TaxTMI Updates e-Newsletter
Mar 05,2026

Violation of principles of natural justice for failure to afford personal hearing - remand for fresh consideration to afford personal hearing and consider reply.

Violation of principles of natural justice for failure to afford personal hearing - Impugned assessment orders passed without affording personal hearing and in violation of principles of natural justice - HELD THAT: - The show cause notices were uploaded on the GST portal, and while the petitioner submitted replies in person, those replies were not uploaded to the portal. The assessing officer proceeded to pass the impugned orders on the basis that no reply was filed through the portal, without providing any opportunity of personal hearing. The Court concluded that the orders were passed in breach of the principles of natural justice because no personal hearing was afforded before passing the assessment orders. Having noted that the petitioner has deposited 25% of the disputed tax as directed earlier, the Court found it appropriate to set aside the impugned orders and remit the matter for fresh consideration so that the petitioner may file his reply/objections and be afforded a personal hearing before fresh adjudication on merits. [Paras 7, 8]

Impugned orders set aside; matter remanded to the assessing officer to permit filing of reply/objections within two weeks and to issue a clear 14-day notice fixing date of personal hearing, and thereafter decide the matter on merits in accordance with law.

Final Conclusion: The impugned assessment orders for 2017-18 and 2018-19 were set aside for denial of personal hearing; the matter is remitted for fresh consideration after the petitioner files reply/objections and is afforded a personal hearing, following which the assessing officer shall pass appropriate orders on merits.

Seeking rectification under Section 161 of the GST enactments -Failure to adjudicate rectification application - direction to decide rectification application on merits within a specified time.

Rectification under Section 161 - consideration on merits - Respondent to consider and dispose of the petitioner's rectification application on merits within a stipulated period. - HELD THAT: - The petitioner challenged the impugned order passed in Form GST DRC-07 for the tax period 2021-2022 and had filed an application on 21.01.2026 seeking rectification under Section 161 of the GST enactments. The Court recorded that the application had not been addressed by the respondent. The respondent informed the Court that the application would be considered and disposed of on merits. In view of these facts and by consent, the Court directed the respondent to dispose of the rectification application on merits within 30 days. The Court did not adjudicate the underlying merits of the departmental demand, including the petitioner's contention concerning Input Tax Credit and the supplier's registration; those contentions remain for consideration by the respondent when deciding the rectification application. [Paras 6, 7, 8]

The respondent is directed to consider and dispose of the rectification application filed under Section 161 on merits within 30 days.

Final Conclusion: Writ petition disposed at the admission stage by directing the respondent to decide the petitioner's rectification application on merits within 30 days; the court did not decide the substantive tax dispute.

Validity of Section 15(3)(b) of the CGST Act - relation to trade discounts computed after formation of the underlying contract - interim protection subject to deposit of 10% of the disputed tax - invocation of Section 74.

Prima facie challenge to validity of Section 15(3)(b) of the CGST Act - interim protection subject to deposit of 10% of the disputed tax - HELD THAT:- The petition assails Section 15(3)(b) of the CGST Act, contending that trade discounts arising from pre-existing agreements, though computed later, cannot be treated as affecting the transaction value or amount receivable. Reliance was placed on prior Supreme Court authorities which, it was submitted, favour the assessee under the pre-existing CGST and VAT regimes. The bench noted the legislative intent to delete the provision on the recommendation of the GST Council via the Finance Bill, 2026.

Having considered these points, the Court recorded that a prima facie case exists for deeper scrutiny and accordingly issued notice to the Attorney General of India. In view of the prima facie findings, the Court found it appropriate to grant interim protection by restraining further recoveries from the petitioner during the pendency of the writ petition, subject to deposit of 10% of the disputed tax (including any amount already deposited or recovered). The other objections raised (including challenge to invocation of Section 74) were recorded but not finally adjudicated in the order. [Paras 2, 3, 6, 9]

Notice issued; interim protection granted restraining further recoveries subject to deposit of 10% of the disputed tax; matter listed for further hearing.

Final Conclusion: The High Court recorded a prima facie challenge to Section 15(3)(b) of the CGST Act, issued notice, and granted interim protection by restraining further recoveries from the petitioner during pendency of the writ petition on condition of deposit of 10% of the disputed tax.

Denial of refund applications - condonation of delay -Exclusion of limitation period from 15.03.2020 to 28.02.2022 -

Exclusion of limitation period from 15.03.2020 to 28.02.2022 - Impugned rejection of the petitioners' refund applications on the sole ground of delay, without applying the Supreme Court's exclusion of the limitation period, is unsustainable and requires fresh consideration. - HELD THAT:- The petitioners filed refund applications in respect of Financial Year 2018-2019 and 2019-2020 which were rejected by respondent no.3 on the ground that the limitation period under Section 54(1) had expired. The Supreme Court's order excluding the period from 15.03.2020 to 28.02.2022 for purposes of limitation was relied upon by the petitioners and the exclusion was not disputed by the Standing Counsel. In these circumstances the High Court held that the refund applications could not be rejected merely on the ground of delay while ignoring the aforequoted Supreme Court order. The impugned order was therefore quashed and the matter remitted to respondent no.3 for fresh decision in accordance with law after affording a reasonable opportunity of hearing and by a reasoned and speaking order. [Paras 6, 8, 10, 11]

Impugned order quashed; refund applications to be decided afresh in accordance with law, by reasoned and speaking order after hearing the petitioners.

Final Conclusion: The writ petition is disposed of by quashing the impugned deficiency memos; the refund applications shall be reconsidered by the respondent in accordance with the Supreme Court's exclusion of limitation and decided expeditiously after affording opportunity of hearing.

Failure to afford personal hearing - ineffective service by portal and duty to explore alternative modes of service.

Failure to afford personal hearing - ineffective service by portal and duty to explore alternative modes of service -HELD THAT:- The Court found that an earlier assessment order for the same assessment year existed and an appeal was pending, yet a subsequent impugned assessment was passed without providing any personal hearing to the petitioner. Although service by uploading on the portal is a valid mode, the Officer who sent repeated portal reminders did not apply mind to explore other statutory modes of service when there was no response from the taxpayer. The Court held that where notices sent by a particular mode elicit no response, the issuing Officer must consider other modes of service prescribed under the Act (preferably RPAD) to effectuate service; mere formal compliance by portal upload without meaningful attempts at effective service results in an ex parte order that causes multiplicity of litigation and defeats the object of the GST regime. For this procedural defect, the Court concluded that the impugned order could not stand without fresh consideration after effective service and opportunity of personal hearing. [Paras 7, 8, 9]

Impugned assessment order is set aside and the matter is remanded to the respondent for fresh consideration; remand is conditional upon the petitioner depositing 10% of the disputed tax amount within the prescribed period, after which the petitioner shall file reply/objection and the respondent shall issue a clear 14 day notice fixing date for personal hearing and decide the matter on merits in accordance with law.

Final Conclusion: The writ petition is disposed by setting aside the impugned assessment order for lack of effective opportunity of personal hearing; the matter is remitted for fresh consideration subject to the petitioner depositing 10% of the disputed tax amount and the respondent affording a personal hearing before passing orders on merits.

Validity of order passed without affording an opportunity of personal hearing -Service by uploading notices on GST portal - duty to explore alternative modes of service under Section 169 - requirement of personal hearing before confirming show cause proposals.

Service by uploading notices on GST portal - duty to explore alternative modes of service under Section 169 - Validity and effectiveness of service effected solely by uploading notices on the GST portal when there is no response from the taxpayer. - HELD THAT:- The Court acknowledged that uploading a notice on the GST portal constitutes a recognised mode of service. However, where repeated reminders elicit no response from the taxpayer, the Officer must apply his or her mind and explore other modes of service prescribed in Section 169 of the GST Act so as to effectuate effective service rather than merely fulfil a formal requirement. Reliance on a single mode of communication without attempting alternative statutory modes (for example, registered post with acknowledgment) risks rendering service ineffective and may result in ex parte orders that invite further litigation. The Court emphasised that officers should take reasonable steps to ensure notices are effectively delivered before proceeding to confirm proposals in a show cause notice. [Paras 7, 8, 9]

Uploading on the GST portal is a valid mode of service but, where there is no response, the Officer must explore other modes under Section 169 to ensure effective service.

Requirement of personal hearing before confirming show cause proposals - Whether the assessment order confirming proposals in the show cause notice can stand where no personal hearing was afforded to the petitioner. - HELD THAT: - The Court found that the impugned assessment order had been passed without affording the petitioner any opportunity of personal hearing and while notices had been communicated only by uploading on the portal. Given the absence of an effective opportunity to be heard, the Court concluded that the assessment could not stand. In view of the petitioner's expressed willingness to deposit 25% of the disputed tax, the Court exercised remedial discretion to set aside the impugned orders and remand the matter to the assessing authority for fresh consideration. The remedial directions condition remand upon payment of 25% within four weeks, filing of reply/objection within three weeks thereafter, and issuance of a clear 14 day notice fixing a date for personal hearing before passing a fresh order on merits expeditiously. [Paras 7, 10, 11]

Impugned orders set aside and matter remanded for fresh consideration; remand is conditional on payment of 25% of the disputed tax and subject to filing of reply and grant of a personal hearing as directed.

Final Conclusion: The Court set aside the impugned assessment and summary orders for failure to afford an effective opportunity of hearing and for inadequate service steps; the matter is remanded to the assessing authority on condition of deposit of 25% of the disputed tax, with directions to accept the petitioner's reply, issue a 14 day notice for personal hearing and decide the matter on merits expeditiously.

