TaxTMI Updates e-Newsletter
Mar 26,2026

Validity of Imposition of Penalty under section 73 - Interest on belated payment of tax - Adjustment of excess tax payment.

Penalty under section 73 - HELD THAT: - The Court held that, on the facts placed before it, there was no justification for imposing penalty under section 73 of the GST Act, 2017. The finding on penalty was separated from the admitted tax liability and the corresponding liability to interest. [Paras 7, 8]

The penalty could not be sustained in the form imposed, and the petitioner was left at liberty to submit a proper representation in that regard.

Interest on belated payment of tax - Adjustment of excess tax payment - HELD THAT: - The Court held that once tax liability was admitted, the petitioner was bound to pay interest under section 50(1) of the respective GST enactment. At the same time, since the impugned order itself recorded an excess payment and there was doubt regarding the correctness of the calculation in the tabulation, the interest liability had to be recomputed after giving adjustment to the excess amount shown therein. [Paras 7, 8]

The matter was remitted for fresh determination of the correct interest payable after adjustment of the excess payment, and only the balance, if any, could be demanded.

Final Conclusion: The writ petition was disposed of by holding that penalty under section 73 was not justified on the facts, while interest on the admitted delayed tax payment remained payable. The matter was remitted to the respondent for fresh computation of interest after adjusting the excess amount already paid.

Alternative statutory remedy - maintainability of writ petition where appellate forum becomes functional - Compliance with the pre-deposit requirement under the GST Act before filing the appeal.

Alternative statutory remedy - GSTAT appeal - mandatory pre-deposit - HELD THAT:- The Court accepted that a writ petition could be entertained when the statutory appellate forum was not constituted, since an aggrieved person could not be left remediless. It, however, held that such position did not permit bypassing the statutory conditions attached to the appeal. With the appellate forum now made functional and the period for filing appeal having been notified and structured through the filing timeline, the dispute was required to be agitated before that forum. The Court further held that the condition of deposit under Section 112(8) had to be strictly complied with, and the writ jurisdiction could not be used to obtain a departure from that statutory mandate. [Paras 4, 5, 6]

The writ petition was disposed of by directing the petitioner to make the deposit required under Section 112(8) and file the appeal before the GSTAT within the notified timeline, leaving the merits of the appellate order open.

Final Conclusion: The Court declined to examine the merits in writ jurisdiction after noting that the GSTAT had become functional and that the appeal period had been provided. The petitioner was relegated to the statutory appellate remedy, subject to compliance with the mandatory pre-deposit and filing requirements.

Rejection of the statutory appeal on want of jurisdiction - Failure to transmit appeal to the correct appellate authority - Jurisdictional Error.

Improper rejection of appeal for wrong jurisdiction - HELD THAT:- The Court found from the Department's written instructions that the appeal had been rejected because there was then no system available in the appellate office for transmitting appeals filed against the concerned orders to the correct jurisdiction, and that the petitioner had been advised to re-file the appeal so that steps could be taken for such transmission. In that view, the Court held that the rejection of the appeal was a mistake on the part of the Department. Without examining the merits of the underlying dispute, the Court treated the defect as procedural and directed restoration of the appeal with transmission to the appropriate appellate authority. [Paras 6]

The impugned appellate order was set aside; the appeal was restored and directed to be transmitted to the appropriate appellate authority for decision in accordance with law.

Final Conclusion: The writ petition was disposed of by setting aside the rejection of the appeal as having been wrongly made on the ground of jurisdictional filing. The restored appeal was directed to be transmitted to the competent appellate authority for consideration on merits in accordance with law.

Violation of the notification issued under Section 168A of the CGST Act - no power under Section 168A of the Act to extend the time limit for passing orders - ultra vires to the provisions of Section 73(4) of the CGST Act. - HELD THAT:- The very issue is subject matter of consideration before this Court in Shyam Udyog vs. Union of India & Ors. [2025 (4) TMI 1168 - BOMBAY HIGH COURT], in which the petition was admitted and interim protection was granted.

In Rite Equipments Pvt. Ltd. vs. State of Maharashtra & Ors. [2026 (2) TMI 1330 - BOMBAY HIGH COURT] wherein following the order passed by the co-ordinate Bench of this Court in Shyam Udyog (supra), the said proceeding was admitted and interim relief was granted.

Accordingly, we are inclined to pass similar order as in Shyam Udyog (supra) as also in Rite Equipments Pvt. Ltd. (supra).

Ordered accordingly.

Entitlement to grant bail under Section 483 - Absence of extraordinary circumstances - fraudulent availment of input tax credit - accused of offences under Section 132(1)(b), (c), (f) and (i) of the Central Goods and Services Tax Act, 2017.

Bail - CGST offences - Extraordinary circumstances - HELD THAT: - The Court found that the alleged offences are triable by a Magistrate and carry a maximum punishment of five years. It also noted that the petitioners had remained in custody since 28.11.2025, no similar criminal antecedents were shown against them, and no material was produced by the Union of India to show any extraordinary circumstances justifying denial of bail. Applying the principle noticed from Vineet Jain [2025 (5) TMI 925 - SC ORDER], and taking into account the law laid down in Satender Kumar Antil [2022 (8) TMI 152 - SUPREME COURT], the Court held that bail ought to be granted without expressing any view on merits. [Paras 5, 7]

The petitioners were admitted to bail on terms to the satisfaction of the court in seisin of the case.

Final Conclusion: The bail applications were allowed. Having found no extraordinary circumstance to deny bail in offences punishable up to five years, and noting the period of custody and absence of criminal antecedents, the Court directed release of the petitioners on bail subject to conditions.

Validity of the endorsements at Annexures-A and A1 - seeking cancellation of the Bank Guarantee furnished - security for release of goods and conveyance - bona fide and compliant taxpayer - Whether the Bank Guarantee requires to be kept alive.

Continuance of bank guarantee - security for release of goods and conveyance - bona fide and compliant taxpayer - HELD THAT: - The Court held that the purpose of the bank guarantee was only to secure the revenue in the event the confiscation order was finally upheld. While recognising the revenue's concern that assessees may abandon proceedings and frustrate recovery, the Court stated that such discretion must be exercised differently where the assessee is a regular and consistent taxpayer. On the material placed, including the uncontroverted assertion regarding the absence of other confiscation proceedings and the petitioners' compliance record, the petitioner was found, prima facie, to be a bona fide tax payer. In those circumstances, the Court treated the petitioners' compliance track record itself as sufficient security for adherence to any final orders, and therefore found no justification to insist on continuation of the bank guarantee while other disputes remained pending. [Paras 10, 12, 13, 14, 16]

The endorsements rejecting cancellation of the bank guarantee were set aside, all other contentions were kept open, and the bank guarantees were directed to be returned.

Final Conclusion: The writ petition was disposed of by setting aside the endorsements insisting on continuance of the bank guarantee. The direction was issued on the peculiar facts of the case, having regard to the petitioners' compliance record, and was expressly stated not to operate as a precedent in other matters.

Blocking of electronic credit ledger (ECL) - Input Tax Credit - Negative balance in input tax credit - Violation of provisions of Rule 86A of Central Goods and Services Tax Act, 2017 and in violation of principles of natural justice - Whether Rule 86-A of Goods and Services Tax Rules, 2017 (Rules, 2017) permit the Commissioner or an officer authorized by him to block a tax payer’s ECL by an amount exceeding the credit available at the time of issuance of said order?

Electronic credit ledger - Rule 86A - Negative blocking - HELD THAT:- The Court followed its earlier decision in M/s Shyam Sunder Strips [2025 (11) TMI 486 - PUNJAB AND HARYANA HIGH COURT] and endorsed the view taken by the Gujarat, Delhi, Telangana and Bombay High Courts that the availability of input tax credit in the electronic credit ledger is a condition precedent for invocation of Rule 86A. The rule authorises only a temporary restriction on debit of the credit that is available; it does not empower the authorities to create an artificial negative balance or to block credit in excess of what stands to the taxpayer's credit. The Court also noted that, though prior notice is not required for invoking Rule 86A in an emergent situation, the absence of available credit makes such negative blocking impermissible, leaving the authorities free to adopt other statutory modes of recovery in accordance with law. [Paras 9, 10, 11, 12, 13]

The negative blocking of the petitioner's electronic credit ledger was held unsustainable, and the writ petition was allowed in terms of the earlier decision, with liberty to the respondents to pursue other remedies for recovery in accordance with law.

Final Conclusion: The Court held that Rule 86A can operate only against input tax credit actually available in the electronic credit ledger and cannot be used to create a negative balance. The writ petition was accordingly allowed in terms of the earlier binding decision, while leaving it open to the respondents to pursue recovery by other statutory means.

Interest on refund u/s 244A(1)(b) - Refund of self-assessment tax paid in anticipation of liability - Adhoc remittance - HC [2024 (11) TMI 1607 - MADRAS HIGH COURT] held there was no dispute regarding the assessee's entitlement to refund of the amount paid in anticipation of the Department taking a similar stand in subsequent assessment years - amount paid could not be treated as a mere parking of funds; it was a tax payment which, on becoming refundable, attracted interest u/s244A(1)(b) from the date of payment. The Court therefore agreed with the Writ Court that the assessee was entitled to such interest

HELD THAT:- Delay was condoned and the special leave petition was dismissed, the Court finding no good ground to interfere with the impugned judgment in exercise of jurisdiction under Article 136 of the Constitution of India.

Limitation under Sections 148 and 149 - requirement of "shall be issued" under Sections 148 and 149 - issuance versus service of notice - electronic despatch from Income Tax Business Application (ITBA) as date of issuance - attribution and dispatch of electronic records - gross delay of 480 days in filing the Special Leave Petition

HC [2024 (7) TMI 1186 - TELANGANA HIGH COURT] held in the electronic regime a notice is 'issued' only when it is despatched such that it leaves the originator's control - i.e., when the e mail/attachment exits the ITBA servers and enters a computer resource outside the Department's control.

HELD THAT:- The Special Leave Petition was dismissed on the ground of delay as well as merits, the delay having been found not satisfactorily explained and no reason being seen to interfere with the impugned order.

Validity of reassessment notice - Period of limitation - scope of period prescribed under the Taxation and Other Laws (Relaxation and Amendment of certain Provisions) Act, 2020 - HELD THAT: - The Court held that it was undisputed that the impugned notice related to A.Y. 2015-16 and had been issued after 1 April 2021. It treated the position as concluded by the Revenue's concession recorded by the Supreme Court in Union of India vs. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] namely that for assessment year 2015-16 all notices issued on or after 1 April 2021 would have to be dropped.

Following the same position, and noticing that this Court had taken a similar view in Mitra Biswas [2026 (2) TMI 372 - BOMBAY HIGH COURT] the Court held that the notice was bad in law. It further held that acceptance of the return filed pursuant to such notice could not enable the Department to recover demand or levy penalty on the basis of a notice unsustainable in law. On the objection of delay, the Court accepted the explanation offered in the writ petition and held that delay by itself could not validate a notice otherwise invalid in law, particularly when penalty had also been levied on the basis of the impugned reassessment proceedings. [Paras 8, 9, 10]

Final Conclusion: The Court held that the reassessment notice issued after 1 April 2021 for A.Y. 2015-16 was invalid in law and that neither acceptance of the return nor delay in filing the writ petition could cure that defect. The notice and all consequential proceedings, including assessment, demand and penalty, were accordingly quashed.

