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Issues: (i) Whether Section 16(2)(c), read with Section 155, of the Central Goods and Services Tax Act, 2017 is unconstitutional or must be read down to confine ITC reversal to fraudulent, collusive, or non-genuine transactions; (ii) Whether and subject to what safeguards a purchaser's ITC may be denied or reversed when the supplier defaults in depositing tax or its registration is subsequently cancelled.
Issue (i): Whether Section 16(2)(c), read with Section 155, of the Central Goods and Services Tax Act, 2017 is unconstitutional or must be read down to confine ITC reversal to fraudulent, collusive, or non-genuine transactions.
Analysis: Input tax credit is a statutory concession, and actual payment of tax to the Government is integral to the credit mechanism. Section 16(2)(c) operates subject to Section 41 and forms part of an integrated statutory framework governing eligibility, reversal, recovery from the supplier, and subsequent re-availment. The earlier matching and reconciliation framework under Sections 42 and 43 was not operationalised, but the resulting difficulty concerns the manner of enforcement rather than the constitutional validity of the condition itself.
Analysis: The possibility of arbitrary or mechanical action in individual cases does not invalidate Section 16(2)(c). The condition cannot be restricted only to fraud, collusion, or fictitious transactions by reading down its text; instead, it must be applied harmoniously with the statutory safeguards and recovery mechanisms available against the defaulting supplier.
Conclusion: Section 16(2)(c), read with Section 155, is constitutionally valid and is not read down to limit its operation exclusively to fraudulent, collusive, or non-genuine transactions.
Issue (ii): Whether and subject to what safeguards a purchaser's ITC may be denied or reversed when the supplier defaults in depositing tax or its registration is subsequently cancelled.
Analysis: The non-operationalisation of the original matching mechanism, the phased substitution of Section 41, and the subsequent introduction of Rule 37A require the statutory regime applicable to the relevant tax period to be applied. For periods before Rule 37A, the absence of a re-availment mechanism is material. The statutory power to recover tax collected but not deposited by the supplier, including under Section 76, remains a relevant part of the scheme and cannot be rendered ineffective.
Analysis: Subsequent or retrospective cancellation of the supplier's registration, a nil or short tax declaration, or an alert concerning the supplier may justify an inquiry but cannot alone justify denial or reversal of ITC. The notice must disclose the relevant supplier, invoices, tax periods, nature of the default, material relied upon, and the status of recovery proceedings against the supplier. The purchaser may discharge the burden of proof through invoices and evidence of actual receipt and movement of goods or services. A notice invoking fraud, wilful misstatement, or suppression must itself state the foundational facts connecting the purchaser to such conduct. Personal hearing, reasoned consideration of the purchaser's material, and examination of the grounds for retrospective cancellation are required.
Conclusion: ITC cannot be denied or reversed mechanically merely because the supplier defaulted or its registration was subsequently cancelled. Reversal may follow where the purchaser fails to establish eligibility or where fraud, collusion, non-receipt of goods or services, or other grounds rendering the credit inadmissible are established in accordance with law.
Final Conclusion: Pending notices and completed adjudications must be dealt with afresh in conformity with the prescribed safeguards, after adequate opportunity to furnish material and be heard. Amounts already reversed, deposited, or recovered shall be adjusted or refunded as warranted by the fresh determination, and no fresh coercive recovery may be undertaken until that determination.
Ratio Decidendi: Actual payment of tax is a valid statutory condition for input tax credit, but Section 16(2)(c) must be enforced as part of the integrated GST scheme and cannot be used to impose mechanical reversal upon a bona fide purchaser without a fact-based inquiry, procedural fairness, and consideration of recovery from the defaulting supplier.
Issues: Whether the reassessment order under Section 148A(3) and the consequent notice under Section 148 for assessment year 2020-21 warranted writ interference where the materially identical reassessment challenge for the preceding assessment year had already been decided against the assessee.
Analysis: The information and allegations underlying the impugned reassessment action were identical to those involved in the preceding assessment year. The earlier decision had found that determining whether the amount disclosed by the assessee arose from a spurious transaction resulting in escaped income required factual examination by the Assessing Officer. Judicial discipline required adherence to the coordinate bench decision rendered in the assessee's own case.
Conclusion: The reassessment order and consequential notice did not warrant writ interference; the issue was decided against the assessee.
Issues: (i) Whether service tax paid under a mistake of law on exempt goods transport agency services is refundable; (ii) Whether interest is payable on that amount and, if so, at what rate.
Issue (i): Whether service tax paid under a mistake of law on exempt goods transport agency services is refundable.
Analysis: The assessee was eligible for exemption under Clause (21)(d) of Notification No. 25/2012-ST, as amended, but paid service tax under reverse charge despite no liability. Such payment, made under a mistake of law, is a revenue deposit rather than tax or duty. Consequently, Section 11B of the Central Excise Act, 1944 does not govern the refund claim, and retention of the amount would be without authority of law under Article 265 of the Constitution of India.
Conclusion: The refund of the amount paid under mistake of law is admissible, in favour of the assessee.
Issue (ii): Whether interest is payable on that amount and, if so, at what rate.
Analysis: Since the payment retains the character of a revenue deposit and is outside the statutory refund mechanism for duty, the interest regime under Section 11BB of the Central Excise Act, 1944 is inapplicable. The applicable principle supports compensatory interest at 12% per annum for wrongful retention of the deposit.
Conclusion: The assessee is entitled to interest at 12% per annum from the respective dates of deposit until payment of the refund, in favour of the assessee.
Final Conclusion: The exemption is given full effect by treating the erroneous payment as a refundable revenue deposit, with compensation for its retention.
Ratio Decidendi: A payment made under a mistake of law where no tax liability exists is a revenue deposit outside Section 11B of the Central Excise Act, 1944, and its unlawful retention warrants refund with compensatory interest.
Issues: Whether the Commissioner could withhold the refund under Section 54(11) of the Central Goods and Services Tax Act, 2017 when an anti-evasion investigation concerning alleged fraudulent input tax credit was pending.
