TaxTMI Updates e-Newsletter
Mar 23,2026

Mandatory limitation for refund claims under Section 54 - availability of writ remedy under Article 226 for belated refund claims - condonation of delay subject to corresponding extension for Sections 73 and 74.

Mandatory limitation for refund claims under Section 54- Filing an application for refund within two years from the relevant date under Section 54 of the CGST Act is mandatory for the proper officer to entertain the claim - HELD THAT:- Having regard to the statutory scheme and the purpose of prescribing the two-year period - including its relationship to the remedial provisions in Sections 73 and 74 - the Court held that the two-year limitation must be read as mandatory. The absence of any enabling provision in the Act to condone delay or to treat the period as directory means the proper officer has no jurisdiction to entertain refund claims filed after the prescribed period, except where the statute itself provides relief. [Paras 9]

The two-year period under Section 54 is mandatory and must be enforced by the proper officer

Availability of writ remedy under Article 226 for belated refund claims - HELD THAT: - The Court held that where the CGST Act does not provide any mechanism to remedy a belated refund claim, the bar in Section 54 operates only against the proper officer and does not oust the High Court's jurisdiction under Article 226. In cases where the statutory scheme is not complete and no adequate remedy is provided, the High Court may entertain writ petitions for condonation of delay, subject to considerations of laches, bona fides and the statutory scheme. [Paras 10]

A claimant whose refund application under Section 54 is time-barred may invoke Article 226 of the Constitution to seek condonation of delay

The Court held that it may condone delay in a belated refund claim in appropriate cases, but such condonation must be conditional: if condoned, corresponding extension of time must be made available to the proper officer to invoke and apply consequential provisions (notably Sections 73 and 74) that would have been available had the claim been filed within time. This approach balances the interests of the taxpayer and Revenue and prevents unjustifiable bar to remedial action by the authorities. [Paras 11]

The Court may condone delay in filing a refund claim, subject to granting corresponding extension of time to the proper officer to invoke applicable provisions including Sections 73 and 74

Final Conclusion: The Court held that the two-year limitation in Section 54 is mandatory, but where the Act provides no remedy for belated claims the High Court may, in appropriate cases, condone delay under Article 226 subject to conditions that protect the Revenue (including corresponding extensions to invoke Sections 73/74); on the facts the delay was condoned and the refund application was directed to be considered in accordance with law.

Validity of clubbing of period, while issuing notice under Section 74 - Consolidation of tax periods in show cause notices - fraudulent availment of input tax credit - single consolidated show cause notice under Section 74 - Separate limitation and assessment regime for each financial year under the CGST Act

Validity of issuing a single consolidated show cause notice under Section 74 of the CGST Act covering multiple financial years/tax periods, including where fraudulent availment of input tax credit is alleged -HELD THAT: - The Court held that the statutory scheme of the CGST Act treats each financial year as a distinct tax period tied to the return for that period, and that Sections 73(10) and 74(10) fix separate limitation periods year-wise. Aggregating different tax periods in a single show cause notice would conflate distinct limitation dates and denial of year wise procedural rights of the taxpayer. The Court expressly rejected the submission that allegations of fraudulent availment of input tax credit permit consolidation of show cause notices across years, observing that Section 74 contains no distinct provision authorising clubbing of different financial years even in fraud cases. The decision relies on and follows the reasoning in Milroc Good Earth Developers [2025 (10) TMI 867 - BOMBAY HIGH COURT] and Rite Water Solutions [2025 (11) TMI 1939 - BOMBAY HIGH COURT], and concludes that consolidated SCNs for multiple financial years are impermissible under Section 74. [Paras 4, 8, 12]

Consolidated show cause notices under Section 74 covering multiple financial years are not permissible; allegations of fraudulent availment do not validate clubbing of tax periods.

Having found the consolidated show cause notice unlawful for contravening the year wise scheme and limitation in the Act, the Court quashed the impugned notice. The respondents were granted liberty to re issue show cause notice strictly in accordance with the provisions of Section 74 for the relevant financial year or years, and to revive proceedings if earlier decisions are overturned by a higher forum. This relief preserves the respondents' ability to proceed within the statutory framework while protecting the taxpayer from impermissible clubbing. [Paras 17]

Impugned consolidated show cause notice quashed; respondents may re issue notices strictly in accordance with Section 74 and have liberty to revive proceedings if higher court decisions permit.

Final Conclusion: The consolidated show cause notice dated 28/09/2025 covering financial years 2018-19 to 2022-23 was quashed for impermissible clubbing of distinct tax periods under Section 74 of the CGST Act; respondents are permitted to re-issue notices strictly in terms of Section 74 and may revive proceedings if higher court rulings alter this position.

Time limit for refund claim - Failure to comply with statutory time-lines for refund scrutiny - acknowledgement and deficiency procedure - Mandamus for compliance with prior order directing refund with interest.

Failure to comply with statutory time-lines for refund scrutiny - HELD THAT:- The Court recorded that the earlier order disposed [2025 (3) TMI 1630 - DELHI HIGH COURT] in light of the coordinate bench decision which found that Rules 90 and 91 provide a complete code with strict timelines for acknowledgement, scrutiny and communication of deficiencies, and that issuance of a deficiency memo after the prescribed period is impermissible. The Court therefore affirmed that it was not open to the respondent to violate the time-lines and issue a deficiency memo beyond the statutory period, entitling the petitioner to proceed for grant of the refund and interest in accordance with law. [Paras 4, 5]

The Court held that the respondent could not issue a deficiency memo beyond the prescribed timeline and that the refund claim was to be treated in accordance with the earlier order and applicable rules.

Mandamus for compliance with prior order directing refund with interest - HELD THAT:- The Court observed that the earlier order disposing the writ petition directed the respondent to sanction the refund with statutory interest and that the subsequent application did not require clarification of that order. The present petition seeking enforcement was allowed by directing the respondent to take necessary steps to furnish the refund in terms of the earlier directions and in accordance with law, with a time-bound compliance directive. [Paras 5, 6]

The respondent was directed to ensure compliance with the earlier order and to furnish the refund along with statutory interest within the period specified by this Court.

Final Conclusion: The Court directed the respondent to comply with the earlier order and sanction the refund due to the petitioner for the period April 2020 to March 2022, together with statutory interest, and ordered necessary compliance within three weeks; the petition is disposed of accordingly.

Non-compliance with the show cause notice - Neither filed any reply nor appeared for the personal hearings fixed - limitation period - statutory period for filing an appeal under Section 107 of the GST enactments - Seeking for fresh adjudication subject to conditions including a pre-deposit by the petitioner, in view of delay and expired statutory appeal period.

Remand for de novo adjudication on pre-deposit conditions - HELD THAT: - It is noticed that the limitation for filing an appeal under Section 107 of the respective GST enactments, 2017 against the impugned Order has already expired. The present Writ Petition has been filed only on 10.03.2026.

At this stage, Petitioner submits that the Petitioner is willing to pre-deposit 50% of the disputed tax as a condition for de novo adjudication.

Under similar circumstances, Orders have been quashed and cases have been remitted back to pass a fresh order on terms subject to such Assessee depositing 25% to 100% of the disputed tax depending upon the length of delay in approaching the Court. I do not find any reason to take a different view in this case.

Therefore, to balance the interest of both parties viz., the Assessee and the Revenue, the case is remitted back to the Respondent to pass a fresh order subject to the Petitioner depositing 50% of the disputed tax in cash from the Petitioner's Electronic Cash Register within a period of thirty (30) days from the date of receipt of a copy of this order.

Within such time, the Petitioner shall also file a reply to the Show Cause Notice in GST DRC-01 dated 28.05.2024 (digitally signed on 27.05.2024) together with requisite documents to substantiate the case by treating the impugned Order dated 22.08.2024 as an addendum to the Show Cause Notice dated 28.05.2024 (digitally signed on 27.05.2024).

It is made clear that bank attachment shall be lifted subject to the deposit of 50% of the disputed tax as ordered above and the Petitioner not being in arrears of any other amount for any other tax period barring the amount demanded under the impugned Order.

In case the Petitioner fails to comply with any of the stipulations, the Respondent is at liberty to proceed against the Petitioner to recover the tax in accordance with law as if this Writ Petition was dismissed in limine today.

Final Conclusion: The writ petition is disposed of by remitting the matter to the respondent for fresh adjudication on terms: the petitioner must deposit 50% of the disputed tax and file a reply and documents; the respondent shall thereupon decide the matter on merits and the bank attachment will be vacated subject to compliance, failing which the respondent may recover the tax as if the petition were dismissed.

Determination of GST rate by sale value per piece - classification of a pyjama set as a single piece - Benefit of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 and Notification No. 9/2025-Central Tax (Rate) dated 17.09.2025).

Whether two pyjama sets packed in one pack constitute a single retail unit for the purpose of applying the lower GST rate or whether the GST rate is to be determined by the sale value per piece where one 'piece' is a pyjama set (top and bottom sold together). - HELD THAT:- The Authority held that a 'pyjama set' (a top and a bottom sold together) constitutes a single piece for classification under the Notification. A pack containing two such sets therefore comprises two pieces and cannot be treated as one piece or a single retail unit merely because both sets are packed together. Consequently, the applicable rate is determined by the sale value per piece; the pack price must be apportioned to obtain the per-piece sale value. Applying that approach to the facts, the per-piece price falls below the threshold in the relevant Notification and the lower rate applies. The Authority also noted the subsequent amendment raising the threshold effective from 22.09.2025, which is consistent with the same per-piece approach adopted here. [Paras 7, 8]

A pyjama set (top and bottom) is a single piece; a pack of two sets equals two pieces and the GST rate is assessed by sale value per piece, resulting in qualification for the lower rate.

Final Conclusion: The AAR's ruling is upheld and the appeal is dismissed: the pyjama set is to be treated as one piece and the GST rate is determined per piece, yielding the lower rate on the facts before the Authority.

Condonation of delay under proviso to Section 100(2) of the CGST Act - sufficient cause - delay of 28 days in filing the appeal - technical glitch as cause - repeated attempts to file the appeal online were unsuccessful due to a recurring portal error, supported by screenshots and a helpdesk ticket - Power of the Appellate Authority under Section 101(1).

Condonation of delay under proviso to Section 100(2) of the CGST Act - HELD THAT: - The Appellate Authority examined the material on record and found that the appellant received the advance ruling and made repeated attempts to file the appeal online but encountered a persistent portal error shown in screenshots and had raised a helpdesk ticket. The appeal was filed within the further period of thirty days permitted by the proviso to Section 100(2). On these facts the Authority was satisfied that the appellant was prevented by a sufficient cause from presenting the appeal within the initial thirty days and therefore the delay was condonable under the proviso. The Authority relied on its power under Section 101(1) to pass the appropriate order. [Paras 7, 8]

The delay in filing the appeal is condoned under the proviso to Section 100(2) and the appeal is admitted for consideration on merits.

Final Conclusion: The Appellate Authority condoned the delay in filing the appeal on the basis of technical portal failure constituting sufficient cause under the proviso to Section 100(2) and admitted the appeal for adjudication on merits.

Action of the SST/ Static Surveillance Team in detaining/seizing the consignments and handing over to the Income Tax Department - Violation of Standard Operating Procedure for seizure during Model Code of Conduct - Notice u/s 148 against a courier employee lacking ownership - Claims to seized goods to be adjudicated u/s 132B

Violation of Standard Operating Procedure for seizure during Model Code of Conduct - Lawfulness of the SST seizure and its handover to the Income Tax Department - HELD THAT: - The Court upheld the High Court's finding that the SST did not follow the SOP applicable during the Model Code of Conduct, and there was no requisite satisfaction that the articles were being transported to influence voters or belonged to candidates. Documents and statements established the consignments were in transit with a courier and not liable to be detained; therefore the seizure and subsequent requisition to Revenue were vitiated and the High Court's findings on this aspect require no interference. The Court modified the relief to direct release in favour of the person from whom the goods were seized (the courier), consistent with the SOP. [Paras 10, 16, 19]

Seizure was in violation of the SOP and the High Court's findings on the illegality of the seizure and handover are sustained; seized articles to be released to Sequel Logistics as the person from whom they were seized.