Tax recovery after appellate relief - Attachment limited to subsisting recoverable demand - continuation of attachment orders when additions being subsequently deleted.

Challenging Tax Recovery Certificates as issued by the Department and attachment of properties for three AY on the ground that the outstanding demand on the basis of which the Tax Recovery Certificates were issued and properties were attached, have been substantially extinguished after appellate proceedings.

HELD THAT: - The Court found that, after the appellate proceedings, the majority of the demands on the basis of which the recovery action had been initiated no longer survived. It was not disputed that the only outstanding demand presently recoverable was the interest component relating to the quantum addition for A.Y. 2008-09, while the penalty demand and interest thereon had been stayed and were therefore not presently recoverable.

In these circumstances, the impugned recovery certificates and attachments were held unsustainable except to the limited extent necessary to safeguard the Revenue in respect of the subsisting recoverable demand for A.Y. 2008-09. On that basis, attachment of two properties was quashed, one property was permitted to remain attached, and the Tax Recovery Officer was directed to revise the certificates so as to reflect only the outstanding demand for which no stay had been granted. [Paras 9, 10, 11, 12]

The attachments over two properties were set aside; attachment of one property was continued subject to the outcome of proceedings for A.Y. 2008-09; and the recovery certificates were directed to be revised to reflect only the unstayed outstanding demand.

Final Conclusion: The writ petition was allowed in part by holding that the recovery action could not continue on the basis of demands that had ceased to survive after appellate relief. Recovery and attachment were confined only to the extent of the subsisting unstayed demand for A.Y. 2008-09.

TP Adjustment - BLT method for AMP adjustment - Comparable selection - Interest on receivables - Separate benchmarking

TP Adjustment - BLT method for AMP adjustment - International transaction - TPO's findings relating to the conduct of parties and ownership of intangibles (IPR's) in respect of AMP expenses- HELD THAT: - We find that Issues ‘A’, ‘B’ and ‘C’ in one way or the other relate to the basic issues which have been decided by a coordinate Bench of this Court vide its judgment in Tupperware India Pvt. Ltd [2025 (12) TMI 1809 - DELHI HIGH COURT] whereby the appeal filed by the Revenue on similar issue has been rejected.[Paras 11]

The Revenue's grounds on AMP adjustment and allied transfer pricing aspects were rejected as covered by the earlier judgment.

Interest on receivables - Separate benchmarking - Tribunal's deletion of separate adjustment on interest on receivables - As argued assessee has failed to prove that its working capital adjustment captured abnormal delays - HELD THAT: - The Court held that Issue 'D' was covered by its earlier order in Kusum Health Care Pvt. Ltd. [2015 (4) TMI 180 - ITAT DELHI] which had been relied upon by the Tribunal. On that basis, the Revenue's objection to the Tribunal's treatment of receivables did not survive. [Paras 13]

No separate interference was warranted on the issue of interest on receivables.

Comparable selection - FAR analysis - inclusion of comparable which do not have similar FAR as that of the assessee - HELD THAT: - The Court held that Issue 'E' was covered by its earlier order in Tupperware India Pvt. Ltd. [2024 (3) TMI 1387 - DELHI HIGH COURT]. As the question of inclusion of the comparable had already been addressed in that case, the Revenue's ground on dissimilarity in FAR could not be entertained. [Paras 12]

The Tribunal's view on inclusion of the comparable was sustained.

Final Conclusion: The Court held that all the questions sought to be raised by the Revenue were already covered by earlier decisions against it. Both appeals were therefore dismissed.

Maintainability of writ petition - Efficacious alternate remedy - Challenge to Tribunal's interpretation of tax provisions

Revenue's writ petition challenging the Special Bench order of the Tribunal on interpretation of Sections 50 and 112 - HELD THAT: - The Court held that although the objection that the writ petition was not maintainable for failure to challenge the subsequent final order of the regular Bench could not be accepted, that did not justify exercise of writ jurisdiction. The regular Bench had decided other issues and not the legal issue answered by the Special Bench. However, the grievance raised in the petition was only against the correctness of the Special Bench's interpretation of the Act.

Such a challenge, being one of alleged error of law, did not by itself establish absence of jurisdiction, violation of natural justice, or any other exceptional circumstance warranting departure from the rule of alternate remedy as explained in Whirlpool Corporation v. Registrar of Trade Marks, Mumbai & Ors. [1998 (10) TMI 510 - SUPREME COURT] - Since the Special Bench order could be assailed in appeal under Section 260A before the High Court itself, the Court declined to entertain the writ petition and left all merits open. [Paras 6, 7, 9]

Final Conclusion: The Court dismissed the writ petition, holding that the Revenue's challenge to the Special Bench's interpretation of the Act should be pursued through the statutory appellate remedy under Section 260A. The correctness of the Special Bench view on merits was expressly left open.

Disallowances of cross charges for non-deduction of TDS u/s 40(a)(ia) - operation of second proviso to section 40(a)(ia) - payments were made for rendering business auxiliary services through invoices inclusive of the service tax and therefore, includes profit component - contention of Revenue that the said transaction has an income-component, owing to the fact that service tax was charged on the same - ITAT deleted addition holding that these charges represent mere reimbursement

Whether levy of service tax is a factor determining the nature of the transaction, when the transaction itself is not in the nature of income? - HELD THAT: - In Union of India vs. Intercontinental Consultants and Technocrats Private Limited [2018 (3) TMI 357 - SUPREME COURT] held that service tax can be levied only on the gross amount charged for the taxable service itself and that any additional amounts that are not directly charged for providing the taxable service cannot be included in the taxable value.

Thus we are in agreement with the submission of Assessee that, payment of service tax would not make the said transaction taxable, given that the same is in the nature of reimbursement of expense incurred without markup, as has been established. Furthermore, in view of the amendment introduced vide Finance Act, 2012, we also agree with the submission of Assessee that the Assessee in the present case cannot be treated as an assessee in default.

The Court accepted the concurrent findings of the CIT(A) and the Tribunal that the payment was made under a cost-sharing agreement on a cost-to-cost basis for staff cost, travelling, advertising and promotional expenses, and other miscellaneous expenses, without any mark-up. The sister concern had already deducted tax at source on payments made to third party vendors or employees wherever applicable, and had not claimed deduction for the same expenditure. On that factual foundation, the Court held that the payment contained no income element and could not attract disallowance under section 40(a)(ia).

Revenue's contention that levy of service tax showed a profit component was rejected, the Court holding that mere charging of service tax does not alter the inherent character of a payment which is otherwise only reimbursement. [Paras 10, 11, 12, 13, 20]

The payment was held to be pure reimbursement without mark-up, and no TDS liability arose on that amount.

Scope /operation of second proviso to section 40(a)(ia) - scope of amendment - Assessee in default - Curative and beneficial amendment - HELD THAT: - The Court followed the view that the amendment introduced by the Finance Act, 2012 is beneficial, declaratory and curative in nature. It held that the proviso creates a legal fiction by which, where the payer is not deemed to be an assessee in default because the resident payee has filed its return, taken the amount into account, and paid due tax, the payer is deemed to have deducted and paid tax for the purposes of section 40(a)(ia). Since those conditions were found to be satisfied in the present case and a Chartered Accountant's certificate had been furnished, disallowance u/s 40(a)(ia) was held to be impermissible. [Paras 15, 16, 17, 18, 19]

The assessee could not be treated as an assessee in default, and the disallowance under section 40(a)(ia) was not sustainable.

Final Conclusion: The Court held that the cross-charge paid under the cost-sharing agreement was only reimbursement of expenditure without any profit element and did not attract TDS. It further held that, in any event, the second proviso to section 40(a)(ia) operated retrospectively, with the result that no disallowance could be made where the payee had returned the income and paid tax; accordingly, the Revenue's appeal was dismissed for absence of any substantial question of law.

Eligibility under the Direct Tax Vivad Se Vishwas Scheme, 2024 - Specified date under the 2024 Scheme - Pending appeal requirement - Whether application filed with delay would be eligible under the Scheme?

HELD THAT: - The Court held that the Scheme proceeds on the basis of the specified date of 22.07.2024 and requires that an appeal should have been ready for filing or the relevant proceeding should have been pending as on that date. The removal of difficulties order was construed to cover only those situations where an order had been passed before the specified date, the time for filing appeal was still available on that date, and the appeal was thereafter filed within the prescribed time and without any application for condonation of delay.

In the present case, the Tribunal had already decided the appeal, the further appeal u/s 260A was not filed, and the limitation for such appeal had expired before the specified date. The later application under Section 254(2), even assuming it could be treated as an appeal for the purposes of the Scheme, was itself filed beyond the prescribed period and not within the conditions contemplated by the removal of difficulties order. On that reasoning, the assessee could not claim eligibility under the 2024 Scheme. [Paras 7, 8]

The rejection of the assessee's claim under the 2024 Scheme was upheld, and the dismissal of the writ petition was found to be justified.

Final Conclusion: The appeal was dismissed. The Court affirmed that, since no qualifying appeal was pending on the specified date and the later rectification application was filed beyond limitation, the assessee was not entitled to the benefit of the Direct Tax Vivad Se Vishwas Scheme, 2024.

Addition based on alleged clandestine salesand unexplained investment - Evidentiary effect of excise proceedings - addition u/s 69A on the ground that these are unaccounted sales and gross profit earned thereon has not been disclosed.

HELD THAT: - The Tribunal noted that, for another assessment year concerning the same basis of allegation, the appellate authority had deleted the additions after noticing that the charge of clandestine removal recorded by the Central Excise Authorities was found unsustainable by the CESTAT. Proceeding on that basis, the Tribunal held that when the very allegation of clandestine sales did not survive, the additions founded upon such allegation had no independent basis or legs to stand, therefore could not be maintained. [Paras 7]

Final Conclusion: The Tribunal allowed the appeal and deleted the additions for Assessment Year 2010-11, holding that they could not stand once the underlying allegation of clandestine sales had itself not been sustained.

Validity of satisfaction note u/s 153C - Consolidated satisfaction for multiple assessment years- need for Satisfaction note for each assessment year - combined satisfaction note for assessment years 2012-13 to 2018-19 - HELD THAT: - On examining the satisfaction notes of both the Assessing Officer of the searched person and the Assessing Officer of the assessee, it found that a common satisfaction had been recorded for multiple assessment years.

Following the view adopted in the co-ordinate bench decision in Chitra Narendra Parmar [2025 (7) TMI 1050 - ITAT PUNE] and noticing that the decisions referred to before it supported the proposition that satisfaction u/s 153C must be recorded separately for each assessment year, the Tribunal held that a consolidated satisfaction note for several years is not in accordance with law and is fatal to the very assumption of jurisdiction. On that basis, the assessments in the appeals were quashed. [Paras 8, 13, 15, 16, 18]

Final Conclusion: The Tribunal allowed both appeals. It held that the common satisfaction notes recorded for multiple assessment years under section 153C were legally unsustainable, and consequently quashed the assessments for AY 2016-17 and AY 2018-19.

Deduction u/s 80P(2)(d) - Interest from investments with co-operative banks - Scope of section 80P(4) - dividend and interest received on investment made in other cooperative society banks -

HELD THAT: - The Tribunal held that the controversy was governed by the principle that section 80P(2)(d) allows deduction of interest derived by a co-operative society from investments with another co-operative society, and that section 80P(4) excludes only a co-operative bank claiming deduction in its own right, not a co-operative society earning interest from deposits placed with a co-operative bank.

