TaxTMI Updates e-Newsletter
Mar 31,2026

Condonation of delay - gross delay of 544 days in filing this Special Leave Petition - HELD THAT:- The Special Leave Petition was dismissed on the ground of delay and also as having been rendered infructuous in view of the submission that the impugned order [2021 (5) TMI 462 - TELANGANA HIGH COURT] had already been complied with.

Validity of the service of show cause notice - issued without application of mind - vagueness of show cause notice - demanding reversal of Input Tax Credit (ITC) and demanding payment - violation of natural justice - Alternate Remedy - Ex Parte Order.

Service of show cause notice - ex parte adjudication - HELD THAT: - The Court held that, although the Order-in-Original recorded that notice had been served, there was no material on record to establish such service on the assessee. In that situation, the ex parte adjudication was treated as offending the principles of natural justice. On that limited ground, the assessee was given liberty to file a reply to the show cause notice, and the assessing officer was left free to consider that reply and pass a fresh order. [Paras 8, 9]

The impugned order was set aside on the limited ground of want of proof of service of the show cause notice, with liberty for fresh adjudication after reply.

Vagueness of show cause notice - application of mind - HELD THAT: - The Court expressly held that the contention that the show cause notice was vague and issued without application of mind was devoid of merit. It further clarified that the assessee would not be permitted to revive the plea that the notice was vague, lacked application of mind, or did not contain material particulars, and that only such reply as may be filed to the notice would be considered in the fresh adjudication. [Paras 8, 10]

The plea attacking the validity of the show cause notice for vagueness or lack of application of mind stood rejected and was kept closed.

Final Conclusion: The appeal was allowed only to the extent of setting aside the adjudication order for breach of natural justice arising from absence of material proving service of the show cause notice. The assessee was permitted to reply to the notice, while the objections that the notice was vague or without application of mind were expressly rejected, and any jurisdictional plea was left open for consideration by the assessing officer.

Entitlement to Anticipatory bail - fraudulent Input Tax Credit - commission of offence punishable under Sections 69 & 132 of CGST/CGGST Act, 2017 - Non-cognizable and bailable GST offence.

Anticipatory bail - Non-cognizable and bailable GST offence - Apprehension of arrest - HELD THAT: - The Court found from the record that the proceedings against the applicant related to a GST liability of less than Rs. 5 crore. On that basis, it held that under Section 132 of the GST Act, an offence involving an amount below that threshold is non-cognizable and bailable. Since the application under Section 482 BNSS was founded on an apprehension of arrest in respect of such an offence, the Court held that the plea for anticipatory bail was devoid of merit. [Paras 6, 7]

The anticipatory bail application was rejected.

Final Conclusion: The Court rejected the application for anticipatory bail, holding that the alleged GST offence involved liability below Rs. 5 crore and was therefore non-cognizable and bailable, making the apprehension-based plea untenable.

Challenged the orders passed under the Central Goods and Services Tax regime - Failure to consider material factual claim - reversal and reclassification of the input tax credit before the show cause notice.

Material factual claim - fresh adjudication - HELD THAT: - The Court noted that this ground had been raised before the appellate authority but was rejected as unsubstantiated for want of documentary support. Since, before the Court, the respondent candidly confirmed the correctness of the petitioner's submission earlier recorded by the Court, the basis on which the impugned orders had proceeded required reconsideration. On that limited ground, and without examining the merits of the underlying input tax credit dispute, the Court held that the matter had to be reconsidered by the adjudicatory authority. [Paras 6, 7, 8, 9, 10]

The impugned original and appellate orders were quashed, and the matter was remanded to the adjudicatory authority for fresh decision expeditiously; no finding on merits was returned.

Final Conclusion: The writ petition was allowed in part by setting aside the original and appellate orders and remanding the matter for fresh adjudication in light of the respondent's confirmation of the petitioner's factual claim. The Court expressly left all merits open.

Alternative statutory remedy - Maintainability of writ petition against assessment order - violation of principles of natural justice in deliberate ignorance of the crucial documentary evidence filed by the petitioner and mala fides - Appellate scrutiny of factual findings.

Alternative statutory remedy - Maintainability of writ petition against assessment order - HELD THAT:- The Court held that the petitioner had an effective statutory remedy of appeal under the Act and had approached the Court even before expiry of the prescribed appeal period. Since the grievance related to the assessing authority's findings on the petitioner's job work claim and the evidentiary material relied upon in support of that claim, those matters were held to be fit for examination by the appellate authority. The Court further held that the jurisdiction of the assessing officer to adjudicate the proceedings was not in question, and therefore interference under writ jurisdiction was not warranted on the grounds urged. [Paras 6, 7, 8]

The writ petition was dismissed, leaving it open to the petitioner to raise all grounds on facts and in law before the appellate authority.

Final Conclusion: The Court declined to entertain the writ petition against the order-in-original for the tax period 2018-19, holding that the dispute should be pursued through the statutory appellate remedy. All grounds on merits and in law were left open to be urged before the appellate authority.

Entitlement to GST budgetary support benefits under Notification No. 20/2007 dated 25-04-2007, in light of the clarification dated 22-02-2023 and the earlier coordinate Bench decision - verification for parity with similarly situated units.

GST budgetary support eligibility - Parity with similarly situated units - Verification of claim - HELD THAT: - The Court noted that the exemption notification applied to units which commenced commercial production not later than 31-03-2017, and that the petitioner's eligibility certificate showed commencement of commercial production after modernization with effect from 30-03-2017. It further noted that the coordinate Bench, on the basis of the clarification dated 22-02-2023, had already held that units falling within that clarification were to be treated as having availed the earlier exemption notification and were entitled to the consequential benefits. Since the respondents did not dispute that position, the Court did not undertake any fresh merits adjudication, but directed verification of whether the petitioner was similarly situated to the petitioners in M/s Sai Enterprises Vs. UoI & Ors. [2023 (10) TMI 1069 - GAUHATI HIGH COURT] and the analogous matters. [Paras 8]

The respondents were directed to verify the petitioner's claim and, if the petitioner was found similarly situated to the petitioners in the coordinate Bench matters, to extend the same benefits.

Final Conclusion: The writ petition was disposed of without a final merits determination of the petitioner's entitlement. The respondent authorities were directed to verify whether the petitioner stood on the same footing as the units covered by the coordinate Bench decision and, if so, to extend the corresponding benefits.

Validity of the representations made by the petitioner at Annexures P.5 and P.30 for exemption under notification No. 12 of 2017-Central Tax (Rate) - Adequacy of representation - cryptic and do not contain details or supporting documents - applicability of GST on rental transaction.

Cryptic representation - Supporting documents - HELD THAT: - The Court found that the representations relied upon by the petitioner for its claim were insufficient, as they did not set out adequate particulars, facts or supporting material. In that view, the Court declined to examine the claim on merits and considered it appropriate to grant liberty to the petitioner to submit a fresh detailed representation before the competent respondent, to be considered in accordance with law within a reasonable time. [Paras 3, 4]

Liberty was granted to file a detailed representation with supporting documents, and the competent authority was directed to consider it in accordance with law; no opinion was expressed on the merits.

Final Conclusion: The writ petition was disposed of without adjudicating the substantive claim. The petitioner was left at liberty to submit a proper and supported representation for fresh consideration by the concerned authority.

Brand name and trade connection - pictorial representation and packaging features used on the unbranded unit containers of farmers with agricultural implements - benefit of exemption Serial Nos.73 and 74 of Notification No.2/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No.28/2017-Central Tax (Rate) dated 22.09.2017 - Foregoing actionable claim or enforceable right - Extended period for suppression of facts - Bona fide belief - Actionable claim - Bunching of multiple tax periods by issuance of a single Show Cause Notice -.

Brand name - Trade name - Exemption notification - Foregoing actionable claim - HELD THAT:- The definition of ‘Brand Name’ makes it clear that a ‘Brand Name’ means a “Brand Name” or a “Trade Name”, that is to say, a name or a mark such as a symbol, monogram, label, signature, invented word, writing which is used on the specified goods for the purpose of indicating or so as to indicate a connection in the course of trade between the goods and the person using such a trade name or a brand name, with or without any indication.

In the case of specified goods bearing a “brand name” simpliciter, the benefit was still available, provided that “any actionable claim or enforceable right in respect of such “brand name” was voluntarily foregone, subject to the conditions in Annexure-I to Notification No.2/2017- Central Tax (Rate) dated 28.06.2017 as amended Notification No.28/2017-Central Tax (Rate) dated 22.09.2017.

The Court held that, after the amendment, the notification covered specified goods in unit containers even where they bore a brand name simpliciter, provided any actionable claim or enforceable right over such brand name had been voluntarily foregone in the manner prescribed in Annexure-I. The common pictorial representation on the petitioner's packaging did indicate a trade connection and therefore answered the amended definition of brand name. However, the petitioner had admittedly filed the affidavit in January 2018 under Annexure-I, and the department itself returned it on the footing that no brand name was being used on the unit container. In that factual background, the declaration contained in the affidavit entitled the petitioner to the exemption. The Court further held that the mention of the corporate name on the package, being required under the Food Safety and Standards Act, 2006 and the Legal Metrology Act, 2009, could not be treated as the petitioner's trade mark or brand name for denying the exemption, nor was the petitioner required to forego rights in its separately registered brand names which were not used on the impugned goods. [Paras 82, 83, 84, 89, 90]

Exemption under Serial Nos.73 and 74 was held available to the petitioner on the supplies in question.