Validity of orders made against the non-existing company - notice or order is issued in the name of a non-existing transferor following merger - HC [2025 (4) TMI 90 - BOMBAY HIGH COURT] held as notice and the assessment order is passed in the name of the transferor company and not the transferee company same are bad.

HELD THAT:- Special Leave Petition dismissed - not inclined to interfere with the impugned judgment and order passed by the High Court - accompanying interlocutory application(s) disposed of.

Grant of exemption u/s 80G - automatic Section 80G benefit on registration u/s 12AA - Revenue entitled to initiate action if conditions for Section 80G are violated subject to due process

HELD THAT: - The Court applied the principle laid down in Commissioner of Income-Tax (Exemptions) v. Sant Girdhar Anand Parmhans Sant Ashram [2023 (3) TMI 566 - SC ORDER] and held that registration under Section 12AA does not by itself confer the benefit under Section 80G. The requirements of Section 80G must be satisfied independently for the benefit to be admissible.

Applying that reasoning, it is held that legal test for Section 80G remains independent of registration u/s 12AA, while recognising that, in the present case, the respondent is presently enjoying exemption under the orders of the Tribunal and High Court. [Paras 6]

Final Conclusion: The appeal is disposed of on the basis that registration under Section 12AA does not automatically confer Section 80G benefits; the respondent presently enjoys the exemption under earlier orders, and the Revenue may, following due process, take action if it establishes any violation of the conditions for Section 80G.

Registration of educational charitable institution under Section 12AA - power to withdraw registration for breach of conditions after due process - judicial restraint from reopening long-standing registration without fresh proceedings

Whether the Court should reopen or interfere with the grant of registration to the respondent-society which has been in existence for over a decade? - HELD THAT: - The Tribunal had allowed the respondent's appeal against the rejection by the Commissioner (Exemption) and granted registration, a decision thereafter upheld by the High Court. The registration has been in force since the impugned order of grant and is presently valid upto the Assessment Year 2026-27.

The Court recorded that where a registrant under Section 12AA is found to have violated conditions of registration, the appropriate remedy is withdrawal of registration following due process. Given the long-standing nature of the registration and the availability of statutory remedies to the Revenue to investigate and initiate withdrawal proceedings if violations are found, the Court declined to re-examine the merits of the original grant in the present appeal and exercised restraint from interfering.

The appeal was disposed of without adjudicating the merits of the grant of registration; the Revenue is left free to initiate appropriate proceedings to withdraw registration if violations of the terms for grant are discovered following due process.

Final Conclusion: The Supreme Court declined to disturb the existing registration of the respondent-society, refraining from deciding the merits of the grant, and left the Revenue free to pursue withdrawal of registration by following the prescribed statutory procedure if violations are established.

Validity of reopening of assessment u/s 147 - New regime law -Limitation for issuance of reassessment notice u/s 149 - application of Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 to compute surviving limitation - exclusion of period consequent to deemed show-cause notices under Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT]

Whether the order under Section 148A(d) dated 25.07.2022 and the consequential notice under Section 148 dated 26.07.2022 for Assessment Year 2013-14 were time-barred? - HELD THAT: - The court applied the post 1 April 2021 statutory scheme and the principles laid down in the Supreme Court judgments (Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] and Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)]) to compute the surviving limitation. The notice issued on 31.05.2021 fell within the period extended by Section 3(1) of TOLA so that thirty days of limitation remained available to the Revenue as at that date. The period from 01.06.2021 until 04.05.2022 (date of Ashish Agarwal) is excluded under the third proviso to Section 149(1); the interval from 04.05.2022 to 24.05.2022 (date of issuance of the Section 148A(b) communication) is also excluded; and the two week period allowed to the assessee to respond to the Section 148A(b) show cause notice is excluded.

Because the petitioner did not furnish any reply, limitation recommenced on 08.06.2022, after which the AO had thirty days to pass an order u/s 148A(d) and issue a notice u/s148. The order under Section 148A(d) was in fact passed on 25.07.2022 and the notice issued on 26.07.2022, both falling beyond the surviving period available under Section 149 read with TOLA and the exclusions recognized by the Supreme Court; therefore the impugned proceedings are barred by limitation and invalid. [Paras 23, 24, 25, 26, 27]

The order dated 25.07.2022 under Section 148A(d) and the consequential notice dated 26.07.2022 under Section 148 are time-barred and are quashed.

Final Conclusion: The writ petition is allowed; the impugned order under Section 148A(d) and the consequential notice u/s 148 for Assessment Year 2013-14 are set aside as barred by limitation.

Cancellation of sale deeds and reversal of consideration - Computation of taxable income - During assessment proceedings under Section 148A no documents were not produced

HELD THAT: - The Court found, and the respondent admitted by additional affidavit, that documents showing cancellation of the registered sale deeds and reversal of the consideration were produced before this Court for the first time and were not before the Assessing Officer during the Section 148A proceedings.

Relying on the reasoning in M/s Lok Housing & Constructions Limited [2015 (4) TMI 840 - BOMBAY HIGH COURT] - a decision whose SLP [2025 (7) TMI 533 - SC ORDER] was dismissed by the Supreme Court - the Court observed that where transactions have been cancelled and consideration reversed such cancelled transactions do not, in reality, give rise to taxable income. Because the Assessing Officer failed to consider the fact of cancellation and reversal when passing the impugned orders and notices, the orders could not be sustained on the material now shown to exist but not placed before the AO.

Impugned orders quashed and set aside for failure to consider cancellation of sale deeds and reversal of consideration; matter disposed in light of the cited precedent.

Final Conclusion: The Court made the rule absolute and quashed and set aside the impugned assessment orders because they were passed without consideration of the cancelled sale deeds and reversal of payment - cancelled transactions were held not to give rise to taxable income.

Penalty u/s 271DA - cash payment of Rs.2,00,000/- or more -applicant submits that he has filed the instant application under Section 528 BNSS [The Bharatiya Nagarik Suraksha Sanhita, 2023] - applicant submits that where more than Rs.2,00,000/- is paid in cash in a registered deed, the Sub-Registrar shall inform the Income-tax Department and before lodging the F.I.R., the aforesaid process should be completed and, in the present case, an amount of more than Rs.20,00,000/- is alleged to have been given in cash to the applicant.

A.G.A. submits that he may be permitted to obtain instructions from the concerned police station.

HELD THAT:- Issue notice to opposite party No.2 for filing counter affidavit.

List this case as fresh on 10.03.2026.

Assessment u/s 153C - reliance on material seized from third party or information available from the government website/public domain - mandation of recording the satisfaction note on the incriminating material on which he has placed reliance

HELD THAT: - The court found that the jurisdictional Assessing Officer premised the invocation of Section 153C upon data obtained from the government website Any ROR and other public-domain sources which were not part of the incriminating material seized from the searched person. Because the chit and seized materials sent by the searched person did not contain the petitioners' names or the public-domain records relied upon, the impugned initiation under Section 153C was held to be founded on material that had no nexus to the seized documents. The court relied on identical reasoning in earlier decisions of this Court to conclude that reliance on external/public-domain material not forming part of the seized records is impermissible for assuming jurisdiction under Section 153C. [Paras 5]

Invocation of Section 153C based on material not forming part of seized records or drawn from public domain is invalid.

Recording of satisfaction note by AO of searched person as jurisdictional precondition - The court reiterated that when incriminating material 'relating to' a third person is found during a search and transmitted, it is mandatory for the Assessing Officer of the searched person to record and communicate a satisfaction note before the jurisdictional Assessing Officer proceeds under Section 153C. The legislative scheme treats that satisfaction as a jurisdictional requirement, and the jurisdictional Assessing Officer cannot substitute it by independently relying solely on the transmitted incriminating material.

This Court has already clarified in the decisions rendered in case of Paras Chandreshbhai Koticha [2026 (1) TMI 417 - GUJARAT HIGH COURT] that the jurisdictional Assessing Officer of the “other/searched person” (Section 153C) can invoke the provisions of Sections 147/148 of the Act only on the basis of material available to him from other sources, but the “other person” cannot be subjected to assessment/ reassessment under Section 153C of the Act on the material received by the Assessing Officer sans a satisfaction note, and such material having been supplied to the assessee.

Thus, the attempt made by the revenue for the first time before this Court through an Affidavit by placing reliance on the incriminating material of pocket diary, bereft of satisfaction note, is de hors the scheme of section 153C of the Act. [Paras 6]

Proceedings under Section 153C without a satisfaction note recorded by the Assessing Officer of the searched person are without jurisdiction and unsustainable.

Final Conclusion: The notices issued under Section 153C of the Income tax Act dated 12.03.2023 were quashed because they were founded either on public domain/external material not forming part of the seized records or were issued without the mandatory satisfaction note recorded by the Assessing Officer of the searched person.

Validity of notice issued u/s 153C as barred by limitation -Computation of ten assessment years under Explanation 1 to Section 153A - “relevant assessment years”, subject to fulfillment of certain conditions - intention of the legislature was to exclude the word “end” from the statute - two methods cannot be adopted for computation of the six-year block period as mentioned in Sections 153A and 153C of the Act and for calculation of the ten-year block period

HELD THAT: - The Court examined Section 153A(1)(b) and Explanation 1 to Section 153A and followed the approach adopted by the Delhi Dinesh Jindal [2024 (6) TMI 75 - DELHI HIGH COURT] Ojjus Medicare (P) Ltd. [2024 (4) TMI 268 - DELHI HIGH COURT] and Madras High Court in A.R. SAFIULLAH [2021 (6) TMI 867 - MADRAS HIGH COURT] that two distinct modes of computation apply - the six-year block is computed with reference to the assessment year relevant to the previous year in which the search is conducted, whereas the ten-year outer limit is to be reckoned backwards from the end of that assessment year.

