TaxTMI Updates e-Newsletter
Mar 18,2026

Seeking to challenge the legality and validity of specified Central and State Notifications extending the time limit under Section 73(10) of the Central Goods and Services Tax Act, 2017 and the Rajasthan Goods and Services Tax Act, 2017 - Permission to prefer statutory appeal - condonation of delay - exemption of filings.

Legality and validity of the Notifications -HELD THAT:- The Court, noting that the legality of the Notifications is pending before this Court and that similar matters had allowed challenges to assessment orders by statutory appeal, exercised its discretion to enable the petitioner to seek appellate remedy against the impugned assessment orders within a limited time frame. The grant of time was directed as an interim procedural accommodation without prejudicing the substantive challenge to the Notifications pending before this Court. [Paras 9, 10]

Final Conclusion: The petitions are disposed of by permitting the petitioner to prefer a statutory appeal within four weeks against the assessment orders; the appellate decision is expressly declared subject to this Court's pending adjudication on the validity of the Notifications, and delay and exemption applications are allowed.

Interim order - Seeking modification / alteration of the order - furnishing of adequate bank guarantee - security for tax demand - furnishing of adequate bank guarantee - releasing of the goods - perishable goods relief.

Security for disputed tax liability limited to tax short paid - HELD THAT:- The Court considered the departmental communication showing a penalty component but held that the primary purpose of the interim direction was to secure the amount of tax allegedly short paid. Having noted the perishable nature of the goods and being prima facie satisfied, the Court declined to modify the interim order to require a bank guarantee covering the penalty; the Department retains the right to pursue penalty enforcement if the petitioner fails in the writ petition. [Paras 2, 3, 5, 6]

No modification of the interim order to include the penalty component in the bank guarantee.

Furnishing of bank guarantee to proper authority - HELD THAT:- On the departmental request that the bank guarantee be submitted to a different official, the Court modified the interim order only to direct that the bank guarantee, otherwise mandated by the interim order, be furnished in the name of the Additional Director General of DGGI (respondent no.3). This modification is procedural and does not alter the amount secured under the interim direction. [Paras 7]

Bank guarantee to be furnished in the name of respondent no.3 (Additional Director General, DGGI).

Final Conclusion: The application for modification is dismissed insofar as it sought inclusion of the penalty in the bank guarantee; the interim order remains in force securing the tax short paid, but is modified to require the bank guarantee to be furnished in the name of the Additional Director General, DGGI. The Department's right to enforce any penalty is preserved.

Initiation of proceedings under Section 74 of the Central Goods and Services Tax Act, 2017 - independent adjudicatory power to issue a show cause notice when the contingencies -principles of natural justice - territorial jurisdiction - rule of prudence and fair play - Admissibility of evidence obtained by illegal search - Permissibility for proper officer to rely on materials gathered by another Commissionerate - Prematurity of writ interference where noticee has opportunity to reply.

Independence of adjudication under Section 74 from proceedings under Section 67 - HELD THAT:- The Court held that Section 74 confers an independent substantive power on the proper officer to initiate adjudicatory proceedings and that initiation under Section 74 may follow from diverse sources (including scrutiny under Section 61) and is not conditional upon proceedings under Section 67. The plain language of Section 74 does not prescribe the legal source of foundational material; what matters is that material exists and particulars are supplied so the noticee can reply. [Paras 7]

Proceedings under Section 74 may be validly initiated notwithstanding infirmities, if any, in action under Section 67, provided relevant material exists

Admissibility of material obtained in alleged illegal search governed by relevancy - HELD THAT:- Relying on precedents including Pooran Mal [1973 (12) TMI 2 - SUPREME COURT] and subsequent authority, the Court reiterated that Indian evidence law admits relevant material notwithstanding irregularity in acquisition; exclusion is a matter of prudence, not an automatic rule. Neither Section 67 nor Section 74 contains an express or implied bar to use of such material, and the noticee can challenge relevance or admissibility during adjudication. [Paras 8]

Material seized in the course of an alleged illegal search may be acted upon in Section 74 proceedings subject to its relevancy and admissibility

Permissibility for proper officer to rely on materials gathered by another Commissionerate - HELD THAT:- The Court found no statutory impediment to a proper officer relying on materials collected by another Commissionerate, particularly in coordinated investigations into a widespread racket. Where materials gathered elsewhere are furnished to the noticee and form part of the factual foundation, reliance on them is permissible and accords with the requirement to supply all foundational particulars for an effective reply. [Paras 10]

Materials collected by another Commissionerate may be utilized by the proper officer in issuing and adjudicating a show-cause notice under Section 74

Prematurity of writ interference where noticee has opportunity to reply - HELD THAT:- The Court observed that where the foundational material has been furnished and the statutory process under Section 74 affords an opportunity to submit a reply, the writ jurisdiction should not be exercised to quash the notice at the threshold. The propriety and relevance of the material are matters for factual adjudication by the proper officer, and premature judicial intervention would undercut the statutory adjudicatory process. [Paras 13]

The writ petition was premature and the noticee should be afforded the statutory opportunity to file a reply and defend in the adjudicatory proceedings

Final Conclusion: The intra Court appeal was allowed; the Single Judge's order was set aside and the writ petition dismissed. The respondent is directed to file a reply to the show cause notice and the Revenue is permitted to proceed with adjudication in accordance with law, with all contentions on the merits kept open.

Entitlement to the benefit of concessional rate of tax at 0.1% under Notification: 41/2017-I.T. (Rate) - concessional rate for merchant exporters - registered supplier and registered recipient - Strict interpretation - Compliance with prescribed conditions for concessional IGST - requirement of supply and movement between registered supplier and registered recipient.

Compliance with prescribed conditions for concessional IGST - HELD THAT: - The Court held that the Notification grants a concessional rate subject to the specific conditions it prescribes and that those conditions must be strictly complied with. Condition (v) requires that the registered recipient place an order on the registered supplier and furnish a copy to the supplier's jurisdictional officer; Condition (vi) requires that the registered recipient move the goods from the place of the registered supplier either directly to the export point or directly to a registered warehouse (with Condition (vii) permitting aggregation at a registered warehouse only in the limited manner specified). The scheme contemplates only the two defined persons - the registered supplier and the registered recipient - and contemplates movement of goods from the registered supplier as stipulated. Where the supply was effected to a third party (the chemical manufacturer) and not directly to the registered recipient or to a registered warehouse in the manner required, the conditions of the Notification were not satisfied. The Court further held that, in line with authority on exemption notifications, it was not open to read down, omit or otherwise dilute the express conditions of the Notification by resort to external aids when the language is clear; purposive construction in favour of the claimant was not warranted because the Notification was unambiguous on its requirements. [Paras 8, 9, 11, 12, 13]

The petitioner is not entitled to the concessional rate under the Notification because the prescribed conditions - including supply and movement from the registered supplier to the registered recipient or to a registered warehouse - were not satisfied.

Final Conclusion: The writ petition is dismissed; the Appellate Authority's confirmation of the Advance Ruling denying the concessional rate under Notification No. 41/2017-I.T.(Rate) is upheld because the Notification's conditions were not strictly complied with.

Seeking of refund of statutory pre-deposit made u/s 107(6) - retrospective amendment - time limit for availing input tax credit - remittal for factual verification.

Effect of Section 16(5) on the time-limit for claiming input tax credit for the specified financial years - HELD THAT:- The Court held that Section 16(5), inserted by the Finance (No. 2) Act, 2024 with retrospective effect from 01.07.2017 and stating 'notwithstanding anything contained in subsection (4)', operates to extend and relax the time-limit prescribed under Section 16(4) in respect of invoices/debit notes pertaining to the financial years 2017-18, 2018-19, 2019-20 and 2020-21. In consequence, a return filed within the extended period permitted by Section 16(5) is not barred on the ground of the time-limit under Section 16(4). The Court relied on the legislative amendment and the administrative clarification to conclude that permissibility of claiming ITC is governed by the extended cut-off under Section 16(5). [Paras 5, 6]

Claims of input tax credit for the specified financial years are not barred by Section 16(4) where the claim falls within the extended period under Section 16(5).

Remand for factual determination of eligibility for input tax credit - HELD THAT:- The Court set aside the impugned orders insofar as they denied ITC solely on the ground of the time-bar and remitted the matter to the assessing authority for consideration of factual eligibility. The authority is empowered to examine and decide the factual aspects of entitlement to ITC but is not permitted to re-open the legal conclusion that claims within the extended period under Section 16(5) are permissible. Other contentions were left open for adjudication by the authority. [Paras 7, 8]

Impugned orders set aside on the time-bar ground and the matter remitted to the assessing authority for factual adjudication of eligibility to claim ITC.

Final Conclusion: The Court held that Section 16(5) retrospectively extends and overrides the time-limit in Section 16(4) for the financial years 2017-18 to 2020-21, disallowed denial of ITC solely on the basis of the earlier time-bar, set aside the impugned orders on that ground and remitted the matter to the assessing authority to examine factual eligibility for the claimed input tax credit.

Validity of ex parte order, in absence of the petitioner's reply to the show cause notice - Demand in Form GST DRC-01 - opportunity to file reply and produce documents before final order - verification of recovery from Electronic Liability Ledger - conditional lifting of bank attachment upon compliance -

Ex parte assessment - HELD THAT:- The Court found that the assessment order was passed ex parte and noted that the disputed tax and penalty appear to have been recovered from the petitioner's Electronic Liability Ledger. Consequently the matter is remitted to the respondent to pass a fresh order on merits provided the petitioner files a reply to the Show Cause Notice in Form GST DRC-01 dated 24.01.2023 with requisite documents within thirty days of receipt of this order. The respondent is directed to independently verify whether recovery from the petitioner's Electronic Liability Ledger has in fact taken place and, if not, the petitioner shall deposit the disputed tax. On compliance, the respondent shall decide the matter on merits expeditiously, preferably within three months of the petitioner's reply, and any bank attachment shall stand automatically vacated subject to there being no other arrears for other tax periods. If the petitioner fails to comply with the stipulations, the respondent may proceed to recover the tax as if the writ petition had been dismissed, but must give due notice before taking action. [Paras 7, 8, 9, 10, 11]

Final Conclusion: The writ petition is disposed of by remitting the ex parte assessment for fresh consideration on merits subject to the petitioner filing a reply with documents within thirty days, the respondent verifying recovery from the Electronic Liability Ledger and, on compliance, deciding the matter within three months and vacating any bank attachment; failure to comply permits the respondent to recover the demand after giving notice.

Characterization of receipt - consideration received by the assessee for assignment of trademark / brand name - Allowability of the short term capital loss

Taxability of the consideration received for assignment of trademarks/brand names (with apparent reference to goodwill) - Revenue or capital rececipts - HELD THAT: - The Court accepted the Tribunal's finding that the assessee transferred 22 self-generated registered trademarks and not the goodwill of the overall pharmaceutical business. Applying the ratio in B.C. Srinivasa Shetty [1981 (2) TMI 1 - SUPREME COURT] the court held that where an asset is self-generated and no ascertainable cost of acquisition exists, the computation provisions for capital gains under sections 48 and 55 cannot be applied; the 2001 amendment to section 55(2)(a) bringing trademarks within the definition of cost of acquisition has prospective effect from 01.04.2002 and is not applicable to the present transaction. The Assessing Officer's attempts to tax the receipt as business income under section 28(iv) or as recoupment under section 41(1) were rejected on the facts and law. The Court also held that the adoption of a particular valuation methodology (DCF) does not change the legal character of the transfer. [Paras 17, 19, 20, 22, 23]

Consideration received for assignment of the trademarks is not chargeable to tax as capital gains for AY 2001-02; the Tribunal's conclusion in favour of the assessee is upheld.