Validity of notice u/s 148 against a courier employee lacking ownership -Claims to seized goods to be adjudicated u/s 132B - HELD THAT: - The Court agreed with the High Court that Amit Sharma was merely an employee/custodian of the courier and had not claimed ownership of the consignments. Initiating Section 148 proceedings against him on a prima facie presumption of ownership was arbitrary. Given the absence of materials to treat him as owner or as possessing undisclosed income represented by the seized goods, the High Court's quashing of such proceedings was sustained. [Paras 11, 16]

Proceedings under Section 148 against Amit Sharma were manifestly arbitrary and the High Court's view quashing such action is upheld.

Entitlement of Arihant Jewelers to release of seized jewelry and forum for determination of ownership - Claims to seized goods to be adjudicated under Section 132B - HELD THAT: - The Court held that, because the seizure ought to have been dealt with under the SOP (return to the person from whom seized) and the High Court had decided Issues Nos. 1 and 2 on that basis, the High Court should not have proceeded to adjudicate a third party's ownership claim in writ proceedings. The appropriate remedy for claimants disputing ownership of requisitioned/seized articles is to invoke the procedure under Section 132B of the Act before the tax authority; therefore Arihant Jewelers' writ was not maintainable in that forum. [Paras 17, 18, 19]

Writ by Arihant Jewelers dismissed as not maintainable; ownership claims to be pursued under Section 132B before the appropriate authority.

Final Conclusion: The appeals are partly allowed: the High Court's findings that the seizure violated the SOP and that proceedings under Section 148 against the courier employee were arbitrary are sustained; the relief is modified to order release of the seized articles to Sequel Logistics, Arihant Jewelers' writ is dismissed as not maintainable, and claimants remain free to seek relief under Section 132B.

Absence of a final assessment order passed within the period prescribed u/s 144C(13) -Mandatory time limit u/s 144C(13) - draft assessment order not creating enforceable demand -

Mandatory time limit u/s 144C(13) - draft assessment order not creating enforceable demand - technical/administrative glitches to extend statutory limitation - Effect of failure to pass final assessment order within the time prescribed by Section 144C(13) and validity of demand issued with a draft order - HELD THAT: - The Court held that Section 144C(13) mandates completion of the assessment in conformity with the Dispute Resolution Panel's directions within one month from the end of the month in which those directions are received, and that this requirement is imperative and operates notwithstanding Section 153 or Section 153B. Because the directions were received in September 2021, the Assessing Officer was required to pass the final order by October 31, 2021; no such order was passed. Consequently the authority became functus officio on expiry of the statutory period and lost jurisdiction to complete the assessment. A draft assessment order and the notice of demand issued with it do not create an enforceable tax liability absent a valid final assessment; internal technical or administrative difficulties in the department cannot extend the statutory limitation or cure the absence of a valid final order. The Court applied these principles to hold that the demand and penalty notices relating to AY 2017-18 had no legal foundation and that the return must be treated as accepted. [Paras 6, 11, 12, 14]

Failure to pass the final assessment within the period prescribed by Section 144C(13) rendered the Assessing Officer without jurisdiction; the draft order and the notice of demand issued with it were without legal basis and unenforceable.

Final Conclusion: The writ petition is allowed - Notice of demand and penalty notice for AY 2017-18 are quashed, the amount adjusted against an earlier refund is to be refunded with applicable interest, and the respondents are restrained from enforcing the impugned demand.

Validity of order passed u/s 92CA(3) as barred by limitation - reference to the TPO -ad-interim relief in the form of a stay on the operation - it is the case of the Petitioner that once the Assessment proceedings were itself barred on 31st March, 2025, there was no question of making any reference to the TPO after the said date.

HELD THAT: - The Court, observing the factual position and without prejudice to the rights and contentions of the parties, granted ad-interim relief staying the operation of the impugned order passed under Section 92CA(3) and restrained the Respondents from taking further steps, including continuing assessment proceedings for the assessment year 2023-24. The Court directed the Revenue to file an Affidavit in Reply by a specified date and permitted the Petitioner to file a rejoinder, and listed the matter for further hearing on the specified date. [Paras 8, 9]

Ad-interim stay granted of the impugned order dated 31st December, 2025 and respondents restrained from proceeding with assessment proceedings for assessment year 2023-24; matter listed for further consideration.

Final Conclusion: The High Court granted ad-interim relief by staying the operation of the impugned Section 92CA(3) order and restraining further assessment steps in respect of assessment year 2023-24, directed filing of affidavits by the parties, and listed the matter for further hearing.

Condonation of delay in filing return u/s 119(2)(b) - reasonable cause arising from internal corporate disputes and pending NCLT proceedings - treatment of belated filing as return u/s 139(4) of the Income Tax Act - Delay of 169 days in filing the return for A.Y. 2022-23

HELD THAT: - The Court found that, except for the year under dispute, the petitioner had a continuous history of timely filings and that internal disputes between the company's directors, which culminated in proceedings before the NCLT and delayed finalisation of financial statements, constituted a reasonable cause for the delay.

Court noted that supporting documents for the NCLT proceedings were placed on record in the second application and, having considered these facts, held that the criteria for condonation u/s 119(2)(b) were satisfied. The Court therefore set aside the orders rejecting the earlier applications and directed that the belated return be allowed to be uploaded and treated as a return u/s 139(4). [Paras 10, 11]

Final Conclusion: The High Court quashed the orders refusing condonation, held that the petitioner's directoral disputes and pending NCLT proceedings constituted reasonable cause for the delay, condoned 169 day delay and permitted filing of the return within four weeks, to be treated as a return u/s 139(4), with directions to reopen the e filing window.

Benefit of exemption u/s 11 - payments have been made to related concerns in the course of carrying out the activities of the Trust - disallowance has been sought to be made by invoking Section 13(1)(c) primarily on the ground that the concerns have earned higher profits, as reflected in their statements of profit and loss -Rule of consistency in income-tax proceedings

Payment for benefit to specified persons - HELD THAT: - The Court held that Section 13(1)(c) disallows exemption only where application of income or property results in a direct or indirect benefit to persons specified in Section 13(3). It emphasised that not every transaction with a concern in which specified persons have an interest will automatically attract the embargo; the statutory test is whether the payments amount to benefit of those persons. The Tribunal's interpretation that benefit to specified persons must be established before invoking Section 13(1)(c) was upheld. [Paras 7, 12]

Section 13(1)(c) cannot be invoked merely by existence of transactions with related concerns; the fund application must be shown to benefit the specified persons.

Commercial expediency and evidential burden to show diversion of trust income - Whether higher profit margins or payments alone justify treating payments as diversion of trust income? - HELD THAT: - The Court found that the Assessing Officer had not produced comparative material to demonstrate that remuneration or payments were excessive or unreasonable in relation to services rendered. Mere reflection of higher profit margins in the accounts of related concerns, without material establishing that payments constituted diversion for benefit of specified persons, is insufficient to invoke Section 13(1)(c). The existence of substantive activity in the concerns militated against treating the payments as diversion. [Paras 8, 9, 10]

Higher profit margins or payments, standing alone, do not justify disallowance under Section 13(1)(c) absent material showing diversion or lack of commercial expediency.

Rule of consistency in income-tax proceedings - Effect of earlier assessment years' acceptance of identical transactions on subsequent assessments - HELD THAT: - The Court applied the rule of consistency: although res judicata does not strictly apply to income-tax proceedings, where earlier assessments dealing with identical facts had accepted the payments without invoking Section 13(1)(c), and there was no change in the factual matrix or law, a departure from that view was not warranted. On that basis the Tribunal was justified in following the earlier consistent view and rejecting the Revenue's appeals. [Paras 10, 11, 12]

In the absence of any change in facts or law, the consistent view taken in earlier assessment years precludes reopening identical transactions under Section 13(1)(c).

Final Conclusion: The Tribunal correctly interpreted and applied Section 13(1)(c), held that higher margins alone do not establish diversion for benefit of specified persons, and properly relied on consistency with earlier assessments; no substantial question of law arises and the appeals are dismissed.

Transfer of land u/s 2(47)(v) under the JDA - Year of assessment - prevention of double taxation where consideration already taxed in subsequent assessment years - Whether the transaction under the Joint Development Agreement amounted to a transfer chargeable in AY 2005-06 and whether capital gains could be taxed in that year where the consideration had been offered to tax in Assessment Years 2007-08 and 2008-09?

HELD THAT: - It is a settled principle of law that an agreement must be read as a whole and that isolated clauses cannot be relied upon to determine its true nature and effect.

Upon an overall reading of the JDA in its entirety, we are of the considered view that the concurrent findings recorded by the AO the CIT(A), and the Tribunal cannot be said to be perverse or erroneous. Although we uphold the finding of the three authorities that a transfer of land took place in the AY 2005-06, we propose to interfere with the impugned orders for reasons distinct from those assigned by the authorities, as stated hereinbelow.

It is a settled position of law that tax is to be levied on income in the relevant assessment year and in the hands of the correct assessee. The mere fact that income has been offered to tax in another year does not, by itself, determine its taxability in the proper year. In the facts of the present case, if the consideration arising from the transfer of land is brought to tax in the AY 2005-06, the taxes already paid for the Assessment Years 2007-08 and 2008-09 would necessarily require adjustment.

There is no substantial variation in the ultimate tax liability so as to result in any undue benefit to the Revenue or any unwarranted advantage to the assessee. At this distant point of time—nearly two decades later—bringing the sale consideration to tax in the Assessment Year 2005-06 and correspondingly rectifying the concluded assessments for the Assessment Years 2007-08 and 2008-09 would serve no meaningful purpose, except causing avoidable inconvenience to both the assessee and the Revenue.

We hold that if the entire sale consideration brought to tax in the reassessment for the Assessment Year 2005-06 has already been subjected to tax in the Assessment Years 2007-08 and 2008-09, the same shall not be taxed again for the Assessment Year 2005-06. Subject to verification of the aforesaid aspect by the Assessing Officer, the addition made towards capital gains for the Assessment Year 2005-06 stands set aside.

Final Conclusion: The appeal is disposed of by upholding the concurrent finding of transfer, but directing that the capital gains addition for AY 2005-06 shall not be taxed again if the Assessing Officer verifies that the consideration was already subjected to tax in AYs 2007-08 and 2008-09; the other substantial questions are not decided as they were not pressed.

Addition u/s 56(2)(x) - difference between the actual consideration paid by the assessee for the purchase of immovable property and the stamp duty value of the property - Retrospective effect of a curative amendment - Applicability of the enhanced 10% tolerance u/s 56(2)(x)

Whether the amendment increasing the tolerance band to 10% applies retrospectively so that differences less than 10% between consideration and stamp duty value are not taxable under Section 56(2)(x)? - HELD THAT: - The Tribunal accepted precedents of coordinate Benches holding that the legislative enhancement of the tolerance band is curative in nature and must be given retrospective effect. Having regard to those decisions and the absence of any contrary binding authority, the Tribunal held that the 10% tolerance for variations between stated consideration and stamp duty valuation applies to earlier assessment years. Applying that principle to the facts on record, where the difference between actual consideration and stamp duty value was below 10%, the deeming provision under Section 56(2)(x) did not operate to treat the difference as income. [Paras 7, 8]

The amendment is retrospective and the addition under Section 56(2)(x) is deleted because the variation was less than 10%.

Final Conclusion: The appeal is allowed and the addition made under Section 56(2)(x) is deleted on the basis that the 10% tolerance (held to be retrospective) applies and the difference was below that threshold.

Disallowance of power and fuel expenses - expenses apportioned to rented portion where corresponding recovery is treated as business income - disallowance of repair and maintenance expenses apportioned to rented shops

Disallowance of expenses apportioned to rented portion where corresponding recovery is treated as business income - addition made by AO of power and fuel expenses apportioned to rented portion - HELD THAT: - The Tribunal found the issue to be recurring and noted that the assessee had recovered power charges from tenants which were accounted as business income. The coordinate Bench had earlier considered identical facts in the assessee's cases for other years and relief was granted after verifying challans and noting acceptance of similar claims in subsequent assessment proceedings. In view of identical facts for the year under appeal and the prior decisions where the disallowance was not sustained, the Tribunal deleted the addition made on account of disallowance of power and fuel expenses.