Suppression of facts - Extended period of limitation - Section 74 - HELD THAT: - The Court found that the petitioner had disclosed its position to the department by filing the affidavit claiming the exemption under the amended notification, and the department had returned that affidavit in 2018 after recording that no brand name was being used on the unit container. Once these material facts were already within departmental knowledge, the allegation of suppression could not be sustained. Applying the principle stated in Nizam Sugar Factory v. CCE, AP [2006 (4) TMI 127 - SUPREME COURT], the Court held that, on the same set of disclosed facts, the larger period could not be invoked. At best, only the normal period under Section 73 would be available. [Paras 86, 87, 88]

The invocation of Section 74 was held unsustainable for want of suppression of facts.

Bunching of multiple tax periods by issuance of a single Show Cause Notice - Although, the issue of bunching of multiple tax periods by issuance of a single Show Cause Notice was raised, the larger issue is still pending before the Hon’ble Division Bench of this Court and in view of the above discussion on merits that the petitioner is indeed entitled to the benefit of Notification No.2/2017- Central Tax (Rate) dated 28.06.2017 by Notification No.28/2017-Central Tax (Rate) dated 22.09.2017 in the light of the Affidavit filed by the petitioner, I am refraining from expressing any opinion on the issue of bunching of multiple tax periods by issuance of a single Show Cause Notice.

Final Conclusion: The writ petition was allowed. The Court held that the petitioner was entitled to the exemption under the amended notification and that the demand raised by invoking the extended period under Section 74 could not be sustained; the issue relating to bunching of multiple tax periods was expressly left open.

Entitlement to release of the balance refund of State Tax sanctioned under the GST refund provisions along with applicable interest - Unutilised Input Tax Credit - procedural delay in disbursement - interest on delayed refund.

Sanctioned refund - procedural hurdles - delayed refund interest - HELD THAT: - The Court found that the refund had already been sanctioned by the competent authority and that the balance amount remained unpaid only because the respondent sought revalidation of the sanction orders before presenting the refund bills. It held that an amount lawfully due to the petitioner could not be kept pending because of internal procedural hurdles or administrative red tape, and that the State authority ought to have coordinated with its counterpart instead of delaying payment. On that basis, the Court directed release of the pending refund along with applicable interest under the GST enactments. [Paras 5]

The respondent was directed to pay the balance State tax refund together with applicable interest within 30 days.

Final Conclusion: The writ petition was disposed of by directing payment of the outstanding State tax refund for the relevant period, along with applicable interest. The Court treated the delay arising from revalidation and internal processing as no ground to withhold a refund already sanctioned.

Rejection of application for registration u/s 12A(1)(ac)(iii) - Charitable purpose u/s 2(15) - Microfinance activities - Profit motive or charitable - Rejection of the petitioner's application for registration on the ground that its objects relating to microfinance were not charitable was upheld - HELD THAT: - The Court held that provision of microfinance and credit facilities, even if intended for economic upliftment, would not qualify as a charitable activity where the operations bear commercial features. The governing test is the absence of profit motive.

Since the authority found that the petitioner had not satisfactorily explained the manner in which microfinance would be carried on, had not disclosed the rate of interest to be charged, and proposed lending on RBI norms without establishing how such interest-based activity would remain charitable, the conclusion that the microfinance objects in the Memorandum could not be treated as charitable suffered from no perversity or illegality. [Paras 8, 10]

Final Conclusion: The Court upheld the order rejecting registration, holding that the petitioner's microfinance objects were not shown to be charitable in nature. It, however, left it open to the petitioner to apply afresh for exemption after duly amending its Memorandum of Association in accordance with law.

Unexplained money u/s69A - Accommodation entry receipts - Penalty for concealment u/s. 271(1)(c) - bank credits routed through the assessee's account were liable to be treated as unexplained money OR commission from accommodation entry operations - HELD THAT: - Tribunal held that the pattern of inter-account credits, the commonality of directors, partners and proprietors in the identified beneficiary concerns, and the routing of funds through the assessee's bank account established use of the account for providing accommodation entries. It further held that the purchases shown from real estate companies in a fabric business created serious doubt and that mere production of books of account, without supporting evidence of actual movement of goods such as delivery challans or dispatch records, was insufficient to prove genuine transactions. On that basis, it found that the first appellate authority erred in restricting the addition to the cash withdrawals as commission, since that very finding supported the conclusion that the bank credits themselves remained unexplained. [Paras 6]

The entire addition made by the AO was upheld and the relief granted by the first appellate authority was set aside.

Penalty u/s 271(1)(c) - HELD THAT:- Tribunal treated the penalty issue as flowing from its decision in the quantum appeal. Since it had upheld the AO's addition and reversed the first appellate order on the substantive issue, it also set aside the appellate order relating to penalty which had been confined to the reduced addition. [Paras 7]

Revenue's appeal in penalty was also allowed and the order of the first appellate authority on penalty was set aside.

Final Conclusion: Both Revenue appeals were allowed. Tribunal restored the AO's treatment of the bank credits as unexplained money for AY 2014-15 and, consequentially, also reversed the appellate relief granted in the penalty matter.

Unexplained cash credit - addition u/s 68 - Identity, creditworthiness and genuineness not proved - addition made u/s 56(2)(viib) - Share valuation under Rule 11UA - Cash deposits from earlier withdrawals

Unexplained cash credit u/s 68 - Identity, creditworthiness and genuineness not proved - Loan from sister concern - HELD THAT: - The Tribunal found that the appellate authority had recorded a clear finding that the assessee discharged the primary onus u/s 68 by producing documentary material establishing the lender's identity, the genuineness of the transaction and the lender's creditworthiness, including financial statements, bank statements and confirmation through response to notice under section 133(6). Since these findings were not controverted by the Revenue before the Tribunal, no interference was warranted. [Paras 6]

The deletion of the addition on account of the loan from the sister concern was sustained.

Addition u/s 56(2)(viib) - Share premium valuation under Rule 11UA - Book value method - only reason for disallowance was that the assessee got the valuation of shares under Rule 11UA(2)(b) certified by a Chartered Accountant and not Merchant Banker, as prescribed by the CBDT’s Notification no. 23/2018 dated 24.05.2018 which had omitted the reference of Chartered Accountant - HELD THAT: - The Tribunal held that the reason adopted by the Assessing Officer for making the addition was unsustainable. It accepted the finding that the CBDT notification omitting reference to a chartered accountant was not applicable because the shares had been issued in the financial year 2017-18 and the valuation report had been obtained earlier. It further accepted that a merchant banker report is required where the Discounted Free Cash Flow method is adopted, whereas in the present case the assessee had adopted the book value method, for which the report obtained from an accountant was accepted. [Paras 7]

The deletion of the addition under section 56(2)(viib) was affirmed.

Cash deposits from earlier withdrawals - Unexplained cash credit - Correlation with cash book and bank statements - HELD THAT: - The Tribunal accepted the finding that the assessee had supported the cash deposits with comprehensive evidence, including cash books and bank statements, showing that the deposits were sourced from prior withdrawals from its own bank accounts. As the Revenue was unable to dislodge this factual finding by any cogent material, the Tribunal declined to interfere. [Paras 8]

The deletion of the addition relating to cash deposits was sustained.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the appellate order deleting all the impugned additions. It found no ground to interfere with the findings that the assessee had satisfactorily explained the loan transaction, the share valuation, and the source of the cash deposits.

Penalty u/s 270A - Specific limb of under-reporting or misreporting - income is either ‘under reported’ or ‘misreported’ - non specification of clear charge - HELD THAT: - The Tribunal held that section 270A contemplates distinct consequences for under-reporting and misreporting, with different penalty rates, and therefore the Assessing Officer was required to clearly specify the exact limb attracted and the applicable clause of sub-section (9).

In the present case, the notice initiated penalty for under-reporting, while the higher rate applicable to misreporting was imposed without identifying how the case fell within any of the clauses of section 270A(9). The penalty order also did not contain a clear finding of misreporting.

Since the relevant details for computation of income were already disclosed in the return, the Tribunal found that there was neither misreporting nor under-reporting warranting penalty. Following the decisions in Schneider Electric Sought East Asia (HQ) PTE Ltd [2022 (3) TMI 1295 - DELHI HIGH COURT] and Jaina Marketing and Associates [2024 (3) TMI 1007 - ITAT DELHI] it held that such non-specification of the precise charge was fatal to the penalty proceedings. [Paras 4, 5, 6]

Final Conclusion: The Tribunal allowed the appeal and held that the penalty proceedings under section 270A were vitiated by failure to specify the precise charge of under-reporting or misreporting. As the assessee had disclosed the relevant particulars in the return, the penalty was deleted.

TDS u/s 194IA - Payment on transfer of certain immovable property other than agricultural land - threshold of Rs. 50 lakhs prescribed u/s 194IA - Aggregation of consideration for multiple transferors - HELD THAT: - The Tribunal held that, for the year under consideration, section 194-IA did not contain any provision requiring aggregation of consideration in cases involving multiple co-owners. The later amendment introduced by the Finance Act, 2024 was held to be prospective and therefore inapplicable.