Applying that method to the search dated 04.03.2022 (falling in the financial year 2021-22), AY 2022-23 is the first year of the ten-year block and the tenth year is AY 2013-14. Consequently AY 2012-13 falls outside the ten-year period available under Explanation 1 to Section 153A and the statutory limitation for issuing a notice under Section 153C has been exceeded. The Court rejected the revenue's alternative contention that the proviso to Section 149 permits issuing a notice in such circumstances and did not accept any calculation that would include AY 2012-13 within the ten-year window. [Paras 7, 8, 9]

Final Conclusion: The writ petition is allowed - the impugned notice under Section 153C seeking reopening for Assessment Year 2012-13 is quashed as barred by limitation.

Addition made u/s 56(2)(x)(b) - Reference to Valuation Officer for valuation of immovable property- provision for reference to the DVO in the scheme of sec.56(2)(x) - difference between the purchase consideration and the market value determined by the Stamp Valuation Authority u/s 56(2)(x)(b) - Scope of third proviso to section 56(2)(x)(b) read with section 50C(2) - submissions of the assessee regarding the distress sale or the old condition of the property

HELD THAT: - The Tribunal found that the stamp valuation adopted by the Stamp Valuation Authority exceeded the consideration and that the value so adopted was not disputed in any appeal, revision or reference, thereby satisfying the conditions set out in the statute for a referral to the Valuation Officer. Both the conditions of section 50C(2) of the Act are fulfilled in the present case.

Having regard to the third proviso to the provision treating excess of stamp duty value over consideration as income, the Assessing Officer was required to refer the valuation to the Valuation Officer when the statutory pre-conditions in the related provision were fulfilled. The Assessing Officer did not make such a reference and the learned CIT(A) also did not direct a reference, notwithstanding the assessee's submissions and the statutory mechanism permitting a reference.

Both the AO and the Commissioner (Appeals) erred in law in not invoking the Valuation Officer mechanism and that the matter should be restored to the file of the jurisdictional Assessing Officer for fresh adjudication after obtaining a report from the Valuation Officer and after affording the assessee a reasonable opportunity of hearing. [Paras 7, 9, 10]

Final Conclusion: The Tribunal allowed the appeal for statistical purposes by setting aside the impugned order and remitting the matter to the Assessing Officer for fresh adjudication after obtaining a valuation report from the Valuation Officer and giving the assessee an opportunity to be heard.

Penalty u/s 271(1)(c) - estimation of addition on bogus purchases - AO made an addition, in quantum proceedings, on account of bogus purchases by bringing to tax the estimated profit element embedded in such purchases, being 12.5% of the total non-genuine purchases by the assessee in the year under consideration, which was further reduced by the Tribunal to 8%.

HELD THAT:- We find that in CIT v/s Krishi Tyre Retreading and Rubber Industries [2014 (2) TMI 21 - RAJASTHAN HIGH COURT] held that where an addition is made purely on an estimate basis, no penalty under section 271(1)(c) of the Act is leviable. Similar view has been expressed in CIT v/s Sangrur Vanaspati Mills Ltd. [2008 (2) TMI 285 - PUNJAB AND HARYANA HIGH COURT] also held that when the addition has been made on the basis of estimate and not on any concrete evidence of concealment, penalty under section 271(1)(c) of the Act is not leviable

Applying those precedents to the facts where the entire addition arose from estimation, the Tribunal held that the statutory threshold for levying penalty-proof of concealment or furnishing of inaccurate particulars-was not satisfied by an estimated disallowance. Consequently, the penalty could not be sustained and the AO was directed to delete the penalty. [Paras 6, 8]

Final Conclusion: The appeal is allowed; the penalty levied under section 271(1)(c) is deleted for AY 2009-10 as the impugned addition was founded on estimate and therefore did not justify penalty.

Foreign tax credit under DTAA Article 24 of the India-UK DTAA - AR submitted that since the assessee has already paid taxes in UK on the salary (including bonus) with respect to services rendered in UK, the credit of such taxes be granted to the assessee as per the provisions of Article 24 of the India-UK DTAA - HELD THAT: - The assessee placed on record his UK tax return for tax year 2016-17 and the UK assignment letter issued by Vodafone India Limited evidencing that the salary attributable to services rendered in the UK had been offered to tax in the UK.

Tribunal, without adjudicating the merits of residence or treaty entitlement, found that the claim for credit of taxes paid in the UK required verification and therefore restored the matter to the file of the AO for examination of the assessee's claim in accordance with Article 24 of the India UK DTAA. The assessee was directed to furnish any information as may be sought by the AO for such examination. The Tribunal expressly kept the questions on residence and applicability of Article 16(1) or Article 16(2) open in view of the assessee's submissions, and treated the remand as limited to examination of the foreign tax credit claim. [Paras 8]

Final Conclusion: The Tribunal restored the claim for foreign tax credit to the Assessing Officer for verification under Article 24 of the India UK DTAA (relating to F.Y: 2016-17) - Ground allowed for statistical purposes.

Estimation of profit element in non-genuine purchases - CIT(A) restricting the addition made by the Assessing Officer in respect of bogus purchases from 25% to 8% - primary onus of proving the genuineness of the source and the transaction - Revenue’s primary contention is that the legal landscape has shifted significantly following the recent decision in Pr. CIT v. Kanak Impex (India) Ltd [2025 (3) TMI 230 - BOMBAY HIGH COURT]

HELD THAT: - The Tribunal found that the CIT(A) had followed an earlier ITAT direction in the assessee's own case for A.Y. 2011-12 which restricted disallowance to the profit element (estimated at 8%), but did not independently examine whether the facts of A.Y. 2009-10 matched that earlier year or whether later judicial developments (notably the Bombay High Court decision in Pr. CIT v. Kanak Impex (India) Ltd and the line of authority cited by the Revenue) changed the applicable legal position.

Tribunal observed that subsequent authority critiques the routine practice of estimating a fixed profit rate when the assessee fails to discharge the onus of proving genuineness. Because the CIT(A)'s restriction to 8% was made solely by following the earlier ITAT direction without assessing factual identity or the impact of later binding precedents, the appellate order lacked independent reasoning on the determinative question. For these reasons the impugned order was set aside and the matter remitted to the CIT(A) to re-adjudicate after affording the assessee an opportunity of hearing, to examine the issue afresh in light of applicable binding precedents and to record a reasoned finding. [Paras 4, 5, 6]

Final Conclusion: The Revenue's appeal is allowed for statistical purposes; the CIT(A)'s order restricting the addition to 8% is set aside and the issue is remitted to the CIT(A) for fresh, reasoned consideration in light of binding precedents after affording the assessee an opportunity of hearing.

Estimation of income by applying percentage on sales turnover - allowability of expenses where income from circular trading/transactions - treatment of intra corporate loans under section 68 as unexplained cash credit

Estimation of income by applying percentage on sales turnover - Whether additional income could be estimated on sales turnover (AO at 7%; CIT(A) at 0.5%) and whether any addition was sustainable? - HELD THAT: - The Tribunal analysed the nature of the transactions (consignor consignee and heavy bulky steel trading), the material seized, bank/payment records and appellate findings. It recorded that purchases and sales were reflected in the books and payments flowed through banking channels via LC and bill discounting; no evidence of introduction of cash to generate accommodation entries was found and the AO did not explain basis for selecting the 7% rate. While the CIT(A) accepted some circularity and sought to quantify 'additional income' at 0.5% relying on orders in related matters, the coordinate bench precedents (including Subhkaran & Sons [2026 (1) TMI 607 - ITAT MUMBAI] and Duli Trade & Commodities [2025 (8) TMI 1508 - ITAT MUMBAI]) dislodged the factual and evidentiary basis for any estimation: absence of seized documents, absence of statements indicating cash receipts, failure to identify payer of alleged unaccounted amounts, and industry profit margins showing thin accepted net margins. Applying those findings to the facts of the present case, the Tribunal held that estimation even at 0.5% was unsustainable and deleted the addition. [Paras 15, 16, 17, 18, 19]

Deletion of addition computed by applying a percentage on sales turnover; estimation at 0.5% or 7% is unsustainable and addition is deleted.

Disallowance of indirect expenses and depreciation - depreciation and indirect/financial expenses incurred in relation to the recorded circular trading disallowed as transactions were alleged to be bogus - HELD THAT: - There is no reason to suspect the genuineness of the purchase and sales transactions of the assessee and deleted the addition made by the AO by treating the transactions as bogus. Moreover, AO has not raised any doubt regarding the actual incurring of the expenses.

Tribunal agreed that once regular income is disclosed in books and expenditures are genuinely incurred (not shown to be penal or unlawful), the related expenses, including finance costs, and depreciation are allowable. There was no material to show that payments were not made or that expenses were fictitious. [Paras 20, 21]

Disallowance of depreciation and indirect/financial expenses is not justified; the CIT(A)'s deletion of these disallowances is upheld.

Treatment of intra corporate loans under section 68 as unexplained cash credit - FAA deleted addition - HELD THAT: - The AO treated certain unsecured loans as unexplained cash credits relying on third party statements. The CIT(A) examined ledger entries, repayments, bank evidence and found the identity and creditworthiness of creditors established, major part of loans repaid during the year or subsequently, repayment included recovery of earlier advances made by the assessee to those parties, and transactions routed through banking channels with no finding of cash being introduced. The Tribunal found the AO failed to consider advances given by the assessee to the lenders and the bank records showing sufficiency of funds before loans were advanced. In view of these facts and the coordinate bench precedents on identical group transactions, the CIT(A)'s deletion of the section 68 additions was held to be correct. [Paras 23, 24, 25, 26]

Addition under section 68 is not sustainable; deletion of the unexplained cash credit is upheld.