Allowability of the short term capital loss -HELD THAT: - The revenue admitted inability to controvert the applicability of the Supreme Court decision in Walfort Share and Stock Brokers [2010 (7) TMI 15 - SUPREME COURT] and accordingly the Court answered the substantial question in favour of the assessee without further contestation. [Paras 26]

Final Conclusion: The appeals are dismissed; the High Court upholds the Tribunal's findings that the Rs.29.10 crore receipt arose from transfer of self-generated trademarks not chargeable to capital gains for the relevant year and that the claimed short-term capital loss stands in favour of the assessee.

Conditional stay of tax demand on deposit - Adjustment of refunds towards outstanding demand - Stay to continue until disposal of appeals

HELD THAT: - The Court, without adjudicating the merits, concluded that in the interest of justice the impugned order rejecting the petitioner's stay application should be modified so that the balance demand for A.Y. 2017-18 is stayed on the petitioner making a total deposit of Rs.10 Crores with the Income Tax Department, subject to credit being given for refunds due for A.Y. 2016-17 and A.Y. 2025-26. The Court directed that the petitioner shall deposit the net sum (after adjustment of the specified refunds) by the date prescribed by the Court, and authorised the Department to adjust those refunds against the outstanding demand. [Paras 4, 6]

On deposit of the stipulated amount with credit for the specified refunds, the balance demand for A.Y. 2017-18 shall be stayed and the Income Tax Department may adjust the refunds against the outstanding demand.

Stay to continue until disposal of appeals - Temporal scope of the stay granted conditioned on deposit - HELD THAT: - The Court specified that if the required net deposit is made by the prescribed date, the balance demand shall remain stayed until the earlier of disposal of the appeal filed by the petitioner before the CIT(A) against the Order Giving Effect dated 17th December 2025 or the appeal before the ITAT against the CIT(A)'s order dated 28th August 2025. The Court also requested the ITAT to take up and dispose of the petitioner's appeal expeditiously and preferably within the period indicated. [Paras 6, 7]

The stay shall remain in effect until the earlier of the disposal of the specified appeals; the ITAT was requested to hear and dispose of the appeal expeditiously.

Final Conclusion: The writ petition was disposed of by modifying the impugned order: the balance demand for A.Y. 2017-18 is stayed on the petitioner making the prescribed deposit with credit for the specified refunds, the stay to continue until the earlier disposal of the listed appeals, and the ITAT was requested to expedite disposal; no order as to costs.

Exemption u/s 80-IA(4) -Development-only eligibility under Section 80-IA(4) - distinction between developer and works contractor - transfer by handing over possession - scope of meaning of term “developer”

Eligibility u/s 80-IA(4) - Whether assessee cannot be said to be a developer of the two projects? - HELD THAT: - The Court construed Section 80-IA(4) in light of amendments (Finance Acts 1999 and 2001) and legislative intent to promote private participation in infrastructure. The amendment and explanatory materials show that deduction was extended to enterprises which only develop infrastructure. The Court followed precedent and held that an entity that undertakes development (even if not operating/maintaining) falls within the scope of the section, and a literal construction excluding developers would render the provision unworkable and contrary to legislative purpose. [Paras 22, 28, 39, 44, 46]

Section 80-IA(4) applies to an enterprise which only develops an infrastructure facility and such development-only enterprises are eligible for deduction.

Distinction between developer and works contractor - Receipt of periodic payments or description as a contractor does not automatically disqualify an assessee; the factual matrix must determine whether it is a developer or merely a works contractor. - HELD THAT: - The Court held that the distinction depends on contractual terms and facts, particularly whether the assessee bore financial, operational and executional risks and whether planning/design/execution were undertaken by it. Periodic stage-wise payments in the contract do not by themselves convert a developer into a works contractor. The Court accepted factual findings that the assessee bore investment and technical risks, deployed significant assets and personnel, and undertook design and execution, supporting developer status rather than mere contractorship. [Paras 34, 52, 53, 54]

Periodic payments and labels in the agreement are not determinative; on the facts the assessee qualified as a developer and was not excluded as a works contractor.

Transfer by handing over possession - Handing back possession of the developed infrastructure to the government under the agreement amounts to a 'transfer' within the meaning of Section 80-IA(4) - HELD THAT: - Having examined the contractual scheme and the nature of the projects (build-and-transfer development), the Court interpreted 'transfer' in its factual context to include handing over possession of the developed facility to the government. The Court rejected the Revenue's contention that government ownership of underlying land or prior payments precluded transfer, noting that government land is typically handed to developers for construction and the completed facility being handed back fulfils the transfer requirement.

The land involved in the infrastructure facility always belongs to the Government whether it would be a case of BOT, BOOT, Build-Transfer (BT) and is handed over by the Government to the developer for development of infrastructure facility/project. In the present case, the project was in the nature of build and transfer being merely a development project and did not involve “operate” aspect of the same. Consequently once the infrastructure facility was developed, the same was to be handed over to the Government on its completion which would amount to a transfer within the meaning of Section 80-IA(4).[Paras 57]

The assessee's handing over of possession on completion satisfied the transfer requirement of Section 80-IA(4).

Final Conclusion: The Court upheld the ITAT's findings that the assessee was a developer (not merely a contractor), that development-only enterprises are eligible for deduction under Section 80-IA(4), and that handing over possession satisfied the transfer requirement; the appeals were dismissed and the substantial question answered in favour of the assessee.

Bogus purchases - Onus of disproving sham transaction - Validity of reopening of assessment based on investigation material

Additions were made by reference to information obtained from an investigation - HELD THAT: - The Court accepted the concurrent findings of the CIT(A) and the Tribunal that the AO did not bring any cogent or adverse material to controvert the documents and records produced by the assessee. AO's addition was premised on factually incorrect data and the AO neither rejected the assessee's books nor recast trading results; VAT and sales tax proceedings supported the assessee's position.

Tribunal independently examined the record, agreed that the AO failed to discharge the onus of disproving sham transaction, and found no justification to sustain the reopening or the addition. In view of the absence of contrary material before this Court, the appellate orders deleting the addition were affirmed.

Reopening of assessment - As no adverse material is brought on record to substantiate the allegation of reopening that the assessee has shown purchases from impugned party i.e. Keshav Impex. The Assessing officer even not examined the facts pleaded by the assessee and to verify the evidence brought on record. AO made addition by ignoring vital facts.[Paras 6, 7, 8, 9]

Final Conclusion: The High Court dismissed the Revenue's appeal, affirmed the CIT(A) and Tribunal findings that the Assessing Officer failed to establish that the purchases were sham transactions, and upheld deletion of the addition for AY 2012-13.

TP Adjustment - Addition u/s 14A and Rule 8D - suo motu disallowance made in the return of income

TP Adjustment - TP adjustments made in respect of various transactions by the TPO are to be contested in the event of acceptance of the entity level benchmarking or non-acceptance of the decision of entity level benchmarking -Precedential effect of prior decision on identical questions - HELD THAT: - The Court recorded that the two substantial questions of law framed as (i) and (ii) were already dealt with by this Court in an earlier reported decision relating to the earlier assessment year [2016 (7) TMI 1245 - BOMBAY HIGH COURT] and that Special Leave Petition [2018 (10) TMI 1611 - SC ORDER] against that decision had been dismissed. Having regard to the reasons recorded in that reported decision, the Court dismissed the appeal insofar as substantial questions (i) and (ii) were concerned and did not reopen the matters covered by the earlier ruling. [Paras 3]

Appeal dismissed insofar as substantial questions (i) and (ii) are concerned.

Application of section 14A and Rule 8D - suo motu disallowance made in the return of income - Whether the Assessing Officer could make disallowance u/s 14A read with Rule 8D without recording adverse findings on the assessee's suo motu disallowance and supporting material - HELD THAT: - The Court concurred with the ITAT's conclusion that the provisions of section 14A read with Rule 8D cannot be applied mechanically. The AO/DRP had not pointed out why the assessee's suo motu disallowance and the supporting accountant's report were unacceptable and had not given clear findings demonstrating a bona fide satisfaction and objective reason for treating the assessee's claim as incorrect.

AO is supposed to give a clear-cut finding as to how and why the provisions of the section 14A are applicable and as to why the disallowance made by the assessee is not acceptable. In the cases Aditya Birla Finance Ltd. [2017 (6) TMI 827 - ITAT MUMBAI]; Smartchem Technologies Ltd. [2017 (8) TMI 717 - ITAT MUMBAI] the Tribunal has held that the AO, without giving any finding about the suo motu disallowance made by the assessee, cannot make any addition u/s 14A r.w.r. 8D of the Rules

Court found no error in the ITAT's restriction of additional disallowance and upheld the requirement that the AO must give clear-cut, justifiable reasons when invoking Rule 8D beyond the amount disallowed suo motu by the assessee. [Paras 6, 7]

Final Conclusion: The appeal is dismissed: the Court declined to revisit points already decided by an earlier reported decision and affirmed the ITAT's holding that disallowance under section 14A read with Rule 8D cannot be made mechanically and requires clear, recorded reasons if it departs from an assessee's suo motu disallowance.

Joinder of necessary party - affected party - Whether Daiwa Securities Group INC is a necessary party and may be joined as Respondent No. 3? - HELD THAT: - The Court concluded that if the Department's case were upheld, Daiwa Securities Group INC would be the affected party and therefore a necessary party to the writ petition. In view of this, the Court granted leave to the Department to amend the petition to join Daiwa Securities Group INC as Respondent No. 3, directed that the amendment be made within two weeks from uploading of the order, dispensed with re-verification, and ordered that service on the newly added respondent be effected so as to be returnable on the listed date. [Paras 5, 6, 7, 8]

Amendment permitted to join Daiwa Securities Group INC as Respondent No. 3 within two weeks - re-verification dispensed; service to be ensured returnable on the listed date.

Final Conclusion: The writ petition will be amended to add Daiwa Securities Group INC as a necessary party; timelines for amendment and service were fixed and the matter was placed on board for directions on the listed date.

Non-grant/withdrawal exemption u/s 10(23C)(iiiae) - Validity of faceless assessment notices - assessee failed to prove the genuineness of the accounts with specific, cogent and reliable evidences and after allowing the benefit of deficit has made the addition

HELD THAT: - The Tribunal found that the assessee carried out charitable palliative medical care and fell within the scope of section 10(23C)(iiiae). There was no statutory requirement to obtain registration where aggregate receipts did not exceed the prescribed limit. The assessee maintained audited books, furnished audited financial statements and bank statements showing payments (notably salaries) through banking channels, and recorded an excess of expenditure over income for the year.

AO had denied the claimed exemption on the ground of alleged non-genuineness of accounts without cogent, reliable evidence; the Tribunal found those observations unsupported and held that the assessee's claim for application of funds to charitable purposes was established. Having allowed the legal issues raised about the validity of the notices and the entitlement to exemption, the Tribunal deleted the addition made by the AO. [Paras 7, 8, 9]

Final Conclusion: The Tribunal held that the assessee qualified for exemption u/s 10(23C)(iiiae), the faceless assessment material did not sustain the denial of exemption, the addition was deleted and the appeal was allowed, with other grounds rendered infructuous.