Since the consideration relatable to each co-owner was admittedly below the statutory threshold, the assessee had no obligation to deduct tax at source under section 194-IA. The coordinate bench decisions in Aakash Pursottambhai Vaghela [2025 (6) TMI 2003 - ITAT AHMEDABAD], Bhikhabhai Hirabhai Patel [2020 (2) TMI 1032 - ITAT AHMEDABAD] and Archanaben Rajendrasingh Deval [2025 (4) TMI 215 - ITAT AHMEDABAD] were followed. Once no default under section 194-IA survived, the demand under section 201(1) and the consequential interest under section 201(1A) were also unsustainable. [Paras 13, 14, 15, 16]

The assessee could not be treated as an assessee in default under section 201(1), and the consequential interest under section 201(1A) was also deleted.

Final Conclusion: The Tribunal held that, for A.Y. 2015-16, section 194-IA did not apply where the consideration attributable to each co-owner was below the prescribed threshold and aggregation was not mandated by the law then in force. The demand under section 201(1) and the consequential interest under section 201(1A) were therefore deleted and the assessee's appeal was allowed.

Unexplained cash deposits - Unexplained money u/s 69A - Sale of assets disclosed under Income Disclosure Scheme, 2016 - Protective and substantive taxation of capital gains - as argued assessee had shown that they arose from sale of silver bullion earlier disclosed under the Income Disclosure Scheme, 2016, and the related short-term capital gains had already been offered to tax

HELD THAT: - The Tribunal held that the lower authorities were not justified in rejecting the assessee's explanation for the cash deposits. The assessee had produced material showing disclosure of the silver bullion under the Income Disclosure Scheme, 2016, payment of due taxes thereon, and sale of that bullion in several tranches during the year, with the resultant short-term capital gains returned. Once the holding of the bullion stood evidenced and its sale was disclosed, the mere fact that the assessee was not engaged in the business of bullion trading was not a valid ground to disbelieve the sale.

On that basis, the explanation of source was accepted as reasonable, the addition u/s 69A was held unsustainable, and the short-term capital gains already returned were directed to be taxed on substantive basis instead of protective basis. [Paras 5]

The addition for unexplained cash deposits was deleted, and the short-term capital gains already declared by the assessee were directed to be assessed on substantive basis.

Final Conclusion: The appeal was allowed on merits. The cash deposits were held to be properly explained as arising from sale of silver bullion disclosed under the Income Disclosure Scheme, 2016, and the jurisdictional objections were left open without adjudication.

Denial of Foreign tax credit - Form No. 67 was filed after the due date prescribed for filing the return of income - Procedural orDirectory requirement -

HELD THAT: - The Tribunal held that filing of Form No. 67 for claiming foreign tax credit is only a procedural requirement and is to be treated as directory, not mandatory. Since the assessee had disclosed the foreign income and had paid tax abroad, belated filing of Form No. 67 could not by itself defeat the substantive claim to credit. The Tribunal noted that, though there was a contrary view of the Vizag Bench in case of Muralikrishna Vaddi [2022 (6) TMI 693 - ITAT VISAKHAPATNAM] several co-ordinate benches had taken the view in favour of the assessee, and it followed those decisions. It further observed that the belated Form No. 67 ought to have been taken into account, and breach of a procedural requirement cannot fasten substantive tax liability. [Paras 6, 7, 8]

Final Conclusion: The Tribunal allowed the appeal and held that foreign tax credit could not be denied merely because Form No. 67 was filed belatedly. The claim was directed to be allowed by granting the credit and recomputing the tax liability.

Validity of assessment framed u/s 147 r/w section 144B - information available on the Insight Portal and ITS data - notice u/s 143(2) was issued by the Jurisdictional Assessing Officer - additions have been made essentially on account of non-compliance and absence of documentary substantiation during assessment proceedings -

Notice under section 143(2) was issued by the Jurisdictional Assessing Officer - HELD THAT:- Upon harmonizing the statutory provisions and judicial precedents, we find that the ratio of Hexaware does not extend to invalidate proceedings where the mandatory notice under section 143(2) has been issued by a competent Assessing Officer and the assessment is thereafter completed under the faceless regime as contemplated by section 144B. The Hon’ble Delhi High Court’s view in Inder Dev Gupta [2025 (11) TMI 1522 - DELHI HIGH COURT] reinforces the principle that concurrent or complementary jurisdiction survives notwithstanding the faceless scheme.

Accordingly, even after considering in detail the authorities cited by both parties, we are unable to accept the contention that the assessment stands vitiated solely on the ground that notice under section 143(2) was issued by the Jurisdictional Assessing Officer and the assessment was completed by the Assessment Unit. The legal ground raised by the assessee is therefore rejected.

Assessment under section 147 read with section 144B making additions comprises of Short Term Capital Gain by treating the entire sale consideration of certain properties as income on the footing that cost of acquisition was not furnished, estimation of income at 12% on contract receipts, estimation of 50% of professional receipts and addition of rent receipts as business income - HELD THAT:- As we find that the addition towards Short Term Capital Gain has been made by treating the entire sale consideration as taxable gain without examination of cost of acquisition, indexed cost, nature of asset, period of holding or computation as per sections 45 and 48. Such an approach, though prompted by absence of details, does not constitute a proper determination of taxable capital gains in accordance with law.

Contract receipts and professional fees, the AO has applied ad hoc percentages without rejecting books of account or conducting any verification. The addition of entire rent receipts as business income also appears to have been made solely on the basis of ITS data without examining whether such receipts were already accounted for in the return or whether any expenditure was incurred in earning such income.

At the same time, it cannot be ignored that the assessee did not furnish necessary details during assessment and appellate proceedings, resulting in the ex parte orders. The failure of the assessee to discharge the initial burden of proof has materially contributed to the additions.

Issues on merits require fresh factual examination. The determination of capital gains cannot be sustained merely by adopting Nil cost without verifying purchase documents. Estimation of business income requires examination of books of account and reconciliation of receipts. The rental income needs to be correlated with books and nature of activity. These aspects necessitate proper verification at the assessment stage.

Final Conclusion: The Tribunal rejected the assessee's legal challenge to the reassessment and held that the assessment was not invalid merely because the notice under section 143(2) was issued by the Jurisdictional Assessing Officer while the reassessment was completed under the faceless regime. However, the additions on merits were set aside and the matter was remanded to the Assessing Officer for fresh examination, with the appeal partly allowed for statistical purposes.

Disallowance under the head “cost allocated from group company” -Deductibility of shared service cost allocation - Commercial expediency u/s 37(1) - Reasonableness of allocation key for common business expenditure - AO disallowed the claim primarily on the reasoning that the expenditure was not directly incurred by the assessee, that the same was only allocated on a group basis, that the nexus with the assessee’s business was not established, and that some items of expenditure were not verifiable

HELD THAT: - Tribunal held that the disallowance had been made on broad and generalized observations without any positive material to show that the assessee had not received the services, or that the expenditure was sham, fictitious, inflated, capital, personal, or otherwise barred by law.

The record showed that the expenditure had in fact been debited in the assessee's profit and loss account and was supported by the inter-company arrangement governing rendition of common services and allocation of costs.

The mere fact that the expenditure was first incurred by a centralized service entity and then cross-charged to beneficiary group entities could not by itself justify disallowance. The governing test was whether the assessee derived business benefit and whether the basis of allocation was reasonable.

In the assessee's line of business, allocation based on workstations was found to be a rational and business-oriented key having direct nexus with its operations. Once common expenditure could in principle be allocated on a reasonable basis, complete disallowance of the entire claim, without disproving the business nexus or the fact of benefit, was unsustainable.

Tribunal further held that in cases of centralized shared services, the law does not require impossible one-to-one correlation of every item of pooled expenditure; demonstration of business nexus and a reasonable method of allocation is sufficient. On the material placed, the assessee had discharged its initial onus, while the Revenue failed to rebut the explanation by any concrete contrary material. [Paras 29, 30, 31, 32, 33]

The disallowance of cost allocated from the group company was held to be unsustainable and was directed to be deleted.

Final Conclusion: The Tribunal allowed the appeal and held that the shared support cost allocated by the group company was deductible. The addition made on that account was directed to be deleted.

Refund of excess Dividend Distribution Tax (DDT) remitted to a non-resident shareholder under the India-Netherlands DTAA - Maintainability of refund claim without return of income - HELD THAT: - As was argued by DR, the DDT is not a tax on the income of the assessee so as to trigger the applicability of DTAA but is a charge levied at the specified rate on the profits of the company distributed as dividend and was brought into the statute for a specific purpose for taxing the distributed profits of the companies while the rate of DDT and the rate of tax applicable in the hands of the taxpayers on its income may also be different. Moreover, since the assessee had not filed any return of income for claiming the refund in accordance with the provisions of section 139 of the Act, as required under sub-section (1) of section 239 of the Act, the claim of the assessee for the refund is not maintainable and the grounds of appeal are hereby dismissed

Final Conclusion: The Tribunal dismissed the assessee's appeals for all the years in question. It held that dividend distribution tax is a charge on distributed profits of the domestic company and that, in any event, the refund claim was not maintainable without filing a return of income for claiming such refund.