Final Conclusion: Tribunal held that the AO's estimation of undisclosed income on turnover (whether at 7% or 0.5%) could not be sustained, accepted the allowability of depreciation and indirect/financial expenses where income was disclosed in audited books and payments made through banking channels, and upheld the deletion of additions under section 68; accordingly the revenue appeals were dismissed and the assessee's appeals were partly allowed.

Reopening of assessment - unexplained credit u/s 68 - unexplained cash expenditure u/s 69C - As alleged assessee has transacted in shares alleged to be a penny stock listed on BSE scrip code basis which the AO reopened the assessee’s case pursuant to the information received from ADIT (Inv.), Unit-8(2), Mumbai that the assessee was one of the beneficiaries of availing bogus LTCG by transacting in the said penny scrip.

HELD THAT:- The reassessment was initiated on the basis of information received from the investigation wing that the assessee had transacted in an alleged penny scrip resulting in large tax-exempt long-term capital gains. The Tribunal accepted the AO's reliance on such information and the circumstantial evidence of an unexplained, rapid and disproportionate increase in share price.

By considering the proposition laid down in the case of Sanjay Bimalchand Jain [2017 (5) TMI 983 - BOMBAY HIGH COURT] also Swati Bajaj [2022 (6) TMI 670 - CALCUTTA HIGH COURT] we deem it fit to hold that the assessee has failed to establish as to the huge increase in the share price resulting in unrealistic LTCG, which a regular scrip pertaining to a functional company would yield. On the basis of the circumstantial evidences and also in the absence of any rebuttal by the assessee inspite of several opportunities

The assessee did not appear before the Tribunal and neither contested the factual basis nor produced documentary evidence to rebut the Revenue's case. Applying the material on record and precedent relied upon by the Revenue, the Tribunal found no infirmity in the reopening and upheld the reassessment process. [Paras 7, 8]

Final Conclusion: On the materials and in the absence of any rebuttal or appearance by the assessee, the Tribunal found the reassessment valid, upheld the additions treating the sale proceeds as unexplained and the related unexplained expenditure, and dismissed the appeal.

Final assessment order passed pursuant to the direction of the DRP as barred by limitation - start of limitation prescribed in section 153(3) - HELD THAT:- The Tribunal in the first round had passed the order on 28.07.2022. Hence, the limitation prescribed in section 153(3) of the Act would start from that date. As per 1st proviso to section 153(3) of the Act, the ld AO should have passed the final assessment order itself within 12 months from the end of the financial year in which the order of the Tribunal was passed. Hence, the last date for passing final assessment order for the ld AO would expire on 31.03.2024, which means the directions of the ld DRP should have been issued prior to that date.

In the instant case, the directions of DRP itself were issued only on 25.03.2025, which is beyond the time limit prescribed under 1st proviso to Section 153(3) - final assessment order becomes barred by limitation. AR rightly placed reliance on the decision of TNS India Pvt. Ltd Vs. Union of India [2023 (10) TMI 785 - TELANGANA HIGH COURT]

Final Conclusion: The assessee's appeal is allowed; the impugned assessment orders for AY 2017-18 are quashed as barred by limitation.

Assessable value of imported mixed used/unused tool room parts - contemporaneous imports - Reliance on Chartered Engineer certificate as sole basis for rejection of transaction value - Confiscation and penalty for mis-declaration - Whether the enhancement of value of imported goods determining the differential duty payable by the appellant, on the basis of Chartered Engineer’s certificate and contemporaneous imports of identical goods, is sustainable or not, in terms of the legal provisions of Section 14 of the Customs Act, 1962 and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 [‘CVR’].

Valuation of second-hand/used imported goods under Customs Valuation Rules - Reliance on Chartered Engineer certificate as sole basis for rejection of transaction value - HELD THAT: - The Tribunal held that valuation of second hand or used goods must follow the sequential methodology under Rule 3 and, where applicable, Rules 4 to 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 read with Section 14 of the Customs Act. Difficulties in applying Rules 3-8 for used goods may justify resort to the residual method under Rule 9, but the statutory sequence and requirements cannot be bypassed. The authorities below had purported to re determine value purportedly on the basis of contemporaneous imports and the Chartered Engineer's certificate, yet no contemporaneous import data was produced and the re determination rested solely on the Chartered Engineer's certificate. The Tribunal observed that the Chartered Engineer's certificate itself recorded that the goods were used/unused tool room parts and that the description in the declaration matched the certificate. Given that the appellant had submitted to first check examination and the CE certificate did not contradict the declared description, the procedure laid down in the CVR for rejection of transaction value and subsequent valuation was not followed; reliance on the CE certificate as the sole basis for rejecting transaction value and re determining assessable value was therefore unsustainable. [Paras 5, 6, 7, 8]

The re determination of assessable value solely on the basis of the Chartered Engineer's certificate, without applying the sequential methods of the CVR and without contemporaneous import data, was unlawful and could not be sustained.

Confiscation and penalty for mis-declaration - HELD THAT: - The Tribunal found that the record showed the goods comprised a mixture of used and unused parts and that the importer had requested first check examination. The Chartered Engineer's certificate confirmed the goods as used/unused tool room parts and was in conformity with the declaration. The authorities below concluded intentional mis declaration and imposed confiscation, redemption fine and penalty; however, the Tribunal held that such conclusions were contrary to the factual matrix because there was no material disproving the declared description and no proper application of valuation rules to justify rejection of transaction value. The Tribunal noted precedent of a co ordinate Bench in the case of RKG International Private Limited [2018 (5) TMI 269 - CESTAT MUMBAI], where enhancement based solely on a CE certificate without contemporaneous import data was set aside, and applied like reasoning here. [Paras 6, 8, 9]

Confiscation, redemption fine and penalty imposed for alleged mis declaration were not legally sustainable on the record and were set aside.

Final Conclusion: The Tribunal set aside the impugned appellate order upholding reassessment, confiscation and penalties, concluding that valuation and mis declaration findings were unsustainable where transaction value was not properly rejected following the CVR sequence and the Chartered Engineer's certificate did not contradict the declared description; the appeal was allowed.

Re-determination of assessable value by market survey under Rule 7 - lack of comparable data- contemporaneous import data from the National Import Database - Classification of goods - 'walking stick with torch' - confiscation and penalties unsustainable where declaration not false and compliance possible before clearance

Invalid valuation under Rule 7 of CVR for lack of comparable data - Re-determination of assessable value by market survey under Rule 7 of the CVR was unsustainable. - HELD THAT: - The Tribunal found that the authorities rejected the transaction value and purportedly applied Rule 7 of the Customs Valuation Rules by adopting median/average prices from three market invoices. However, the order below did not demonstrate that the goods used for comparison were identical or similar in origin, manufacturer, brand, quality or at the same commercial level, nor did it show reliance on contemporaneous import data as required by the sequential valuation methodology (Rules 3-9). The investigation did not show how goods unavailable in the National Import Data Base would legitimately establish domestic resale prices at the required commercial level and timing. For these reasons the valuation under Rule 7, founded solely on the market survey as recorded, was held contrary to the statutory scheme and set aside. [Paras 7]

Re-determined assessable value based on the impugned market survey under Rule 7 CVR is set aside as not in conformity with the valuation rules.

Classification of walking sticks with torch under CTI 6602 0000 - HELD THAT: - Applying the General Rules for Interpretation, the Tribunal observed that Chapter 66 expressly covers walking-sticks of all kinds except specific exclusions, and Chapter 94 principally covers luminaires and lighting fittings whose primary function is lighting. Where the main function of the imported article is as an assistive walking-stick, an ancillary torch does not alter its essential character to make it an electric luminaire under Chapter 94. On that basis the Tribunal held the appellants' classification under CTI 6602 0000 to be appropriate and rejected the department's classification to CTI 9405 4900. [Paras 8]

Walking sticks with torch are classifiable under CTI 6602 0000.

Confiscation and penalties unsustainable where declaration not false and compliance possible before clearance - Confiscation, redemption fine and penalties imposed on the appellant could not be sustained. - HELD THAT: - The Tribunal found that the variations identified by SIIB (e.g., kitchen knife with chopping board, two types of laser pens, multiple Halloween items) did not amount to a material mis-declaration altering the nature of the goods; the descriptions were consistent with what was found on examination. Further, the requirement under DGFT Notification No.44/Legal Metrology for labelling could be complied with prior to clearance since the consignment had not been cleared from customs custody. Because the valuation was set aside and the classification of walking sticks was found to be correct, the consequential findings of confiscation under Sections 111(d)/(m), and the imposition of redemption fine and penalties were held to be contrary to the factual matrix and law and therefore unsustainable. [Paras 8, 9]

Confiscation, redemption fine and imposed penalties are set aside as unsustainable in law and fact.

Final Conclusion: The appeal is allowed: the Tribunal set aside the impugned order to the extent it re determined value on the basis of the impugned market survey, reclassified the walking sticks as electric luminaires, and confirmed confiscation, redemption fine and penalties; valuation under Rule 7 CVR, the confiscation and penalties are quashed and the appellants' classification under CTI 6602 0000 is upheld.

Maintainability of class action under Section 245 for past and continuing transactions - scope of reliefs under Section 245(1)(g) and (h) including claims against third parties - Compliance of Section 245(4) - illegal and systematic fraudulent acts - prejudicial to the interests - application of Section 245(4) factors (good faith and locus to pursue) and relevant NCLT Rules in admission.

