TaxTMI Updates e-Newsletter
Mar 06,2026

Assignment of leasehold rightsfor 95 years - scope of supply and land/building transactions​​​​​​​ - Transfer of benefits arising out of immovable property - miscellaneous service under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and issued notice under Section 75 read with Section 73(5) of the Maharashtra Act, 2017.

Assignment of leasehold rights - Transfer of benefits arising out of immovable property - HELD THAT: - The Court examined whether the assignment of the petitioner's leasehold rights to a third party amounted to a supply of services within the meaning of Section 7(1) read with Schedule II. The lease in question is a long-term lease (95 years) and the leasehold rights are transferable under the lease deed. The transaction extinguished the petitioner's rights and transferred the benefits arising out of immovable property to the assignee. The transaction therefore constituted transfer of benefits arising out of immovable property rather than a provision of services in the course or furtherance of the petitioner's business. The Court relied on and followed the reasoning of the Gujarat High Court in the case of Gujarat Chamber of Commerce and Industry Vs. Union of India [2025 (1) TMI 516 - GUJARAT HIGH COURT], which held that assignment/sale/transfer of leasehold rights of an allotted plot by a lessee to a third-party assignee is an assignment of benefits arising out of immovable property and is not subject to GST as a supply of services. The absence of any nexus with the petitioner's business and the nature of the long-term lease were treated as determinative factors. [Paras 10, 11, 12, 13, 14]

Assignment of the leasehold rights is not a taxable supply of services under the GST Act.

Classification as other miscellaneous services unlawful - The impugned show-cause notice treating the assignment as 'other miscellaneous services' taxable at 18% was legally unsustainable. - HELD THAT: - The respondents had classified the assignment as a service falling under miscellaneous services (Sr. No. 35 of Notification No. 11/2017 CT (Rate)) and contended it was taxable at 18%. The Court observed that the examples listed under 'other miscellaneous services' relate to petty service activities and cannot be extended to encompass transfer/assignment of leasehold rights in immovable property. Because the transaction was a transfer of benefits arising out of immovable property and not a service provided in the course or furtherance of the petitioner's business, the classification adopted in the show-cause notice was invalid and rendered the notice bad in law on that count. [Paras 6, 7, 8, 9]

The classification of the assignment as other miscellaneous services and the consequent show-cause notice seeking GST on that basis is invalid.

Final Conclusion: The writ petition was allowed: the impugned order arising from the show-cause notice was quashed and set aside, the assignment of leasehold rights was held not to be a taxable supply of services and the classification as other miscellaneous services was rejected.

Cancellation of GST registration under Section 29(2)(d) - absence of reasons and application of mind - failure to afford opportunity of hearing - appeal barred by limitation.

Lack of application of mind in cancellation order - failure to afford opportunity of hearing - HELD THAT:- The Court examined the cancellation order and found that it does not ascribe any reasons for taking the drastic step of cancelling registration. Relying on precedent of the coordinate Bench in M/s Chandra Sain Vs Union of India and Ors. [022 (9) TMI 1047 - ALLAHABAD HIGH COURT] which emphasised that quasi judicial orders must disclose application of mind and reasons, the Court held that an order devoid of reasons cannot satisfy Article 14. The petitioner was also not afforded a personal hearing prior to the impugned order, contrary to the statutory scheme and principles of natural justice. As the cancellation order was patently ex parte and without reasons, it could not be sustained. Consequentially, the appellate order dismissing the appeal as beyond limitation was quashed in the light of the primary infirmity in the cancellation order and because the matter requires fresh consideration on merits after hearing the petitioner. The Court directed that the petitioner be permitted to file a reply and that the adjudicating authority pass a fresh order after affording an opportunity of hearing and taking into account the defence raised. [Paras 7, 8, 9]

Impugned cancellation order is set aside for lack of reasons and failure to afford hearing; appellate order is quashed; matter remitted for fresh consideration after permitting petitioner to file reply within three weeks and after affording opportunity of hearing.

Final Conclusion: The petition is allowed: the cancellation order and the appellate dismissal are quashed; the adjudicating authority shall decide afresh after granting the petitioner an opportunity to file a reply and be heard.

Bail applications -creation, circulation and infusion of fictitious Input Tax Credit (ITC), without the actual supply of goods -serious economic offence and bail principles - risk of tampering with evidence and absconding -Offences committed under Section 132(1)(b), 132(1)(c) and 137 of the Central Goods and Services Tax Act, 2017 and punishable under Clause (i) of Section 132(1) of the CGST Act, 2017.

Economic offences constitute a class apart - serious economic offence and bail principles - risk of tampering with evidence and absconding - HELD THAT: - The Court examined the complaint, the nature and scale of the alleged GST fraud involving creation and circulation of fictitious input tax credit through a network of fake/non existent firms, and the roles attributed to the applicants. Relying on the settled principle that economic offences are a class apart and must be approached differently when considering bail (as explained in Tarun Kumar [2023 (11) TMI 904 - SUPREME COURT] and followed by later authorities), and having regard to the serious nature of the offence, the substantial alleged revenue loss and the applicants' alleged positions in the fraudulent scheme, the Court concluded that the principles applicable to serious economic offences weigh against bail. The Court also noted authorities holding that principles applicable to heinous crimes are applicable to serious economic offences and observed that there were reasons to believe there existed a real risk of tampering with evidence and absconding. On these grounds the Court found that no case for grant of bail was made out. [Paras 11, 12, 13, 14, 15]

Bail rejected for all three applicants.

Final Conclusion: On consideration of the complaint, the alleged large scale fraudulent availment and passing of input tax credit, and binding principles governing serious economic offences, the High Court refused bail to the three applicants and directed that the trial court proceed expeditiously.

Seeking application for revocation of the cancelled GST registration in terms of Section 30 of the respective GST Enactments - exercise of writ jurisdiction under Article 226 - application of conditions for revival of registration.

GST registration restoration - HELD THAT: - The Court noted that the petitioner's Electronic Credit Ledger, which had been blocked, was subsequently unblocked after a second inspection of the premises. Relying upon the Court's earlier decision in Tvl. Suguna Cut Piece Center [2022 (2) TMI 933 - MADRAS HIGH COURT] the Court held that it was appropriate to exercise its writ jurisdiction under Article 226 to revive the registration. The Court applied the revival framework and conditions set out in Tvl. Suguna Cut Piece Center-including requirements for filing returns, payment of tax, interest, fines and fees, restrictions on utilization of Input Tax Credit pending scrutiny, and other safeguards-to the present petition. The Court observed that this course is appropriate notwithstanding that the petitioner ought to have filed an application under Section 30, and directed that the writ petition be disposed of in terms of the directions in the cited precedent.

Registration restored and the writ petition disposed of in terms of the directions contained in Tvl. Suguna Cut Piece Center; petitioner to comply with the specified conditions for revival.

Final Conclusion: The High Court exercised its Article 226 jurisdiction to order restoration of the petitioner's cancelled GST registration, directing revival in accordance with the conditions and safeguards laid down in Tvl. Suguna Cut Piece Center; the writ petition is disposed of on those terms.

Remand for fresh consideration after hearing - seeking extension of the benefits earlier granted to the Petitioner in the year 2013 and 2015, which were subsequently extended during the COVID-19 pandemic - audi alteram partem - expeditious decision-making obligation.

Remand for fresh consideration after hearing - expeditious decision-making obligation - HELD THAT: - The Court found that the matters raised in the Petitioner's representation involve policy considerations requiring inter-departmental consultation between the Department of Tourism and the Ministry of Finance and other concerned Ministries. Given those peculiar circumstances and the absence of a final decision by the Respondents, the appropriate course is to remit the representation for fresh consideration by the competent authorities. The Court directed that the Respondents decide the representation in accordance with law, after giving the Petitioner an opportunity to be heard and to file further documents, and to do so expeditiously. The Court expressly refrained from expressing any opinion on the merits of the rival contentions and kept all contentions open.

The representation is to be considered afresh by the concerned Ministries/authorities in accordance with law, after giving the Petitioner an opportunity of being heard and to file further documents, and the decision shall be taken expeditiously (preferably within two months).

Final Conclusion: The petition is disposed of by directing the competent Ministries/authorities to consider the Petitioner's representation dated 11th January 2024 afresh, grant the Petitioner an opportunity of hearing and permit additional documents, and to decide the matter in accordance with law expeditiously; all parties' contentions remain open and the Court expresses no opinion on the merits.

Classification under customs tariff - entry in GST rate schedules - applicable GST rate under GST 2.0

Classification under customs tariff - Tariff/HSN classification of the applicant's non alcoholic beverages, iced tea preparations, syrups and beverage concentrates, and extracts/essences/concentrates of tea. - HELD THAT: - The Authority examined the product descriptions, ingredient lists and manufacturing processes supplied by the applicant and compared them with the Customs Tariff entries. It found no tariff item numbered 22029020 as suggested by the applicant and identified the closest and correct tariff items by matching the nature and composition of the goods to the headings and sub headings in Chapter 21 and 22. Non alcoholic beverages without fruit pulp or juice fall under heading 2202 and specifically tariff item 22029990. Iced tea preparations and extracts/essences/concentrates of tea fall under heading 2101 and sub heading 210120. Syrups and beverage concentrates are covered by sub heading 210690 and specifically tariff item 21069019. [Paras 4]

Non alcoholic beverages: 22029990; Iced tea preparations and tea extracts/essences/concentrates: sub heading 210120; Syrups and beverage concentrates: 21069019.

Entry in GST rate schedules - Whether the products qualify for entries in Schedule I or Schedule III of the rate notification. - HELD THAT: - By reference to the rate notification as amended, the Authority mapped the identified tariff items to the schedules. Non alcoholic beverages covered by tariff items 2202 91 00 and 2202 99 90 fall within Serial No. 2 of Schedule III. Iced tea preparations and extracts/essences/concentrates of tea, being under sub heading 210120, fall within Serial No. 136 of Schedule I. Syrups and beverage concentrates under tariff item 21069019 are covered by Serial No. 145 of Schedule I. [Paras 4]

Non alcoholic beverages: Schedule III (serial no. 2). Iced tea preparations and tea extracts/essences/concentrates: Schedule I (serial no. 136). Syrups and beverage concentrates: Schedule I (serial no. 145).

Applicable GST rate under GST 2.0 - Applicable GST rates for the identified products under GST 2.0. - HELD THAT: - Applying the schedule entries to the tariff items found to be applicable, the Authority determined the tax rates specified in the notification. Goods falling in Schedule III attract the higher rate specified therein, whereas the entries in Schedule I attract the lower rate mentioned against those serial numbers. Having mapped each product to its schedule entry, the corresponding Central and State tax rates were taken from the amended notification. [Paras 4]

Non alcoholic beverages (22029990): taxed at 20% CGST + 20% SGST. Iced tea preparations and extracts/essences/concentrates of tea (210120): taxed at 2.5% CGST + 2.5% SGST. Syrups and beverage concentrates (21069019): taxed at 2.5% CGST + 2.5% SGST.

Final Conclusion: The Authority ruled the correct tariff classifications as 22029990 for the non alcoholic beverages, sub heading 210120 for iced tea preparations and tea extracts/essences/concentrates, and 21069019 for syrups and beverage concentrates; mapped these items to Schedule I or III of the rate notification as stated; and fixed the applicable GST rates accordingly.

Pure services - Government Entity - exemption under Notification No. 12/2017-Central Tax (Rate)

Pure services - Security services supplied to FCI are pure services. - HELD THAT: - The Authority found that the security services supplied by the contractor consist of deployment of security personnel and do not involve any supply of goods or works contract. The term 'pure services' in Sl. No. 3 of Notification No. 12/2017 (as amended) excludes works contracts or composite supplies involving goods; services which do not involve supply of goods fall within the meaning of 'pure services'. Applying this understanding to the facts, the supply of security guards is a supply of service without any goods element and therefore qualifies as a pure service. [Paras 4]

Security services to FCI are pure services.

Government Entity - exemption under Notification No. 12/2017-Central Tax (Rate) - Whether the exemption in Sl. No. 3 of Notification No. 12/2017 applies to security services supplied to FCI. - HELD THAT: - The Authority examined definitions in Paragraph 2 of the notification and the statutory scheme establishing FCI. FCI was held to satisfy the criteria of a 'Government Entity' (being established by an Act of Parliament and under government control). The description in Sl. No. 3, however, requires the recipient to be the Central Government, State Government, Union territory or a local authority. A 'Government Entity' is not one of those four categories. Although the entry covers 'any activity in relation to any function' listed in the Eleventh Schedule (and security services are activities in relation to PDS), the recipient condition is separate and indispensable. Because FCI is a Government Entity and not one of the specified recipients, the statutory exemption at Sl. No. 3 does not extend to services provided to FCI. [Paras 4]

The exemption in Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) does not apply to security services supplied to FCI, since FCI is a 'Government Entity' and not a specified recipient (Central/State/UT/local authority) under that entry.

Final Conclusion: The Authority ruled that security services supplied to Food Corporation of India, West Bengal region, are 'pure services' but the exemption in Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) is not available because the notification's recipient categories do not include a 'Government Entity' such as FCI.