Unexplained investment - business receipts already offered to tax - additional evidence under Rule 46A - unverifiable expenditure - claim of expenditure supported by self-made vouchers and additional material - consultancy receipts assessed in entirety as unexplained investment -

Gross receipts treated as unexplained u/s 69 -HELD THAT: - The Tribunal found that the assessee had, in response to notice u/s 148, disclosed income from the impugned activity and claimed expenditure against the consultancy receipts. It noted that the assessee had entered into transactions relating to the redevelopment projects, that copies of the memoranda of understanding were on record, and that part of the receipts had moved through banking channels. On that basis, the existence of the activity and the receipt of income therefrom could not be wholly disregarded. Consequently, once the net income from the same receipts had already been offered in the return, treating the entire gross receipts again as unexplained under section 69 was held to be unsustainable. [Paras 5]

The treatment of the entire consultancy receipts as unexplained investment was set aside.

Additional evidence under Rule 46A - unverifiable expenditure - HELD THAT: - The Tribunal upheld the appellate authority's refusal to admit the self-made vouchers and related material produced for the first time in appeal, holding that the conditions for admission of additional evidence under Rule 46A were not met. It also recorded that the expenditure had not been substantiated before the Assessing Officer by cogent and verifiable evidence. However, in view of the assessee's fair concession before the Tribunal that a lump-sum disallowance could be sustained towards unverifiable expenses, and considering the overall facts, the Tribunal restricted the disallowance to that extent instead of sustaining the entire disallowance. [Paras 5]

The disallowance of expenditure was restricted to Rs. 10,00,000/- and the balance disallowance was deleted.

Final Conclusion: The appeal was partly allowed. The Tribunal held that the gross consultancy receipts could not be taxed again as unexplained investment, and sustained only a lump-sum disallowance of Rs. 10,00,000/- towards unverifiable expenditure.

Penalty u/s 271D - receipt of cash on transfer of immovable property where the sale deed had been executed through a subsisting GPA -​​​Execution of sale deed through GPA

HELD THAT: - The Tribunal held that the AO's basis for invoking section 269SS read with section 271D was erroneous, since a sale deed could validly be executed through a GPA until its cancellation, and there was no case of the Revenue that the GPA had been cancelled before execution of the sale deed.

Proceeding on that incorrect premise, the AO committed an error in applying the penal provision. Tribunal also followed the co-ordinate Bench decisions cited WAHID ALI [2024 (1) TMI 1543 - ITAT DELHI] AND AGGARWAL CONSTRUCTION COMPANY [2025 (5) TMI 1379 - ITAT AMRITSAR] and held that the assessee's case stood covered by them. [Paras 6]

Final Conclusion: The Tribunal allowed the appeal and deleted the penalty under section 271D for A.Y. 2017-18. It held that the AO had wrongly invoked the penal provision on an incorrect premise regarding execution of the sale deed through GPA.

Condonation of delay -Classification of imported aircraft engine - HELD THAT:- The appeal was dismissed on the ground of delay, the delay of 313 days having not been satisfactorily explained, and the Court also found no reason to interfere with the impugned order on merits.

Classification of goods - import and trading of mineral products such as rutile ore/rutile sand - ores or concentrates - misdeclaration - normal preparation of ores - benefit of exemption from Additional Duty of Customs under Notification No. 4/2006-CE and Notification No. 12/2012-CE - extended period of limitation - Wilful Suppression - Mens Rea - Confiscation - Strict Construction of Exemption - penalty under Section 114A.

Whether the goods imported by the Appellant during the period January 2011 to October 2012 are classifiable as “ores” or as “concentrates” within the meaning of Chapter 26 of the Customs Tariff. - HELD THAT: - The Tribunal held that Chapter 26, read with the HSN Explanatory Notes, preserves the character of ore where the material has undergone only normal physical or mechanical preparation such as separation, washing, screening or gravity-based processes. Conversion into concentrates requires proof of special treatment going beyond such normal preparation, particularly treatment affecting the chemical composition or crystallographic structure. On the record, the import documents consistently described the goods as rutile ore, rutile sand or titanium ore; in one consignment, the departmental laboratory itself examined the sample and the goods were accepted as rutile ore; and there was no evidence of roasting, leaching, calcination, acid treatment or other special beneficiation. Mere high TiO2 content and generic technical literature could not displace consignment-specific documentary and test evidence. The Tribunal therefore held that Chapter Note 4 could not be invoked in the absence of proof of any process converting ore into concentrate. [Paras 7]

The goods were held to be ores; the contrary finding treating them as concentrates of titanium was unsustainable.

Denial of exemption from additional duty of customs - HELD THAT:- The demand had been founded on the adjudicating authority's view that the goods were concentrates and therefore outside the claimed exemption. Since the Tribunal held on merits that the imports were ores within Chapter 26, the basis for denying the exemption notifications ceased to exist. [Paras 5, 9]

The benefit of exemption under Notification No. 4/2006-CE and Notification No. 12/2012-CE was held admissible.

Misdeclaration - extended period of limitation - HELD THAT:- The Tribunal found that the descriptions in the Bills of Entry matched the commercial invoices and load-port analysis certificates, and that in the consignment tested by the Department, the laboratory report did not say that the goods were concentrates or had undergone special treatment. For the remaining consignments also, the Department produced no contrary test report and did not impeach the supplier certificates. The allegation of misdeclaration rested only on general technical literature and assumptions about overseas suppliers, which could not override contemporaneous import documents and laboratory evidence. Since the appellant had disclosed all material facts and the dispute was at best one of interpretation on classification and exemption, there was no positive act of wilful misstatement or suppression so as to justify the extended period of limitation. [Paras 8]

The charge of misdeclaration failed, and the demand beyond the normal period was held time-barred.

Confiscation - penalty under Section 114A - HELD THAT:- The Tribunal held that confiscation under Section 111(m) presupposes a sustainable finding of misdeclaration of description or other particulars. As the declarations were found truthful and supported by the record, the goods were not liable to confiscation. Penalty under Section 114A was also held unsustainable because such penalty depends on wilful misstatement or suppression with intent to evade duty, and no such element was established where the appellant had declared the goods consistently on the basis of supplier documents and the assessments were completed after departmental scrutiny. [Paras 8]

The confiscation and penalty imposed in the impugned order were set aside.

Final Conclusion: The Tribunal held that the imported goods were ores and not titanium concentrates, with the result that the denial of exemption, the differential duty demand, and the findings of misdeclaration could not be sustained. The extended period, confiscation and penalty were also held inapplicable, and the impugned order was set aside in entirety.

Classification of the goods - “Bearing-of bore diameter exceeding 100mm” - classifiable under CTH 8482 or CTH 8708 - General Rules for Interpretation -imposition of penalties - Sole or principal use test - Penalty in interpretational classification dispute.

Classification of parts and accessories of motor vehicles - Sole or principal use test - Bearing assembly - HELD THAT:- The Tribunal held that the exclusionary notes in Sections XVI and XVII could not by themselves resolve the conflict between headings 8482 and 8708, and therefore Note 3 to Section XVII had to be applied. Relying on G.S. Auto International Ltd. Versus Collector of C. EX., Chandigarh [2003 (1) TMI 700 - SUPREME COURT] and M/s. Cast Metal Industries (P) Ltd. Versus Commr. Of Central Excise-IV, Kolkata [2015 (11) TMI 833 - SUPREME COURT], it applied the test whether the goods were suitable for use solely or primarily with motor vehicles. Since there was no dispute that the impugned goods were bearing assemblies used solely as automotive components in car wheels and rear drum assemblies, and were not mere bearings simpliciter but assemblies of sub-parts ready for fitment, they were correctly classifiable as parts of road wheels of motor vehicles under CTH 87087000. [Paras 12, 13, 14]

The classification issue was decided in favour of the Revenue.

Penalty in interpretational classification dispute - Judicial discipline - HELD THAT:- The Tribunal found that the dispute concerned interpretation of the proper tariff classification of the imported goods. It also noticed that in one of the three orders-in-original no penalty had been imposed and the department had not challenged that non-imposition, showing that the department itself did not treat the matter as warranting penalty. The lower appellate authority was held to have erred in distinguishing Indu Nissan Oxo Chemical Industries vs. Commissioner of Customs, Kandla [2013 (9) TMI 387 - CESTAT AHMEDABAD] on the basis of its own view on confiscation; judicial discipline required adherence to the Tribunal's view that penalty does not arise in such interpretational disputes. On that reasoning, the penalties imposed in the two appeals were set aside. [Paras 15]

The penalties imposed on the appellant were set aside.

Scope of show cause notice - Classification based on description, form and function - HELD THAT: - The Tribunal held that both the adjudicating authority and the lower appellate authority had examined the same controversy arising from the notices, namely whether the imported goods were bearings under heading 8482 or bearing assemblies identifiable as parts of car wheels under heading 8708. Their reasoning consistently proceeded on the description of the goods, their form as assemblies of multiple sub-parts, and their function as automotive components specifically used in vehicle wheels and drum assemblies. The appellate order therefore rested on the same foundational grounds as the show cause notices and the original orders, and did not introduce a new case against the appellant. [Paras 17]

The objection that the lower appellate authority had gone beyond the show cause notices was rejected.