The disallowance made by the AO on account of power and fuel expenses is deleted.

Disallowance of repair and maintenance expenses apportioned to rented shops - AO was sought to disallow proportionate expenses on the rented portion on the ground that while offering rental income, as income from house property, the assessee had reduced the rental income from total income shown from business and profession - HELD THAT: - The Tribunal observed that the repair and maintenance expenses attributable to the rented shops and common areas were met out of CAM/maintenance charges received from tenants and reflected as business income in the assessee's books. The matter was a recurring controversy in which the coordinate Bench had decided in the assessee's favour for other assessment years and the Department had not sustained similar disallowances in subsequent final assessment orders. Applying the same reasoning to the identical facts of the present year, the Tribunal deleted the proportionate disallowance.

The disallowance made by the AO out of repair and maintenance expenses is deleted.

Final Conclusion: The Tribunal allowed the assessee's appeals, deleting the disallowances made by the AO in respect of power and fuel expenses and repair and maintenance expenses.

Revision u/s 263 in the name and PAN of non-existent entity (later sought to be corrected through corrigendum) -Validity of corrigendum rectifying party name - Revisionary jurisdiction u/s 263 applicable to faceless assessments - Lack of enquiry vs. Inadequate Enquiry - Allegation of related party transactions - Revisionary jurisdiction under section 263 applicable to faceless assessments -

Validity of corrigendum rectifying party name - whether Corrigendum rectifying the corporate name in the section 263 order is valid and cures the inadvertent mistake of initial mention of the erstwhile entity? - HELD THAT: - The Tribunal recorded that the show cause notice was issued when the erstwhile entity still existed and the scheme of amalgamation was sanctioned later; the Principal CIT recognized the clerical error in the impugned order and issued a corrigendum the next day.

Tribunal found the facts and authorities relied on by the assessee distinguishable and held that the corrigendum timely rectified an inadvertent mistake without any procedural violation that would render the order void ab initio. [Paras 10, 11]

Grounds challenging the revisionary proceedings as void for being in the name of a non existent entity are rejected.

Revisionary jurisdiction under section 263 applicable to faceless assessments - Whether the revisionary order passed u/s 263 has not passed the test of pre-requisite twin conditions that it is erroneous and prejudicial to the interest of the revenue? - HELD THAT: - In the given case, we observed that the assessing officer had asked several information by issue of questionnaires and assessee also submitted the same time to time. However, the assessment was completed without making any enquiries which he should have made, we observed from the detailed observations and detailed submissions made by the assessee during the revisionary proceedings. It clearly shows that the AO had not applied his mind during the assessment proceedings and merely accepted the various documents submitted by the assessee either not understood the nature of the business of the assessee or by negligence. Therefore, after considering the detailed findings and submissions of the assessee, in our view the order passed by the AO without making enquiries which he should have is erroneous. [Paras 12]

Whether the order passed is prejudicial to the interest of revenue? - Assessee had claimed provision for doubtful advances in the AY 2020-21 and the same was reversed, in support it had submitted ROI and computation for AY 2020-21 substantiate that the said expenses had been duly disallowed. The assessee had created the provision and reversed it suo motto and disallowed the same in the computation in the previous assessment year, is the above expenditure automatically eligible to claim in the present year, in our view, it is not justified to claim the same without bringing on record relevant details and rationale to do so. This issue was never confronted to the assessee. Similarly, the issue of Provision for slow and ageing goods, this issue also the assessee had made the submissions similar to the provision created for doubtful advances. In our view, the explanation offered and acceptance by the AO without proper verification on the eligibility to claim the same without proper enquiry is prejudicial to the interest of the revenue.

Related party transactions - As submitted that the related party transactions are disclosed under clause 23 of the tax audit report, mere submission without proper enquiry by the AO, particularly the assessee had disclosed the transactions party wise, nature and payment details, it is the duty of the AO to verify whether they are reasonable and within the range of the industry. Therefore, even in one of the above transactions are not properly verified as the AO supposed to have verified, which is erroneous as well as prejudicial to the interest of the revenue. In our considered view, there exist twin conditions of failure in the order passed u/s 143(3) of the Act. Therefore, we are inclined to reject the plea of the assessee and the case law relied by the assessee are distinguishable to the fact in the present case particularly after the insertion of the definition of erroneous in so far as it is prejudicial to the interest of revenue in the Act itself.

AR made elaborate submissions that the AO had made specific enquiries and the assessee had responded, similarly the assessee had submitted the various information during the revisionary proceedings. After considering the detailed submissions, no doubt all the details were submitted before the AO and AO had miserably failed to enquire which he should have. The data involved in the present case is huge and it is not possible to verify at this stage, therefore the same was set aside to the AO to complete the assessment de novo.

With regard to view taken by the AO is a plausible view in law, in our view, after insertion of explanation 2 in section 263, when the AO does not make enquiries which he supposed to have, the view taken by the AO cannot be treated as plausible view. Further with regard to lack of enquiry and inadequate enquiry, also the issue must be seen on a case to case basis. In the given case, the AO had failed to make enquiry he supposed to make, merely asking for details and not act upon will not absolve the officer from the duty. Therefore, we reject the same in the present case.

With regard to prima facie findings, we observed that the information required for complete findings are not possible in the present case and the Ld PCIT had broadly explained for forming the above opinion in his order elaborately. The case relied by the assessee are distinguishable to the fact in the present case.

Assessment completed by NaFAC cannot be subjected to revisionary proceedings - NFAC is the intermediary between the AU and the other service providers to complete the assessment proceedings. The NFAC is being controlled by the PCCIT as an administrator or controller.

AU is the faceless or invisible JAO to complete the assessment of the relevant assessee. Therefore, as per the provisions of section 144B, the assessment is being completed as per the old procedure except the NFAC has equipped AU, is made more robust to assist the AU and the final say is with the AU only. Even though there are several criteria to evaluate the proceedings in fixed time line, still no other authorities are interfering into the assessment proceeding carried on by the AU. Therefore, assessment completed by the AU, which is the faceless JAO in the faceless regime, the order passed by the NFAC is always subjected to the revisionary jurisdiction u/s 263 of the Act. Therefore, PCIT has jurisdiction over the cases passed by the NFAC or the JAO irrespective of the fact that the relevant assessment was completed physical mode or faceless mode. Hence, the ground raised by the assessee is accordingly rejected.

Final Conclusion: The appeal is dismissed. The Tribunal upheld the Principal CIT's section 263 order (after a valid corrigendum) holding that NaFAC assessments are subject to revision and that the AO's assessment was erroneous and prejudicial for lack of necessary enquiries; the matter is remitted for fresh assessment in accordance with the impugned order.

TP adjustment - specified domestic transaction relating to transfer of steam from eligible captive power unit to non-eligible units - Enhanced deduction under section 80 IA may be remitted for verification - Receipts from Renewable Energy Certificates are capital receipts and excluded from book profits under section 115JB - Disallowance under section 14A where no exempt income is earned

TP Adjustment in respect of transfer of steam from eligible power unit to non-eligible unit - assessee applied ‘Other Method’ as the most appropriate method to benchmark the said transaction of transfer of steam at its cost of production without any mark-up on the same - TPO disregarded the methodology of the assessee and redetermined the ALP of the steam to NIL - Binding nature of DRP directions under section 144C - Deletion of transfer pricing adjustment on intra group steam transfers following precedent - HELD THAT: - The Tribunal accepted that the DRP had directed verification of whether the CIT(A) order for AY 2015 16 was challenged and, since the Revenue admitted by affidavit that no appeal was filed, held that the Assessing Officer/TPO violated the binding DRP direction by retaining the adjustment. Relying on coordinate bench decisions in the assessee's own earlier years and a High Court decision in the group's case, the Tribunal deleted the TP adjustment on transfer of steam. [Paras 15, 16]

TP adjustment in respect of transfer of steam deleted.

Enhanced deduction u/s 80IA on transfer of steam -redetermination of ALP of steam transferred from eligible unit to non-eligible units and consequent enhancement of deduction under section 80IA - HELD THAT: - The Tribunal found that the assessee had raised the enhanced claim before the TPO/AO and DRP, that the TPO/AO did not address the claim despite DRP directions to do so, and that coordinate bench orders had remitted the issue for verification. Accordingly, the Tribunal restored the matter to the Assessing Officer to verify the assessee's claim and decide in accordance with law, giving the assessee a reasonable opportunity of being heard. [Paras 19, 28]

Issue restored to the Assessing Officer for verification and adjudication; grounds allowed for statistical purposes.

Receipts from Renewable Energy Certificates - revenue or capital receipts and excluded from book profits u/s 115JB - HELD THAT: - It is a fact on record that the assessee has received RECs issued by CERC. REC as referred, are basically issued to incentivize generation of power through renewable energy so as to reduce the effect of emissions, which impact clean environment and leads to global warming.

Thus, if we apply the test of purposive interpretation, it can be seen that the object of REC and carbon credits are akin in nature and operate on similar underlying principles - Section 115BBG of the Act specifically provides for taxation of ‘carbon credits’ and the term has been explicitly defined within the section itself. In view of the established principle of strict interpretation of taxing statutes, REC and carbon credits cannot be treated as synonymous and must be considered separately for the purpose of taxation.[Paras 36, 37]

REC receipts held to be capital receipts; not taxable as revenue and excluded from book profits under section 115JB.

Disallowance u/s 14A where no exempt income is earned - addition u/s 14A read with rule 8D while computing income both under the normal provisions as well as under section 115JB - suo motu disallowance under section 14A read with Rule 8D - HELD THAT: - Admittedly, in the assessment year under dispute, the assessee has not earned any exempt income. Therefore, as per the settled legal principles, no disallowance under section 14A read with Rule 8D is called for.

Inclusion of book profit under section 115JB - We hereby follow the judgement of Vireet Investment [2017 (6) TMI 1124 - ITAT DELHI] where it is held that no addition could be made on account of disallowance under section 14A to the book profit. This being so, we delete such addition in book profits and allow the assessee’s ground of appeal.[Paras 43, 44]

Suo motu disallowance under section 14A deleted and excluded from book profits.

Final Conclusion: The appeal is allowed in part: the transfer pricing adjustment on steam and the section 14A disallowance are deleted; REC receipts are held to be capital receipts excluded from book profits; the enhanced 80 IA claim and computational errors are remitted to the Assessing Officer for verification and decision in accordance with law; penalty and interest challenges are dismissed as premature.

Disallowances of agricultural income - Addition treating the same as unexplained money u/s 69A - addition made for non-maintenance of bills or vouchers.

AR before us submitted that section 69A of the Act can be invoked only when the assessee is found to be the owner of money and fails to explain the nature and source and as assessee is an agriculturist and is not required to maintain books of account under section 44AA - HELD THAT: - The Tribunal held that section 69A can be invoked only where the assessee is found to be the owner of money and fails to offer a satisfactory explanation regarding its nature and source. Here the assessee's ownership of agricultural land and cultivation was not disputed, documentary proof was furnished for a substantial portion of receipts sold to registered dealers, and the balance represented direct retail sales in local markets where formal invoices are commonly not maintained.

AO produced no material to demonstrate any source other than agriculture or that the impugned amounts were unexplained money; therefore treating the amounts as unexplained on the sole ground of missing bills amounted to suspicion and was not sustainable in law. [Paras 10]

The addition treated as unexplained under section 69A was not justified and is deleted.

Final Conclusion: The Tribunal allowed the appeal, deleted the addition of agricultural income treated as unexplained under section 69A.