Services under the Conservancy Department of Howrah Municipal Corporation (H.M.C.) for carrying of segregated waste from the secondary transfer point to the dumpsite in a segregated manner with own fuel-operated vehicle -Pure service - composite supply - works contract​​​​​​​ - exemption under Notification No. 12/2017-Sl. 3 - activity in relation to functions entrusted to a Municipality under Article 243W - definition of "local authority" - Whether the services provided by the Applicant to Howrah Municipal Corporation (H.M.C.) for carrying of segregated waste from secondary transfer point to dumpsite in segregate manner with own Fuel Operated vehicle are exempt under Notification No. 12/2017-State Tax (Rate), Sl. No. 3, 3A, or 4, being activities relating to functions entrusted to a Municipality under Article 243W of the Constitution?

Pure service - exemption under Notification No. 12/2017-Sl. 3 - composite supply - governmental authority - Whether the applicant's services of carrying segregated municipal waste for Howrah Municipal Corporation qualify as exempt under Notification No. 12/2017 (Sl. 3, 3A or 4). - HELD THAT: - The Authority identified the three simultaneous conditions for applicability of Sl. No. 3: (i) the service must be a pure service (not a works contract or composite supply involving supply of goods); (ii) the recipient must be a Central/State/Union territory/local authority; and (iii) the service must be in relation to a function entrusted to a Panchayat/Municipality under Articles 243G/243W. The Howrah Municipal Corporation is a local authority constituted under Article 243P/243Q and the applicant's activity (collection, segregation, transportation and disposal of municipal waste) relates to entry 6 of the Twelfth Schedule under Article 243W. The work orders and operational terms show that the applicant provides vehicles, operates and maintains them, uploads daily removal records, and is paid on the basis of quantity of garbage removed; these facts indicate no transfer of property in goods and no works contract or composite supply involving supply of goods. Consequently, the activity qualifies as a pure service. Serial No. 4 was held inapplicable because the applicant is not a 'governmental authority' as defined in the notification. Serial No. 3A was inapplicable because no supply of goods (within the meaning required for a composite supply) was found on the facts. For these reasons the activity satisfies the conditions of Sl. No. 3 and is exempt under that entry. [Paras 4]

The services of carrying segregated waste for Howrah Municipal Corporation qualify as a pure service in relation to a municipal function under Article 243W and are exempt under Serial No. 3 of Notification No. 12/2017-Central Tax (Rate).

Final Conclusion: The Advance Ruling declares that the applicant's services for carrying segregated municipal waste for Howrah Municipal Corporation are pure services in relation to municipal functions and are exempt from tax under Serial No. 3 of Notification No. 12/2017-Central Tax (Rate).

Supply of food or any other article for human consumption or any drink (other than alcoholic liquor) - Composite supply - principal supply - ejusdem generis -any other article for human consumption - tax liability on composite and mixed supplies - Whether or not serving of non-tobacco hookah / tobacco-based hookah in the restaurant along with food will be termed as supply of goods or services within the ambit of Clause 6(b) of Schedule II to the CGST Act? and consequently be taxable at the rate applicable to restaurant services, that is 5 percent.

Composite supply - principal supply - any other article for human consumption - Characterisation of serving hookah (tobacco and non-tobacco) in a restaurant under Clause 6(b) of Schedule II to the CGST Act. - HELD THAT: - The Authority examined whether hookah, served within restaurant premises, falls within sub-clause (b) of Clause 6 of Schedule II which treats supply, by way of or as part of any service, of goods being food or any other article for human consumption or any drink (other than alcoholic liquor) as supply of service. Applying ejusdem generis, the phrase 'any other article for human consumption' must be read in the context of 'food' and 'drink' and thus refers to substances ingested and digested via the alimentary canal. Smoke inhaled from hookah (tobacco or non tobacco) is inhaled into the respiratory tract and not ingested for nutritional purposes; its purpose (including delivery of nicotine) differs fundamentally from food or drink. Although serving hookah involves restaurant infrastructure and service elements (apparatus, ambience, attendance), the Authority found that these constitute a composite supply in which the goods used for smoking are the principal supply because the customer's basic purpose is to obtain the smoking product and the apparatus/service merely facilitates consumption. Consequently, the supply of hookah does not fall within Clause 6(b) and cannot be treated as restaurant service merely because it is supplied in a restaurant setting. [Paras 4]

Serving hookah in a restaurant is not covered by Clause 6(b) of Schedule II; the supplies are separate and the principal supply in the hookah transaction is the goods used for smoking.

Tax liability on composite and mixed supplies - principal supply - Tax treatment and applicable rates for tobacco-based and non-tobacco-based hookah supplied in a restaurant. - HELD THAT: - Having characterised the hookah supply as a composite supply where the goods (tobacco or non tobacco products) are the principal supply, the Authority applied Section 8 which requires a composite supply to be treated as supply of the principal supply. For tobacco based hookah the principal goods fall under the HSN heading applicable to tobacco products and the Authority ruled they attract the rate applicable to that heading. For non tobacco preparations described by the applicant (dried tea leaves, mint, rose petals, etc.), the Authority found no specific exemption or entry in the exempt or taxable schedules that would render them nil rated; accordingly such non tobacco products supplied for smoking are to be treated as supply of goods and taxed at the rates applicable to that classification. The Authority also clarified that food supplied by the restaurant continues to be taxable as restaurant service under Clause 6(b) and subject to the concessional rate applicable to restaurant services where relevant, but the hookah supplies are taxed separately in accordance with their classification as goods. [Paras 4]

Food served in the restaurant remains taxable as restaurant service at the applicable concessional rate; tobacco based hookah is taxable as supply of goods under the relevant tobacco HSN at the corresponding rate; non tobacco hookah ingredients, as described, are taxable as goods under the appropriate HSN and rates.

Final Conclusion: The Authority ruled that serving hookah in a restaurant does not fall within Clause 6(b) of Schedule II and therefore is not taxable as restaurant service; the supplies are to be treated separately - food as restaurant service (taxed at the applicable concessional rate) and hookah as a composite supply whose principal element is goods, taxed according to the classification and rates applicable to tobacco and non tobacco products respectively.

Summary order. The application for advance ruling is disposed of as withdrawn. [The issue was involved regarding Supply of Glucose Powder along with a Plastic Sipper or Shaker]

Draft order u/s 144C(1) - Failure to communicate court order - either due to some communication gap or otherwise, the order of this Court did not reach the AO(who is a FAO) and therefore, he passed a draft order under Section 144C(1) - HELD THAT: - We are of the view that due to communication gap or on account of the order being uploaded on 10.02.2026 (Tuesday), the AO has passed the order for which he cannot be said to be at any fault.

Therefore, the impugned order is hereby set aside.

The order dated 05.01.2026 passed by the TPO has already been set aside and TPO has already supplied copies of the relied upon agreements to the petitioner on 12.02.2026. Now the petitioner shall file its reply latest by 16.03.2026. On reply being filed, the TPO shall pass fresh order by 16.04.2026.

All the timelines of the proceedings before the TPO/AO and DRP shall stand extended by sixty days qua which the petitioner shall be precluded from raising any objection.

Final Conclusion: The writ petition is allowed: the assessment order dated 10.02.2026 is set aside for non-communication of this Court's earlier order; the TPO has furnished the relied upon agreements and the petitioner is directed to file its reply within the fixed time, after which the TPO shall pass a fresh order; all timelines before TPO/AO and DRP are extended and the petitioner is precluded from objecting to the extension.

Tax withholding certificate at the rate of 15% u/s 197 - petitioner, is a non-resident company and a tax resident of the USA - petitioner submitted that in spite of the fact that the nature of transactions carried out by the petitioner with its Indian counterpart is clear and though there is neither any involvement of royalty or copyright nor any reason to apprehend Fees for Included Services as per the India-USA DTAA

HELD THAT: - The Court examined the impugned order and concluded that the petitioner's case is covered by the decision in Engineering Analysis Centre of Excellence Ltd. [2021 (3) TMI 138 - SUPREME COURT] and that the Competent Authority had not correctly dealt with that precedent nor taken other relevant factors into account.

The absence of proper application of the settled precedent and failure to record reasons supporting the 15% rate rendered the certificate unsustainable in law.

Although the Department contended that detailed examination of transactions in assessment proceedings is necessary to determine taxability and that a withholding certificate is not final, the Court found that those contentions did not justify maintaining the 15% certificate in the circumstances of this case. [Paras 9]

The 15% withholding certificate issued by the Competent Authority is unsustainable.

Since almost 85% of the period is already over and the payments made to the petitioner have been subjected to 15% tax, though the transactions prima-facie look to be not exigible to tax, if a certificate of deduction at 2% is issued to the petitioner so that the concern of the Revenue that the petitioner can be subjected to scrutiny assessment can be addressed and some respite can be given to the petitioner as a substantial amount is otherwise being withheld by the respondents.

Final Conclusion: The petition was partly allowed - withholding certificate at 15% was held unsustainable and the respondent was directed to issue a tax withholding certificate requiring deduction at 2% for AY 2026-27 (FY 2025-26).

Continuation of lookout circular after conclusion of proceedings - violation of fundamental rights by indefinite travel restraint - conditioned lifting of lookout circular upon undertaking - continued operation of the lookout circular against the petitioners after completion of the assessment and in absence of any outstanding demand is unlawful and violative of their fundamental rights

HELD THAT: - So far as the proceedings under the Act of 1961 are concerned, they have been culminated and as of today, not even a demand is outstanding against the petitioners. Search was conducted on 17.03.2021 and the respondents if have made any reference under FT&TRD, the proceedings are lying pending for about five years.

If for one reason or the other, the respondents are not in a position to gather or elicit information from the foreign countries, the petitioners’ rights cannot be kept suspended for an indefinite period.

We are, therefore, of the view that the respondents’ action of continuing with the lookout circular is violative of petitioners’ fundamental rights.

In case the petitioners furnish an undertaking that they will not alienate, transfer or otherwise create third party rights qua the assets they possess and own outside India and if so choose to, they will intimate the Income Tax Department at least thirty days in advance. In case such undertaking is furnished, their lookout circular deserves to be set aside.

The lookout circulars issued in relation to petitioners are hereby set aside. Both the petitioners shall furnish an undertaking to the above effect to this Court on or before 15.03.2026 after providing a copy thereof to Mr. Gaurav Gupta, learned Senior Standing Counsel. In case, the petitioners violate the undertaking so furnished, the respondent-Department shall be free to initiate any action as per law including to prefer proceedings of contempt of Court in accordance with law.

Final Conclusion: The petitions were allowed - Court held that continuing the lookout circular after culmination of assessment proceedings and without an outstanding demand infringed the petitioners' fundamental rights, and directed the lookout circulars to be set aside subject to the petitioners furnishing a specific undertaking to safeguard the Department's interest; failure to comply permits appropriate action by the Department.

Validity of assessment order passed u/s 144 r/w Section 144B and consequential demand notice u/s 156 - denial of opportunity to file reply and denial of personal hearing - violation of principles of natural justice - denial of e-submission and video-conference opportunity under faceless assessment - HELD THAT: - The Court found on the record that the petitioner was prevented by the portal from filing her reply to the show-cause notice and that an online grievance lodged on that day was not redressed.

Although the appellate authority had remanded the matter with a direction to afford sufficient opportunity before completing the assessment afresh, no personal hearing was offered and the faceless assessment portal access remained closed.

On these facts the Court concluded that the impugned assessment order was passed in breach of the principles of natural justice. The Court did not examine the merits of the assessment but held that the procedural denial of the opportunity to be heard rendered the assessment invalid and required fresh consideration after granting the opportunity to file replies and be heard. [Paras 10, 11]

Final Conclusion: The writ petition is allowed - faceless assessment order and demand notice are set aside for breach of natural justice and the respondents are directed to re-open assessment proceedings, permit filing of the reply and grant opportunity of hearing before passing fresh orders.

Royalty on account of revenue transfers received - Income deemed to accrue or arise in India - chargeable to Income-tax u/s 9(1)(vi) of the Act and/or under Article 12 of the DTAA - attribution of profits to permanent establishment - beneficial treaty rate for royalties - recomputation of interest under section 234B - withdrawal of limitation ground

Royalty receipts - Whether notional royalty on revenue transfers to OIPL under the SSSA could be brought to tax in the hands of the assessee where no contractual obligation to pay such royalty exists and OIPL had itself offered revenue to tax? - HELD THAT: - The Tribunal followed its earlier common order in the assessee's own case and held that royalty under section 9(1)(vi) and Article 12 of the India-USA DTAA can accrue only where a right to receive royalty arises under contract. The SSSA did not provide for payment of royalty to the assessee on global deals (no duplication in India and RBI restrictions applicable at the relevant time) and there was no material to show any payable obligation. Where OIPL had itself offered the receipts to tax and inter company agreements were amended to pay a specified percentage (56%) which the assessee had offered to tax, treating a larger portion as royalty in the hands of the assessee would amount to double taxation; the notional enhancement was therefore deleted and the assessee's claim allowed. [Paras 2, 7]

Notional royalty on global revenue transfers and on training/consultancy was deleted; the assessee's claim that no additional royalty accrues in the absence of contractual payable obligation is allowed by applying the earlier common order.