Final Conclusion: The Tribunal upheld the reclassification of the imported bearing assemblies under CTH 87087000 as parts of motor vehicles and rejected the challenge to the merits of classification. However, treating the dispute as interpretational, it set aside the penalties in two appeals; accordingly, two appeals were partly allowed and the remaining appeal was rejected.

Liability for misdeclaration to duty under Section 28 - Importer status - Redemption fine -Seeks clearance for home consumption as the importer for assessment and recovery purposes -non-compliance with pre-deposit under Section 129E - Penalty for facilitation of misuse of non-transferable advance licences - confiscation and redemption fine​​​​​​​.

Importer status - Duty demand - Conditional exemption - HELD THAT:- The Tribunal held that, for the purposes of assessment and recovery, the person who files the Bill of Entry, subscribes to the statutory declaration and seeks clearance is the importer. In both matters, those acts were performed by the filing firms and not by the appellants. Mere description of the clearances as being on account of the appellants, or the fact that they furnished advance licences, end-use bonds and bank guarantees, did not make them importers within Section 2(26). On that basis, the duty demand under Section 28 failed against them, and the denial of the benefit of Notification No. 80/95-Cus in their hands was also held unsustainable. [Paras 7, 11]

The duty demands and consequential denial of exemption against both appellants were set aside.

Misdeclaration liability - Confiscation - Redemption fine - HELD THAT: - The Tribunal found that misdeclaration under Section 111(m) requires responsibility for, or knowing participation in, the false declaration. The material on record showed that the filing firms handled the description and clearance of the goods, while there was no evidence that either appellant instructed or knowingly participated in the misdescription. Misdeclaration, if any, was therefore attributable to the entities that filed and subscribed to the Bills of Entry. Since importer status and misdeclaration were not established against the appellants, the foundation for confiscation under Sections 111(d), (m) or (o) in their hands failed, and the principle in Weston Components Ltd. v. Commissioner of Customs [2000 (1) TMI 45 - SC ORDER] was held inapplicable on the facts. [Paras 8, 9, 11]

The findings of misdeclaration against both appellants were rejected, and the confiscation and redemption fine imposed on them were set aside.

Penalty under Section 112(a) - Facilitation of improper clearance - Misuse of non-transferable advance licences -HELD THAT:- The Tribunal accepted that the appellants had furnished non-transferable QBAL advance licences, executed end-use bonds and provided bank guarantees which enabled clearance under a conditional exemption scheme. The record also showed irregularities in the bank guarantees and misuse of non-transferable licences by third parties. Though the appellants were exonerated on importer status and misdeclaration, the Tribunal found deliberate negligence and premeditated facilitation of improper clearance sufficient to attract penalty under Section 112(a), since their acts rendered the goods liable to confiscation for breach of the conditions governing the exemption scheme. [Paras 10, 11]

The penalties imposed on both appellants under Section 112(a) were sustained.

Final Conclusion: The appeals were partly allowed. The Tribunal set aside the duty demands, denial of exemption, confiscation and redemption fine against both appellants, but sustained the penalties imposed on them under Section 112(a) for their facilitative role in misuse of the DEEC scheme.

Classification of goods - AMOLED display assembly imported for use in cellular mobile phones - classifiable under CTI 85249220 as a flat panel display module of OLED Or under CTI 85177990 as parts of goods of heading 8517 - Exclusion for video-converting components - Essential character - General Rules for Interpretation - Specific heading versus parts classification.

Flat panel display modules - HELD THAT:- The Authority held that classification had to be determined first by the terms of the competing headings and the relevant Chapter and Section Notes. On that basis, Note 7 to Chapter 85 was read as covering flat panel display modules even where they incorporate drivers or control circuits required for display operation. The exclusion in that Note for modules equipped with components for converting video signals was held not to apply merely because the assembly contained a driver IC performing signal driving, pixel control, timing and allied display-related functions; that exclusion applies where the module, by reason of sophisticated signal-processing components, assumes the character of goods of another heading. The applicant had also failed to produce technical material showing that the imported goods were in fact equipped with such video-converting components of the nature contemplated by the exclusion. The HSN Explanatory Notes were treated as supporting inclusion of modules with drivers under heading 8524 so long as they retain the character of display modules. Since tariff item 85249220 specifically covers OLED flat panel display modules for smartphones and other cellular mobile phones, that specific entry governed the classification. Section XVI Note 2(a) was then applied to hold that where the goods are themselves covered by a specific heading in Chapter 85, they cannot be relegated to a residual parts entry under heading 8517 merely because they are used in mobile phones. The ruling in M/s Orpak Systems India Pvt. Ltd. [2025 (12) TMI 1746 - CUSTOMS AUTHORITY FOR ADVANCE RULINGS, MUMBAI] was distinguished on the ground that the product there contained decoder and processor components imparting a character beyond that of a simple display module. [Paras 4]

The display assembly was ruled to be rightly classifiable under tariff item 85249220, and the claim for classification as parts under tariff item 85177990 was rejected.

Final Conclusion: The application was answered against the applicant. The Authority ruled that the imported AMOLED display assembly is specifically classifiable as an OLED flat panel display module under tariff item 85249220 and not as a part of mobile phones under tariff item 85177990.

Condonation of Delay in appeal under the Companies Act - application filed under Section 233(5) of the companies Act, 2013 read with Rule 25 (6) - beyond the limitation period so prescribed under Section 233(5) of the Companies Act 2013 - matter of scheme of merger/amalgamation - Limitation for objections to fast track merger.

Fast track merger - Limitation for objections - HELD THAT: - The Appellate Tribunal held that, under Section 233(5), objections to the scheme had to be filed within 60 days from receipt of the scheme. Since the respondent companies had informed the appellant's office on 29.06.2023 and 30.06.2023, but the application was filed only on 09.08.2024, it was far beyond the prescribed period. On that basis, the dismissal of the objections was upheld. The Tribunal further observed that, once the objections were liable to be dismissed, there was no reason to direct the appellant to consider the matter on merits. [Paras 3, 4]

The objections filed under Section 233(5) were rightly dismissed as time-barred, and the direction to decide the matter on merits was unwarranted.

Statutory limitation for company appeals - Delay of 196 days in filing the appeal could not be condoned as it exceeded the outer statutory limit for appeals. - HELD THAT: - Relying on Bengal Chemists and Druggists Association Vs. Kalyan Chowdhury [2018 (2) TMI 487 - SUPREME COURT], the Appellate Tribunal held that the limitation under Section 421 is peremptory and that any appeal filed beyond the extended period of 45 days is incapable of condonation. As the present appeal had been filed with a delay of 196 days from the impugned order, the application for condonation was not maintainable. [Paras 5, 6, 7]

The application for condonation of delay was dismissed, and consequently the appeal was also dismissed as barred by limitation.

Final Conclusion: The Appellate Tribunal held that the Central Government's objections to the fast track merger had been filed beyond the 60-day period prescribed under Section 233(5). Independently, the appeal itself having been filed with a delay of 196 days beyond the condonable limit was dismissed as barred by limitation.

Condonation of delay - HELD THAT:- Delay was condoned, and the Civil Appeals were dismissed as the Court found no good ground to interfere with the impugned order of the Securities Appellate Tribunal.

Moratorium under insolvency law - Seeking its adjustment towards post-CIRP dues - cash deposit made with the appellant prior to the CIRP but apportioned and disbursed against the bills raised before and after the CIRP - invoking the Payment Security Mechanism (PSM) - set-off during CIRP - security deposit in lieu of letter of credit - enforceable bank guarantee or letter of credit permitting set-off against pre-CIRP dues.

Set-off during CIRP - appropriation of security deposit towards pre-CIRP dues - pari passu principle - HELD THAT: - The Court held that the deposit was made as security for payment of bills and remained the corporate debtor's property until actual adjustment. The appellant had not appropriated the amount before commencement of CIRP, though the underlying bills were pre-CIRP. After commencement, it filed its claim before the resolution professional in respect of those dues, part of which was admitted and not challenged. In that situation, a subsequent unilateral appropriation of the deposit towards pre-CIRP bills violated the moratorium and the scheme of the Code, under which recovery of pre-CIRP dues must proceed through the insolvency process. The principle governing set-off in CIRP did not assist the appellant, as there were no mutual cross-demands of the kind that could justify contractual or equitable adjustment; permitting such appropriation would also run contrary to the pari passu scheme operating in insolvency. [Paras 17, 18, 19, 24, 25]

The adjustment of the deposit towards pre-CIRP dues was held illegal, and the amount was liable to be treated in accordance with the insolvency process and adjusted only towards post-CIRP dues.

Security deposit in lieu of letter of credit - security interest - status of operational creditor - HELD THAT: - The Court found that there was in fact no bank guarantee or letter of credit issued; there was only a cash deposit said to have been made in lieu of such security. Even treating it as security for payment default, the deposit continued to belong to the corporate debtor until appropriation, and any such appropriation after the moratorium commenced, insofar as it related to pre-CIRP dues, was impermissible. The appellant was not a financial creditor and could not be treated as a secured creditor on the basis of this deposit. The authorities concerning enforcement of bank guarantees, security interests and rights of secured creditors were therefore inapplicable to the present arrangement. [Paras 20, 21, 22, 23, 25]

The appellant was treated only as an operational creditor, and the deposit was not enforceable as a security interest against pre-CIRP liabilities during the moratorium.