Analysis: Section 54(11) permits withholding where the refund-generating order is subject to an appeal, further proceedings, or any other pending proceeding under the Act, and the Commissioner, after hearing the taxable person, forms an opinion that release would adversely affect revenue because of fraud or malfeasance. The expression concerning other pending proceedings extends beyond a formally instituted appeal and includes a pending statutory investigation. The anti-evasion investigation had commenced before the refund-withholding order and was supported by contemporaneous material indicating non-existent or cancelled suppliers, absence of established movement of goods, and absence of the claimant from the manufacturer's supply chain. Those circumstances bore directly on actual receipt of goods for input tax credit purposes and supported the requisite opinion of fraud or malfeasance. A subsequently issued show-cause notice merely crystallised the ongoing investigation; the absence of a pending appellate proceeding or separate judicial stay did not invalidate the statutory withholding.
Conclusion: The refund was validly withheld under Section 54(11); the issue was decided against the assessee.
Issues: Whether extraordinary writ jurisdiction could be exercised to quash an input-tax-credit adjudication order despite an available statutory appeal, on the asserted bar under Section 6(2)(b), variance from the show-cause notice, and denial of an effective hearing.
Analysis: Article 226 jurisdiction does not ordinarily substitute the statutory appellate process where the challenge requires examination of the adjudication record and disputed facts. The bar under Section 6(2)(b) depends upon identity of the precise subject matter, including the relevant tax period, transactions, invoices, ITC liability and allegations; a common supplier or general connection with ITC is insufficient. Whether the State and Central proceedings concerned identical liabilities required examination of their respective notices, orders and transaction-wise material. The impugned order disclosed an independent finding of ITC availment on goods-less invoices with reference to Section 16(2)(b), and therefore did not facially rest on a wholly new basis. The recorded grant of hearing opportunities, notwithstanding an apparent date discrepancy, and objections regarding evidence, limitation, clubbing of periods, replies and invocation of Section 74 required scrutiny of the underlying record in appeal.
Conclusion: An efficacious appellate remedy was required to be pursued because no ex facie lack of jurisdiction or undisputed breach of natural justice was established; all objections, including the applicability of Section 6(2)(b), remained open for appellate determination.
Issues: (i) Whether GST dues for Financial Year 2021-22, including related interest and penalty, which were not lodged in the CIRP, stood extinguished upon approval of the resolution plan, rendering subsequent proceedings without jurisdiction; and (ii) Whether the availability of a statutory appeal precluded exercise of writ jurisdiction.
Issue (i): Whether GST dues for Financial Year 2021-22, including related interest and penalty, which were not lodged in the CIRP, stood extinguished upon approval of the resolution plan, rendering subsequent proceedings without jurisdiction.
Analysis: Section 31(1) of the Insolvency and Bankruptcy Code, 2016 binds governmental authorities to an approved resolution plan, while Section 238 gives the Code overriding effect. Statutory claims relating to a pre-effective-date period that were not submitted during the CIRP are extinguished on approval of the plan. The approved plan expressly extinguished pre-effective-date governmental claims, whether assessed or unassessed, known or unknown. The distinction between tax adjudication and recovery was unavailable because initiation and continuation of proceedings under Section 73 of the Central Goods and Services Tax Act, 2017 in respect of an extinguished claim are themselves barred. Section 88 of that Act concerns liquidation and could not revive an extinguished liability; its general adjudicatory provisions also yield to the Code. The departmental circular and instruction recognised that unfiled or belated claims are extinguished on approval of the resolution plan.
Conclusion: The GST dues, interest and penalty for the relevant period stood extinguished upon approval of the resolution plan, and the revenue authorities lacked jurisdiction to initiate or continue proceedings concerning them. This issue is decided in favour of the assessee.
Issue (ii): Whether the availability of a statutory appeal precluded exercise of writ jurisdiction.
Analysis: A statutory appellate remedy does not bar writ jurisdiction where the authority has acted without jurisdiction or contrary to binding law. The admitted facts raised a pure legal question concerning the power to initiate proceedings after extinction of the claim under the approved resolution plan.
Conclusion: The statutory appellate remedy did not preclude writ jurisdiction. This issue is decided in favour of the assessee.
Final Conclusion: Statutory tax claims omitted from the CIRP cannot be revived through post-resolution-plan adjudication, including demands of related interest and penalty.
Ratio Decidendi: An approved resolution plan extinguishes statutory tax claims not submitted in the CIRP, and the overriding effect of the Insolvency and Bankruptcy Code, 2016 prevents revenue authorities from initiating or continuing proceedings to determine or recover such claims.
Issues: Whether a notice issued under Section 153C for assessment year 2010-11 was within the applicable limitation period.
Analysis: The satisfaction note was recorded in assessment year 2024-25. Under Section 153A read with Section 153C, the extended ten-year period, applicable where escaped income exceeds Rs. 50 lakh, could extend only up to assessment year 2015-16 when computed backwards from assessment year 2024-25. Assessment year 2010-11 consequently fell outside the permissible period.
Conclusion: The notice for assessment year 2010-11 was time-barred and invalid.
Issues: (i) Whether the predicate allegations disclosed scheduled offences under the PMLA; (ii) Whether the attached properties could be retained as value equivalent to proceeds of crime notwithstanding claimed licit sources or pre-dating acquisition; (iii) Whether the confirmation order was non-speaking; (iv) Whether use of guideline or current market value invalidated the attachment; and (v) Whether valid reasons to believe existed for attachment and adjudication.
Issue (i): Whether the predicate allegations disclosed scheduled offences under the PMLA.
Analysis: The charge sheet included offences under the Indian Penal Code, 1860 and Sections 3 and 4 of the Explosive Substances Act, 1908. These offences fall within the relevant parts of the Schedule to the Prevention of Money Laundering Act, 2002. The fact that alleged mining-law violations were not themselves scheduled offences did not displace the scheduled offences disclosed in the predicate proceedings.
Conclusion: The predicate allegations disclosed scheduled offences and furnished a valid basis for proceedings under the PMLA.