Penalty imposed u/s 271(1)(c) -Notice non specifying limb of section 271(1)(c) - Notice u/s 271(1)(c) which mentioned both limbs without striking off the inapplicable limb - HELD THAT: - The Assessing Officer's notice recited both limbs of section 271(1)(c) and did not strike off the inapplicable portion. The penalty order proceeded on the basis that penalty was for furnishing inaccurate particulars, but the defect in the notice remained. The Tribunal, applying the ratio of M/S. SAHARA INDIA LIFE INSURANCE COMPANY, LTD. [2019 (8) TMI 409 - DELHI HIGH COURT] held that a notice must specify which limb of section 271(1)(c) proceedings are initiated under and that failure to do so vitiates the penalty proceedings. Consequently the penalty order was quashed for want of a valid notice. [Paras 6]

Penalty order quashed for defective notice; ground of the assessee's appeal allowed.

Final Conclusion: The appeal is allowed and the penalty imposed under section 271(1)(c) is quashed because the notice failed to specify and strike off the inapplicable limb, rendering the proceedings invalid.

Treatment of sale proceeds as unexplained credit u/s 68 - addition u/s 69C for commission on accommodation entries - requirement of year-specific tangible evidence to sustain sham-transaction findings

HELD THAT: - The Tribunal examined contemporaneous documentary evidence supporting the genuineness of the transactions - preferential allotment/allotment letters, demat holdings held for more than one year, contract notes evidencing sale on a recognised stock exchange, STT payment and receipt of sale proceeds through banking channels. It held that statements and seizure material relied upon by the Department related to third-party entry operators recorded before the sales and did not establish a nexus with the appellant's specific transactions in the year under appeal. Relying on coordinate-bench decisions and the principle that each assessment year is a separate unit, the Tribunal found the AO/CIT(A) lacked fresh, tangible year-specific material to treat the transactions as sham; suspicion or prior-year findings alone were insufficient to sustain additions. Consequently the section 68 and corollary section 69C additions were not sustained for the year under appeal.

Assessing Officer has to bring tangible material on record to support his finding that there has been collusion or connivance between the broker and the assessee for the introduction of its unaccounted money. A transaction of purchase and sale of shares, supported by contract notes, demat statements, and account payee cheques, cannot be treated as bogus.[Paras 9, 10]

Final Conclusion: The Tribunal allowed the appeals: it reversed the additions under section 68 and section 69C and the finding of sham transactions for the assessee in the cited assessment years, holding that the Department failed to produce year-specific tangible evidence to controvert contemporaneous documentary records of genuine share transactions.

Dividend stripping and anti-avoidance u/s 94(7) - application of section 94(7) to the entire dividend received - onus on assessee to prove non-applicability of section 94(7)

Whether Section 94(7) applies to the entire dividend or income received or receivable and is not restricted to exempt dividend only? - HELD THAT: - The Tribunal held that the statutory phrase "dividend or income received or receivable" is not confined to exempt dividends; the provision is an anti-avoidance measure to neutralise artificial losses from dividend-stripping transactions. The Explanatory Memoranda and the purpose of the provision support application to the whole dividend, including amounts taxed under separate provisions, because allowing loss set-off even against partly taxed dividends would enable tax arbitrage and defeat the legislative intent

Hon’ble Supreme Court in CIT vs Walfort Share & Stock Brokers Pvt Ltd [2010 (7) TMI 15 - SUPREME COURT] explained that section 94(7) is a specific anti avoidance provision intended to neutralize artificial losses arising from dividend stripping transactions.. [Paras 7]

Section 94(7) applies to the entire dividend received and not merely to any exempt portion.

Whether Section 94(7) of the Act applies only to exempt dividend? - Onus on assessee to prove non-applicability of section 94(7) - assessment officer's factual determination on qualifying transactions - The AO's identification of transactions falling within section 94(7) and the quantum of dividend relatable to those transactions - HELD THAT: - The Tribunal accepted the AO's detailed tabulation and verification of purchases, record dates and sales, finding that the assessee's annexures failed to rebut those findings. The Tribunal noted specific examples and the correct use of calendar days for computing holding periods, and held that the burden to show non-applicability lay on the assessee which was not discharged; the insignificant minor variance on mutual funds did not warrant interference. [Paras 7, 8]

The addition u/s 94(7) as computed by the AO and confirmed by the CIT(A) is sustained.

Levy of interest under sections 234B, 234C and 234D is consequential and does not require separate adjudication in this appeal

Final Conclusion: The appeal is dismissed; the disallowance under section 94(7) as determined by the AO and confirmed by the CIT(A) is upheld, Levy of interest under sections 234B, 234C and 234D is consequential.

Penalty u/s 271(1)(c) - concealment or furnishing inaccurate particulars - bona fide disclosure and legal view based on professional advice - debatable question of taxability as defence to penalty - as alleged assessee had concealed income and furnished inaccurate particulars in respect of the amount received from the foreign trust.

Whether penalty u/s 271(1)(c) is sustainable in respect of receipt from a foreign trust when the receipt was disclosed and the assessee took a bona fide legal view that it was a capital receipt? - HELD THAT: - The Tribunal held that the assessee had disclosed the receipt from the foreign trust in the return and in the notes thereto and had furnished full particulars during assessment. The assessee had taken a specific legal position, based on professional advice, that the amount was a capital receipt not chargeable to tax, and the taxability question had been referred to a Special Bench, demonstrating that divergent views exist.

Relying on the principle that an incorrect claim of law made on a disclosed factual basis and in bona fide belief does not attract penalty, as expounded by the Supreme Court in CIT vs. Reliance Petroproducts [2010 (3) TMI 80 - SUPREME COURT] and Price Waterhouse Coopers Pvt. Ltd. [2012 (9) TMI 775 - SUPREME COURT] and the Ahmedabad Special Bench decision in Gujarat Credit Corporation Ltd. [2008 (5) TMI 354 - ITAT AHMEDABAD] Tribunal found that the essential ingredients for invoking section 271(1)(c) were not made out and that the Department had not shown deliberate concealment or lack of bona fides. [Paras 14, 15, 16, 17, 18]

Final Conclusion: The Tribunal deleted the penalty under section 271(1)(c), holding that the assessee had made full disclosure and advanced a bona fide, debatable legal view that the receipt from the foreign trust was a capital receipt, and accordingly the ingredients for imposing penalty were not established.

Permanent Establishment - Income deemed to accrue or arise in India -Characterisation of contract as supply or service - India-France DTAA - attributing receipts from offshore supply of equipments

HELD THAT: - The Tribunal found that the assessee, a tax resident of France, supplied machinery manufactured and dispatched from outside India on CFR/ex-works terms and that installation and commissioning in India was limited by the contract (installation to be completed within 60 days and 20% payment after installation). The Assessing Officer's finding of a PE rested on the duration of the overall contract; the Tribunal held that contract duration alone is not determinative and what matters in substance is whether the contract is for supply of equipment or for provision of services.

No material or document was produced by the AO to demonstrate the existence of a PE in India or that ownership/risks were retained in India. The Tribunal also noted the assessee's consistent treatment in earlier assessment year proceedings. Applying these conclusions, the Tribunal held that the receipts from offshore supply could not be taxed as income attributable to a PE in India. [Paras 9, 10, 11]

The addition treating offshore supply receipts as attributable to a PE is reversed and the appeal is allowed.

Final Conclusion: The Tribunal held that the assessee's offshore supplies to ONGC do not give rise to a Permanent Establishment in India and the receipts are not taxable in India for AY 2020-21; the appeal is allowed.

Exemption u/s 10(23C)(iiiad) - Computation of Aggregate annual receipts u/s 10(23C)(iiiad) - corpus donations receipts -classification of receipts as capital or revenue

Aggregate annual receipts under section 10(23C)(iiiad) - corpus donations receipts - Whether voluntarily received donations earmarked for building fund form part of aggregate annual receipts for the purpose of exemption under section 10(23C)(iiiad)? - HELD THAT: - The Tribunal, following a Coordinate Bench decision of M/S. SATHYAM EDUCATIONAL & CHARITABLE TRUST [2023 (4) TMI 571 - ITAT CHENNAI] held that for granting exemption under section 10(23C)(iiiad) only annual receipts are to be considered and voluntarily received donations given with specific directions for infrastructure (building fund) are capital receipts. Such corpus donations do not form part of the aggregate annual receipts for the purpose of the provision; applying that principle to the facts, the assessee's annual receipts were below the statutory threshold and thus eligible for exemption. [Paras 6]

Corpus donations earmarked for building fund are not includible in aggregate annual receipts under section 10(23C)(iiiad); the assessee is entitled to the exemption.

Final Conclusion: The Tribunal allowed the appeal, holding that donations specifically directed to a building fund are capital receipts and must be excluded from aggregate annual receipts for the purpose of section 10(23C)(iiiad), resulting in grant of the exemption for the assessment year in question.

Deductibility of royalty for use of logo u/s 37(1) - valuation of closing stock by consistently followed accounting method - capital subsidy as incentive not to be reduced from asset cost under Explanation 10 to section 43(1) -

Deductibility of royalty for use of logo under section 37(1) - allowable business expenditure or not? - HELD THAT: - The Tribunal found that the assessee had raised the claim supported by the relevant agreement and additional evidence, and that the CIT(A) did not identify a specific defect in that evidence but disallowed the claim on the ground that 'logo' royalty was not part of the earlier demerger scheme. The Tribunal accepted the assessee's entitlement to the royalty payment as deductible under section 37(1) because the payment for use of the logo was established and not shown to be other than wholly and exclusively for business. [Paras 5]

Addition for royalty on logo is deleted and the royalty claim is allowed.

Addition on account of undervaluation of stock - Valuation of closing stock by consistently followed accounting method - Addition on account of undervaluation of closing stock was not sustain able - HELD THAT: - The Tribunal applied the principle of consistency in stock valuation and noted that any adjustment to closing stock would be tax neutral through corresponding opening stock adjustment. As the assessee consistently followed its method of valuation (excluding freight) accepted in earlier years, the addition for undervaluation was disallowed. [Paras 6]

Addition for undervaluation of closing stock (as disallowed by AO/CIT(A)) is deleted.

Capital subsidy as incentive not to be reduced from asset cost under Explanation 10 to section 43(1) - Capital subsidy received as an incentive for industrial development was not required to be reduced from the cost of fixed assets - HELD THAT: - Relying on precedent and the factual finding that the subsidy was granted as an incentive to promote industry (and had been credited to capital reserve and previously accepted), the Tribunal held that Explanation 10 to section 43(1) did not apply because the subsidy did not constitute payment intended directly or indirectly to meet actual cost of the assets. The Tribunal also noted the delay and absence of earlier adjustments and declined to change the settled treatment. [Paras 6]

Addition relating to treatment of the capital subsidy is deleted and the subsidy need not be reduced from asset cost.

Final Conclusion: The assessee's appeals for AYs 2010-11, 2011-12 and 2012-13 are partly allowed by deleting the royalty addition for the logo, overturning additions for undervaluation of closing stock and for reduction of capital subsidy from asset cost.

Determination of ALP of the specified domestic transactions of purchases under clause (i) of u/s 92BA as the said section omitted with retrospective effect - Retrospective effect of omission of a statutory provision

HELD THAT: - The Tribunal held that clause (i) of Section 92BA was omitted by the Finance Act, 2017 w.e.f. 01/04/2017 without any saving clause and, applying the principles identified in Kolhapur Canesugar Works Ltd [2000 (2) TMI 823 - SUPREME COURT] and as followed in Pr. CIT-7 & Anr. v. M/s Texport Overseas Pvt. Ltd. [2019 (12) TMI 1312 - KARNATAKA HIGH COURT] the omission operates retrospectively so that the provision must be treated as never having existed. On that basis the reference to the Transfer Pricing Officer and the consequent transfer pricing adjustment in A.Y. 2015-16 were held to be invalid, and the addition was directed to be deleted. [Paras 7, 8, 9]

The addition in respect of specified domestic transactions for A.Y. 2015-16 is deleted.