Eligibility for deduction u/s 80P(2)(a)(i) - Construction of society objects by reference to byelaws - objective of the society is acquiring and purchasing land, which is also evident from the name of the society - DR contended that the name and primary objects of the society indicate activities relating to acquisition of land rather than providing credit facilities to members.

as per CIT(A) objects & byelaws of the society, observed that the assessee is not a credit co-operative society engaged in the business of banking or in providing credit facilities to its members - HELD THAT: - The Tribunal examined the society's registration documents and byelaws and found clause 11 expressly authorising the society "To grant loans and advances to members." The authorities below denied the deduction by relying on the society's name and selective object clauses without reading the byelaws in their entirety. Because the income arose from providing credit facilities to members as authorised by the byelaws, the society is eligible for deduction under section 80P(2)(a)(i) on the enhanced profit determined in assessment. The Tribunal therefore directed the Assessing Officer to allow the deduction under section 80P(2)(a)(i) on the income as assessed and specifically on the amount representing provisions debited to the profit and loss account, resulting in deletion of the additions made by denying the deduction. [Paras 9]

Deduction under section 80P(2)(a)(i) is allowable as the byelaws authorise granting loans to members; the AO is directed to allow the deduction on the assessed income including the provisions debited, and the additions made by denying the deduction are deleted.

Final Conclusion: The appeal is allowed: the Tribunal held that a full reading of the byelaws shows the society provides credit to members and is therefore entitled to deduction under section 80P(2)(a)(i); the Assessing Officer is directed to give consequential relief including deletion of the additions related to denial of that deduction.

Deductibility u/s 80P(2)(a)(i) - provision made for interest on deposits - interest on mandatory deposits with bank.

Addition u/s 80P(2)(a)(i) - Addition on account of provision for interest disallowed for adopting a hybrid system of accounting and its tax consequence - HELD THAT: - The Tribunal accepted the alternative contention that the assessee is a cooperative society engaged in providing credit facilities to members and that any income assessed under 'profits and gains of business or profession' arising from that activity would qualify for deduction u/s 80P(2)(a)(i).

Consequently, even if the AO's disallowance of the provision for interest (due to hybrid accounting treatment) were sustained and business income recomputed at a higher figure, that enhanced income would retain the character of business income from providing credit facilities and be eligible for deduction u/s 80P(2)(a)(i). Therefore, the addition would be absorbed by the statutory deduction and would not result in taxable income. [Paras 10]

Assuming the disallowance is upheld, the resultant income is allowable as deduction u/s 80P(2)(a)(i) and the addition does not survive for taxation.

Interest income earned from deposits with scheduled banks - contention of the assessee is that the deposits with scheduled banks were made out of statutory reserves which were required to be maintained u/s 58 of the Karnataka Co-operative Societies Act, and therefore the interest earned therefrom is intrinsically connected with the banking operations carried on by the assessee - HELD THAT: - The Tribunal held that the AO did not examine whether the deposits with scheduled banks were made out of statutory reserves or funds integrally connected with the business of providing credit facilities as required under the Karnataka Co-operative Societies Act. The eligibility of deduction u/s 80P(2)(a)(i) for interest on such deposits depends on that factual determination. In the interest of justice, the Tribunal set aside the orders on this point and directed the AO to verify the nature and source of the deposits, the statutory requirement under the Karnataka Act, and then decide the deduction claim after affording the assessee an opportunity to be heard. [Paras 18]

Matter restored to the AO for fresh examination on whether the bank deposits arose from statutory reserves or funds integrally connected with the assessee's credit business; AO to decide eligibility for deduction in accordance with law after giving opportunity to the assessee.

Final Conclusion: The appeal is partly allowed: the disallowance of interest provision is rendered tax-neutral by allowance under section 80P(2)(a)(i), while the question of deductibility of interest from scheduled bank deposits is remanded to the AO for factual verification and fresh decision.

Disallowance of deduction claimed u/s 80P - delayed verification of return of income - return treated as a belated return merely because the verification was completed after 30 days.

HELD THAT: - The Tribunal held that verification of an electronically filed return is a procedural formality to validate a return already furnished; where the return was electronically filed within the due date under section 139(1), a subsequent delayed verification that is later cured does not change the fact that the return was furnished within the statutory due date. The Tribunal rejected reliance on the CBDT notification and the Supreme Court decision in Checkmate Services Pvt. Ltd [2022 (10) TMI 617 - SUPREME COURT (LB)] as inapplicable to the facts, and placed reliance on precedent of a coordinate bench where belated submission of ITR-V did not defeat substantive entitlements. Consequently, the condition in section 80AC denying deductions for returns not furnished by the due date could not be invoked where the electronic filing itself occurred within the due date and the verification delay was only a procedural defect subsequently cured. [Paras 7]

Deduction under section 80P cannot be denied on account of delayed verification of an electronically filed return where the return was electronically filed within the due date; the disallowance under section 80AC was not sustainable.

Final Conclusion: The appeal is allowed - disallowance of the deduction under section 80P sustained by the CPC and the CIT(A) is set aside and the AO is directed to allow the deduction in accordance with law.

Addition made u/s 69C bogus purchases - Addition u/s 68 for bogus sales

HELD THAT: - The Tribunal held that section 69C may be invoked only where the assessee fails to explain the nature of expenditure or the source of shares of expenses. In the present case all purchases were reflected in the assessee's books, supporting bills were produced and payments were made through the assessee's bank account; these transactions were accepted by the AO. On that basis the Tribunal concluded that section 69C could not properly be applied to make the addition for alleged bogus purchases. [Paras 7, 9]

Addition made u/s 69C is set aside.

Addition u/s 68 for alleged bogus sales -Invocation of section 68 where amount already offered as turnover - HELD THAT: - The Tribunal held that invoking section 68 to add amounts already included and taxed as turnover would amount to double taxation. The assessee had offered the alleged sales amount in the trading account as turnover; therefore the addition u/s 68 was not permissible. The Tribunal relied on existing authority cited in the record Mahaveer Kumar Jain vs. CIT [2018 (4) TMI 1078 - SUPREME COURT] to support the principle against double taxation. [Paras 8, 9]

Addition made u/s 68 is set aside.

Final Conclusion: The Tribunal allowed the appeal, setting aside the additions made under sections 69C and 68.

Territorial jurisdiction - Exercise of extraordinary writ jurisdiction to quash a show cause notice-noticebarred for want of an extension under Section 110(2) - Whether the Show Cause Notice is time barred or the petitioner not served with the Show Cause Notice in the matter of extension of period provided under Sub-Section (2) of Section 110 of the Customs Act, 1962.

Exercise of extraordinary writ jurisdiction to quash a show cause notice -HELD THAT:- The Court declined to invoke its extraordinary jurisdiction to quash the Show Cause Notice since proceedings were pending against multiple accused and exercise of such jurisdiction at this stage could impede ongoing inquiries; the petitioner's challenge on limitation was kept open for adjudication by the respondents-authority rather than being decided by this Court. The Court therefore did not determine the legal question sought to be raised in the petition and refrained from issuing relief in writ jurisdiction (paras 8, 11, 12). [Paras 8, 11, 12]

Writ petition dismissed without adjudication on the merits; Court refrained from quashing the Show Cause Notice and left the issue to the respondents-authority

The Court observed that the petitioner has submitted an explanation asserting the Show Cause Notice to be time barred and directed the respondents to consider that explanation and the decisions relied upon by the petitioner, including earlier Supreme Court decisions and the recent apex judgment cited by respondents, namely Union of India & Ors. v. Jatin Ahuja [2025 (10) TMI 1285 - SC ORDER]; the Court required the authority to deal with the contention on limitation while conducting further proceedings (paras 9, 10, 12). The Court did not pronounce any view on the correctness of the limitation plea but mandated consideration by the adjudicating authority. [Paras 9, 10, 12]

Respondents-authority to consider the limitation/time-bar contentions urged by the petitioner and decide the matter in accordance with law and the precedents relied upon

Final Conclusion: The High Court refused to quash the Show Cause Notice in writ jurisdiction, kept the limitation issue open, and directed the respondents-authority to consider the petitioner's reply on limitation/time-bar in light of the precedents relied upon and decide the matter accordingly.

Retrospective effect of an amendment by substitution of condition (6) of Notification No. 110/95-Cus dated 05.06.1995 by Notification No. 42/98-Cus dated 30.06.1998 (adding the word "premises") - benefit of exemption - installation of imported capital goods at a testing laboratory - Whether the petitioner can be granted the benefit of the amended/substituted condition no. 6 introduced vide Notification No. 42/98-Cus dated 30.06.1998 with retrospective effect or not.

Amendment by substitution to condition (6) of Notification No.110/95-Cus by Notification No.42/98-Cus is capable of retrospective operation and must be given beneficial construction where it rectifies an obvious omission - HELD THAT:- The Court applied the principles in Government of India v. Indian Tobacco Association [2005 (8) TMI 113 - SUPREME COURT] and related authorities to conclude that substitution of text in an exemption notification which supplies an obvious omission (addition of the word "premises" to condition (6)) was intended to grant the same benefit as originally envisaged and is not expressly limited to prospective effect. The Court held that where the amended exemption makes an importer eligible, the amended notification should receive a beneficent construction and operate so as to give effect to that intention rather than be confined to prospective application. Accordingly, the benefit introduced by Notification No.42/98-Cus (substituting condition (6) to include "premises") applies to the appellant's case and the earlier denial on the basis of the original wording was erroneous. [Paras 11, 12]

Notification No.42/98-Cus substituting condition (6) is to be construed as applying to the appellant's imports and the appellant is entitled to the benefit of the amended condition.

Requirement to consider subsequent amended notification before issuing show cause notice - The authority issuing the show cause notice was obliged to take into account Notification No.42/98-Cus when issuing the show cause notice dated 26.05.1999 and failure to do so was a legal error - HELD THAT: - The Court found that the show cause notice relied solely on the original text of condition (6) of Notification No.110/95-Cus while Notification No.42/98-Cus substituting that condition had come into force prior to issuance of the notice. The authorities were therefore required to consider the substituted condition. The omission to consider the effect of the amended notification rendered the departmental action legally untenable. [Paras 13, 14]

The show cause notice and the consequent orders based on the original condition (6) without regard to the substituted condition were patently illegal and the impugned orders are quashed.

Final Conclusion: The Court allowed the Tax Appeal, quashed the CESTAT and CIT(A) orders, directed that the appellant be extended the benefits of Notification No.110/95-Cus as amended by Notification No.42/98-Cus, and directed payment of consequential benefits to the appellant within twelve weeks.

Entitlement to claim SAFTA exemption at a belated stage, including at the appellate stage or post provisional clearance - benefit under Notification No.99/2011-CUS dated 09.11.2011 (SAFTA exemption) -

Claim of exemption notification can be made post-clearance or post-assessment - HELD THAT: - The hon’ble apex court in the case of Share Medical Care v. Union of India [2007 (2) TMI 2 - SUPREME COURT] had categorically held that even if the appellant had not claimed benefit under a particular Notification at initial stage, “he is not debarred, prohibited, stopped from claiming such benefit at a later stage.” It is therefore categoric that an exemption Notification benefit can be claimed and allowed subsequently if eligible. This Tribunal in the case of CIPLA Ltd. v. Commissioner of Customs, Chennai [2007 (8) TMI 131 - CESTAT, CHENNAI] has held that benefit of an exemption Notification not claimed at the time of import can however not be denied as it can be claimed at the appellate stage as well. There are a slew of case laws to this proposition of law - for instance Zenith Computers Ltd. v. Commissioner of Customs, Goa [2017 (3) TMI 758 - CESTAT MUMBAI].

The Tribunal held that benefit under an exemption Notification is capable of being claimed even after clearance or after self-assessment, provided the conditions of the Notification are met and the usual legal procedure is followed. There is no estoppel arising solely from an importer having carried out self-assessment without claiming the exemption. Authorities are obliged to grant appropriate legal benefits admissible in law even if not initially claimed by the importer. The Tribunal relied on settled precedent confirming that a belated claim for exemption cannot be denied on the ground that it was not made at the time of importation or initial assessment. [Paras 9, 11, 12]

The Commissioner (Appeals)'s denial of the SAFTA exemption on the ground that it was not claimed at the time of clearance or cannot be availed at the appellate stage is not sustainable.