In reaching that conclusion, the Tribunal followed the recent decision of the Sikkim High Court in Sikkim State Cooperative Supply [2025 (12) TMI 808 - SIKKIM HIGH COURT] and Marketing Federation Limited [2025 (6) TMI 1629 - ITAT KOLKATA] which had distinguished Totgars [2010 (2) TMI 3 - SUPREME COURT] on the footing that Totgars concerned section 80P(2)(a)(i) and not section 80P(2)(d).

Tribunal also treated decision in Doaba Cooperative Sugar Mills Ltd. [1997 (4) TMI 49 - PUNJAB AND HARYANA HIGH COURT] as supporting the view that the nature or source of the invested funds was not material once the income was derived from investment with a co-operative society. On that reasoning, the disallowance of the claimed deduction was held to be unsustainable. [Paras 9, 10]

Final Conclusion: The Tribunal allowed the appeal and held that the assessee co-operative society was entitled to deduction under section 80P(2)(d) in respect of interest earned from deposits with co-operative banks. The contrary view adopted in the impugned appellate order was rejected.

Unexplained cash credit u/s 68 -Bogus unsecured loans - Repayment through banking channels - onus to prove

HELD THAT: - The Tribunal held that the assessee failed to discharge the onus of establishing the genuineness of the impugned loan transactions to the satisfaction of the AO. It accepted the concurrent view of the authorities below that mere routing of funds through banking channels, or the fact that the entities were income-tax assessees or registered concerns, was not sufficient to prove the transactions genuine.

Tribunal further endorsed the finding that, once the loans were found to be bogus and in the nature of accommodation entries, their repayment in the same or subsequent period through banking channels did not confer genuineness on the original credits and could not neutralise the addition u/s 68. On that reasoning, the order of the Commissioner (Appeals) was upheld. [Paras 6]

The unsecured loans were treated as bogus accommodation entries, and the addition u/s 68 was confirmed.

Final Conclusion: The Tribunal dismissed the assessee's appeal and upheld the addition made under section 68 in respect of the unsecured loans. It held that repayment through banking channels did not render genuine loans already found to be bogus accommodation entries.

Excessive or unreasonable expenditure to related party - addition u/s 40A(2)(a) on the premise of excessive payment made to a sister concern - Depreciation on assets kept ready for use - Allowability of expenditure admitted as not incurred for business purpose

Excessive or unreasonable expenditure to related party - Like-to-like comparability u/s 40A(2)(a) - payment to the sister concern for email marketing - AO conducted online enquiries and devised his own algorithm to conclude that the payment of Rs. 1 per email was excessive as the average cost was merely 0.30 paise - HELD THAT: - The Tribunal held that, though the Assessing Officer could examine related-party payments under section 40A(2)(a), the comparison had to be made only with a like service. The material on record showed that the assessee's case involved email marketing using the service provider's database and related infrastructure, whereas the comparables adopted by the Assessing Officer were factually different.

An apple has to be compared to an apple only and not an orange. In the present case, we have noted that the rate of 30 paise calculated by the ld. AO as against Rs. 1 claimed by the assessee, was distinguished on facts. The charges for data services will have to be higher than the cases where the buyer uses his own data base. Thus, we have noted that the comparisons made by the ld. AO are distinguished on facts.

Since the rate adopted by the AO was based on dissimilar services, and the appellate order contained no independent analysis beyond repeating the assessment order, the conclusion of excessiveness was found unsupported by the record. [Paras 7]

The disallowance under section 40A(2)(a) was deleted.

Depreciation on assets kept ready for use - Interest on car loan for business asset - claim disallowed because the vehicles were not actually used during the year - HELD THAT: - In the case of Escorts Tractor [2015 (5) TMI 116 - DELHI HIGH COURT] held that ‘if plant and machinery is kept ready for use that would be enough to grant depreciation.’ Similarly, in the case of Capital Bus Service [1980 (2) TMI 69 - DELHI HIGH COURT] it was similarly held that where an asset is kept in condition of readiness, the depreciation under section 32 would be allowable.

Following the decisions cited before it, the Tribunal held that actual user is not the sole test where the asset is kept in a state of readiness for business use. As the Revenue had not shown that the vehicles lacked business connection, the claim could not be denied on the ground of non-use during the relevant year. [Paras 9]

The claims of depreciation and interest on car loan were directed to be allowed.

Allowable Business expenditure - HR recruitment and placement expenditure and staff welfare expenses - HELD THAT: - The Tribunal noted that the assessee had itself admitted during assessment that, having no employee during the year, the recruitment and staff welfare expenses were liable to disallowance. That admission remained undisputed, and the further explanation did not displace the fact that the amount had been offered for disallowance. [Paras 11]

The disallowance of the recruitment and staff welfare expenses was confirmed.

Final Conclusion: The appeal was partly allowed. The disallowance under section 40A(2)(a) and the disallowance of depreciation and car-loan interest were deleted, while the disallowance of recruitment and staff welfare expenses was upheld.

Addition u/s 68 - year of receipt of the funds for addition u/s 68 -Credit in books of account - Unexplained share application money - DR submitted that u/s 68, it is statutory requirement to consider unexplained funds in the year in which it is credited in the books of accounts - only defence furnished by the assessee is that four entries of Rs. 20 lakh each has been physically received in the Bank on 31.03.1996 relevant to AY 1996-97 and therefore no addition can be made in AY 1997-98.

HELD THAT: - We find that the such a claim of receipt of share application money and the creditworthiness of the investor companies has not been substantiated by any cogent evidence such as balance sheets of the investors companies. We therefore are of thew view that the assessee has not been able to explain, the source of funds and failed to establish the identity, creditworthiness and genuineness of the transaction and therefore, the addition made under section 68 of the Act by the AO is valid.

What is the year of receipt of the funds for addition u/s 68? - We are of the considered view that the law mandates the invocation of provisions of section 68 of the Act on sum in the year in which the said sum is credited in the books of account. In the instant case, since the sum/fund has been credited in the books of account on 01.04.1996, the addition u/s 68 of the Act is to be made in AY 1997-98 only. The addition made u/s 68 of the Act therefore, in AY 1997-98, is valid and legally sustainable.

Final Conclusion: The Tribunal dismissed the appeal and sustained the addition under section 68. It held that the sum was taxable in Assessment Year 1997-98 because that was the year in which it was credited in the books, and the assessee had not proved the source and genuineness of the credits.

Nature of expenses - Aborted public issue expenditure - Deduction u/s 10B on foreign exchange difference and provision write-back - Deferred revenue expenditure - Disallowance u/s 14A restricted to exempt income - Hedging loss on forward contracts

Aborted public issue expenditure - Revenue expenditure under section 37(1)or capital expenditure -Enduring benefit - HELD THAT: - The Tribunal found it to be an admitted and uncontroverted fact that the proposed IPO did not materialise and stood aborted. Since no asset came into existence and no enduring benefit was obtained by the assessee, the expenditure could not be treated as incurred for expansion of the capital base in the manner contemplated in the authorities relied upon by the Revenue. On that factual basis, the expenditure was held to be akin to expenditure on an aborted project and allowable u/s 37(1). [Paras 10]

The assessee's claim for deduction of the IPO expenditure was allowed.

Deduction u/s 10B - Derived from export undertaking - First degree nexus - deduction u/s 10B disallowed on difference in foreign exchange and excess provision written back on the ground that it is not derived from industrial undertaking - HELD THAT: - The Tribunal held that although these receipts were shown as 'other income' in the financial statements, they arose directly from the sale and purchase transactions of the 100% export-oriented unit in the normal course of business. The write-back of provisions for doubtful debts and sundry creditors, as well as the foreign exchange difference, had a direct and first-degree nexus with the business carried on by the export-oriented unit. They were therefore treated as income derived from the unit's export activity and held eligible for section 10B deduction. [Paras 11]

The disallowance of deduction u/s 10B on these receipts was deleted.

Deferred revenue expenditure - Product development expenses - Business expenditure u/s 37(1) - Product development expenses could not be spread over future years as deferred revenue expenditure - HELD THAT: - The Tribunal treated the dispute as a recurring legacy issue already decided in the assessee's favour in earlier years. Following the Delhi High Court view in favour of the assessee in Assessment Year 2007–08 it held that, in the absence of statutory basis, the Revenue could not defer or spread such revenue expenditure over multiple years. The deletion of the addition by the Commissioner (Appeals) was therefore upheld. [Paras 12]

The Revenue's challenge to deletion of the disallowance of product development expenses failed.

Disallowance u/s 14A r/w Rule 8D - Exempt income ceiling - HELD THAT: - The Tribunal followed the decision of the Delhi High Court in Joint Investment (P) Ltd. [2015 (3) TMI 155 - DELHI HIGH COURT] and held that disallowance under section 14A cannot exceed the exempt income earned during the relevant year. Applying that ratio, it sustained the relief granted by the Commissioner (Appeals) and rejected the Revenue's plea for restoration of the larger disallowance. [Paras 13]

The disallowance under section 14A was held liable to be confined only to the exempt income.

Disallowance of loss on account of deficit on settlement of forward contracts, as speculation loss -Hedging loss on forward contracts - Speculation loss u/s 43(5) - Normal business loss - HELD THAT: - The Tribunal followed the decision in the assessee's own case [2021 (10) TMI 154 - ITAT DELHI] and accepted that the forward contracts were entered into in the course of the export business to safeguard against foreign exchange fluctuation in underlying business transactions and foreign currency liabilities. Such contracts were treated as hedging transactions integral to the assessee's business exposure and therefore outside the character of speculative loss. On that basis, the loss was held to be a normal business loss. We are also fortified by the decision of Simon India Ltd [2022 (12) TMI 358 - DELHI HIGH COURT] and Bechtel India Pvt. Ltd. [2024 (3) TMI 1360 - DELHI HIGH COURT] [Paras 14]

The deletion of the addition treating the forward contract loss as speculation loss was upheld.

Final Conclusion: The assessee's appeals for A.Y. 2009-10 and A.Y. 2010-11 were allowed, holding the aborted IPO expenditure to be revenue in nature and granting deduction under section 10B on the impugned receipts. Revenue's appeals for A.Y. 2009-10 to A.Y. 2012-13 were dismissed, with the relief granted on product development expenses, section 14A disallowance and forward contract loss being upheld.

Benami transactions within the meaning of Section 2(9)(A) - Fiduciary capacity exception - third-party beneficial arrangement - Part performance under section 53A - Retrospective Application of the provisions of the PBPTA after the amendment in 2016 - Beneficial Ownership - Ostensible Owner - Motive to defeat another law.

Benami transaction - beneficial ownership - transfer to benamidar - The impugned land transactions satisfied the ingredients of a benami transaction under section 2(9)(A) of the PBPTA. - HELD THAT: - The Tribunal held that the conjunction between clauses (a) and (b) required both conditions to be satisfied, but rejected the respondents' contention that the provision would not apply because the Trusts were in possession of the properties. It found that the consideration was admittedly provided by the Trusts and the properties were transferred to Shri Lamba in his name. The record, including the MoUs, showed that the transfer to Shri Lamba was for the immediate and future benefit of the Trusts, and that he had lent his name so that the lands could later be converted and transferred to them. The Tribunal held that the statute does not require the property, after transfer, to continue to be held only by the benamidar; possession or use by the beneficial owner does not take the arrangement outside section 2(9)(A). [Paras 16]

The transactions were benami transactions within section 2(9)(A) of the PBPTA.