Maintainability of class action under Section 245 for past and continuing transactions - Class action under Section 245 is maintainable in respect of impugned transactions pleaded as past, continuing or systematically orchestrated and not confined to exclusively in praesenti acts. - HELD THAT: - The Tribunal construed Section 245 as permitting reliefs for acts prejudicial to the company and its members whether the acts are past, present or likely to occur. The provisions, read as a whole and in light of the legislative history (J.J. Irani Committee and subsequent Bills), show Parliament intended class actions to vindicate the interests of the company as well as its members. The Tribunal noted that certain reliefs under Section 245, such as damages or compensation, necessarily contemplate past or concluded transactions. Where allegations assert a scheme or systematic concealment that prevented shareholders from knowing or authorising transactions, those transactions cannot be treated as simply closed for the purpose of excluding Section 245. On the facts, the impugned transactions were pleaded as part of a continuum and thus the Tribunal correctly held admission on maintainability was justified. [Paras 18, 24]

Maintainable; the NCLT rightly held Section 245 can apply to past and continuing impugned transactions on the prima facie record.

Scope of reliefs under Section 245(1)(g) and (h) including claims against third parties - Reliefs under Section 245(1)(g) and residuary clause (h) extend to claims of damages or other suitable actions against the company, its directors and third parties, and may include remedies addressing loss suffered by the company and consequential loss to shareholders. - HELD THAT: - The Tribunal interpreted sub clause (g) to permit claims 'from or against' the company, directors or other persons, observing the use of 'or' demonstrates Parliament's intent to permit actions against third parties (directors, auditors, experts). Clause (h) is a wide residuary head empowering the Tribunal to grant other remedies as fit. The court reasoned that where the company itself is a victim of alleged fraudulent or wrongful conduct by promoters or others, reliefs aimed at restoring the company's position (including compensation) and thereby protecting the minority shareholders fall within Section 245. Consequently, seeking compensation traceable to past misconduct was not outside the statute's ambit. [Paras 22, 23]

Section 245(1)(g) and (h) permit claims against third parties and remedies for past misconduct; the Tribunal correctly interpreted and applied these provisions.

Application of Section 245(4) factors (good faith and locus to pursue) and relevant NCLT Rules in admission - The NCLT appropriately considered Section 245(4) factors (good faith and whether the cause of action could be pursued in individual right) and the relevant NCLT Rules in admitting the petition; there was no failure to apply mind or to consider statutory ingredients. - HELD THAT: - The Tribunal examined evidence on good faith (communications by the petitioners seeking information, independent valuation by FTI and the sequence of events) and assessed whether the reliefs sought could be pursued only as a class action rather than by individual members. It applied Rule 84/85 considerations regarding threshold shareholding, impracticability of joinder and common questions of fact or law, and recorded satisfaction on these pre conditions. Given the prima facie allegations of systematic concealment and market/regulatory investigations, the admission was a threshold/prima facie exercise; detailed merits remain open for fuller adjudication. On this basis the appellate court declined to interfere with the impugned admission order. [Paras 25, 27]

The NCLT did consider Section 245(4) and relevant Rules and its admission on those grounds was not interfered with.

Final Conclusion: On the prima facie record the Tribunal correctly held the company petition under Section 245 was maintainable: Section 245 covers past, continuing or concealed transactions; its reliefs encompass claims against directors and third parties and remedies for loss to the company and members; and the NCLT properly applied Section 245(4) and the relevant Rules in admitting the petition. The appeal is dismissed.

Acknowledgment under Section 18 of the Limitation Act - extension of limitation by judicial exclusion of period - fresh period of limitation from issuance of recovery certificate - permissibility of withdrawal of appeal with Section 12A route after settlement - Whether application filed by the IDBI Bank under Section 7 was barred by time or not.

Fresh period of limitation from issuance of recovery certificate - extension of limitation by judicial exclusion of period - acknowledgment under Section 18 of the Limitation Act - HELD THAT: - The Tribunal held that the Recovery Certificate dated 26.07.2018 by the DRT commenced a fresh three-year limitation period. The period falling between 15.03.2020 and 28.02.2022 was excluded by the Suo Moto order of the Supreme Court, making the residual period available from 01.03.2022 and extending the outer limit accordingly. Independently, the audited financial statements (notes to accounts) for F.Y. 2019-20, 2020-21 and 2021-22 recorded the counter-guarantee and related contingent liabilities and were, on a case-by-case examination, held to constitute acknowledgments within the meaning of Section 18 of the Limitation Act. The settlement correspondence from the Corporate Debtor dated 18.04.2022 and 02.06.2022 were also treated as acknowledgments. Applying the settled principles in precedents (including the approach in Asset Reconstruction Co.[2021 (4) TMI 753 - SUPREME COURT] and subsequent Supreme Court decisions), the Tribunal concluded that these entries and communications renewed the debt and furnished fresh limitation for three years from the date of acknowledgment, thereby rendering the Section 7 application filed on 13.06.2024 within time. [Paras 11, 12, 13, 26, 28]

The Section 7 application was not barred by limitation.

Permissibility of withdrawal of appeal with Section 12A route after settlement - Whether the Appellant could withdraw the appeal and whether the Corporate Insolvency Resolution Process (CIRP) could be closed following settlement between the Financial Creditor and the Corporate Debtor. - HELD THAT: - The Tribunal recorded that the IDBI Bank had entered into a settlement and received payment. While the Appellant was permitted to withdraw the appeal, the Tribunal held that the CIRP could not be closed merely by settlement between the Financial Creditor and the Corporate Debtor in the appellate forum. Instead, the Financial Creditor was directed to file an application under Section 12A of the IBC before the Adjudicating Authority through the IRP, in accordance with applicable regulations and the law laid down by the Supreme Court in Glas Trust Company LLC v. Byju Raveendran & Ors. [2024 (10) TMI 1185 - SUPREME COURT (LB)] Timelines were specified for filing the Section 12A application and for the IRP's steps; interveners were allowed to oppose or intervene in the Section 12A proceedings. [Paras 29, 31, 32]

Appellant permitted to withdraw the appeal; CIRP not closed; Financial Creditor to file Section 12A application through the IRP within the directed timeframe and the IRP to await decision on that application before taking further steps.

Final Conclusion: The impugned NCLT order admitting the Section 7 application is upheld because limitation was extended by the recovery certificate, the judicial exclusion of time, and acknowledgments in the audited accounts and correspondence; the Appellant may withdraw the appeal but CIRP remains subsisting until the Financial Creditor seeks termination under Section 12A, which must be filed through the IRP within the timelines directed and may be opposed by interveners.

Existence of pre existing dispute - notice of dispute under Section 8 - plausible contention requiring further investigation - undisputed operational debt.

Existence of pre existing dispute - notice of dispute under Section 8 - plausible contention requiring further investigation - Whether the Section 9 application filed by the operational creditor was liable to be rejected on account of a pre existing dispute and an effective notice of dispute. - HELD THAT: - The Tribunal found that the corporate debtor had, prior to and upon receipt of the demand, communicated a clear notice of dispute and raised a substantive defence supported by materials on record. The record included the operational creditor's own audit confirmation/ledger communications and audited balance sheet entries indicating amounts allegedly payable by the operational creditor to the corporate debtor, which together raised a plausible contention that required further investigation and was not a patently feeble or illusory defence. Applying the settled principle that an operational creditor's Section 9 application must be rejected where a real dispute exists (so long as the dispute is not mere bluster) and that admission is appropriate only for an undisputed operational debt, the Tribunal concluded that the present claim was contested on admissible materials and therefore the application could not be admitted under Section 9. [Paras 7, 8, 12, 17]

Section 9 application is rejected because a pre existing dispute was shown by notice of dispute and supporting materials raising a plausible defence.

Final Conclusion: The appeal is dismissed; the Section 9 petition was rightly rejected on the ground that the corporate debtor had raised a pre existing dispute and given a notice of dispute supported by documentary material, precluding admission of the insolvency application.

Maintainability of the Section 9 application on the ground that there is a pre-existing dispute - Transfer of winding-up proceedings to the Tribunal to be dealt with under the I&B Code - admission of a Section 9 application subject to satisfaction of statutory parameters including threshold - applicability of amended threshold for initiation of insolvency proceedings determined as on conversion date - unilateral invoice term for interest unenforceable in absence of agreement or acceptance -remedial direction to pay deposited amount with interest

Transfer of winding-up proceedings to the Tribunal to be dealt with under the I&B Code - admission of a Section 9 application subject to satisfaction of statutory parameters including threshold - Whether a winding-up petition transferred to the NCLT must be mechanically admitted on the basis of the High Court's earlier admission or must be examined afresh under the I&B Code for admission of Section 9 application. - HELD THAT: - The Tribunal held that transfer of an admitted winding-up petition to the NCLT does not mandate mechanical admission under Section 9. Proceedings transferred under the proviso to Section 434(1)(c) are to be dealt with by the Tribunal as applications under the I&B Code, and the NCLT must examine and apply the statutory parameters for admission of a Section 9 application. Reliance on Supreme Court in A. Navinchandra Steels (P) Ltd. vs. Srei Equipment Finance Ltd. [2021 (3) TMI 38 - SUPREME COURT], was recorded to the effect that Section 7/9 proceedings are independent and must be decided on the I&B Code's parameters despite prior winding-up proceedings or earlier orders of the Company Court. The Adjudicating Authority's earlier direction that the applicant satisfy the bench about maintainability (including threshold) was correctly required by law, and prior admission in winding-up cannot obviate this requirement. [Paras 20, 21, 22, 24]

After transfer, the NCLT must examine and decide the converted Section 9 application in accordance with the I&B Code and its admissibility criteria; prior admission in winding-up does not automatically result in admission under Section 9.