Remand for fresh consideration of admissibility of exemption during finalization of provisional assessment - remedial course to be followed where imports were provisionally assessed and exemption claim requires consideration - HELD THAT: - The Tribunal observed that provisional assessments remain subject to finalization and that provisional clearance does not preclude re-assessment or consideration of an exemption claim at the time of finalization. Although the Commissioner (Appeals) noted that the appeal was premature because finalization was pending, the Tribunal found merit in the appellant's primary plea and directed that the matter be remanded to the original authority to examine the admissibility of the SAFTA Notification during finalization of the Bills of Entry. The remand requires the authority to consider the SAFTA Certificate and, if eligible, grant the benefit while finalizing the provisional assessments. [Paras 10, 13, 14]

The appeals are remanded to the original authority with directions to examine the admissibility of Notification No.99/2011-CUS and, if found admissible, grant the benefit while finalizing the provisional assessments.

Final Conclusion: The Tribunal held that an importer may claim an exemption Notification belatedly if eligible, and remanded the matters to the original authority to examine and, if admissible, grant the SAFTA benefit while finalizing the provisional assessments.

Validity of Revocation of the Customs Broker licence and related forfeiture and penalty - due diligence - presumption of regularity - violation of the prescriptions of Regulation 10(d), 10(m) and 10(n) of the Customs Brokers Licensing Regulations (CBLR), 2018.

Insufficiency of evidence to sustain revocation of customs broker licence - HELD THAT: - The Tribunal found that the adjudicating authority's conclusion that the appellant was the exporter and had undervalued consignments rested on assumptions and surmises without tangible proof. The record did not establish that the appellant itself was the exporter or that the appellant acted with fraudulent intent; multiple government-issued identifiers and export records for the purported exporter undermined the finding of non-existence. In these circumstances the findings of violation of Regulations 10(d), 10(m) and 10(n) were held to be without foundation and the punitive measures were set aside (paras 14, 18, 20, 23, 24). [Paras 14, 18, 20, 23, 24]

The revocation, forfeiture and penalty were set aside and the broker's licence restored; security deposit and penalty to be returned.

Inadmissibility of covert market survey and hearsay as basis for disciplinary action - Discreet market enquiries and hearsay evidence could not form the mainstay for disciplinary conclusions against the Customs Broker - HELD THAT: - The Tribunal held that the revenue's reliance on a covert market survey and an email from an industry source amounted to evidence gathered without associating or confronting the exporter and thus could not substantiate the charge. Such material was characterised as hearsay or merely suggestive and was discounted as a valid basis for holding the broker liable (para 13). [Paras 13]

The covert market survey and similar hearsay material were rejected as insufficient to support the adjudication.

Standards of due diligence required of a customs broker under Regulation 10(n) of CBLR, 2018 - The appellant's KYC and documentary checks met the regulatory standard and did not require physical inspection of the exporter's premises - HELD THAT: - Applying the regulatory test and precedent, the Tribunal held that a Customs Broker is required to take reasonable precautions and verify identity by reliable independent documents, but is not obliged to physically visit the exporter's premises or to act as an inspector of genuineness. The KYC documents produced by the appellant were held sufficient to satisfy Regulation 10(n) and related obligations (paras 17, 21). [Paras 17, 21]

The broker's due diligence complied with Regulation 10(n); no violation was established on this ground.

The Tribunal found that the Inquiry Officer's report and the Disciplinary Authority's order proceeded without proper consideration of the appellant's replies, overlooked material submissions, and misinterpreted the High Court's direction on timelines. The inquiry was found to be delayed and the adjudicating authority's rationale (including assertions about replies not being filed) was described as fallacious and without logical basis (paras 9, 11, 16, 18, 23). These procedural failures vitiated the disciplinary outcome. [Paras 9, 11, 16, 18, 23]

The inquiry was procedurally flawed and the resultant disciplinary findings could not stand.

Final Conclusion: The Tribunal set aside the adjudicating authority's order revoking the Customs Broker licence, quashed the forfeiture of the security deposit and the penalty, restored the licence, and directed return of the security deposit and penalty, concluding that the findings against the broker were unsupported by evidence and that the inquiry was procedurally defective.

Maintainability of appeal, where the amount of penalty involved in each appeal is less than Rs. two lakhs under the second proviso to Section 129A(1) of the Customs Act, 1962 - discretion to refuse admission - monetary threshold for admission - presumption of service under general clauses act - limitation and delay in filing appeals. - Penalty on Customs Broker

Appeal filed by the appellant were dismissed by the Commissioner (Appeal) on the round of limitation as these have been file beyond the period which could have been condoned by the Commissioner (Appeal).

Appellate Tribunal's discretion to refuse appeals where penalty involved is less than Rs.2 lakhs - HELD THAT:- Appellant has in the appeal memo, at SI No 14 appellant has declared the penalty amount to be “Rs.25,000/- under Section 112(a)(ii) of the Customs Act, 1962 and in the second appeal, penalty amount to be “Rs.75,000/- under Section 112(a)(ii) of the Customs Act, 1962”.

The Tribunal applied the second proviso to Section 129A(1) and held that it has discretion to refuse admission of appeals in cases where the amount of fine or penalty determined by the order does not exceed Rs.2 lakhs.

Presumption of service under general clauses act - limitation and delay in filing appeals. - HELD THAT:- It is evident that the order in originals had been sent to the appellant in normal course of business to their address by the speed post. The details of the speed post have been provided in the table. These orders sent to the appellant were not returned back by the Department of Posts undelivered. In terms of Section 27 of the General Clauses Act, the orders have been delivered to the appellant within a reasonable time (about a week) from their date of dispatch to the appellant. The presumption under Section 27 of the General Clauses Act is a presumption in law and need to be rebutted by the aggrieved party by providing necessary evidences. No such thing available on record. Thus do not agree to the submissions made by the appellant in this regard. Also the decisions relied upon by the appellant are clearly distinguishable.

Tribunal do not find the appeal maintainable as having very low amount involved - not intend to discuss this aspect in much more detail.

However while making the above order, It is clear that neither Commissioner (Appeal) has in her order nor Tribunal have in this order examined the issue with regards to merits of penalty imposed upon the appellant. This order or the order in appeal should in no way be considered to be approving the penalty imposed upon the appellant.

Appeal is dismissed as not maintainable.

Final Conclusion: The Tribunal exercised its discretion under the proviso to Section 129A(1) to refuse admission of the appeals because the penalties determined by the impugned orders in each appeal were below the Rs.2 lakh threshold; consequently the appeals were dismissed as not maintainable.

Validity of demand of Basic Customs Duty (BCD) and Social Welfare Surcharge (SWS) on the imported oils - classification claimed under CTH 3301 and documentary evidence produced at import - Whether the demand of Basic Customs Duty and Social Welfare Surcharge could be sustained after the goods were assessed, examined and granted Out-of-Charge while classified under CTH 3301.

Exemption under notification for goods classified under Chapter 3301 - HELD THAT: - The Tribunal found from the Bill of Entry and supporting documents that the appellant claimed exemption under CTH 33019079 and produced requisite documentary evidence including certificate of origin and invoice, and that the goods were examined and Out-of-Charge granted after satisfaction with the classification. The Notifications provide exemption for goods covered under Chapter Heading 3301 irrespective of the sub heading. On this basis the Tribunal held there was no merit in the confirmed demand of BCD and SWS and set aside that demand. [Paras 9, 10]

The confirmed demand of Basic Customs Duty and Social Welfare Surcharge was set aside.

Demand of differential IGST - HELD THAT:- The Tribunal found there was a genuine bonafide error in payment of IGST at a lower rate, the appellant volunteered to pay the differential and sought permission to file a supplementary Bill of Entry to avail input tax credit which was not considered. The Tribunal applied the principle that where the differential duty accrues as input/CENVAT/GST credit to the assessee - producing a revenue neutral position - the confirmed demand is not legally sustainable, relying on consistent tribunal and court authorities. Applying that reasoning to the facts, the Tribunal set aside the confirmed differential IGST demand. [Paras 11]

The confirmed demand of differential IGST was set aside.

Final Conclusion: The appeal was allowed in part: the Tribunal set aside the confirmed demands of Basic Customs Duty and Social Welfare Surcharge and also set aside the confirmed demand of differential IGST, granting the appellant consequential relief as per law.

Actual-user and non-transferability conditions- import of goods under Target Plus scheme - Compliance with the conditions of Notification No. 32/2005-Cus., issued under the Scheme - burden of proof for claiming exemption - corroborative circumstantial evidence - Whether the duty-free paper and paperboard imported thereunder were utilised in accordance with the actual-user and non-transferability conditions, or were diverted / disposed of in violation of the said notification.

Actual-user and non-transferability conditions - burden of proof for claiming exemption - HELD THAT:- The Tribunal found that the appellants did not discharge the burden of proof to show compliance with the notification. The findings included absence of endorsed names/addresses of supporting manufacturers on licences, job workers denying receipt of goods, false or non-existent addresses, lack of contemporaneous records of storage/transport/processing, high-seas sale arrangements, and delivery of processed goods to a third party under the control of that third party. These documentary and circumstantial facts, taken cumulatively, supported an adverse inference and demonstrated diversion of duty-free imports rather than bona fide utilisation by the licence holder. The Tribunal applied the principle that exemption is an exception and the claimant must prove eligibility, and that best evidence in the appellants' possession must be produced to rebut departmental evidence. [Paras 11, 12, 13, 14]

The impugned findings that the goods were not used in accordance with Notification No. 32/2005-Cus. were upheld and the demand, confiscation and penalties (other than the penalty under section 112) sustained.

Requirement of specifying clause in show cause notice under section 112 - Whether the penalty confirmed under section 112 of the Customs Act, 1962 was sustainable despite the form of the show cause notice. - HELD THAT:- The Hon’ble Supreme Court has consistently held that mere citation of an incorrect provision does not vitiate proceedings if the substantive power exists in law [See: Collector of Central Excise Vs Pradyumna Steel Ltd. [1996 (1) TMI 127 - SUPREME COURT].; JK Steel Vs Union of India [1968 (10) TMI 45 - SUPREME COURT]; Sanjana Vs Elphinstone Spinning & Weaving Mills [1971 (1) TMI 50 - SUPREME COURT] In Dharampal Satyapal Ltd. Vs Dy. Commissioner of Central Excise [2015 (5) TMI 500 - SUPREME COURT], the Court further clarified that procedural lapses invalidate proceedings only where prejudice is shown. However, the jurisdictional Madras High Court in Lakshmichand [1981 (9) TMI 128 - MADRAS HIGH COURT], held that a bare reference to Section 112, without specifying the applicable clause or setting out its essential ingredients, reflects non-application of mind and renders the proceedings unsustainable, as this is not a case of mere mis-citation but of fundamental ambiguity. In keeping with judicial discipline, we follow the binding decision of the jurisdictional High Court and accordingly set aside the penalty on the appellants which was proposed under section 112 and confirmed in the OIO.

The Tribunal observed that the jurisdictional High Court had held that a bare reference to section 112 without specifying the relevant sub clause or setting out essential ingredients may reflect non-application of mind. Although higher courts have held mis-citation is not fatal where substantive power exists, the Tribunal followed the binding decision of the jurisdictional High Court on this procedural point and found the penalty under section 112 unsustainable on that basis. [Paras 14, 15]

Penalty confirmed under section 112 was set aside.

Final Conclusion: The Tribunal upheld the departmental findings that the Target Plus conditions were not complied with for the importations between October 2006 and January 2009 and sustained the consequential demand, confiscation and penalties except that the penalty confirmed under section 112 was set aside; the appeals are disposed accordingly.

Classification of goods - imported “Digital Video Recorders” (DVR) for use in Hawk military aircraft - classifiable as parts of aircraft under CTH 88033000 or as video recording apparatus under CTH 85219090 - Suitability for use test under Note 3 to Section XVII - limitation of Note 2(f) to Section XVII where parts are solely or principally for Chapters 86-88.