Part performance under section 53A - statutory exclusion - The respondents could not claim exclusion from the definition of benami transaction under the Explanation relating to section 53A of the Transfer of Property Act. - HELD THAT: - The Tribunal held that the statutory exclusion applies to transactions where possession is allowed or retained in part performance of a contract of the kind contemplated by section 53A, namely a seller-buyer arrangement answering the conditions set out in the Explanation. The present arrangements did not fall within that category, because they involved not merely the seller and buyer but also a third party that provided the consideration and for whose benefit the transfer was made. On that construction, the Explanation did not exclude the impugned transactions from the ambit of the PBPTA. [Paras 17]

The Explanation based on section 53A did not protect the impugned transactions from being treated as benami.

Fiduciary capacity exception - name lending - HELD THAT: - The Tribunal found that Shri Lamba purchased the properties in his own name in order to circumvent the prevailing prohibition against Trusts purchasing agricultural land. The contemporaneous MoUs showed a structured arrangement under which he agreed to acquire the lands in his individual capacity for the immediate and future benefit of the Trusts, which had provided the purchase money. The Tribunal also noted that the very execution of the MoUs indicated that the arrangement was not a simple case of property being held by a person in a fiduciary capacity for another, but a deliberate device by which he lent his name to the transaction. On these facts, the statutory exception for property held in fiduciary capacity was held inapplicable. [Paras 18]

The fiduciary capacity exception was not attracted.

Motive to defeat another law - retrospective omission of land restriction - HELD THAT: - The Tribunal held that benami character has to be adjudged strictly on the parameters of section 2(9)(A) of the PBPTA and not by reference to the continued applicability of the Karnataka Land Reforms Act. Even if the earlier prohibition on transfer of agricultural land to Trusts stood omitted retrospectively, the essential ingredients of the benami provision remained fulfilled because the properties were transferred to Shri Lamba on consideration provided by the Trusts and for their immediate and future benefit. The Tribunal further agreed that motive to defeat another law is relevant in the context of prosecution under section 53, but not a necessary ingredient for determining whether a transaction is benami under section 2(9)(A). [Paras 19]

The Tribunal held that the transactions remained benami notwithstanding the later amendment to the Karnataka law or the argument regarding motive.

Final Conclusion: The Tribunal held that the impugned transactions answered the statutory test of benami transactions, and that neither the plea of fiduciary capacity nor the reliance on section 53A or the later amendment to the Karnataka law altered that conclusion. The impugned orders of the Adjudicating Authority were therefore set aside and the appeals filed by the Initiating Officer were allowed.

Misdeclaration of quantity in the imported goods - excess of the declared quantity -Customs valuation - wrongly re-determined the value on the basis of Chartered Engineer's report - essential character - Classification of incomplete computer systems.

Whether there is mis-declaration of the quantity and value by the Appellant. - HELD THAT: - The Tribunal found that the goods imported were computer cabinet cases and that 111 pieces were found in excess over the declared quantity of 4320 pieces. Having regard to the small proportion of the excess quantity, the explanation of the foreign supplier that a few extra pieces were supplied to cover possible transport damage, and the general trade practice of adding some pieces for such purpose, the Tribunal held that there was no misdeclaration of quantity with intent to evade duty. It held that, at the highest, duty could be charged on the extra pieces found, but that circumstance by itself did not justify confiscation or penalty. [Paras 6]

No actionable misdeclaration of quantity was established, and confiscation and penalty could not be sustained on that basis.

Customs valuation - Redetermination of value - HELD THAT: - The Tribunal held that the redetermined value adopted by the department at 12 USD per piece, based on the Chartered Engineer's report, was unsupported by evidence. It found that the Chartered Engineer had indicated the value casually and without supporting material, that there was no evidence of contemporaneous imports of similar or identical goods at a comparable value, and that it was not the department's case that any amount over and above the invoice price had been paid to the foreign supplier. In the absence of such material, no case for redetermination of value was made out. [Paras 7]

The rejection of the declared value and its redetermination were held to be unsustainable.

Classification of incomplete computer systems - Essential character - HELD THAT: - The Tribunal noted that the authorities below had recorded no reasons for treating the goods as incomplete computer systems. It found that the Chartered Engineer had used the expressions computer cabinet cases and bare bone systems interchangeably, and held that a cabinet case with merely a motherboard and fan could not be regarded as an unfinished or incomplete computer system. The Tribunal further held that without a CPU the goods did not attain the essential character of a computer, and in the absence of any technical opinion produced by the department, the importer's declaration and the Chartered Engineer's certificate could not be disregarded. [Paras 8]

The goods were held not classifiable as incomplete or unfinished computer systems, and the contrary finding in the impugned order was set aside.

Final Conclusion: The Tribunal held that neither misdeclaration of quantity nor undervaluation was established, and that the goods could not be treated as incomplete computer systems. The impugned order was therefore set aside and the appeal was allowed with consequential relief.

Condonation of delay - Classification of goods imported - HELD THAT:- Delay condoned.

In the light of the dismissal of Civil Appeal No. 4475/2025, titled “Gastrade International vs. Commissioner of Customs, Kandla”, [2025 (4) TMI 23 - SUPREME COURT], we find no good ground and reason to interfere with the impugned judgment passed by the Customs, Excise & Service Tax Appellate Tribunal [2025 (6) TMI 610 - CESTAT MUMBAI], West Zonal Bench at Mumbai.

The appeals are, accordingly, dismissed.

Validity of direction restricting redemption of the imported goods to re-export -Retrospective operation of beneficial amending notification - clearance of imported goods - Redemption of confiscated goods for home consumption - Concession-based decision as non-binding precedent.

Concession-based precedent - Binding precedent - HELD THAT: - The Tribunal held that the judgment in Amba Lal [1960 (10) TMI 1 - SUPREME COURT] rested on a concession made by the learned Additional Solicitor General, and the Supreme Court itself had not expressed an independent view on the legal question. A proposition accepted on concession or admission was therefore treated as not constituting a binding precedent. On that basis, the appellant could not claim release for home consumption merely by invoking that decision. [Paras 5]

Amba Lal was held inapplicable and did not govern the dispute.

Beneficial amending notification - Home consumption after redemption - Restricted goods - HELD THAT: - The Tribunal noted that, though confiscation and penalty were justified at the time of import because the goods then stood as prohibited under the prevailing notification, the later notification altered their status to restricted before the impugned order came to be passed. The appellant had also agreed to pay duty on the enhanced value in conformity with the amended position. Applying the principle that a beneficial amending notification operates retrospectively, the Tribunal held that redemption for home consumption ought to have been allowed instead of restricting the goods to re-export. [Paras 6, 7]

The order was modified to permit clearance for home consumption after redemption at the enhanced value, subject to payment of applicable duties and interest.

Final Conclusion: The Tribunal rejected the appellant's reliance on the concession-based ruling in Amba Lal, but held that the subsequent beneficial amendment changing the goods from prohibited to restricted had to be given retrospective effect. Accordingly, the order limiting redemption to re-export was modified and clearance for home consumption was permitted on the enhanced value, subject to applicable dues.

Denial of exemption from Basic Customs Duty under Notification No. 046/2011-Cus - imported aluminium scrap did not bear country-of-origin markings on the goods - Procedural Requirement - Rules of Origin - procedural defect, relating to nonidentification of imported goods in the absence of the country of origin not being mentioned on the goods - Country of Origin under the ASEAN–India Free Trade Agreement - Preferential Tariff Benefit - payment of duty under protes.

Preferential exemption under ASEAN-India Free Trade Agreement - Doctrine of substantial compliance - HELD THAT:- The Tribunal held that the governing requirement was that the description of goods be sufficiently detailed to enable identification by Customs. In the representative bill of entry and the certificate of origin, the goods were described consistently as aluminium extrusion scrap of a specified grade and type, which was adequate for identification. The customs officer had also verified the PSI certificate, sales contract form, FTA certificate and weighment slips, and no discrepancy was noticed in any of these documents. In the absence of any evidence of tampering or any blameworthy act by the importer, the mere absence of country-of-origin markings on scrap goods could not, by itself, defeat the claim to preferential treatment. The Tribunal further held that procedure is only a means to enforce the law and, where the substantive requirements stood satisfied, the doctrine of substantial compliance applied and a minor procedural deficiency could not be used to deny the exemption. [Paras 6, 7, 8]

The imported goods were held entitled to the benefit of exemption from Basic Customs Duty under the notification, and the denial of the benefit on the stated procedural ground was set aside.

Final Conclusion: The Tribunal held that the goods were sufficiently identifiable from the bill of entry, certificate of origin and other verified documents, and that absence of physical country-of-origin markings on the scrap could not justify denial of the preferential exemption. The appeal was allowed with consequential relief according to law.

Eligibility of sub-contractor under exemption notification- imported “Toll collection and traffic control equipments” - benefit of Sl. No. 368 of Notification No. 12/2012-Cus. - equipments imported duty-free - confiscation under Section 111(o) and penalties - recording statements of various persons connected with the said import and installation of the goods - Construction of condition against sale or disposal - Confiscation and penalty consequential to denial of exemption

Exemption for goods required for construction of roads - Eligibility of sub-contractor - Harmonious construction of project agreements - The imported toll management system equipment was eligible for exemption under Sl. No. 368 of Notification No. 12/2012-Cus. as the first appellant qualified as a sub-contractor for the road project. - HELD THAT:- The Tribunal held that, on a plain reading of condition No. 9(a), a person named as a sub-contractor for the road construction contract would be entitled to the exemption. On examining the concession agreements, the toll management system agreements, and the subsequent communications with NHAI and Customs, it found that the concessionaire was authorised to appoint contractors for performance of its obligations and had in fact appointed the first appellant for supply, installation, commissioning and maintenance of the toll management system. NHAI was informed of that appointment and issued a certificate to facilitate import of the equipment. In these circumstances, mere non-appearance of the first appellant's name in the original concession agreement could not defeat the exemption. The Tribunal therefore concluded that condition No. 9(a) stood sufficiently complied with. [Paras 12, 13, 14]

The benefit of the exemption notification was available to the first appellant on the imported goods used in the toll management system for the national highway projects.

Construction of condition against sale or disposal within five years - Completion of project and transfer of goods - HELD THAT: - The Tribunal held that the Revenue had misread condition No. 9(b). Where the imported goods had been used for the project and, on completion, the system was handed over in terms of the contractual arrangement, the contractor or sub-contractor could not be required to retain the completed project assets merely to satisfy the five-year condition in a literal and impractical manner. The condition could not be construed to prohibit transfer of the project or project equipment to the concessionaire or project authority after completion of the work. Accordingly, the finding of breach of condition No. 9(b) was unsustainable. [Paras 15]

The Tribunal rejected the Revenue's case that the exemption stood violated by transfer of the equipment after completion of the project.

Confiscation under Section 111(o) - Penalty consequential to denial of exemption - HELD THAT: - The Tribunal treated the issues of confiscation and penalty as consequential. Since the appellants were held entitled to the exemption and in compliance with the conditions of the notification, the very basis of the duty demand, confiscation and penalties disappeared. [Paras 16]

The confiscation and penalties were set aside along with the impugned order.

Final Conclusion: The Tribunal held that the first appellant had satisfied the conditions of Sl. No. 368 of Notification No. 12/2012-Cus. and was entitled to the exemption on the imported toll management system equipment used in the national highway projects. As the denial of exemption failed, the duty demand, confiscation and penalties were set aside and the appeals were allowed.