Issue (ii): Whether the attached properties could be retained as value equivalent to proceeds of crime notwithstanding claimed licit sources or pre-dating acquisition.
Analysis: Section 24 of the Prevention of Money Laundering Act, 2002 placed the burden on the appellants to establish licit sources. The claimed granite-quarrying income, agricultural income, interest, cash holdings and real-estate income remained unsupported by reliable documentary material and were not substantiated by the income-tax returns produced. Independently, the attachment was of property representing the value equivalent of proceeds of crime under Section 2(1)(u). For such equivalent-value attachment, the independent source and the date of acquisition of the substitute properties were immaterial.
Conclusion: The attached properties were liable to attachment as value equivalent to proceeds of crime.
Issue (iii): Whether the confirmation order was non-speaking.
Analysis: The confirmation order addressed the rival material concerning the predicate offences, quarrying licences, claimed sources of income, absence of reliable evidence for the acquisitions, recorded reasons to believe, and the applicable standard for attachment. It contained findings responsive to the material objections raised.
Conclusion: The confirmation order was a speaking order and was not vitiated for want of application of mind.
Issue (iv): Whether use of guideline or current market value invalidated the attachment.
Analysis: Section 2(1)(zb) defines value with reference to the fair market value on the date of acquisition, or the date of possession where acquisition date cannot be determined. Guideline value or current market value was therefore not the proper statutory measure. However, the alleged proceeds of crime were quantified from the value of illegally extracted granite rather than from the valuation of the attached properties. The valuation error did not affect the legal basis for attachment, particularly where the attached assets represented only a fraction of the alleged proceeds.
Conclusion: The use of guideline or current values was erroneous but did not invalidate the attachment.
Issue (v): Whether valid reasons to believe existed for attachment and adjudication.
Analysis: The recorded reasons linked the scheduled offences and alleged proceeds of crime to the listed assets, and identified the risk of their transfer, disposal or encumbrance frustrating confiscation proceedings. The reported sale of certain attached properties reinforced the apprehension of alienation. Section 5(1) required material supporting a prima facie belief, not conclusive proof. A separate communication or recording of reasons was not required under Section 8(1) before the adjudicatory process was commenced.
Conclusion: The reasons to believe under Section 5(1) were legally sufficient, and no separate requirement under Section 8(1) was breached.
Final Conclusion: The statutory prerequisites for attachment of assets as value equivalent to alleged proceeds of crime were satisfied, and the confirmed attachment remains legally sustainable notwithstanding the valuation error.
Ratio Decidendi: Property equivalent in value to proceeds of crime may be attached under the PMLA irrespective of its independent source of acquisition or whether it was acquired before the predicate offence.
Issues: Whether CENVAT credit of service tax paid on Business Support Services received from a group company is admissible.
Analysis: Business Support Services comprising common corporate and operational support provided to group entities were taxable services, and the service tax charged through invoices had been paid and accepted by the revenue authorities. Allocation of the provider's expenses among group entities, without a separate profit element, did not alter the character or taxable value of the services. The services had a direct nexus with the recipient's manufacturing business. Where the service provider's tax assessment had not been revised, credit could not be denied by recharacterising the invoiced services at the recipient's end. Identical disputes for earlier and subsequent periods had also been decided consistently on this basis.
Conclusion: CENVAT credit of the service tax paid on the Business Support Services was admissible; its disallowance and the consequential demand and penalty were unsustainable, in favour of the assessee.
Issues: Whether sale outside the factory of electricity generated from bagasse attracts the 6% payment obligation under Rule 6(3) of the CENVAT Credit Rules, 2004.
Analysis: Bagasse is agricultural waste or residue and is not the outcome of manufacture. Rule 6 of the CENVAT Credit Rules, 2004 consequently does not apply to electricity generated from bagasse. The settled position consistently excludes electricity wheeled to a State electricity distribution authority from the requirement to pay 6% of its value.
Conclusion: No amount under Rule 6(3) of the CENVAT Credit Rules, 2004 is payable on electricity generated from bagasse and cleared outside the factory.
Issues: Whether the Deputy Commissioner could block input tax credit exceeding the pecuniary limit prescribed under the Commissioner's administrative order.
Analysis: The Commissioner's administrative order prescribed a pecuniary limit of Rs. 1 crore for blocking input tax credit. The personal affidavit acknowledged that input tax credit exceeding that limit had been blocked and was subsequently unblocked. Exercise of statutory power requires adherence to the jurisdictional limits fixed by the competent administrative authority.
Conclusion: The Deputy Commissioner had no pecuniary jurisdiction to block input tax credit exceeding Rs. 1 crore.
Issues: Whether rejection of an appeal for non-response to a notice could be sustained when the appellant asserted that the delay was caused by circumstances beyond control and fell within the condonable period.
Analysis: The appeal was filed beyond the ordinary limitation period but within the period in which delay could be condoned under Section 107(4). The asserted medical circumstances preventing a response to the notice were not shown to be ungenuine. A fair opportunity was therefore required for the appellant to explain the delay and for the appellate authority to consider that explanation after hearing the appellant.
Conclusion: The appellant was entitled to an opportunity to establish sufficient cause for the delayed appeal; the rejection without such consideration could not stand.
Issues: (i) Whether failure to pay part of the invoiced consideration within 180 days contravened the second proviso to Section 16(2) of the Central Goods and Services Tax Act, 2017; (ii) Whether a financial/commercial credit note for a value discount permitted retention of input tax credit under the Board clarifications; and (iii) Whether invocation of Section 74 of the Central Goods and Services Tax Act, 2017 and imposition of penalty were sustainable, and what interest liability survived.
Issue (i): Whether failure to pay part of the invoiced consideration within 180 days contravened the second proviso to Section 16(2) of the Central Goods and Services Tax Act, 2017.
Analysis: The second proviso required a recipient availing input tax credit to pay the supplier the value of supply and tax within 180 days, failing which proportionate credit was required to be added to output tax liability with interest. The ledger established that part of the invoice value remained unpaid beyond 180 days. No contemporaneous agreement or evidence established that the discount had been agreed and the reduced consideration settled within that period.