Permanent establishment in India - Whether OIPL constituted a Permanent Establishment (fixed place, service PE, equipment PE or agency PE) of the assessee in India so as to attract taxation of business profits in the hands of the assessee? - HELD THAT: - Relying on its detailed earlier findings and applying principles including the 'disposal' test and business activity/service PE thresholds, the Tribunal found that the AO/CIT(A) had not produced cogent evidence of the assessee's control or disposal over premises or equipment, nor of the assessee furnishing services in India for the requisite period, nor of OIPL habitually exercising authority to conclude contracts on behalf of the assessee. OIPL was held to be a separate legal and functional entity, remunerated at arm's length, and therefore not a dependent agent or PE of the assessee. Consequentially, attribution of business profits to a PE did not arise. [Paras 8]

OIPL is not a Permanent Establishment of the assessee; grounds attacking PE and attribution of profits are allowed.

Attribution of profits to permanent establishment - Whether profits were correctly attributed to the alleged PE in India and whether attribution should have followed transfer pricing principles and Article 26 considerations. - HELD THAT: - Having held that no PE exists (see previous issue), the Tribunal observed that attribution of profits does not arise. Where attribution had been made by the authorities, it was founded on assumptions and arbitrary apportionments (e.g., application of a 50% share or limiting deductions to 5%) contrary to the earlier reasoning and the evidentiary record; those attributions were therefore set aside by applying the earlier common order and the consistency principle. [Paras 8]

Attribution of profits to the alleged PE is set aside as there is no PE; consequential additions are deleted.

Interest under section 234B - Whether interest under section 234B should be charged having regard to tax deductible at source and the Mitsubishi Corporation judgment, and whether the AO must recompute interest. - HELD THAT: - Following the Tribunal's common order and the Supreme Court's ratio in Director of Income tax v. Mitsubishi Corporation [2021 (9) TMI 875 - SUPREME COURT] the Tribunal held that prior to FY 2012 13 an assessee could reduce tax deductible/collectible at source while computing advance tax. The Tribunal directed that the AO charge interest under section 234B 'as per law keeping in mind' Mitsubishi and restored the computation to the file of the AO for recalculation. [Paras 13]

Issue of interest under section 234B is remitted to the AO for recomputation in accordance with the Mitsubishi ratio; ground allowed for statistical purposes.

Beneficial treaty rate for royalties - Whether royalty income earned by the assessee from its wholly owned Indian subsidiary is taxable at the beneficial treaty rate and whether education/health cess and surcharge are leviable in addition?- HELD THAT: - Applying Article 12(2) of the India-USA DTAA and the Tribunal's reasoning in related authorities, the Tribunal found that royalties arising in India and paid to a resident of the other Contracting State may be taxed in the recipient's State but, if taxed in the source state, the tax shall not exceed 15% of the gross amount. Given the facts and the Tribunal's findings on PE, the assessee's royalty was to be brought to tax at 15% and health & education cess (and similar additions) were not to be levied on top of that rate. [Paras 27]

Royalty income to be taxed at the DTAA rate of 15%; education and health cess not leviable in addition under the facts of the case.

Final Conclusion: The Tribunal, applying its earlier common order in the assessee's own case and the consistency principle, deleted the notional royalty enhancements and training/consultancy imputations, held that OIPL is not a PE of the assessee so no profits are attributable to a PE, directed recomputation of interest under section 234B in light of Mitsubishi [SUPRA], held that royalty is taxable at the DTAA rate of 15% without additional education/health cess.

Validity ofUnsigned reopening notice - Signing requirement u/s 282A(1) as mandatory for electronic communications - violation of Section 282A(1) - Scope of the word “shall”

HELD THAT: - Tribunal examined the notice issued under section 148 and found it unsigned and without seal despite bearing the name and designation of the issuing officer. Relying on Section 282A(1) read with the deeming/authentication rule in Section 282A(2), the Court held that the statutory use of the word "shall" makes signing of a notice mandatory even when communicated electronically; the deeming provision of authentication under Clause (2) does not dispense with the mandatory signing requirement in Clause (1).

The Tribunal applied its earlier decisions and relevant High Court and Supreme Court precedents addressing similar factual situations and observed that the Revenue placed no evidence to contradict the absence of signature.

Consequentially, an unsigned notice is invalid and void ab initio, and an invalid notice does not vest the AO with jurisdiction to proceed with reassessment under Section 147 (and connected provisions), rendering the resultant reassessment and subsequent proceedings a nullity. [Paras 9, 10, 11]

Final Conclusion: The signed/unsigned issue under Section 282A(1) was determinative: the Tribunal held the unsigned notice under section 148 invalid and void ab initio for AY 2011-12, quashed the reassessment proceedings for lack of jurisdiction, and allowed the appeal.

Cancelling the registration granted u/s 12A r.w.s. 12AA and 12AB applying provision of law introduced only by the Finance Act 2022 w.e.f. 01.04.2022 - Finance Act entrusted jurisdiction upon the PCIT to apply the same with retrospective effect -Retrospective application of Section 12AB(4) - jurisdiction of the Principal Commissioner to cancel registration u/s 12AB(4)

Whether the Principal Commissioner could invoke Section 12AB(4) (as amended by the Finance Act, 2022) to cancel the assessee's registration with retrospective effect to previous years including A.Y. 2013-14 and intervening years. - HELD THAT: - The Tribunal held that the concept of "specified violation" and the procedural code for cancellation under Section 12AB(4) were introduced by the Finance Act, 2022 with effect from 01.04.2022 and, in consequence, cannot be given retrospective operation to years prior to their coming into force. The decision relied on CBDT guidance and consistent coordinate-bench precedents which have held that cancellation under the amended provision can be made only from the assessment year from which Section 12AB(4) is operative (i.e., A.Y. 2023-24 and onwards), and that invoking Section 12AB(4) to cancel registration for earlier years is beyond the jurisdiction conferred by the amendment.

Tribunal found that the show cause notices and cancellation proceedings initiated by the PCIT grounded on Section 12A/12AA and Section 12AB(4) in respect of years prior to 01.04.2022 were therefore founded on an incorrect legal basis; the show cause notices were treated as non est and the ensuing cancellation order was held to be legally unsustainable, arbitrary and a colourable exercise of power. Having decided the legal question in favour of the assessee, the Tribunal found no need to adjudicate the remaining factual or procedural grounds raised by the assessee. [Paras 14, 15, 21, 22, 23]

Impugned cancellation under Section 12A r.w.s. 12AA and Section 12AB(4) insofar as made retrospectively for previous years prior to the operation of the 2022 amendment is quashed

Final Conclusion: The Tribunal allowed the appeal, quashed the impugned order of retrospective cancellation under Section 12A/12AA/12AB(4) (as applied to years prior to the Finance Act, 2022 effective date), set aside the related show cause proceedings, and directed restoration of the assessee's registration.

Denial of registration u/s 80G -Whether the objects are wholly or substantially of a religious nature - applicability of Explanation 3 to section 80G - approval to a "Religious" or a "Religious-cum-charitable" trust - Difference between charitable purpose and religious purpose - As submitted main aim and objective of the trust are the relief of the poor education, medical relief, yoga etc and to run and maintain mandir, dharamshala, satsang is also one of the activities

HELD THAT: - The Tribunal examined the trust deed and financials and found multiple primary objects directed to relief of the poor, education, medical relief, yoga, preservation of environment and monuments, and advancement of objects of general public utility. Clause 5(h) concerning religious activities (running mandir, dharamshala, satsang bhawan, gaushala, bhandara, katha, parvachans) was not the sole or overriding object.

The deed expressly opens benefits to all without discrimination, and the trust's expenditures reflect activities beyond purely religious worship. Explanation 3 to section 80G excludes charitable purpose only where the whole or substantially the whole of the objects are religious in nature; that condition was not satisfied.

The Tribunal distinguished the Supreme Court decision in Upper Ganges Sugar Mill Ltd [1997 (8) TMI 4 - SUPREME COURT] on the facts because the impugned object did not dominate the trust's purposes.

Reliance on the ITAT Rajkot decision SHREEJI EDUCATION AND CHARITABLE TRUST [2025 (7) TMI 1984 - ITAT RAJKOT] was noted to support that non-exclusive or non-overriding religious objects do not attract Explanation 3. On these findings, the denial of registration under section 80G was not sustainable and registration was to be granted.

The denial of registration under section 80G was set aside and the CIT(E) was directed to grant registration to the trust.

Final Conclusion: The appeal was allowed; the Tribunal held that the trust's objects are not wholly or substantially religious in nature and directed grant of registration under section 80G for the assessment year in issue.

Cancellation of registration u/s 10(23C)(vi)/12A for specified violations - Scheme of grant of registration to ‘Charitable Institutions’ - Validity of the cancellation of the assessee's registration under 10(23C)(vi) on the basis of the enquiries undertaken and conclusions drawn by the CIT (Exemptions) - enquiry was started by the ld. CIT(E) on the ground that Department’s Risk Management System flagged huge cash transactions in the accounts of the assessee - assessee society has made payments of lease rent to ‘specified person’

HELD THAT: - Tribunal analysed the show-cause notices, the assessee's detailed replies and supporting bank/fee records, and found that the CIT (Exemptions) drew adverse inferences from minor discrepancies without calling for or verifying primary records and without subjecting the contested transactions to the kind of enquiry appropriate for assessment proceedings. Specific findings of the CIT (Exemptions) - including alleged duplicate fee receipts, advance payment for land, lease/asset treatment and assorted small expenditures - were held to be either factually incorrect, explainable on commercial grounds, or matters that required scrutiny assessment (including examination under section 13(3) where relevant) rather than summary cancellation.

Assessee society has made payments of lease rent to Smt. Vijaya Jebakumar. However, in the balance sheet, society has shown building as the fixed asset. On a careful examination of the finding of ld. CIT(E), we are of the view that ld. CIT(E) has failed to appreciate the controversy. The land was owned by Smt. Vijaya Jebakumar. This was given on lease to the society with a permission to raise building. The society has constructed the building which belongs to the society but her concern was if building is being demolished or something unnatural happened, then quality of her land should not be disturbed or destroyed.

It is pertinent to note that whole of the Cannaught Place in Delhi is on leasehold properties. Showroom owners are not enjoying free hold rights of the land beneath the showroom. Similarly, many houses in the Chandigarh are not free hold. House owners are having leasehold rights from U.T. Administration. This aspect has not been appreciated by the ld. CIT(E). An institution can enter into agreement for availing a long-time lease of the land on which building can be constructed for a specific period. For argument sake, it can be 20 years, 30 years but, it cannot be said that since building is being shown as an asset in the books of the assessee, therefore, it is doubtful whether land under beneath belongs to somebody else which has been given on lease to the assessee society. This aspect must have been examined by the AO in scrutiny assessment and every year, lease money has been allowed to the assessee society. Therefore, we are of the view that ld. CIT(E) has unnecessarily drawn adverse inference on this count.

CIT(E) has nowhere examined whether the land taken on lease could fetch the huge rental as paid by the assessee society in the open market. No such enquiry has been made. Without any enquiry of this nature, no doubt can be expressed on the action of the assessee.

Addition of small-small expenditures of the assessee Society are nothing unusual and cannot be made ground to cancel registration.

Tribunal applied the legal framework in the 15th proviso and Explanation 2 and concluded that the recorded reasons did not satisfy the requirement of being satisfied that one or more specified violations had taken place prior to cancelling approval; therefore the cancellation order was unsustainable and registration was restored. [Paras 10, 13, 14]

Order cancelling registration u/s 10(23C)(vi) set aside and registration restored.

Final Conclusion: The Tribunal allowed the main appeal by setting aside the CIT (Exemptions) order cancelling registration under 10(23C)(vi) and restored the registration.

Penalty levied u/s 270A - computation ofprofits from the insurance business - disallowance made of the expenditure in excess of limit prescribed under the IRDA Regulations read with Section 40C -Deductibility of expenses incurred in excess of IRDA statutory ceiling - Application of Explanation 1 to section 37(1) to expenses reallocated under IRDA regulations - Operation of section 44 and Rule 5 of the First Schedule in computing profits of insurance business -

HELD THAT:- The Tribunal held that profits of insurance business are to be computed under section 44 and the First Schedule, and Rule 5 applies to amounts which are expenditures not admissible under sections 30 to 43B. The excess management expenses were an accounting allocation mandated by the IRDA Regulations (charged to shareholders' Profit & Loss account when overall limits are exceeded) and were incurred wholly and exclusively for business; such reallocation was not an infringement or unlawful purpose attracting Explanation 1 to section 37(1).

Reliance on the principles in General Insurance Corporation of India v. CIT [1999 (9) TMI 3 - SUPREME COURT] establishes that accounts prepared in accordance with the Insurance Act and regulations are binding for tax computation and that artificial accounting allocations do not convert business expenditure into non-expenditure for the purpose of Rule 5. Applying these principles, the Tribunal concluded that the disallowance of the excess management expenses was not justified and directed deletion of the addition made by the Assessing Officer and sustained by the CIT(A). [Paras 13, 14]

Penalty under section 270A - Tribunal held that the penalty founded on that addition cannot subsist and accordingly cancelled the penalty to the extent it related to the deleted addition. [Paras 16]

Final Conclusion: The appeals are allowed - addition disallowing excess management expenses over the IRDA limit is deleted and the penalty under section 270A relating to the deleted addition is cancelled.