Applicability of amended threshold for initiation of insolvency proceedings determined as on conversion date - admission of a Section 9 application subject to satisfaction of statutory parameters including threshold - Which threshold (Rs. 1 Lakh or Rs. 1 Crore) applies to the Section 9 application converted from the winding-up petition. - HELD THAT: - The Tribunal held that the relevant threshold is to be assessed as on the date the winding-up petition was converted into a Section 9 application. Since the conversion occurred after the legislative amendment raising the minimum default threshold, the Rs. 1 Crore threshold (as applicable w.e.f. 24.03.2020) governs eligibility. The legislative scheme and Rule 5 of the Transfer Rules do not permit reliance on the earlier threshold applicable at the time of initial filing of the winding-up petition; the Operational Creditor therefore had to demonstrate that the debt exceeded Rs. 1 Crore when the petition was converted into Section 9 proceedings. [Paras 26, 27, 28]

Threshold applicable to the converted Section 9 application is Rs. 1 Crore and the Operational Creditor was required to satisfy that threshold.

Unilateral invoice term for interest unenforceable in absence of agreement or acceptance - admission of a Section 9 application subject to satisfaction of statutory parameters including threshold - Whether the Operational Creditor's claim to include interest at 24% per annum (as per invoice note) can be included in the debt for meeting the threshold. - HELD THAT: - The Tribunal found that the claim for interest at 24% was a unilateral term in invoices and there was no agreement or evidence that the Corporate Debtor accepted liability for such interest or had paid interest at that rate. Precedent of the Tribunal was relied on to hold that invoice terms alone do not bind the Corporate Debtor on the question of interest unless there is an express agreement or other material showing acceptance. In the absence of such agreement or evidence of acceptance, the interest claim could not be included in the admitted debt. Consequently, without the interest component the principal debt of Rs. 7,62,500/- fell well short of the Rs. 1 Crore threshold. [Paras 30, 31, 32, 33, 34]

Interest at 24% cannot be included in the debt without evidence of agreement or acceptance; excluding interest, the debt did not satisfy the Rs. 1 Crore threshold.

Pre-existing dispute defence and bonafides of dispute - Whether the Corporate Debtor had a pre-existing bona fide dispute such as to require rejection of the Section 9 application. - HELD THAT: - The Tribunal examined the account confirmation dated 03.03.2004, signed by the Corporate Debtor confirming the outstanding amount, and the later letter dated 24.05.2004 which complained about invoice rates. The Tribunal held that the later letter did not amount to a pre-existing bonafide dispute, particularly given the account confirmation and the invoice condition that claims must be notified within 48 hours. The High Court's earlier finding that the dispute was not bonafide was noted and the Tribunal agreed that the defence amounted to a sham/illusionary claim rather than a genuine pre-existing dispute. [Paras 36, 37, 38, 39, 40]

The claim of a pre-existing dispute was not bona fide and did not justify rejection of the application on that ground.

Remedial direction to pay deposited amount with interest - Whether the Corporate Debtor should be directed to pay the amount earlier ordered by the High Court to be paid to the Operational Creditor and, if so, with what interest and terms. - HELD THAT: - The Tribunal noted the High Court order of 04.04.2006 directing payment of the deposited amount and the subsequent dismissal of the Corporate Debtor's appeal that left the Operational Creditor entitled to the deposit. Observing that the Operational Creditor had been deprived of the amount, the Tribunal directed the Corporate Debtor to pay the deposited sum with compound interest at 12% per annum from 04.04.2006 until payment, but permitted the Corporate Debtor to withdraw the deposited sum from the High Court and pay the same (with interest) to the Operational Creditor within 30 days. This remedial direction was treated as independent of the Section 9 admission analysis. [Paras 41, 42, 43]

The Corporate Debtor is directed to pay the deposited amount to the Operational Creditor with compound interest at 12% from 04.04.2006; the deposit may be withdrawn and paid within 30 days.

Final Conclusion: The appeal is allowed: the NCLT order admitting the Section 9 application is set aside because the converted application did not meet the Rs. 1 Crore threshold (interest claimed at 24% cannot be included without agreement); the Corporate Debtor is directed to pay the previously ordered deposit to the Operational Creditor with compound interest @12% from 04.04.2006 within 30 days; parties to bear their own costs.

Seeking admission of belated claims after approval of resolution plan - claims reflected in the corporate debtor's records and information memorandum,but the appellant did not filed any claim.

Admission of belated claims after approval of resolution plan - claims reflected in the corporate debtor's records and information memorandum - HELD THAT: - The Tribunal found that the appellant's claim and the payment made in respect of the unit were recorded in the books/list prepared by the Resolution Professional and thus reflected in the corporate debtor's records. Relying on the reasoning in Puneet Kaur [2022 (6) TMI 108 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI] (as applied in Rahul Jain [2025 (5) TMI 1030 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI - LB] and distinguishing Pooja Mehra [2024 (4) TMI 1064 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI] the Tribunal held that where homebuyers' claims are reflected in the records of the corporate debtor, fairness requires that such claim details be furnished to the Resolution Applicant so that an addendum to the resolution plan may be prepared and placed before the CoC for consideration. The Tribunal rejected the contention that mere adjustment of unclaimed units amounted to due consideration of the appellant's claim, noting that payment by the appellant had not been considered against the unit. Consequently, the Tribunal directed the Resolution Professional to submit the details of appellants reflected in the records (including their claims) to the Resolution Applicant, and directed the Resolution Applicant to prepare an addendum to the resolution plan for placement before the CoC; the CoC's consideration of such addendum and the minutes shall be available to the Adjudicating Authority at the time of plan approval.

The Resolution Professional shall submit the appellant's details and claims reflected in the corporate debtor's records to the Resolution Applicant, who shall prepare an addendum to the resolution plan and place it before the CoC for consideration; the CoC's minutes and the addendum shall be considered by the Adjudicating Authority when approving the plan and the exercise completed within the timeframe directed by the Tribunal.

Final Conclusion: The appeal is disposed by directing the Resolution Professional to furnish the appellant's details and claims to the Resolution Applicant, the Resolution Applicant to prepare an addendum to the resolution plan for CoC consideration, and for the Adjudicating Authority to consider the addendum and CoC minutes when approving the plan, in terms of the directions given in paragraph 17 of the Tribunal's earlier judgment.

Statutory requirement u/s 8(1) - commission of predicate offence -Recording of reason to believe for issuance of show cause notice - two-tier process, followed before the issuance of the show-cause notice - independence of Adjudicating Authority's satisfaction - provisional attachment and reasons to believe u/s 5(1) - misappropriating the funds of the investors.

Recording of reason to believe for issuance of show cause notice - provisional attachment and reasons to believe under Section 5(1) - Whether the Adjudicating Authority was required to record reasons to believe in writing and serve a copy when issuing a notice under Section 8(1). - HELD THAT: - The Tribunal held that Section 8(1) does not mandate that the Adjudicating Authority record its reason to believe in writing and serve that record to the noticee. By contrast, Section 5(1) expressly requires reasons to be recorded in writing at the provisional attachment stage. The Tribunal observed that the show cause notice in the present record stated that the reasons to believe were recorded and made available, with an arrangement for the noticee to obtain a certified copy from the Registry. Reliance on judgments was considered: the Vanpic [2022 (9) TMI 1287 - TELANGANA HIGH COURT] (that the Adjudicating Authority must form its own reason to believe independent of the attaching authority) was accepted in principle, but the High Court of Delhi's broader direction requiring written reasons to be recorded and supplied at the Section 8(1) stage was not followed. The Tribunal emphasised that courts cannot rewrite statutory language to import procedural requirements not found in the statute, and that any initial statutory infraction at the provisional attachment stage can be addressed during adjudication under Section 8. The Tribunal therefore found no procedural illegality in the issuance of the notice and no prejudice shown from the manner in which reasons were made available on the record. [Paras 16, 22, 24, 28, 30]

The requirement to record and serve written reasons is not compelled by Section 8(1); the notice as issued and the arrangement to obtain a certified copy did not vitiate the proceedings.

Independence of Adjudicating Authority's satisfaction - Whether the Adjudicating Authority acted without independent satisfaction and whether the appellants could raise new factual matters and tender documents outside the pleadings before this Tribunal. - HELD THAT: - The Tribunal accepted that the Adjudicating Authority must have its own reason to believe (independent satisfaction) when issuing a notice under Section 8(1), in line with the Vanpic. On the facts, however, the appellants did not press a contention of innocence or demonstrate that the Adjudicating Authority failed to form its own satisfaction; the appeals were prosecuted primarily on the ground of non provision of reasons. Further, the Tribunal refused the appellants' belated attempt to rely upon additional documents not filed with the appeal, holding that the appeal must be decided on the pleadings and material placed before the Tribunal. The appellants were afforded opportunities but did not raise other substantive arguments; consequently the Tribunal did not permit expansion of issues by production of fresh documents at the hearing stage. [Paras 11, 12, 13, 15, 31]

No failure of independent satisfaction by the Adjudicating Authority was shown on the record and the appellants cannot rely on documents or factual matters not pleaded; the appeals therefore fail on the raised grounds.

Final Conclusion: The appeals are dismissed on the ground that Section 8(1) does not require written reasons to be recorded and served, the Adjudicating Authority's process in the record did not vitiate the proceedings, and the appellants failed to establish prejudice or place requisite documents/pleadings before the Tribunal.