Conclusion: The 180-day payment condition was breached in respect of the unpaid value until its subsequent waiver, against the assessee.
Issue (ii): Whether a financial/commercial credit note for a value discount permitted retention of input tax credit under the Board clarifications.
Analysis: A financial/commercial credit note did not reduce the original transaction value or the supplier's tax liability, and the supplier had borne tax on the undiscounted invoice value. The Board clarifications provided that the recipient need not reverse input tax credit attributable to a discount settled through such a note. Section 168(1) made these directions binding on departmental officers, and the later clarification was beneficial and clarificatory of the earlier circular. Upon waiver of the unpaid balance, no further consideration remained payable by the recipient; the third proviso to Section 16(2) and Rule 37(4) consequently enabled retention or re-availment of the credit.
Conclusion: The recipient was entitled to retain the input tax credit based on the original invoices after accounting for the financial/commercial credit note, in favour of the assessee.
Issue (iii): Whether invocation of Section 74 of the Central Goods and Services Tax Act, 2017 and imposition of penalty were sustainable, and what interest liability survived.
Analysis: Section 74(1) required fraud, wilful misstatement, or suppression of facts with intent to evade tax. Detection in audit alone did not establish suppression where the unpaid balance and its write-back were recorded in the audited accounts, and the view that reversal was unnecessary was bona fide. Section 75(2) required the matter to be treated as one under Section 73(1) where the ingredients of Section 74 were not established. Nevertheless, proportionate credit had remained unreversed after expiry of 180 days until receipt and accounting of the credit note, attracting interest under Section 50 for that intervening period.
Conclusion: The Section 74 charge and penalty were unsustainable, in favour of the assessee; interest on proportionate credit for the intervening period remained payable, against the assessee.
Final Conclusion: The commercial settlement preserved the credit entitlement but did not retrospectively extinguish interest arising from retention of proportionate credit during the earlier period of non-payment.
Ratio Decidendi: A financial or commercial credit note that leaves the supplier's original tax liability unchanged and settles unpaid consideration permits the recipient to retain or re-avail input tax credit, though statutory interest remains payable for the period during which proportionate credit was retained after the 180-day limit.
Issues: (i) Whether the appellate authority's failure to address the cited precedent and statutory amendment affected its conclusion; (ii) Whether the resort building and civil structures qualified as plant and machinery under Section 17(5)(d), including under the unamended functionality test; (iii) Whether the resort was constructed on the assessee's own account despite its accommodation, event and photo-shoot activities; (iv) Whether any balance input tax credit fell outside Section 17(5)(d); and (v) Whether the interest and penalty were sustainable.
Issue (i): Whether the appellate authority's failure to address the cited precedent and statutory amendment affected its conclusion.
Analysis: Sections 75(6) and 107(12) of the Central Goods and Services Tax Act, 2017 require reasoned orders that address the points for determination and the basis of decision. The cited precedent, the retrospective amendment and the claim concerning residual credit ought to have been addressed by the appellate authority. However, Section 113(1) permitted complete adjudication of the issues on the existing record after both sides were heard, and all contentions were determined afresh.
Conclusion: The omission did not invalidate the conclusion, and no prejudice was caused to the assessee.
Issue (ii): Whether the resort building and civil structures qualified as plant and machinery under Section 17(5)(d), including under the unamended functionality test.
Analysis: Section 124 of the Finance Act, 2025 retrospectively substituted "plant and machinery" for "plant or machinery" in Section 17(5)(d) from 01.07.2017. Explanation 1 to Section 17 expressly excludes land, buildings and other civil structures from plant and machinery. The resort building and associated civil structures consequently cannot qualify for the exception. Even under the earlier wording, the functionality test did not extend to hotel or resort buildings, which remain premises in which the hospitality business is conducted rather than the business apparatus.
Conclusion: Input tax credit on goods and services used to construct the resort building and its civil structures was blocked, against the assessee.
Issue (iii): Whether the resort was constructed on the assessee's own account despite its accommodation, event and photo-shoot activities.
Analysis: Section 17(5)(d) applies even where construction inputs are used in the course or furtherance of business. Construction on own account includes a building used as the setting for the taxable person's own business, whereas construction intended for sale, lease or licence to another stands differently. The resort was used to provide the assessee's accommodation, restaurant and event services; no evidence identified any portion as constructed for sale, lease or licence to a third party. Section 155 placed the burden of proving credit eligibility upon the assessee.
Conclusion: The resort was constructed on the assessee's own account, and the construction-related credit was blocked, against the assessee.
Issue (iv): Whether any balance input tax credit fell outside Section 17(5)(d).
Analysis: Section 17(5)(d) does not bar credit on every purchase made for establishing a resort; applicability depends on the nature and purpose of each item, rather than its accounting classification. Credit on the invoice-wise items identified by the assessee as electrical equipment, air-conditioners and expensed purchases had already been allowed. No further invoice, supplier, category or evidence established that the remaining credit related to movable assets or qualifying plant and machinery rather than construction of civil structures.
Conclusion: No part of the balance input tax credit was shown to fall outside Section 17(5)(d), against the assessee.
Issue (v): Whether the interest and penalty were sustainable.
Analysis: Under Section 50(3) and Rule 88B(3), interest arises only on wrongly availed and utilised input tax credit, measured by the extent to which the electronic credit ledger balance falls below the disputed credit. Interest was confined to the extent of actual utilisation, with no interest imposed where the ledger balance remained sufficient. Section 73(8) relieved penalty only upon payment of tax and interest within thirty days of the notice; otherwise, Section 73(9) required the prescribed penalty.
Conclusion: The interest and penalty were correctly computed and sustained, against the assessee.
Final Conclusion: The retrospective statutory exclusion of buildings and civil structures from plant and machinery, together with construction on own account and failure to establish any additional eligible item, sustained the denial of the disputed credit and the consequential liabilities.
Ratio Decidendi: From 01.07.2017, Section 17(5)(d) excludes input tax credit on goods and services used to construct a building or civil structure on the taxable person's own account, because such property cannot qualify as defined plant and machinery merely because it is used to provide taxable hospitality services.