Reopening of assessment -Computation of limitation under grandfathering proviso to Section 149(1)(b) - scope of new law v/s old law - Section 148B pari materia with Section 153D - invalidity of mechanical or omnibus approval under Section 148B

Computation of limitation under grandfathering proviso to Section 149(1)(b) - Validity of reopening AY 2012-13 in view of the first proviso to section 149(1)(b) and computation of the block period for searches conducted after 01.04.2021 - HELD THAT: - The Tribunal applied the principle laid down by the Hon'ble Supreme Court in Rajiv Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] and subsequent decisions of the Delhi High Court, concluding that where a search was conducted after 31.03.2021 the first proviso to section 149(1)(b) operates to 'grandfather' the old regime's time limits for assessment years 2021-22 and prior. The ten year outer limit under the amended provision therefore does not operate retrospectively to extend reopening power for years already barred under the pre amendment computation. Applying that construction to the facts - search on 09.02.2022 and notice under section 148 issued on 20.01.2023 - the Tribunal found AY 2012-13 lay outside the block of years permissible under the old regime and was therefore time barred. [Paras 14, 15]

Revenue's appeal for AY 2012-13 dismissed; reopening for AY 2012-13 held barred by limitation under the grandfathering proviso to section 149(1)(b).

Section 148B pari materia with Section 153D - invalidity of mechanical or omnibus approval under Section 148B - Validity of prior approvals under section 148B for assessment years 2013-14 to 2022-23 and whether omnibus/mechanical approvals without examination of seized material sustain the consequent assessments. - HELD THAT: - The Tribunal held that section 148B is pari materia with the earlier section 153D and that the statutory safeguard of prior approval requires independent application of mind by the approving authority, including consideration of the seized material/appraisal and year wise scrutiny. On the facts - consolidated proposals, approvals granted on the same day proposals were received, and absence of transmission of seized material to the approving authority as shown by RTI reply - the approvals were found to be mechanical/omnibus and granted without independent consideration.

The authority granting approval has to apply its mind for "each assessment year" for "each assessee" separately.

Reliance was placed on consistent judicial and coordinate bench decisions (as discussed in the order) establishing that rubber stamping or bulk approvals vitiate the approval and render assessments framed pursuant thereto void.

Approval is granted by Adl. CIT without independent application of mind and without even referring to the seized material based on which additions were proposed in the draft assessment order and thus is invalid approval and consequent final assessment orders passed based on such invalid approval are hereby quashed [Paras 41, 42]

Assessments for AYs 2013-14 to 2022-23 quashed as passed pursuant to invalid approvals under section 148B; the assessee's appeals allowed and revenue's appeals dismissed for those years.

Final Conclusion: The Tribunal dismissed the revenue appeal for AY 2012-13 holding the reopening time barred under the grandfathering proviso to section 149(1)(b). For AYs 2013-14 to 2022-23 the Tribunal held section 148B to be pari materia with section 153D and quashed the assessments as based on mechanical/omnibus approvals lacking independent application of mind; accordingly the assessee's appeals were allowed and the revenue's appeals dismissed.

Validity of AO's jurisdiction u/s 153A(1) - Validity of DVO report u/s 142A(6) - scope of reference to Valuation Officer under Section 142A - AO made addition of alleged unaccounted expenditure in project u/s 69B r.w.s. 115BBE while finalizing the assessment - jurisdiction u/s 153A fourth proviso - escaped income represented as asset - assessment limitation where reference to DVO is time barred - evidentiary value of retracted confessional statement and right to cross examination

Jurisdiction u/s 153A fourth proviso - escaped income represented as asset - AY beyond six assessment years but within ten assessment years - Whether the Assessing Officer had jurisdiction under section 153A read with the fourth proviso and Explanation 2 to assess AY 2013 14 in absence of incriminating material showing escaped income represented as an "asset" or ‘property’ or ‘investment’ - requirement of furnishing of valuation report by DVO to the assessee HELD THAT: - The Tribunal found that AY 2013 14 was a completed/unabated assessment year and, following the Supreme Court precedent Abhisar Buildwell (P.) Ltd. [2023 (4) TMI 1056 - SUPREME COURT] no addition in respect of a completed assessment can be made in absence of incriminating material found during the search. The seized material consisted of cash flow sheets for July 2020 and did not demonstrate incriminating material indicating income of Rs.50 lakhs or more represented in the form of an asset as defined in Explanation 2. There was therefore no cogent material to invoke the proviso and assume jurisdiction for AY 2013 14; jurisdiction was vitiated. [Paras 6, 18]

Assessed jurisdiction under section 153A for AY 2013 14 was invalid; the appeal on this ground is allowed.

Scope of reference to Valuation Officer u/s 142A - Whether reference to the Valuation Officer under section 142A to estimate construction expenditure of a builder was within the statutory scope - HELD THAT: - The Tribunal held that section 142A empowers reference to estimate value of an "asset, property or investment"; construction expenditures of a builder are revenue expenses/stock in trade and do not fall within the categories contemplated by section 142A(1). On the facts there was no prima facie material under section 69 enabling a valid reference; similar attempts at valuation after search had earlier been dropped. Accordingly the reference to DVO for estimating construction cost was held to be not justifyable on the facts. [Paras 7, 15]

Reference to DVO under section 142A to value alleged construction expenditure was not within statutory scope and was invalid.

Validity of DVO report under Section 142A(6) - assessment limitation where reference to DVO is time barred - Whether the DVO's valuation reports, furnished to the Assessing Officer after six months and not served on the assessee within the statutory period, could be relied upon and whether reliance extended assessment limitation for the year - HELD THAT: - Section 142A(6) mandates that the Valuation Officer shall send a copy of the report to the AO and the assessee within six months from the end of the month in which reference was made. The Tribunal interpreted the statutory "shall" as mandatory: where the DVO failed to serve the assessee within that period and issued reports after the six month window, the report became time barred and the DVO functus officio. The Tribunal rejected the proposition that a pending or delayed DVO report could furnish an unlimited extension of limitation under the Explanation to section 153, finding that such a construction would be absurd and contrary to legislative intent. In consequence, the AO could not take cognizance of the time barred DVO reports to sustain additions; without the valuation report nothing remained to support the large additions. [Paras 9, 11, 15]

DVO reports served beyond the six month period under section 142A(6) and not served on the assessee within that period are not admissible against the assessee; the assessment relying on those reports is time barred and cannot be sustained.

Validity of DVO report under Section 142A(6) - scope of reference to Valuation Officer under Section 142A - Whether the addition under section 69B based solely on the DVO valuation for AY 2013 14 (and equally for AYs 2017 18 and 2018 19) was sustainable on merits - HELD THAT: - The Tribunal held that (a) the DVO adopted CPWD rates without properly considering project specific records and the assessee's furnished bills and independent valuer's report; (b) no draft report was confronted to the assessee and the DVO did not serve the report on the assessee within the statutory six month period; and (c) the reference itself was not properly founded for the reasons stated earlier. Given these legal and material defects, the DVO valuation could not be the sole basis for additions u/s 69B. The Tribunal relied on co ordinate and higher decisions to support deletion where additions rest only on an invalid or time barred DVO report and where local PWD rates rather than CPWD rates are to be preferred. [Paras 8, 11, 13, 15]

Additions made under section 69B based solely on the DVO valuation are deleted for AY 2013 14, AY 2017 18 and AY 2018 19.

Evidentiary value of retracted confessional statement and right to cross examination - Whether additions made under section 69A/115BBE (and similar cash receipt additions) based on the statement of an employee that was subsequently retracted and where the assessee was not allowed cross examination could be sustained ?- HELD THAT: - The Tribunal noted that the key statement of the accountant was retracted within a short span and that the assessee sought cross examination which was not granted. The Tribunal held that material collected at the back of the assessee and not confronted (and where cross examination was denied) cannot be used; denial of opportunity to cross examine witnesses amounts to violation of principles of natural justice and vitiates the addition. On the evidentiary balance, affidavits from buyers and absence of independent corroboration left the AO without requisite proof. The Tribunal therefore deleted the cash receipt additions on both legal and factual grounds. [Paras 3, 17]

Additions based on the retracted statement and without affording cross examination are deleted.

Evidentiary value of retracted confessional statement and right to cross examination - Whether the addition under section 68 in AY 2018 19 - treating an unsecured loan as unexplained share/credit - was sustainable - HELD THAT: - The Tribunal applied the law under section 68 requiring the assessee to prove identity, genuineness and creditworthiness of the lender. The assessee produced ledger extracts, bank statements and the lender's returns; the Tribunal held that once the assessee discharged the initial onus, the revenue was required to rebut that evidence. Mere low returned income of the lender without further evidence of sham transactions was insufficient to displace the assessee's proof. Accordingly the AO's finding that the lender borrowed from third parties did not negate the assessee's prima facie case. [Paras 22, 23]

Addition under section 68 in AY 2018 19 is deleted.

Final Conclusion: The Tribunal partly allowed the appeals: additions founded solely on the DVO valuation were deleted because the reference and reports were outside the statutory scope or time barred and could not sustain search year additions; cash receipt additions based on a retracted statement and without affording cross examination were deleted; the unsecured loan addition under section 68 was also deleted. The Assessing Officer is directed to recompute income accordingly for the affected assessment years.

Reopening of assessment u/s 147 v/s 153C - Provisions of section 147 and 153A/153C in a search and seizure related case -documents seized during a search of a third party

Whether the reassessment proceedings initiated under Section 147/148 were valid where the reopening was founded on documents seized in a search from a third party? - HELD THAT:- The Tribunal held that the reopening was founded on documents seized during a search under Section 132 from premises of a third party and, therefore, the special procedure u/s 153C r/w Section 153A applied.

Tribunal followed the jurisdictional High Court decision in Sejal Jewellary [2025 (2) TMI 870 - BOMBAY HIGH COURT] Parshwa Investment, Mumbai [2025 (6) TMI 2099 - ITAT MUMBAI] AND Ghanshaym R. Shah [2025 (4) TMI 1258 - ITAT MUMBAI] which interpret the non obstante clause in Sections 153A/153C as mandating proceedings under Section 153C when seized material pertains to persons other than the searched party. The Court reasoned that Section 153C has overriding effect over the general reassessment provisions and that once incriminating material belonging to another person is seized, the AO must proceed u/s 153C and cannot invoke Section 147/148; invocation of Section 147/148 in those circumstances vitiates the reassessment.

In the present case the Assessing Officer had initiated proceedings under Section 153C which were dropped and thereafter issued notice under Section 148; on the facts this was impermissible and rendered the reassessment proceedings and assessment order void ab initio. The Tribunal therefore quashed the notice and consequential assessment.[Paras 6, 7]

Final Conclusion: The appeal is allowed: the notice under Section 148 and the assessment framed under Section 147 are quashed as void for non invocation of the mandatory procedure under Section 153C read with Section 153A.

Deductibility of interest and dividend received from a co-operative bank u/s 80P(2)(d) - Binding effect of jurisdictional High Court precedent

HELD THAT: - The assessee, a co-operative society, received interest and dividend from Surat Co-operative Bank, which is registered under the Co-operative Societies Act.

The Tribunal applied the decision of the Hon'ble Gujarat High Court in Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd [2022 (1) TMI 1309 - GUJARAT HIGH COURT] holding that co-operative societies receiving interest from co-operative banks are entitled to deduction under section 80P(2)(d).

Assessing Officer and the CIT(A) did not take cognizance of the said jurisdictional High Court precedent.

Deduction under section 80P(2)(d) in respect of interest and dividend received from the co-operative bank is allowed; the assessee's appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, directing that the deduction under section 80P(2)(d) be granted in respect of interest and dividend received from the co-operative bank for Assessment Year 2018-19.

Assessment u/s 153A - Approval u/s 153D - consolidated sanction for multiple years -mechanical or consolidated approval - non independent application of mind

HELD THAT: - The approving authority's letter was examined and found to contain only a general recital that the seized materials and draft orders had been perused and that issues were incorporated in accordance with law. The record did not disclose any antecedent perusal of draft orders or any indication that the approving authority applied independent mind to the draft assessment order for the assessment year in question.

Tribunal noted that the approval granted consolidated sanction for multiple years and relied on judicial authorities holding that approval under Section 153D must be given separately for each assessment year and cannot be a mere ritualistic endorsement.

Given the multiplicity of differing issues across assessment years and the absence of any specific or year wise application of mind in the approval, the consolidated approval was held to be contrary to the statutory mandate and to amount to mechanical rubber stamping, thereby vitiating the assessment framed under Section 153A. [Paras 4, 5, 6, 7, 8]

Final Conclusion: The Tribunal sustained the ground challenging the approval and quashed the impugned assessment u/s 153A for AY: 2017-18 on the basis that the approving authority's consolidated, mechanical approval did not satisfy the statutory requirement of a year wise independent application of mind.