Doctrine of mutuality - Taxable services under the category of ‘Club or Association Membership Services’ - exclusion of bodies constituted under a law from definition of club or association - temporal scope of taxability of services to non-members after amendment inserting "or any other person" - benefit of cum-tax value and dropping the demand towards interest charged on delayed payments - extended period of limitation - fraud or suppression - Whether the services rendered to its members by the club are taxable under the category of ‘Club or Association Services’.

Doctrine of mutuality - exclusion of bodies constituted under a law from definition of club or association - Receipts from members of the Panchkula Golf Club are not exigible to service tax under 'Club or Association Services' for the impugned period. - HELD THAT: - The Tribunal found that the appellant is a members club registered under the Societies Registration Act, 1860 and therefore is a body constituted under a law for the time being in force, which stood expressly excluded from the definition of 'club or association'. Applying the doctrine of mutuality as affirmed by the Hon'ble Supreme Court in State of West Bengal v. Calcutta Club Ltd[2019 (10) TMI 160 - SUPREME COURT (LB)], the Tribunal held that services and receipts between the club and its members fall within mutual transactions and are outside the scope of service tax for the impugned period. [Paras 6, 7]

All receipts from members are not exigible to service tax under 'Club or Association Services' during the impugned period.

Temporal scope of taxability of services to non-members after amendment inserting "or any other person" - Services rendered to non-members by the club are not taxable for the period prior to the amendment w.e.f. 01.05.2011 that expanded the charge to 'any other person'. - HELD THAT: - The Tribunal observed that prior to the Finance Act, 2011 amendment (w.e.f. 01.05.2011) the definition of taxable services in respect of clubs and associations was confined to services provided to members. The 2011 amendment inserted the phrase 'or any other person', thereby widening the tax base prospectively. Since the period in dispute falls before the effective widening of taxability, services rendered to non-members in that period were not exigible to service tax. [Paras 8]

On account of the amendment taking effect w.e.f. 01.05.2011, the club is not liable to service tax for services to non-members for the impugned pre-amendment period.

Classification of sponsorship receipts as sponsorship services - Income from sponsorship for sports events was incorrectly taxed under 'Club or Association Services' and should have been considered under 'Sponsorship Services'. - HELD THAT: - The Tribunal noted that sponsorship receipts pertaining to sports events fall within the separate category of 'Sponsorship Services' introduced under the relevant notification, and that the show cause notice and demand classified such receipts under 'Club or Association Services' without legal basis. Following precedents of the Tribunal, the demand confirmed under the incorrect head was held unsustainable. [Paras 9]

Demand confirmed under 'Club or Association Services' on sponsorship income is not sustainable; such receipts ought to be treated under 'Sponsorship Services'.

Extended period of limitation not invokable for interpretational issues absent fraud or suppression - Extended period of limitation cannot be invoked where the issue is interpretational and no fraud or suppression is attributable to the assessee. - HELD THAT: - The Tribunal held that the controversy in the present case was essentially one of statutory interpretation (scope of taxable services and applicability of mutuality/exclusions). In the absence of any finding or material pointing to fraud or deliberate suppression by the appellant, the invocation of the extended period of limitation was not justified. [Paras 10]

Extended period of limitation is not invokable in the present case as the issue is interpretational and there is no allegation of fraud or suppression.

Final Conclusion: Following the determinative findings on mutuality, statutory exclusion, temporal scope of taxability to non-members, misclassification of sponsorship receipts, and the inapplicability of extended limitation, the Tribunal set aside the impugned order and allowed the appellant's appeal with consequential relief as per law.

Classification of goods - composite service -classifiable as Business Auxiliary Service (information technology service excluded) or as Management, Maintenance or Repair service - demand for service tax - barred by limitation - extended period for suppression of facts.

Classification of composite services - Information Technology Service - Business Auxiliary Service - Management, Maintenance or Repair service - The nature and proper classification of the facility management services provided by the appellant. - HELD THAT: - The services comprised server management, WAN/LAN management, vendor coordination, help desk and related network administration tasks. Applying the priority rules in Section 65A, where a service is prima facie classifiable under more than one head, the most specific description or the service giving the composite service its essential character must be preferred. The Tribunal found that the appellant's work was essentially an IT service-operation and management of the client's computer systems and networks-with only ancillary maintenance activities. Consequently the composite arrangements could not be recast as falling within the broader category of Management, Maintenance or Repair service; instead they retained their character as Information Technology Service excluded from Business Auxiliary Service during the relevant period. The Commissioner's reliance on circular F.No.334/1/2003-TRU dated 28.02.2003 and subsequent Circular No.81/2/2005-ST dated 07.10.2005 to treat the contracts as maintenance or repair was held to be a mis interpretation in the factual matrix of this case. [Paras 14, 15, 18]

The facility management services are IT services and not taxable as Management, Maintenance or Repair service; they fall within the exclusion from Business Auxiliary Service for the disputed period.

Limitation - extended period for suppression of facts - Whether the departmental demand was barred by limitation or saved by invocation of the extended period. - HELD THAT: - The Tribunal examined the invocation of the proviso to Section 73(1) for extended limitation on the basis of alleged suppression and observed precedent in the case of Raghuvar (India) Ltd. vs. CCE: [2023 (1) TMI 932 - CESTAT NEW DELHI],where similar audit triggered demands were held not to justify extended period absent proof of suppression. Applying that reasoning to the facts, the Tribunal concluded that the Department's case for invoking the extended five year period was not made out and therefore the demand was time barred. [Paras 16]

The demand could not be sustained on the ground of extended limitation and is barred by limitation.

Final Conclusion: The Tribunal held that the appellant's facility management services are Information Technology Services (excluded from Business Auxiliary Service and not classifiable as Management, Maintenance or Repair service) and that the departmental demand is time barred; the impugned order was set aside and the appeal allowed with consequential relief as per law.

Entitlement to avail cenvat credit on e-statements issued by National Payments Corporation of India (NPCI) for ATM/NFS transaction charges -taxable services under the category of ‘Banking and other Financial Services’ (BOFS) -application of proviso to Rule 4A of the Service Tax Rules, 1994.

Admissibility of cenvat credit on electronic statements - HELD THAT: - The Tribunal examined whether the e-statements issued by NPCI satisfied the documentary requirements for availing cenvat credit by a banking company. It applied the proviso to Rule 4A of the Service Tax Rules, 1994, which relaxes certain formal requisites for invoices, bills or challans in the case of banking companies and financial institutions. The Tribunal noted that NPCI acts as an intermediary under agreements with member banks to provide switching, accounting and settlement services for ATM/card transactions, and that the e-statements were issued in that commercial and contractual context. On review of the material, the Tribunal found the e-statements to be self-contained and to incorporate the requisite particulars envisaged by the proviso to Rule 4A. The revenue had not pointed to any irregularity in NPCI's filings or returns that would cast doubt on the transactions recorded. The Tribunal further relied upon the earlier decision considered in the order [2019 (2) TMI 1383 - CESTAT CHENNAI], which treated similar NPCI statements as meeting the requirements for banking companies to claim credit. In these circumstances the Tribunal concluded that denial of credit on the ground that the e-statements were not authenticated or not invoices was unsustainable. [Paras 6, 7]

The appellant was entitled to avail cenvat credit on the NPCI e-statements for April 2009 to March 2012; the impugned findings to the contrary were set aside.

Final Conclusion: The impugned order was set aside and the appeal allowed; the appellant is entitled to the claimed cenvat credit for the period April 2009 to March 2012, with consequential relief as per law.

Classification of goods - listed printed products fall under Chapter sub-heading 4820 Or under Chapter sub-headings 4901/4911 - dutiability of paper scrap arising during manufacture - binding effect of CBEC Circular No.1052/1/2017-CX on classification.

Classification- University answer booklets and bank passbooks - HELD THAT: - The Tribunal held that the primary purpose of university answer booklets is for further writing by examinees and that bank passbooks are prepared for subsequent entries; the security or anti duplication features are ancillary. Note 14 to Chapter 48 preserves classification in heading 4820 where paper products of heading 4820 are intended for further printing or writing. The Tribunal applied the HSN Explanatory Notes and precedent (including Holostick) to conclude that security printing is ancillary where the product's primary use is stationery for manuscript or typescript completion, and therefore answer booklets and passbooks fall within Chapter 4820. [Paras 21, 22, 23, 24, 29]

University answer booklets and bank passbooks are within Chapter Sub heading 4820.

Classification of other printed matter under Chapters 4901 and 4911 - interpretation of Chapter Note 12 vis a vis Note 14 - Other items such as loose application forms, ticket type sheets, leaflets and similar printed matter are classifiable under Chapter Sub heading 4901/4911 as indicated in the Board Circular. - HELD THAT: - Having examined Chapter Notes 10, 12 and 14 and the CBEC Circular No.1052/1/2017 CX, the Tribunal accepted the Circular's distinctions: loose sheets cut to size, printed forms requiring insertion of particulars and items where printing is not merely incidental are outside heading 4820 and fall under headings in Chapter 49 (4901/4911). The Circular was treated as a binding clarification directing uniform classification of the illustrative items. [Paras 16, 18, 26, 29]

Remaining examined items are classifiable under Chapter Sub heading 4901/4911 as per the Circular.

Dutiability of paper scrap arising during manufacture - manufacturing process for classification of waste - Paper scrap/end cuttings arising during production of the disputed items are not dutiable. - HELD THAT: - The Tribunal found that the appellant is not a paper manufacturer and the waste comprised end cuttings arising from printing and finishing operations; no fresh manufacturing of paper from pulp takes place. Reliance was placed on Tribunal precedents (Wimco Ltd. [2008 (7) TMI 108 - CESTAT NEW DELHI] and Universal Offsets [2018 (1) TMI 1086 - CESTAT NEW DELHI] to conclude that such end cuttings are not dutiable. [Paras 6, 28]

Paper scrap generated during manufacture is not chargeable to duty.