Final Conclusion: Appeal allowed and the additions made by the AO in the assessments under challenge are directed to be deleted because they were founded on a provision of the Act that the Tribunal held to have been omitted retrospectively and therefore incapable of sustaining the contested adjustments.

Condonation of delay - Levy of Central Excise Duty - process amounting to manufacture or not - HELD THAT:- Delay condoned.

No reason to entertain this civil appeal challenging the order [2025 (8) TMI 1138 - CESTAT KOLKATA]passed by the Customs, Excise and Service Tax Appellate Tribunal, East Zonal Bench, Kolkata in Excise Appeal No.75729 of 2016.

The civil appeal is, accordingly, dismissed.

Maintainability of appeal to the High Court - distinction between Section 130 and Section 130E - appeal to the High Court and to the Supreme Court from the order passed by the CESTAT -Determination relating to an exemption notification and the rate of duty or value for assessment - imported used self-propelled workboat - classification as well as availing exemption of applicable duties in excess of 15% under the exemption Notification No.27/2002-CUS dated 01.03.2002.

Determination relating to the rate of duty or value for purposes of assessment - HELD THAT:- The Court applied the test in Navin Chemicals [1993 (9) TMI 107 - SUPREME COURT] that a question must have a direct and proximate relation to the rate of duty or to the value of goods for purposes of assessment to fall within the exclusion from referral or appeal to the High Court. An exemption notification that operates to alter the aggregate duty payable (here, reduction by the claimed 15% exemption) relates directly and proximately to the rate of duty for assessment purposes. Although classification alone may not attract the exclusion, where the matter also involves the claim of an exemption that affects the rate of duty or value for assessment, the appeal does not lie to the High Court but to the Supreme Court under Section 130E. [Paras 11, 13, 14]

The appeals are not maintainable before the High Court; the department may, if so advised, file an appeal to the Supreme Court.

Final Conclusion: The High Court held that because the CESTAT's order involved determination connected with an exemption notification affecting the rate of duty/value for assessment, the proper forum for appeal is the Supreme Court and the appeals before the High Court are closed, leaving the department free to approach the Supreme Court.

Validity of show-cause notice and breach of natural justice - notice did not specify how the relied-upon material established - violation of the regulations 10(a), 10(d), 10(e) and 10(n) - absence of a substantial question of law under Section 130 of the Customs Act, 1962 -Whether the Order-in-Original was vitiated by being founded on material and findings beyond the scope of the show-cause notice, thereby violating principles of natural justice.

Vagueness of show-cause notice and breach of natural justice - HELD THAT:- The court examined the show-cause notice (para 4) and found that the material relied upon originated from a show-cause notice under the Customs Act aimed at penalties under specified sections, but did not specify how that material established prima facie contraventions of the cited Customs Brokers Licensing Regulations. The Order-in-Original traversed beyond the scope of the show-cause notice by treating additional inquiry material as the basis for findings without having given specific allegations or adequate notice to the respondent.

It is a settled position of law that in case if the show cause notice is vague or the order based on the show cause notice considers such material which was never part of the record of the show cause notice, the order can be said to be in violation of the principles of natural justice. The said position is also affirmed by the judgment of the Apex Court in Commissioner of Central Excise, Bangalore vs Brindavan Beverages (P) Ltd. and Ors.[2007 (6) TMI 4 - SUPREME COURT].

The Order-in-Original travelled beyond the scope of the show-cause notice and was thereby susceptible to challenge on grounds of vagueness and breach of natural justice; the Tribunal's finding in that respect was justified.

The court noted that an appeal under Section 130 is maintainable only if a substantial question of law is involved. Having found that the Tribunal was correct in observing that the Order-in-Original exceeded the show-cause notice and offended natural justice, the court concluded that no substantial question of law arose for its consideration in the present appeal. [Paras 2, 3, 17, 18]

No substantial question of law was involved; the appeal was dismissed.

Final Conclusion: The challenge to the Tribunal's order fails: the Order-in-Original was held to have gone beyond the show-cause notice and to have offended principles of natural justice, the Tribunal's finding in that regard was justified, and no substantial question of law arose under Section 130; the appeal is dismissed.

Rejection of declared transaction value under Rule 12 - re-determination of assessable value under the Valuation Rules - admissibility and evidentiary value of electronic records, private documents and admissions under Section 108 - residual valuation under Rule 9 - contemporaneous data - invocation of extended limitation under Section 28(4) for suppression/fraud - mandatory penalty under Section 114A and personal penalties under Section 114AA for fraud or wilful suppression - confiscation under Section 111(m) for deliberate mis declaration of value.

Rejection of declared transaction value under Rule 12 - admissibility and evidentiary value of electronic records, private documents and admissions under Section 108 - HELD THAT:- The Tribunal held that rejection was supported by an interlocking body of evidence recovered from the appellants' custody - parallel/proforma invoices, emails, blank signed letterheads, diary entries and contemporaneous private records - together with voluntary admissions recorded under Section 108. Electronic records so recovered, when corroborated by admissions and surrounding circumstances, were held admissible and of probative value; consequently the declared invoice value did not represent the full consideration and could be rejected under Rule 12. [Paras 7]

Rejection of the declared transaction value upheld.

Re-determination of assessable value under the Customs Valuation Rules, 2007 - HELD THAT:- The Tribunal accepted that sequential valuation methods are the norm but held that sequence should not be applied ritualistically where factual realities render contemporaneous import data unreliable. Given admitted suppression, fabricated documents and clandestine payments, comparables and deductive/computed methods were unreliable; reliance on parallel documents and admissions justified valuation by the residual method under Rule 9. [Paras 8]

Re-determination of assessable value under Rule 9 upheld.

Demand of differential duty and interest - HELD THAT:- Having sustained the rejection of declared value and re-determination of assessable value, the Tribunal held the differential duty necessarily follows; interest under the relevant provisions is compensatory and arises automatically once duty is found short levied, without separate mens rea requirement. [Paras 9]

Demand of differential duty and applicable interest confirmed.

Invocation of extended limitation under Section 28(4) for suppression/fraud - HELD THAT:- The Tribunal held suppression in valuation can arise from non disclosure of material facts (such as extra bank payments and dual invoicing) even where imports were outwardly cleared; since the investigation unearthed deliberate non disclosure of actual consideration, the proviso to Section 28(4) applied and extended limitation was rightly invoked. [Paras 10]

Extended period under Section 28(4) lawfully invoked.

Confiscation under Section 111(m) for deliberate mis declaration of value - HELD THAT:- The Tribunal found the mis declaration to be conscious and systematic based on documentary evidence and admissions; therefore the goods fell within Section 111(m). Where some goods were not physically available, the liability nonetheless survived; confiscation of seized goods and the statutory option of redemption on payment of a redemption fine were held to be appropriate and within statutory limits. [Paras 11, 14]

Confiscation under Section 111(m) and redemption option upheld.

Mandatory penalty under Section 114A and personal penalties under Section 114AA for fraud or wilful suppression - HELD THAT:- The Tribunal held that once extended limitation is invocable on account of fraud, wilful misstatement or suppression, the penalty under Section 114A is mandatory; personal penalties under Section 114AA were also sustained on the record of admissions and corroborative documentary evidence showing active involvement and knowledge in use of false/fabricated documents. Mere retraction without proof of coercion did not vitiate the admissions relied upon. [Paras 12, 14]

Penalties under Sections 114A and 114AA affirmed.

Final Conclusion: All appeals are dismissed and the impugned Order in Original is upheld in all respects: rejection of declared value, re determination of assessable value, demand of differential duty and interest, invocation of extended limitation, confiscation (with redemption option for seized goods) and imposition of penalties under Sections 114A and 114AA are sustained.

Demand on imported marble blocks used by EOUs - DTA sales - equivalence of excise and customs duty - extended period of limitation - violation of paragraph 6.8 of the FTP and the customs notification - exemption under Notification No. 52/2003-Cus - penalty for collusion or suppression - confiscation for breach of import condition - sanction by proper officer - redemption fine under section 125.

Demand of customs duty with consequential interest on imported marble blocks -HELD THAT:- The Tribunal held on the merits that during the period when High Court stay orders permitted DTA clearance subject to payment of full excise (equal to customs under the proviso to section 3 of the Excise Act), there was no short-levy of duty or loss of revenue because duty was received as excise on the finished slabs rather than as customs on raw marble. The appellants had paid central excise equal to applicable customs duty and the DTA clearances were made pursuant to the judicial stay; therefore the departmental demand of customs duty with interest could not be sustained. [Paras 15, 16, 17, 18, 29]

Demand of customs duty with consequential interest set aside.

Validity of penalty imposed under section 114A - HELD THAT:- Because the Tribunal found that the demand of duty could not be sustained on merits, the mandatory penalty under section 114A, which attaches only where duty or interest has been short-levied, non-levied or refunded by reason of collusion or wilful misstatement, could not stand and therefore was set aside. [Paras 19, 20, 29]

Penalties under section 114A set aside.

Liability of imported marble blocks to confiscation under sections 111(d) and 111(o) -HELD THAT:- The Tribunal held that section 111(d) does not apply because clearances to DTA were made pursuant to the High Court's conditional stay and the proper officer had allowed import clearances; section 111(o) likewise did not apply because the High Court had sanctioned clearance to DTA and the proviso to section 111(o) exempts cases where the proper officer sanctions non-fulfilment of conditions. Further, the goods had been used in manufacture and therefore were not available for confiscation. [Paras 21, 22, 23, 24, 29]

Imported marble blocks were not liable to confiscation under sections 111(d) and 111(o).

Validity of redemption fines imposed in lieu of confiscation under section 125 and attendant obligations under section 126 -HELD THAT:- The Tribunal explained that imposition of a redemption fine under section 125 is an option available to the owner of goods and is not obligatory except where goods were provisionally released on bond containing an undertaking; only in that situation does payment of redemption fine become binding. The court also emphasised that where goods are confiscated they vest in the Central Government and the adjudicating authority is obliged to take possession under section 126, a consequence that makes compulsory redemption in other cases inappropriate. [Paras 25, 26, 27, 28, 29]

Redemption fines cannot be imposed as a compulsory substitute for confiscation except where provisional release on bond creates that obligation; the redemption fines imposed are not sustainable.

Final Conclusion: All impugned demands, penalties, confiscation findings and redemption fines were set aside: the Tribunal allowed the appeals on merits, holding that DTA clearances made under High Court stay on payment of excise equal to customs precluded demands of customs duty and attendant penalties or confiscation, and clarifying the limited circumstances in which redemption fines and the adjudicating authority's possession obligations apply.

Appealability of interlocutory orders initiating contempt proceedings - discovery and production of documents - Maintainability of appeal against interim disclosure directions superseded by subsequent orders and subsumed in substantive appeal - notice for defamation to the court appointed auditor - Whether an appeal lies as of right against the issuance of a show cause notice initiating contempt proceedings by the Tribunal in the present facts.

Appealability of interlocutory contempt notice - HELD THAT:- Following the Purshotam Dass Goel Vs. Hon’ble Mr. Justice B S Dhillon [1978 (3) TMI 217 - SUPREME COURT] The Tribunal applied the principle that mere initiation of contempt proceedings by issuance of a notice does not decide any substantial right of the party and therefore is not ordinarily appealable as of right; an appealable order must adjudicate some bone of contention affecting the party's rights. Applying that principle, the Tribunal did not entertain the appeal against the show cause notice but granted liberty to the appellant to file a reply to the show cause notice before the Learned NCLT, keeping all objections open. [Paras 4]

Liberty granted to the appellant to file reply to the show cause notice; appeal disposed of on that basis.

