): Whether the description declared in the Bills of Entry amounted to misdeclaration or suppression so as to justify invocation of the extended period of limitation under Section 28(4) of the Customs Act, 1962.

Analysis: The declared description matched the invoices and the goods were self-assessed and, in several cases, physically examined by Customs. Section 46 does not require declaration of end-use, and a genuine interpretational dispute on classification cannot by itself amount to suppression. Since the department did not establish deliberate concealment or wilful misstatement, the ingredients for invoking the extended period were not made out.

Conclusion: The allegation of misdeclaration or suppression was not established and the extended period under Section 28(4) was not invocable.

Final Conclusion: The classification adopted by the importer was upheld and the demand failed on merits as well as on limitation, resulting in relief to the importer.

Ratio Decidendi: Where imported goods are specifically covered by a tariff heading, they must be classified under that heading notwithstanding their intended use in a finished article, and a bona fide interpretational dispute on classification does not constitute suppression absent proof of deliberate non-disclosure.

Tariff classification of LCD panels follows their imported identity, while bona fide disputes cannot establish customs suppression.
LCD panels imported for automotive instrument clusters are classifiable under Heading 9013 when that heading specifically covers the goods as imported. Intended end-use in motor vehicles does not shift classification to vehicle-parts headings, because Section XVII excludes Chapter 90 articles and sole or principal use cannot override that exclusion. A Bills of Entry description consistent with invoices, self-assessment and Customs examination does not establish misdeclaration or suppression. End-use need not be declared under Section 46, and a bona fide classification dispute cannot trigger the extended limitation period without deliberate concealment or wilful misstatement.

Tariff classification of liquid crystal devices - LCD panels imported for use in automotive instrument clusters - Specific heading versus parts heading - Exclusion of Chapter 90 goods from Section XVII - Extended limitation for alleged misdeclaration Tariff classification of liquid crystal devices - Specific heading versus parts heading - Exclusion of Chapter 90 goods from Section XVII - imported LCD panels were classifiable under CTH 9013 OR under CTH 8708/8714 as parts of motor vehicles - HELD THAT: - The Tribunal held that classification had to be determined on the basis of the goods as imported, namely LCD panels, and not by treating them as Automotive Instrument Clusters or as motor vehicle parts after their subsequent use in manufacture. Note 2(g) to Section XVII specifically excludes articles of Chapter 90 from the scope of that Section, and Note 3 cannot be applied so as to override that exclusion merely because the goods are suitable for sole or principal use with motor vehicles. CTH 9013 specifically names liquid crystal devices, whereas headings for parts and accessories of motor vehicles are generic; therefore, the specific heading prevailed. The earlier decision concerning classification of AICs in Premier Instruments & Controls Ltd. [2000 (1) TMI 314 - CEGAT, NEW DELHI] was held inapplicable since the present dispute concerned LCDs at the point of import. Relying on Videocon Industries Ltd.[2023 (3) TMI 1338 - Supreme Court], Secure Meters Ltd. [2015 (5) TMI 241 - Supreme Court] and Samsung India Electronics Pvt Ltd. [2023 (10) TMI 737 - SC Order] the Tribunal held that a heading referring generally to parts cannot be treated as more specific than a heading which expressly covers LCDs by name. [Paras 16, 17, 18, 19, 20] The classification adopted by the importer under CTH 9013 was upheld and the contrary classification under CTH 8708/8714 was held unsustainable. Extended limitation for alleged misdeclaration - Suppression of facts - Self-assessment and disclosure in bill of entry - HELD THAT: - The Tribunal found no statutory requirement in Section 46 compelling declaration of end-use in the manner assumed by the Commissioner. The importer had described the goods in the Bills of Entry as LCD/Liquid Crystal Device/Liquid Crystal Display in line with the supplier invoices, had filed the supporting documents, and in most cases the goods were physically examined before clearance. The finding that the assessing officers were misled by the description was therefore rejected. The Tribunal also held that reliance on what other importers had declared could not create an obligation absent statutory prescription, and that relied-upon documents concerning the allegation of suppression had not been furnished despite request. Since the dispute was essentially interpretational and the declaration of the imported goods was correct, the allegation of suppression failed. [Paras 21, 22, 23] The demand was held barred by limitation and the extended period under Section 28(4) was ruled out. Final Conclusion: The Tribunal allowed the appeal, holding that the imported LCD panels were rightly classifiable under CTH 9013 and not as motor vehicle parts under CTH 8708/8714. It further held that there was no misdeclaration or suppression, and consequently the extended period of limitation was not available.

2026 (5) TMI 1607 - CESTAT CHENNAI Customs

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Non-speaking adjudication order under BIS quality control regime set aside and remanded for fresh consideration.
Imports of sanitary napkins, sanitary towels and panty liners were examined under the quality control and BIS compliance framework. The Tribunal found the adjudication order to be mechanical and non-speaking because it did not adequately deal with the applicable quality control guidance, the importer's MSME-related submissions, or the contention on the relevant import date and compliance timeline. As the reasoning was insufficient and natural justice required proper consideration of all contentions, the impugned order was set aside and the matter remanded for fresh adjudication. The Commissioner was directed to pass a speaking order after granting due opportunity of hearing.

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2021 (11) TMI 376 - AT - Income Tax

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Tribunal upholds capitalization of NTPC project expenses, citing consistency with prior judgments.
The Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s decision to allow expenses related to the NTPC project to be capitalized. The ... Summary

Tribunal upholds capitalization of NTPC project expenses, citing consistency with prior judgments.

The Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s decision to allow expenses related to the NTPC project to be capitalized. The Tribunal's ruling was based on consistency with previous judgments in the assessee's own case for A.Y. 2012-13 and 2013-14, where similar issues were addressed and decided in favor of capitalization of project-related expenses.

Issues:
1. Dismissal of general ground in appeal
2. Allowing adjustment of carry forward business losses with current year income
3. Allowing expenses related to NTPC project incurred prior to business setup

Analysis:

Issue 1: Dismissal of General Ground in Appeal
The Revenue appealed against the order of the Ld. CIT(A)-18, Kolkata for A.Y. 2014-15. The Tribunal noted that while the Revenue raised three grounds of appeal, Ground No. 3 was a general ground and thus needed to be dismissed.

Issue 2: Allowing Adjustment of Carry Forward Business Losses
Regarding Ground No. 2, the Tribunal observed that the appeal against allowing adjustment of carry forward business losses with current year income did not stem from the Ld. CIT(A)'s order. The Tribunal dismissed this ground as the Revenue failed to provide sufficient evidence to support their claim.

Issue 3: Allowing Expenses Related to NTPC Project
The primary issue revolved around the action of the Ld. CIT(A) in allowing expenses related to the NTPC project, which the Assessing Officer (A.O.) deemed as pre-operative expenses. The A.O. contended that the business had not commenced, and thus, the expenses were not considered as revenue expenditures. The Ld. CIT(A) partially allowed the assessee's appeal, holding that expenses directly related to the NTPC project should be capitalized. The Tribunal upheld this decision based on previous rulings for A.Y. 2012-13 and 2013-14, where the Ld. CIT(A) directed the capitalization of expenses related to the NTPC project. As the assessee did not challenge this decision, the Tribunal confirmed the partial relief granted by the Ld. CIT(A) in this case as well.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s decision to allow expenses related to the NTPC project to be capitalized. The Tribunal's ruling was based on consistency with previous judgments in the assessee's own case for A.Y. 2012-13 and 2013-14, where similar issues were addressed and decided in favor of capitalization of project-related expenses.

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Tribunal upholds capitalization of NTPC project expenses, citing consistency with prior judgments.

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