Re quantification of demand after classification - fresh adjudication on limitation and applicability of penal provisions - The matter is remanded to the adjudicating authority to re quantify demand in accordance with the Tribunal's classification and to decide limitation and penal consequences after affording opportunity of hearing. - HELD THAT: - Because the Tribunal modified the classification (answer booklets and passbooks under 4820; other items under 4901/4911), it directed remand for recomputation of duty/demand. The Tribunal observed that the learned Commissioner had not recorded findings on limitation; therefore limitation and consequent applicability of penal provisions must be examined afresh by the adjudicating authority with a reasonable opportunity to the respondent. [Paras 29, 30]

Matter remanded for re quantification of demand and fresh adjudication on limitation and penalties after hearing.

Final Conclusion: The Tribunal held that university answer booklets and bank passbooks are classifiable under Chapter Sub heading 4820, other specified printed items fall under Chapter Sub headings 4901/4911 in accordance with CBEC Circular No.1052/1/2017 CX, and paper scrap arising as end cuttings is not dutiable. The matter is remanded to the adjudicating authority to re quantify the demand and to decide limitation and penal issues after giving the respondent an opportunity of hearing.

Denial of Cenvat credit on FB Tipper used in transportation of sand to the RMC plant for manufacture of Ready Mix Concrete (RMC) and denial of credit on Concrete Mixer used for transportation of Ready Mix Concrete from RMC plant to the place of construction by the service provider - availing the benefit of Cenvat credit of the duty paid on inputs, capital goods and input services as per the Cenvat Credit Rules, 2004 - penalty imposed under Section 11AC.

Eligibility for Cenvat credit on transit concrete mixers and tippers - integral and essential connection to manufacture - Cenvat credit claimed on the Transit Concrete Mixer and FB Tipper is admissible. - HELD THAT: - The Tribunal examined whether the subject vehicles were excluded from credit under the definitions of 'capital goods' and 'inputs' in the Cenvat Credit Rules and considered purposive clarifications in Circular No. 943/4/2011-CX and judicial authorities holding that specialized vehicles integrally connected to the manufacture and delivery of the final product are eligible for credit. Applying the established ratio that goods which are essential and integrally connected with the manufacturing process (including transportation where specialised vehicles are necessary to preserve or deliver the final product) are entitled to credit, and having regard to precedents treating tippers/dumpers and mixers as integrally connected to manufacture, the Tribunal held that the Transit Concrete Mixer and FB Tipper used in the production and supply chain of Ready Mix Concrete were eligible for the Cenvat credit claimed for the period in question.

Cenvat credit availed on Transit Concrete Mixer and FB Tipper for March 2011 to April 2011 is admissible.

Penalty under Rule 15(1) of the Cenvat Credit Rules, 2004 - The demand, interest and penalty confirmed in respect of the irregular credit are unsustainable in view of the admissibility of the credit. - HELD THAT: - The adjudicating authority had confirmed demand, interest and penalty on the ground that credit was irregular and the appellant had not discharged the burden of proof. Having held that the credit on the subject vehicles is admissible because they are essential and integrally connected to manufacture/supply of RMC, the Tribunal found that the impugned demand, interest and penalty could not be sustained. The Tribunal noted earlier orders and clarifications relied upon by the appellant and concluded that the impugned findings imposing financial consequences were not tenable.

The demand, interest and penalty imposed in the impugned order are set aside.

Final Conclusion: The impugned order is set aside; the appeal is allowed, Cenvat credit on the Transit Concrete Mixer and FB Tipper for March 2011 to April 2011 is permitted and the demand, interest and penalty arising from the adjudication are quashed, with consequential relief as per law.

CENVAT credit onlocomotive engines, locomotive parts and spare parts - definitions of 'capital goods' and 'input' under Rule 2(a)(A) and Rule 2(k) of the CENVAT Credit Rules, 2004 - scope of goods that are accessories or components of capital goods - Whether cenvat credit availed on the locomotive Engines, parts and it's spares which have been procured by the appellant for the purpose of hauling the 'torpedo ladle car' in the transportation of the molten metal from the blast furnace to the steel melting shop and other locations within the factory for further processing of the molten metal taken out from the blast furnace into different products is tenable.

CENVAT credit on locomotives as capital goods or accessories - classification and place of use of the locomotive within factory premises - scope of 'inputs' and 'capital goods' used directly or indirectly in manufacture - HELD THAT: - The Tribunal found that the locomotives in question were special-purpose machines designed to haul torpedo ladle cars within the appellant's factory and were used directly or indirectly in relation to the manufacture of final products. The molten metal transported in torpedo ladle cars is extremely heavy and at very high temperature, making manual handling impracticable and requiring mechanical hauling on rails; the revenue did not place on record specifications showing the locomotives were main-line passenger/goods engines. The Tribunal applied the statutory definition of 'capital goods' and the wide definition of 'input' to hold that locomotives which function as accessories to capital machinery (the torpedo ladle car and associated plant) fall within the ambit of Rule 2(a)(A) and Rule 2(k) of the CENVAT Credit Rules, 2004. Reliance was placed on earlier decisions treating similar locomotives as accessories or inputs where they formed part of the chain of manufacturing operations, and the Tribunal concluded that classification under Chapter 86 did not preclude the locomotives from being capital goods or accessories when used as described. For these reasons the denial of CENVAT credit was held to be untenable. [Paras 13, 14, 15, 16, 17]

Denial of CENVAT credit on the impugned locomotive engines, parts and spares is not tenable; the impugned order is set aside and the appeal is allowed with consequential relief.

Final Conclusion: The Tribunal held that locomotives used to haul torpedo ladle cars within the factory are accessories/capital goods or inputs used directly or indirectly in manufacture; accordingly the impugned order denying CENVAT credit is set aside and the appeal is allowed with consequential relief.

Constitutional validity of Clause (d) of the proviso to Rule 5(1) of the West Bengal Excise (Change in Management) Rules, 2009 (“2009 Rules”) - clarificatory amendment - definition of “change in management” brought about by the 2020 Rules - revised demand - intelligible differentia - discrimination intra-class -Whether the exemption granted to Public Limited Companies, as opposed to Private Limited Companies, which in turn deprives Private Limited Companies of such exemption, is unreasonable, arbitrary and/or discriminatory - Irrespective of the nature of the levy (whether a tax or a fee), if the distinction is tainted by irrational discrimination between the same class of entities having similar characteristics vis-à-vis the exemption granted, the same is subject to scrutiny by Courts in judicial review on the ground of violation of Article 14 of the Constitution of India.

Reading up - intelligible differentia - discrimination intra-class - HELD THAT: - The Court held that Clause (d) as originally worded - exempting only death of directors in private limited companies while Clause (e) exempted death or change in management in the usual course of business for public limited companies - effected an unjustifiable intra-class discrimination between limited companies lacking any intelligible differentia germane to the object of the 2009 Rules. The scheme of the 2009 Rules (notably Rules 2 and 4) treats changes in management of private and public limited companies alike and recognises that changes in the usual course of business are involuntary; hence exclusion of private limited companies from the exemption for such changes is not rationally connected to the object of imposing licence fees. Applying the Budhan Choudhry test [1954 (12) TMI 17 - SUPREME COURT], the Court found no rational nexus for the classification and therefore the provision as applied was susceptible to Article 14 challenge. Rather than striking down the provision altogether, the Court invoked the corrective remedy of reading up to cure the constitutional defect: Clause (d) was to be read as including "change in management in the usual course of business" for private limited companies, bringing it into parity with Clause (e). The Court further observed that striking down Clause (d) entirely would defeat the object of the reading-up exercise and would remove even the existing exemption for death of directors, which the reading-up was meant to preserve. [Paras 128, 129, 130, 131, 132]

Clause (d) of the proviso to Rule 5(1) is to be read up to read "death of Director(s), or change in management in the usual course of business of a private limited company." The portion of the earlier judgment striking down Clause (d) as ultra vires is set aside; the reading-up is adopted and consequential reliefs granted below are affirmed.

Retrospective effect - clarificatory amendment - Whether Notification No. 212-F.T. dated February 11, 2020 (which defined "change in management") operates retrospectively as a clarificatory amendment applicable to disputes predating the amendment. - HELD THAT: - The Court rejected the State's contention that the 2020 amendment was merely clarificatory and therefore retrospective. The 2009 Rules contained no prior definition of "change in management"; the 2020 Notification substituted a new definition regime and expressly stated that the amendments would come into force "with immediate effect." On that basis, and applying authorities on retrospective and explanatory amendments, the Court concluded that the 2020 Notification was not a retrospective clarificatory enactment and could not be applied to alter substantive rights existing under the 2009 Rules prior to the notification. [Paras 115, 116, 117, 118, 119]

The 2020 amendment/Notification is not retrospective or merely clarificatory and therefore cannot be given retrospective effect to alter the position under the 2009 Rules.

Final Conclusion: The appellate court modified the impugned judgment by reading up Clause (d) of the proviso to Rule 5(1) of the 2009 Rules to include change in management in the usual course of business for private limited companies, set aside the portion of the Single Judge's order that struck down Clause (d) as ultra vires, affirmed the setting aside of the Appellate Authority's order dated February 16, 2018 and the consequential demand dated February 27, 2018, and held that the 2020 amendment is not retrospective.