Classification - HELD THAT:- The DVRs imported by the appellant have been fixed in the cockpit and records the pilot view along with symbolagies i.e. the displays as seen by the pilot. The camera which is not part of this item is procured separately which is mounted at over the HUD at the front of the cockpit.

The Tribunal applied the principle in Westinghouse Saxby Farmer Ltd. [2021 (3) TMI 291 - SUPREME COURT] that Note 3 to Section XVII (the suitability for use test) requires that parts which are suitable for use solely or principally with articles of Chapters 86-88 be treated as parts of those Chapters notwithstanding the general exclusion in Note 2(f). The DVRs were found to be specifically engineered and designed for the Hawk aircraft, interfacing with onboard avionics and incapable of functioning as standalone commercial video recorders; their exclusive and principal use in the Hawk aircraft was not disputed. Consequently, Note 2(f)'s exclusion of electrical machinery under Chapter 85 does not apply to these DVRs, and they must be classified as parts of aircraft under CTH 88033000. [Paras 6, 7, 9, 10, 13]

DVRs are classifiable under CTH 88033000 as parts of aircraft by reason of their sole or principal use in the Hawk aircraft; the impugned classification under CTH 85219090 is incorrect.

Final Conclusion: The appeal is allowed; applying the suitability for use test in Note 3 to Section XVII, the imported DVRs are classifiable as parts of aircraft under CTH 88033000 and not under CTH 85219090, and the impugned order is set aside.

Export benefits reversal - Applicability of Notification entries to re-importation where replacement consignment - duty drawback - Entitlement to retain export benefits upon export of replacement goods - surrender and refund of export benefits - Whether the re-imported goods attract Sr. No. 1 of Notification No. 46/2017-Cus. or Sr. No. 5 of the Notification and whether the appellant is liable to reverse export benefits with interest.

Applicability of Notification entries to re-importation where replacement consignment has been exported - Entitlement to retain export benefits upon export of replacement goods - HELD THAT: - The Tribunal found that the learned Commissioner misappreciated the facts. The factual sequence established in the record shows original goods were exported first, the replacement goods were exported subsequently, and the defective original consignment was re-imported thereafter. The Chartered Accountant's certificate recorded that no extra amount was charged for the replacement and that export benefits were availed only once on the original supply and not on the replacement consignment. On these facts the Tribunal held that Sr. No. 1 of the Notification is not attracted and Sr. No. 5 applies; once the replacement consignment was exported the export transaction stood satisfied and the appellant was entitled to retain the export benefits, therefore no reversal with interest was warranted. [Paras 5]

Sr. No. 5 of Notification No. 46/2017-Cus. is applicable; the appellant is not liable to reverse the export benefits taken on the original export and no reversal with interest is required.

Refund of surrendered export benefit deposited for clearance of re-imported goods - HELD THAT:- The Tribunal recorded that the appellant had deposited the surrendered export benefit to effect clearance of the shipment. Having held that no reversal of export benefits was required, the Tribunal directed that the amount surrendered towards export benefit be refunded to the appellant on application to the concerned authority. [Paras 5, 7]

The appellant's deposit towards surrender of export benefit shall be refunded by the concerned authority.

Final Conclusion: The impugned orders are set aside; the Tribunal held that the export benefits need not be reversed because the replacement consignment was exported and directed refund of the surrendered export benefit to the appellant on application to the concerned authority.

Entitlement to leave to institute a suit for specific performance in respect of an unregistered agreement for sale - disclaimer of onerous property - pre-emption/right to match highest bid in liquidation sale.

Validity and effect of the unregistered agreement for sale relied upon by Eyelid in respect of Dunlop's undivided half share of the property -HELD THAT:- The Court found that Eyelid relies on an unregistered agreement for sale and that an unregistered agreement does not confer title. The Court also noted surrounding circumstances-absence of Eyelid at the time the official liquidator took possession, municipal records not recognising Eyelid, doubts as to authenticity of documents relied upon by Eyelid, and material suggesting circular payments between group companies-that cast serious doubt on Eyelid's asserted transactions and entitlement. Having regard to these findings, the Court held that Eyelid cannot insist on disclaimer by the official liquidator or on execution and registration of a deed of conveyance in its favour on the basis of the unregistered instrument. [Paras 21, 22]

Eyelid's claim based on the unregistered agreement cannot sustain an entitlement to disclaimer or to execution and registration of conveyance.

Leave to institute a suit for specific performance under the Companies Act - HELD THAT: - While recording doubts about Eyelid's title and the surrounding transactions, the Court declined to deny leave to institute proceedings under the Companies Act. The Court observed that Eyelid presently seeks leave to institute a proceeding and, without conferring any substantive right on Eyelid at this stage, it would not be prudent to refuse such leave. Accordingly, the Court granted liberty to Eyelid to institute a suit or proceeding to establish its rights in accordance with law. [Paras 23]

Liberty granted to Eyelid to institute a suit or proceeding to establish its rights in accordance with law.

Pre-emption/right to match highest bid in liquidation sale - Extent of Salasar's entitlement in relation to the proposed sale of the property by the official liquidator - HELD THAT:- The Court recorded earlier directions that Salasar may participate in the auction and, if able to match the highest bid, its claim would require further consideration. The Court observed that in terms of the prior order the matter would only require further consideration if Salasar matches the highest bid obtained in the auction process. [Paras 3, 24]

Salasar's entitlement to further consideration is limited to the event it matches the highest bid in the liquidation sale.

Final Conclusion: The application by Eyelid seeking prevention of the liquidation sale and seeking conveyance was rejected on the merits of the unregistered agreement, but Eyelid was granted liberty to institute civil proceedings to establish its rights; the application by Salasar will be considered further only if it matches the highest auction bid.

Validity of oral family settlement and bid - partial payments admitted by parties -claims of cash payments, non-production of key documents and counter-allegations of forgery and non-compliance with the settlement terms - Oppression and mismanagement - forensic examination of documents - Jurisdiction for specific performance - effect of non-compliance with buy-out terms on change of management - permission for forensic examination by an administrator - increase of authorized share capital - Whether the alleged family settlement and bid of 04.02.2008 effected a valid transfer of management and resignation of the respondents.

Validity of oral family settlement and bid - effect of non-compliance with buy-out terms on change of management - HELD THAT: - The Tribunal found that although an oral settlement and a bid document dated 04.02.2008 existed, the material required by the settlement was not complied with: full consideration as alleged was not paid to all groups, no transfer deeds for shares were produced, and the appellants themselves admitted only partial payments. The absence of proof of the alleged cash payments and inconsistencies in the record meant the terms of the buy-out were not performed, and the factual matrix did not establish an effective transfer of management or an unimpeachable resignation of the respondents. Consequently, the impugned displacement of management could not be sustained on the basis of the disputed settlement and bid. [Paras 24, 25]

The Court upheld the conclusion that the buy-out terms were not complied with and that the asserted resignations and change of management could not be accepted as establishing a complete and lawful transfer.

Permission for forensic examination by an administrator - HELD THAT:- The Tribunal declined to order an immediate forensic examination of the disputed documents but recognised that if, at any future time (for example, on a buy-out or on production of alleged receipts to the Administrator), the Administrator finds it necessary, the Administrator is at liberty to approach the NCLT to direct forensic examination. This modifies the impugned order by preserving the Administrator's ability to seek such investigation when a concrete dispute over produced receipts or documents arises. [Paras 25]

The request for immediate forensic examination was rejected, but the order was modified to permit the Administrator to move the NCLT for forensic examination later if necessary.

Final Conclusion: The appeal is disposed of by affirming that the buy-out terms were not performed and the management change could not be sustained on that basis; the appointment of an administrator and attendant directions remain in effect, but the order is modified to allow the Administrator to seek forensic examination of disputed receipts or documents from the NCLT in future if required. No other relief is granted.

Patent illegality or fraud - Auction process/NRRA assignment process conducted under Regulation 37A of the IBBI (Liquidation Process) Regulations, 2016 - non-transparent acceptance of the offer of Respondent No.3 - transparency in bidding process - fairness in competitive bidding - maximisation of asset value - stakeholders consultation committee - finality of sale​​​​​​​ - Whether the liquidator and the SCC were obliged to consider the appellant's enhanced offer made during the SCC meeting in light of the requirement of transparency and fairness under Regulation 37A.

Fairness in NRRA assignment to be evaluated in factual context - HELD THAT:- The Tribunal held that the obligation of fairness under Regulation 37A must be applied with regard to the surrounding circumstances; fairness is not one sided and must account for the interests of the liquidator and the secured creditor who had repeatedly attempted sale and opted for NRRA as a last resort. On the facts, the Court was not persuaded that denying consideration of the appellant's contemporaneous enhanced offer constituted such patent unfairness as would vitiate the process where timelines and the legitimate expectations of other stakeholders were engaged. [Paras 7]

The claim that the enhanced offer should have been considered was rejected on the factual application of the fairness principle.

Belated non-compliant bids after prescribed cut-off need not be entertained - HELD THAT:- The Tribunal observed that the process document fixed timelines and required compliance (including deposit of 20%) for revised bids; entertaining belated offers that fail to meet those conditions would undermine finality and allow unsuccessful bidders to indefinitely reopen the process. The appellant's revised offer was after the stated cut off and was not accompanied by the requisite deposit, and therefore the liquidator was justified in not treating it as a valid bid. [Paras 4, 7]

The appellant's belated and non compliant revised offer need not be entertained and was properly excluded from consideration.

Acquiescence and waiver by conduct bars post-sale challenge - vested rights of purchaser acting on sale protect completed transactions absent fraud or collusion - HELD THAT:- The Tribunal found that the appellant sought and accepted refund of its EMD and delayed filing the interlocutory application, facts which the Court treated as evidencing acquiescence and waiver. Further, the successful purchaser had taken steps to restore lease rights and made investments; absent allegations of fraud or collusion, vested rights acquired and acted upon cannot be set aside lightly. On these grounds the Court declined to disturb the completed sale. [Paras 7, 8]

The appellant's challenge was barred by its conduct and the settled protection afforded to a purchaser who has acted on the sale, and therefore the sale was not disturbed.

Final Conclusion: On the facts, the Tribunal dismissed the appeal: the liquidator and SCC were not obliged to consider the appellant's belated, non compliant offer; the appellant's conduct amounted to acquiescence; and the purchaser's vested and acted upon rights could not be disturbed in the absence of fraud or collusion.

Validity of rejecting the Section 10 application on the ground of incompleteness and auditor's disclaimer and the consequent relief - curability of defects -existence of default - initiation of the CIRP process against the Corporate Applicant - completeness of application - opportunity to rectify defects.

Initiation of corporate insolvency resolution process by corporate applicant under Section 10 - HELD THAT:- The Tribunal held that although Section 10(3) mandates furnishing specified information and documents with a Section 10 application, procedural defects or incompleteness are generally curable and ought not to be used to foreclose the applicant's substantive right to seek CIRP. The adjudicating authority must confine itself to determining whether the application is complete as per the Code and whether a default exists and should give the applicant opportunity to rectify defects. The impugned order showed no adequate analysis by the NCLT of the materials on record or application of the principle in Innoventive Industries [2017 (9) TMI 58 - SUPREME COURT] and therefore rejection on the basis of the auditor's disclaimer and alleged unreliability of financial statements without affording a further opportunity was unsustainable. The matter was therefore remitted for fresh decision with directions to permit the appellant to produce necessary documents and to apply the settled legal tests while reconsidering the application. [Paras 5, 6, 7]

Impugned order quashed and the application remitted to the adjudicating authority for fresh consideration after giving the appellant an opportunity to cure defects and after applying the principles governing Section 10 admissions.

Final Conclusion: The NCLAT set aside the rejection of the Section 10 application, holding that deficiencies in accompanying documents are curable and that the adjudicating authority must re-examine the application afresh after giving the appellant an opportunity to supply requisite documents and applying the settled law on admission.