Appeal against interim disclosure direction subsumed in substantive appeal - HELD THAT:- The Tribunal noted the impugned disclosure direction related to transactions with Ascot Realty Pvt. Ltd that the challenged order had been superseded by a later order requiring production of documents, and that Ascot Realty has a substantive appeal pending. Given that the relief sought was limited to assistance/cooperation regarding those transactions and the matter is already before the Tribunal in the substantive appeal, the Tribunal found no reason to keep this appeal pending and concluded there was no force in it. [Paras 3]

Appeal dismissed as lacking merit and being rendered unnecessary in view of the subsisting substantive appeal; pending applications disposed of.

Final Conclusion: The appeal against the show cause notice was disposed by granting liberty to file a reply before the NCLT; the appeal against the interim disclosure direction was dismissed as the order was superseded and the subject matter was subsumed in a substantive appeal. Pending applications in both matters were disposed of.

Jurisdiction to determine disputes - Scope of SEBI's and the Securities Appellate Tribunal's powers to receive and conduct evidence in proceedings - evidence based adjudication.

Power of Securities and Exchange Board of India to take evidence under Section 11C - HELD THAT:- The Court clarified that SEBI is specifically empowered to take evidence for determining disputes under Section 11C of the SEBI Act, 1992, and that the Securities Appellate Tribunal, while exercising appellate jurisdiction, is empowered to effectively conduct its proceedings under Section 15U of the Act. The observation affirms that both statutory bodies possess procedural powers to receive and evaluate evidence in the course of their adjudicatory functions. [Paras 3]

SEBI may take evidence under Section 11C and the Tribunal may conduct proceedings under Section 15U; their determinations must proceed within those statutory powers.

The Court held that decisions by the Board or the Tribunal must be based on evidence that has been brought on record through the statutory investigative and adjudicatory processes; external enquiry reports which do not form part of the Board's investigation or enquiry should not be relied upon by either statutory authority. [Paras 4]

External Enquiry Reports not forming part of SEBI's investigation or enquiry should not be relied upon by SEBI or the Tribunal.

Having reviewed the matter and in the facts and circumstances of the case, the Court found that the imposition of costs on the appellant was not justified and therefore that aspect of the Tribunal's order could not be sustained. [Paras 6]

The Tribunal's order insofar as it imposed costs on the appellant is set aside.

Final Conclusion: The appeal was disposed of with clarifications that SEBI may take evidence under Section 11C and the Tribunal may conduct proceedings under Section 15U, that adjudicatory decisions must be based on evidence on record and not on external enquiry reports, and that the Tribunal's imposition of costs on the appellant is set aside.

Lack of proper disclosure in the Draft Red Herring Prospectus (DRHP) and Red Herring Prospectus (RHP) for the Initial Public Offering (IPO) - contents of General Order issued by SEBI u/s 11A - HELD THAT:- We are not inclined to interfere with the impugned order [2025 (12) TMI 377 - BOMBAY HIGH COURT] in exercise of our jurisdiction under Article 136 of the Constitution of India.

The Special Leave Petition is, accordingly, dismissed and the accompanying interlocutory application(s), if any, stands disposed of.

Entitlement to contractual interest in insolvency proceedings - failed to produce any contractual or documentary basis - substantiation of financial claim - administrative role of resolution professional.

Whether the appellants were entitled to interest on their unsecured loans as part of their admitted claims in the CIRP -HELD THAT:- The Adjudicating Authority's finding that the appellants failed to establish any contractual or documentary basis for entitlement to interest at 18% (or at any rate) was upheld. The Court applied the statutory requirement that financial claims in CIRP be substantiated by cogent evidence under the relevant provisions and regulations, observing that the principle of equity among creditors does not override the statutory requirement to substantiate claims. The balance-sheet entries and the appellants' pleadings were found insufficient to prove a contractual right to the interest claimed and no material was placed before the Authority to justify admission of interest. [Paras 8, 16, 17, 23]

Appellants not entitled to interest as claimed; rejection of interest component sustained for lack of contractual or documentary proof.

Administrative duty of the resolution professional in collating claims - HELD THAT:- The Court observed that the Resolution Professional performs administrative functions in collating claims and must admit claims based on the documentation received. The RP admitted only the principal amount because no documents demonstrating entitlement to interest were furnished to the RP; the separate admission of interest in respect of another creditor was supported by a specific board resolution and was not challenged in the application. In absence of supporting material placed before the RP or the Adjudicating Authority, there was no error in the RP's action. [Paras 21, 22, 24]

No error in the Resolution Professional admitting only the principal amount where no documentary basis for interest was produced; RP's action sustained.

Final Conclusion: The impugned order rejecting the applications was upheld and both appeals are dismissed; the findings that interest was not payable for want of contractual or documentary proof and that the Resolution Professional correctly admitted only the principal amount are sustained.

Admission of application under section 9 - discharge/novation based on a letter and alleged transfer of liability - corporate insolvency resolution process - operational debt - pre-existing dispute - Effect of third party performance under Section 41 of the Indian Contract Act - novatio and substituted contract under Section 62 of the Indian Contract Act - seeking withdrawal of CIRP - unenforceable agreement for want of consideration - collusive transfer of liabilities.

Whether payment or acceptance by a third party discharged the corporate debtor under Section 41 of the Contract Act - HELD THAT:- The court held that Section 41 applies only where there is actual performance of the original promise by a third person accepted by the promisee; a mere promise or partial payments by a third party does not discharge the promisor. The pleaded or alleged payments by MK Overseas Pvt. Ltd., and the disputed letter of no objection, did not amount to actual performance that would extinguish the corporate debtor's liability under Section 41. [Paras 11, 16]

Section 41 does not operate to discharge the corporate debtor on the facts of this case

Novatio and substituted contract under Section 62 of the Indian Contract Act - HELD THAT:- The court found no valid, enforceable substituted contract evidencing novation. The alleged letter of no objection was unilateral, lacked consideration and was not a binding contract with the corporate debtor and MK Overseas Pvt. Ltd.; therefore it could not operate as a valid novation to extinguish the original liability. [Paras 17, 18, 19]

There was no novation under Section 62 and the corporate debtor remains liable

Pre existing dispute and unilateral transfer of liability in insolvency proceedings - HELD THAT:- The court held that unilateral internal arrangements or inter se agreements between shareholders or group companies, not assented to by the operational creditor, do not create a pre existing dispute between the corporate debtor and the operational creditor. The adjudicating authority correctly rejected the plea of novation and found no pre existing dispute preventing admission of the Section 9 application. [Paras 21, 22, 25]

The adjudicating authority rightly admitted the Section 9 application as there was debt and default by the corporate debtor

Scope of adjudicating authority's observations concerning criminal liability - HELD THAT:- The court examined the impugned order and concluded that although the adjudicating authority had recorded observations suggesting potential criminality, the operative portion contained no direction to initiate such proceedings. The appellate court held those observations to be inappropriate and ordered their deletion. [Paras 23, 26]

Observations about proceeding under criminal provisions are deleted

Final Conclusion: The admission of the Section 9 petition was upheld; the appellate court held that neither third party payments nor the alleged unilateral letter effected discharge or novation of the corporate debtor's liability, deleted the adjudicating authority's observations about criminal proceedings, and granted the appellant an opportunity to pay the claimed amount within 30 days to permit the operational creditor to seek withdrawal under Section 12A.

Amendment of pleadings - Validity of order to amend the Form No.1 in order to change the date of default with a further liberty to the Respondent (Appellant herein) to file a Reply vis-à-vis the amended Form-1, within a period of seven days from the date of receipt of the amended Form-1 - limitation period -rectification of defects - prejudice to opposite party - opportunity to be heard - Discretion to allow amendment before final order.

Amendment of Form-1 under Section 7 - HELD THAT:- The Tribunal upheld the Adjudicating Authority's exercise of discretion in permitting the applicant to file an amended Form No.1 changing the date of default, noting that amendments or additional documents may be filed any time before a final order admitting or rejecting an application under Section 7 is passed. The court applied the principles in Dena Bank v. C. Shivakumar Reddy [2021 (8) TMI 315 - SUPREME COURT] and the guidance on amendment in Life Insurance Corporation of India v. Sanjeev Builders [2022 (9) TMI 1564 - SUPREME COURT], observing that amendments should be allowed where they assist in determining the real controversy, do not introduce a time barred claim, do not change the nature of the proceeding, and do not cause injustice by divesting the other side of a valuable right. The Adjudicating Authority had afforded the respondent an opportunity to file a reply to the amended Form No.1 and the amended date of default (as pleaded) fell within limitation; therefore, no prejudice or loss of a valuable accrued right to the respondent was shown. The Tribunal emphasised that the Adjudicating Authority must assess the ingredients of Section 7 on the pleadings and documents before deciding admission or rejection, and that discretion to permit amendment must be exercised on sound principles.

The Adjudicating Authority correctly granted liberty to file the amended Form No.1 and provided consequential opportunity to the respondent; the amendment did not warrant interference.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority's liberty to permit amendment of Form No.1 and to receive a reply is upheld and it is directed to proceed to decide the Section 7 application on merits.

Imposition of penalty - contraventions of Sections 9(1)(b) and 9(1)(d) read with Section 64(ii) - aiding and abetting - reasoned findings - Failure to consider and discuss evidence - requirement of reasons supporting adverse findings.

Whether the impugned order sustained an adverse finding against the appellant on a basis that was supported by discussion of the evidence -HELD THAT:- The Appellate Tribunal found that the Impugned Order contained an adverse finding against the appellant but did not record any discussion of the evidence supporting that finding. The only material in the Impugned Order relating to the appellant was a conclusory statement that he received and transferred money and aided the transactions of another person, yet no particulars of evidence or reasoning were set out to justify that conclusion. Because the adjudicating authority failed to articulate the evidentiary basis or engage with the material facts underpinning the adverse finding, the Tribunal treated the defect as fatal to the impugned determination and remitted relief by setting aside the order qua the appellant. [Paras 6]

Final Conclusion: The appeal is allowed and the impugned order, insofar as it imposes penalty on the appellant, is set aside because the adjudicating authority failed to discuss or justify the adverse finding on the evidence.

Validity of service of summons and notices relied upon documents by electronic transmission satisfied the requirements of Rule 13(2) read with Rule 13(11) of the Adjudicating Authority (Procedure) Regulations, 2013 and Section 13 of the Information Technology Act, 2000 - recording of reasons to believe under Section 8(1) PMLA - obligation to serve complete relied upon documents and Adjudicating Authority's duty to determine sufficiency.

Validity of electronic service of summons and notices - HELD THAT: - The Court applied Rule 13(3)(iii) which permits service by electronic mail and Rule 13(11) which regards transmission through electronic mode as valid service under the Information Technology Act, 2000. In the facts of this case the notice and RUDs communicated by PDF via email were held to constitute valid service. [Paras 20]

Service by email was held to be valid.

Recording of reasons to believe under Section 8(1) PMLA - HELD THAT: - The Court examined the reasons recorded by the Adjudicating Authority, which identified prima facie involvement in money laundering upon perusal of the RUDs and investigation material, and found no fault in the recording of those reasons. [Paras 26]

The recording of reasons to believe by the Adjudicating Authority was upheld as not illegal.