Classification of goods - Modular kitchens in CKD/SKD condition - administrative DGOV furniture valuation guidelines cannot override Section 14 and the Customs Valuation Rules - rejection of transaction value in 11 Bills of Entry - Whether the relationship between the parties influenced the price under Rule 3(3) of the Customs Valuation Rules, 2007.

Classification of modular kitchens imported in CKD/SKD condition as furniture under Chapter 94 - administrative DGOV furniture valuation guidelines cannot override Section 14 and the Customs Valuation Rules - HELD THAT: - The Tribunal held that tariff classification is to be determined at the time and condition of importation; modular kitchen components imported in CKD/SKD form are movable at import and fall within Chapter 94 and Heading 9403 (Chapter Note 2 and HSN Explanatory Notes expressly cover cupboards and unit furniture that may be fixed after import). Reliance on excise decisions addressing post-installation immovability was found misplaced because those cases concerned excise and marketability after erection, not customs classification at import. However, classification under Chapter 94 does not supplant the statutory valuation framework: DGOV administrative guidelines cannot override Section 14 of the Customs Act or the sequence and tests laid down in the Customs Valuation Rules, 2007; application of any administrative benchmark presupposes lawful rejection of transaction value under the Rules. [Paras 7]

Modular kitchens in CKD/SKD condition are properly classifiable under Chapter 94, but DGOV furniture guidelines cannot displace the statutory valuation regime.

Rejection of transaction value must comply with Rule 12 and redetermination under Rule 4 using truly comparable goods - HELD THAT: - The adjudicating authority derived a per kilogram value by dividing total CIF by total weight and compared these figures across consignments; however, the invoices were article- or unit-wise and not on a weight basis, so the per kilogram figure was an analytical construct and not the declared unit of transaction. Rule 4 permits redetermination only by comparison with identical or similar goods imported at the same commercial level and substantially the same quantity, requiring establishment of identity, similarity and commercial comparability. The internal mechanical weight-based comparison failed to account for differences in design, specification, customization and sale conditions and therefore did not satisfy the comparability requirement. Further, although a relationship existed, there was no evidence of price influence (no flow-back, compensatory arrangements or abnormal consideration) beyond commercial discounts and the claimed project-based procurement differences. On these grounds, rejection under Rule 12 and revaluation under Rule 4 could not be sustained. [Paras 8]

Rejection of declared value in the 11 Bills of Entry and enhancement based on per kilogram comparison is set aside as not in accordance with Rule 12 and Rule 4.

Acceptance of transaction value where Rule 3(3)(a) examination shows relationship did not influence price - Acceptance of the declared value in the remaining Bills of Entry was consistent with Rule 3(3)(a) because examination of the circumstances of sale did not show that the relationship influenced the price. - HELD THAT: - The Tribunal noted that the adjudicating authority examined pricing across 72 Bills of Entry over the relevant period and found broad consistency except for the 11 disputed consignments; the Department did not produce contemporaneous third party import data to establish systematic undervaluation in respect of the remaining consignments. Mere existence of a relationship does not shift the burden to reject transaction value; in absence of specific grounds under the Rules, the transaction value must be accepted in line with the Supreme Court principle that transaction value is to be accepted unless rejection is properly justified. Consequently, acceptance of declared values for the remaining Bills comported with Rule 3(3)(a). [Paras 9]

Declared values in the remaining Bills of Entry stand accepted under Rule 3(3)(a).

Final Conclusion: The Tribunal upheld classification of modular kitchens imported in CKD/SKD condition as furniture under Chapter 94 but held that DGOV valuation guidelines cannot override the statutory valuation rules; the rejection and enhancement in respect of 11 Bills of Entry was unsustainable, while acceptance of declared values in the remaining Bills complied with Rule 3(3)(a). The departmental appeals are dismissed and the impugned appellate orders are upheld.

Scope and applicability of Condition No. 104 of Notification No. 21/2002-Customs (S. No. 347B) - grants conditional exemption to aircraft imported for providing non-scheduled (passenger) or non-scheduled (charter) services, subject to approval by the competent civil aviation authority and an undertaking limiting use to the specified purpose - liability to pay duty - aircraft imported by Privilege and confirmed demand of duty - Whether aircrafts imported for non-scheduled (passenger) service can be used for non-scheduled (charter) service.

Use of aircraft imported for non-scheduled (passenger) services for non-scheduled (charter) services - Whether an aircraft imported claiming exemption for non-scheduled (passenger) services could lawfully be used for non-scheduled (charter) services and whether denial of exemption, demand of duty, confiscation and penalties on that basis were justified. - HELD THAT: - The Tribunal, following the reasoning and conclusions in the larger bench decision in VRL Logistics [2022 (8) TMI 720 - CESTAT AHMEDABAD (LB)] held that aircraft imported for non-scheduled (passenger) services can be used for non-scheduled (charter) services. The impugned order denied the exemption under notification No. 21/2002-Cus (S. No. 347B) and imposed demand, confiscation and penalties on the ground that the aircraft was chartered out for exclusive use by another company. Having applied the larger bench authority, the Tribunal found no basis to sustain the finding that use for non-scheduled (charter) services breached Condition 104 and therefore concluded that the consequences imposed in the impugned order were not justified. [Paras 8, 9]

The finding that the aircraft's use for non-scheduled (charter) services violated Condition 104 was rejected and the impugned order was set aside with consequential reliefs.

Final Conclusion: Applying the larger bench decision in VRL Logistics, the Tribunal concluded that use of the imported aircraft for non-scheduled (charter) services did not disentitle the importer from the conditional exemption under notification No. 21/2002-Cus (S. No. 347B) and therefore set aside the impugned order imposing duty, confiscation and penalties.

Seeking quashing of the First Information Report registered by the Central Bureau of Investigation (CBI) against the GTL Limited, unknown directors of the GTL Limited, unknown bank officers and unknown private persons including the vendors and beneficiary group of the GTL Limited - fraudulently obtained various credit facilities from the consortium of banks and diverted/siphoned off major part of the loan amount to various vendor-companies -requirement to identify accused before instituting a roving investigation - distinction between bona fide commercial decisions and criminality - Section 17A bar on investigation of public servants for decisions taken in discharge of official functions without prior sanction.

Quashing of FIR for lack of prima facie case - requirement to identify accused before instituting a roving investigation - HELD THAT:- The Court examined the materials collected during the Preliminary Enquiry and the papers placed by the petitioner, and concluded that the CBI had not identified any accused person despite extensive enquiry. The CBI relied on a source complaint and selective portions of reports but did not demonstrate any prima facie deception, dishonest intention at the inception of transactions, or documentary/oral evidence showing collusion between the petitioner and identifiable bank officials or vendors. Reliance was placed on the settled principle that criminal proceedings should not be allowed to continue where they would amount to a roving or fishing inquiry and that a High Court may quash proceedings at a preliminary stage where allegations are substantially negated by uncontroverted documents. Applying those principles, and having found no material showing the ingredients of cheating or conspiracy against the petitioner, the Court held that the FIR and investigation could not be allowed to proceed further. [Paras 11, 16, 20, 21, 23]

The First Information Report and the investigation in RC2192023E0003 cannot be permitted to continue and are quashed.

Distinction between bona fide commercial decisions and criminality - HELD THAT:- The Court observed that decisions taken by lender banks and financial institutions are commercial in nature and evaluated in the regulatory and supervisory context of the RBI and Ministry of Finance. A dissent by certain lenders does not, by itself, convert a bona fide commercial decision into criminality. The Forensic Audit, JLF minutes and communications with RBI and the Ministry showed that lenders, after consideration, did not classify the account as fraudulent. In the absence of material showing fraudulent intention or misrepresentation by the petitioner to induce the banks at the inception, the Court held that the commercial choices of lenders could not form the basis for criminal prosecution of the petitioner. [Paras 14, 15, 17, 18, 21]

The consortium's commercial decisions do not, on the record, establish criminality against the petitioner and cannot sustain the FIR.

Section 17A bar on investigation of public servants for decisions taken in discharge of official functions without prior sanction - HELD THAT: - The Court noted that Section 17A of the Prevention of Corruption Act places a bar on inquiry or investigation into offences attributable to recommendations or decisions taken by a public servant in discharge of official duties without prior approval of the appropriate authority. The complaint pleaded unknown bank officials of multiple banks but did not allege any breach of extant circulars, guidelines or rules by identifiable public servants nor produce prior sanction. Given the regulatory oversight by RBI and the Ministry of Finance and the absence of allegations showing that bank officials acted dishonestly in contravention of their official duties, the Court treated the Section 17A protection as a relevant constraint on allowing a fishing inquiry against unnamed public servants. [Paras 11, 13, 14]

Allegations against bank officials could not justify investigation in the absence of identification of accused or compliance with the pre-conditions contemplated by Section 17A; this principle reinforced the decision to quash the FIR.

Final Conclusion: On the facts and materials placed before it the High Court concluded that the FIR and investigation were unsustainable - there was no prima facie case against the petitioner, no identified accused, and the record established that lender decisions were commercial and subject to regulatory oversight - and therefore writ petition was allowed and the FIR/investigation quashed.

Fraudulent trading - wrongful trading - intent to defraud creditors - ordinary course of business - preferential transaction

Fraudulent trading - intent to defraud creditors - ordinary course of business - Managerial remuneration paid to the suspended management for FY 2019-2020 falls within Section 66 of the IBC as fraudulent or wrongful trading - HELD THAT: - The Tribunal held that Section 66 requires proof of intention to defraud by cogent and unimpeachable evidence beyond reasonable doubt; mere suspicion or circumstantial allegations are insufficient. The record (IBBI Claims Portal entries, Transaction Audit Report and ledger entries) showed the RP had admitted managerial remuneration claims for FY 2020-2021 and contemporaneous ledgers demonstrated payments and dues for FY 2019-2020. There was no pleading or proof of falsification of records or that the managerial services had not been rendered. The dates of actual withdrawals for the major payment were March 31, 2021 - substantially prior to commencement of CIRP - undermining any inference of last minute siphoning. In the absence of specific, cogent evidence linking the withdrawals to an intent to defraud creditors, the payments for FY 2019-2020 could not be characterised as fraudulent or wrongful trading under Section 66; payments made in the ordinary course for legitimate services do not attract Section 66. [Paras 9, 10, 11, 12]

The characterization of the FY 2019-2020 managerial remuneration as fraudulent or wrongful trading under Section 66 is not sustained.

Wrongful trading - intent to defraud creditors - Whether a specific cheque withdrawal dated 30.06.2022 (cleared after CIRP commencement) forming part of the managerial remuneration requires restitution - HELD THAT: - The Tribunal found that the withdrawal by cheque on 30.06.2022 was cleared after commencement of CIRP and that the appellant must have had knowledge that insolvency was imminent or inevitable. Unlike the other payments which were demonstrably earlier and supported by ledgers, this particular withdrawal cannot be ruled out as made without awareness of the impending insolvency and therefore did not satisfy the threshold of bona fide payment in the ordinary course. Consequently, this sum was held not to be protected and deserves restoration to the corporate debtor. [Paras 11, 12]

The sum withdrawn by cheque on 30.06.2022 must be refunded to the corporate debtor.

Fraudulent trading - ordinary course of business - Whether routing of receipts through a sister concern establishes fraudulent intent under Section 66 - HELD THAT: - The Tribunal observed that routing revenue or receipts through a sister concern is a common business practice and, by itself, does not establish fraudulent intent. To treat such routing as evidence of siphoning or fraud requires specific pleading and proof which were absent. Therefore, the mere fact of receipt from a sister concern did not substantiate an allegation of fraudulent trading. [Paras 13]

Routing of receipts through a sister concern does not by itself establish fraudulent intent.

Preferential transaction - fraudulent trading - Whether failure to deposit statutory dues (such as TDS) converts managerial remuneration payments into fraudulent or preferential transactions - HELD THAT: - The Tribunal held that inability to meet tax or statutory obligations during financial distress is not determinative of a dishonest design to defraud creditors. Payments for managerial services and non payment of statutory dues belong to different categories; treating non deposit of statutory dues as conclusive evidence of fraudulent intent would be impermissible. The threshold for Section 66 demands proof of deliberate intent to cause wrongful loss to creditors, which was not established. [Paras 14]

Non payment of statutory dues does not, without more, convert managerial remuneration payments into fraudulent or preferential transactions.

Preferential transaction - fraudulent trading - Whether the Adjudicating Authority erred by conflating preferential transactions with fraudulent/wrongful trading - HELD THAT: - The Tribunal noted that preferential transactions and fraudulent/wrongful trading are distinct legal concepts within the IBC, each requiring different material facts and standards of proof. The impugned order's interchangeable use of the terms was improper; specific material facts must be pleaded and proved separately for Section 43 (preferential transactions) and Section 66 (fraudulent/wrongful trading). [Paras 15]

The Adjudicating Authority erred in conflating preferential transaction analysis with fraudulent trading; the two concepts must be treated separately.