Validity of recovery of customs duty, confiscation and penalties under Section 28AAA - Cancellation of fraudulently obtained SEIS scrips - collusion, wilful misstatement or suppression of facts - Use of statement recorded under Section 108 - Confiscation and penal consequences for utilisation of invalid duty credit scrips - Personal penalty on company employee for wrongful SEIS claim.

SEIS scrips obtained by wilful misstatement - HELD THAT: - The Tribunal held that once the DGFT had cancelled the SEIS scrips void ab initio, the exemption flowing from those scrips was never available. It found that the appellant had wilfully mis-declared the services in the application before DGFT as management consulting services though the services actually rendered were IT and IT-enabled services not eligible for the benefit. Since the scrips had been obtained by wilful misstatement and were thereafter transferred to another person who utilised them for payment of customs duty, both statutory conditions for Section 28AAA stood satisfied. The Tribunal rejected the contention that the DGFT order was based merely on an improper claim or breach of conditions, and held that the DGFT cancellation itself conclusively established that the instrument was never valid. The decisions cited by the appellant were held inapplicable because, unlike those cases, the DGFT had here already cancelled the scrips. [Paras 16, 17, 18, 19, 20]

The demand of duty with interest against the company under Section 28AAA was upheld.

Section 138B - Use of statement recorded under Section 108 - Absence of prejudice - HELD THAT: - The Tribunal held that the objection founded on Section 138B lacked merit. It noted that the statement had not been retracted and was followed by voluntary payment of customs duty with interest. It further held that the appellant had not shown any prejudice from absence of examination in chief, and that there is no absolute right to insist on such examination in every proceeding. Relying on the decisions in Kanungo & Company [1972 (2) TMI 35 - SUPREME COURT], Surjit Singh Chhabra Vs. Union of India [1996 (10) TMI 106 - SUPREME COURT] and M/s Telstar Travels (P) Ltd. versus Enforcement Directorate [2013 (2) TMI 396 - SUPREME COURT], the Tribunal held that denial of further examination or cross-examination did not vitiate the proceedings in the facts of the case. [Paras 21]

The challenge to reliance on the recorded statement was rejected.

Confiscation under Sections 111(m) and 111(o) - Penalty under Sections 112(a), 114AB and 114AA - Fraudulent availment of duty exemption - HELD THAT: - The Tribunal held that where scrips are fraudulently obtained and used to secure customs duty exemption on imports, the imports cease to satisfy the conditions of the exemption and the goods become liable to confiscation. Following Fashion Accessories, Anoop Thatai, Shri Jile Singh, Pradeep Arora Vs. Commissioner-Kandla [2024 (3) TMI 293 - CESTAT AHMEDABAD], it held that the company had misrepresented the nature of services before DGFT in order to obtain transferable scrips for use by importers, and this justified confiscation as well as penalties under the relevant provisions. The authorities cited by the appellant on absence of misdeclaration were distinguished on the ground that those cases involved bona fide or non-deliberate declarations, whereas the present case involved intentional misstatement to secure ineligible benefits. [Paras 22, 23]

The confiscation findings and the penalties imposed on the company were affirmed.

Personal penalty on employee - Abetment - Proportionality of penalty - HELD THAT: - The Tribunal noted that the CFO had admitted the ineligibility of the SEIS claim and that the duty with interest had thereafter been voluntarily paid. It further considered that he was an employee functioning as Chief Financial Officer of the company and that substantive penalties had already been imposed on the company itself under the relevant provisions. In those circumstances, it found no justifiable reason to sustain the separate personal penalties imposed on him. [Paras 24]

The penalties imposed on Shri Rajesh Shetty under Sections 112(a) and 114AA were set aside.

Final Conclusion: The appeal of the company was dismissed, the recovery of duty with interest under Section 28AAA and the confiscation and penalties against it being sustained. The separate appeal of the CFO was allowed and the personal penalties imposed on him were set aside.

Application for initiation of corporate insolvency resolution process by operational creditor - Notice of dispute - plea of pre-existing dispute as to the operational debt is spurious and moonshine defence - Operational debt - Relevance of subsequent GST assessment - Fraudulent invoices - Input tax credit - Whether there is a plausible contention which requires further investigation and that the “dispute” is not a patently feeble legal argument or an assertion of fact unsupported by evidence.

Notice of dispute - Pre-existing dispute - Section 9 rejection - The corporate debtor's reply dated 15.06.2022 to the demand notice was a valid notice of dispute disclosing a pre-existing dispute. - HELD THAT: - The Tribunal held that the statutory scheme requires rejection of a Section 9 application where notice of dispute has been received, provided the dispute raised is real and calls for investigation, and is not merely illusory or unsupported. The reply dated 15.06.2022 did not contain a bare denial; it referred to the commencement of internal audit from 22.12.2021, alleged fictitious invoices, absence of prior communication or purchase records, fake vehicle particulars, returned material, and the stand that no invoices prior to December 2021 remained payable. These were founded on events stated to have arisen before the demand notice and therefore constituted a plausible dispute as to the debt. The Tribunal found that the Adjudicating Authority wrongly treated the reply as a feeble contention by proceeding on an incorrect factual premise that payments had continued to the operational creditor after December 2021. [Paras 30, 54, 58, 59, 60]

The reply dated 15.06.2022 was held to be a notice of dispute within the meaning of Section 9(5), and the Section 9 application was liable to be rejected on that ground.

Moonshine defence - Acknowledgment of debt - Plausible contention - HELD THAT: - The Tribunal found the three principal reasons adopted by the Adjudicating Authority to be unsustainable. First, there was no pleading in the Section 9 application that the corporate debtor had availed input tax credit on the disputed invoices; hence an adverse inference for not disputing such a case was erroneous. Secondly, the affidavit dated 15.03.2022 attributed to a director of the corporate debtor could not be treated as a reliable acknowledgment in the facts of the case, since the said person was himself alleged to be in collusion and the affidavit had been procured by the operational creditor. Thirdly, the finding that payments were made by the corporate debtor to the operational creditor after December 2021 was contrary to the record; the later payment relied upon was to the bank against letters of credit and not a payment to the operational creditor. The Tribunal further noted that the record itself supported specific aspects of the defence, including the operational creditor's email acknowledging that goods under certain invoices had been rejected and received back. In these circumstances, the defence raised was a genuine and supported dispute requiring investigation, not a mere bluster or sham. [Paras 55, 56, 57, 59, 60]

The defence was held to be neither spurious nor moonshine, and admission of the insolvency application on the contrary view was unsustainable.

Relevance of subsequent GST assessment - The GST assessment order dated 02.07.2025 was relevant to the controversy and supported the corporate debtor's case regarding the disputed invoices. - HELD THAT: - The Tribunal held the GST assessment to be relevant because the Adjudicating Authority itself had faulted the corporate debtor for not raising the invoice dispute before the GST authorities. The assessment, pertaining to Financial Year 2021-22, examined the operational creditor's transactions for the same period in which the disputed invoices were raised. The order recorded findings regarding absence of source procurement, lack of vehicle movement, generation of e-way bills without actual supply of goods, duplicate or replicated invoices, and non-availment of input tax credit by the corporate debtor in respect of certain disputed invoices. The Tribunal observed that these findings materially supported the stand earlier taken by the corporate debtor in its reply to the demand notice and in its reply to the Section 9 application. It nevertheless clarified that even independently of the GST assessment, the corporate debtor had already shown a plausible pre-existing dispute. [Paras 67, 68, 69, 71, 74]

The GST assessment order was treated as relevant material and as reinforcing the corporate debtor's defence to the operational debt claim.

Final Conclusion: The Tribunal allowed the appeal, held that the corporate debtor had raised a genuine pre-existing dispute and that the Section 9 application ought to have been rejected. The admission order was set aside, the operational creditor's application was dismissed with costs, and the intervention application was declined.

Initiation of Corporate Insolvency Resolution Process (CIRP) - debt and default on part of the corporate debtor - project-wise insolvency - independence of proceedings relating to other projects - Withdrawal of CIRP by settlement under Section 12A - Whether the Financial Creditors in a class in their Section 7 application being (IB)No.239(PB)/2023 have been able to prove debt and default on the part of the CD, so as to initiate CIRP against the CD?

Whether the CIRP against the CD ought to have been confined to the project Raheja Shilas (Low Rise), in which project, Respondent Nos.1 to 43 Financial Creditor in a class had received the units?

Proof of debt and default for initiation of CIRP - Admission of Section 7 petition against the Corporate Debtor on the ground of debt and continuing default. - HELD THAT: - Part-IV of Section 7 application, gives details pertaining to each of the Applicants and the amount in default. Part-IV of Section 7 application mentions total amount paid and the number of the unit allotted to each of the Applicants. For example, Vipul Jain and Rachna Jain unit No. is IF3-02 and the total amount paid is Rs. 59,07,450/-. In Column -1. In Column-2 of Part-IV, total amount claimed in default with respect to Vipul Jain and Rachna Jain mentioned as Rs. 1,87,48,141/- and date of start of default is mentioned as 06.03.2012. Accordingly, details with regard to all the Respondent – Financial Creditor in a class, the units allotted to them, the amount paid by them and the amount claimed to be in default are mentioned. In Part-V, copy of Allotment Letter, Agreement to Sell and copy of Statement of Account and calculations are mentioned.

The Tribunal found that Part IV and Part V of the Section 7 application furnished particulars of allotment, amounts paid and amounts claimed in default, and that the Adjudicating Authority correctly concluded that possession was contractually due in 2012-2014 (with a six month grace) and that debt had been acknowledged by communications. On those findings, the initiation of CIRP was sustained as there was sufficient proof of debt and default to admit the Section 7 application. [Paras 13]

The Adjudicating Authority's admission of the Section 7 petition was upheld on the ground that debt and default were established.

Whether the CIRP ought to be confined to the Raheja Shilas (Low Rise) project and whether other projects of the Corporate Debtor are affected. -HELD THAT: - In the judgment of this Tribunal in Flat Buyers Association Winter Hills [2020 (2) TMI 1409 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] was quoted with approval by this Tribunal, where this Tribunal has held that in a CIRP against the real-estate company, if allottees/ Financial Creditors or Financial Institutions are Operational Creditors of one project have initiated a CIRP against the CD, it should be confined to the particular project and it cannot affect any other project. Thus, the above proposition of law as laid down in Flat Buyers Association Winter Hills was again been reiterated in the judgment of Gagan Tandon.[2026 (1) TMI 661 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI.] Gangan Tandon was a case where IL& FS Financial Services Ltd. – Financial Creditor has initiated proceedings under Section 7. It was held by this Tribunal in the above case that IL&FS has obtained various securities from the CD and CIRP should confine only to those projects in which Financial Creditor has securities. The CD was holding various projects in different States and different Cities and the State of UP, were not to be affected. The conclusions were recorded on the said judgment. The above judgment fully supports the submissions of the Appellant that allottees being only to the project Raheja Shilas (Low Rise), the CIRP should confine to the project Raheja Shilas (Low Rise) only. We, thus, are satisfied that the impugned order needs to be modified, confining the CIRP to the project Raheja Shilas (Low Rise) only.