Issues: Whether detention, tax demand and penalty under Section 129 for an un-updated Part-B of an e-way bill, where the vehicle had reached the consignee's premises and the omission was immediately cured, were legally sustainable.
Analysis: Section 129 applies to goods while in transit. The vehicle had completed its journey and was stationary at the consignee's registered premises when it was intercepted; hence, the jurisdictional condition of goods being in transit was absent. Valid tax invoices and Part-A of the e-way bill accompanied the goods, and the Part-B omission was promptly rectified, establishing substantive compliance and a curable procedural defect without revenue loss or mens rea. Section 126, the applicable circular, and the doctrine of proportionality required moderation rather than punitive action for such a bona fide technical lapse. The adjudication was also vitiated by breach of the principles of natural justice, since the personal hearing was conducted after the date borne by the adjudication order, offending audi alteram partem.
Conclusion: The detention, tax demand and penalty under Section 129 were illegal and unsustainable; the amounts recovered under protest were directed to be refunded with applicable statutory interest.
Issues: (i) Whether the re-investigation was void ab initio for want of jurisdiction; (ii) Whether the investigative authority was functus officio and a fresh Standing Committee reference was required before re-investigation; (iii) Whether the re-investigation was barred by limitation under Rule 129(6), including the validity of the extension; (iv) Whether the revised methodology and re-investigation denied the respondent natural justice; (v) Whether failure to pass on the additional input tax credit benefit contravened Section 171(1), and the consequential relief.
Issue (i): Whether the re-investigation was void ab initio for want of jurisdiction.
Analysis: A binding jurisdictional precedent found the earlier real-estate profiteering methodology legally unsustainable because input tax credit and buyer collections do not correlate uniformly during a project's life cycle. The applicable methodology requires project-wide GST savings to be apportioned across the total saleable area on a per-square-foot basis. Remitting pending matters to correct that legal infirmity ensured conformity with binding precedent and did not amount to an impermissible review of a concluded adjudication. No fundamental statutory prohibition or jurisdictional defect was established.
Conclusion: The re-investigation was valid and was not void ab initio, against the respondent.
Issue (ii): Whether the investigative authority was functus officio and a fresh Standing Committee reference was required before re-investigation.
Analysis: The doctrine of functus officio did not apply because the original report, founded on a flawed methodology, had not culminated in a final adjudicatory order. Rule 133(4) permitted remand for re-investigation, while the original reference under Rule 128 remained operative. The fresh exercise was undertaken pursuant to remand within the same proceedings rather than through a suo motu reopening.
Conclusion: The investigative authority was not functus officio, and no fresh Standing Committee reference was required, against the respondent.
Issue (iii): Whether the re-investigation was barred by limitation under Rule 129(6), including the validity of the extension.
Analysis: Rule 129(6) does not prescribe a consequence of abatement upon expiry of the reporting period. Its time limit is directory, not mandatory, particularly having regard to the beneficial and consumer-welfare character of the anti-profiteering framework. Complete documents were furnished only in August 2025, and the respondent could not rely on delay attributable to its own non-production of records.
Conclusion: The re-investigation was not barred by limitation, and the extension was valid, against the respondent.
Issue (iv): Whether the revised methodology and re-investigation denied the respondent natural justice.
Analysis: The revised methodology followed binding law and was not an arbitrary alteration of standards. Notice of re-investigation, an opportunity to supply documents, service of the report, and repeated opportunities to file objections were provided. The respondent elected to confine its defence to preliminary objections and did not contest the computation on merits.
Conclusion: There was no violation of the principles of natural justice, against the respondent.
Issue (v): Whether failure to pass on the additional input tax credit benefit contravened Section 171(1), and the consequential relief.
Analysis: Section 171(1) requires actual transmission of input tax credit benefit through commensurate reduction in price and is a beneficial provision requiring purposive construction. Once records establish an accrued benefit, the evidential burden lies on the supplier to show that it was passed on. The uncontroverted computation showed an increase in credit ratio from 2.37% to 8.42%, producing a per-square-foot benefit of Rs. 40.33 and an aggregate unpassed benefit of Rs. 31,20,542 for 66 eligible homebuyers. No evidence of price reduction, adjustment, credit note, refund, or other transmission of the benefit was produced. The contravention period ended before Section 171(3A) came into force.
Conclusion: The respondent contravened Section 171(1) by failing to pass on Rs. 31,20,542 to 66 eligible homebuyers; the amount is payable with interest at 18% per annum, and no penalty is imposable.
Final Conclusion: The remand and corrected project-wide methodology were sustained, and the additional input tax credit saving was required to be restored to the eligible homebuyers with interest; the pre-effective-date period excluded penal liability.
Issues: Whether the Revenue appeals warranted consideration despite the low tax effect and the claimed exception to the monetary-limit policy for proceedings under section 263.
Analysis: The claimed exception for revision proceedings does not require the tax effect to be disregarded in every case. The tax difference was approximately Rs. 7 lakhs, substantially below the Union policy threshold of Rs. 2 crores for Revenue litigation before the High Court, and the transactions did not indicate recurring or multiple disputes.
Outcome: The appeals were dismissed as below the monetary limit; the questions of law were left open.
Issues: (i) Whether an Assessing Officer may issue a notice under Section 143(2) of the Income-tax Act, 1961 in reassessment proceedings before disposing of the assessee's objections to reopening; (ii) Whether an Assessing Officer may issue a notice under Section 142(1) of the Income-tax Act, 1961 within four weeks after rejecting the assessee's objections to reopening.
Issue (i): Whether an Assessing Officer may issue a notice under Section 143(2) of the Income-tax Act, 1961 in reassessment proceedings before disposing of the assessee's objections to reopening.
Analysis: Under the pre-1 April 2021 reassessment framework, a return filed pursuant to a notice under Section 148 is processed as a return under Section 139. Scrutiny of that return commences with a notice under Section 143(2). Recorded reasons must be furnished on request, and objections to reopening must be determined by a speaking order before the assessment is proceeded with. Since such objections may establish that jurisdictional requirements for reopening are absent, initiating scrutiny before their disposal reverses the mandatory sequence. The notice under Section 143(2) was issued even before the recorded reasons were furnished.