Final Conclusion: The impugned order holding the questioned withdrawals as vitiated by fraud under Section 66 is set aside in relation to the managerial remuneration payments for FY 2019-2020, except that the cheque withdrawal dated 30.06.2022 is directed to be restored to the corporate debtor and the appellants have agreed to restore the other admitted post CIRP amount; the appeal is disposed of accordingly.

Condonation of delay - imposition of costs on financial creditors in Section 12A withdrawal

Condonation of delay - Application for condonation of 14 days' delay in filing the appeal - HELD THAT: - The Tribunal considered the explanation that after receipt of the Adjudicating Authority's order imposing costs the Bank referred the matter to its head office and obtained approval before filing the appeal. The Tribunal found that sufficient cause was shown in the application and therefore the delay in filing the appeal was excused. [Paras 2, 3, 4]

Delay of 14 days condoned.

Imposition of costs on financial creditors in Section 12A withdrawal - Validity of the Adjudicating Authority's imposition of costs of Rs. 5,00,000 on each financial creditor while allowing the Section 12A withdrawal - HELD THAT: - The Tribunal examined the facts that the Corporate Debtor entered into settlements with financial creditors after an interim order directing collation of claims and withholding constitution of the CoC, and that no other creditor had filed objections to the Section 12A application. While noting the Supreme Court's decision in Glass Trust Company (LLC) recognising other creditors' right to object, the Tribunal observed that no objections were recorded in the impugned order. The Tribunal concluded there was no valid reason recorded in the impugned order for imposing costs on the financial creditors merely for entering into settlement and facilitating withdrawal, and that the Adjudicating Authority could have taken other courses of action if it considered the withdrawal inappropriate. Accordingly, the imposition of costs was found to be unjustified. [Paras 11, 12, 13, 14, 15]

Impugned order insofar as it imposed costs of Rs. 5,00,000 on each financial creditor is set aside.

Final Conclusion: The application for condonation of delay is allowed and the appeals are allowed insofar as the Tribunal has set aside the direction to impose costs of Rs. 5,00,000 on each financial creditor in the impugned order.

Condonation of delay under Section 61 of the IBC - delay of 103 days in filing an appeal - scope of Section 198 regarding condonation of delay by the Adjudicating Authority - locus of the Insolvency and Bankruptcy Board of India to file an appeal.

Condonation of delay under Section 61 of the IBC - scope of Section 198 regarding condonation of delay by the Adjudicating Authority - HELD THAT: - Section 61(2) prescribes a 30 day period for filing appeals, with a discretionary extension by this Tribunal of up to 15 days. Section 198 empowers the relevant Adjudicating Authority to condone delay where the Board fails to perform an act within a period specified under the Code; it is engrafted to address delays in the Board's performance of time bound statutory functions (for example, the ten day timelines in Sections 16(4), 27(4)/(6) and 82(4)). The non obstante opening of Section 198 is contextual and confined to condonation of delays in performance of Board functions governed by the Code, and does not operate so as to enlarge this Tribunal's statutory power to condone appeals beyond the maximum period permitted by Section 61(2). Although this Tribunal can, in general, exercise some jurisdiction similar to the Adjudicating Authority, the specific purpose and object of Section 198 indicate it was not intended to override the limitation scheme for filing appeals under Section 61. The present delay of 103 days therefore exceeds the maximum condonable period under Section 61(2) and cannot be cured by invoking Section 198. [Paras 4, 10, 11, 20, 26]

Delay of 103 days cannot be condoned; IA No.391 of 2026 and the memo of appeal are rejected on limitation grounds.

Locus of the Insolvency and Bankruptcy Board of India to file an appeal - Whether the IBBI has locus to file an appeal against an order of the Adjudicating Authority. - HELD THAT: - While the present determination turns on limitation, the Tribunal accepted the settled proposition that the IBBI, being a statutory regulator entrusted with wide powers under the Code (for example Section 196 and other provisions), cannot be denied locus to file an appeal when it is aggrieved by an order. The Court expressly refrained from deciding ancillary consequences of locus for the merits of the appeal, confining its observation to recognition of the Board's entitlement to be an aggrieved party for purposes of filing appeals. [Paras 25]

The IBBI's locus to file an appeal when aggrieved is recognised, but that recognition does not overcome the limitation bar in this case.

Final Conclusion: The application for condonation of delay is rejected as the appeal was filed beyond the maximum condonable period under Section 61(2); consequently the memo of appeal is dismissed. The Tribunal noted, without deciding merits, that the IBBI has locus to appeal when aggrieved.

Imposition of penalty - Liabilities of a company struck off the register continue and remain enforceable - vicarious liability -liability of legal representatives under section 43 of FEMA continues for adjudication though limited to estate - penalty under section 13(1) of FEMA - requirement of mens rea - principle of proportionality in imposition of penalty.

Effect of striking off a company on liabilities and enforceability of penalties. -HELD THAT: - The Tribunal examined Chapter XVIII of the Companies Act, 2013 (Sections 248 and 250) and held that even after a company is struck off and deemed dissolved, its liabilities and obligations continue and may be enforced as if the company had not been dissolved; sufficient provision must be made for discharge of liabilities and assets remain available for that purpose. Consequently, penalties imposed on the struck off company in the impugned order subsist unless a contrary judicial order is obtained. [Paras 3, 4]

Penalties imposed on the struck off company continue as its liability and remain enforceable.

Liability of legal representatives under section 43 of FEMA continues for adjudication though limited to estate - HELD THAT: - The Tribunal reproduced the adjudicating authority's findings that the deceased was personally in charge and responsible for the contraventions (quoting the impugned order paragraphs relied upon). It noted that proceedings do not abate on death and legal representatives may represent the deceased in adjudication. While counsel argued that liability of a legal representative is limited to the inheritance or estate and that the appellants were neither official receivers nor assignees, the Tribunal accepted the AA's application of section 43 to continue adjudication against legal representatives and treated the individual liability as subject to the legal framework governing such representatives. [Paras 6]

Adjudication and imposition of penalty against legal representatives in terms of Section 43 is permissible; liability continues to be cognisable against them within the limits of law concerning legal representatives.

Penalty under section 13(1) of FEMA is civil in nature and does not require mens rea - Whether mens rea is an essential element for imposing penalty under Section 13(1) of FEMA. - HELD THAT: - Relying on settled precedents (including SEBI v. Shriram Mutual Fund [2006 (5) TMI 191 - SUPREME COURT] and earlier decisions applying similar principles under FERA), the Tribunal held that penalties under Section 13(1) of FEMA are civil in nature and attracted upon proof of contravention; the presence or absence of guilty intention (mens rea) is irrelevant unless the statute expressly requires it. The Tribunal rejected reliance on Hindustan Steel [1969 (8) TMI 31 - SUPREME COURT] (a criminal/quasi criminal context) as inapposite to civil penalties under FEMA. [Paras 7, 8]

Mens rea is not required to be established for imposing penalty under Section 13(1) of FEMA.

Principle of proportionality in imposition of penalty - Whether the penalties imposed on the individual appellants should be reduced on principles of proportionality. - HELD THAT: - Having considered the nature of the contraventions, the appellants' submissions as to inadvertence and proportionality, and the quantum imposed by the adjudicating authority, the Tribunal exercised its power to moderate the penalties. In the interests of justice and applying proportionality, the Tribunal reduced the penalties on each individual appellant to the specified reduced amount and directed adjustment of pre deposits made earlier. [Paras 9, 10, 11]

Penalties on the individual appellants reduced to the quantum determined by the Tribunal and pre deposits adjusted accordingly.

Final Conclusion: The appeals are partly allowed: the Tribunal affirmed that liabilities of the struck off company continue and that adjudication against legal representatives under Section 43 of FEMA is maintainable; it held that penalties under Section 13(1) are civil and do not require mens rea; applying proportionality, the Tribunal reduced the penalties payable by each individual appellant to the reduced amount and ordered adjustment of the pre deposits. The company level penalties as imposed in the impugned order remain intact subject to any higher forum order.

Entitlement to regular bail under Section 45 - Satisfaction of the twin conditions - parity with co-accused - laundering of proceeds of crime generated through illegal liquor operations - investigation substantially complete - criminal syndicate comprising senior bureaucrats, political functionaries, intermediaries and private persons, which manipulated the excise policy and liquor procurement system to generate illegal commissions and unaccounted income.

Satisfaction of the twin conditions under Section 45 of the PMLA-HELD THAT: - The Court applied the statutory test under Section 45 and held that a prima facie satisfaction - not a finding of acquittal - is required. Having weighed the material on record (statements under Section 50 PMLA, digital chats, diary entries, prosecution complaints) against factors such as the stage of investigation, absence of direct overt acts linking the applicant to a money trail in the main charge-sheet, and the ability to secure presence by conditions, the Court concluded that both limbs are met. The Court found prosecutorial apprehensions of guilt and risk of reoffending to be generalized and addressed by stringent bail conditions; consequently, the statutory twin conditions were satisfied on a prima facie basis and bail was appropriate. [Paras 95, 98, 99]

The twin conditions under Section 45 PMLA are prima facie satisfied and entitle the applicant to bail subject to conditions.

Parity with co-accused - Whether parity with co-accused who have been enlarged on bail requires similar treatment of the applicant - HELD THAT: - The Court recognised parity as a relevant consideration in bail adjudication. It observed that several principal accused have already been granted bail and that the Supreme Court directed consideration of the applicant's bail keeping those prior orders in mind. On prima facie appraisal the Court concluded that consistency and parity weighed in the applicant's favour, particularly because investigation qua the applicant was substantially complete and the principal conspirators had been released. The Court held that continued detention inconsistent with parity would warrant reconsideration and favoured release subject to stringent conditions. [Paras 89, 90]

Parity with co-accused who have been granted bail militates in favour of enlarging the applicant on bail.

Investigation substantially complete - speculative apprehension of tampering insufficient - Whether the stage and completeness of investigation, custody duration and the nature of tampering fears justify continued custody - HELD THAT: - The Court found that the prosecution complaint has been filed and that investigation qua the applicant was substantially complete; no further custodial interrogation was shown to be necessary. The period of custody was limited (approximately two months) and the prosecution's apprehension of tampering was general and lacking particularized material. The Court held that such speculative fears do not justify continued detention where investigation is complete and where tailored bail conditions (reporting, non-contact with witnesses, passport surrender, etc.) can mitigate risks. The Court emphasised that gravity of the offence alone cannot override Article 21 safeguards when the statutory twin conditions are otherwise satisfied. [Paras 86, 87, 92, 93]

Completed investigation and absence of specific tampering material negate the need for continued custody; risks can be mitigated by stringent bail conditions.

Final Conclusion: On a prima facie appraisal the Court was satisfied that the twin conditions of Section 45 PMLA are met, parity with co-accused and the substantially complete stage of investigation favour release, and speculative tampering fears can be addressed by stringent conditions; accordingly the bail application is allowed and the applicant is to be released on bail subject to the conditions directed by the Court.

Provisional attachment of proceeds of crime - bitcoin- based scam operated - possession by a person not named as accused - unexplained repayment of loan as indicium of layering - death of the principal accused - funds collected from the investors on false promises were identified as the proceeds of crime and were laundered through layered banking transactions, acquisition of movable and immovable properties, and incorporation and operation of shell entities in order to conceal the same - apprehension of alienation as basis for provisional attachment.

Provisional attachment of proceeds of crime - HELD THAT: - The Tribunal found that funds collected through the gainbitcoin.com scheme were proceeds of crime and were laundered through layered transactions and acquisition of movable and immovable properties. Material, including admissions by Amit Bhardwaj and tracing of bank transactions, supported the finding that the properties now held by the appellants derived directly or indirectly from the criminal scheme. The Adjudicating Authority therefore correctly characterised the impugned properties as proceeds of crime and justified confirmation of the provisional attachment. [Paras 20, 21, 23, 26]

Provisional attachment confirmed as properties represented proceeds of crime.

Possession by a person not named as accused - Provisional attachment is permissible where property in possession of a person who is not yet named as an accused, if material indicates it is proceeds of crime. - HELD THAT: - Relying on the statutory sweep of Section 5(1) of the Act and the Apex Court's exposition in the case of Vijay Madanlal Choudhary Vs. Union of India [2022 (7) TMI 1316 - SUPREME COURT (LB)] the Tribunal held that the authority to provisionally attach property is not confined to property held by an accused named in FIR/ECIR. The trigger is material indicative of any person being in possession of proceeds of crime; such person may later be made an accused. The appellants' non-inclusion in the FIR/ECIR did not bar attachment where the property was found to be tainted. [Paras 24]

Attachment valid despite appellants not being named accused.

Unexplained repayment of loan as indicium of layering - Repayment of a loan within a short period from undisclosed cash deposits can be treated as manipulation to layer proceeds of crime and justify attachment. - HELD THAT: - The Tribunal accepted that although the purchase was shown as funded by a bank loan, the unusually swift repayment within four months by cash deposits-without disclosed source-indicated that the loan was used as a vehicle to disguise tainted funds. Admissions in statements and bank analysis corroborated that repayment arose from proceeds of the criminal scheme, justifying treatment of the property as acquired through laundering. [Paras 21, 22, 23]

Undisclosed rapid loan repayment treated as layering; property attributed to proceeds of crime.