Scope of Section 10A which suspends initiation of CIRP for defaults - Corporate insolvency resolution process - exceeding the statutory threshold - date of default - statutory definitions of financial creditor and financial debt under Section 5(7) and Section 5(8) - election of remedies - limitation principles to the date of filing - Initiation or continuation of SARFAESI proceedings - clean hands doctrine.

Suspension under Section 10A of the Insolvency and Bankruptcy Code not applicable - HELD THAT:- The Tribunal accepted the Adjudicating Authority's finding that the date of default relied upon by the Financial Creditor falls outside the period of suspension under Section 10A. The Adjudicating Authority quantified the debt, identified the date of default from records (including NeSL/asset classification), and concluded that the default occurred after the 10A period; therefore Section 10A has no application to the admitted Section 7 petition. The Tribunal treated the Adjudicating Authority's application of the temporal test under Section 10A as dispositive for maintainability. [Paras 9, 10, 16]

Section 10A does not bar the admission of the Section 7 application.

Parallel SARFAESI action - file a Section 7 application - THAT:- The Tribunal endorsed the Adjudicating Authority's view that the Financial Creditor may pursue remedies under SARFAESI and, independently, institute insolvency proceedings under Section 7; the existence of SARFAESI action, including sale proceedings, does not ipso facto invalidate a Section 7 petition where debt and default are established. The Tribunal also noted that differing subject-matters of recovery (personal loan v. corporate facility) and interim orders in other fora do not automatically deprive the Adjudicating Authority of jurisdiction to admit a Section 7 petition when the statutory conditions are satisfied. [Paras 6, 7, 17]

Parallel SARFAESI proceedings did not bar admission of the Section 7 application.

Unqualified admission/settlement by debtor amounts to admission of debt and default - HELD THAT:- The Tribunal relied on the record that the appellant submitted an undertaking/offer to settle the loan, which the Financial Creditor relied upon as an admission of debt and default. The Tribunal held that non-disclosure of this material fact in the appeal amounted to concealment and demonstrated that the statutory preconditions (existence of financial debt, quantification and default) for Section 7 were satisfied. This conduct informed the Tribunal's conclusion that the appeal lacked merit. [Paras 12, 13, 17]

The appellant's settlement undertaking was taken as an admission of debt/default and negatively affected the appeal, which was therefore dismissed.

Final Conclusion: The Tribunal upheld the Adjudicating Authority's admission of the Corporate Debtor into CIRP under Section 7: Section 10A was held inapplicable, parallel SARFAESI steps did not preclude filing under Section 7, and the appellant's settlement undertaking was treated as an admission; the appeal was dismissed.

Entitlement to issuance of Form SVLDRS-4 - claim under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - denied for technical difficulties beyond the assessee's control- payment not made within the stipulated time - arbitrariness - non-application of mind - legitimate expectation - procedural fairness - extension of time due to force majeure.

Entitlement to issuance of Form SVLDRS-4 despite payment difficulties caused by technical issues during the COVID-19 period - HELD THAT: - In the decision of Arjun Rampal [2023 (5) TMI 13 - BOMBAY HIGH COURT] following the decision of Shekhar Resorts Limited Vs. Union of India & Ors [2023 (1) TMI 256 - SUPREME COURT] it has been held that while considering the SVS, 2019 scheme the benefit thereof could not be deprived merely on the basis of a technical issue for which the assessee was not at fault.

In the facts of the present case, the Petitioner-assessee made the payment of the determined tax in the extended period as the Covid-19 pandemic hit the country, however challan was not getting uploaded due to some technical issue. This to our mind, was a genuine difficulty which the Petitioner was facing and hence the rejection of the Petitioner’s request for issuance of discharge certificate in form SVLDRS-4 by letter/order dated 13th December 2023 by Respondent No. 3 was arbitrary and not warranted. The action of Respondent No. 3 also disregards several decisions of this Court and the Supreme Court, and the other High Courts as enumerated in paragraph 5 above, and hence the aforesaid rejection has been made on a complete non application of mind. In light of the above discussion and in view of the settled position of law, we deem it appropriate to pass the following order which will meet the ends of justice.

Final Conclusion: The petition succeeds: the order rejecting issuance of Form SVLDRS-4 is quashed and set aside, the earlier order of attachment is quashed, and the respondents are directed to issue Form SVLDRS-4 to the petitioner within four weeks.

Demand on reimbursable expenses and the freight margin - purchase and sale of cargo/space by a multimodal transporter (difference between price at which cargo space is booked and price at which it is sold) - business auxiliary/support services - Nature of the transactions - pre-amendment provisions of Section 67 and Rule 5.

Reimbursable expenses - HELD THAT:- The Tribunal applied the Supreme Court precedent in Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT], holding that Rule 5(1) of the Service Tax Valuation Rules, 2006 could not validly enlarge the valuation under Section 67 prior to the legislative amendment effective May 14, 2015. The reasoning emphasises that valuation must be limited to the gross amount charged 'for such' taxable service and that rules cannot exceed statutory mandate; consequently, reimbursed expenditures such as freight/air and sea charges are not includable in valuation for the periods in issue. [Paras 10, 12]

Demand insofar as it relates to reimbursable expenses is unsustainable and set aside.

Purchase and sale of cargo space by multimodal transporter not exigible to service tax - Margins earned by the appellant from purchase and sale (trading) of cargo space in containers/air space as a multimodal transporter are not exigible to service tax - HELD THAT:- The Tribunal found, following coordinate-bench authorities, that where the appellant acts as a multimodal transport operator contracting as principal-to-principal-procuring space from carriers and reselling or allocating that space to shippers-the consideration collected represents trading in space (purchase and sale) and not a service rendered for the carrier or client that falls within Business Auxiliary/Support Services. The absence of evidence in the SCN to show agency or that classification must change reinforced adherence to the consistent view of coordinate benches that such freight margins are not subject to service tax. [Paras 11, 12]

Demand insofar as it relates to freight margins from booking and sale of cargo space is unsustainable and set aside.

Penalties under sections 76 and 77 -HELD THAT:- Having held the contested demands in respect of reimbursable expenses and freight margins to be unsustainable, the Tribunal concluded that the concomitant penalties could not stand. The Tribunal therefore set aside the penalties imposed in the impugned orders in view of the dismissal of the substantive demands. [Paras 12]

Penalties under sections 76 and 77 upheld in the orders below are set aside.

Final Conclusion: The appeals are allowed: the service-tax demands in respect of reimbursable expenses and freight margins arising from purchase and sale of cargo space are set aside, and the penalties under sections 76 and 77 imposed on those demands are also set aside; the uncontested airway bill charge remains as not contested by the appellant.

Availement of Cenvat Credit in respect of input services at unregistered premises viz. Renting of Immovable Property and Security Services - Condition precedent for availing Cenvat credit -application of Rule 6 of Cenvat Credit Rules where provider supplies taxable and exempt services - right of assessee to elect option under Rule 6(3) and duty to provide opportunity to prove compliance - extended period of limitation where material facts are intentionally suppressed.

Registration with the department - precondition for entitlement to avail Cenvat credit. - HELD THAT:- The Tribunal held that Cenvat Credit Rules, 2004 do not prescribe registration as a condition precedent to claim Cenvat credit and therefore non-inclusion of a unit in centralized registration cannot, by itself, disqualify the appellant from availing credit; reliance was placed on precedent to that effect and the finding of the lower authorities on this ground was held to be in error. [Paras 4]

Non-registration of certain units did not by itself disallow the claimed Cenvat credit.

Application of Rule 6 of Cenvat Credit Rules where provider supplies taxable and exempt services - HELD THAT: - The Tribunal agreed with the Commissioner (Appeals) that the appellant provided trading activity (an exempted service) along with taxable services, and therefore the obligations under Rule 6 to maintain separate accounts or follow the alternative options under sub-rule (3) arose; being centrally registered, activities of registered and unregistered branches are attributable to the appellant and Rule 6 is applicable. [Paras 4]

Since appellant provided both taxable and exempt services and did not maintain separate accounts, Rule 6 was applicable.

Right of assessee to elect option under Rule 6(3) and duty to provide opportunity to prove compliance - HELD THAT: - The Tribunal recognised that the assessee may choose between the options in Rule 6(3) and observed that although the appellant claimed to have availed the option under clause (ii) and paid under sub-rule (3A), there was no evidence on record. The Tribunal held that the department should have ascertained payment and given the appellant an opportunity to prove compliance; procedural lapses in intimating the authority may be condoned. Consequently the matter was remanded to the Adjudicating Authority to verify the appellant's claim and decide afresh after giving opportunity. [Paras 4]

Matter remanded to determine whether the appellant genuinely availed Rule 6(3)(ii) and paid under sub-rule (3A), after giving opportunity to prove the same.

Computation of value of exempted services under Rule 6 - HELD THAT: - The Tribunal found that the Commissioner did not afford the appellant an opportunity to submit computations/evidence that the value of exempted services was to be calculated based on cost of goods sold rather than on the assumption adopted by the adjudicating authority; it directed the Adjudicating Authority to permit the appellant to produce evidence and to re-evaluate the quantification de novo. [Paras 4]

Adjudicating Authority to re-calculate the amount payable (if any) after allowing the appellant to prove the correct computation of value of exempted services.

Extended period of limitation where material facts are intentionally suppressed - HELD THAT:- The Tribunal agreed with the Commissioner that the appellant had not disclosed existence of certain unregistered branches and the fact of availing credit on input services used for both taxable and exempt services only came to light on departmental audit; on these facts the Tribunal upheld the invocation of the extended period as justified. [Paras 4]

Invocation of extended limitation period was upheld due to intentional suppression of material facts.

Final Conclusion: The appeal is allowed to the extent that the impugned order is set aside and the matter is remitted to the Adjudicating Authority to, after giving the appellant an opportunity of hearing, verify whether the appellant availed the option under Rule 6(3)(ii) and paid under sub-rule (3A), re-examine the computation of value of exempted services, and pass a de novo decision. Registration status does not bar Cenvat credit, and the extended period was held to be rightly invoked on the facts.

Validity of demand for differential service tax and related recoveries based on difference between financial accounts/invoice values and ST-3 returns - valuation of the service portion vis-a -vis material transfers and recognition of notional income in financial statements - notional income. - HELD THAT:- As per the Point of Taxation Rules, 2011, even in the case of continuous supply of service, there needs to be an obligation on the receipt of the service to make payment to the provider of service on completion of certain stages of the contract to fulfil the Point of Taxation. In absence of such contractual time lines, the Point of Taxation would be receipt of consideration or raising of invoices. The respondent having made payment of service tax on receipt of advance and on invoicing the customer, the valuation adopted by the respondent is in line with the provision of the Finance Act, 1994. The only case of the Revenue is that gross value should have been taken as taxable value. The said argument of the Revenue is in conformity with the allegation in the show-cause notice which states that the material portion separately indicated in the invoice, duplication of value and notional income included as required under the Accounting Standards issued by the Institute of Chartered Accountant of India which can be never treated as part of taxable value under the Finance Act, 1994.

A plain reading of the grounds of appeal which though vague leads to an understanding that the Revenue has disputed the impugned order on the issue of demand of Rs.4,72,48,186/- on the ground that the correct assessable value was not shown and service tax was not discharged on the correct assessable value.

No rebuttal has been advanced by the Revenue in the grounds of appeal. Learned Commissioner has dropped the demand recording reason against each of the issue as narrated above. We do not find any discrepancy in the said observation of the Learned Commissioner. Consequently, the impugned order is upheld and the Revenue’s appeal being devoid of merit is dismissed.

Final Conclusion: The Tribunal found no error in the Commissioner's reasoning and upheld the impugned order dropping the proposed demands; the Revenue's appeal is dismissed. The demands based on inclusion of material value, on notional income recognised under AS-7, and on any duplicative comparison were held unsustainable and were dropped.

Availment of the benefit of SSI exemption - classification of Rishisol S-1, Rishisol S-2 and Rishisol S-3 and Rishisol B-1 - requirements to fulfill cumulative conditions for "motor spirit" to satisfy.