Thus, the Court held that when allottees or financial creditors initiate CIRP in respect of a single real estate project, the CIRP must be confined to that project and cannot be extended to other separate projects of the same corporate debtor. Accordingly, the impugned order admitting CIRP was modified to limit the CIRP to the Raheja Shilas (Low Rise) project, and claim/relief in respect of other projects remain independent and may be pursued separately. [Paras 17, 18, 23]

Whether Respondent Nos.1 to 43 having received possession of their units, the CIRP initiated by the impugned order needs to be closed? - HELD THAT: - The view that CIRP initiated by the impugned order, needs to be confined to the project Raheja Shilas (Low Rise) of the CD, it shall be open for the allottees of other projects and Financial Creditors in class and other Financial Institutions to pursue their appropriate proceedings under Section 7 against the CD and the order passed by the Adjudicating Authority dated 19.11.2024 as modified by this order shall not come into the way and Adjudicating Authority shall proceed to examine applications filed relating to other projects of the CD in accordance with law.

Whether Intervention Applications filed by Financial Creditor in a class of other projects of the CD, are entitled to prosecute their Section 7/9 applications before the Adjudicating Authority? - HELD THAT:- As already noticed the submissions of learned Counsel appearing for Respondent Nos.1 to 43, who has contended that issues have not been fully solved and there are large number of issues pending with the CD, are unresolved. Learned Counsel appearing for Respondent Nos.1 to 43 is consistently raising objection to the statement of the Appellant regarding resolution of the issues.

The view that no order can be passed in this Appeal for closing the CIRP. We only observe that in event the issues between the CD and the Respondent Nos.1 to 43 are resolved and any settlement is entered, it shall be open for Respondent Nos.1 to 43 to file an application under Section 12A for withdrawal of the CIRP.

Final Conclusion: The Tribunal upheld the Adjudicating Authority's finding of debt and default to admit the Section 7 petition, modified the admission order to confine the CIRP to the Raheja Shilas (Low Rise) project only, allowed creditors relating to other projects to pursue independent remedies, and refused to close the CIRP while leaving open withdrawal by settlement under Section 12A.

Validity of pre-existing dispute - Proof of supply - supply chain for the procurement of diamonds by its related company - Operational creditor status of proprietorship concern - Maintainability of the application under Section 9 - Section 8 contemplates issuance of demand notice by operational creditor while section 5(20) of the code defines operational creditor to be a person to whom an operational debt is owed and also that Section 3(23) of the Code does not list out sole proprietorship as legally recognisable person - Demand notice through authorised advocate - franchisee agreement - Whether there was a pre-existing dispute existing between the parties with regard to the payment of amount as claimed by the Appellant.

Pre-existing dispute - Afterthought defence - The plea that the goods covered by the invoices were not supplied could not be accepted as a ground to reject the Section 9 application when such defence was not taken in reply to the demand notice. - HELD THAT: - The Appellate Tribunal held that, in the reply to the demand notice, the corporate debtor had not denied receipt of goods or alleged that the invoices were forged. Its objection was confined to absence of formal agreement and the alleged dispute arising from the franchise arrangement with another proprietorship concern. Since the defence of non-supply was introduced only later before the Adjudicating Authority, it was treated as an afterthought. The Tribunal further found no justification for doubting the invoices on superficial grounds, particularly when the commercial arrangement for dispatch through a third party under a bill-to-ship model was not shown to be inherently unacceptable. The principle applied was that a later-raised defence, not forming part of the notice reply, cannot by itself be elevated into a genuine pre-existing dispute. [Paras 29, 30, 32, 74]

The finding that supply of goods was not established was held unsustainable, and the later plea of non-supply was not accepted as a valid defence to the operational debt claim.

Pre-existing dispute - Separate contracts - Distinct proprietorship concerns - A dispute arising under the franchise agreement with another proprietorship concern of the same proprietor was not a pre-existing dispute in relation to the operational debt claimed under the three invoices. - HELD THAT: - The Appellate Tribunal found that IB Jewels and Brij Ratnam, though owned by the same proprietor, were distinct proprietorship concerns with separate bank accounts and GST registrations. The franchise agreement and its termination notice were confined to disputes between the corporate debtor and Brij Ratnam, and neither the agreement nor the termination and arbitration notices referred to the invoice transactions forming the subject matter of the operational debt claim. The emails relied upon by the corporate debtor were held insufficient to convert the franchise dispute into a dispute concerning the invoice transactions. Applying the principle that a pre-existing dispute must be real, substantial, and related to the debt claimed, the Tribunal held that disputes under a different and independent transaction could not be used to defeat the Section 9 application. [Paras 62, 63, 64, 65, 75]

The dispute under the franchise agreement was held not to constitute a pre-existing dispute regarding the invoice debt claimed by the appellant.

Operational creditor status of proprietorship concern - Demand notice through authorised advocate - Maintainability of Section 9 application - HELD THAT: - The Appellate Tribunal rejected the Adjudicating Authority's view that a sole proprietorship could not issue a demand notice or maintain proceedings as an operational creditor. Relying on the law noticed in Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd. [2017 (12) TMI 850 - SUPREME COURT], it held that a demand notice may validly be issued through an authorised advocate or legal representative on behalf of the operational creditor. It also accepted the position stated in Unigold System that proprietorship firms can invoke the Code. On that basis, the objection to maintainability founded on the trade name of the proprietorship and the filing by the proprietor was held to be without legal support. [Paras 69, 70, 71, 72, 73]

The objection that the demand notice and the Section 9 application were incompetent because the creditor was a proprietorship concern was rejected.

Final Conclusion: The appeal was allowed. The Appellate Tribunal held that the rejection of the Section 9 application was founded on untenable grounds, set aside the impugned order, and remanded the matter to the Adjudicating Authority for fresh orders in accordance with its findings.

Ownership of assets discovered post-CIRP - margin money belongs to the corporate debtor - extinguishment of claims - Successful resolution applicant rights - due diligence in insolvency process - Seeking directions to both Banks to credit the amount of respective FDR proceeds together with interest at commercial rates, however, the Adjudicating Authority, by the common impugned order dated 21.12.2023.

Whether fixed deposit receipts (margin monies) and other assets not disclosed in the information memorandum become the property of the successful resolution applicant or belong to the erstwhile Committee of Creditors after approval and implementation of a resolution plan - HELD THAT:- The Tribunal held that the information memorandum is intended to set out assets and liabilities available to prospective resolution applicants but Regulation 36 does not expressly require disclosure of "contingent assets" and omission of assets from the information memorandum does not, by itself, vest those assets in the erstwhile Committee of Creditors. The Court accepted the NCLAT ratio that margin money (FDRs) provided as security for bank guarantees remains the borrower's asset while the guarantee is alive and, if the guarantee expires without invocation, the margin money reverts to the borrower. It distinguished the operation of the principle in Ghanashyam Mishra [2021 (4) TMI 613 - SUPREME COURT] concerning extinguishment of claims/liabilities once a resolution plan is approved) by holding that the freeze of claims under Section 31 applies to liabilities but does not automatically transfer subsequently discovered assets away from the corporate debtor or its successor in management. The Tribunal found no provision in the regulations or resolution-plan rules that requires a resolution applicant to lose title to assets merely because they were not mentioned in the information memorandum, and rejected the banks' contention that non-disclosure precludes the SRA from claiming such assets. The Tribunal also noted that deliberate fraud to appropriate such assets would be unsustainable and that banks have no right to adjust such FDRs after full implementation of the resolution plan. [Paras 38, 40, 41, 43, 44]

Fixed deposit receipts held as margin money for expired bank guarantees are assets of the corporate debtor (and therefore of the successful resolution applicant after implementation of the resolution plan); respondent banks have no right to adjust such FDRs post-implementation and the appeals succeed on this issue, with the impugned order set aside and the matter remitted to the Adjudicating Authority for decision in accordance with law.

Final Conclusion: The appeals are allowed; the impugned order is set aside and the matter is remanded to the Adjudicating Authority to decide in accordance with the legal conclusions on ownership of the FDRs and other assets not disclosed in the information memorandum.

Commencement of corporate insolvency resolution process - sufficient reason to commence CIRP proceeding - delay in disbursal of working capital loan - extended time for the Corporate Debtor to fulfil its one-time settlement (OTS) obligation before filing under Section 7 - omission or non mentioning of the date of default.

Admission of Section 7 application upon satisfaction of default - HELD THAT: - The Tribunal upheld the NCLT's application of settled law that once the Adjudicating Authority is satisfied that a default has occurred and the Section 7 application is complete, it must be admitted; the authority is not required to delve into reasons for default or reject the application because creditors share some blame. The procedural completeness and evidence of consistent defaults and inability to pay justified admission of CIRP. [Paras 12, 17]

The Section 7 application was correctly admitted on grounds of established debt and default.

Whether belated release of working capital by the Financial Creditor barred initiation of CIRP. - HELD THAT: - Relying on precedent in the matter of State Bank of India v. N.S. Engineering in CA(AT)(Ins) [2023 (2) TMI 185 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI], the Tribunal held that inadequate or delayed disbursement by the creditor does not entitle the Corporate Debtor to have a Section 7 application rejected; the Court will not investigate the reasons behind the default beyond establishing debt and default under the Code. [Paras 12, 14]

Delay in disbursal of working capital did not bar the Financial Creditor from initiating CIRP.

Whether, the Financial Creditor should have given more time to the Corporate Debtor to fulfil its obligations under OTS, which was offered to the Corporate Debtor pursuant to the order of DRT-1 Hyderabad dated 14.07.2022, in IA/857/2022, instead of filing the application under Section 7 of the code and accelerating the CIRP process? - HELD THAT: - The Tribunal observed that OTS proposals are within the commercial discretion of the creditor and rejection of an OTS does not prevent filing a Section 7 application so long as debt and default are established; the Adjudicating Authority need not probe the creditor's internal decision-making beyond noting that the OTS was rejected. [Paras 13]

Rejection of the OTS did not preclude the Financial Creditor from filing the Section 7 application.

Whether omission of the date of default and contention that default fell within the Section 10A moratorium rendered the Section 7 application untenable. - HELD THAT: - The Tribunal accepted the NCLT's finding that multiple facilities had different default dates the latest being 30.03.2021 and none fell within the Section 10A moratorium period; further, reliance was placed on precedent holding that non-mention of the date of default in the application is not a fatal defect warranting rejection, and the application could be admitted where defaults were otherwise established. [Paras 15]

The omission of a specific date of default did not vitiate the Section 7 application and Section 10A was not attracted on the facts before the Tribunal.

Whether pendency of arbitration, which might yield funds sufficient to satisfy dues, required stay or pause of the CIRP initiation. -HELD THAT: - The Tribunal noted that arbitration proceedings were pending but not crystallised and in the absence of a concluded favourable result ensuring repayment, mere pendency does not show the Corporate Debtor was capable of repaying; hence pendency of arbitration did not warrant denial of the Section 7 petition. [Paras 16]

Pending arbitration did not preclude initiation of CIRP in the circumstances.

Whether the Financial Creditor's initiation of CIRP amounted to impermissible recovery proceedings rather than a legitimate insolvency resolution. - HELD THAT: - It is clear from the list of dates and events and also from the own pleading of the Appellant that the Corporate Debtor faced difficulty in servicing the term loan taken by it, that the account was declared as NPA on 03.06.2018, that the account was restructured and accumulated interest was converted into Funded Interest Term Loan (FITL) by Financial Creditor on 28.06.2019, that further relaxations were given on account of Covid and subsequent accumulated interest were converted into Funded Interest Term Loan (FITL) and the revised repayment date was fixed as 31.03.2021. Thus, it cannot be said that the Corporate Debtor was a solvent company and it was pushed into CIRP by the Financial Creditor, which could at all be said was only interested in recovering its dues. Thus, filing of applications under Section 7 is not against the objectives of the code.