Death of accused does not automatically vitiate attachment without order of abatement - The appellants' contention that proceedings abated on death of Amit Bhardwaj was not established and does not, on the record, invalidate provisional attachment. - HELD THAT: - The Tribunal noted absence of any order recording abatement of criminal proceedings on the file and observed that mere death of the principal does not ipso facto nullify attachment steps unless abatement is formally recorded. The respondents also indicated that the appellants may be arrayed as accused for laundering; in those circumstances the challenge based on alleged abatement failed. [Paras 25]

No interference on ground of death/abatement where no order of abatement exists.

Apprehension of alienation as basis for provisional attachment - Apprehension of alienation of property in a person's possession is a sufficient basis for invoking provisional attachment under the Act. - HELD THAT: - The Tribunal held that when property is held by the person against whom attachment is sought, there naturally exists a risk of alienation; that risk justified invoking Section 5(1). Provisional attachment operates as a protective measure pending trial and final adjudication under the scheme of the Act, and the mere occupation of the property by the appellant did not negate the statutory basis for attachment. [Paras 27]

Apprehension of alienation properly relied upon to justify provisional attachment.

Final Conclusion: On the material before it, including admissions and bank-trace analysis, the Tribunal found the Adjudicating Authority correctly concluded the impugned properties were proceeds of crime, held that attachment may be made against persons not named in the FIR where material so indicates, treated unexplained rapid loan repayment as evidence of layering, rejected the abatement argument for lack of record, and upheld provisional attachment justified by apprehension of alienation; appeals dismissed.

Proceeds of crime - attachment of property of equivalent value - computation of 180 days for confirmation of provisional attachment - fair market value for value - definition of 'value' under Section 2(zb) - definition of "proceeds of crime" -Offence under Section 120-B, 467 and 471 IPC against M/s National Spot Exchange Ltd. (M/s NSEL) and its Directors apart from key officials of the company, 25 defaulters and others.

Proceeds of crime - The appellant received proceeds of crime and the provisional attachment of his properties was justified on the basis of traced money flows and failure to satisfactorily disclose source. - HELD THAT: - The Tribunal found on the material in the investigation, statements recorded under section 50 and bank/payment records that the appellant received Rs.10.50 crores from M/s Vihang Aastha Housing Projects LLP which were part of funds siphoned from NSEL through Aastha group. Although the appellant paid certain sums to farmers (accepted to the extent of approx. Rs.1.34 crores), the respondents were able to trace the balance to acquisition of properties by the appellant and his wife. The appellant failed to disclose a bona fide source for acquisition when issued notice under Section 8(1), and the Adjudicating Authority therefore correctly treated the receipts as proceeds of crime for the purpose of provisional attachment. [Paras 17, 20, 21]

Provisional attachment confirmed as the appellant received proceeds of crime and failed to satisfactorily disclose legitimate source.

Attachment of property of equivalent value - Properties acquired prior to the commission of the scheduled offence may be provisionally attached as property of equivalent value where the actual proceeds are not traceable. - HELD THAT: - Examining the definition of 'proceeds of crime' and relevant precedents, the Tribunal accepted the three limb construction that permits attachment of property of equivalent value when tainted property is not traceable or has vanished. The Tribunal relied on the Delhi High Court's approach in Axis Bank [2019 (4) TMI 250 - DELHI HIGH COURT] and subsequent authorities and concluded that attachment of prior acquired properties is permissible subject to safeguards and assessment of equivalence in value; hence even if some properties were acquired before the crime period, provisional attachment can be sustained in the circumstances where proceeds could not be traced and were siphoned off. [Paras 23, 24, 25]

Attachment of properties acquired before the crime is permissible as equivalent value attachment where proceeds are not traceable; therefore the challenge to attachment on this ground fails.

Fair market value for value under the Act - The value for attachment was correctly assessed by reference to the sale deed/ acquisition date fair market value under the Act and the provisional attachment was not in excess of the proceeds of crime. - HELD THAT: - The Tribunal applied the definition of 'value' under Section 2(zb) - fair market value on date of acquisition (or date of possession if acquisition date cannot be determined) - rather than current market value. Having accepted that the appellant received Rs.10.50 crores and utilised approx. Rs.1.34 crores for payments to farmers, the value of properties attached (totaling Rs.3,74,71,900/- as per acquisition values) was found to be less than the proceeds attributable to the appellant. Consequently the contention that attachment exceeded proceeds was rejected. [Paras 22, 25]

Attachment value was correctly computed under the Act and is not excessive relative to proceeds of crime in appellant's hands.

Computation of 180 days for confirmation of provisional attachment - The confirmation of the provisional attachment was within the 180 day period after excluding the Covid 19 exclusionary period directed by the Supreme Court, so the attachment did not lapse under Section 5(3). - HELD THAT: - The provisional attachment was dated 03.06.2021 and the confirmation was dated 08.02.2022. The Tribunal held that the period from 15.03.2020 to 28.02.2022 must be excluded for computation of limitation in light of the Supreme Court's orders in the suo motu proceedings extending/excluding Covid period for judicial and quasi judicial timelines. Applying that exclusion, the confirmation fell within 180 days and therefore Section 5(3) did not operate to render the provisional attachment ineffective. The Tribunal considered and distinguished contrary High Court views and relied on authority holding the exclusion applicable to PMLA timelines for termination/confirmation of attachment. [Paras 26, 27]

Provisional attachment remained effective because the Covid exclusionary period is to be excluded when computing the 180 day limit for confirmation.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority's confirmation of the provisional attachment was upheld: the appellant was found to have received proceeds of crime, the value and extent of attachment were proper, properties acquired prior to the crime may be attached as equivalent value where proceeds are not traceable, and the confirmation was within the 180 day period after excluding the Covid 19 suspension period.

Invocation of extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994 - bona fide belief regarding applicability of Notification No.30/2012 - taxable services such as Rent-a-Cab Services etc. falling under as defined under Section 65B(44) of the Act read with Section 66D of the Finance Act, 1994 - suppression of facts / wilful misstatement as prerequisite for extended limitation.

Invocation of extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994 - bona fide belief regarding applicability of Notification No.30/2012 - HELD THAT: - The Tribunal found that the appellant had entertained a bona fide belief that Notification No.30/2012 placed the liability on the service recipient and that the impugned order did not record any reason to hold that possession and control of vehicles had been transferred to recipients. In the absence of documentary evidence contradicting the appellant's position and given that the appellant had produced some records (Form 26AS, invoices, ITR, partial ST-3), the appellant's belief furnished a plausible basis for non-payment. Applying settled principles in the decisions relied upon by the Tribunal (including Uniworth Textiles Ltd. [2013 (1) TMI 616 - SUPREME COURT] and authorities following the requirement that the proviso applies only where there is fraud, collusion, wilful misstatement or suppression of facts), the Tribunal held that mere non-payment or filing incomplete returns does not, without more, establish the positive mischief required to invoke the extended five-year period. Where the department seeks to invoke the proviso it must specifically allege and prove the nature of mala fide conduct; the impugned proceedings did not demonstrate such specific averments or positive acts of suppression with intent to evade tax. Consequently, the demand could not be sustained beyond the normal limitation period by relying on the proviso to Section 73(1). [Paras 4]

Extended limitation under the proviso to Section 73(1) could not be invoked and the demand based on the extended period is unsustainable.

Final Conclusion: The appeal is allowed on the ground that invocation of the extended period of limitation under the proviso to Section 73(1) was unwarranted in the absence of material showing fraud, collusion, wilful misstatement or suppression of facts and therefore the demand premised on the extended period cannot be sustained.

Rejection on ground of limitation beyond scope of show-cause notice - beyond the period of 6 months prescribed - refund claims filed under Notification No.9/2009-ST (as amended by Notification No.15/2009-ST)​​​​​​​ - show-cause notice as foundational pleading requirement.

Rejection on ground of limitation beyond scope of show-cause notice - HELD THAT:- Both the original authority and the Commissioner (Appeals) rejected the refund claims on the ground that they were filed beyond the six-month period prescribed by the Notification. The show-cause notices issued to the appellant, however, did not allege that the refunds were barred by limitation; they related to the use of services within the SEZ and deficiencies in documentary proof. The Tribunal applied the settled principle that the allegations in the show-cause notice form the foundation of the case and an order cannot be sustained on a ground not pleaded in the notice, relying on the reasoning of the Supreme Court in cases in the case of Commissioner of Central Excise Versus Gas Authority of India Ltd. [2007 (11) TMI 276 - SUPREME COURT]. Since the limitation ground was not part of the show-cause notices, the authorities erred in rejecting the claims on that basis. [Paras 5, 6]

Impugned orders rejecting the refund claims on the ground of limitation are unsustainable and are set aside.

Final Conclusion: The Tribunal set aside the impugned orders and allowed the appeals because the rejection of refund claims on limitation was beyond the scope of the show-cause notices; other grounds were left unexamined by the lower authority.

Interpretation of Rule 3(5) of the CENVAT Credit Rules, 2004 - inapplicability of Section 11D to inter unit stock transfers - denial of CENVAT credit to recipient units K-7 and E-8 - reversal of cenvat credit - unjust enrichment - extended period of limitation and penalties imposed on D-7, K-7 and E-8 - Whether the D-7 Unit contravened Rule 3(5) of the CENVAT Credit Rules, 2004 by reversing excess credit while clearing inputs “as such” to its sister units and whether such excess reversal attracts recovery under Section 11A read with Rule 14 or under Section 11D of the Central Excise Act, 1944.

Interpretation of Rule 3(5) of the CENVAT Credit Rules, 2004 - inapplicability of Section 11D to inter unit stock transfers - recovery under Rule 14 read with Section 11A -HELD THAT: - The Court held that Rule 3(5) requires payment equal to the credit availed when inputs are removed "as such" and thus mandates a minimum equal reversal to secure revenue neutrality; the rule does not expressly prohibit reversal of an amount greater than the credit originally availed and no prohibition can be implied. Fiscal liabilities must be strictly construed; absent express statutory language, excess reversal cannot be equated with wrongful utilization or short reversal. Section 11D applies only where an assessee has collected an amount from a buyer representing duty and retained it; it is an anti unjust enrichment provision, not a general recovery mechanism. Inter unit transfers within the same legal entity involve no sale to a buyer, no collection from an external buyer and no unjust enrichment; therefore Section 11D is inapplicable. The facts show reversal equal to or greater than original credit and no shortfall or wrongful utilization; accordingly there is no basis for recovery under Rule 14/Section 11A or for invoking Section 11D. [Paras 7]

D 7 did not contravene Rule 3(5); recovery under Rule 14/Section 11A and invocation of Section 11D are not sustainable in the factual matrix of inter unit transfers.

Preservation of credit chain where supplier's debit remains undisturbed - denial of input credit to recipient when supplier's payment stands - HELD THAT: - The Tribunal applied the established principle that recipient units cannot be denied credit where the supplier has paid duty (or made debit entries) and such payment/debit has not been refunded or set aside, since denial would amount to double recovery and break the credit chain. Reliance on precedents holding that credit cannot be refused while duty stands at the supplier end supported the conclusion. There was no allegation of bogus invoices or fraud; the supplier's debits were reflected in proper invoices and remain unchallenged or unrefunded, hence the recipients' credits cannot be denied. [Paras 8]

Denial of credit to K 7 and E 8 is legally unsustainable while the debit recorded by D 7 remains unreduced or unrefunded; the confirmed demands against K 7 and E 8 cannot stand.

Penalties imposed on D 7, K 7 and E 8 are sustainable. - HELD THAT: - The Tribunal observed absence of suppression, fraud or intent to evade and found the controversy to be interpretational regarding Rule 3(5) and inter unit transfer mechanics. Where the substantive demand is set aside, or where the dispute is one of interpretation, penalty provisions should be strictly construed and ordinarily do not survive. Precedents were relied upon to the effect that penalty cannot subsist when the demand itself fails. Applying these principles, the penalty imposed on D 7 was set aside and the penalties on K 7 and E 8 were also deleted. [Paras 9]

Penalties levied on D 7, K 7 and E 8 are unsustainable and are set aside.

Final Conclusion: The Tribunal dismissed the Departmental appeal, upheld the Order in Original dropping the demand against D 7, set aside the demands confirmed against K 7 and E 8 and quashed the penalties imposed on all three units, allowing the assessee appeals.

Conditional exemption under Notification No. 22/2003-CE - Attraction of duty on electricity generated from duty-free furnace oil and supplied to SKS Mills (after it became DTA) - 100% Export Oriented Unit (EOU) - internal job work transfer or constitutes supply to DTA - extended period of limitation for suppression of material facts - penalty under Section 11AC for wilful suppression - manufacture of cotton terry towels falling under Chapter 63 of the First Schedule to the Central Excise Tariff Act, 1985.