Conclusion: A notice under Section 143(2) cannot be issued before the assessee's objections to reopening are disposed of by a speaking order. The impugned notice was invalid and was set aside, in favour of the assessee.
Issue (ii): Whether an Assessing Officer may issue a notice under Section 142(1) of the Income-tax Act, 1961 within four weeks after rejecting the assessee's objections to reopening.
Analysis: Where objections to reopening are rejected, the reassessment procedure requires a four-week interval from service of the order rejecting those objections before further assessment steps may be taken. The notice under Section 142(1) was issued before expiry of that mandatory interval and therefore breached the prescribed procedural safeguard.
Conclusion: A notice under Section 142(1) cannot be issued within the mandatory four-week interval following rejection of objections to reopening. The impugned notice and consequential action were invalid and were set aside, in favour of the assessee.
Final Conclusion: Reassessment scrutiny cannot validly commence until reopening objections have been decided by a speaking order and the mandatory interval for challenging that decision has expired.
Ratio Decidendi: Under the pre-2021 reassessment scheme, notices initiating scrutiny or calling for assessment details constitute proceeding with the assessment and may be issued only after a speaking disposal of reopening objections and completion of the required four-week interval.
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1. ISSUES PRESENTED AND CONSIDERED
1.1 Whether the resolution plan submitted for the corporate debtor satisfied the requirements of Sections 30(2), 30(4), 30(6) and 31 of the Insolvency and Bankruptcy Code, 2016 and corresponding CIRP Regulations, so as to warrant approval.
1.2 Whether the classification and treatment of Government lessors (YATC and Shilparamam/Society) as "Special Operational Creditors", with 100% payment of admitted claims, while other operational creditors received NIL, was permissible and non-discriminatory under the Code and Regulations.
1.3 Whether prior written consent/approval of the Government of Telangana and Shilparamam/Society was a condition precedent to approval of the resolution plan by the Adjudicating Authority.
1.4 Whether objections of the suspended promoter/director to the resolution plan, including reliance on a higher OTS proposal and alleged infirmities in feasibility, viability, distribution and process (including evaluation matrix, collusion and non-consideration of Section 12A) could be sustained against the commercial wisdom of the CoC.
1.5 Whether the hotel operator and 16% shareholder/promoter (EIH) could insist on continuation as operator and protection of alleged "independent" contractual rights under the management agreements, and whether such participation would offend Section 29A in the context of the resolution plan.
1.6 Whether the grievances of non-government operational creditors (including MSME contractors) regarding NIL payment, alleged discrimination vis-à-vis YATC/Society, and alleged violation of the "fair and equitable" requirement and MSMED Act, required rejection or modification of the resolution plan.
1.7 Whether the plan being subject to a "Condition Precedent" (written consent of YATC and Society) and containing various reliefs/waivers from governmental authorities rendered it non-compliant or incapable of approval, and to what extent such waivers could be granted by the Adjudicating Authority.
2. ISSUE-WISE DETAILED ANALYSIS
2.1 Compliance of the resolution plan with Section 30(2), 30(4), 30(6) and 31 and CIRP Regulations
Legal framework (as discussed)
2.1.1 The Tribunal examined Section 30(2)(a)-(f), Section 30(4), Section 30(6) and Section 31 of the Code (as amended on 06.08.2019), and Regulation 38 of the CIRP Regulations. It noted the binding interpretation of the Supreme Court in decisions on: (i) the limited scope of judicial review (commercial wisdom of CoC) and (ii) the minimum treatment of operational creditors in light of Section 30(2)(b) read with Section 53.
Interpretation and reasoning
2.1.2 The Tribunal recorded that:
(a) The plan provides for payment of CIRP costs in priority.
(b) The plan was approved by 68.26% of voting share of financial creditors, in compliance with Section 30(4).
(c) The resolution applicant's eligibility under Section 29A was verified and supported by affidavit under Section 30(1).
(d) Liquidation value was ascertained by two registered valuers under Regulation 27; total financial commitment under the plan (INR 584.02 crores) was higher than average liquidation value (INR 448-458 crores).
(e) The plan provides 37% of admitted claims for secured financial creditors, capital infusion of INR 180 crores for capex/working capital, and detailed provisions on management, implementation and supervision (including a Steering Committee and independent O&M contractor).
(f) For operational creditors (other than the Special Operational Creditor), the plan provides NIL payment, being the liquidation value under Section 53; the Tribunal noted that, following the statutory amendment to Section 30(2)(b), distribution as per the liquidation waterfall is statutorily deemed "fair and equitable".
(g) The plan deals with pending arbitration awards by directing distribution of any favourable award amounts to financial creditors and extinguishing adverse liabilities, and sets out a comprehensive implementation schedule.
2.1.3 The Tribunal relied upon:
(a) The RP's Form-H compliance certificate affirming conformity with the Code and Regulations, and eligibility of the resolution applicant under Section 29A.
(b) The CoC's recorded assessment of feasibility and viability, and its commercial decision as to distribution, in light of the Supreme Court rulings that the Adjudicating Authority cannot sit in appeal over commercial wisdom.
Conclusions
2.1.4 The Tribunal held that the resolution plan meets all requirements of Section 30(2)(a)-(f) and Regulations 37, 38, 38(1A), 39(4), does not violate Section 29A, exceeds liquidation value, and thus qualifies for approval under Section 31.
2.1.5 The resolution plan was accordingly approved and made binding on the corporate debtor, its employees, members, creditors, guarantors, and all stakeholders, including Central and State Governments and local authorities, subject to limited directions regarding governmental approvals and waivers (see Issue 2.7).
2.2 Preferential treatment of Government lessors (YATC and Shilparamam/Society) as "Special Operational Creditors"
Interpretation and reasoning
2.2.1 The plan classified YATC and Shilparamam/Society (owners/lessors of the project land) as "Special Operational Creditors" with admitted claims of approx. INR 41.99 crores to be paid in full, while other operational creditors receive NIL.