Applying Innoventive [2017 (9) TMI 58 - SUPREME COURT] and related reasoning, the Tribunal affirmed that where default is established, the purpose of the Code is insolvency resolution; the factual record of NPA classification, restructurings, conversion to FITL and continued defaults demonstrated insolvency concerns rather than a mere recovery motive. [Paras 14, 17]

The initiation of CIRP was not merely recovery-driven and was consistent with the objectives of the Code.

Final Conclusion: All grounds raised by the appellants were considered and rejected by the Tribunal which found the NCLT's admission of the Section 7 application to be legally sustainable; the appeal is dismissed and the impugned order is upheld.

Denial of the requested relief solely on the ground that a related matter was pending before the Appellate Tribunal - Pendency of Proceedings -Reasoned adjudication - Non-disclosure of reasons

Reasoned adjudication - Non-disclosure of reasons - Pendency of appeal - HELD THAT:- The Appellate Tribunal found that the impugned order granted the prayer for extension of the CIRP period, but refused the further prayer only on the ground that the matter was pending before the Appellate Tribunal. The order, however, did not disclose in what manner the pendency of the appeal had any bearing on the maintainability or adjudication of that prayer. Since the controversy before it was confined to the decision-making process and not to any adjudication on the merits of the parties' rights, the absence of reasons rendered the refusal unsustainable. The matter was therefore sent back for consideration of that prayer on merits, even if the Adjudicating Authority were ultimately to reject it on the ground of pendency of the appeal, provided reasons were stated. [Paras 8, 10]

The appeals were disposed of by requesting the Adjudicating Authority to consider the prayer for re-running the CIRP and pass a reasoned order on merits within the time indicated.

Final Conclusion: The Appellate Tribunal did not interfere with the extension of CIRP time already granted. It held only that the refusal to consider the further prayer, without disclosing reasons as to the effect of the pending appeal, required reconsideration by the Adjudicating Authority through a reasoned order.

Vicarious liability of partners under Section 42 of FEMA - principle of deemed liability to a firm and to the persons in charge of its business - Effect of exoneration of firm on partner's penalty - application of mutatis mutandis - association of acquisition of an asset/ property outside India - Admissibility of Retracted Statements - Corroborative Evidence - contraventions of the provisions of Section 3(b), (c) & (d) read with Section 42 of FEMA - Imposition of penalty and confiscation.

Where the Order against the Company stands quashed, then can imposition of penalty on its Directors and Employees for the contravention of the said provisions invoked in terms of provisions of Section 42 of FEMA survive. - HELD THAT: - The Tribunal noted that, in the earlier appellate order concerning the same impugned adjudication order, the penalty and confiscation against M/s S.R. & Co. had been set aside and that order was not displaced thereafter. Proceeding on Section 42 of FEMA, read with its explanation applying the provision to a firm and its partners, the Tribunal held that the section creates derivative liability: where contravention by the company or firm is not established, penalty on directors or partners cannot stand. The earlier findings also recorded that the present appellant's alleged acts were treated as independent of the firm's business. In that background, and with the order exonerating the firm having attained finality, the appellant's penalty under Section 42 read with Section 3(b), 3(c) and 3(d) could not be sustained. [Paras 12, 13, 14, 15]

The impugned order was set aside qua the appellant, the penalties were quashed, and the seized/confiscated amounts along with the pre-deposit were directed to be released to him.

Final Conclusion: The appeal was allowed. Since the firm had already been exonerated and Section 42 fastens only consequential liability on partners where contravention by the firm is established, the penalty and consequential confiscation against the appellant were quashed.

Provisional Attachment - Reason to Believe - money laundering offence - expression “proceeds of crime” - purchased earlier and financed as a loan arrangement - Attachment of property of non-accused persons - Infusion of proceeds of crime into pre-acquired property - Burden of proof regarding tainted property.

Attachment of property of non-accused persons - Proceeds of crime - Burden of proof - Property standing in the name of a person not arrayed as an accused in the scheduled offence or in the ECIR can nevertheless be attached if material shows his involvement in a process connected with proceeds of crime. - HELD THAT:- The Tribunal found that the investigation disclosed substantial transfers from the account of Shri Pramatha Nath Manna to the appellant's bank accounts, and that the appellant's explanation that these were mere loans was unsupported by documentary material. On the material placed, the Tribunal held that part of the funds generated by cheating investors had been routed through the appellant. It therefore rejected the plea that absence of the appellant's name in the scheduled offence or ECIR barred attachment, holding that the statutory sweep extends to any person in possession of, or involved in dealings with, proceeds of crime. The Tribunal also held that once the authority produced material linking the property with such proceeds, the burden shifted to the appellant, which he failed to discharge. [Paras 13, 15, 18]

The appellant's non-accused status did not preclude attachment, and the property was held liable to proceed under the Act.

Infusion of proceeds of crime into pre-acquired property - Indirectly derived property - HELD THAT: - The Tribunal held that the definition of proceeds of crime covers not only property directly obtained from criminal activity but also property derived or obtained indirectly as a result of such activity. It found that, even if the property had originally been purchased by the appellant from lawful sources, funds traceable to the fraudulent deposit schemes were later received and used in connection with the property and its retention. On that basis, the Tribunal rejected the appellant's reliance on Pavana Dibbur, holding that the present case involved direct post-offence infusion of tainted funds into the property and was therefore factually different. [Paras 14, 17]

The prior lawful acquisition of the property did not immunise it from attachment once tainted funds were found to have been infused into it.

Reason to believe for provisional attachment - Nexus with material on record - The provisional attachment satisfied the statutory requirement of reason to believe. - HELD THAT: - The Tribunal held that the respondent had adequate material to form the requisite belief that the property was involved in money laundering and was liable to attachment to prevent transfer or alienation. It accepted that the belief was founded on investigation material, including statements recorded under the Act, and that there was a rational nexus between the material and the conclusion reached. The Tribunal therefore rejected the challenge to the validity of the attachment on the ground of absence of proper satisfaction. [Paras 16]

The challenge to the provisional attachment on the ground of want of reason to believe was rejected.

Final Conclusion: The Tribunal upheld the confirmation of attachment and dismissed the appeal. It held that the appellant failed to establish that the funds received from Shri Pramatha Nath Manna were untainted and that the attached property was not involved in money laundering.

Provisional Attachment - attachment related to property treated as proceeds of crime - statutory remedy for release after settlement of dues.

Claim for release of attached property after settlement of investors' dues - The appellants were held entitled to seek release of the attached properties only after settlement of the investors' dues, by moving the Special Court under the statutory remedy available under PMLA. - HELD THAT:- The Tribunal noted that the impugned attachment had been confirmed on the finding that the proceeds of crime of MPS Greenery Developers Ltd. were routed through a third party for purchase of the property and its subsequent transfer to M/s Temp Store, whose partners included the appellant. It further observed that, in view of the order of the High Court constituting a one-man Committee for settlement of the investors' claims, realization from the impugned property could be utilized for discharge of such dues. Following the co-ordinate Bench order in connected matters, the Tribunal held that the proper course for the appellants was to seek release of any property remaining after settlement of the investors' dues by approaching the Special Court under Section 8(8) of PMLA.

The appeals were disposed of with liberty to the appellants to move the Special Court for release of the remaining properties after settlement of the investors' dues.

Final Conclusion: The Tribunal disposed of the appeals by holding that the attached properties would remain available for settlement of the investors' dues and that any claim for release of the balance property must be pursued before the Special Court under PMLA.

Demand was barred by limitation -Extended period of limitation under section 73(1) - Suppression of facts with intent to evade - Effect of audit and return disclosure - Wrongly availed abatement under Notification No.01/2006 ST dated 01.03.2006 for construction service by not fulfilling the condition of non-availment of cenvat credit prescribed thereon.

If the demand is not barred by limitation, then on merits whether the Appellant is eligible for the credit and benefit of exemption notification No.1/2006-ST claimed, as contended by the Appellant ?

Extended period of limitation - HELD THAT:- The Tribunal held that mere non-payment or wrongful availment, by itself, does not justify recourse to the extended period, and the proviso to section 73(1) is attracted only where there is a deliberate act amounting to suppression of facts with intent to evade. The appellant had filed the prescribed returns, and the records, credit documents and contractual arrangements had been examined during audit. The show cause notice itself proceeded on material gathered from audit, and the appellant had also furnished replies and particulars regarding credit and abatement before issuance of the notice. In the absence of any statutory requirement shown to have been breached by non-disclosure in the returns, and when the material facts were available to the department through returns, audit and correspondence, failure on the part of the department to scrutinize the returns in time could not be converted into an allegation of suppression. On that basis, the extended period was held to be unavailable and the entire demand was found time-barred. Since the demand itself was barred by limitation, the Tribunal declined to examine the merits of credit eligibility or abatement, and the consequential interest and penalty were also held unsustainable. [Paras 18, 19, 20, 21, 24]

The demand was held wholly barred by limitation; consequently, the impugned order was set aside and the connected interest and penalty also failed.

Final Conclusion: The Tribunal held that the extended period was wrongly invoked, since the material facts were available to the department through returns, audit and correspondence and no deliberate suppression with intent to evade was established. The entire demand was therefore set aside as time-barred, with consequential relief, and the Tribunal declined to enter upon the merits.

Service tax demand on freight paid to goods transport operators - Benefit of Notification No.41/97-ST - Reverse Charge Mechanism - invocation of the five-year extended period under Section 73 - Whether the confirmation of service tax demand made on the appellant on the value of the taxable services rendered to the appellant by the goods transport operators during the period from 16-11-97 to 1-6-98 demanded under SCN dated 22.03.2002 issued under Section 73 of the Act is tenable.

Show cause notice under Section 73 - HELD THAT:- The Tribunal held that, for the disputed period, though the recipient's liability to service tax stood validated, the statutory scheme required such recipient to file the special return under Section 71A read with the relevant rules and within the extended time recognised in law. The show cause notice in the present case had been issued earlier under Section 73 on the footing of non-filing of returns and non-payment of tax under the general mechanism, and no revised notice was issued in the context of the special return obligation and the extended date. Following the coordinate Bench decision in CCE Raipur v. Jaiswal Equipment & Holdings P. Ltd.[2007 (6) TMI 31 - CESTAT, NEW DELHI], which had considered Commissioner of Central Excise, Meerut -II versus LH Sugar Factories Limited [2005 (7) TMI 106 - SC ORDER] and Gujarat Ambuja Cements Ltd vs UOI, [2005 (3) TMI 492 - SUPREME COURT] the Tribunal held that, in the absence of a revised notice covering the statutory position applicable to persons falling under Section 71A, the demand founded on the earlier notice was wholly untenable. The authorities cited by the Revenue were distinguished because those matters involved either notices issued within the post-amendment permissible period or disputes of a different nature such as refund. [Paras 14, 15, 16]

The impugned demand, having been confirmed on the basis of an inadequate and inapplicable show cause notice, was set aside.

Final Conclusion: The Tribunal held that the demand could not be sustained because the recovery proceedings were founded on a show cause notice issued under the wrong statutory mechanism and were not aligned with the special return regime applicable to recipients of goods transport operator service for the relevant period. The impugned order was therefore set aside and the appeal was allowed with consequential relief, while the limitation contention was left open.