Final Conclusion: The Supreme Court affirmed the orders under challenge and held that the appellant could not, after commencement of CIRP, appropriate the cash deposit towards pre-CIRP transmission dues. The appellant's claim in respect of such dues had to abide by the insolvency process, and the appeals were dismissed.

Corporate Insolvency Resolution Process - Related party disqualification - Challenged the liquidation and consequential dissolution on the ground that the operational creditor was a related party through the shareholding - Cessation of Directorship.

Related party disqualification - challenge to liquidation proceedings - HELD THAT:- The Appellate Tribunal held that the material relied on by the appellant did not establish any infirmity in the liquidation process. It noted the finding that M.S. Balaji had resigned from the corporate debtor and thereafter from the operational creditor well before admission of the section 9 proceedings, and therefore was not holding any directorship at the time of the insolvency or liquidation process. The Tribunal further observed that the appellant's own pleading before the Adjudicating Authority was that the 27% shareholding in the corporate debtor was held by Kasa, while M.S. Balaji was only referred to as its director. In that view, the MGT-7 form did not advance the appellant's case, and no basis was made out to treat the entire process as vitiated. [Paras 12, 13]

No error was found in the rejection of the application seeking to set aside the liquidation process, and the consequential order of dissolution was not interfered with.

Final Conclusion: The Appellate Tribunal dismissed both appeals, holding that the appellant failed to establish that the insolvency, liquidation, or dissolution stood vitiated on the alleged related party ground.

Jurisdiction of the NCLT to issue direction to revive the Concession Agreement - request for revival of Concession Agreement​​​​​​​ - limits of resolution plan implementation - Implementation of resolution plan.

Terminated concession agreement - A pre-CIRP concession agreement, already terminated and not revived, could not be directed to be revived or implemented through the approved resolution plan against the appellant. - HELD THAT: - The Tribunal held that there was no dispute that the concession agreement had stood terminated long before commencement of CIRP. Once so terminated, it did not form part of the CIRP estate in a manner that would permit the Adjudicating Authority to compel its revival through the resolution plan or by a subsequent implementation order. The appellant was also not a participant in the CIRP process, and therefore the direction requiring it to take steps in terms of the approved plan, insofar as it related to revival of the concession agreement, was beyond the permissible scope of the Adjudicating Authority's power. The Tribunal further clarified that neither the approval of the resolution plan nor the impugned order could be treated as issuing any binding direction to revive the terminated concession agreement. [Paras 11, 12, 13, 14]

The impugned order was modified to the extent that no direction could be issued to the appellant to revive the concession agreement terminated prior to CIRP.

Prayer for Revival of the conciliation process to which the Appellant is also agreeable - The Tribunal recorded the common position emerging before it that the respondent was pressing only for revival of the conciliation process, and that the appellant had no objection to such recourse provided the proceedings were undertaken in accordance with law and with liberty to raise all available pleas. On that basis, while declining any compulsory revival of the concession agreement, the Tribunal preserved the parties' contractual dispute-resolution remedies and directed that the appellant consider the respondent's request for conciliation or arbitration in accordance with law. [Paras 12, 13, 14]

The parties were left free to take steps for conciliation or arbitration, and the appellant was to consider the respondent's request in accordance with law.

Final Conclusion: The appeal was disposed of by modifying the impugned order and clarifying that neither the approved resolution plan nor the order of the Adjudicating Authority could compel revival of the concession agreement terminated before commencement of CIRP. The parties were left at liberty to pursue conciliation or arbitration in accordance with law.

Corporate insolvency resolution process - Maintainability of the application under Section 65 on the plea that the Section 7 proceedings were initiated fraudulently or with malicious intent because of non-issuance of no-objection certificates - Malicious initiation of insolvency proceedings.

Malicious initiation of insolvency proceedings - Non-issuance of NOC - Section 65 application - HELD THAT: - The Appellate Tribunal held that the pleadings in the homebuyers' application did not contain allegations or material satisfying the ingredients of fraudulent or malicious initiation required for invoking Section 65. Their grievance was confined to non-issuance of NOC and the resulting prejudice in obtaining possession and conveyance, but that, by itself, did not establish that the insolvency process had been initiated for a purpose other than insolvency resolution. The Tribunal accepted the view that the issue of non-issuance of NOC arose subsequent to the occurrence of default and, therefore, could not invalidate or obstruct proceedings under Section 7. It further noted that the Adjudicating Authority had considered the application on merits and found absence of cogent material showing mala fides or fraud. [Paras 10, 11, 12]

The rejection of the homebuyers' application under Section 65 was affirmed and the appeal against that order was dismissed.

Final Conclusion: The appeal challenging rejection of the Section 65 application was dismissed, the Tribunal holding that non-issuance of NOC and the allegations made by the homebuyers did not establish fraudulent or malicious initiation of CIRP. The companion appeal against admission of the Section 7 application was disposed of in terms of the separate order passed in the connected appeal.

Seeking declaration of Edelweiss Asset Reconstruction Company Limited (Respondent No. 2) as a “related party” under Section 5(24) of the IBC - Locus to challenge replacement of liquidator - Related party status of financial creditor - statutory framework governing the Stakeholders' Consultation Committee - related party under Section 5(24) - removal on the basis of voting share allegedly influenced by a creditor claimed to be a related party - Whether the Liquidator/Appellant has the locus to maintain the appeal against his replacement.

Locus standi of liquidator - Replacement of liquidator - Supervisory powers of Adjudicating Authority - HELD THAT:- The Tribunal held that Regulation 31A(11) permits the stakeholders' consultation committee to propose replacement of the liquidator by the prescribed majority, and that the liquidation process remains under the supervision of the Adjudicating Authority. It accepted that the Adjudicating Authority is not confined to a mechanical vote count and may direct replacement if, on the overall circumstances, continuation of the liquidator is not conducive to smooth completion of liquidation. Relying on earlier NCLAT decision in V. Venkata Sivakumar v. IDBI Bank Limited [2022 (12) TMI 1056 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, CHENNAI BENCH] the Tribunal held that the office of liquidator is functional and fiduciary, not proprietary; removal from such statutory assignment, without invasion of any independent civil or proprietary right, does not make the liquidator a person aggrieved for the purpose of appeal. [Paras 49, 51, 53, 54, 70]

The challenge to replacement was not maintainable at the instance of the Appellant, and the direction replacing him as Liquidator was upheld.

Related party - Management or policy control - Pledged shares and lender oversight - HELD THAT: - Section 5(24) defines “related party” in specific and precise terms. Commercial influence, monitoring rights, and restructuring supervision, are common features of lending transactions involving distressed companies. These do not automatically amount to management or policy control. Control in the statutory sense requires something more concrete and demonstrable.

The Tribunal found that the shares relied on by the Appellant were pledged securities assigned with the debt and had never been invoked; until invocation, ownership and voting rights remained with the pledgor, so mere holding of pledged shares did not establish control. It further held that appointment of an observer, sharing of agenda papers, escrow monitoring, restructuring supervision, and engagement of EY were lender-protection and advisory measures in a distressed account and did not amount to management or policy control. The IBBI order concerning the Resolution Professional being guided by EARCL in appointing EY was treated as a finding on the RP's independence, not as proof that EARCL exercised statutory control over the corporate debtor. The Tribunal also noted the delayed raising of the related party objection and held that the facts relied on largely pertained to the pre-CIRP restructuring period. On that basis, and also noticing the statutory position under the provisos to Section 21(2), it concluded that EARCL could not be treated as a related party whose vote had to be excluded. [Paras 64, 66, 67, 69, 70]

The application to treat EARCL as a related party failed, and the objection to its participation in the voting process was rejected.

Final Conclusion: The Appeal was dismissed. The Tribunal upheld the replacement of the Appellant as Liquidator, held that he had no locus to challenge such replacement as a matter of right, and further held that EARCL was not a related party of the corporate debtor.

Provisional attachment - seeking for release of the property in light of the Section 32A - liability of the Corporate Debtor for an offence committed prior to commencement of CIRP - distinction between immunity from prosecution under sub-section (1) and the bar against action against the property of the corporate debtor under sub-section (2) - Change in management or control - Statutory bar on action against corporate debtor property.

Prior attachment and approved resolution plan - Section 32A(2) of the IBC - Continuation of provisional attachment - HELD THAT: - The Tribunal held that the appellant's reliance on Section 32A(1) was misplaced because the appeal did not concern prosecution of the corporate debtor, but attachment of its property. On Section 32A(2), the Tribunal read the provision, in the light of the law declared in Manish Kumar [2021 (1) TMI 802 - SUPREME COURT], as creating a bar against taking action against the property of the corporate debtor once the resolution plan approved under Section 31 results in a qualifying change of control. That bar, however, was held not to operate retrospectively so as to wipe out a provisional attachment already made before approval of the resolution plan. The Tribunal further held that the immunity under Section 32A(1) is not automatic on approval of the resolution plan, but depends on fulfilment of the statutory conditions, including that the incoming person is not one who had abetted or conspired in the offence; hence continuance of the prior attachment could not be rejected on the assumption that prosecution had necessarily come to an end. The conflict between the IBC protection and the power of attachment under the PMLA was thus resolved by holding that the PMLA power must yield only from the stage specified in Section 32A, and not so as to invalidate action validly taken earlier. Any contrary interpretation would amount to rewriting the statute. [Paras 13, 14, 15, 16, 18]

The challenge to the provisional attachment order and its confirmation was rejected, with liberty to the appellant to pursue any other remedy available in law, including in relation to prosecution if pending.