Attraction of duty on electricity supplied to DTA where fuel procured duty free under EOU notification - Whether electricity generated from duty-free furnace oil and supplied to SKS Mills (after it became DTA) attracts duty under Notification No. 22/2003-CE? - HELD THAT:- The third proviso to paragraph 7 of Notification No. 22/2003 CE and Appendix 14 I C read with paragraph 6.16 of the Hand Book of Procedures regulate supply of power from EOUs to the Domestic Tariff Area and require payment equivalent to duty foregone on raw materials used for generation of power supplied to DTA. Electricity itself is not excisable, but liability arises from the conditional exemption. SKS Mills exited EOU status in October 2010; thereafter supplies of electricity from the appellant's captive plant could not be treated as transfers between EOUs. The exemption must be strictly construed and substantial or outcome based compliance (i.e., eventual export use) cannot validate non observance of the notification conditions. Applying these principles, the Tribunal held that the continued supply of electricity to SKS Mills after its conversion to DTA attracted duty under the notification. [Paras 9, 10, 11, 13, 18]

Answered in favour of the Department; duty liability under Notification No. 22/2003 CE is attracted.

Unit wise operation of EOU scheme - transfer to DTA not excused by internal job work or corporate integration - HELD THAT: - The EOU scheme operates on a unit wise basis; once SKS Mills ceased to be an EOU, its legal character changed and movement of power from the EOU enclave into the Domestic Tariff Area falls within the regulatory concept of 'sale into DTA' under the proviso, irrespective of commercial consideration or corporate integration. The notification makes no exception for electricity supplied to a DTA unit as part of job work for the EOU. Decisions on CENVAT credit and the concept of 'factory' relied upon by the appellant were found inapposite because the present dispute arises under a conditional exemption notification with distinct regulatory requirements. [Paras 12, 14, 15]

Answered in favour of the Department; the transaction legally amounted to supply to a DTA unit, not an internal job work transfer.

Extended period of limitation for suppression of material facts - HELD THAT: - The appellant endorsed the exit order but did not disclose that electricity generated from duty free inputs continued to be supplied to the recipient after it became a DTA unit, nor did it obtain requisite permissions or amend procurement declarations. Suppression includes failure to disclose material facts required for correct assessment. In light of precedents on suppression, the Tribunal found that the conduct amounted to wilful contravention with intent to evade duty and sustained invocation of the extended limitation period. [Paras 16, 19]

Extension of limitation is legally sustainable on account of suppression of material facts.

Penalty under Section 11AC for wilful suppression - HELD THAT: - Section 11AC provides for penalty equal to duty where non payment is by reason of fraud, suppression or wilful misstatement. Given the appellant's continued availing of duty free fuel despite knowledge of the recipient's change of status and absence of requisite permissions or disclosure, the Tribunal found the imposition of penalty proper. The penalty is upheld subject to the statutory option for reduced penalty as provided by law. [Paras 17, 19]

Penalty under Section 11AC upheld.

Final Conclusion: The Tribunal upheld the adjudicated demand, interest and penalty: electricity supplied to SKS Mills after its exit from the EOU scheme attracted duty under Notification No. 22/2003 CE; the supply was not a job work transfer; the extended period of limitation and penalty under Section 11AC were sustainable; the appeal is dismissed.

Manufacture of Pan Masala and Gutkha under the brand name of ‘Gold Mohar’ -sale proceeds of unaccounted goods removed clandestinely - Seizure of Cash sums from the factory and residential premises - Onus of proof for confiscation of seized currency - requirement of corroborative evidence - inadequacy of theoretical/input-output formula without corroboration - absence of willful suppression for levy of penalty.

Onus of proof for confiscation of seized currency - HELD THAT: - The Tribunal held that the Department failed to discharge the burden to show that the seized currency represented sale proceeds of clandestinely removed excisable goods. The Appellants produced documentary material and affidavits explaining the sources of the cash (sale of vehicle, sale of bullion, agricultural receipts, etc.), which were not specifically controverted by the Department. The Tribunal applied authorities holding that mere non-accountal is insufficient and that the Revenue must lead affirmative tangible evidence to connect seized currency to clandestine removals. In absence of such corroboration and given that explanations were supported by documents and not rebutted, confiscation could not be sustained. [Paras 14, 24]

Seizure and confiscation of Rs.15,97,000/- from residence and Rs.3,46,000/- from factory office are set aside.

Requirement of corroborative evidence for clandestine removal - inadequacy of theoretical/input-output formula without corroboration - HELD THAT:- The Tribunal found that Basudeo Prasad & Sons were not legally required to maintain the accounts in the form criticized by the Department and that the dealer had produced 14 invoices, entries in PLA register and Pappu Long Books showing the goods were duty paid. The Department had not considered these documents and relied on conjecture about records being in pencil and alleged mismatch with stock. The Tribunal held that such half-baked reasoning and failure to consider the primary documents rendered the finding of connivance and confiscation unsustainable. [Paras 17, 24]

Seizure and confiscation of goods from Basudeo Prasad & Sons (Tobacconist) is set aside.

Inadequacy of theoretical/input-output formula without corroboration - requirement of corroborative evidence for clandestine removal - Validity of demands of Central Excise duty raised on account of alleged unaccounted manufacture and clandestine removal - HELD THAT: - The Tribunal concluded that the duty demands based on alleged excess consumption of raw material and an input-output formula (leading to calculations of unaccounted manufacture) were not supported by corroborative evidence. The Department had relied on a formula and selective parts of a statement, failed to examine the quantitative tally register (QTR), and did not investigate buyers, transportation, receipt of consideration or other corroborative material. Precedents were applied holding that clandestine removal cannot rest on theoretical assumptions or isolated statements; the Revenue must produce sufficient positive evidence. Given these lacunae and the non-application of mind by the lower authorities, the duty demands were unsustainable. [Paras 18, 20, 21, 24]

Central Excise duty demands of Rs.1,81,006/- Rs.1,71,149/- Rs.32,88,080/- and Rs.4,92,525/- are set aside.

Absence of willful suppression for levy of penalty - HELD THAT: - The Tribunal held that penalties could not be sustained because the Department failed to prove willful suppression. The Appellants had produced records and statutory registers; the demand and penalty were founded on erroneous calculations and uncorroborated allegations. Reliance was placed on authorities that extended periods or penalties for suppression require proof of deliberate concealment, which was absent here. In these circumstances the imposition of penalties was vacated. [Paras 23, 24]

Penalties imposed on M/s Sarin & Sarin, Basudeo Prasad & Sons and Shri Deepak Mehra are set aside.

Final Conclusion: All impugned seizures, confiscations, duty demands and penalties were examined on merits and, for lack of affirmative corroborative evidence, erroneous application of theoretical formulas, and absence of willful suppression, have been set aside; the three appeals are allowed with consequential relief as per law.

Refund claim under Rule 5 of Cenvat Credit Rules read with Notification No.27/2012 dt.18.06.2012 - definition of ‘export’ -refund claim filed on account of both physical exports, as also for the deemed exports - 100% EOU - manufacturing of bulk drugs - clarificatory amendment to Rule 5 has retrospective effect - deemed exports .

Refund under Rule 5 of Cenvat Credit Rules is confined to physical exports - export under bond or letter of undertaking - Refund under Rule 5 of the Cenvat Credit Rules is available only for physical exports and does not extend to deemed exports (clearances from one EOU to another EOU). - HELD THAT: - The Tribunal held that Rule 5 and the procedures under Notification No.27/2012 must be read together and that the term 'export' in that framework refers to goods exported without payment of Central Excise duty under bond or letter of undertaking. The scheme, its formula and the notification require export proofs (such as shipping documents) and are directed at assessees who export physically. Clearances between EOUs do not involve taking goods out of India under bond or letter of undertaking and therefore fall outside the intended scope of Rule 5 and the notification. The Tribunal relied on prior decisions that treated Rule 5 as enabling relief only for physical exports and requiring export evidence, concluding deemed exports to other EOUs are not eligible for cash refund under Rule 5. [Paras 9, 10]

Only physical exports qualify for refund under Rule 5; deemed exports between EOUs do not.

Clarificatory amendment has retrospective effect - test for clarificatory explanation - The explanation inserted by Notification No.06/2015 is clarificatory and therefore operates retrospectively. - HELD THAT: - Applying the settled test, the Tribunal first examined the meaning of Rule 5 and the notification prior to the insertion and then compared it with the effect of the inserted explanation. Finding that Rule 5 and Notification No.27/2012 already indicated coverage limited to goods exported without payment of duty under bond or letter of undertaking, the Tribunal concluded the insertion merely clarified the existing position rather than altering rights. Accordingly, the explanation is clarificatory and has retrospective effect, thereby excluding deemed exports from the scope of refunds under Rule 5 retrospectively. [Paras 11, 12]

The amendment by Notification No.06/2015 is clarificatory and retrospective, confirming that Rule 5 was always confined to physical exports.

Deemed exports not equivalent to physical exports for refund under Rule 5 - The ratio of the Gujarat High Court decision in Shilpa Copper Wire Industries Ltd [2010 (2) TMI 711 - GUJARAT HIGH COURT], (upheld by the Supreme Court [2011 (1) TMI 1508 - SC ORDER] against delay) is not applicable to these appeals in view of the clarificatory explanation inserted by Notification No.06/2015. - HELD THAT: - Although the facts in Shilpa involved clearances between EOUs and the Gujarat High Court in the case of CCE Vs Shilpa Copper Wire Industries Ltd. treated deemed exports as equivalent to physical exports for refund purposes, the Tribunal found that the explanation inserted by Notification No.06/2015-which it has held to be clarificatory and retrospective-was not considered in that judgment. Because the explanation restricts Rule 5 to physical exports, the earlier ratio treating deemed exports as physical exports cannot be applied to the present appeals. [Paras 13, 14]

Shilpa Copper Wire Industries Ltd is not applicable here because the clarificatory explanation limits Rule 5 to physical exports.

Final Conclusion: The Tribunal dismissed the appeals, holding that refunds under Rule 5 are limited to physical exports; the 2015 explanation is clarificatory and retrospective, and the Shilpa precedent does not apply to permit refund of Cenvat credit on deemed exports between EOUs.

Levy of additional tax in the nature of surcharge under Section 7-A - tax payable under Section 7 on taxable turnover of declared goods - non-obstante clause in Section 7-A excluding restrictions of Section 7 - definition of “last turnover” under Section 2(u), “sale” under Section 2(ze), “sale price” under Section 2(zg), “taxable turnover” under Section 2(zn) - engaged in trading of iron and steel goods. Iron and steel goods being “declared goods” are taxable @ 5% on the taxable turnover under the 1956 Act - erroneous interpretation of Sections 7 and 7-A of 2003 Act by the Assessing Authority as well as the Appellate Authorities.

Tax payable under Section 7 on taxable turnover of declared goods - HELD THAT: - The Court examined Section 7 and its sub provisions and concluded that Section 7(2) specifically prescribes the rate and mode of levy for sales to authorised dealers against the prescribed declaration (Form D 1), thereby fixing the tax at four per cent for such sales. The statutory scheme in Section 7 delineates the taxable event, person, rate and measure for computing the tax on such declared goods and the requirement of furnishing prescribed declarations for the concessional rate is integral to that levy. [Paras 10, 11]

Tax payable under Section 7 in respect of sales of declared goods on production of prescribed declaration is confined to the rate stipulated in Section 7.

Levy of additional tax in the nature of surcharge under Section 7-A - non-obstante clause in Section 7-A excluding restrictions of Section 7 - HELD THAT: - A plain reading of Section 7 A shows it commences with a non obstante clause and expressly levies an additional tax calculated as five per cent of the tax payable by a registered dealer. The provision is not a levy on gross or taxable turnover but on the tax computed under the Act. Because of the non obstante language, the restrictions and conditions in Section 7 do not preclude the operation of Section 7 A; consequently Section 7 A is leviable over and above the tax determined under Section 7. The four components of a valid levy (taxable event, person, rate and measure) are present for the surcharge under Section 7 A. [Paras 11, 13, 14, 16]

Additional tax/surcharge under Section 7 A is leviable at five per cent of the tax payable under Section 7 and is not precluded by Section 7.

Levy of additional tax in the nature of surcharge under Section 7-A - HELD THAT:- The Court noted that the legislature included a proviso to Section 7 A to ensure that the combined incidence of tax and surcharge conforms to Sections 14 and 15 of the Central Sales Tax Act for declared goods. That alignment demonstrates legislative competence to impose the surcharge subject to the central statute's ceiling, and confirms that the State levy resulting in an aggregate below the CST rate is permissible. Reliance on earlier decision in Mahashiv Promoters Pvt. Ltd. Vs. State of Haryana and another [2016 (9) TMI 869 - PUNJAB AND HARYANA HIGH COURT] concerning different factual and statutory contexts (such as lump sum composition cases) does not assist the appellant where taxable turnover was determined and taxed under Section 7. [Paras 17]

The proviso to Section 7 A, which limits the aggregate tax and surcharge in conformity with the Central Sales Tax Act, validates the additional levy under Section 7 A in the present context.

Final Conclusion: The Court held that Section 7 and Section 7 A operate in distinct fields: tax on taxable turnover under Section 7 (including concessional rate on declared goods) and an additional surcharge under Section 7 A calculated on the tax payable. The additional tax under Section 7 A is validly leviable in addition to tax under Section 7; the impugned orders are upheld and the appeals are dismissed.