2.2.2 The Tribunal noted:
(a) The corporate debtor is a special purpose vehicle whose entire hotel project stands on land leased from YATC and Society; lease tenure is limited (33 years, up to 2041); arbitration is pending for alleged breaches.
(b) Continuation of the project as a going concern is dependent on subsisting lease and cooperation of these lessors; non-payment would likely result in termination, multiplicity of proceedings, and failure of the resolution plan leading to liquidation.
(c) NCLAT has held that landlord-tenant relations do not per se constitute an operational creditor-operational debtor relationship, distinguishing such creditors from typical trade/ services operational creditors.
2.2.3 The Tribunal reasoned that:
(a) Though the Code does not expressly recognise a category of "special operational creditor", creditors similarly situated may not exist in this fact situation; YATC/Society as land-owning lessors are materially distinct from trade/service suppliers.
(b) Applying the principle in Binani and Swiss Ribbons, discrimination is impermissible only among "similarly situated" creditors; differential treatment based on an intelligible differentia rationally connected with resolution objectives is permissible.
(c) If YATC/Society were treated strictly at par with other operational creditors and paid NIL, the project would "come to a standstill", defeating the object of resolution and compelling liquidation with no better outcome for stakeholders.
Conclusions
2.2.4 The Tribunal held that treating YATC and Society differently from other operational creditors is justified and consistent with the Code, given their unique position as lessors and critical stakeholders for continued operation.
2.2.5 Objections that such treatment was discriminatory or illegal were rejected.
2.3 Necessity of prior government/lessor consent as condition precedent to NCLT approval
Legal framework (as discussed)
2.3.1 The Tribunal considered Section 31(4) (one year window to obtain statutory/government approvals after plan approval) and the plan's own Condition Precedent requiring written consent of YATC and Society for change of control/restructuring within one year, failing which the performance bank guarantee would be returned and obligations cease.
Interpretation and reasoning
2.3.2 YATC and Society contended that:
(a) As owners of the land under BOT/lease arrangements, their prior written consent was mandatory before approval of the plan; and
(b) The plan was defective for not obtaining such consent upfront.
2.3.3 The Tribunal held that:
(a) The Code prescribes strict timelines; by the time a plan is voted upon by CoC and presented to NCLT, limited CIRP time remains, making it impractical to insist on full prior governmental approvals as a condition to NCLT approval.
(b) Section 31(4) expressly allows the resolution applicant one year from NCLT approval (or such period as specific law may prescribe) to obtain necessary approvals from government or local authorities.
(c) Since the plan provides for full payment of YATC/Society's claims, pending arbitrations may be resolved in terms of such payment, and the lease arrangements remain in force; YATC and Society can thereafter consider approvals when approached.
(d) The plan's own Condition Precedent mechanism protects the resolution applicant: if consent is not obtained despite reasonable efforts within one year, the performance guarantee is returned and obligations under the plan cease.
Conclusions
2.3.4 The Tribunal rejected the contention that prior written consent of YATC/Society was a legal precondition to NCLT's approval of the resolution plan.
2.3.5 The plan was approved subject to the Condition Precedent being fulfilled or waived by the resolution applicant within one year, in line with Section 31(4).
2.4 Objections of the suspended promoter/director, including OTS and alleged infirmities in feasibility, viability and process
Legal framework (as discussed)
2.4.1 The Tribunal relied on the Supreme Court's exposition in decisions clarifying: (a) commercial wisdom of CoC in approving a resolution plan is non-justiciable except on Section 30(2)/31 parameters, and (b) NCLT/NCLAT cannot re-evaluate merits, feasibility, viability, or re-distribute value.
Interpretation and reasoning
2.4.2 The promoter argued that:
(a) An OTS/settlement proposal of approx. INR 430 crores was superior to the plan (which provides lesser absolute payment to financial creditors), and CoC erred in not accepting it.
(b) The CoC failed properly to evaluate feasibility and viability; there were alleged collusive acts, violations of evaluation matrix, and inadequate due diligence by the RP.
2.4.3 The Tribunal observed that:
(a) Once CIRP is initiated, any settlement is to be routed through Section 12A, requiring 90% CoC voting; the Code does not permit the Adjudicating Authority to compel consideration or acceptance of an OTS outside Section 12A.
(b) The financial creditors' lending is contractual; they cannot be compelled to accept the promoter's settlement proposal in preference to a CoC-approved resolution plan.
(c) The RP had placed the OTS/Section 12A issue before CoC in meetings; CoC discussed the proposal with legal opinion, but did not exercise the option to withdraw under Section 12A.
(d) Allegations of collusion, misuse of evaluation matrix, and failure to consider arbitral claims, etc., all go to commercial assessment and strategy of CoC; absent violation of Section 30(2), NCLT cannot second-guess such decisions.
(e) The CoC's approval of the plan by 68.26% votes itself reflects its view on feasibility and viability; as held by the Supreme Court, such collective business decision is non-justiciable.
Conclusions
2.4.4 The Tribunal held that it could not direct CoC to prefer or consider the promoter's OTS proposal over the duly approved resolution plan.
2.4.5 All objections by the suspended promoter in IA No. 61/2019, including on OTS, feasibility/viability, alleged discrimination, procedural complaints and collusion, were rejected as unsustainable in view of the binding precedents on the primacy of CoC's commercial wisdom and the plan's conformity with Section 30(2).
2.5 Rights and eligibility of EIH as hotel operator and 16% shareholder/promoter
Legal framework (as discussed)
2.5.1 The Tribunal analysed Section 29A, particularly clauses (c) and (j)(ii), and the definition of "connected person", read with judicial exposition on promoters and control. It also considered ongoing arbitration between the corporate debtor and EIH under the management agreements.
Interpretation and reasoning
2.5.2 EIH contended, inter alia, that:
(a) It has a "dual capacity" - (i) 16% shareholder/promoter and (ii) independent hotel operator under management agreements.