Final Conclusion: The Tribunal dismissed the appeal and held that approval of the resolution plan did not erase the provisional attachment made prior to such approval. It clarified that Section 32A of the IBC bars further action only from the statutory trigger point and does not automatically extinguish earlier attachment or prosecution without fulfilment of the prescribed conditions.

Removal of capital goodsunder Rule 3(5) - invoices for sale of moulds without physical movement of moulds - Reversal of CENVAT credit - Extended period of limitation - demand of interest and imposition of penalties.

Whether raising invoices for sale of moulds without physical movement of moulds amounts to “removal” of capital goods under Rule 3(5) of the CENVAT Credit Rules, 2004. - HELD THAT: - The Hon’ble Supreme Court in J.K. Spinning and Weaving Mills Ltd. vs Union of India [1987 (10) TMI 51 - SUPREME COURT], has explained the concept of removal under Central Excise law. The Apex Court held that excise duty is attracted on manufacture and removal and that removal contemplates physical movement of goods from the place of manufacture. Thus, unless the goods physically move out of the factory premises, the requirement of removal cannot be said to have been satisfied.

A similar issue was examined by the Tribunal in Mutual Mecaplast Ltd. vs CCE – [2007 (7) TMI 523 - CESTAT, AHMEDABAD], wherein moulds were invoiced to customers but continued to remain within the manufacturer’s factory for use in production. The Tribunal held that issuance of an invoice does not by itself amount to removal when the goods continue to remain within the factory and are used in the manufacture of final products.

The Tribunal held that Rule 3(5) applies only when capital goods are removed as such from the factory, which postulates physical removal. Mere transfer of ownership or issuance of invoices, even with collection of VAT, does not create a deeming removal under the Central Excise scheme. Since the moulds continued to remain installed in the factory and were used for manufacture of customer-specific final products, the statutory condition of removal was not satisfied. [Paras 13, 14, 15, 16, 17]

The moulds were not removed within the meaning of Rule 3(5), and invoicing alone could not trigger the liability attached to removal of capital goods.

Reversal of CENVAT credit - Capital goods used in manufacture - Revenue neutrality - HELD THAT: - The Tribunal found that Rule 3(5) is intended to neutralize credit only where inputs or capital goods are removed as such without use in manufacture. Here, the moulds were accepted as eligible capital goods, remained within the factory, and continued to be used in producing the final products. The Tribunal also noted the appellant's case that the mould cost was amortised in the assessable value of the finished goods, reinforcing that denial of credit was unwarranted. [Paras 19, 20, 21, 22, 23]

No reversal of the CENVAT credit availed on the moulds was required.

Extended period of limitation - Interpretational dispute - Suppression of facts - HELD THAT: - The Tribunal held that extended limitation under Section 11A requires fraud, suppression, wilful misstatement or collusion with intent to evade duty. It found that the appellant had regularly filed statutory returns, maintained proper records, and reflected the mould-related transactions in its books of account. Since the dispute turned on interpretation of Rule 3(5) and the meaning of removal, and the relevant facts were available to the department, the ingredients necessary for invoking the extended period were absent. [Paras 24, 25, 26, 27]

The demand could not be sustained on the basis of the extended period.

Penalty and consequential interest - Mens rea - Bona fide belief - HELD THAT: - The Tribunal held that interest under the Central Excise Act is consequential to the duty liability and therefore cannot survive once the demand itself fails. As to penalty, it found that the case arose out of an interpretational dispute, that the transactions were disclosed in statutory records, and that the appellant had acted under a bona fide belief that no reversal was required in the absence of physical removal. In these circumstances, the necessary elements for invoking penal provisions were not established. [Paras 28]

The demands of interest and penalty were liable to be set aside.

Final Conclusion: The Tribunal held that invoicing of moulds without their physical removal from the factory did not attract Rule 3(5), and therefore no reversal of CENVAT credit was warranted. The extended period was held inapplicable, and the consequential interest and penalties were also set aside.

Post-clearance sale of vehicles through Regional Sales Offices - Trading as exempted service under Rule 2(e) - assumption of engaged in trading activity - Applicability of Rule 6 - reversal of credit or payment of amount - manufacture of Light Commercial Vehicles known as “DOST” on job work basis - cleared on payment of Central Excise duty in terms of Rule 10A of the Central Excise Valuation - demand in the first notice hit by limitation - Extended period of limitation.

Whether the appellant was engaged in trading activity amounting to “exempted service” under Rule 2(e) of the CENVAT Credit Rules, 2004 - HELD THAT:- The Tribunal held that, in common commercial understanding, trading denotes purchase and sale of goods without undertaking manufacture. Here, the vehicles were admittedly manufactured by the appellant at its factory on job work basis and cleared on payment of Central Excise duty under Rule 10A. Mere subsequent sale through Regional Sales Offices formed part of the normal sale chain after clearance and did not alter the character of the activity already completed in the factory. In the absence of any evidence that the appellant independently purchased finished vehicles as a trader for resale, the allegation of trading could not be sustained. [Paras 8]

The Department failed to establish that the appellant was engaged in trading of vehicles so as to fall within exempted service.

Applicability of Rule 6 credit reversal - Common input services - Nexus with exempted activity - HELD THAT:- The Tribunal held that invocation of Rule 6 required proof of two foundational elements: engagement in both dutiable and exempted activities, and use of common inputs or input services for both. The show cause notices proceeded only on the assumption that sale through Regional Sales Offices was trading, without identifying any specific input service used in relation to the alleged exempted activity or establishing a nexus between the credit availed and such activity. The Tribunal also noted that duty had been discharged on the vehicles cleared from the factory on the assessable value determined under Rule 10A. Applying the principles in M/s. Markwell Paper Plast Pvt. Ltd. Versus CC&CE, Noida [2012 (7) TMI 290 - CESTAT, NEW DELHI], Commissioner of Central Excise, Tirunelveli vs DCW Ltd [2008 (10) TMI 380 - MADRAS HIGH COURT], and Union of India vs Hindustan Zinc Ltd [2014 (5) TMI 253 - SUPREME COURT], it held that credit reversal provisions could not be invoked on an artificial bifurcation of the same manufacturing activity. [Paras 9]

The demand raised under Rule 6(3) lacked legal basis and was unsustainable.

Extended period of limitation - Suppression of facts - Penalty - HELD THAT: - The Tribunal found that the first notice was founded on materials drawn from the appellant's own financial statements and annual reports, showing that the relevant facts were already available to the Department during audit. There was no evidence of suppression, fraud or wilful misstatement, and the dispute arose only from the Department's legal characterization of the activity. Relying on Gammon India Ltd. vs Commissioner of Central Excise and Pahwa Chemicals Pvt. Ltd. vs Commissioner of Central Excise [1999 (5) TMI 436 - CEGAT, MUMBAI], the Tribunal held that extended limitation could not be invoked where facts stood disclosed in statutory records. Since the demand failed on merits in any event, the second notice, though within normal limitation, also could not survive; and the penalties were liable to be set aside. [Paras 10]

The demand in the first notice was barred from invocation of the extended period, and all penalties were set aside; the second notice also failed on merits.

Final Conclusion: The Tribunal held that the appellant's activity remained one of manufacture and clearance on payment of duty, and could not be recharacterised as trading to invoke Rule 6 of the CENVAT Credit Rules, 2004. The demands failed on merits; the extended period invoked in the first notice was also held inapplicable, and the penalties were set aside.

CENVAT credit of service tax paid on input services distributed through Input Service Distributor (ISD) invoices - Place of removal - definition of “input service” under Rule 2(l) - Outward transportation as input service - Extended period of limitation - Wilful Suppression - Bona Fide Belief - Ownership and Risk in Transit - 100% Export Oriented Unit with a Customs bonded warehouse licence under the Customs Act, 1962 and clears finished goods both to Domestic Tariff Area (DTA) customers and for export.

Whether CENVAT credit distributed to the appellant through Input Service Distributor (ISD) invoices is legally admissible and whether proceedings could validly be initiated against the appellant instead of the Input Service Distributor. - HELD THAT:- The Tribunal held that distribution of credit through ISD invoices does not place the recipient manufacturer beyond scrutiny. While the recipient unit cannot claim immunity merely because the credit originated from an ISD, the ultimate admissibility of the credit must still be tested on merits with reference to the definition of input service and the facts of the recipient unit. [Paras 7]

The objection to the proceedings on the sole ground that the credit was distributed through ISD invoices was rejected.

Place of removal - Outward transportation as input service - Contractual transfer of property - HELD THAT:- Hon’ble Supreme Court in CCE vs Ultra Tech Cement Ltd.[2018 (2) TMI 117 - SUPREME COURT], wherein the Court held that outward transportation beyond the place of removal cannot be treated as an input service. However, it is important to note that the said judgment was rendered in the context of a situation where the sale of goods was completed at the factory gate and the transportation thereafter was arranged by the buyer.