Obligation to serve complete relied upon documents in a bound paper book - Adjudicating Authority's duty to determine sufficiency of relied upon documents - HELD THAT: - Although Rule 13(2) prescribes service of complete relied upon documents in a bound paper book with affidavit and proof of service, the Court declined to decide on the factual sufficiency of the documents supplied. The Court directed the Adjudicating Authority to first determine whether the documents requested by the petitioners constitute relied upon documents and, if so, to direct the Enforcement Directorate to supply them within two weeks. The Court further directed that, if additional documents are supplied, the petitioners be allowed two weeks to file a supplementary reply. Parties aggrieved by the Adjudicating Authority's decision on supply may seek remedies under Section 26 of the PMLA, 2002. [Paras 28, 30]

The matter of sufficiency of relied upon documents was left to the Adjudicating Authority to decide; the Authority was directed to order supply of further RUDs if appropriate and to allow a two week period for a supplementary reply.

Final Conclusion: The writ petition was disposed of by upholding electronic service and the Adjudicating Authority's reasons to believe, while remitting the factual question of completeness of relied upon documents to the Adjudicating Authority with directions to order supply where appropriate and to permit a supplementary reply; parties remain free to pursue remedies under Section 26 of the PMLA, 2002.

Entitlement to bail despite the rigours of the PMLA and having been in custody for over three years - right to life and personal liberty - Article 21 and pre-trial custody - presumption regarding proceeds of crime - twin conditions for bail in money laundering - weight of statement recorded under Section 50 of the PMLA - risk of tampering with evidence.

Relaxation of twin conditions under Section 45 of the PMLA - Article 21 and pre-trial custody - HELD THAT:- The Court held that prolonged incarceration exceeding three years engages Article 21 and may warrant relief notwithstanding stringent statutory provisions. While recognising that economic offences are grave, the Court accepted that constitutional protection of liberty can justify relaxation of the twin conditions under Section 45 of the PMLA in an appropriate case where continued detention amounts to infringement of Article 21 and further custody is not required for investigation or to prevent tampering. [Paras 8, 14, 16]

Section 45 conditions were relaxed on the touchstone of Article 21 as continued detention was not required

Weight of statement recorded under Section 50 of the PMLA - HELD THAT: - The Court reiterated that a statement recorded under Section 50 of the PMLA when the accused is in custody is not admissible as substantive evidence and can only operate as corroboration to investigative material; the truth and veracity of such statements must be assessed at trial. [Paras 11]

Statements under Section 50 recorded in custody are not substantive evidence and have limited corroborative value

Article 21 and pre-trial custody - risk of tampering with documentary evidence - HELD THAT:- The Court found investigation in respect of the petitioner to be complete, noted that the case rests primarily on documentary evidence in the agency's custody and official witnesses unlikely to be influenced, and held that risks of tampering or flight could be addressed by stringent bail conditions; consequently further custodial interrogation was not required. [Paras 15]

Further detention was unnecessary as investigation was complete and risks could be mitigated by conditions

Applying the foregoing principles, the Court exercised its constitutional jurisdiction to grant bail subject to stringent conditions designed to prevent flight, tampering with evidence and witness intimidation; the trial court was authorised to cancel bail if conditions were breached and to proceed independently on merits. [Paras 16, 17, 19, 21]

Bail granted on stringent conditions and trial court empowered to cancel bail for violations

Final Conclusion: The petition for bail was allowed: the Court directed release on bail subject to stringent conditions addressing passport surrender, territorial and communication limitations, non-interference with evidence and witnesses, and observance of court appearances, and observed that its remarks were confined to the bail application without expressing any opinion on merits.

Scope of attachment and confiscation under Section 5(1) and the procedure under Section 8(1) - proceeds of crime - commission of the scheduled offence or in money-laundering - possession of tainted property - related burden on a person served with notice to disclose sources of acquisition - preponderance of probabilities.

Whether properties held by a person not shown as accused in the scheduled offence can be provisionally attached under the PMLA - HELD THAT:- The legal position is well-settled that the property of any person can be proceeded against under the PMLA if the same is found to have been derived or obtained directly or indirectly from proceeds of crime or represents the value of such tainted property, regardless of whether or not such person himself or herself had any role in the commission of the scheduled offence from which the proceeds were derived or obtained. In this context, apart from the case laws cited by the respondents as mentioned in in the aforementioned para 32 (supra), reference can also be had to the landmark judgment of the Apex Court in Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)] Special Leave Petition, wherein it was categorically held that the objective of enacting the Act is the attachment and confiscation of proceeds of crime so as to combat the evil of money-laundering, by reaching the proceeds of crime in whosoever’s name they are kept or by whosoever they are held. It was also specifically held that sweep of Section 5(1) is not limited to the accused named in the scheduled offence. It would apply to any person (not necessarily being accused in the scheduled offence), if he is involved in any process or activity connected with the proceeds of crime. Needless to add, such ‘process or activity’ would include mere possession of tainted property.

Thus, the property of the appellant herein could have been attached even if she had no role in the scheduled offence and even if she did not play any active role in the offence of money laundering, so long as she was in possession, whether jointly or individually, of proceeds of crime.

Onus on person served notice under Section 8(1) to prove legitimate source - HELD THAT:- Applying the civil standard of preponderance of probabilities applicable to adjudicatory proceedings under the Act, the Tribunal found the Adjudicating Authority was justified in confirming the PAO. The appellant herself stated she was a housewife and that her financial affairs were managed by her husband; her husband's statements under Section 50 admitted payments into the appellant's account and use of funds from the partnership firm to repay the loan taken for purchase of the plot. Those admissions, together with the husband's subsequent conviction on related charges and the ongoing PMLA prosecution, led the Tribunal to conclude the appellant failed to discharge the burden imposed by Section 8(1) to demonstrate legitimate sources of acquisition. On that factual and legal basis the attachment was held sustainable and interference was declined. [Paras 41, 42, 43, 44, 45]

The Tribunal upheld the confirmation of the provisional attachment, finding the appellant did not discharge the statutory onus and that the evidence supported continued attachment.

Final Conclusion: The Tribunal dismissed the appeal and upheld the Adjudicating Authority's confirmation of the provisional attachment of the appellant's plot and bank account under the PMLA, concluding (i) attachment may be made irrespective of whether the owner was an accused in the scheduled offence and (ii) on the evidence and admissions before it the appellant failed to prove legitimate sources so as to vacate the attachment.

Taxability of salaries paid to the GM and other department heads - valuation rule in Section 67 of the Finance Act, 1994 - nexus between consideration and service - fulfilment of all the statutory obligations of an employer, viz., PF contribution, Form-16 of the employees - relationship of employer-employee - extended period of limitation.

Whether salaries paid by the hotel-owner to the General Manager and other department heads are includible in the operator/management fee charged by the foreign operator and taxable under Section 67 of the Finance Act, 1994. - HELD THAT:- The Apex Court in the case of Union of India vs. Intercontinental Consultant and Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT], held that the value of taxable service shall be the gross amount charged by the service provider 'for such service; and the valuation of such service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service.

The Tribunal applied the settled principle that the value of a taxable service is the gross amount charged by the service provider for that service and must represent consideration paid quid pro quo for the service. The Court accepted authorities and reasoning that, unless an amount is charged by the service provider to the service recipient and bears nexus with the taxable service, it cannot be included in the taxable value. On that basis the Tribunal found the salaries paid by the appellant to the GM and other department heads were not sums charged by Hilton overseas as consideration for management services and therefore were not includible in the operator fee for valuation under Section 67. [Paras 6]

Salaries paid by the appellant are not includible in the operator fee payable to Hilton overseas and are not liable to service tax under Section 67.

Characterisation of employer-employee relationship by contractual terms and statutory compliance - Whether the General Manager and other department heads were employees of the foreign operator (Hilton) or of the hotel-owner, for the purpose of taxation of the amounts paid as salary. - HELD THAT:- Our view is further strengthened by fact that the Appellant had fulfilled all the statutory obligations of an employer, viz., PF contribution, Form-16 of the employees. Compliance of such statutory requirements by the Appellant, all of which clearly establishes the relationship of employer-employee between the Appellant and the GM and other department heads. We draw support from the decision of the Tribunal in the case of M/s Allied Blenders and Distillers Pvt. Ltd. v. Commissioner of Central Excise & Service Tax [2019 (1) TMI 433 - CESTAT MUMBAI], wherein, the Tribunal relied on the fact that statutory obligations of an employer were fulfilled by the appellant and thus the directors were to be considered as employees of the appellant company.

The Tribunal examined the Operating Agreement which expressly provided that the property's employees are employees of the owner and recorded contractual provisions vesting rights of approval, hire, transfer and termination with the owner. The appellant's compliance with statutory employer obligations (PF contributions, Form-16 etc.) was taken as corroborative of an employer-employee relationship with the owner. Relying on these contractual terms and statutory compliance, and consistent departmental orders in similarly placed cases, the Court concluded that the GM and department heads were employees of the appellant and not employees of the foreign operator. [Paras 6]

The General Manager and other department heads are employees of the appellant and not of the foreign operator; therefore the salaries paid are not attributable to the operator as consideration for taxable services.

Final Conclusion: The Tribunal allowed the appeal, holding that the salaries paid to the General Manager and other department heads are not includible in the operator/management fee charged by the foreign operator and consequently no service tax is payable on those amounts; the impugned order was set aside.

Statutory levy -Collection of auction fee - storage of un-manufactured tobacco - category of storage and warehousing service -levy demurrage charges for delay in lifting of tobacco stocks stored in the godown in order to avoid blocking of godowns - Storage of unmanufactured agricultural produce excluded from storage and warehousing service - penal/demurrage charges not consideration - limitation as the extended period of limitation - invoking the provision of Section 80.

Statutory levy - HELD THAT:- The auction fee collected by the Board is prescribed under the Statutory Provisions as above. Hon’ble Supreme Court in the case of CCE and ST Vs Gujarat Industrial Development Corporation [2023 (4) TMI 716 - SC ORDER], wherein, it was held that statutory levies collected by statutory authorities in discharge of statutory obligation cannot be treated as consideration for service unless there is a clear element of commercial activity. Similarly, in the case of Rosmerta Technologies Ltd., Vs CCE and ST, LTU [2019 (11) TMI 1573 - CESTAT CHANDIGARH] which is affirmed by the Hon’ble Apex Court [2023 (8) TMI 189 - SC ORDER], wherein, it was held that activities performed pursuant to statutory mandate do not constitute taxable service. Hon’ble Supreme Court in the case of Krishi Upaj Mandi Samit [2022 (2) TMI 1113 - SUPREME COURT], wherein, it was held that the sovereign/public authority under the provisions of law being mandatory and statutory functions and the fee collected for performing such activities is in the nature of a compulsory levy as per the provisions of the relevant statute and it is deposited into the Government treasury, no service tax leviable on such activities. It is also held that if such authority performs a service, which is not in the nature of a statutory activity and the same is undertaken for the consideration, then in such cases, service tax would be leviable.

Auction fee is not taxable as consideration for service.

Storage of unmanufactured agricultural produce excluded from storage and warehousing service - penal/demurrage charges not consideration -HELD THAT:- Section 65(102) expressly excludes services provided for storage of agricultural produce from the definition of 'storage and warehousing'. Unmanufactured tobacco is an agricultural produce as clarified in the relevant Board order. Consequently, warehousing/rental charges for storage of such produce do not attract service tax. Demurrage collected as a penal charge for delay in lifting is penal in nature and, following precedents, cannot be treated as 'consideration' for a taxable service. [Paras 29, 30, 31]

Storage charges for unmanufactured tobacco and demurrage charges are outside the taxable service net.