(b) Its operator rights are third-party contractual rights unaffected by CIRP or any resolution plan.
(c) Section 29A does not apply to its role as future operator, and CoC/RP cannot insist on its exclusion or termination of its agreements through the resolution plan.
2.5.3 The Tribunal found:
(a) EIH is a promoter shareholder holding 16% equity in the corporate debtor; the project was bid jointly by EIH and the other promoter with a clear understanding that EIH would operate and manage the hotel.
(b) Being an artificial juridical person, EIH cannot be bifurcated into separate legal "personalities" (promoter vs operator); its operator role is structurally and causally linked to its promoter status and shareholding.
(c) Under the management agreement, EIH exercised substantial control over the hotel's bank accounts and operations; NCLAT had to intervene to restore control to the RP, reflecting EIH's effective control over the corporate debtor's operations.
(d) As a promoter of a corporate debtor whose account is NPA, EIH falls within Section 29A(c) and is ineligible to be "connected" with a resolution applicant during implementation of the plan.
(e) The management agreements have been terminated and rights are sub judice before an arbitral tribunal; an interim status quo award is in force. The Tribunal held it inappropriate and premature to adjudicate EIH's contractual rights while arbitration is pending.
2.5.4 On reliefs sought:
(a) EIH's prayers to declare that its operator rights are unaffected by CIRP or that no plan can displace it were rejected, as such directions would (i) conflict with Section 29A, and (ii) pre-empt the arbitral tribunal's final award.
(b) The plan's prayer to terminate EIH's agreements was also not adjudicated, given the pending arbitration; the Tribunal declined to decide termination within the Section 31 approval order.
(c) However, the Tribunal clarified that if, post-implementation, the resolution applicant, in its commercial discretion, wishes to engage EIH purely as a hotel operator (without management/control or participation in decision-making), nothing in the order would preclude such engagement, provided Section 29A is not offended.
Conclusions
2.5.5 EIH, as a promoter shareholder with 16% equity and effective operational control, is ineligible to be part of the resolution process as a connected person under Section 29A; NCLT cannot direct its inclusion as integral to the plan.
2.5.6 EIH's applications seeking protection of operator status and restriction on CoC/RP/RA from altering that status were disposed of with the above observations and without granting the substantive declarations sought.
2.6 Grievances of non-government operational creditors, including MSMEs, regarding NIL payment and alleged discrimination
Interpretation and reasoning
2.6.1 Operational creditors (including MSMEs like CEC, Infinity Interiors, and NCC) contended that:
(a) They were initially offered a small amount (e.g. INR 5 crores collectively), later reduced to NIL, while YATC/Society were paid in full.
(b) This was discriminatory and contrary to Binani, Swiss Ribbons and Essar line of cases; operational creditors should receive "roughly the same treatment" as financial creditors.
(c) MSME creditors invoked MSMED Act provisions and argued for full payment or priority.
2.6.2 The Tribunal, while acknowledging that the Code and Regulations require priority to operational creditors and non-discriminatory treatment among similarly situated creditors, reasoned that:
(a) After the statutory amendment to Section 30(2)(b), the minimum payment for operational creditors is what they would receive in liquidation under Section 53 or equivalent; distribution in accordance with that clause "shall be fair and equitable" by legislative declaration.
(b) For the non-government operational creditors, liquidation value under Section 53 is NIL; the plan therefore complies with Section 30(2)(b) in giving NIL.
(c) YATC/Society are not "similarly situated" to other operational creditors due to their role as landowners/lessors on whom the very substratum of the business depends.
(d) The CoC's decision to preserve the project by paying YATC/Society is a commercial decision aligned with the objective of resolution; insisting on equal pro-rata payment could jeopardize lease rights and force liquidation.
(e) Statutory rights of MSMEs under the MSMED Act cannot override the distribution scheme of the Code in a CIRP approval proceeding; any such claims must be pursued in accordance with the statutory framework, without re-writing a CoC-approved distribution that is Code-compliant.
Conclusions
2.6.3 The Tribunal held that allocation of NIL to non-government operational creditors (including MSMEs), while paying YATC/Society in full, is not illegal or discriminatory under the Code, given the statutory framework of Section 30(2)(b), Section 53, and the distinct position of lessor Government agencies.
2.6.4 Applications by NCC, CEC and Infinity Interiors seeking rejection or modification of the plan on these grounds were dismissed.
2.7 Conditionality of the plan, governmental waivers, and scope of NCLT in granting concessions
Interpretation and reasoning
2.7.1 The plan contained: (a) a Condition Precedent requiring written consent of YATC/Society within one year; and (b) various prayers for waivers/reliefs from Government of Telangana and tax authorities (including extension of lease tenure and statutory tax waivers).
2.7.2 During the hearing, the RP and resolution applicant stated that certain prayers - including waiver of taxes, blanket waivers from Government of Telangana, and extension of lease term to 2074 - were "not pressed".
2.7.3 The Tribunal:
(a) Accepted that these non-pressed prayers would not be granted or form part of the approval.
(b) Clarified, following precedent, that NCLT's approval of a plan does not constitute or confer any automatic waiver or exemption from statutory obligations; any concessions or waivers under other laws must be obtained from the competent authorities in accordance with those laws.
(c) Distinguished the case relied upon regarding municipal property (where creation of security over third-party municipal land without statutory approval was disallowed) on facts; here, lease agreements already exist, and the plan only contemplates seeking necessary approvals within the statutory timeframe, not overriding public law constraints.
(d) Emphasised that Section 31(4) governs the timeframe for obtaining any necessary approvals post-plan approval; NCLT cannot substitute itself for statutory or governmental decision-makers.
Conclusions
2.7.4 The Tribunal held that the Condition Precedent structure is permissible and consistent with Section 31(4); it does not render the plan non-compliant.
2.7.5 Prayers for universal waivers, tax immunities, or automatic extension of lease were not granted; any such concessions remain subject to independent approval by competent authorities.
2.7.6 The plan stands approved without modification, save that no deemed statutory waivers or extensions flow from the approval order.
TaxTMI