The Hon’ble Supreme Court in Padmini Products vs CCE [1989 (8) TMI 80 - SUPREME COURT] held that where the dispute relates to interpretation of statutory provisions and the assessee entertains a bona fide belief regarding the eligibility of duty or credit, the extended period of limitation cannot be invoked. In the present case the dispute essentially concerns the interpretation of the definition of “input service” under Rule 2(l) of the CENVAT Credit Rules and the determination of the “place of removal” based on contractual terms governing the transaction. Such issues have been the subject matter of considerable judicial interpretation and therefore the appellant could reasonably entertain a bona fide belief regarding the eligibility of credit on the services in question.

The Tribunal held that admissibility of credit on outward transportation depends on the place of removal. Where contractual terms establish that delivery, installation, commissioning and acceptance at the buyer's premises form an integral part of the transaction, the sale is completed only there and not at the factory gate. In such a case, transportation up to that point remains part of clearance up to the place of removal. The printed invoice condition disclaiming responsibility for loss or damage in transit was treated as a general condition which could not override the substantive contractual clauses governing completion of sale and transfer of property. On the contracts examined, the buyer's premises was held to be the actual place of removal. Though the Tribunal observed that other contracts could require verification for parity of terms, it confined that aspect to a limited remand in principle. [Paras 8, 9, 11]

On the contractual terms placed before it, the Tribunal held that the buyer's premises constituted the place of removal and that credit on the courier services could not be denied on the footing that transportation was beyond the factory gate.

Extended period of limitation - Wilful suppression - Interpretational dispute - HELD THAT:- The Tribunal found that the appellant had regularly filed statutory returns and maintained records showing availment of credit on ISD invoices, so the material facts were available to the department. It held that invocation of the extended period requires wilful suppression or misstatement with intent to evade duty, which was absent here. The dispute turned on interpretation of input service and determination of place of removal, an interpretational controversy on which a bona fide belief could exist. Since the notice was issued for the period June 2014 to January 2015 only on 07.02.2017, the demand was held time-barred, and on that ground alone the demand, interest and penalty were unsustainable. [Paras 10, 11]

The entire demand of credit along with interest and penalty was held unsustainable as barred by limitation.

Final Conclusion: The Tribunal held that the recipient unit could be proceeded against notwithstanding distribution of credit through ISD invoices, and further held on the contracts examined that the buyer's premises was the place of removal, making outward transportation up to that point eligible in principle. However, since the demand for June 2014 to January 2015 had been raised only by invoking the extended period without proof of wilful suppression, the entire demand with interest and penalty was set aside as barred by limitation.

Maintainability of appeal against rejection of rectification application - Rejection of a rectification application filed in relation to an order passed in appeal under Section 62, in view of the deeming provision in Section 69 - Rectification of mistakes - Mistake apparent from the record.

Appeal maintainability - Rectification of mistakes - Deeming fiction - HELD THAT: - The Court held that Section 63 permits an appeal to the Tribunal against an order passed under Section 62 or Section 63A. Under Section 69(4), an order passed under Section 69(1) is deemed to be an order passed under the same provision as the original order only where the rectification application is entertained and the mistake is actually rectified. Where the rectification application is rejected, that deeming fiction is not attracted. Consequently, rejection of a rectification application seeking correction of an appellate order under Section 62 does not itself become an appealable order under Section 62 for the purposes of Section 63. [Paras 8, 9]

The Tribunal was right in rejecting the appeal as not maintainable, and no interference was warranted.

Final Conclusion: The revision petition was dismissed. The High Court upheld the Tribunal's view that no appeal lay under Section 63 against mere rejection of the rectification application.

Disciplinary Jurisdiction - failure to exercise due diligence and grossly negligence - failure to promptly report material banking irregularities in the course of concurrent audit - Guilty of professional misconduct of chartered accountant - violation of natural justice - Limited judicial review in disciplinary findings - Validity of penalty of removal from membership for six months.

Due diligence as independent ground of professional misconduct - Failure to promptly report serious banking irregularities, despite being required to do so in the course of concurrent audit, constituted professional misconduct under Clause (7) of Part I of the Second Schedule. - HELD THAT: - A close reading of the provision of Clause-7 will depict that the same is divided in two parts by “,”(coma) and word “or”, i.e, “does not exercise due diligence,” or “is grossly negligent in the conduct of his professional duties”.

The use of ‘coma’ before word “or” used in Clause 7 is a disjunctive particle to express an alternative. The intention of Clause 7 in the first part of failure to exercise due diligence forms a separate class of misconduct, and cannot be read as “and” to connect with gross negligence. Both the words “diligence” and “negligence” are forms of conduct/behaviour and hence are used in a single sentence instead of making a separate clause. Therefore, the respondent, who has not shown due diligence in highlighting the deficiencies/irregularities promptly, can be said to have committed professional misconduct.

The Court found that the respondent did not dispute his appointment obligations, the existence of the irregularities, or the fact that the flash reports were not made immediately and were submitted only after the bank's internal inspection. The explanation founded on family circumstances was rejected as unacceptable, since the events relied upon had occurred earlier and did not explain the continued inaction thereafter. On interpretation of Clause (7), the Court held that the expressions 'does not exercise due diligence' and 'is grossly negligent' are disjunctive and constitute separate alternatives; therefore, absence of mala fides, dishonesty or ill-motive does not exclude misconduct where due diligence was not exercised. The Court also held that non-supply of the inspectors' report caused no demonstrated prejudice and did not alter the admitted position that the respondent had failed to act diligently. [Paras 27, 28, 29, 30, 33]

The finding of professional misconduct was upheld on the ground that the respondent had failed to exercise due diligence in the conduct of his professional duties.

Limited judicial review in disciplinary findings - HELD THAT: - The Court noted that the respondent had participated in the inquiry, was given adequate opportunity, and had not established any irregularity in the conduct of the disciplinary proceedings. Applying the settled principle from decisions State Bank of Bikaner and Jaipur vs. Nemi Chand Nalwaya [2011 (3) TMI 1839 - SUPREME COURT], State of Karnataka vs. N. Gangaraj [2020 (2) TMI 1757 - SUPREME COURT], governing judicial review of disciplinary matters, the Court held that it could not reassess adequacy of evidence or disturb concurrent findings fairly reached by the disciplinary authorities where no violation of statutory procedure, natural justice, or reliance on extraneous material was shown. [Paras 21, 32]

The concurrent findings of the Disciplinary Committee and the Council were not interfered with on merits.

Modification of disciplinary penalty - Reprimand in lieu of removal from membership - HELD THAT: - While holding the recommendation to be appropriate in principle, the Court considered that nearly two decades had passed since the Council's decision. Having regard to that delay, the Court held that subjecting the respondent at such a belated stage to removal from membership, even for a limited period, would not be justified. It therefore considered a reprimand under Section 21(6) sufficient to meet the ends of justice. [Paras 34, 35, 36]

The proposed penalty of removal from the register for six months was modified to a reprimand.

Final Conclusion: The Court upheld the finding that the respondent was guilty of professional misconduct for failure to exercise due diligence in discharge of his audit duties. However, considering the long passage of time, it modified the recommended punishment of removal from the register for six months to a reprimand.

Negotiable Instruments Act - Dishonour of cheque - Compounding of offence under Section 138, after conviction - Post-conviction compromise - Doctrine of merger - withdrawn or non-speaking dismissal of special leave - power to recall its judgment u/s 147.

Compounding after conviction - Statutory compounding - Post-conviction settlement - HELD THAT:- Since in the case at hand, petitioner after being convicted under Section 138 of the Act has compromised the matter with the respondent complainant and in terms thereof has already paid the entire amount of compensation, prayer for compounding the offence can be accepted in terms of judgment passed by the Hon’ble Apex Court in Damodar S. Prabhu V. Sayed Babalal H [2010 (5) TMI 380 - SUPREME COURT] wherein it has been categorically held that court, while exercising power under Section 147 of the Act, can proceed to compound the offence even after recording of conviction by the courts below. Hon’ble Apex Court in K. Subramanian v. R. Rajathi represented by P.O.A.P. Kaliappa [2009 (11) TMI 1013 - SUPREME COURT] has held that in view of the provisions contained under Section 147 of the Act read with Section 320 of Cr.PC, compromise arrived can be accepted even after recording of the judgment of conviction.

The Court held that the power under Section 147 of the Negotiable Instruments Act permits compounding of the offence even after conviction. Relying on the principle noticed in earlier decisions, the Court accepted that where the complainant has received the entire compensation and raises no objection, the compromise can be given effect to notwithstanding the earlier affirmation of conviction. On the facts recorded, since the settlement was admitted and the whole compensation had already been paid, the petitioner was entitled to have the offence compounded and the conviction order recalled for that purpose. [Paras 12, 13]

The compromise was accepted, the offence was compounded, and the conviction and sentence were quashed with acquittal of the petitioner.

Final Conclusion: The petition was allowed on the basis of the post-conviction compromise. The Court permitted compounding of the offence under Section 138 of the Negotiable Instruments Act, set aside the conviction and sentence, and acquitted the petitioner.