Extended period of limitation not invokable in interpretative disputes - HELD THAT:- The demand based on the impugned orders is founded on a question of law and interpretation regarding taxability of statutory boards and related services, an area where there was considerable doubt during the relevant period. In such circumstances, and in light of authority precluding invocation of extended limitation where the issue is interpretational, the extended period cannot be invoked against the appellant. [Paras 32, 33]

Extended limitation period cannot be applied; the demand cannot be sustained on that ground.

Final Conclusion: The Tribunal allowed the appellant's appeals and dismissed the Department's appeal, holding that the auction fee is a statutory levy not taxable as consideration, storage of unmanufactured tobacco and demurrage are not taxable, and the extended period of limitation is not invokable.

Denial of refund of Cenvat credit on various input services received by the appellant - definition of input service in Rule 2(l) - export turn over shown as a “total turnover” - claiming the refund of unutilized input services credit - activity as a 100% export oriented unit (BPO/Call Centre) registered with the Software Technology Park of India, working on a 24x7 basis​​​​​​​ - Whether the Appellate Authority erred in holding that the formula adopted by the refund sanctioning authority was correct ?

Eligibility of input services under Rule 2(l) of the Cenvat Credit Rules (pre-01.04.2011) - HELD THAT:- With regard to the availment of Cenvat credit on the input services prior to the period 1-4-2011, the definition of “Input Service” contained in Rule 2(l) ibid provided that “activities relating to business” should be considered as input service. In this case, the Department has not raised any prior objections that the appellants had not availed the input services for accomplishing their business purpose. We find that the definition of ‘input services’ during the relevant period had a wide ambit as it included the words “activities relating to business.” In various decisions, the Tribunal as well as higher judicial fora have repeatedly held that the said services are eligible for credit if it is established from records that assessee has used the said service for providing the output services. The decision in CCE Nagpur v Ultratech Cement Ltd [2010 (10) TMI 13 - BOMBAY HIGH COURT] refers. We are also satisfied with the justifications as contended above by the Appellant and find that the judicial precedents relied upon by the appellant are apposite in this regard.

The reliance placed by the appellant on the decision of the Jurisdictional High Court in P.P. Products Ltd v CC, Custom [2019 (5) TMI 830 - MADRAS HIGH COURT] wherein it has been held that disbelieving CA Certificate without any material against it is not justified, is wholly apposite in this regard. The said decision is seen relied on by the Jurisdictional High Court yet again in Johnson Lifts Pvt Ltd v. Asst Commr of Cus. (Refunds) [2021 (2) TMI 401 - MADRAS HIGH COURT]. For the aforesaid reasons, we are therefore of the considered view that the findings in the impugned order holding that these services are ineligible to be considered as input services under Rule 2(l) of the Cenvat Credit Rules, 2004 are unsustainable and liable to be set aside.

Application of refund formula confined to the registered premises for which refund is claimed - HELD THAT:- On construing the Refund Notification (Notification No.5/2006-CE (NT)) and its Appendix, the Tribunal held that the refund of unutilised input service credit is specific to the registered premises from which output services are exported and where input credit cannot be utilized. Consequently, the export turnover and total turnover for calculating the ratio in condition 5 must be referenced to that particular registered premise. Where STPI and SEZ premises are distinct and the appellant maintains unit wise accounts for those premises, the correct course is to confine the numerator and denominator of the formula to the STPI unit's turnover for determining refund in respect of the STPI unit. The Appellate Authority's approach of excluding SEZ exports from export turnover while including them in total turnover was not sustained. [Paras 24, 25, 26, 27]

The formula must be applied with reference to the registered premises for which refund is claimed and, given separate unit wise accounts, the turnover of the STPI unit alone is to be used for computing the refund attributable to that unit.

Final Conclusion: The appeals are allowed to the extent indicated; the impugned orders disallowing the refund are set aside and the matter is remanded to the original authority to redetermine the quantum of refund and sanction the same with interest in accordance with law, with directions to complete the proceedings expeditiously.

Liability to pay service tax -works contract service​​​​​​​ - Construction of residential complex - prospective operation of legislative amendment - reversal of cenvat credit on non taxable outputs - Treatment of cenvat credit availed and its reversal consequent to the finding of no output tax liability -​​​​​​​ Board Circulars and prevailing law.

Construction of residential complex - taxable prior to 1-7-2010 - application of Board Circular No.108/02/2009-ST and Circular No.151/2/2012-ST - HELD THAT: - The Tribunal held that for the periods under appeal (which fall prior to 1-7-2010) service tax could not be levied on construction of residential complexes. The Tribunal applied the Board Circulars and earlier tribunal and appellate decisions (as summarised in para 5) concluding that, whether characterised as service simpliciter or as works contract, construction of residential complexes prior to insertion of the explanation w.e.f. 1-7-2010 was not taxable, and therefore the demands confirmed by the Commissioner for the disputed periods cannot be sustained. [Paras 5]

Demands for service tax for the disputed periods are unsustainable and set aside.

Reversal of cenvat credit on non taxable outputs - HELD THAT: - The Tribunal observed that the appellant had accumulated cenvat credit up to June 2010 which was utilized to discharge the impugned demand. Having held that the output services were not taxable for the disputed periods, the Tribunal directed that the appellant must reverse the credit availed and remanded the matter to the original authority to quantify and determine the reversal in accordance with the Cenvat Credit Rules, 2004. [Paras 6]

Matter remanded to the original authority to re determine and direct reversal of cenvat credit in accordance with law.

Final Conclusion: The confirmed service tax demands for the periods February 2009 to December 2009 and January 2010 to May 2010 are set aside as the Tribunal found no liability prior to 1 7 2010; the question of reversal/quantification of cenvat credit is remanded to the original authority for fresh determination under the Cenvat Credit Rules, 2004.

Transaction value - disallowance of valuation adopted under Section 4 of the Central Excise Act, 1944 in respect of certain tyres, tubes and flaps cleared to the replacement market - Liability for valuation under Section 4A - read with Notification No. 49/2008-CE (NT) - definition of "pre-packaged commodity" in Section 2(l) - Section 4A contingent on statutory requirement under weights and measures law - extended limitation under Section 11A(4) - wilful suppression or deliberate concealment - penalty under Section 11AC and interest under Section 11AA .

Section 4A contingent on statutory requirement under weights and measures law - HELD THAT: - The Court held that the definition of "pre-packaged commodity" requires that a commodity be "placed in a package", a concept that connotes enclosure or containment and cannot be equated with mere securing or strapping. Section 4A is an exception to the transaction-value rule in Section 4 and applies only where the statutory preconditions, including a legal mandate under the weights and measures regime to declare retail sale price on the package, are satisfied. On the facts the strapped tyre-tube-flap combinations did not create any enclosure, the strapping covered only a minimal surface area and was for logistic convenience; earlier clarifications under the prior weights-and-measures regime continued to apply; and coordinate Tribunal and other decisions on materially identical facts support the view that such strapping does not amount to packaging. Consequently the statutory preconditions for invoking Section 4A were not fulfilled and valuation must follow Section 4. [Paras 9]

Strapped tyre-tube-flap combinations are not 'placed in a package' within the Legal Metrology Act and Section 4A does not apply; valuation under Section 4 is correct.

Extended limitation under Section 11A(4) - wilful suppression or deliberate concealment - HELD THAT:- In Anand Nishikawa Co. Ltd. v. CCE, [2005 (9) TMI 331 - SUPREME COURT], the Supreme Court categorically held that suppression of facts must be wilful and deliberate. The Court observed that mere omission to disclose information is not suppression unless there is deliberate withholding of information with intent to evade duty. The Court emphasised that something positive other than mere inaction or negligence is required before the extended period can be invoked.

Applying settled law, the Court found that invocation of the extended five-year period requires positive proof of fraud, collusion, wilful misstatement or deliberate suppression with intent to evade duty. The dispute here was interpretational-whether Section 4A applied-and the assessee had disclosed clearances in statutory returns, had correspondence with authorities describing the packaging process, and had applied Section 4A in other factually distinguishable instances. Differential valuation arising from factual distinctions in packaging does not amount to suppression. In the absence of any specific finding of deliberate concealment, the Department failed to discharge the burden to establish the jurisdictional facts for extended limitation. [Paras 10]

Invocation of extended limitation under Section 11A(4) is unsustainable.

Penalty under Section 11AC dependent on establishment of Section 11A(4) ingredients - HELD THAT:- Penalty under Section 11AC is contingent on the same ingredients required for invoking the extended period under Section 11A(4). Having held that Section 4A is inapplicable and that the extended period is not invocable because there was no fraud or deliberate suppression, the Court found that the requisites for imposing penalty were not satisfied. Interest is compensatory and arises only where duty is legally payable; with the demand set aside on merits and limitation, interest does not survive. [Paras 11]

The imposition of penalty under Section 11AC and the demand for interest under Section 11AA are not sustainable.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned Order-in-Original and held that the strapped tyre-tube-flap combinations are assessable under Section 4 (not Section 4A), that the extended limitation and consequential penalty and interest are unsustainable, and granted consequential relief in accordance with law.

Reversal of Cenvat credit by intimating the Jurisdictional Range Superintendent as required under Rule 6(3A) - proportionate reversal of credit -belated reversal treated as non-taking of credit - remand for verification of reversal and interest computation - Whether exercising option for reversal of credit by filing intimation with the Jurisdictional Range Superintendent as per Rule 6(3A) of the CCR, 2004 is mandatory requirement of a procedural?

Procedural nature of intimation under Rule 6(3A) -HELD THAT: - The Tribunal examined the requirements of Rule 6(3A) and observed that particulars sought (name, address, registration number, date of option, descriptions of inputs/goods/services and balance credit) constitute general information already available to the department through other returns. The Court therefore distinguished conditions precedent to statutory exemption under Section 5A from the Rule 6(3A) intimation requirement and held that the statutory intimation in Rule 6(3A) is procedural rather than a substantive condition whose non-compliance would defeat the right to reverse credit on a proportionate basis. [Paras 5]

Intimation to the jurisdictional Superintendent under Rule 6(3A) is procedural and its non-filing does not preclude acceptance of proportionate reversal of credit.

Acceptability of proportionate reversal of Cenvat credit - remand for verification of reversal and interest computation - Belated proportionate reversal of Cenvat credit by the assessee was acceptable; correctness of the amount reversed and interest payable is to be verified and quantified by remand to the Adjudicating Authority. - HELD THAT:- The Tribunal held that demanding a lump-sum reversal at the prescribed percentage under Rule 6(3)(i) was not justified where the assessee had reversed credit on a proportionate basis (albeit belatedly) and such reversal had been accepted by lower authorities. However, because Rule 6(3A) prescribes detailed formulas and specific rates of interest (which changed w.e.f. 01.04.2016), the Tribunal remitted the matter to the Adjudicating Authority to verify the correctness of the amount reversed and computation of interest. The Adjudicating Authority was directed to decide the quantification on submission of details within the prescribed time and the assessee was to pay any balance of credit and/or interest as determined. [Paras 5]

Proportionate reversal of Cenvat credit is acceptable; matter remanded to the Adjudicating Authority to verify and quantify the correct reversal and interest, with directions for payment of any balance.

Final Conclusion: The appeal is allowed in part by remanding the quantification of the proportionate reversal and interest to the Adjudicating Authority; the requirement to intimate under Rule 6(3A) is procedural and does not bar acceptance of a proportionate reversal of Cenvat credit.

Eligibility of Cenvat credit on structural steel used in fabrication and erection of capital goods - scope of Rule 2(a)(A)(iii) and Rule 2(k) (including Explanation 2) - prospective application of amendment to Explanation 2 of Rule 2(k) of the Cenvat Credit Rules, 2004.