Classification of Rishisol S-1, Rishisol S-2, Rishisol S-3 and Rishisol B-1 under CTH 2710.13 - HELD THAT:- The Tribunal applied the settled threefold test for 'motor spirit'-that the product is a hydrocarbon oil excluding crude, has flash point below 25 C, and is by itself or in admixture with any other substance suitable for use as fuel in spark ignition engines. While the products satisfied the first two criteria, the technical opinion of Prof. M. C. Dwivedi (IIT Bombay) and the record showed that the products are aromatic industrial solvents with low RON, inadequate aromatic content and boiling characteristics, absence of octane-boosting additives, and would cause poor engine performance, vapor lock and pre-ignition; the Chemical Examiner's report did not establish suitability for spark-ignition use or for admixture to make them suitable. No evidence was produced to demonstrate that these goods, either alone or mixed with another substance, are substantially and practically fit for use as spark-ignition fuel. Consequently the decisive third criterion was not satisfied and classification under CTH 2710.13 could not be sustained; the penalty based on that classification also could not stand. [Paras 5]

The products are not classifiable under CTH 2710.13 as the requirement of suitability for use as fuel in spark ignition engines is not satisfied; the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, holding that although the products were hydrocarbon oils with flash points below 25 C, they failed the essential condition of being suitable, either by themselves or in admixture, for use as fuel in spark-ignition engines; classification under CTH 2710.13 and the connected demand and penalty could not be sustained.

Excise duty - Clubbing of clearances for Small-Scale Industries (SSI) exemption - splitting the activities into different units - illegal utilization of CENVAT credit - admissibility of statements recorded during investigation under section 9D(1)(b) - availability and reversal of CENVAT credit - interest and penalties.

Whether the separate manufacturing units should be clubbed to deny SSI exemption - HELD THAT:- The Tribunal held that the Revenue failed to establish common books of account, common bank accounts, common tax registrations, common funding, mutuality of business interest or financial flow-back such as would justify treating the units as a single unit for denial of SSI exemption. Mere family relationship, proximity of premises, sharing of some employees or occasional use of common facilities was insufficient; separate registers of employment and independent identities of the units weighed against clubbing. The recording of statements during investigation without compliance with section 9D(1)(b) further weakened reliance on those statements. On these findings the Tribunal concluded that clearances could not be clubbed and the denial of SSI exemption was unsustainable. [Paras 15]

Clearances of the several units shall not be clubbed; denial of SSI exemption is unsustainable and set aside.

Admissibility of statements recorded during investigation under section 9D(1)(b) - HELD THAT:- The Tribunal accepted that statements recorded during inquiry are not automatically admissible; where persons were not examined before the adjudicating authority and the statutory procedure under section 9D(1)(b) was not complied with, those statements could not be relied upon. The absence of such compliant examination undermined the Revenue's factual case on clubbing and related allegations. [Paras 12, 15]

Statements recorded during investigation, not admitted in evidence after compliance with section 9D(1)(b), could not support the demand; reliance on them was excluded.

Availability and reversal of CENVAT credit - HELD THAT: - The Tribunal noted absence of particulars showing CENVAT on capital goods had been rented out such that credit should be denied and accepted that the entire credit taken during April 2013 to September 2013 had been reversed/deposited without utilization. Applying precedent of Hon’ble High Court of Karnataka in the matter of Bill Forge Private Limited [2011 (4) TMI 969 - KARNATAKA HIGH COURT] that reversal before utilization is equivalent to not taking credit, the Tribunal found the demand unsustainable in the absence of requisite quantification and segregation under the Cenvat Credit Rules. [Paras 16]

Demand for alleged ineligible CENVAT credit is unsustainable and set aside; claimed credit entitlement allowed to the extent reversed without utilization.

Penalties under central excise law -HELD THAT: - Because the Tribunal set aside the substantive demands relating to denial of SSI exemption and alleged ineligible CENVAT credit, it held that consequential penalties under Section 11AC, Rule 15(2) read with Section 11AC, and personal penalties under Rule 26 could not be sustained. The Tribunal also observed absence of material to justify confiscation or penal liability which would support personal penalties. [Paras 16]

Penalties and personal penalties imposed in the impugned orders are unsustainable and are set aside.

Final Conclusion: The impugned adjudication orders confirming duty, CENVAT demand and imposing penalties are set aside: clearances of the units will not be clubbed for SSI denial, the CENVAT demand is unsustainable given reversal without utilization, and attendant penalties are quashed, with consequential relief to follow in accordance with law.

Extended period of limitation - clandestine removal - short payment of excise duty - freight exclusion in transaction value - entitlement to deductions from assessable value for prompt payment discount, pro-rata recovery, trading activity, freight and sales tax/VAT.

Validity of invoking the extended period of limitation by alleging clandestine removal or suppression -HELD THAT:- The Tribunal found that all sales were effected under proper invoices and payments were made by account payee cheque to a government undertaking (KSRTC); there was no allegation or evidence of clearance without invoices or of suppression or mis statement to evade duty. Consequently the invocation of the extended period of limitation and the allegation of clandestine removal were unsustainable and could not support confirmation of demand. [Paras 15, 19]

Invocation of the extended period of limitation and allegation of clandestine removal are unsustainable; demand confirmed on that basis set aside.

Admissibility of pro rata recovery deductions claimed against assessable value -HELD THAT: - Although the pro rata recoveries were made on a lump sum basis in bills rather than invoice wise, the purchase orders provided for such deductions and there was no dispute about failures of performance. The Adjudicating Authority erred in rejecting the claim solely because invoice wise particulars were not produced; the claim for pro rata recovery could not be denied on that ground. [Paras 16, 19]

Pro rata recovery deductions are allowable; denial on invoice wise detail ground was erroneous.

Admissibility of prompt payment discounts (PPD) as deduction from assessable value - HELD THAT:- The appellant produced purchase orders/letters of intent setting out PPD terms and detailed records showing invoices, dates of payment and cheque particulars establishing that discounts were actually passed to KSRTC. The Adjudicating Authority failed to appreciate this evidence even after remand; therefore denial of PPD was unsustainable. [Paras 17, 19]

Prompt payment discounts correctly claimed and supported by evidence are allowable; demand confirmed on account of disallowance of PPD set aside.

Admissibility of deductions for trading activity, freight and VAT - HELD THAT: - The Tribunal found that the appellant furnished sufficient evidence before the Adjudicating Authority and the Tribunal to substantiate claims for trading turnover, equalized freight (under valuation principles) and VAT paid/payable; the Adjudicating Authority's rejection of these deductions was not justified on the record examined. [Paras 18, 19]

Deductions for trading activity, freight and VAT claimed by the appellant are allowable on the evidence produced.

Final Conclusion: The impugned order confirming demand, interest and penalty was set aside; the appeal is allowed and the appellant is entitled to consequential relief as per law, after giving effect to the allowable deductions and the finding on limitation.

Condonation of delay - HELD THAT:- Delay condoned.

No good ground to interfere with the impugned order/judgment [2025 (2) TMI 1634 - JHARKHAND HIGH COURT] in exercise of our jurisdiction under Article 136 of the Constitution of India.

Accordingly, the special leave petition stands dismissed.

Sufficiency of cause for condonation under Section 5 of the Limitation Act delay of 435 days (and overall delay of about 11/2 years from grant of approval) in filing the Sales Tax Revision Petition under Section 65(1) of the Karnataka Value Added Tax Act, 2003 - focusing on adequacy of reasons - bona fides.

Sufficiency of cause for condonation under Section 5 of the Limitation Act -HELD THAT:- The Court applied the qualitative test for sufficiency of cause under Section 5 of the Limitation Act, observing that length of delay is not determinative but the explanation must be cogent and credible. Reliance was placed on the Apex Court's exposition in SHIVAMMA [2025 (9) TMI 1721 - SUPREME COURT] that the acceptability of the explanation is decisive and that longer delays attract stricter scrutiny. The Tribunal's order dated 26.07.2022 was communicated to the Department in October 2022, approval to file revision was granted on 30.01.2023, yet the petition was filed only on 21/22.06.2024. The State's explanation that delay resulted from a single Law Officer's medical leave was not supported by material nor accepted as a plausible reason because State machinery cannot be rendered inoperative by absence of one officer. On this basis the Court concluded that the State failed to furnish a sufficient cause to justify condonation of the delay. [Paras 8, 12, 13]

I.A. No.1/2024 is rejected and the revision petition is not entertained for want of sufficient cause to condone the delay.

Final Conclusion: The application for condonation of delay under Section 5 of the Limitation Act is rejected because the State failed to furnish a cogent and credible explanation for the inordinate delay; consequently the revision petition is not entertained.

Negotiable Instruments Act, 1881 - Dishonour of cheques - Effect of a completed corporate insolvency resolution process and an approved resolution plan on the continuing liability of the company for acts - personal liability of signatories - Whether the company in the hands of the successful resolution applicant can be held liable for cheques dishonoured before the change of management pursuant to corporate insolvency resolution.

Effect of corporate insolvency resolution on post resolution liability - HELD THAT:- The Court noted that corporate insolvency resolution had been completed and the resolution applicant had taken over management. Applying the principle in Ajay Kumar Radhe Shyam Goenka [2023 (3) TMI 686 - SUPREME COURT] the Court held that once the erstwhile management was ousted by the approved resolution plan, the company under the new management cannot be held liable for acts (dishonour of cheques) committed long before the takeover. Consequently, impleadment of the company after the change of management does not prejudice the new management, and the remedy lies against the persons who were directors/signatories at the relevant time. [Paras 7, 8, 9]

The company in the hands of the successful resolution applicant cannot be held liable for the prior dishonour of cheques; proceedings may be pursued against the erstwhile directors/cheque signatories, and the later impleadment of the company does not affect the new management.

Final Conclusion: The appeals are allowed: the new management (successful resolution applicant) is not liable for cheque dishonour occurring before the change of management, complainants may proceed against the erstwhile directors/signatories, the impleadment of the company post resolution has no effect on the new management, and the earlier stay is vacated.

Seeking application for appointment of an arbitrator under the arbitration clause in the reconstituted partnership deed - impleadment of the non-signatory corporate entity - Prima facie existence of an arbitration agreement - piercing the corporate veil - kompetenz-kompetenz.

Prima facie existence of an arbitration agreement - appointment of arbitrator under Section 11 - HELD THAT:- The Court held that the partnership deed, as amended, contains an arbitration clause covering disputes relating to the partnership affairs and, on a prima facie examination, the petitioner is entitled to invoke that clause. The Court refrained from undertaking an elaborate factual inquiry into the merits of the disputes and appointed the nominee proposed by the petitioner as arbitrator, while making the appointment subject to the arbitrator's compliance with Section 12 of the Arbitration and Conciliation Act, 1996. [Paras 17, 20, 25, 26, 27]

Application allowed; arbitrator appointed and directed to comply with Section 12 of the Arbitration and Conciliation Act, 1996.

Joinder of non signatory by reference to alter ego/estoppel - referral court to undertake only prima facie inquiry and leave substantive issues of joinder to the arbitral tribunal - HELD THAT:- Relying on the pleaded allegations and authorities cited, the Court found on a prima facie basis that there may be commonality of subject matter and specific allegations of the non signatory acting as an alter ego (use of same premises, user id, diversion of orders, poaching of staff). The Court emphasized that under the statutory scheme and the cited precedents, the referral court's role under Section 11 is limited to a prima facie examination and that substantive determinations on joinder, mis joinder or piercing the corporate veil are matters for the arbitral tribunal under Section 16 (kompetenz kompetenz). The Court observed that the arbitrator can add or delete parties and can deal with costs if a non signatory is vexatiously impleaded. [Paras 20, 21, 22, 23, 24]

Impleadment of the non signatory respondent prima facie justified; objections on joinder left open for determination by the arbitral tribunal.

Final Conclusion: The Court allowed the application for appointment of an arbitrator on a prima facie finding of an arbitration agreement in the partnership deed, prima facie permitted impleadment of the non signatory respondent, and directed that questions of joinder, mis joinder or piercing the corporate veil be determined by the arbitral tribunal, which shall also comply with Section 12 of the Act.