Claim for refund of service tax paid in excess (including amounts paid by mistake) - payment under mistake of law - statutory limitation period - one-year limitation prescribed under Section 11B.

Whether the one-year limitation under Section 11B of the Central Excise Act applies to a refund claim in respect of service tax paid in excess by mistake - HELD THAT: - The Tribunal held that Section 11B governs refund of duty/tax properly leviable under the statute and does not apply where an amount was paid erroneously and was not a duty/tax payable in law. Relying on coordinate-bench and judicial decisions (including KVR Construction [2012 (7) TMI 22 - KARNATAKA HIGH COURT] and subsequent Tribunal and High Court authorities), the Court treated the excess payment as not falling within the legal parameters of Section 11B because there was no taxable event or obligation supporting retention. Consequently, limitation under Section 11B is inapplicable to a refund claim based on payment by mistake and the department cannot withhold amounts paid without authority of law. The Tribunal therefore allowed the refund with interest as per law. [Paras 6, 7]

Section 11B does not bar the refund claim of excess service tax paid by mistake; the impugned order is set aside and refund is allowed with interest.

Final Conclusion: The appeal is allowed; the Tribunal held that the excess service tax paid by mistake is not caught by the one-year limitation under Section 11B and directed refund of the amount with interest, setting aside the impugned order.

Liability of service tax on ‘Business Auxiliary Services’ (BAS) - activity of threshing and re-drying of tobacco leaves on job work basis - Processing of agricultural produce - failed to discharge service tax liability on the job work charges received from their customers - definition of ‘agricultural produce’ -essential character test - Binding precedent - stare decisis - imposition of penalty - Whether the impugned activity undertaken by the respondents, who are not cultivators will make it out of purview of 'agriculture produce' or not.

Whether threshing, drying and packing of tobacco leaves undertaken on job work basis is processing of agricultural produce not liable to service tax under Business Auxiliary Services -HELD THAT: - The Tribunal held that the processes of threshing, drying and packing do not alter the essential character of tobacco and therefore constitute processing in relation to agricultural produce rather than a taxable Business Auxiliary Service. The Bench relied on its earlier decision in Green Leaf Tobacco Threshers Ltd and others Vs CCE & ST [2017 (5) TMI 518 - CESTAT HYDERABAD], Guntur, where identical processes were held to fall within the exemption and which attained finality after the Revenue's appeals were dismissed by the Hon'ble Supreme Court. No distinguishing facts were shown to displace that binding precedent; accordingly the activity was held not to bring into existence any new distinct commodity and merely stabilises the product for storage and export. [Paras 10, 11, 12]

Threshing, drying and packing of tobacco leaves on job work basis are processing of agricultural produce and not taxable as Business Auxiliary Services; demand and penalties sustained by the adjudicating authority were not upheld.

Binding precedent - Whether the Tribunal is bound to follow its Coordinate Bench decision upheld by the Supreme Court - HELD THAT:- The Bench applied the principle of judicial discipline that a coordinate bench view on identical facts, which has attained finality by dismissal of Revenue's appeals in the Supreme Court, must be followed unless differentiating facts are demonstrated. The department did not show any facts distinguishing the earlier decision; hence the earlier ruling governed the outcome. [Paras 11, 12]

The Tribunal followed the prior coordinate bench decision affirmed by the Supreme Court and declined to sustain the service tax demand.

Final Conclusion: The appeal filed by the Department was dismissed; threshing, drying and packing of tobacco leaves on job work basis were held to be processing of agricultural produce exempt from service tax as Business Auxiliary Services, following the prior coordinate bench decision affirmed by the Supreme Court.

Taxable under the category of ‘Commercial Training or Coaching Service’ - Services of imparting English, foreign language and computer training to students for employment-oriented purposes - Vocational training institute - Benefit of Notification No.9/2003-ST dated 20.06.2003 which provides exemption, has been amended by Notification No.1/2004-ST dated 04.02.2004 and subsequently by Notification No.24/2004-ST dated 10.09.2004 - Whether the services rendered by the appellant viz., imparting training courses on English and other foreign languages such as German, French and Japanese and computer courses, etc., to enable the students to seek employment in BPO, Call Centres and other job-oriented courses fall under the exempted category of ‘Vocational Training Institute’ ?

Vocational Training Institute - Commercial Training or Coaching Service exemption - Foreign language and computer training - HELD THAT:- The Tribunal held that the governing notifications exempted commercial training or coaching where the training imparted skills enabling the trainee to seek employment or undertake self-employment directly after completion of the course. It noted the Board's contemporaneous clarification that foreign language institutes and computer training centres would not be chargeable to service tax, and followed the Tribunal decisions in Anurag Soni [2017 (2) TMI 1220 - CESTAT, NEW DELHI], British School of Language [2017 (4) TMI 97 - CESTAT NEW DELHI], Innovative Training Place (P) Ltd. [2017 (5) TMI 523 - CESTAT NEW DELHI] and C.C.E., Pune-III vs. Consistent Software Technologies (I) Pvt. Ltd. [2018 (4) TMI 1338 - CESTAT MUMBAI], which had treated language-skill training leading to employability as covered by the exemption. It also noted that computer training had been held to be within the exempted category in Doon Institute of Information Technology Pvt Ltd. [008 (5) TMI 197 - CESTAT NEW DELHI] as upheld by the High Court. Applying the wording of the notifications as in force during the relevant period, the Tribunal concluded that the courses offered by the appellants squarely answered the description of a Vocational Training Institute. Since the exemption was available on that basis, the later amendment and circular were held unnecessary to examine and, in any event, not retrospectively applicable. [Paras 9, 10, 11, 12]

The appellants' training activities were exempt from service tax, and the demand under Commercial Training or Coaching Service was unsustainable.

Final Conclusion: The Tribunal held that the appellants' English, foreign language and computer training courses were covered by the exemption available to vocational training institutes during the relevant period. The impugned appellate orders were therefore set aside and the appeals were allowed with consequential relief.

Cenvat credit of service tax paid on outward transportation from the place of removal for the period prior to 01.04.2008 - definition of "input service" as it stood prior to 01.04.2008 - bona fide belief - transporter invoices for inward transportation - Rule 9 of the Cenvat Credit Rules, 2004 -benefit or exemption under Notification No.32/2004 ST.

Interpretation of 'input service' prior to 01.04.2008 covering outward transportation from the place of removal - HELD THAT: - The Tribunal applied the definition of input service as it stood prior to 01.04.2008 and followed the Supreme Court decisions (including Andhra Sugars Ltd.[2018 (2) TMI 285 - SUPREME COURT]) holding that the phrase 'clearance of final products from the place of removal' covers outward transportation from the place of removal up to the first point (depot or customer's place). The Tribunal noted that the restriction to 'upto the place of removal' arose only after the amendment effective 01.04.2008, and therefore credits availed for outward transportation from the place of removal for the pre-amendment period could not be denied. [Paras 5]

Cenvat credit of Rs. 4,26,427/- availed for transportation of final goods from the place of removal is allowed.

Availability of Cenvat credit on transporter invoices under Rule 9(f) despite Notification No.32/2004-ST applying to the goods transport agency - Cenvat credit taken on transporter invoices for inward transportation is admissible where documents satisfy Rule 9(f) and Notification No.32/2004-ST's restriction applies to the goods transport agency and not to the recipient. - HELD THAT: - The Tribunal held that Sub rule (f) of Rule 9 of the Cenvat Credit Rules, 2004 recognises invoices/bills/challans issued by a provider of input service on or after 10.9.2004 as valid documents for credit. The benefit or exemption under Notification No.32/2004 ST (which exempts 75% for the GTA subject to conditions) restricts credit for the GTA and results, where the GTA has charged service tax on 25% of value, in credit being claimable to that extent; it does not preclude the recipient from claiming credit where the transporter's invoices are proper. Since the documents were not disputed, the credit of Rs.75,407/- could not be disallowed. [Paras 5]

Cenvat credit of Rs.75,407/- on transporter's invoices is allowed and the related demand is unsustainable.

Final Conclusion: The Tribunal allowed the appeal in part: the Cenvat credit claimed for outward transportation from the place of removal for the pre amendment period was upheld, and the credit on transporter invoices was held admissible; consequential demands and penalty were set aside insofar as they related to these credits.

Jurisdictional Error - Availability of a statutory appellate remedy under the Value Added Tax Regulation, 2017 - Limitation as mixed question of fact and law - breach of natural justice and for vagueness or want of material particulars.

Alternative statutory remedy - Appellate Tribunal - Writ maintainability - HELD THAT:- The Court accepted the reasoning of the learned Single Judge that, after notification of the appellate forum, an effective statutory remedy was available and the writ jurisdiction ought not ordinarily to be exercised. It found no infirmity in the conclusion that the designated appellate forum was in place and that the matters should be pursued thereunder rather than by invoking Article 226 in the first instance. [Paras 21, 22, 28]

The challenge to the impugned notices through writ proceedings was declined on the ground of availability of the statutory appellate remedy.

Limitation as mixed question of fact and law - Jurisdictional challenge - HELD THAT: - The Court approved the learned Single Judge's view that the limitation objection could not be decided as a pure question of law on the materials placed, particularly when the returns said to be relevant were not enclosed with the writ petitions. On that footing, limitation was treated as a mixed question of fact and law, to be examined in the statutory forum, and not as a self-evident jurisdictional defect justifying bypass of the appellate remedy. [Paras 23, 24, 28]

The limitation objection was left to be pursued before the statutory appellate forum and did not justify admission of the intra-court appeals.

Natural justice in assessment proceedings - Opportunity of objection and hearing - HELD THAT: - Endorsing the reasoning of the learned Single Judge, the Court noted that sections 32 and 33 did not require a pre-notice hearing and that the Regulation itself afforded the assessee an opportunity to file objections and participate in a hearing under section 74. Since the appellants had in fact availed of that procedure and a reasoned order had been passed on their objections, the complaint of breach of natural justice was not accepted. [Paras 25, 26, 27, 28]

The natural justice challenge to the assessment and penalty notices was rejected.

Final Conclusion: The Division Bench found no ground to interfere with the learned Single Judge's reasoned order and declined to admit the intra-court appeals. It upheld relegation of the appellants to the statutory appellate remedy and dismissed all the appeals.

Exercise of statutory discretion in stay matters - Requirement to record reasons - Speaking Order - Power on the Commissioner to stay realization, in whole or in part, pending an appeal before the Tribunal.

Stay of realization pending appeal - Reasoned exercise of statutory power - HELD THAT:- The Court held that once the statute confers power on the Commissioner to stay realization of tax, interest or penalty pending the second appeal, that power must be exercised in the manner intended by the legislation. Consideration of a stay application involves only a limited and tentative examination for the purpose of interim protection and does not prejudge or influence the merits of the appeal before the Tribunal. The reasoning in the impugned order, that pendency of the appeal itself made it inappropriate to examine the matter for stay, was held to defeat the object of Section 17(7). Since the order, though lengthy, did not contain the requisite reasons for refusal of stay, it was found to be contrary to the statutory requirement and was set aside, with remand for fresh consideration after hearing the petitioner, if necessary. [Paras 5, 6, 7]

The impugned order was set aside and the stay application was remitted to the Commissioner for fresh decision by a reasoned order in accordance with law, uninfluenced by any observation in the writ proceedings.

Final Conclusion: The writ petition was disposed of by setting aside the Commissioner's order refusing stay and remitting the matter for fresh consideration. The Court clarified that it had not examined the merits of the stay application.