Eligibility of Cenvat credit on structural steel used in fabrication and erection of capital goods - HELD THAT:- The Tribunal applied settled judicial precedent including the Madras High Court decision in Thiru Arooran Sugars [2017 (7) TMI 524 - MADRAS HIGH COURT] and the Supreme Court's user-test principle in Rajasthan Spinning & Weaving Mills [2010 (7) TMI 12 - SUPREME COURT] to conclude that structural steel items used in the fabrication and erection of equipment/structures necessary for manufacturing are integral to capital goods and eligible for Cenvat Credit. The Tribunal found it undisputed that the steel items were used for erection of capital goods at the appellant's sponge-iron plant and, in light of the precedents, held the availed credit admissible. [Paras 17, 18, 19, 23, 24]

Cenvat Credit availed by the appellant on the disputed MS structural items is admissible.

Prospective application of amendment to Explanation 2 of Rule 2(k) of the Cenvat Credit Rules, 2004 - HELD THAT:- The Tribunal examined conflicting authorities and relevant High Court precedents and concluded that the amendment cannot be applied retrospectively to the disputed period (May 2007 to June 2009). Consequently, denial of credit by applying the amended provision retrospectively was held unsustainable. [Paras 20, 21, 22]

The amendment by Notification dated 07.07.2009 is not to be applied retrospectively to deny credit for the period May 2007 to June 2009.

Final Conclusion: The impugned order denying Cenvat Credit is set aside; the Tribunal allowed the appeal, holding the disputed structural steel items eligible for Cenvat Credit and rejecting retrospective application of the 07.07.2009 amendment for the period May 2007 to June 2009.

Cenvat credit availed on inputs - value is "written down" in the books of account under accounting standards - reversal of cenvat credit under Rule 3(5B) - demands for periods prior to introduction of the recovery mechanism under Notification No. 3/2013-CE (N.T.) dated 01.03.2013 or prior to introduction of the "partial write off" reversal provision - invocation of extended period - Whether cenvat credit availed by the appellants is required to be reversed in terms of Rule 3(5B) of the CENVAT Credit Rules, 2004 on account of 'writing down' the value of the inputs in accordance with the accounting principles.

Reversal of Cenvat credit on write-down of inputs under Rule 3(5B) - HELD THAT:- The Tribunal held that a book entry reducing the value of slow-moving or obsolete inputs for accounting purposes ('write-down') does not amount to a 'write off' of the inputs themselves where the inputs continue to exist in the factory and remain usable. The Court applied accounting distinctions relied on by the appellant and held that Rule 3(5B) is attracted only where inputs are written off fully or partially in a manner that reflects their removal or non-usability; mere provisionary or valuation-driven write-downs do not trigger reversal of Cenvat credit. The Tribunal noted the appellant reverses credit where inputs are identified as actually obsolete and written off, and accepted that the contested demands relate to items only written down in the books and not removed or unusable. [Paras 6, 16, 17]

The Tribunal recorded that the provision for reversal on 'partial write off' under Rule 3(5B) was introduced on 01.03.2011 and that the recovery mechanism to effect recovery under Rule 3(5B) was introduced by Notification No. 3/2013-CE (NT) with effect from 01.03.2013. Applying these temporal facts, the Tribunal held that no mechanism existed to recover Cenvat credit under Rule 3(5B) for the period April 2010 to March 2013 and accordingly demands for that period are not sustainable. [Paras 11, 16]

Demand for the period April 2010 to March 2013 is unsustainable for want of a recovery mechanism and was set aside.

Invocation of extended period - HELD THAT:- The Tribunal found that the particulars concerning the inventories and related entries were declared in the appellant's returns and that the demand was based on audit objections. On that basis, and applying the settled principles that extended period is not invokable in the absence of suppression or positive mis-statement, the Tribunal held that the Department failed to demonstrate any positive act of suppression by the appellant and therefore could not invoke the extended period of limitation to sustain the demand. [Paras 13, 16]

Extended period of limitation was held not invokable and related demands were set aside.

Final Conclusion: The impugned orders confirming demands under Rule 3(5B) were set aside: appeals concerning reversal for write-down periods were allowed with consequential relief, and the appeal filed to protect recovery proceedings was dismissed as infructuous.

Effect of NCLT-approved settlement of admitted claims on excise demand - abatement of proceedings - Invocation of the extended period of limitation - imposition of penalty - manufacturer of metallurgical coke and was availing CENVAT credit of duty paid on input, capital goods and input services under the provisions of CENVAT Credit Rules, 2004.

Effect of NCLT-approved settlement on excise demand - HELD THAT:- The Tribunal recorded that the respondent's claim, including the excise duty demand, was filed in the insolvency process and that NCLT approved the resolution plan settling admitted claims at a specified percentage, following which the present appellant paid the settled amount. Applying the reasoning in the Tribunal's decision in M/s. Alok Industries Ltd. [2022 (10) TMI 801 - CESTAT MUMBAI] (as followed by the Bench), and having noted that the appellant's challenge was confined to invocation of the extended period and imposition of penalty while the principal demand had been settled under the NCLT order, the Tribunal held that once the admitted claim was settled by the NCLT and the settled amount paid by the appellant, the department's demand (as admitted) stood resolved. Consequently, the findings confirming interest and penalty in the impugned order could not be sustained in the face of the NCLT-approved settlement; Rule 22 of the CESTAT Procedure Rules does not alter this outcome where the appeal contests only extended-period invocation and penalty after the claim has been settled in insolvency proceedings. [Paras 8, 9]

The impugned order insofar as it confirmed interest and imposed penalty is unsustainable and the appeal is disposed.

Final Conclusion: The Tribunal held that the NCLT-approved settlement of admitted claims and payment by the appellant resolved the department's admitted demand, and therefore the adjudication confirming interest and imposing penalty could not be sustained; the appeal was disposed accordingly.

Determining the correct valuation - Application of Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - identical goods are sold to independent buyers as well as to sister units - applicability of extended limitation under the Proviso to Section 11A(1) - voluntary payment doctrine.

Application of Rule 8 of the Valuation Rules - HELD THAT:- The Tribunal held that Rule 8 applies only where the entire quantity of goods is sold exclusively to the sister unit. Where the assessee sold the same steel scrap both to independent external buyers and to its sister unit, Rule 8 had no application and transaction value had to be determined in terms of Rule 4 on the basis of price realizable from independent buyers. The Tribunal relied on its earlier decision in Jai Balaji Industries Ltd. [2023 (6) TMI 1102 - CESTAT KOLKATA] and the subsequent affirmation by the Calcutta High Court [2024 (4) TMI 1255 - CALCUTTA HIGH COURT] to conclude the issue was no longer res integra. [Paras 6, 7, 8, 9]

Rule 8 is not applicable; valuation must be on transaction value under Rule 4 where sales were made to independent buyers as well as to sister units.

Sustainability of duty demand and penalty - consequence of valuation finding on demands, interest and penalty - HELD THAT:- Because the Tribunal determined that valuation for the scrap should have been on transaction value under Rule 4, the confirmed demand of duty and the penalty could not be sustained. The Tribunal held that the appellant had correctly paid duty on the basis of transaction value for clearances to the sister unit and therefore the demands of duty and penalty were unsustainable; accordingly the impugned order was set aside. The Tribunal treated the precedent reasoning which also addressed related issues of interest and limitation as supportive of this conclusion. [Paras 9, 10]

The demand of duty and penalty confirmed by the lower authorities are not sustainable and are set aside.

Final Conclusion: The Tribunal allowed the appeal, holding that where goods were sold to both independent buyers and sister units valuation is to be determined under Rule 4 and not Rule 8; on that basis the confirmed duty and penalty were unsustainable and the impugned order was set aside, with consequential relief.

Rejection of the transaction value - determining assessable value by applying Section 4(1)(b) read with Rule 7 - place of removal - duty on the clearance of Compressed Natural Gas (CNG) on stock transfer basis to Retail Outlets and paying the excise duty by back working of the price based on retail outlet selling price - related persons - new grounds not raised in show cause notice cannot be taken - principle to principle sale.

Valuation under Rule 7 where place of removal is retail outlet - HELD THAT: - The Tribunal held that the show cause notice expressly relied on the contention that the place of removal was the CNG dispensing stations at HPCL retail outlets and therefore that the situation required resort to Rule 7 read with Section 4(1) and 4(3)(c) for valuation. The allegation that the parties were related and that transaction value should be rejected on that basis was not made in the SCN; accordingly the revenue could not introduce the related party ground at the appellate stage. The Bench therefore treated the Department's contention as one based on place of removal (necessitating Rule 7 valuation) and not as a pleaded related party rejection of transaction value, and disallowed the belated ground of relatedness. [Paras 3, 9]

The ground of relatedness not pleaded in the show cause notice cannot be taken up; the SCN relied on place of removal at retail outlets and valuation under Rule 7, not on rejection of transaction value for related party reasons.

The Tribunal reviewed its earlier final order in the appellant's case for the period August 2005 to December 2009 [2023 (11) TMI 1165 - CESTAT HYDERABAD] including the subsequent Rectification of Mistake (ROM) consideration, and found that the identical factual and legal matrix had been decided in favour of the appellant. The Bench declined to distinguish the earlier order on the present facts, observed that the ROM left the core issue for adjudication intact, and therefore applied the prior decision to the present periodical demands. [Paras 8, 10]

The Tribunal followed its earlier decision on identical facts and allowed the appeals.

Final Conclusion: The appeals were allowed: the Tribunal applied its earlier final order on the identical factual matrix and held that the revenue could not raise the unpleaded related party ground, the SCN having relied on place of removal at retail outlets and valuation under Rule 7.

Maintainability of section 11 application - seeking appointment of a suitable person as arbitrator to settle the dispute between the petitioner and the 3rd respondent - designation of courts under special statute - application of arbitration act to special regime - Whether the High Court could appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act in respect of a dispute falling under Section 42 of the SEZ Act.

Application of Section 11 of the Arbitration and Conciliation Act - HELD THAT: - The High Court's jurisdiction under Section 11 of the Arbitration and Conciliation Act is limited to cases where the statutory conditions in Section 11 are satisfied - notably the existence of a valid arbitration agreement and circumstances showing lack of consensus between parties regarding appointment. Section 42 of the SEZ Act provides a special scheme: where courts under Section 23 are not designated, disputes of civil nature are to be referred to arbitration and the arbitrator is to be appointed by the Central Government under Section 42(2). Section 42(3) makes the Arbitration and Conciliation Act applicable to such arbitrations only once an arbitrator has been appointed and the dispute is referred for arbitration; its opening words "save as otherwise provided under this Act" exclude application of the general appointment mechanism of the Arbitration Act to the special appointment regime under Section 42. In the present case no valid arbitration agreement was produced and no request was made to the counterparty for appointment of an arbitrator; consequently the conditions for invoking Section 11 are absent and the High Court cannot usurp the Central Government's appointment power under Section 42(2) of the SEZ Act. [Paras 8, 9, 10, 11, 12]

The petition under Section 11 is not maintainable and is rejected; the High Court will not appoint an arbitrator in place of the Central Government under Section 42 of the SEZ Act.

Final Conclusion: The arbitration petition was held misconceived and dismissed as not maintainable because the statutory appointment power under Section 42(2) of the SEZ Act rests with the Central Government and the prerequisites for invoking Section 11 of the Arbitration Act were not satisfied; the petitioner remains free to pursue appropriate remedies to compel consideration by the Central Government.